You are on page 1of 107

Page 1 of 107

Final Project
On

UNITED BANK LIMITED

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

Submitted By:
Aftab Mughal 1632-211004
MBA (Hon) (Banking & FINANCE)

Submitted To: ___________________________

PIMSAT
Institute of Higher Education

Page 2 of 107

FOR The partial fulfilment of the requirements for awarding the degree of MBA (Banking & Finance)
Assigned by: ____________________________ Faculty Members Signature: _______________ Internal Examiner Sign: ____________________ Name: __________________________________ External Examiner Sign: ____________________ Name: __________________________________
Page 3 of 107

We are thankful to Allah and many different people for helping us creating this project. Thanks to our families for their trust and understanding. Our friends (who have always been a source of inspiration) have helped to create a wonderful academic climate.

Page 4 of 107

Our Dearest and most respected Parents. Whose efforts and prayers are great source of strength to us in every noble venture? Their love inspired us to the higher idea of life.

Page 5 of 107

There are many definitions of the word Bank even the standard encyclopedia and law books find it difficult to state exactly what a Bank is! There have been many attempts by different writers to explain the exact significance of the term Bank. Here some of the definitions are quoted as follows:

Banking Companies Ordinance 1962 Section 5 (b) defines banking as:


Banker means a person transacting the business of accepting, for the purpose of lending or investment, of deposits from the public, and withdrawal by cheques, drafts, order of otherwise, and include any post office saving banks.

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

According to Gilbert:
A bank is a dealer in capital or dealer in money. He is an intermediary party between the borrowers and lenders.

According to Samuelsson:
Commercial banks provide certain services for customers and in return receive payments from them.

Thus the comprehensive definition of the bank is:


A bank is a financial institution, which deals with money and credit. It accepts deposits from individuals, firms and companies at a lower rate of interest and gives at a higher rate of interest to those who need them. The difference between the terms at which it borrows and at which it lends forms the source of it profit. No doubt, a bank, thus, is a profit earning institution.

Page 6 of 107

VALUE of BANKING
Banks play very important role in the economic life of a nation. The growth of the economy is dependent upon the soundness of its banking system. Although banks do not create new wealth but borrow, exchange and consume. These make generation of wealth. In this way they become most effective partners in the development of that country. To encourage the habit of saving and to mobilize these savings is its basic purpose. Banks deposit surplus from the public and then advances these surpluses in the form of loans to the industrialists, agriculturists, businessmen and unemployed people under different schemes so that they set up their own business. Thus banks help in capital formation. If there are no banks, then there would be concentration of wealth in few hands and great portion of wealth of a country would be idle. In the fewer developing countries rate of saving is very low and due to this, rate of investment and rate of growth is also very low. We can take bank just like a heart in the economic structure and capital provided by it is like blood in it. As long as the blood is in circulation, the organs will remain sound and healthy. If the blood is not provided to any organ then the organ would become useless. So if the finance is not provided to agriculture sector or to industrial sector, it will be destroyed. Loan facility provided by bank works as an incentive to the producer to increase production. Banks provide transfer of payment facility, which is cheaper, quicker and safe. Many difficulties in the international payment have been overcome and volume of transactions has been increased. These facilities are very much helpful for the development of trade and commerce.

Page 7 of 107

BANKING SYSTEM

Banking services are extremely important for both developed and developing economy such as Pakistan. Banking services serve two primary purposes: o First, by supplying customers with the basic mediums-of-exchange (cash, current accounts, and credit cards), banks play a key role in the way goods and services are purchased. Without these familiar methods of payment, goods could only be exchanged by barter (trading one good for another), which is extremely time consuming and inefficient. o Second, by accepting money deposits from savers and then lending the money to borrowers, banks encourage the flow of money to productive use and investments. This in turn allows the economy to grow. Without this flow, savings would sit idle in someones safe or pocket, money would not be available to borrow, people would not be able to purchase cars or houses, and businesses would not be able to build the new factories the economy needs to produce more goods and grow. Enabling the flow of money from savers to investors is called financial intermediation, and it is extremely important for the growth of economy.

Page 8 of 107

HISTORY of BANKING

Earliest Banks:
The first banks were probably the religious temples of the ancient world, and were probably established sometime during the 3rd millennium B.C. Banks probably predated the invention of money. Deposits initially consisted of grain and later other goods including cattle, agricultural implements, and eventually precious metals such as gold, in the form of easy-to-carry compressed plates. Temples and palaces were the safest places to store gold as they were constantly attended and well built. As sacred places, temples presented an extra deterrent to would-be thieves. There are extant records of loans from the 18th century BC in Babylon that were made by temple priests / monks to merchants. By the time of Hammurabi's Code, banking was well enough developed to justify the promulgation of laws governing banking operations. Ancient Greece holds further evidence of banking. Greek temples, as well as private and civic entities, conducted financial transactions such as loans, deposits, currency exchange, and validation of coinage. There is evidence too of credit, whereby in return for a payment from a client, a moneylender in one Greek port would write a credit note for the client who could "cash" the note in another city, saving the client the danger of carting coinage with him on his journey. Pythius, who operated as a merchant banker throughout Asia Minor at the beginning of the 5th century B.C., is the first individual banker of whom we have records. Many of the early bankers in Greek city-states were metics or foreign residents. Around 371 B.C., Pasion, a slave, became the wealthiest and most famous Greek banker, gaining his freedom and Athenian citizenship in the process. The fourth century B.C. saw increased use of credit-based banking in the Mediterranean world. In Egypt, from early times, grain had been used as a form of money in addition to precious metals, and state granaries functioned as banks. When Egypt fell under the rule of a Greek dynasty, the Ptolemies (330323 B.C.), the numerous scattered government granaries were transformed into a network of grain banks, centralized in Alexandria where the main accounts from all the state granary banks were recorded. This banking network functioned as a trade credit system in which payments were affected by transfer from one account to another without money passing.

Page 9 of 107

EVOLUTION of BANKING IN INDO-PAK SUB CONTINENT

The Indian society was quite familiar with the banking, right for the beginning. There is also sufficient evidence to show that during 5th century people were accustomed to use hounds as a credit investment. Loans were given to the people against personal and other securities such as ornaments, goods and other immovable properties.

Page 10 of 107

COMMERCIAL BANKING IN PAKISTAN


First Phase (1947 1974):
o Establishment of Commercial Banking System:
There were 19 non-Indian foreign banks in Pakistan at the time of independence with the status of small branch network, whose policies and operations were controlled by their head office abroad. These banks were solely engaged in export of crops from Pakistan. There were only two banks in Pakistan at the time of Partition, Habib Bank, which had transferred its head office from Bombay to Karachi after the announcement of the partition, and Australian Bank, which has been working in Pakistani territories prior to June 1947.The government of Pakistan, tried hard to eliminate the banking crises. The imperial bank of India closed down most of its offices in Pakistan, which had been working as the agent of Reserve Bank of India was not willing to purchase even token amounts of the government of Pakistan. The Reserve Bank of India was hardly of any help. It refused to help the govt. of Pakistan with advance argument ad-hoc securities to enable them to make essential disbursements such as salaries and other obligations to add to the difficulties. The Indian govt. withheld Pakistans share of 750 million in cash balances held by her at the time of independence. The forgoing developments clearly brought home the urgency of assuming the control and currency in Pakistan and brought to the force the need to setup a central banking institution to take the place of reserve bank of India. Therefore it was agreed between the Govt. of India and Pakistan to authority of Pakistan from 30th September 1947 to 30th June 1948. When it assumed full control of banking and currency in Pakistan the first important task before the SBP was to issue of currency notes and withdrawal of reserve bank of India, which had been in circulating in Pakistan so far.

