PREFACE:

The field of banking has always been a source of inspiration for me during my
entire academic career. To work in a bank, to acquaint with its working
mechanism was always a point of interest for me and God gave me a golden
opportunity to complete my internship at UBL, one of the leading bank in
Pakistan and well known in world due to its appearance in the international
markets. I had a general idea about the banking, but once I practically started the
internship in banking field I observed much about banking, I realized the
importance and significance of commercial banking for the development of
economy. To adjust myself in such a large commercial organization was not an
easy task, but by the grace of Almighty Allah aid my internship in a befitting
manner and I learned a lo about the overall banking arena. This expanded my
vision about the banking sector, which in turn enabled me to make an appraisal of
the economic situation of our country.

This report is a thorough essence of my rigorous studies which I undergone

through in a period of two months in a commercial bank. I have exclusively
studied and observed the operations/ functioning of the bank and tried my best to
abreast myself with all the dimensions of the banks. The purpose of this report is
to evaluate the performance of UBL in diversified avenues and give concrete
recommendation for further improvement. Although the bank is functioning
satisfactory, but the path to ultimate success is still full of threats and hurdles.
It was a great experience to work there and contribute handsomely in the process
of appraising its pros and cons and feeling to be a significant part of the bank.

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

LIST OF CONTENTS

S. No. Title Page

1
 No.

PREFACE I
TABLE OF CONTENTS II
LIST OF TABLES V
LIST OF GRAPHS VI
LIST OF CHARTS VII
LIST OF ACRONYMS VIII
EXECUTIVE SUMMARY IX

Section # 1
CHAPTER – 1
INTRODUCTION OF THE REPORT
1.1 Introduction 1
1.2 Purpose of Study 1
1.3 Scope of Study 1
1.4 Limitations of Study 2
1.5 Methodology of Report 2
1.6 Scheme of Report 3

Section # 2
Chapter – 2
Introduction to UBL
2.1 Banking History 4
2.2 Banking in Pakistan 4
2.3 Towards Islamization of Economy 4
2.4 Birth of UBL 6
2.5 Number of Branches 6
2.6 Subsidiaries 7
2.7 Functions of UBL 7
2.8 Role of UBL in Banking Sector 7
2.8 Computerization of UBL 9

Chapter – 3
Deposits, Remittances, Credit & Clearing Departments

2
 3.1 Deposit Department 12
3.1.1 Functions performed by Deposit Department 12
3.1.2 Types of Accounts 13
3.1.3 Nature of Accounts 13
3.2 Remittances Department 14
3.2.1 Demand Draft 14
3.2.2 Telegraphic Transfer 15
3.2.3 Mail Transfer 15
3.2.4 Pay Order 16
3.2.5 Rupee Travelers Cheque 16
3.2.6 Uniremote 16
3.3 Credit Department of UBL 17
3.3.1 Credit department of UBL Nowshera 17
3.3.2 Procedure for Financing 17
3.4 Clearing Department 19
3.4.1 Procedure for clearing of Cross cheques 20
3.4.2 IBC 21
3.4.3 LBC 21
3.4.4 OBC 21

Section # 3
Chapter – 4
Financial Analysis
4.1 Group and its Operations 22
4.2 Basis of Presentation 22
4.3 Significant Account Policies 23
4.4 Risk Management 25
4.5 Concentration of Credits and Deposits 26
4.6 Investment Portfolio 27
4.7 Profitability 27
4.8 FINANCIAL ANALYSIS 28
4.8.1 Common size analysis of Balance Sheet 28
4.8.2 Common size analysis of Income Statement 32
4.8.3 Financial Ratios 34

Chapter – 5

3
 Qualitative Analysis
5.1 Qualitative Analysis of UBL 41
5.2 SWOT Analysis 44
5.2.1 Strengths 45
5.2.2 Weaknesses 46
5.2.3 Opportunities 46
5.2.4 Threats 47

Section # 4
Chapter – 6
Recommendations
6.1 Recommendations 49
6.1 Human Resource Department 49
6.2 Credits and Advances 53

Section # 5
Chapter – 7
Implementation Plan
7.1 Action Plan 1 57
7.1.1 Franchise Agriculture Supplies Stores 57
7.2 Action Plan 2 59
7.2.1 Techniques for effective Management and Recovery of 59
Advances
7.3 Action Plan 3 62
Bibliography 68
Annexure 69

4
 LIST OF TABLES

S. No. Title Page No.

1 Common size Analysis of Balance Sheet 30

2 Common Size analysis of Income Statement 33

3 Financial Ratios 34

4 Cost Schedule of Action Plan 59

5 Cost/revenue schedule – Marketing Plan 67

5
LIST OF GRAPHS

S. No. Title Page No.

1 Total Current Assets 30

2 Fixed Assets Distribution 31
3 Short Term Liabilities 31
4 Long term Liabilities 31
5 Income composition 33
6 Current Ratio 35
7 Asset Turnover 35
8 Debt to Assets 36
9 Debt to Equity 36
10 Coverage Ratio 37
11 Gross Profit Margin 37
12 Net Profit Margin 38
13 Return on Investment 38
14 Return on Equity 39
15 Advances to Deposits 39
16 Investment to Deposits 40
17 Cash Ratio 40

6
LIST OF CHARTS

S. No. Title Page No.

1 Senior Management of UBL 10

2 Organizational Hierarchy of UBL 11

7
 List of Acronyms

AD Authorized Dealer.
ATM Automated Teller Machine
ATR Asset Turn Over
AVP Assistant Vice President
AOF Account Opening Form
BOG Board Of Governor
BOD Board Of Director
CA Credit approval
CP Credit Proposal
DAC Disbursement Authorization Certificate
DD Demand Draft
DP Note Demand Promissory Note
EBIT Earnings Before Interest & Tax
ESVP Executive Senior Vice President
EVP Executive Vice President
FDD Foreign Demand Draft
FMT Foreign Mail Transfer
FTDR Foreign term Deposited Receipt
FTT Foreign Telegraph Transfer
GM General Manager
GOP Government Of Pakistan
GPM Gross Profit Margin
HBL Habib Bank LTD
IMS Institute Of Management Sciences
LC letter Of Credit
MCB Muslim Commercial Bank
MT Mail Transfer
NPM Net profit Margin
OG1 Officer Grade 1
PLS Profit & Loss Saving Account
PO Pay Order
RCAD Regional Credit Administration Department
RF Running Finance
RM Relationship Manager
ROI Return On Investment
RTC Rupee Traveler Cheque
STDR Special term Deposited Receipt
SVP Senior Vice President
SWOT Strength Weakness Opportunities Threats
TIE Time Interest Earned

8
TT Telegraphic Transfer
UBL United Bank LTD
EXECUTIVE SUMMARY

1. Banking operations and services are one of the basic needs of an

economy. These include acceptance of deposits and disbursement of
advances to individuals and others at higher rates. Banks perform
various fundamental factions, which are directly or indirectly
contributory towards economic and social development of countries.
UBL, a commercial bank was established in 1959 as result of reckless
efforts made by Agha Hassan Abidi. The UBL has shown the fastest
growth pattern and in a period of just 27 years became the second
largest bank of Pakistan. The bank image however adversely destroyed
when it suffered heavy losses during its nationalization period due to
political and other factors. The bank is showing re-emerging
indications as is evident from its financial statements. UBL on October
19, 2002 was privatized and bought by two financially sound parties of
international repute i.e. best way group and Abu Dhabi group holding
51% of the banks share and thus has emerged as the largest private
bank surpassing MCB.

2. The purpose of this report is to study operations and analyze

performance of UBL to see whether the bank is successful in its
operational performance or not, and recommending possible solutions
for problems. For meeting the purpose both secondary and primary
data have been used.

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

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

purpose, methodology and limitations faced during the preparation of the
report.

9
 Section II is the review portion and contains five chapters. First chapter is
introducing the organization, UBL which came in to being in 1959.
Remaining four chapter are explaining operations and relevant broader but
comprehensive set of information of the functional departments of the
bank. An attempt has been made so that readers of this report should be
able to gain sufficient knowledge of the processing and procedures of the
operations carried out by these departments. However in the chapter
pertaining to foreign exchange department main focus is places on the
payments regulations and procedures of letter of credits in the light of
foreign exchange regulation Act, 1947.

Section III; the analysis part of the report and is comprising of two
chapters. Chapter 5 is the critical analysis of the departments and its
functions. SWOT analysis is an integral part of this chapter. As an internee
I was deeply concerned about the performance level of the UBL and
therefore tried to analyze the bank financial performance that is included
in chapter 4, this chapter reveals that the bank is trying to regain its
position in the present more dynamic and competitive environment. Major
findings are included in this summary which is the outcome of these
analysis.

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

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

Three action plans are included in section V with the hope that if
implemented properly will enhance the bank’s overall productivity and
will also enable it to compete more efficiently and effectively. These plans
are related to exploration of new opportunity present in the agriculture
sector, effective management and recovery of advances and marketing
activities respectively.

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

10
 i. Mark up expense of the bank has reduced and administrative
expenses have shown increase.

ii. Non-performing advances have reduced; deposits show

consistency.

iii. Due to lack of job rotation opportunity and lack of informal

group existence, employees do not share each other workload.

iv. The recent downsizing hustle and bustle trends have affected
bank’s efficiency due to lay-off survival syndrome.

v. Presently about 1100 employees have been placed in surplus

pools that are unaware of their future.

vi. Motivation level of employees is not satisfactory which effects

their own and as well as performance of the organization.

vii. In proportion to number of accounts and functions performed

sizes of branch’s buildings are small.

viii. Newly developed account opening form carries restricted space

where only two applicant’s names can be incorporated.

5. Recommendations of the report are as under:

i. Training for developing managerial leadership should be

provided.

ii. Political interference in placements etc. should be discouraged.

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

management changes.

iv. Recruitment policies should be changed, MBA’s and other

business related qualified individuals should be hired.

v. HRD should frequently conduct refresher courses.

vi. Computer training courses should be imparted.

11
vii. Staffs who deal with credit, should be properly trained for their
jobs.

viii. HRD should focus on designing new courses to build

organizational image and goodwill.

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

x. Customer orientation culture should be developed among

employees.

xi. For enhancing motivation level fair and clear career

development policies should be implemented.

xii. Relationship managers should be trained to correctly access

credit related risks.

xiii. Skills should be development of employees to assess

management abilities of the borrower’s of their business.