Second Phase (1974-1979):


o Nationalization of Banks:
The banking reforms turned out to be a transitional and temporary step and hardly after 18 months, the government nationalized the banking system. Thus through the Nationalization Bank Act 1974, SBP and all commercial banks incorporated in Pakistan and carrying on business in or Page 11 of 107

outside the country were brought under the government ownership with effect from January 1974. The ownership and management of all Pakistan banks stood transferred and rested in the federal government. The shareholders were provided compensation in the form of federal government bonds redeemable at par any time with in a period of fifteen years. The amount of compensation was equal to the breakup value of the shares in case of commercial banks. For the SBP shares the amount of compensation was estimated on the basis of average of the clearing quotations during the 6 working days preceding nationalization. The chairman, director and chief executive of various banks were removed from their offices other than those appointed by the federal government and the state bank. The central board of banks, managing committees and similar other bodies were dissolved.

o Causes of Nationalization:
The nationalization of banks may be justified on the following grounds: - Large business and industrial houses dominate the lending policies of the commercial banks; this brought forward the problem of concentration of wealth. - Commercial banking operations were guided by profit motives and as a result the backward regions and the small entrepreneurs were never been their favorite customers. - The operation of banks, unlike after business, have direct implication on the entire national economy. For instance if the banks raise the cost of their credit, the cost of everything may go up.

Third Phase (1979-1991):


o Introduction of Islamic Banking:
In 1977 the Bhutto government was toppled. The martial law government planned to reform the banking sector in a novel way. The overall policy was to Islamize the economy and the banking system, being based on interest was an important target of the new policy. The most preferred form of Islamic bank financing profit and loss sharing would receive banks to receive deposit without guaranteeing any return. The Islamic bank has to acquire a high degree of confidence of the saver to make him deposit his money with them. Not even the return of the principal amount if guaranteed. The Islamic bank cannot finance the project of an investor merely on the furnishing of collateral. The bank will have to be a partner in the project. This will require to careful security of the project and the assessment of risk involved because profits are the function of the amount of risk in the project. Honesty and trust from both sides of the market are more important to the system of Islamic Banking. Page 12 of 107

Fourth Phase (1991-2000):


o Privatization And De-Regulation:
The government headed by Prime Minister Nawaz Sharif was not fully satisfied with the performance of nationalized banks. The areas, which were severely criticized, were the falling standard of banking services and common red-tapism. There were complaints about the services as delay in home remittances, dispatch of cheques, drafts, inefficient counter services, bad debts of the banks etc. were on sector application for privatization of other banks namely UBL and HBL were also invited but the bidding response was quite poor. The privatization of these banks is under consideration. Legislation was enacted to permit the establishment of new banks and the government approved 10 application from the private sector for the grant of commercial bank licenses by SBP, out of these 9 new banks have since been incorporated. Till March 1994 there were 20 domestic scheduled banks with 9825 branches and 21 foreign banks with 66 branches in operation in the country. Overall investment of the scheduled banks rose to 76.7%. At present there are 24 domestic scheduled with 8137 branches and 19 foreign banks with 71 branches are in operation in the country. Total assets of domestic scheduled banks amounting to Rs.1563.73 billion on 30th March 1996.

Page 13 of 107

BENEFITS of BANKING for ECONOMY


The deposits and loan services provided by bank beneficial for an economy in many ways: First, Current account, because they act like cash, make it much easier to buy goods and services and therefore help both consumers and businesses, who would find it inconvenient to carry or send through the mail huge amounts of cash.

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


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

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

Finally, since banks want loans repaid, banks choose borrowers carefully and
monitor performance of a companys managers very closely. This helps ensure that only the best projects get financed and that companies are run efficiently. This creates a healthy, efficient economy. In addition, since the owners (stockholders) of a company receiving a loan want their company to be profitable and managed efficiently, bankers act as surrogate monitors for stockholders who cannot be present on a regular basis to watch the companys managers.

Page 14 of 107

UNITED BANK LIMITED


UBL was established in November 7, 1959 and is one of the major commercial banks of Pakistan. The Bank is making every effort to meet the up-coming challenges through strategic planning and making the best use of the resources at its command. UBL is a Banking Company, which is engaged in Commercial & Retail Banking and related services domestically and overseas. On 1st January 1974 banking nationalization act was promulgated which states that all the banks working in the territory of the state are owned by Federal Government. There were 14 banks with 3323 branches within the country and 74 in foreign country offices. On 1st July 1974 under nationalization act Commerce Bank was merged in United Bank. There were complaints about the services as delay in home remittances, dispatch of cheques, drafts, inefficient counter services, bad debts of the banks etc. were on sector application for privatization of other banks namely UBL and HBL were also invited but the bidding response was quite poor. Due to above Problems State bank of Pakistan has took over the United Bank Ltd in 1996. A professional team was appointed in mid 1997 to restructure the bank and to commence rightsizing. The management is also in the process of rationalizing the branch network and identifying and recovering its doubtful and classified portfolio. It has planned to institute major improvements in customer services and internal systems to improve efficiency. It also intends to launch innovative products. The bank is increasing resource mobilization through regular deposit campaigns and accelerating the process of recovery of outstanding advances and non-performing assets. In October, 2002 UBL was sold to Abu Dhabi Group of Industry and Best Way Group of Industry with 51% shares were given to them.

Page 15 of 107

UNITED BANK LIMITEDs VISION


The statement said with a vision of becoming a World Class Bank together with its 'you come first' philosophy, the UBL has come a long way in the journey to accomplish its vision.

UNITED BANK LIMITEDs MISSION


Set the highest industry standard for quality, across all areas of our operation, on a sustained basis Optimize people, processes and technology to deliver the best possible financial solutions to our customers Become the most sought after investment and Be recognized as the employer of choice

Page 16 of 107

UNITED BANK LIMITEDs PRESENT POSITION


United Bank ltd is the third largest bank in Pakistan. UBL has assets of over Rs. 550 billion and a solid track record of forty eight years - in addition to the convenience of over 1000 branches serving you throughout the country and also at several overseas locations.- in addition to the convenience of over 1000 branches serving you throughout the country and also at several overseas locations. Its paid up capital Rs.8.09 Billion and Reserves Rs.10.261 Billion Inappropriate profit Rs.15.56 Billion (as at December 31st 2007)

Long Term Rating AA +:


United Bank Limited is one of the largest Commercial Bank in Pakistan. The Bank's long term rating is AA +, which denotes good credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions.

Short Term Rating A-1+:


The short-term rating is A-1+, which denotes the highest certainty of timely payment. Short-term liquidity, including internal operating factors and / or access to alternative sources of funds, is outstanding and safety is just below risk free Government of Pakistan's short-term obligations.

Term Finance Certificate Rating:


TFC - I: 'AA' TFC - II: 'AA' TFC - III: 'AA' TFC - IV: 'AA'

Page 17 of 107

FUTURE STRATEGIES
UBL expects its strong customer focus to drive the Banks future business strategy. On the domestic front the bank is already an established player in consumer banking business. It has taken an aggressive entry into the consumer assets market with full range of product offerings, e.g. car financing, home loans, etc. UBL plans to increase investment in developing human resources, infrastructure and internal systems to support the aggressive consumer initiative and exploration of new avenues of revenue recognition UBL is introducing a range of credit cards backed by visa and master card and establish a strong market position through innovation and provision of superior value to the customers On the international front ,UBL plans to continue to build the core gulf business with special focus on trade, With a network presence in Gulf, New York, Zurich and London UBL has an ideal opportunity to offer correspondent banking services in these key financial centers to a host of small and middle-tier banks in the subcontinent, middle east and Africa.

Page 18 of 107

HISTORY of UNITED BANK LIMITED


1. 2. 3. 4. The history of UBL can be divided into four main Phases: Formulation Nationalization Privatization Today

1. Formulation:
In June 1957, Mr. Agha Hassan Abidi decided to open a Bank different from others, to provide modern facilities to trade and industry and to promote thrift and habit of saving amount common thereby stimulating the economy as a whole. Necessary formalities completed for obtaining registration certificate from State Bank of Pakistan to perform business activities. After passing through all these formalities on 7th November, 1959 United Bank Ltd came into existence as a Schedule bank. The Head office of the Bank was established in the New Jubilee Insurance House, 1, l.l Chandrigar Road Karachi. It was registered as a joint stock company. The bank was incorporated with an Authorized Capital of Rs. 20,000,000 and issued and subscribed and paid up capital of Rs. 1,000,000. Saigol family owned it and Agha Hassan Abedi was its first managing Director. It had posted a profit of Rs. 0.7 million in its first year of operation with just Eight branches at Karachi.

2. Nationalization:
As a policy of nationalization fourteen commercial banks was merged into five big banks. So consequently on 21st December 1974 Commerce Bank and Union bank was merged with the UBL. Mr.Mushtaq Ahmed khan Yousafi took over the charge of UBL. Now, there are six directors, a secretary and a president.

3. Privatization of UBL:
United Bank Limited UBL was the largest privatization attempted by the government of Pakistan, launched in June 2001, with 21 interested parties. It was impacted by the adverse developments of the September 11, 2001 and was finally concluded in October 2002, which left stage only three bidders. The consortium comprising Bestway Group (BG), out of the UK and Abu Dhabi Group (ADG) from the UAE were finally the winners at a record price.

Page 19 of 107

Sale proceed was Rs. 12350 million. This signaled the strong confidence reposed by these investor groups, in the improved governance of the country, the economic potential, the banking opportunity and the existing management of the bank.

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

Logo:
The United Bank Limited (UBL) management has launched its new corporate identity and changed its 44 year-old-logo following its privatization.

UBL Online:
Evolution of internet and mobile online banking.

Money Direct:
This remittance facility has been started to facilitate transfer of money from UK to Pakistan.

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

Page 20 of 107

MANAGEMENT of UNITED BANK LIMITED


Over view of UBL:
UBL has assets of over Rs. 550 billion and a solid track record of forty eight years - in addition to the convenience of over 1000 branches serving you throughout the country and also at several overseas locations. o Date Established: o Chairman: o Deputy Chairman: o President & CEO: o Branches: o Joint Venture with NBP: o Representative Offices: o Subsidiary: November 7, 1959 His Highness Shaikh Nahayan Mabarak Al Nahayan Sir Mohammed Anwar Pervez OBE Mr. Atif R. Bokhari 1138: 1121 Domestic, 17 Overseas Branches United National Bank Limited, U.K Tehran, Kazakhstan, America & China. United Bank AG Zurich, Switzerland. United National Bank Limited, UK (Joint venture

with NBP). UBL Fund Managers Limited. o Associated Company: Oman United Exchange Company, Muscat. UBL Insurers Limited. o Offshore Banking Unit: Export Processing Zone, EPZ Branch, Karachi, Pakistan o Employees: More Than 10,000. o Head Office: State Life Insurance Corp. Building #1, I.I. Chundrigar Road, Karachi, Pakistan P.O. Box No.: 4306 Phone: (92-21) 111-825-111 Gram: "UNITED" Fax: (92-21) 2413492

Page 21 of 107

Branches by Region
Region
Karachi Hyderabad Multan Lahore Faisalabad Quetta Peshawar Islamabad Azad Kashmir Total

Branches
110 120 165 86 162 42 160 157 77 1079

Provisional Headquarters
Province
Punjab Sindh N.W.F.P Baluchistan Lahore Karachi Peshawar Quetta

Page 22 of 107

United Bank Limited OVERSEAS NETWORK


HUB Name
United Arab Emirate Bahrain Yemen Qatar United States of America Export Processing Zone, Karachi Total Branches

Branches
9 3 2 1 1 1 17

OVERSEAS NETWORK COUNTRIES


Branches "" "" "" "" "" "' Representative offices "" Associated companies Name of Country
U.S.A Qatar U.A.E Bahrain Republic of Yemen Zurich Iran Egypt

Oman

Page 23 of 107

Branches in U.S.A. U.K. and Other Representative & Associated Offices

New York:
Address:
30 Wall Street, 10th Floor, New York, NY 10005. United States of America

United Kingdom UK:


United National Bank
Branches: London Birmingham Bradford Glasgow Manchester

Representative offices:
o Tehran o Kazakhstan o China

Associated Companies:
o Oman United Exchange Co. Muscat o UBL Insurers Limited

Page 24 of 107

MANAGEMENT STRUCTURE
President and Chairman of Board of Director Executive vice President

General Manager of

Dept. 1 Dept.5

Dept. 2

Dept. 3

Dept. 4

Zonal Incharge

Area Manager

Branch Manager

Page 25 of 107

BASIC STRUCTURE
Board of Directors

President & CEO

H.O. Committees

Groups & Segments

Chairman

Groups Heads/Segment Heads

Field Operations H.O. Committees RCE, s / GM, s

Branches Core Functions Support functions

Divisional Heads

Department Heads

Page 26 of 107

RCEs ORGANOGRAM
Regional Chief Executive Head of Branches operations

MIS Coordinator

Coordinator

Senior Relationship Manager (SRM) Area Manager (AM)

Regional Operations Head (ROH) Regional Agric. Manager (RAM)

Relationship Manager (RM)

Coordinato r

Agriculture Credit Officer (ACO)

Relationship Manager (RA) Unit Head Unit Head

Officer Coordination

Officer Coordination Driver Manager

Page 27 of 107

AREA MANAGERS ORGANOGRAM


AREA MANAGER (AM) Regional Operations Head

Coordinator

Hub Branch Manager Hub Branch Operations Manager

Area Operation Manager (AOM)

Branch Manager

Officer

Officer

Branch Operations Manager

Commercial officer

Business Dev. Officer (BDO) Supervisor Funds Transfer Supervisor Customer Services

Commercial Officer Supervisors

Data Supervisor

Supervisor Cash

Hub ECoordinator

Outsourced Cash Officer (OCO) Cash Officer Cashier

Data Input

Cashiers

Cash Officers

Outsource Cash Officer

Page 28 of 107

BUSINESS SEGMENTATION
UBLs credit process is built around the following basis customer constituencies: Corporate Banking Group Commercial Banking Group Consumer Banking Group Investment Banking Treasury and Capital Market Group International Division Financial Institution Division Islamic Banking Group Business group heads will prepare their annual plans with projected financial results and strategies and manage actual transactions and portfolios consistent with their asset writing strategies. These groups are also responsible for monitoring their performance for annual improvement.

o Corporate Banking:
The corporate banking group has endeavored to be the market leader in their area and build market share through offering superior services, competitive pricing, and a whole product range to valued corporate clients which include private and public sector entities This group will continue to remain the major contributor to UBLs earning by taking advantage of tremendous growth potential of corporate clients. The group requires talented, qualified and proactive human resources. Frontline relationship managers require a complete grasp of UBLs credit policies and procedures as they directly affect existing and future credit portfolio handling.

o Commercial Banking:
This group caters to the needs of commercial entities and SMEs as defined in prudential guidelines of SBP (State Bank of Pakistan). This group deals with commercial clients of small to medium size in both private and public sector. It operates almost in every city of Pakistan. This group aims to fulfill necessary business needs of its customers, which are more numerous than corporate clients, however, their individual requirements are much smaller than those demanded by corporate clients.

Page 29 of 107

o Consumer Banking Group:


This group provides financial facilities to individuals through a diverse product line. Its success depends on the design of effective products, comprehensive communication and marketing strategies. This group operates almost in all Pakistan cities and also in some international location through UBLs network of branches and trained sales force. This group offers products such as home loans, personal loans, auto loans, business loans and credit card facilities. Consumer banking group requires regular training of its workforce and the need for imparting basic product knowledge to sales staff is highly pronounced in this group as they are in direct contact with the customer base. This group conducts business based on structured products that fit into the needs of its target market. Product process manuals are developed for these products and are provided with credit policy and procedure guidelines.

o Investment Banking:
This group specializes in providing innovative and unique advice to its clients, assisting them in meeting challenges in an ever changing market. This group is equipped with adequate experienced professionals. This group will either lead or participate in major Term Finance Certificates in the market. It offers a full spectrum of services. Including, TFCs, syndicated loans, structured finance, leverage buyouts, project finance, quasi equity products, independent advice, equity placements, mergers, corporate restructuring, acquisition and other products. Although the corporate banking group supports the product line of investment banking group, the special nature of these products demands a more active involvement of risk management. Risk management is to be proactively involved in investment banking group transactions, right from the time of initiation until the time of execution.

o Treasury and Capital Markets Group:


The major roles of this group include: Managing banks liquidity and balance sheet requirement as per UBL and SBP guidelines. Dealing in foreign currencies on behalf of its customers. Providing treasury and foreign exchange related financial services to its clients. This group consists of highly qualified and experienced HR who is actively involved in dealing with other banks/financial institutions to execute transaction in various currencies. In performing these tasks, it undertakes credit risk which is identified, monitored and managed by middle staff.