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

correct documentation.

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

analyze, verify and maintain securities in handsome manner.

xvi. Various administrative reforms should be made to resolve

quickly default cases.

xvii. Marketing department at Hub branches should be created.

xviii. All employees should participate in marketing operations of the

bank.

xix. Marketing at Desk concepts should be practiced.

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

12
 xxi. Marketing research and development department of the bank
should carry out situational analysis and develop short medium
and long-term plans.

CHAPTER # 1

INTRODUCTION TO THE REPORT

1.1 INTRODUCTION:
Students of M.Com studying courses leading to Master degree in
Commerce are required to undergo an internship programme of two
months duration. This is an essential academic requirement. The internship
is followed by comprehensive report writing, required to submit to the
research and development division (R&DD) of Quaid-e-Azam College Of
Commerce, Peshawar. This report is properly evaluated on the basis of its
description and analytical capabilities by internal and external examiners. I
did my internship in United Bank Limited Nowshera Cantt Branch.

1.2 PURPOSE OF STUDY:

The purpose of the study is to work in real life situation and learn banking
practice by doing. In this context its objectives are:
i. To analyze banking operations i.e. operational analysis, financial
analysis.

13
 ii. To develop concrete and feasible recommendations.

iii. To improve report writing skills.

1.3 SCOPE OF STUDY:

The study is confined to banking operations. An attempt, along with all its
limitations, to collect financial data and general statistics of the bank has
been made. Keeping in view the purpose of the study, which is to make an
acquaintance with practical doings in the bank, this seems a
comprehensive effort.

1.4 LIMITATION OF STUDY:

It is to admit that the study attempts only those aspects, which are closely
relevant to the purpose of the study. facts and figures, which otherwise
might be equally important, but not having a direct bearing on the
conclusions arrived at this study, have been ignored.
The most important limitation from which the study suffers is the non-
availability of information in a manner required for analysis and the
secrecy of the bank. Another important limitation of the study is time and
space constraint.

1.5 METHODOLOGY OF STUDY:

Both primary and secondary data were used in compilation of the report.
Methodological tools used were:
i. Primary Data:
Personal Observations.
Discussion with Bank Personnel.

ii. Secondary Data:

Brochures/ Manuals of the bank.

14
 Annual Report

State Bank Foreign Exchange Manual

Bank internship reports on UBL available in library.

Journals, newspapers and books.

Internet.

1.6 SCHEME OF REPORT:

The report is divided into five sections as under:
Section-I consists of chapter 1, which includes background, purpose,
scope, limitations, methodology and scheme of the report.

Section-II consists of five chapters (Chapter 2-3) and includes

organizational review. In this section background history of UBL, its
organizational structure; and department operations are discussed.

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

and financial analysis of UBL respectively.

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

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

identified in the previous section.

15
CHAPTER # 2

INTRODUCTION TO UBL
2.1 BANKING HISTORY:
Consensus on the origination of word “Bank” is not yet reached at. Some
authors opinion is that this word is derived from the words “Bancus” or
“Banque”, which mean a bench and they further relate banking business inception
to Jews in Lombardy. Other authorities state that the word “Bank” is derived form
the German word “Back” which means “Joint Stock fund” and later on due to
German occupation of Italy, this word was Italianated into “Bank. Authors quote
Babylonians (few quotes Chinese) who developed banking system as early as
2000. B.C1

2.2 BANKING IN PAKISTAN:

Banking started in Pakistan after the bold and emergent decision of
formulation of SBP on July 30, 1948. Thereafter this sector has witnessed
enormous growth. In 1974 banks were nationalized, in the hope that new era of
growth could be achieved through it. However the process is reverse since 1991,
up till now MCB, ABL, and UBL have been privatized and HBL is in the process
of its privatization.

2.3 TOWARDS ISLAMIZATION OF ECONOMY2:

Interest based transactions/businesses are “Haram” in Islam. The GOP has
shown. Interest to eliminate “interest” from its economy by developing various
alternatives. To achieve this objective various efforts are made with the following
outcomes:

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

16
  PLS (Modarba) Accounts
 Current Accounts: (with no return paid)

2.3.2 Loans:
 Qarz-e-Hasana
 Lending on the basis of Service charges

2.3.3 Trade Related Modes of Finances:

 Bai Muajjuai; purchases of goods by banks and their sale to clients at
appropriate mark-up in prices.
 Bai-Salam; purchase of goods from clients by banks and their resale to the
client at increased prices, to be paid in future.

 Financing for development of property on the basis of developmental

charges.

 Purchase of trade bills.

 Ijara: leasing.

 Hire purchase.

2.3.4 Investment Type of Modes of Finances:

 Musharaka: financing on the basis of profit and loss sharing.
 Modaraba: equity sharing of borrower profit and loss on basis of purchase
of modaraba certificates.

 Rent sharing.

 Equity participation through purchase of shares.

17
2.4 BIRTH OF UBL:
On November 9, 1959, UBL was notified and included as a private
schedule bank with authorized capital of Rs. 20 million; issued and paid up capital
of Rs. 10 million divided into 1 million shares of Rs. 10/ each. Currently BOD
and president/ CEO Mr. Amar Zafar Khan being a member of this newly formed
set up manage UBL. Chairman His Highness Shaikh Nahayan Mabarak Al
Nahayan and Deputy Chairman Sir Mohammed Anwar Pervez are the two
supreme controllers of the bank’s affairs. Another development is the appointment
of director operation, Nauman Hussain by the newly privatized bank. Senior
management of the bank is shown in the chart given at the end of chapter.

2.5 NUMBER OF BRANCHS:

UBL has a large network of branches, which extends to the remotest areas
of the country. In December 1983, there were 1623 branches whereas in 1974 it
had only 1238 branches and in October 2003 these figures show total number of
1007 branches3.
UBL has been very active in increasing its overseas branches network. The
first foreign branches were established in London in 1963. Now UBL has
branches in Bahrain, Qatar, Saudi Arabia, United Arab Emirates, Yemen Arab
Republic, UK Switzerland, Egypt, Oman and The United States. These branches
are playing a significant role in channeling home remittances and foreign trade of
Pakistan.

2.6 SUBSIDIARIES:
UBL has four subsidiaries, namely:
 United National Bank Limited (UNB), UK

 United Bank AG (Zurich), Switzerland

3
UBL (2003) Annual Report

18
  United Executers and trustees Company Limited

 United Bank Financial Services (Private) Limited

2.7 FUNCTIONS OF UBL:

UBL is a commercial bank, which transacts the business of banking in
accordance with the provisions of BCO, 1962. Section 7 of the Act authorizes
banks to engage in the prescribed form of business. In the light of this section
UBL’s functions can be categorized as under:
 Agency services

 General Utility Services

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

trading by corporations etc.

 Providing specialized services to customers, and

 Hajj-related services.

2.8 ROLE OF UBL BANKING SECTOR:

The impressive growth and development, which UBL achieve, present it
undoubtedly the most dynamic and progressive. In a very shorter period of time it
became one of the leading banks overtaking several other older and its competitor
banks4. The major contributions5 the bank ahs made are enlisted below:
 Record setting performance and commitment to serve the customers

 Personalized service and dynamic approach

 Catalyst of changes

4
Cap. (Rtd) Syed Hamid Ali Shah, (2002) Internship Report On UBL Main Branch Peshawar.
IMS.
5
M. Iqbal Khan,, (2002) Internship Report On UBL Nowshera Cantt Branch. IMS

19
  Professional management

 Modern banking policy

 Human resource development

 Small loans (or) micro credits

 Pacesetter in economic research established in 1967, department for

economic research.

 Utility bills collection

 Credit cards (unicard-1970)

 Travelers Cheques (Humarah-1971)

 Diaries and calendars – received prizes too

 Promotion of sports

2.9 COMPUTERIZATION OF UBL:

UBL has taken leading start in the introduction of computers in (1966-
1968)6 in important cities. Its three computers centers Rawalpindi, Lahore and
Karachi are equipped with the modern mainframe computers of various
capacities. Every branch has been decorated with microcomputers.
The use of computers has enabled the bank to save time and efforts, raise
efficiency and deliver the goods speedily to its customers. This has also allowed
the bank to maintain its leadership within the industry.

 UBL - On line System7:

Themes of this service is “Access any time, anywhere, any device” which
symbolizes comfort, convince and connectivity. UB-Online a web based service

6
Cap. (Rtd) Syed Hamid Ali Shah, (2002) Internship Report On UBL Main Branch Peshawar.
IMS.
7
UBL, (October 8, 2002). PPI Circular. Karachi

20
that can be accessed through multiple media link like, (i) PC via internet (00)
Mobile phone with WAP or free SMS) (iii) Personal Digital (iv) assistants and (v)
Plain telephone; following are some of the exciting features:
o Accounts statement & electronic data interchange

o Graphical analysis

o Alerts service /facility, search facility and activity long

o The banks as another computer-based system known as “UIBANK”8,

which is a well-develop on-line branch-banking package. The system
automatically prepares various report, central bank returns, and
statement of accounts for customers.

 Money Gram facility:

The bank has recently employed money gram service system, which can
affect money transfers within minutes. Similarly the system used for local transfer
of money transactions is called uni-remote.
 Hajj service:
Keeping to its tradition is august 1982 provided electronic facility at its
Hajj booth and has installed now modern computers at designated branches
(Hajis) and increasing efficiency. This facility has reduced the service time to less
than six minutes per Haji compare to about half-an-hour to 45 minutes per Haji
earlier.

8
www.ubl.com

21
2.10 MANAGEMENT OF UBL:

Chart 2.1 Senior Management of UBL

Sheikh Nahyan Mabarak

Nahayan chairman

Sir Mohammad Anwar

Pervez Deputy Chairman

Amar Zafar Khan

President

M.A Manna
Deputy CEO
Risha Moheyuddin
Nauman Hussain Global Treasurer
Director Operations &
Khalid Munawar-ud-din
Mansoor M. Khan Head Credit Policy
Head Corporate Banking
Muhammad Ejazuddin
Shaharyar Ahmed Audit Chief
Head Investment Banking
Mehboob A.Khan
Shahid Waqar Mehmood
Head Commercial bank
Rukhasana Asghar
Aman Aziz Siddique Global Head Human

Ali sameer Ameer Karachiwala

Chief SAM (domestic) Chief financial Office/HCA

Source: UBL, (2003). Annual Report. Karachi.

22
2.11 FUNCTION HIERARCHY:

Chart 2.2 Organizational Hierarchy of UBL

Chairman

Deputy Chairman

Board of Directors

Executive Committee

Managing Director

SEVP

EVP

VP

Officer Grade-I

Non Clerical Clerical Staff Officer Officer

Staff Grade-II Grade-III

Source: UBL, (2003). Annual Report Karachi.

CH # 3

23
CASH, REMITTENCES, CREDIT & CLEARING
DEPARTMENTS:

3.1 DEPOSITE DEPARTEMNT

As per the definition of “Banking” under see 5(b) of BCO 1992 one of the main
functions of a bank is to accept deposit. Deposits are the backbone of any bank;
other functions of the bank primarily depend upon the type and size of deposits.

3.1.1: Function perfumed by cash and deposit department in UBL Nowshera

Cantt Branch.
Nowshera Cantt Branch accepts deposits under the following three accounts.
i. Current account

ii. PLS Saving account

iii. Terms Deposits

3.1.2: Opening of Account:

To open an account in UBL the customer will have to fill an account opening
form in front of bank officer. He has to sign in all required places in front of the
officer.
3.1.2.1: Documents Required in Account Opening:
i. N.I.C Copy.
ii. Account opening form (provided by bank)

iii. Two photograph (in case of illiterate person)

iv. Specimen Signature card (Provided By Bank)

v. Cheque Requisition Form

vi. Introduction of Account.

24
3.1.2.2. Types of Account:

a. Individual Account
In this account a single customer operates the account. The banker will run
the account according to the rules, but if the customer gives special instructions
the Bank will have to follow it.

b. Joint account:
In this type of account two or more than two persons will open the
account. The account will be operated by one account holder in case of (either of
the survival). If the instructions are not given, all the account holders will have to
sign the check.

3.1.3 NATURE OF ACCOUNTS IN UBL NOWSHEREA

A) Current Account:
These are non-profitable demand accounts. The account can be opened with
minimum amount of rupees 1000/-. These account are usually maintained for
business purpose. Due to enormous competition UBL has introduced daily profit
current account for corporate clients called (UNISEVER) minimum balance
required is Rs. 100,000/-. If minimum balance requirement is not met, bank is
authorized to recover predetermined charges.

B) PLS Saving Account

These accounts were intended with the aim of encouraging thrift among people.
These accounts can be opened either in Pakistani rupees or in few major
currencies of the world. Bank offers (4%- 6%) return on these accounts. The basic
feature is the profit and loss sharing as according to non-interest based banking
system. These accounts can be opened in the name of; individuals, joint names,
trust accounts, charitable organizations.

25
Unlike current accounts, Zakat is applicable on local currency saving accounts.
Minor’s accounts can be opened on the condition that their guardians shall operate
these accounts.

C) Term Deposits:
Term deposits are also called fixed deposits. These can be with drawn after a
specified period of time. Interest is paid to the depositor on all fixed or term
deposits. The rate of return varies with the duration for which the amount is kept
with bank
There are two types of term deposits.

i. STDR’S – Special Term Deposit Receipt (local currency):

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

ii. 3.2.3.2 NTDR’s – Notice Term Deposit Receipt (local currency):

These are term deposit with special features that these can be withdrawn any
time but after giving a predetermined and pre agreed early notice.

3.2 REMITANCES DEPARTEMNT:

Current business trends demand fast movement from one geo-graphic end to
another. Latest technology and telecom data transmission has made it possible to
make such transactions with in minutes. UBL Nowshera Remittances Department
performs following functions.

3.2.1 Demand draft (D.D)

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

26
 A) Procedure For D.D.:
Purchaser is asked to fill in an application form duly singed by applicant. Three
things should be maintained in the form.
 Name of Payee

 Place of payment

 Amount of D.D

Commission is charged on D.D as bank income. The applicant is asked to deposit

the cash specified on the application form to the teller. After depositing cash the
remittances incharge prepare a D.D. That is singed by two officers must having
power of attorney.

Bank also provides this facility to general public who don’t have account in UBL.
They will have to submit a N.I.C copy along with D.D application form.

3.2.2 Telegraphic transfer (T.T):

Transfer of funds to another branch of the same bank with the help of test
numbers. If the test number agrees the bank make payment to the party.
A) Procedure for T.T:
The procedure for T.T is same as D.D. But in D.D it is given on a printed-paper
and singed by two officers but, in T.T, only test number is given to the customer.

3.2.3. Mail Transfer (MT)

When the money is not required immediately, the remittances can also be made by
MT. Here the selling officer of the bank sends instructions in writing by mail to
the paying bank for the payment of a specified amount of money. The payment
under transfer is made by debiting the buyer’s account at the sending office and
crediting it the recipient’s account at the paying bank. UBL takes mail charges
from the applicant where no excise duty is charged.

27
3.2.4 Pay Orders:
Pay order is banker cheque issued favoring a named beneficiary. The issuance
bank is discharged by payment in due course. Application for the
PO stamped and the customer’s account balance is checked or cash received for
the amount PO and other charges. Pay Order leaf is typed and crossed if required
and signed by two authorized persons. Thereafter it is delivered to the customer.
PO can be cancelled at original purchaser’s request in writing and surrender the
instrument, which then marked canceled along with other documents and prior
entries.

3.2.5 Rupee Traveler Cheques:

UBL has launched R.T.C Brand named “Hamrah” in November 1996. These are
issued to applicants with varied denominations without excise duty and
commission. When issued HO account is credited and on encashment the same
account is debited. RTC’s lost cases are communicated to HO and client is either
repaid or new RTC’s are issued to him/her.

3.2.6 Uni Remote:

This is a new tool for the transfer of money. This is a step towards the online
banking taken by UBL. This tool transfers money from one branch of UBL to
other through electronic transfer. The customer will have to fill the deposit slip.
On the slip he will write the name and account number of the person to whom the
money will transfer, the name of the branch is also written. The amount is
deposited with teller and the receipt is shown to remittance inchraged. One I.D
copy is also attached with slip. The remittances incharge will transfer if by using
device (computer) through online service. The fund transfer is must be supervised
by another authorized officer. Every time for this is five minutes.

28
3.3 CREDIT DEPARTMENT OF UBL

General
Credit extension is the principal function of a bank, through which pace of
activity is accelerated in the various sectors of economy. Also the indicators,
which mainly reflect the high quality of bank’s management, are its prudent
financing decisions, proper control of finance and prompt recovery. In this regard
the credit policy of a bank play a very important role as it provides the overall
framework, responsibilities, authorities and facilitate decision-making. Credit
department performance is subject to a defined policy on credit control exercised
by the SBP. SBP affect credit decisions through the weapons of bank rate, open
market operations, variable reserve requirements, selective credit restrictions and
prudential regulations.

UBL Credit Policy:

Credits operations are undertaken in accordance to bank’s credit policy. The
policy strictly prohibits violation of SBP/Local central bank’s rules and suggest
financing of self liquidating, cash flow supported and well collateralized
transactions, which equate the principle of lending (safety, liquidity, dispersal,
remunerations and suitability).

3.3.1 CREDIT DEPARTMENT OF UBL NOWSHERRA BRANCH

Facilities offered by UBL Nowshera.
 Running Finance (for one year)

 Demand Finance (3to 5 years)

3.3.2 Procedure for Financing from UBL

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

29
3.3.2.1 Purpose:
In this the party mentions the purpose, they want to apply for the finances. No
lending is done with out purpose.

3.3.2.2 Business
The party must have some specific running business i.e. general merchandise,
construction business etc.
The second question arises of the cash flow that how much flow is generated by
the party from the current business.

3.3.2.3 Security:
The bank will secure itself against the lending. There can be two type of security.
 Commercial
 Residential
The bank prefers commercial security. Relationship Manager (RM) is mainly
responsible for the relationship between the bank and party. He acts like a bridge
between the two.

In the first instance the party would prepare the following property documents.
 AKS Shajarah
 Naqsha Tasveeri
 Approved Building Plan
 Tresh fard
 Intaqal Naqal
The party is asked to contact any valuator on the panel of UBL. ICM&L and
Tajak Builder are on the panel of UBL Nowshera. The valuator will visit the site
and set market value and FSV of the said property. He prepare report of at least
three pages. These document sent for one page legal opinion to any layer on the
panel of UBL. Having clear legal opinion RM start preparing credit Approval

30
(CA). The documents are singed by the RM & AM and then forwarded to UBL
RHQ in Peshawar. Here SRM examines the CA if he found some exception he
will send it back to the respective Rm.

RM rectifies the acceptation and send it back to SRM. SRM studied and pass it to
credit officer. He has three hours of time to study the CA and if found correct then
he pass it to another credit officer. After his examination the CA is passed on to
the credit risk manager. He checks the CA and after signing it sent to CAD. He
forwards the CA to SCO. Whose office is at UBL RUCO at Lahore, after his
signature the C.A is sent back to RCAD.

RCAD make a check less list and asked the RM to contact the party to complete
the said documents they are.

 Letter of continuity
 Personal Guarantee
 Letter of hypothecation of stock
 D.P Note
 Mortgage Deed
 NIC of executants and witness
 Stock report
 Insurance policy
 Party profile
After completion of charge document RM send it to RCAD when they found it
correct, they issues DAC. A copy of DAC is sent to RM and NICF account is
opened and debit transaction starts.

3.4. CLEARING OF BILLS:

General:
Bank can make payments of only open Cheques on the counter payment. Payment
of cross Cheques cannot be made on counter its payment is possible through

31
collecting bankers. The functions of clearing department is divided into two main
classes.
 Inter Branch Transaction
 Inter Bank Transaction

3.4.1 Procedure of Clearance of Cross (Cheques):

Whenever bank receives a cheque of other bank from the client he cannot make
payment on the counter. The first job banker has to perform is to put a special
crossing across the face of cheque. By special crossing cheque is secured. If it is
stolen the paying banker would not suffer because of non-endorsement. On the
back of the cheque the stamp is made of payee account will by credited on
realization. It is signed by authorized person. Along with the cross cheque the
customer has to fill the deposit slip. The half part of slip is given back to the
customer. after the special crossing and is necessary endorsement the banker write
the amount along with cheque number on paper and attach with each slip. Then
again on he smile paper the amount of all the Cheques along with the bank names
are added and attached to cheque presented for clearing, and advice is also
attached with the cheque presented for clearing. The following entry is passed on
sending the cheque for clearing.
Bill lodged for clearing ……. Dr

Bill for collection ………. Cr

The Cheques are sent on the same day for clearing. The bank receives it on other
day. The paying bank receives the receipt and the amount is credited in the
respective account. The paying banker passed the following.