o International Division:
Page 30 of 107

The international division manages overseas operations including credits handled by network of overseas branches. With careful planning and detailed surveys of market, the international division will explore better quality businesses and products and manage them efficiently to enhance UBLs profitability and turn the overseas branches network into highly profitable unit of bank.

o Financial Institution Division:


This is an independent division operating as a profit center and is responsible for catering non-banking financial institutions. The division caters to financing needs of all local banks, foreign banks and other financial institutions including leasing companies, investment banks, DFIs, insurance companies, mutual funds etc. Like the corporate banking group, the financial institutions division also operates with a structure of relationship managers, providing comprehensive solutions to its clients.

o Islamic Banking Group:


Roles of Islamic banking are: To manage and be responsible for the operations of Islamic Banking Business (IBB) To liaise with other dept. in the bank and the Shariah advisor to ensure smooth operations of IBB To ensure that all funds pooled into the Islamic Banking Fund (IBF) and channeled into Shariah-Compliant financing and investment activities To arrange training of staff is Islamic Banking To arrange for compilation and submission of such returns as may be required to be submitted to SBP from time to time; To ensure that all directives and guidelines, particularly those applicable to Islamic Banking, issued by the SBP are strictly compiled with; To maintain the statutory cash reserves & liquidity requirements with the SBP as prescribed the SBP; and To assume other roles and responsibilities as determined by SBP from time to time.

Page 31 of 107

UNITED BANKs COMMERCIAL BANKING


If you have a small or medium-sized business, UBL can assist you with the right mix of banking services that will help you manage and grow your business. The experts of UBL facilitate its customers in the varied financial situations that they come across.

Commercial Banking Products:


UBL has taken progressive steps and has introduced innovative products and services to provide you a variety of banking and financing services. o Agricultural o Foreign Currency Savings o Foreign Currency Term Deposits Receipts o Rupee Transactional Account (RTA) o Regular Term Deposits Receipts o Small Business o Special Notice Deposits Receipts o UBL Business Partner o UBL Wallet o UBL Profit o Unisaver

Commercial Banking Services:


UBL has taken progressive steps and has introduced innovative products and services to provide you a variety of banking and financing services. o UBL Wallet o Online Banking o Bank Charges o Forms o UBL e-statement

1. Agricultural Loan:
UBL's agricultural loans on easy terms and conditions to small-scale land owning farmers boost the country's economy and yield greener harvests. UBL enables farmers to buy good quality seeds, fertilizers, pesticides and agricultural implements. Through the Government's Loan Schemes for Hairs, UBL helps the formers in crops prosperity to make Pakistan's economy stronger. Page 32 of 107

2. Small Business:
Under the Small Business Scheme, UBL is providing loans on easy terms to those who wish to set up their own small-scale business. This scheme is aimed at spreading prosperity in the country by reducing unemployment. As more and more people start their own industrial units, the country will move steadily towards economic self-reliance.

BusinessLine:
- What is BusinessLine?
It is a Credit Line/ OD Facility against Residential Property. It is an evergreen credit line that the customer can use for his/her business expansion UBL Business line a complete solution to all your Business Financing needs. With UBL Business Financing facility, one can now take his business to greater and newer heights, and achieve the level of success that he truly deserves. UBL Business line is a running Finance facility that not only provides funds for growth but also enables the customers to capitalize on profitable opportunities.

UBL Drive:
UBL Drive is a unique auto financing product which offers features, options and flexibility unmatched by any other bank, because at UBL, You come first.

New Car Financing:


UBL Drive allows to drive away own car by making a down payment of just 10% and to top that with low monthly installments

Used Car Financing:


With UBL Drive one can buy his favorite used car (up to 5 years old) at the most affordable rates.

UBL CashLine:

Introduction:
UBL CASHLINE is a personal loan offered to customers. In today's dynamic and hard economic environment where one can be in difficulty due to any shortage of money for some urgent or routine work, UBL CASHLINE guarantees the solution to the customers. This is a loan offered to the customers with a view to investing the bank's funds in a manner as to get good return financially and socially.

Page 33 of 107

This product of the UBL consumer finance offers very unique features and provides complete convenience, affordability and flexibility to the customer. People now days are not in a condition to save voluntarily. The inflation in our economy is one of the major reasons why people feel difficult to save. Saved money losts its purchasing power as the time passes, so people tend to spend them in some business or buy some durables or in any other activity. Due to these tough economic conditions people have little money to spend for special events. UBL CASHLINE comes to rescue here. It offers a cash loan to customer on easy terms and low mark up and encourages them to spend for themselves. This product like any other consumer finance product has a multiple effect on the economy and positive impact on GDP. This product was launched in LAHORE in OCTOBER, 2006 and is a success since then. It is offered from Rs. 25000-Rs.500000. Like all other consumer finance products of UBL, this particular product also enjoys a 50% plus market share. Such an achievement in just 6 months is remarkable. This indicates the overall strategy and vision of UBL regarding consumer finance.

UBL Travelers Cheaques HAMRAH:


-

Introduction:
UBL was the pioneer in introducing Rupee Travelers Cheques facility in Pakistan, as early as 1971.UBL "Hamrah" has been designed keeping in mind, both convenience and security - be it business, property, trade or personal needs. "Hamrah" Rupee Travelers Cheques are the ideal and safest way of carrying cash when traveling anywhere in Pakistan. Hamrah RTC's are now accepted at more than 2000 places such as hotels, shops, real estate agents, jewelers, car dealers, etc and of course at all our UBL branches. UBL has a 24-Hours customer help-line, providing its customers with round the clock tele-verification of "HAMRAH" travelers Cheques.

Page 34 of 107

o Salient Features:
-

Absolutely FREE - No Bank Commission, No Excise Duty:


Bank doesnt charge any commission or excise duty on sale of travelers Cheques, Whatever the denomination is.

Denominations: UBL RTCs are available in Rs. 10,000 and Rs. 5000 denominations. Easily Transferable and Encashable:
Hamrah Rupee travelers Cheques are easily encashable at designated branches of UBL throughout the country through a single signature.

Available to All:
The person does not need to have an account with UBL to buy rupee travelers Cheques.

Ease of Immediate Assistance in case of Loss or Theft:


In case of theft or loss of the travelers Cheques the customer just has to call the U FIRST SERVIC CENTRE which are providing help to customers 24 hours a day and will guide him in the process.

Special Facility of Refund:


Customer can have an immediate refund from the already designated branches while traveling inside Pakistan.

Valid Until Encashed:


They can be encashed whenever the customer wants, as there validity does not have limit.

Page 35 of 107

Page 36 of 107

CORPORATE BANKING GROUP


The mission of UBL is to serve all the corporate needs and ensure full satisfaction through product innovation, personalized banking, and top notch service. The CBG (CORPORATE BUSINESS GROUP) department of UBL defines corporate banking in Pakistan. Amongst the local banks UBL CBG is the pioneer in providing innovative solutions to its diversified and satisfied customer base. UBL CBG is considered to be a major player in the financial market of Pakistan. The Corporate Banking Group focuses on attracting and servicing large portfolio customers. The forte of UBL is providing exemplary customer service using the "Single Window" concept and product superiority. The Relationship Management team manned by highly qualified individuals from the industry has steadily expanded the customer base and continues to enhance the cordial relations with the esteemed clients. Despite the sluggish economic growth in recent years, UBL outperformed all the other local banks in the corporate banking sector primarily due to CBG's emphasis on establishing and enhancing relationships with foreign/local blue chip and middle market customers thereby capturing significant market share. UBL's appetite for large exposures coupled with dedicated Structured Finance Unit, and an innovative team of professionals having extensive experience of Corporate Banking gives it the right platform to succeed in today's competitive and a demanding environment. The success of CBG has been established from the fact that UBL received the 'No.1 Euromoney 2000' Best Local Bank award and recognized it to have outperformed all other banks. In year 2000, UBL was also voted as the best Corporate Bank by the customers of a major foreign bank in a survey. Aggressive marketing combined with professionalism has led to an increase in UBL's market share with top corporate customers and in some cases replacing Foreign Banks. Presently, its portfolio includes the quality names in the country, which were initially confined to foreign banks only.