Bill for realization. ……. Dr

Bill lodged. ………. Cr

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

32
3.4.2 I B C:
It means “Inter Branch Transaction” when UBL received a cheque a drawn on the
customers of his branch; first they will cheque the amount in the account on
which cheque is drawn. Of the required amount is available in the account they
will match the signature on the cheque along with their SS card. If all the
requirement are completed the bank will send an IBCA to the bank from which
cheque is sent

3.4.3 L B C:
LBC means local branch cheques received for collection. UBL Nowshera,
received cheques from their spoke braches as well as from other UBL branches of
the country, drawn of any other bank in Nowshera. They send the cheque to
responding bank and after clearing the cheque through clearing houses (which is
NBP) in Nowshera. They send LBC advised to the bank from which the cheque
was received. The following entry is passed after sending LBCA.
NBP a/c ………. Dr

Ho a/c………. Cr

3.4.4 OBC
When the bank receives the cheque from its customer or from any other spoke
branch drawn on any other bank of any other city. They sent the cheque to the
UBL main branch of that city, after receiving OBCA the bank will passed the
following entry. In case of his own customers.

Ho a/c………. Dr

Customer a/c………. Cr

In case of spoke branch

Ho a/c………. Dr

Spoke Branch a/c………. Cr

33
CH # 4

FINANCIAL ANALYSIS:

INTRODUCTION
These section efforts have been made to cover all relevant aspects of the financial
performance of UBL. Overtime comparison and Common Size analysis are
carried out with the view to extract concrete conclusion to describe financial
standing and performance of the bank.

4.1 THE GROUP AND ITS OPERATIONS

The group consists of
a) Holding Company
United Bank Limited, Pakistan
b) Subsidiary Companies
 United National Bank Limited, UK
 United Bank AG (Zurich), Switzerland

 United Executers and Trustees Company Limited

 United Bank Financial Services (Pvt) Limited

4.2 BASIS OF PRESENTATION

The purchase and sales of UBL are restricted to the amount of facility actually
utilized and the appropriate portion of mark up there on. They strictly observe the
rules and regulations as applicable and promulgated by the GOP and or SBP.

34
4.3 SIGNIFICANT ACCOUNTING POLICIES

• Revenue Recognition
Returns on advances and investments are recorded on accrual basis. Debts
securities purchased at premium or discount are amortized over their maturity
periods.
Dividend income is recognized on accrual basis of declaration of dividend up to
the year-end. Returns on classified assets are recorded on receipt basis,
rescheduled and restructured loans are treated in accordance to SBP regulations.
Fees/commissions etc. on Letter of Credit and others are recorded on accrual
basis.

• Advances
These items are stated net of provisions against non-performing loans as per SBP
PR – IIIV.

• Investments:

UBL classify its investments as stated below;

a) Held for trading

b) Held to maturity
c) Available for sale-other than the above two types
In the light SBP regulations quoted securities are shown at market values and any
changes arising are taken to profit and loss account only upon actual realization.

Unquoted securities are valued at the lower of cost and break up value and
difference is charged to income. Provisions for diminution in the values are made
after permanent impairment, if any.

35
 • Lending/Borrowing from Financial Institutions
a) Sales under Purchase Obligation: These are reflected as liabilities and the
charges against these are recorded as an expense on pro rata basis.
b) Purchase under Resale Obligation: The differential of the contracted price
and resale price is amortized over the period of their contract and recorded
as income.

• Fixed Assets and Depreciation

a. Owned
Such assets are showed at their cost or revalued amount less accumulated
depreciation and impairment loss, if any. No depreciation is charged on
freehold land. During the year, amendment related to section 235 of the
Companies Ordinance 1984, surplus on revaluation can now be reversed
to the extent of incremental depreciation charged. As a result such
differentials are now transferred to retained earnings/accumulated losses
as per the Securities and Exchange Commission of Pakistan’s (SECP)
clarifications.
Gains and losses on sale of fixed assets are included in income currently,
except that the related surplus on revaluation of fixed assets is transferred
directly to retained earnings/accumulated losses.

b. Leased
Assets under financial leases are stated at cost. The outstanding obligations
are shown as a liability. The finance charges are allocated to accounting
periods in a manner so as to provide a constant periodic rate of charge on the
outstanding liability.

36
 • Taxation

a) Current

Provision is based on the taxable income for the year or minimum tax computed
on the basis of turnover, whichever is higher.
b) Deferred
The bank accounts for deferred taxation on major timing differences, using the
liability method in respect of those timing differences, which may reverse in the
foreseeable future. Deferred tax debits are, however, recognized only if there is
reasonable expectation of realization of the amount.
c. Foreign Currencies:
Balances are translated into rupees at the applicable rate of exchange prevailing at
the balance sheet date or where applicable at contractual rates. During year
transactions are converted into Pak rupees applying the exchange rate at the date
of respective transactions. Gains and losses are included in income currently.
d. Deferred Cost and Lease Payments

These are amortized over a period of five years. Rental obligations under
operating leases are charged to profit and loss account as incurred.

4.4 RISK MANAGEMENT

The bank is primarily subject to interest rate, credit and currency risks. The bank
has designated and implemented a frame work of controls to identify, monitor and
manage these risks are as follow;

• Currency Risk Management

For the purpose of efficient management of this risk, the group enters into ready,
spot, forward and swap transactions in the inter bank market and with the State
Bank of Pakistan in order to kedge its assets and liabilities and cover its foreign
exchange position.

37
 • Credit Risk Management
Out of the total assets of Rs.183, 139.879M assets subject to credit risk amounted
to Rs.178; 958.323M. The bank’s major credit risk is concentrated in textile
sector. To manage it the bank applies credit limits to its customers and obtains
collaterals. Credit risk in the portfolio is monitored by the CRM who formulate
appropriated policies and procedures to ensure building and maintaining quality
credits and efficient credit process.
The bank’s financial institution risk management unit assesses, recommends
financial institutions and also controls cross border/country risk.

• Interest rate Risk Management

The group is mainly exposed to mark up interest rate risk on its deposit liabilities
and its loans and advances and investment portfolios. The asset liability
committee of the bank reviews the portfolio of the bank to ensure that risk is
managed within acceptable limits. Most of the loans and advances portfolio
comprises of working capital, which are reprised on a periodical basis. The
group’s interest is limited since the majority of customer’s deposits are
retrospectively reprised on a six monthly basis due to the profit and loss sharing
principles.

4.5 CONCENRATION OF CREDIT AND DEPOSITS1

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

1
UBL (2003) Annual Report

38
4.6 INVESTMENT PORTFOLIO2
UBL employs diversified investment portfolio. The bank invests its funds both in
risk free assets as well as in risky assets. This enables it to minimize its
unsystematic risk to a great extent.
UBL values its security holding on market value, in accordance with the
guidelines given in SBP circular. Any unrealized surplus/deficit arising on such
revaluation is taken directly to “Surplus/Deficit on revaluation of securities” in
the balance sheet. Where an active market is not available, securities continue to
be stated at cost. Provision for diminution in the value of these securities is made
after considering permanent impairment, if any, in their value.

Where securities are sold subject to commitment to repurchase them at a

predetermined price, they remain on the balance sheet and a liability is recorded
in respect of the consideration received in “Borrowing from Bank” or “Deposits”
as appropriate. Conversely, securities purchased under analogous commitments to
resell are not recognized on the balance sheet and consideration paid is record in
“lending to financial institutions” or “loans and advances” as appropriate.

4.7 PROFITABILITY3
The operating profit before provisions and write offs increased by 80%, where as
the profit before tax and extraordinary items increased by 62% as compared to
last year. The increase is mainly attributed to 14% increase in the net revenue
from funds (NRFF), 10% increase in fee and brokerage income and 75%
reduction inn write offs/provisions for non-performing assets as compared to year
2002.
Performing advances increased by Rs. 2 billion as compared to 2002 while NPAs
decreased by 53%. Presently NPA constitutes 7.4% as compared to 14.6% in 2002
of the total loan portfolio. The branches reduced to 1077 from 1112. The bank

2
UBL (2003) Annual Report
3
UBL (2003) Annual Report

39
handled over Rs. 96 billion of import and export business during the year, an
increase of 24.7% as compared to last year.

4.8 FINANCIAL ANALYSIS

Financial statements are the principal means of reporting the financial condition
and results of operations of a business entity. These statements are meant to assist
various parties in decision making who are interested in the activities of the
business. These statements are means to an end of helping stakeholders in
decision-making. To improve the quality of decision making proper analysis of
these statements helps a lot. Financial statements analysis helps in determining the
financial conditions at any particular points in time and effectiveness of
operations of a firm during a specific period.
The various stakeholders of business are interested in the analysis of financials
statements. But the focus of interest of all is not the same. For example, creditors
and credit reporting agencies are interested in finding out the credit worthiness of
the firm to which they have extended credit or intend to extend credit. Short term
creditors are interested in short term liquidity of the business and long term
creditors are interested in the long term cash flow which the firm can generate
over the long period of time. Investors are interested in the firm’s ability to sustain
profitability over a period of time. Government agencies analyze financial data for
tax purposes. The internal users of financial statements like management also
analyze financial data for planning and control.

4.8.1 COMMON SIZE ANALYSIS OF BALANCE SHEET

Common size analysis is an analysis of financial statements where the total assets
divide all balance sheet items of asset side and all credit side balances divided by
all liability items, and all income statement items are divided by net
sales/revenues. Common size analyses are extremely helpful to highlight changes
over the time in financial performance and financial conditions of the company.

40
The table shows common size analysis of the balance sheets for the years 2001,
2002 & 2003.
The common size analysis given in the table shows that there have been
improvements in the current assets in 2003 as compared to 2002, about 17%. But
there has been decrease in fixed assets of about 16%. The main reason for this
change is increase in short term investment showing a constant increase as a
percentage to total assets. This implies that the bank is concentrating now more on
non-interest income and the interest rates are constantly falling.