Page 37 of 107

TARGET MARKET and PRODUCTS

Objective:
Optimum utilization of available skills and resources will allow United Bank Limited to: Build strong customer relationship through a diversified product portfolio in targeted markets. Provide financial services to customers in an effective manner. Achieve strong market position and adequate returns on capital. Understanding a target market involves business discipline and selectivity. The critical aspects of this process include identifying business potential, defining desirable opportunities, and adhering to resultant marketing objectives and strategies. An unfocused approach to the market may lead to unplanned asset concentration of uneven quality.

Products:
Development of products at United Bank Limited is need based and is market dependant. Innovative products will continue to be formulated as and when required. At present, United Bank Limited is offering the following major products which may be fund based or non fund based: 1. Short-term Credit Facilities. 2. Term Credit Facilities.

1.

Short-term Credit Facilities:


The financing for the period less than one year or one year is known as short term financing. UBL provides different short term facilities to its credit worthy clients to meet their short term needs like working capital requirement etc.

i.

Non Interest Cash Finance (NICF):

This facility allows a client to withdraw more money than the actual balance lying in his account up to a specified approved limit. It is also known as bank overdraft, credit line etc. this facility can be secured or clear (if up to Rs. 500,000). The facility is generally provided against pledge or hypothecation of goods or any other tangible security acceptable to the bank. The customer would be required to adjust the advance periodically or within a specified period.

Page 38 of 107

ii.

Export Finance (FAPE I, II,G / LAPC):

United Bank Limited provides facility against pre-shipment export at an agreed rate of return, as per guidelines established by the SBP or respective central banks in the case of international division.

iii.

Foreign Bills Purchased- On Account (FBP-A):

This is a post shipment facility known as finance against foreign bills. It is allowed to exporter against export bills drawn under different sort of letters of credit. This facility remains on customer risk until realization of proceeds from the bill of exchange.

iv.

Foreign Bills Purchased-against L/C (FBP) & FBP:

United Bank Limited may extend financial accommodation through negotiation and/or discounting at prevailing exchange rate, of a foreign documentary bill accompanied by relevant document of title to goods.

v.

Payment Against Documents- under sight L/C:

Import documents received under sight letters of credit are lodged in PAD (payment against documents), and are released upon payment from the party.

vi.

Financing against Trust Receipt (FTR/LTR):

United Bank Limited provides this facility to its customers on request, at the time of opening of letter of credit or at later stage, release import documents of related goods received under the letter of credit, to enable the party to obtain delivery of goods and arrange to retire the documents out of the sale proceeds of goods or from other sources. This facility is issued against the hypothecation charge on the goods and customer fills a prescribed Trust Receipt Form and provides his signatures.

vii.

Financing Against Imported Merchandise (FIM):

Facility for financing imported goods against import letter of credit established through UBL is also made available at partys request on the basis of mark-up for a short period not exceeding 90 days. This facility may be repaid within the validity period either in part or in lump sum.

viii.

FE-25 Financing:

Fe 25 financing uses the banks foreign currency deposits held under FE25 accounts scheme. This facility is classified as a working capital facility and is allowed to exporter and importers, with a maximum tenure of 180 days from the date of shipment, or as otherwise stipulated by the State Bank of Pakistan guidelines. Page 39 of 107

ix.

Inland Bills Purchased:

Inland bills purchased facility will be allowed to customers against inland documentary bills. This facility will also be allowed for the purchase of cheques and purchase of drafts up to the amount stipulated by the State bank of Pakistan for the clean facility In case of the dishonor of this instrument, the related partys account shall be debited. Simultaneously the drawer shall immediately be asked to arrange for sufficient funds in his account for adjustment.

x.

Commercial Paper (CP):

This is a short-term facility directly issued to the obligor. It is an unsecured facility with tenor of less than 1 year. State Bank of Pakistan guidelines for commercial paper is required to be followed for issuance by the company and participation by banks. Large rated companies allow the investor to invest directly without the need for an intermediary.

xi.

Money Market Line (MML):

This is a short term facility. It is used when the client desires to fix markup for the tenure of the transaction. Money Market Line (MML) is used by corporation with back to back lines booked by treasury. Money Market Line (MML) is usually availed as a sub limit of working capital facilities.

2.

Term credit Facilities:


All credit facilities approved for tenor greater than 1 year with a fixed repayment schedule are defined as term credit facilities. As a rule, term credit facilities are deemed to carry a greater degree of risk than short term facilities. Accordingly, they need to be analyzed in depth and with an outlook of 5 to 7 years.

There are two types of term credit facilities, which are usually approved by the bank. They are: Fund Based. Non Fund Based.

Page 40 of 107

Fund Based:
These are the facilities, in which bank actually disbursed the cash to the client or its customers. i. Commercial and Industrial Loans. ii. Term Finance Certificates (TFC). iii. Syndication. iv. Project Finance.

i. Commercial and Industrial Loans:


Tenor must not exceed 7 years. Principal must be amortized through regular installments, preferably quarterly. Markup should preferably be paid quarterly.

ii. Term Finance Certificates:


Bank will also invest and purchase term finance certificates and privately placed term finance certificates as deemed to be viable and feasible that is issued by existing or new clients. Credit guiding principles are the same as that of for industrial and commercial term loans except that the nature of the instrument is tradable under prevailing laws and rules.

iii. Syndication:
Syndication is defined as any transaction involving common documentation (including, but not limited to, security sharing arrangements) between United Bank Limited and other lenders for the purposes of extending financing facilities to a client.

iv. Project Finance:


Project finance is defined as methodology applied to the large scale financing of specific assets, often utilizing a special purpose project company where repayment is primarily based on future cash flows generated by project assets finance, and where risks are entirely encapsulated within the context of the project and its contractual framework, with lenders having only limited or no recourse to project sponsors.

Non-Funded:
These are the facilities, in which bank actually disbursed to the client or its customers: i. Guarantee (Bonds). ii. Documentary Letter of Credit. iii. Credit Facilities to Individuals. iv. Lending Against Shares.

Page 41 of 107

i. Guarantee (Bonds):
United Bank Limited may issue guarantees (Bonds) on behalf of its customers in favor of government entities or private beneficiaries. The guarantees issued in favor of government beneficiaries are considered lower risk compared to guarantees issued to in favor of private beneficiaries. Primarily, guarantees would be issued in accordance with state bank guidelines.

ii. Documentary letter of credit:


A letter of credit is one of the most widely used modes of settling international trade debts. It is also a convenient and common method of obtaining short term facilities from banks.

Letter of Credit:
A letter of credit (L/C) is one of the most widely used modes of settling international trade debts. It is also a convenient and common method of obtaining short-term finances from banks. L/Cs are broadly classified as follows: 1. Sight letters of credit (DP) 2. Usance letters of credit (DA)

1. Sight Letters of credit (DP):


In case of sight L/C (DP), the draft is drawn at sight and relevant documents are held by importing bank until retired (released) by the customer.

3. Usance letter of credit (DA):


In case of Usance letters of credit (DA), the draft is drawn for a certain period (number of days) clearly mentioned in L/C, payable by the customer on due date

v. Credit Facilities to Individuals:


Extension of credit facility to individuals other than through consumer banking products will not normally within the scope of the business of UBL and will be treated as a special type of loan requiring approval for the group executive.

Page 42 of 107

vi. Lending against Shares:


Lending against shares falls into two categories: 1. Margin Financing (MF) 2. Extension of credit facilities against shares held as collateral. The purpose of both types of lending differs.

1. Margin Financing (MF):


Margin financing is defined as lending against collateral of listed equity securities where the objective of the borrower is to invest in the equity market.

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


Extension of credit facilities against shares held as collateral enables the borrower to pledge his portfolio of shares and avail financing to cater to his business or any personal need including any need other than further investment in the equity market. The need may be to finance working capital requirement or any other financing requirement. The following credit principles are adopted for extension of credit facilities.

Page 43 of 107

CREDIT POLICY
In UBL, group executive risk heads the risk and credit policy which is a group an independent function responsible for setting up frameworks for addressing different types of risks faced by bank including credit risk. Since formally approved credit manual 1998, credit policies and procedures have been further developed and modified through credit policies bulletins. This credit policy aims to consolidate changes made since last approved policy, and incorporate the latest concepts of documenting and presenting credit, an improved credit approval system and a streamlined credit process that has been inducted by UBL. These policies and procedures cover all business areas of the bank and are expected to ensure that lending activities and creation of risk assets are executed prudentially and systematically. The goal of this policy is to achieve portfolios of risk assets that are acceptable quality in order to safely enhance long term corporate earnings. This policy is designed to meet the organizational requirements as they exist today in addition to provide sufficient flexibility to account for future needs of UBL. This comprehensive document explains UBLs credit policies and procedures. Policies and procedures described are minimum requirements under normal circumstances. However, the risk and credit policy group may establish additional controls whenever appropriate. Going forward, any additions or amendments to this policy will be approved by group executive risk and will be ratified by board credit committee which will become integral additions to the manual. Certain policies and procedures of international division may be amended to comply with locally prevailing regulatory requirements. After necessary approvals by group executive risk and board credit committee, these policies will be considered addendum to credit policy manual.

Objectives:
The objective of credit policy is to make risk handling and management a core competency of organization and ensure that risks are accurately identified & assessed properly documented and approved, and adequately monitored and managed. In order to ensure that desired directives are clear and well communicated to relevant functions and departments. This credit policy and procedure manuals aim to achieve following objectives: o To provide tools and techniques for implementing an effective credit administration and monitoring system. o To establish and explain the credit assessment process by setting out outlines for documentary credit, risk assessment and rating system for sound lending practice. o To streamline, standardize and impalement credit approval process and to establish functions and responsibilities for staff engaged in credit activities. o To improve quality of UBLs portfolio o To ensure adequate returns on risk assets taken on by UBL.

Page 44 of 107

CREDIT PRINCIPLES
This section outlines the basic principles that United Bank Limited (UBL) will pursue for extending credit facilities. These principles will serve as useful guidelines and precautionary measured for prudent lending. (UBL) will not extend any such credit facilities, which violate the rules and regulations prescribed by the SBP and/or local central bank from time to time. (UBL) will consider financing of self-liquidating, cash flow supported and well collateralized transactions within a business groups target market and risk acceptance criteria. (UBL) will participate in syndicated facilities if the transaction fulfills the parameters established by the banks. (UBL) will, prior to allowing the facilities, satisfy itself that there are adequately secured with relevant and legally skilled enforceable documents. (UBL) will ensure that facilities allowed are well-aligned to customers business structure and specific needs. (UBL) will assess the customers character for integrity and willingness to repay by studying background and credit history of the customer to establish commitment to repay. Facilities provided by (UBL) will be well diversified into such industrial / trading sectors where United Bank Limited (UBL) has the necessary skills and resources to achieve a strong market position and adequate return on capital. (UBL) shall only land up the amount that the customer has capacity and ability to repay. Customers liquidity and repayment capacity will be determined by careful analysis of Financial Statement and Future Projections to ensure that customers financial condition remains satisfactory liquid to repay the bank. It is against (UBLs) policy to provide financing for speculative purposes and / or undesirable activities. For Islamic Banking Business, Shariah Compliant Business activities shall be financed based on evaluation on Islamic Financial Accounting Standards (FAS). (UBL) shall not allow and credit facility to clients, who have allowed waivers / write offs in United Bank Limited (UBL). Any expectation to this will need approval of the highest level of credit committee including the Group Executive Risk and Credit Policy. (UBL) shall maintain adequate margin against credit facilities, in accordance with State Bank of Pakistans (SBPs) prudential Regulation and / or local central banks instructions. If deemed necessary, the appropriate business unit / credit authority may specify a higher margin. Page 45 of 107

(UBL) shall continue to invest in development of officers dealing with credit risk management and credit risk process. Documents include as annexes of this manual will require regular updates and modifications as per the requirements and needs of the businesses and changing markets dynamics. The Group Executive Risk and Credit Policy will approve any all updates and modifications in such documents. Any major structural changes and / or modifications will require ratification by the Board Credit Committee / Board of Directors as well as clearance by the State Bank of Pakistan (SBP). Any addition/amendments/deletion/deviation in this manual to meet changing conditions and / or regulatory/legal requirements of any domestic or overseas location will be approved by the Group Executive Risk and Credit Policy. However, if any such changes weaken provision in this manual, the same shall require ratification by the Board Credit Committee / Board of Directors as well as clearance by State Bank of Pakistan (SBP). This manual represents policies and procedures introduced to streamline and consolidate all rules applicable to Credit Policies globally. However, management reserves the right to formulate auxiliary credit policies for any domestic or overseas location within parameters laid down in the manual.

Page 46 of 107

FIELD of ACTIVITIES
Regional Credit Administration Functions
Composition of Credit Functions:
Credit and Marketing Credit Administration

Brief Job Description of the Documents: o Credit and Marketing:


Market new relationship to increase banks assets-based portfolio. Financial analysis, evaluation and processing of credit line proposals. Monitoring of credit portfolio through Client visits, Factory visits, inspection and prepare call reports, visit reports in this regard. Responsibilities for the compliance of all pre-approval instructions / regulations issued from time to time by Head Office Credit Policy, State Bank of Pakistan (SBP) and other regulatory bodies including obtaining CIB, Borrowers Basic Fact Sheet, Compliance of ratios, as required under Prudential Regulations, per party limit etc.

o Credit Administration:
Disbursement of Credit Facilities including preparation of security / charge documents, perfection of collateral, ensure compliance of State Bank of Pakistan (SBP)s regulations / credit policy, Head Office (HO) circulars and issuance of Disbursement Authorization Certificate (DAC). Regular monitoring of collateral and asset based portfolio through weekly roosters / diaries, CARS Reports, credit maintenance, identify exceptions and follow for the rectification of the same. MIS related to Credit and Credit Administration Department. Monitoring of markup accruals, recoveries thereof. Liaison with various outside agencies (RCAD Head). Miscellaneous jobs.

Disbursement of Credit Facilities:


Preparation / Filling of charge / security documentation as per credit approval. Perfection of securities and identification of expectations, if any.

Page 47 of 107

Scrutiny of charge / security documents after execution and identification of expectations / observations, if any. Limit feeding.

Preparation / Filling of Charge / Security Documentation as per Credit Approval / Credit Policy
Compulsory Documents:
Limited Company:
o Attested copy of Memorandum and Articles of Association to ensure that the company can borrow from banks, can hypothecate / mortgage its assets to banks, to check seal requirement etc. o List of directors along with specimen signature duly verified by Company Secretary / Chief Executive. o Form-29 (Part of Account opening document). o Board resolution to borrow (in case of limited companies).

Partnership:
o Attested copy of partnership deed. o Attested copy of registration certificate if partnership is registered. o Mandate to sign all borrowing documents on behalf of partnership.

Sole proprietorship:
o A declaration if the firms letterhead evidencing proprietor name, business etc. (A part of account opening document)

Club, Association, Trusts, Charitable Institutes, Schools:


o If the institution is a legal entity (legally registered with the concerned authority), all formalities of limited companies are to be complied with. o Attested copy of bye-laws, rules, trust-deeds etc. o It is advisable that opinion from lawyer should be obtained that all formalities have been completed and disbursement can be allowed to such customers.

Page 48 of 107

List of Security Documents Currently Used at UBL


o Facility wise charge documents: (As per Documentation Check List)
Charge documents for NICF. Charge documents for NIDF. Charge documents for FAPC-l & ll. Charge documents for FAFB. Charge documents for FIM. Charge documents for FTR. Charge documents for LBP. Charge documents for FBP (Discrepant). Charge documents for LG.

o Security wise charge Documents:


Letter of Pledge in respect of roots ( Where any commodity id pledge with the bank) Letter of Lien & se of (in case shares, NIT units, US Dollar Bonds, Wapda Bonds, FEBC. SSC, DSC, RIC, Accounts and TDR issued by other banks are pledges with the bank. Letter of Hypothecation if movables (in case of movable asset as security including raw material, work-in-process, finished talks, plant and machinery, spares, tools, equipments etc. Letter of Hypothecation for stocks, machinery, receivables (in case of current assets as security including raw material, work in process, finished stocks, receivables, machinery (movable / immovable), book debts). Memorandum acknowledging relation of mortgage by deposit of title deeds. Mortgage deed duly registered with the concerned sub-registrar, whenever a registered mortgage required. Personal / Corporate guarantee. Undertaking of clean finance.