Short-term advances have shown a significant change of 15% whereas total

advances show a total change of only 6.3%. This is very significant to note that
major decrease has occurred in long-term performing and non-performing
advances.

There is decrease in long term assets of about 17% which mainly cause the
decrease in long term advances which are about 13% and 6% decrease in long
term investment.

On the liability side the total current liability has shown change of about 4%. The
main reason for which is increase in current deposits, which are about 6%. The
long-term liability of the organization is also decreased by 4%. The main reason
for this is that fixed deposits of organization are decreased by 6%, which shows
that there is a slight change in the organization’s position by decrease in fixed
deposits.

41
Table:4-1 Common size analysis of consolidated Balance Sheet

Rs in '000 Common size (%)

assets 2001 2002 2003 2001 2002 2003
Cash/Bal. With Banks 3609108 70463707 35591280 21.5 17.93 15.79
lending to F.Is 4370006 3627557 19050791 2.6 1.89 8.45
Investment (ST) 9190430 33883311 29580252 5.5 17.66 13.12
Advances-Performing (ST) 39489369 43632117 89292490 23.4 22.75 39.61
Other Assets 8641263 2641471 3509351 5.1 1.38 1.55
Total Current Assets 97782157 118177074 177024164 58 61.61 78.54
Investment (LT) 19388131 33623058 25007413 11.5 17.53 11.09
Advances-Performing (LT) 28477494 26423058 10312297 16.89 13.77 4.57
Advances-Non performing (LT) 11813855 5739798 3671991 7.01 2.99 1.62
Operating fixed Assets 2864018 2831534 3884990 1.7 1.48 1.72
Deferred Tax Assets 8297500 5026459 5486357 4.92 2.62 2.43
Total L.T Assets 70840998 73643958 48363048 42 38.39 21.45
Total Assets 168623155 191821032 225387212 100 100 100
Liabilities
B/Payables 1540592 1847025 2991269 0.91 0.96 1.32
Borrowings ST 4004130 174533 174533 2.37 0.09 0.07
Deposits - Current 102568752 118167469 152580240 60.83 61.6 67.69
Lease and Others 8838842 9986608 5933743 5.24 5.2 2.63
Total Current Liabilities 116952316 130175635 161679785 69.36 67.86 71.73
Fixed Deposits 38747422 43998916 37252204 22.98 22.94 16.52
Other Long term Liabilities 21264831 5212755 10883720 6.21 2.72 4.82
Total LT Liabilities 49219400 49211671 48135924 29.19 25.65 21.35
Total Liability 166171716 179387306 209815709 98.55 93.52 93.09
Shareholder's Equity
Share Capital 22481680 5180000 5180000 13.33 2.7 2.3
Reserves 3960453 4258947 4712569 2.35 2.22 2.09
Accumulated Losses/Profits -27282709 -722387 454403 -16.18 -0.38 0.2
Minority Interest 1168264 1271700 1412932 0.69 0.66 0.62
Surplus on revaluation 2123751 2445466 3811599 1.26 1.27 1.69
Total 24541439 12433726 15571503 1.45 6.48 6.9
Source: UBL (2003) Annual Report

The trend of switching over the investing in share market or other businesses
instead of committing money in advances it is because of fall in interest rates.

42
The share capital of the company is static while in 2002 the share capital was
decreased because of losses faced by the company.

4.8.2 COMMON SIZE ANALYSIS OF INCOME STATEMENT

The common size analysis of income statement is given in the table. Which shows
that the UBL has been able to control its interest or mark up expense. As a result
of decrease in mark up expense as a percentage of total revenues the gross profit
margin has shown a trend of continuous increase. The increasing G/P Margin
shows efficiency of the bank in controlling cost of sales (Markup expense) and
better strategy of pricing, products and services.
The provision for non-performing loans has a decreasing trend making no
provision for non-performing loans and diminution in value of investment, which
increases the profit of current year. The reduction in provision is a good sign,
which shows that the bank is recovering its disbursed advances. It shows the good
credit management of the bank.

There is a great increase in non-markup income, which is about 23%. Among its
individual components investment income has shown a large increase as a
percentage of sales.

Non markup expenses also show a rising trend in absolute amount though the
common size in percentages have shown a mixed trend due to the changes in
revenue figures. The non-performing expanses also increased to about 25%,
which is a very high percentage, but the other aspect of this is that it increased the
efficiency and credit management of the staff.

Like gross profit the net profit margin before tax has also increased with 24% rate.
The extraordinary item expanse has not occurred in 2003 that caused a slight
increase in the net income. The tax expanse is increased about 7% because of the
increase in profit. Loss brought forward from previous year is reduced by 14%.

43
 The common size analysis of the UBL is clearly showing that the bank has shown
a lot of improvement in its performance. The organization shows profit for the
first time in the last 5 years which is a positive sign and it will build up the moral
of the employees by which they can work more effectively and efficiently
increasing the performance of the bank.

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

Rs in Millions Common size (%)

ITEMS 2001 2002 2003 2001 2002 2003
Mark up revenue 11468 11385 9269 100 100 100
mark up expense 6347 5476 1931 55.35 48.09 20.83
gross profit 5121 5909 7338 44.65 51.9 79.89
provisions and B/Debts 1263 746 564 11.02 6.55 6.08
Net Mark up Income 3858 5163 6773 33.64 45.34 73.07
Non Mark up Return
Commission & Brokrage 1097 2008 2142 9.57 17.63 23.1
Dividends/Exchange and Others 1818 1514 2803 15.85 13.3 30.24
Total Non Mark up Income 2915 3522 4945 25.42 30.94 53.34
Total Income 6773 8686 11718 59 76.2 126.42
Non Mark Up Expense
Administrative 4669 5879 6639 40.71 51.64 71.62
Other Provision and Charges 632 51 556 5.15 0.44 6
Total non mark up Expenses 5301 5930 7197 46.22 52.08 77.64
Profit Before Extraordinary Items 1472 2756 4521 12.84 24.2 48.77
Extraordinary Items -7200 25 0 62.78 0.21
Profits before tax -5728 2781 4521 49.95 24.44 48.77
Taxation 1739 1319 1704 15.16 11.59 18.38
Profit/Loss after tax -7467 1462 2818 65.11 12.84 30.39
Share of Minority Interest 6 10 21 0.06 0.09 0.22
Accumulated Loss Brought Frd. 19821 27283 722 172.2 210.64 7.78
Adjustment against sh. Capital 0 25202 0 221.36 0
Appropriation and Transfers
Surplus on revaluation of Assets 0 238 0 2.1 0
Transfer to Statutory Reserve 2 332 527 0.02 2.91 5.68
Accumulated Loss Brought Frd. 27283 722 454 237.9 16.34 4.9
Source: UBL (2003) Annual Report

44
4.8.3 FINANCIAL RATIO ANALYSIS
The user of financial statements finds it helpful to calculate ratios when they
interpret company’s financial statements. A financial ratio is simply one quantity
divided by another. Ratios focus on special relationship between two items of
balance sheet, income statement or one from each. Ratios make it easier to
understand a specific relationship between various items of financial statements
then looking simply at the raw numbers themselves. The number of financial
ratios that might be created is virtually limitless, but there are certain basic ratios
that are frequently used, these ratios can be placed into six different classes.
 Liquidity Ratio
 Asset Turnover Ratio
 Leverage Ratios
 Coverage Ratios
 Profitability Ratios
 Market Value Ratios
The calculation and interpretation of these ratios of financial statements of UBL
are as follows.

Table:4-3 Financial Ratio analysis

YEARS 2001 2002 2003FORMULA

Current Ratio 0.84 0.91 1.15Current Assets / Current Liabilities
Asset Turnover 0.07 0.06 0.04Markup Revenure / Total Assets
Debt to Asset 0.99 0.94 0.93Total Debt / Total Assets
Debt to Equity 14.54 14.4 13.47Total Equity / Total Assets
Coverage Ratio 0.1 1.15 3.34EBIT / Interest Expense
Gross Profit Margin 44.65% 52.50% 79%Gross Profit / Revenue * 100
Net Profit Margin -65.12% 12.69% 30%Net Profit / Revenue * 100
Return On Investment -4.43% 0.76% 1.24%Net Profit / Total Assets * 100
Return On Equity -887.99% 16.78% 18%Net Profit / Total Equity * 100
Advances to Deposit 56.46% 46.74% 45%Advances / Deposits * 100
Investment to Deposit 20.22% 41.63% 28%Investment / Deposits * 100
Cash Ratio 9.59% 9.23% 28%Cash / Current Liabilities * 100

Source: UBL (2003) Annual Report

45
4.8.3.1 CURRENT RATIO:
UBL’s current ratio is increasing over the time. Higher the current ratio higher the
ability to meet the short-term obligations as they come due. The UBL’s current
ratio is increased by 0.18% as compared to 2002. this in turn decreases the risk of
insolvency. The change is occurring due to increase in short term investment and
decrease in short term borrowings.

4.8.3.2 ASSETS TURNOVER:

This shows revenue generated per rupee investment in total assets. UBL’s assets
turnover ratio has shown a little decrease. This is because of increase in total
assets with proportionate increase in revenue. Banks have relatively low ATR
capital, as they are selective in advancing loans and generating smaller sales.

4.8.3.3 DEBT TO ASSET RATIO:

The analysis of total debt to assets ratio, there has been decrease of one percent as
compared to 2002 and 6% to 2001. in 2001 every rupee one of assets was being
financed by rupees 0.098 or debt and in 2002 it is 0.94 while in 2003 it is reduced
to 0.93 worth of debt per rupee of asset. Although the decrease is not large enough
but it is a good sign for bank’s creditors. The decrease may be attributed to the
substantial decrease in borrowings from financial institutions but the affect was
weakened by an increase in bills payable and other liabilities.

4.8.3.4 DEBT TO EQUITY:

This ratio measures how the company is leveraging its debt against the capital
employed by its shareholders. Analysis of debt to equity ratio indicates that the
current position for the debt to equity is that for every one rupee in equity

46
provided by the shareholders the bank has Rs. 13.5 as a debt. This shows that the
bank is heavily relying on debt financing. The reason for huge difference stated in
the table is because of losses occurred in 2001 and 2002.