Page 49 of 107

Types of Collateral Currently Used


o Readily Encashable Registered Securities:
Defense Saving Certificate (DSC) Special Saving Certificate (SSC) Regular Income Certificate (RIC) Special U.S. Dollar Registered Bonds

o Readily Encashable Bearer Securities:


WAPDA Bearer Bonds Special U.S. Dollar Bearer Bonds Foreign Exchange Bearer Certificates

o Deposits Held With United bank Limited:


Saving Deposit Current Deposit Term Deposit

o Deposits Held With Any Other Bank:


Saving Deposit Current Deposit & Term Deposit

o Pledge of any Commodity o Financial Guarantee o Hypothecation of Assets:


Movables Current Assets Receivables Plant & Machinery

o Mortgage of Properties:
Equitable Mortgage Equitable Mortgage with Token Register Mortgage Registered mortgage

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

Page 50 of 107

CREDIT INITIATION
After describing the main functions of RCAD the process of credit initiation is given below in steps: 1. At first the borrower meets the Relation Ship Manager known as RM in the Marketing Unit for the purpose of new facility, extension of existing facility, renewal / enhancement of existing facility or rescheduling or restructuring of the loan. 2. RM prepares the credit application of the client. He fulfills all the documentary requirements which are necessary to initiate the credit. The first requirement is known as Credit Application. This is not a one page application rather it is a full document which contains a lot of things. All the contents of credit files will be discussed after this section 3. Complete Credit Application is send to RCAD for the purpose of scrutiny. If any objection is found the file is returned back to marketing unit. If RCAD is satisfied then this file is sent to the credit committee for approval 4. The next step is the approval of the application. The file is transferred from RCAD to the credit committee which consists of the following authorities depending upon the amount of facility: 4.1. Senior Risk Manager 4.2. Global head CRM 4.3. group Executive Credit Policy 4.4. President 4.5. Board of Directors 5. The next step is the Issuance of DAC. If the file is approved by the credit committee then it is returned back to RCAD which issues DAC to client after being satisfied. 6. When Disbursement Authorization Certificate is issued to the client then he can enjoy the facility. The note able thing is that for every different proposal there will be different RMs and different Credit Committee. The person or group of persons who approves the credit file is collectively known as credit committee and it is designed separately for each client at different Tiers of Capital. For example Senior Risk Manger can approve credit only up to 5 billion PKR and for above amount approval from Global Head CRM is also necessary. The process of DAC Issue is showed in the form of diagram in the next page:

Page 51 of 107

Borrower

Initiates the Business Unit Application Marketing

RM Unit Leader Corporate Head


Recommending

Authorities

Group Executive

Credit Administration Department


Senior Risk Manager

Scrutiny

Credit Committee

Global Head CRM Group Executive President Approving

Authorities

Board of Directors

CAD

ISSUENCE OF DAC

Page 52 of 107

CREDIT APPLICATION
The main document of the process of credit is the credit application also known as CA or Credit approval. As it already have been mentioned that RM in the marketing unit prepares this application or proposal to decide whether the bank will allow the facility to the client or not. There are many different sort of documents which are annexed to this application according to the policies of the bank and instructions of the state bank.

Contents of Credit Application


1. Executive Summary:
In the executive summary the basic information about the company or business is mentioned and the bank needs following type of documents: 1.1. Company Profile ORR, RM, Legal Structure, Line of Business 1.2. Purpose of submission 1.3. Transaction Details 1.4. Time Banded Description of facilities 1.5. Financial Review 1.5.1. Sales 1.5.2. Cost of Sales 1.5.3. Profitability 1.5.4. Receivables 1.5.5. Inventory 1.5.6. Payables 1.5.7. Liquidity 1.5.8. Capital Structure 1.5.9. Leverage 1.5.10. Debt to Equity 1.5.11. Interest Coverage 1.5.12. Comments over financial position 1.6. Summary Of Bank Line 1.7. Comments

2. Facility Appendix:
Facility appendix mentions which type of facilities are being requested by the client and it includes all the terms and conditions at which loan will be disbursed.

Page 53 of 107

3. Borrower Basic Fact Sheet:


This document describes the basic information about the company. It is on the prescribed form according to the instructions of the SBP.

4. Directors Guarantee:
The directors of the company give the personal guarantee that the principle together with the interest will be repaid on the predefined dates.

5. Directors Net worth Statement:


The assets and liabilities of each director of the company are also attached with the application.

6. C. I. B. Report (Corporate Credit Information Report):


It is mandatory and statutory requirement that the bank will attach a report about the credit worthiness of the company from Credit Information Bureau of the SBP.

7. Request letter:
The original request letter on the letter head of the company also attached with the CA. This document works as an order letter.

8. Check List of Prudential Regulations:


RM also ensures that all the regulation laid down by the State Bank of Pakistan from R-1 to R-13 and from M-1 to M-2 has been duly fulfilled.

9. ICIL Report International Credit Information Ltd.


It is a private company which collects the secret information about the companies about their credit worthiness of the companies. A report from that company is also attached with the credit application. The following different types of documents are required before issuance of DAC in respect of any renewal, extension, restructuring / rescheduling or deferrals.

Page 54 of 107

Basic Documents:
o o o o o o o o o o o o o o o o Memorandum of association Certificate of incorporation Certificate of commencement of Business Subordinated agreements signed by the provider of the loan (in case subordinated agreement is present in the balance sheet) Form 29/ A (List of directors from SECP) National Identity Card Partnership Deed Board Resolution (for limited companies) Facility Acceptance Letter Site visit Reports Market Checking Report of ICIL CIB report of SBP Audited Financial Statements Prudential Check List duly signed by RM Borrowers Basic Fact Sheet duly signed by RM Search report showing the status of charges over the assets of the borrower company from the office of SECP

Facility Document:
NICF / FIM / FTR / Export Financing:
In the case of above facilities following documents are required. o Buy back Agreement. o Demand Promissory Note. o Letter of Continuity. o Other related Documents.

FE 25 Export Financing:
o USD financing documents (drafted by chief legal counsel). o Dollar demand promissory note. o Undertaking.

Sight Letter of Credit:


o Application of opening the irrevocable letter of credit.

Non Interest Demand Finance:


o Term Finance Certificate. o Demand Promissory Note.

Syndication term Loan:


o Syndication term facility agreement along with terms and conditions. Page 55 of 107

o Vetting Certificate from transaction lawyer. o Demand promissory note.

Security Support Documents:


Against different types of securities different types of documents are required.

Hypothecation / Floating Charge over Stocks / Book Debts / \Hypothecation of Plant and Machinery:
o 1st pari passu charge / 1st hypothecation charge certificate over the stocks and book debts for Rs. Along with supplementary letter of hypothecation. o 1st pari passu charge / 1st floating charge certificate over stocks and book debts along with deed of floating charge / supplementary deed of floating charge. o 1st pari passu hypothecation charge certificate over plant and machinery along with letter of hypothecation. o Stock reports in case of hypothecated stock. o Insurance Policy from UBL approved company covering full value of stocks / plant and machinery. o Valuation report with FSV.

Pledge of stock:
o Letter of Pledge. o Insurance Policy from UBL approved company covering full value of stocks. o Stock report.

Pledge / Lien on Deposit Account / Government Securities / Shares:


o Letter of lien and set off. o Agreement for sale and buy back of securities. o Transaction slips of CDC for pledge of shares in UBLs pledge account. o Transfer deeds with pledgors signature duly verified from issuing office. o Discharge signatures on government securities duly verified by the issuing office.

Financial/ Bank Guarantee:


o Financial / bank guarantee from FIRMU approved bank.

Page 56 of 107

Personal / Corporate Guarantee of Directors:


o Personal guarantee supported with net worth statement. o Corporate guarantee supported by board resolution, memorandum and articles of association.

Equitable / Registered Mortgage of Property:


o Memorandum of deposit of title deed / mortgage deed. o Title deeds. o Certificate from the relative authority / department showing ownership of mortgagor. o Approved site / building plan. o Valuation report with FSV. o 1st pari passu / 1st charge certificate over fixed charge (land and building). o Insurance policy from UBL approved company covering full value of building mortgaged.