4.8.3.5 COVERAGE RATIO:

This ratio shows the number of times a company can cover or meet its financial
charges or obligations. One of the most commonly used ratio is the interest
coverage ratio that measures the number of times the income is available to pay
interest charges. The UBL interest coverage ratio has shown significant
improvement in these three years. The ratio is increased from 0.10 to 3.34.

4.8.3.6 GROSS PROFIT MARGIN:

Gross profit margin is the difference between the revenue and cost of goods sold.
Gross profit is critical because it represents the amount of money remaining to
pay operating expanses financing cost and taxes. UBL’s gross profit margin per
rupee has shown rising trend in last three years. There is an increase of 27% in
2003 as compared to 2002. this shows efficiency of the bank to control the cost of
sales.

4.8.3.7 NET PROFIT MARGIN:

This ratio shows the profit that is available from each rupee of the sale. After all
expanses have been paid. Net profit margin is also showing an increasing trend.
UBL has improved net profit margin in the current years. The net profit margin
has reached to 30% as compared to 2002 in which it was only 12.69%. While in
2001 it was in negative figure. It shows a good impact on the UBL’s Balance
Sheet.

47
4.8.3.8 RETURN ON INVESTMENT:
This ratio measures the profitability per rupee of investment in assets. UBL’s
return on investment has shown an improvement more than 100%. In 2003 the
ratio is 1.24% while in 2002 it was 0.76% and in 2001 it was in –ive figures.
Although the assets have increased but the operational recovery of the bank is
main cause of increasing this ratio.

4.8.3.9 RETURN ON EQUITY:

This ratio shows the profit as a proportion of the book value of the common
shareholders. The return on equity is also shown a great deal of positive change.
In 2003 the ratio is 45% while in 2002 it was only 16% and in 2001it was in
negative figures.

4.8.3.10 ADVANCES TO DEPOSIT RATIO:

This ratio shows the companies advances employed per unit of deposit. This ratio
of UBL over the recent three years shows a decreasing trend. In 2001 it was 56%
while in 2002 it was 46% and in 2003 it is 45%.

4.8.3.11 INVEST TO DEPOSIT:

This ratio shows the company’s investment employed per unit of deposit. This
ratio increased in 2002 as compared to 2001 but in 2003 it again decreased. It is
because of industrial development factors in the country by which lending have
been increased and investment is slightly decreased.

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4.8.3.12 CASH RATIO:
It is the ratio of cash and cash equivalent of current liabilities. It shows that how
much cash is available to meet the current liabilities. In 2003 this ratio has
increased by 2%. The balance of bank is increased with 20%. Although the
current liabilities also increased but the increase in cash is very high.

CH # 5
QUALITATIVE ANALYSIS

5.1 QUALITATIVE ANALYSIS OF UBL

During my two months of internship period I have tried to fully commit myself in
the learning process. I kept critically observing the things that I could analyze and
the result of the exercise is presented as below.

A) Organizational:
 Existing organizational hierarchy hinders vertical communication and
blocks flow of information among the levels of management.
 The workload is not equally distributed.

 Coordination level among divisions/departments and employees are poor,

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

 There is centralization of authority and branch managers are bound and

restricted to take initiative.

49
  Due to overlapping nature of duties and jobs there exists chaos and
confusion in branches.

B) Departmental:
During my internship period in UBL, in various departments, I noticed following
departmental problems.
• Cash Department:
i. Not very frequently but there are instances of fake currency notes,
being identified. At times notes received from other branches were
found to have certain fake currency notes.
ii. Counting mistakes occur due to overcrowding particularly during the
collection of utility bills. Manual counting system also affects
efficiency of the bank.

iii. Code of conduct of cashiers is found unsatisfactory.

iv. There is generally the lacking in observing and practicing bank’s

relevant procedures and SOP’s.

• Remittances Department:
i. Application of tests for authentication of TTs is not known to al concerned
individuals that reduces the efficiency and further the wrong application of
tests prevent payments and the delay could dissatisfy customers.
ii. Telegraphic messages require specific skills and training. The employees
are partially equipped of such knowledge.

iii. Preparation, execution and management of TTs and MTs and particularly
DDs ask for mastering applicable rules and regulations and most of the
staff was found ignorant of those.

50
 • Deposit Department:
i. Newly designed AOF has an inbuilt deficiency of restricted space and
cannot accommodate more than two names.
ii. Identification of customer’s signature is very important particularly when
cash is to be withdrawn by him. Manual practices pose problems in those
branches where automation has not been done yet.

iii. In cases where the presence of customer himself is must, is sometime

compromised due to influences of\r fear of loss of customer.

• Clearing Department:
i. Wrong endorsement and stamping causes loss to the customers and extra
efforts for the bank to repeat the procedures.
ii. Reasons for the return of the cheques at times are not mentioned on the
return memos.

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

• Credit Department:
i. Timelines in cash disbursement is very important which is compromised
due to lengthy processing and documentation requirements.
ii. Relationship Managers need to be fully equipped with the requisite
knowledge and skills as presently plain BA/B.Sc qualified individuals are
performing jobs of MBAs.

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

borrower’s business.

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iv. Large pool of potential borrowers cannot apply for loans due to lack of
collaterals. Heavy collateral requirements restrict credit business of the
bank.

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

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

• Bills Department:
i. Bills are sent to other cities; therefore, extra care should be exercised in
making entries and stamp affixing.
ii. Proper scrutiny at times is not carried out and it causes loss to the bank or
increase procedural timings.

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

• Foreign Exchange Department:

i. Problems of bills and remittances departments equally apply to foreign

exchange department. There is overlapping of functions and complete
separation of function has not been achieved thus leading to a state of
confusion and conflict among employees.

ii. Employees of this department are lacking computer-operating skills.

iii. Knowledge and educational background of employees working in this

department do not match with the job they are doing.

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

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 • Marketing Department
i. Lack of marketing at desk due to lack of training and awareness among
employees.
ii. Lack of promotional activities.

iii. Little attention to the apparent conditions of the bank exterior, interior
layouts and design of furniture in most of the branches.

5.2 SWOT ANALYSIS:

SWOT is useful tool for providing a framework for analysis of an organization.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. It is a
common approach to make assessments in terms of internal and external
environment of the organization, and to formulate strategies analyzing its internal
strengths and weaknesses, external opportunities and threats, coming up is the
SWOT analysis for the UBL.

5.2.1 STRENGTHS:
• It is one of the largest private banks with a deposit base of Rs. 94883/-
millions showing constant growth over the period from 1999 till the day.
• It has a well-knitted and adequately equipped branch networking system
that efficiently covers both the domestic and international markets.

• It is involved in both corporate and retail banking.

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

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

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

current year’s growth rate is 32%.

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

o Net revenue from funds increased by 18% for the current period.
o Provisions decreased by 14%.
o Total income increased by 16%.
• UBL is actively participating in international markets and has recently
introduced credit cards in UAE, Behrain, and Qatar, being backed up by
24 hours call center out of UAE.

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

like, SBP with 48.69% interest, Best Way group and Abu Dubai group
with 25.50% of interest each. Others are GOP, NBP Trustee Department,
State Life Insurance Corporation etc.

• The bank is run by highly professional recruited from and trained by

foreign banks like Citi Bank.

5.2.2 WEAKNESSES:
• Due to risks such as political, economic and legal etc the bank has suffered
losses the main reason was that of piling up of large amount of
unrecoverable loans and debts which has adversely affected the image of
the UBL.
• Accumulated losses pushed the bank to cut down its promotional activities
in order to reduce expenses for last few years.

• During the nationalization life span of the bank political lords used
influence in bank business and selection of employee at each level and
thus adversely affected the bank’s efficiency and effectiveness.

• Administrative expenses are 51% of the mark up revenue.

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 • Promotions are carried out on annual basis ignoring the importance of
capabilities and performance outputs.

• The bank has large number of employees who are simple graduates with
no banking knowledge.

• Ineffective system of recruiting and selection.

• Lengthy credit processing and documentation procedures.

• Unsatisfactory working conditions.

5.2.3 OPPERTUNITIES:
• Growing policies of the GOP on business and economic sectors provide
UBL an opportunity to efficiently meet with the business people
requirements of instant cash facilities e.g. the government intentions of
developing housing and agriculture sectors.
• The efficiency of stock market and sound exchange reserve level is
providing a good opportunity for effective investment decisions.

• Foreign remittances are another area as present world wide control

systems over transfer of currencies through illegal channels has facilitated
the area for the banks.

• Reconstruction of Afghanistan is a golden opportunity where the bank can

effectively participate.

• Expansion of IT platform and internet based banking system.

• Interest of businesses in leasing facilities provides a healthy opportunity

for banks.

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

professionalism on its organizational culture.

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 • Outsourcing of promotional companies or use of available excellent
promotional facilities.

• Entering new market segments.

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

5.2.4 THREATS:
• Increase in competition due to increasing number of foreign and domestic
private banks offering highly specialized and attractive services.
• Growing global technological advancements and adaptation of modern
style of management in banking sectors.

• Extensive promotion campaigns run by competitors.

• Unemployment, lower level of income and prices like problems in the

motherland coupled with low rate of industrialization, geo political
adverse conditions, religious factor, lack of consistency in policies due to
political instability are some of the other major threats.

This SWOT analysis is a mirror image of the bank’s present conditions. Some
efforts are made and others are still required to be made in order to improve the
situation. The management can develop elaborate strategic plans for capitalizing
the available opportunities. The bank should maintain principal of professional
management and adhere to sound and sophisticated banking rules and regulations
so that confidence and trust of the public in the institutions could be re earned.

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CH # 6

RECOMMENDATIONS
Recommendations are considered to be the most important part of an internship
report, without which no report is considered complete and meaningful. This part
of the report is based on the previous sections i.e. review and analysis. Moreover,
for bringing suggestions, discussions have been conducted with the staff of UBL
officers, who not only provided the basis for recommendations but also pointed
out some areas, where the change for the development is utmost important.
Realizing the importance of this section, efforts have been made to give feasible
recommendations, which are categorized under the following headings.

6.1 HUMAN RESOURCE DEPARTMENT

The importance of manpower cannot be denied in any organization. In case of
banks it is the most valuable asset, because the bank is very sensitive organization

57
and to be in harmony with this sensitivity, need for proper human resource is felt
badly. Critical analysis of UBL necessities recommending suggestions that would
increase bank’s efficiency and effectiveness.

• Development of Managerial Leadership

In services industries like banks the need of managerial skill is much more
important. It makes positive contribution towards higher effective results. Without
development of managerial leadership, the effective utilization of the human
resource will be impossible. UBL should also focus on this area and should avoid
deficiencies in managerial leadership, by applying the modern styles of
management.

• Political interference:
The political intervention in the bank needs to be stopped so that the top hierarchy
as well as the personnel placed at other important levels of the institution is not
changed Just on political grounds and the on going developmental work is not
obstructed. It will enable the management to formulate long term strategies and
their proper implementation because the long term policies, accurately based on
calculated risk, have proved the pivotal role players for organizational sustainable
development.

• Basis for Promotion:

A sizeable portion of the officers of UBL, are promoted in without test and
interviews to officers cadre. The promotion policy must be too tight and
transparent that no one may have the chance to be promoted on criteria other than
the required qualification, experience and performance. As for the present excess
staff, those not found up to the required criteria, may be given GHS etc.

• Management Changes on Merit:

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In UBL, though vary rare fresh recruitments are made, and the bank faces
saturation in personnel, now clipping will be more helpful. This downsizing will
leave the bank with the staff, to be retained on the basis of ultimate meritocracy
with zero tolerance of incompetence. Now in this remaining workforce, a cultural
change right from the top management down to the front line, that better suits to
the present day needs of banking environment could be included through proper
discipline and training.

• Needs of change in Recruitment Policy:

It is important to say that the external level market is full of the required talent
like MBA, M. Com etc,. But on the country only graduation with simple subjects
is still the requisite qualification for officer’s cadre, which has already worked
amply in the devastation of UBL. Therefore the recruitment qualification to the
officer’s framework should be enhanced for simple graduation, to professionally
qualified preferably Masters in their respective fields.

• Refresher Courses:
The Human of the bank should frequently conduct meaningful refresher courses,
seminars and workshops with a view to improve the knowledge of the staff. Due
to severe competition and technological developments, the banking business is
experiencing rapid changes therefore the HRD should have arrangements for staff
trainings to cope with the new changes that may become threats for the interest of
the bank.

• Computer Trainings:
The present conventional and orthodox training programmes need to be made
more comprehensive and reinforced with inclusion of computer training courses.

• Training for Credit Management:

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Special trainings on credit management should be imparted to the finance dealing
staff. Financing is main fountain bank’s income. Sound finance are extremely
necessary for opening of springs of the smooth inflow of the income.

• Training with Clear Objectives:

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

• Change in Appraisal System:

The present performance appraisal system is good. However, it needs to be
implemented in true sense. The drawbacks that are obvious like nepotism and
favoritism etc. need to rooted out and the culture of ultimate meritocracy in
appraising needs be inculcated.

• Introduction of New Courses:

The human recourses division of the bank should focus on the restoration of the
corporate image of the bank by floating programmes such as, marketing
excellence, courses on corporate culture and others. Usually in businesses the
wholesalers, retailers and other intermediaries are finished by opening a network
of the business own outlets. It works as profit maximization devise. In my opinion
the above two programmes marketing excellence and corporate culture, added
with the best counter service and outdoor informal relationship with the potential
customers by the line managers will save the sum of money spent on various
media of advertisement.

• Cheaper means for Postings etc.

60
The culture of attachment of hopes with the elements outside UBL, for promotion,
transfers, postings, and other benefits requires eradication from the roots.

• Customers Orientation:
Every entrepreneur if concerned about the success of his business, has to
understand, recognize, carefully and appropriately that his customer is “The
King” of the business system and the original spring of the business revenue.
UBL should recognize its customers as the mainstream of the bank’s revenue.
They need to be provided the deserved respect, quality and in time service and to
be politely dealt with.

• Career Development:
As a matter of personnel policy HRD of UBL should prepare a plan showing the
future growth potential of employees on the job performance and evaluation and it
should be made known to the employees. In this regard, employees should be
given opportunities to show their performances, which would help in their career
development.

6.2 CREDITS AND ADVANCES DEPARTMENT:

The defaulted loans have showered the process of development of banking sectors
in Pakistan and have reduced the lending capacities of banks. In result of which
economic growth has reduced and rate of industrialization has become lowered.
Defaulted loans being the major cause for this depression, various suggestions and
recommendations have been given with focus on UBL to overcome the drawbacks
of this department.

• Training for RM’s:

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Exclusive mandatory training concerning all possible aspects like, financial
management and organizational management etc is required to be developed and
designed to achieve
i. Risk assessment ability
ii. Understanding of all legal matters
iii. Early detection ability Skill of any loans becoming bad
iv. Ability to develop and suggest sound strategies when needed.

• Fake financial presentation:

The bank should confirm that the provided figures by the borrowing organization
are fairly audited and that the auditors are on the approved list of the bank and
they have clear opinion about the affairs of company and nothing has been made
secret. The bank should have expert to examine various changes and
developments for years in areas of the borrowing corporation like;
i. Financial condition
ii. Cash generation
iii. Ability to pay back
iv. Operational performance
The focus should be on identifying and explaining significant changes and
developments in payback of loans, profit maximization, capital flow and
operating expenses etc. the bank should take critical view of the financial and
should assess changes occurred during the favorable and slack reason for the
company.

• Poor Management:
A large number of industrial units and projects become sick because of poor
management. When a business becomes sick or fails it is unable to return the
loans, it has taken, and as a result such loans become bad debts, to avoid this, it is
the responsibility of UBL, to ensure that the company to which loan is sanctioned

62
enjoys good management skills and reputation. This can only be confirmed, if the
bank assesses the management of the borrower party by taking care of
i. Length and type of experience
ii. Qualification and integrity
iii. Reputation of managerial skills and style of management being used
iv. SWOT analysis
v. Financial procedures and documentation followed by employees
vi. Span of authority and responsibility
vii. Decision making skills of employees
viii. Risk management of employees

• Proper Documentation:
Loans become irrecoverable through court of law in case of default when the bank
fails to prove their claims against the delinquent borrower. If documents are
obtained properly as per terms of the loan it is not difficult for the counsel of the
bank to get decree against the defaulter. For proper and valid documentation the
following aspects must be kept in mind.
i. The bank should confirm that standard loan documentation is in place for
each credit facility prior to disbursement. If the documents required are
different from the bank’s standard approved format, arrangement for
vetting of the legal counsel.

ii. Bank should ensure that the documentation are correct, complete and
correspond with the approved facilities. Also to ensure that blank spaces
are filled, documents are dated, signed and stamped, the signer is
authorized to execute such documents and signatures are verified.

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

documents in vault, maintaining records as per bank operating procedure.

iv. Keep track of expiry of borrowing documents, insurance policies etc and
follow up for regulation of any approved documentation deferrals.

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

vi. Maintaining computerized record of documentation.

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

• Securities:
i. Physical verification of the property offered as a security is must rather to
rely on the documents. Investigation should also be conducted if the
property is of ancestral nature or joint property.
ii. The competent consultants should do valuation of the property and mere
completion of formatives should not be taken into account.
iii. Maintain in safe custody all collateral i.e. shares, govt. securities, property
title deeds, mortgage documents etc.
iv. Bank must ensure receipt of periodical statements of stock and receivables
from customers, as per frequency specified in the credit approval.
v. Bank should also do the periodic physical checking and evaluation of
pledged inventories as per terms of the approvals, i.e. using applicable
margins, such that the drawing power adequately covers out standings
amount at all times.
vi. Bank officials must ensure that the goods hypothecated or pledged are
covered through a valid insurance policy with appropriate risk coverage,
adequately covering the bank’s amount.
vii. Concerned bank staff should ensure compliance with the institutional
credit policies and procedures as laid down in the policy book or credit
manual and advised from time to time by the credit committee or top
management.
viii. Ensure compliance with local regulatory requirements.
ix. Confirm timely submission of correct information in the prescribed format
as may be required by the central bank.

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 • Administrative Reforms:

i. Fast resolving of loan defaults cases is must.

ii. Immediate steps to appoint more banking court’s judges.

iii. Exclusive judges are required for Lahore, Peshawar, Baluchistan, Sindh
High Courts.

iv. Informal body to be set up by the banks jointly with the bar councils and
chamber to monitor and publish performance of the banking courts. This
body will need statutory authority for protection from contempt.

v. Use of debt recovery agencies regulated by law is to allow.

CH # 7

IMPLEMENTATION PLAN:
Every organization has its own strengths, weaknesses and opportunities for
improvements. Nothing is impossible in this world. Possible can become
impossible if untried.
To ensure feasibility of a project, any suggestion or recommendation given for it
should be supported by its implementation plan. An implementation plan consists
of action oriented tools and procedures, which are specific and clear. An
implementation plan means that every thing except resources and taking of step to

65
start work is ready which shows that implementation plan is the soul of a project.
A good implementation plan consists of all the steps needed for the
accomplishment of a task or tasks, it is clear and helps in identifying the problems
to be faced in carrying practical work and provides a full picture of activities and
events.

7.1 ACTION PLAN 1:

7.1.1 Franchised Agriculture Supplies Shops:

In order to exploit opportunities available in the existing agriculture market the
following steps should be taken.

• Establishing franchised supplier shops

UBL should concentrate efforts towards major agriculture union councils and
develop franchised shops; those should provide essential farmer services
including leasing of sophisticated farm machinery and advising farmers how to
improve productivity.

• Location of franchised supplier shops

Preferably such shops should be in close proximity of UBL branches in the area.
These branches should extend credit to the shops for their supplies and
equipments and to farmer customers, at market rates, which are well below the
50%to 90% charged by the arties (informal sector).

• Agri-Officers in Branches:
Such agri credit officers should be employed who possesses requisite knowledge
and know how both of the agricultural field and bank credit fields. The bank
already has such assets, available in its existing HR factory and others can be

66
trained for, if so required. These officers should be provided with motorbikes with
per month fixed mileage limit.

• Cost Schedule
The above-mentioned plan has two major cost categories as given below:
a) Credit amount extension
This amount will be disbursed as per requirement and is to be recovered
with added return.
b) Operation cost
Details of the cost are tabulated below and following points are of significance;
i. Fixed cost, cost of motorbike less tax saving due to
depreciation expense should be amortized for a period
of five years and distributed equally on average number
of customers a mobile agri credit officer will deal with.

ii. Variable cost which includes petrol and maintenance

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

Table: 7-1 Cost Schedules of Action Plan

Fixed Cost Total Variable Cost Total Cost

Mileage/year Petrol/Year Petrol Cost Repair Maintenance

Dep. M/Cycle @50km/day @40km/day Rs.30/litre Per year TVC + TFC

15000 18000 450 13500 500 29000

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

67
 c) Pakistan loses a significant portion of its agriculture land
each year through high soil salinity and poor water
treatment. The bank can finance projects equipped with
measures to treat saline/soda water and soils so as to render
if efficacious for agricultural purposes.

d) The bank may help farmers to acquire needed equipment of

saline soil treatment thus enhancing their ability to bring
more land under cultivation and improve per area yield.

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

marketing services.

7.2 ACTION PLAN 2

7.2.1 Technique For Effective Management and Recovery of Advances:

Banks are highly leveraged bodies where advances constitute a major portion of
their assets. Effective management and recovery of advances has to be an ongoing
process, if the bank is to maintain good quality of its assets. In this regard
following plan is advised for effective management and recovery.

• Through Assessment of Advances:

Bench marketing technique should be used to develop comprehensive proposal
perform, though the existing Performa is not a bad one. Following factors should
be carefully examined.
a. Principle of good lending
This includes safety, desirability, liquidity and profitability.

b. Compilation of credit information report

Through investigation of the borrower’s personal and business related
aspects should be conducted.

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 • Proper and effective Documentation:
Safety of advances depends upon correct documentation. In addition to
compliance with all relevant legal rules and regulations following aspects should
be deeply digged into.

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

b) The Bank’s printed charge Form

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

c) Stamps
Charge form should be properly stamped in accordance with the stamp duty as
applicable in the province, where the documents are executed.

d) Execution and Documents:

These charge documents should be executed in the bank premises and should
be signed in full as per borrower’s specimen signatures.

e) Registration of Charged Documents:

Certain charged documents for example, mortgage deed are required to be
registered at the office of registrar. Such registrations must be affected within
21 days of the creation of the charge.

• Careful Monitoring
As a preventive measure, systematic and continuous evaluation helps to identify
potential problem cases before they reach a critical stage. It is, therefore, essential

69
to monitor advances. Following could prove good sources for effective
monitoring.
i. Financial statements, accounting and management policies.
ii. Bank accounts operations.
iii. Personal contacts and site inspections.
iv. Analysis of overall economic environment.
v. Analysis of industry specific environment.

• Review Function:
This is periodic monitoring function that should be conducted under following
broader guidelines.
i. Analysis of operations on financing account
ii. Credit report - bearing upto date information
iii. Financial statements analysis
iv. Inspection and analysis stocks reports
v. Review and updating charge documents
vi. Analysis, revaluation of securities
vii. Other correspondence with borrowers
viii. Study of previous review files
ix. Analyzing validity of insurance documents

• Handling of Delinquent Advances

Through careful monitoring and periodic reviews delinquent advances could be
recognized and should be tactfully and effectively handled. Good relations with
such customers should be maintained endeavors should be focused on ways and
means of obtaining repayment without resort to litigation. Borrower’s situation
should be analyzed and suggestions for improvement should be given. It is a well-
established fact that legal suits cost both money and time, which could be used for
more productive endeavors.

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 • Recovery of Advances through realization of securities
At times due to unforeseen circumstances beyond the control of the borrower, the
normal plan for repayment may not work out. Then the bank has to rely upon the
realization of security to liquidate the advances. Following steps should be
followed.
i. A notice for sale of security, bearing full particulars of the loans and
security should be served to borrower.

ii. Sufficient time should be given to borrower.

iii. Notice should be issued by registered post, acknowledgement due and

should be retained as evidence.

iv. Reputed surveyors should do through, valuation of security.

v. Written offers from several dealers should be invited.

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

vii. The offer closest to market value should be accepted

7.3 ACTION PLAN FOR MARKETING DEPARTMENT:

This will help the bank to take long-term perspective for its marketing activities,
with consideration on strategic approach of the bank. There are various steps
involved in the given implementation plan, which will come in order, according to
their importance and subjection on one another. Moreover, to bring order and
efficiency to the difficult task of implementation plan. It has been broken down
into the steps, which believed to be needed, when developing a disciplined
action/implementation plan for launching financial products.

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Step 1: Business Review
As we early discussed that this implementation plan will focus on marketing
activities of UBL and as a part of the marketing background component, the
business review is must. It includes the marketing database not only of UBL but
also of other banks. To develop marketing database, we first need to understand
the scope of banking followed by a comprehensive situational analysis of the
financial product, and market place, which is relevant to the target market and
competition situation. This will be accomplished through secondary research in
Pakistan. UBL’s own record of financial products and very often-primary research
surveys of potential customers and focus group information. The business review
provides a qualitative and quantitative decision activities and a rational for all the
strategic marketing decisions with in the plan.

Step 2: Problems and Opportunities

The problems and opportunities step of UBL is a summary of the challenges that
will emerge from the marketing database. In this step the data collected from the
business review is shaped into meaningful summary points that form the basis of
the implementation plan.

Step 3: Quantifiable deposits’ Collection Target

Collection of deposits as an objective represents projected levels of services to be
sold. Setting this objective is critical because it is the first task of this
implementation plan and it sets the tone of the entire implementation plan for the
bank. Everything that follows in the plan is designed to meet the objective of
collecting deposits through financial product from defining the size of the specific
target market establishing marketing objectives
This will also determine the amount of advertising and money spent on it in a
quantifiable manner, e.g. 400 million advertisement expenses in a year, for the
first 5 years of its start.

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Step 4: Target Markets and Marketing
The target market and marketing objective both are inducted in one step due to
their critical link to one another.
Target Market: Once the deposits collection being developed as
quantifiable objective, the staff of marketing department at the Hub branches and
Head Office of bank must determine to whom they will be selling their new
financial packages. In response to which bank will raise deposits, making this
determination is really defining a target market. Which is a group of people with
common characteristics. This part of implementation plan is concerning on
marketing efforts towards the portion of population wit similar banking needs and
saving habits.

Marketing Objectives: Marketing objectives for UBL clearly defines

what the bank want from its target market and potential customers. This part of
implementation plan focuses on the behavior of customers that will help in setting
the marketing objectives.

Step 5: Plan Structure

To compete with other banks, UBL needs to set strategies for its new product by
including the postings strategy, it will help in image building of the financial
package to be launched.
Posting: Once the bank has defined its potential market and has
established marketing objectives, it must need to develop posting of its financial
product. Position is the desired perception of the product within the market target
of the bank for example, if the product is launched. Its position should be done in
such a way, that customer is fully aware of its major characteristics the bank has
stained to build the image of its products as highly profitable package. This
positioning strategy is supported by the strategic consideration on various
marketing mix tools e.g. advertisement, publicity etc,

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 Marketing Strategies: though marketing strategies are descriptive and
non- qualitative yet has a major impact over getting competitive advantage. These
marketing strategies guide to the development and selection of various tactical
marketing mix tools and provide direction in broadening the target market, set by
the bank.

Step 6: Informational Goals:

All steps of this implementation plan are highly dependent, but step 5, 6 & 7 are
much more. Informational goals means to set the target the market awareness and
attitudes package and fulfill the marketing objective of the bank. Another purpose
is to provide direction for what is to be accomplished by each strategic tool in
term of informational context.

Step 7: Strategic Marketing Mix:

This step is highly concerned with getting attention of the customers towards the
service of the UBL offering. Here we are concerned with a new package launched
by the bank. Focus will be on that financial product. This step of disciplined
implementation plan provides some strategic plans for marketing of the product.
These strategic and tactical plans incorporate marketing executed. When
implemented, will allow the bank to meet it’s marketing objectives and fulfill the
overall marketing strategies and information and communication guidelines,
established in the start of the plan. Selection of each marketing tool has its own
objective and strategies. Following are the marketing mix tools included in
strategic planning process.

• Financial package/Product
This is the service which is provide by the bank as a result of which bank gets
deposits and customer takes profit and keeps his money safe.

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 • Branding
Branding is the naming of new-marketed financial products e.g. present products
of UBL i.e., UBL Sahara, UBL Hamrah Travelers Cheque. This brand or name of
service associates with it should be such, which could communicate some
message and attract the customers.

• Profit Percentage
This is the percentage of profit, which the customer expects receives from the
bank against his deposits in a scheme of financial package.

• Advertising Media
Promotional campaigns provide added incentive, encouraging the target market to
perform some incremental behavior, which is highly necessary. Communication
with the target market should be always there and Electronic and Print Media
should be used for promotion of financial product. Following is some financial
tabulation for UBL based on some data taken from an advertising agency. This
will show the importance of advertising and its benefits in terms of figures. This
table gives the plan for one year and is for one financial product, for example, a
product of UBL like SAHARA. A conservative approach has been followed to get
a framework for reality, and to help in avoiding the slack season of economy.

Table: 7-2 Cost/revenue schedule – Marketing Plan

No. Of Average Lending by Total Difference

Customers deposits Bank Deposits (Revenue)
Cost of
Advertising Attached by in Year

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 Customers
48 Million 1 Million

(7% of 2% of D=100 5 billion (b x (E - A)= 52

population) 5000 million c) million

i. The bank’s revenue in the F column does not include advertisement

expense, which is a major cost here in this comparison.

ii. 2% given in column E is the difference of percentage between lending and

borrowing which is again a conservative approach.

iii. Many things in the comparison have been kept constant to understand the
importance of advertisement.

BIBLIOGRAPHY

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• Aswathpa, K, (2003) Human Resource and Personnel Management: New
Delhi: Tata McGraw Hill Gibson, Charles H, (2002), 7th. Ed., Financial
Statement Analysis, Prentice Hall International Corporation.

• Meenai, S A, (1999) Money & Banking in Pakistan, Karachi: the Elahi’s

Book Corporation.

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

Royal Book Company, Karachi.

• UBL (1999). Credit Manual. Karachi.

• UBL (2000). Deposit Manual. Karachi.

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

• Van Horne, J. C & J.M Wachowicz, (1998), 10th Edition. Fundamentals of

Financial Management. New York, Prentice Hall International
Corporation.

• http/. www.ubl.com.pk

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