Term finance Certificate Documents:


o Approval of SECP to issue prospectus. o Clearance of prospectus TFC by stock exchange. o Pledge of TFC within 30 days of issue in CDC favoring UBL or Trustee.

Page 57 of 107

RISK GRADE
In the executive summary of the company its risk grade is written. What is risk grade? Risk grade is measure of the financial strength of the company and it is calculated through a complex method. However basic details about risk grade are given below Given the importance of an accurate consistent measurement of the quality of the banks credit portfolio, a central element is the need for a single and consistent risk grading frame work.

Objective:
The risk-rating system is a tool to evaluate asset quality, and to identify and monitor portfolio risk. UBL risk-rating mechanism is used to assess the two major sources of risk that derived the occurrence of lending loss: o The risk that the customer will default. o The ability to limit loss in event of default by holding tangibles security.

Purpose of Risk Grading:


The risk-grading system provides a framework for: o Loan evaluation and ongoing review, o Measuring credit quality of borrowers/ borrower groups, o Providing early warnings of credit exposures showing signs of deterioration. o Effective Problem Loan management.

Obligor Risk Rating:


This represents a review of the possibility of the customer defaulting on its financial arrangements, i.e. the Profitability of default. This entails: o Failure to meet interest payment and / or principal reductions when due. o Breach of financial covenant or other loan conditions. o Failure to meet financial obligations to other creditors and lenders.

Page 58 of 107

Levels of Risk:
1. ORR1:
The highest rating is reserved for Government institutions and a handful of multi-national and large institutional client. Customers with this rating have shown usually solid and stable profitability, liquidity, and debt coverage in the past and are projected to continue this performance over the long term.

2. ORR2:
Strong corporate/ Institutional clients, Government institutions, or multi-nationals with somewhat greater long-term risk than rating 1 customer, but still supported by very stable operating and financial performance.

3. ORR3:
Customers demonstrate medium to long-term operational and financial stability but they may be somewhat more susceptible to cyclical trends or variability in earnings. Their operating cash-flow projections over the medium to long-term adequately cover both projected principal repayments and interest.

4. ORR4:
Customers portray operational and financial stability over a 3 to 5 years time horizon, but are more likely to be weakened by adverse business, financial and economic condition than clients with stronger ratings.

5. ORR5:
Customers are reasonably sound and have some margin of protection in their current performance, but may portray more erratic patterns as a result of competitive or general economic pressures. Recent profits and operating cash-flows provide moderate comfort; therefore interest and principal repayments are less well assured over a medium to long-term time horizon.

6. ORR6:
These customers face more uncertainty over future operating cash flows, and are often under stronger competitive pressure, their future over three-five years and both in good or bad time, is less well safe guarded by operational and financial performance, with smaller margins of protection on principal repayments and interest.

Page 59 of 107

7. ORR7:
Customers have greater vulnerability to default. While current projections show that they are able to support principal repayments and interest, capacity or willingness repay is likely to be impaired by adverse business, financials are economy conditions. These customers often show greater erratic performance and may have experience recent loss years. They may be perceived as fighting to maintain current levels of profitability. This risk rating would also typically carry customers categorized as watch list under UBLs credit policy.

8. ORR8:
These customers clearly exhibit weaknesses and depend upon favorable economic conditions to meet financial commitments. They have been experiencing difficulties, which may threaten the safety of lending. Retaining the business to sustainable health without important changes in strategies or practices is difficult. If it is highly likely that a breach of repayment arrangements will occur within a period of three months, the requirement of obligor risk rating 9 and 10 are to be strictly observed. Customers under the sub-standard category as defined under the State bank of Pakistan prudential regulations (i.e. mark-up/ interest or principle is overdue by 90 days or more from the due date) would also fall under this risk rating.

9. ORR9:
Customers with credit rating 10 are of very poor standing with little prospect for improvement. Principal recovery will require rigorous remedial management. Customers under the doubtful category as defined under the state bank of Pakistan regulations (i.e. markup/interest or principal is over due by 180 days or more from the due date) would also fall under this risk rating.

10.ORR 10:
This risk rating clearly recognizes and measures assets impaired due to loss of principle (which may be partial) as well as mark-up, thus justifying the provisioning from the same. Customers under the Loss category as defined under the SBP regulations (i.e. where markup/interest or principal is over due by 1 year or more from the due date) would also fall under this risk rating.

Page 60 of 107

Security Indicator:
The obligor risk rating assesses the risk of customer defaulting. For pricing and credit management purposes, UBL need to know the amount UBL can expect to lose in case of default, i.e. loss in the event of default. One of the key drivers of the loss in the event of default is level of securities/ collateral coverage. Therefore once the obligor risk rating has been determined, the next step would be to calculate the security indicator for each facility provided to the customer as for the following methodology:

1) Forced Sale Value (FSV):


FSV is defined as the value of security / collateral under a distress sale scenario. Usually the external valuator would assess the market value of an asset / project and apply a general discount to reach the FSV. 2) Net Realizable Value (NRV): NRV is defined as the value of as asset assessed under a distressed sale scenario which at present will be equal to the present FSV. The following conditions for calculating the NRV will apply: o Hypothecation charge over stocks and book debts: NRV of nil would apply. It has been generally observed that the recovery under this item, from relationships gone sour, has been nil.

Objective:
o To classify security into different group considering their inherent risk o To assign risk weighting to each security class based upon inherent risk of security.

Purpose:
The methodology would facilitate credit portfolio management and monitoring. Facilities shall be divided by their security class and the MIS system would be able to provide details and totals of exposure taken against the single class of the security. Secondly, this method would derive the risk weighted total exposure, which would determine the appropriate tear of approval authority for each proposed limit.

Methodology:
The following security classes have been identified which would be subject to review with changing market dynamics:

Page 61 of 107

1. Class I:
Deposit (Rupee / FCV) with UBL. US $ Bonds, Federal/ Pakistani Investment Bond, Treasury bill, National saving Certificate, Discharge and Under-lien and Government Guarantee.

2. Class II:
Certificate of Investment, Deposited and Guarantee of A rated FIRMU Approved- Global Banks.

3. Class III:
Certificate of Investment, Deposited and Guarantee of A rated FIRMU Approved- Local Banks (Or other than class II).

4. Class IV:
Certificate of Investment, Deposited and Guarantee of A rated FIRMU Approved- DFIs / NBFCs. Shares, TFCs and Certificates of Mutual fund. Nit Units.

5. Class V:
Token / Registered Mortgage. Pledge of goods financed by UBL. Lien on import documents under Sight LCs.

6. Class VI:
Equitable Mortgage. Hypothecation of Stocks and Receivables. Hypothecation over plant and machinery. Others (Trust Receipt etc.).

Risk Grading System:


UBL has adopted a two-dimensional risk-grading system. Risk grading is comprised of two components: 1. Customer Rating Grid (Obligor Risk Rating ORR) risk of default: ability to service and repay debts. 2. Security Indicator (S.I) - measure of the percentage of the facility covered by tangible security which the bank can realized in the event of default.

Customer Page 62 of 107 Ability to Serve / Repay

Security

Loan Security Cover

Example:
o If a customer has ORR as 5 and Security indicator is C so his risk
grade will be 5C.

Page 63 of 107

BUSINESS DESCRIPTION
The Groups principal activities are to provide commercial banking and other financial services. The group offers personal banking, cash management, retail loans and other financial services. These services include deposits, savings/current bank account, vehicle loans, personal loans, retail trade finance, global banking, lending to priority sector and small scale sector, foreign exchange and export finance, corporate loans and equipment loans. The group operates through 1078 branches within Pakistan and 17 branches outside Pakistan.

Job Description of Staff allocated to perform Credit Administration duties:


o Ensure that all legal / banks formalities pertaining to Charge / Security documentation have been completed in accordance with the SBP / Bank policies before disbursement of loan to the customer. o Issuance of Documentation Completion Certificate of security and charge documents and identify exceptions, if any, in this regard. o Ensure effective safeguard controls and safekeeping of all legal / charge Documentation and supervise that record of these documents are regularly maintained in safe in / safe out register. o Provide custodial services of bearer securities and maintenance of safein / safe-out register in this regard. o Ensure compliance of related terms and conditions stipulated in Sanction advice. Identify exceptions (if any) in this regard and also highlight the conditions which needs regular follow up of credit officer / credit admin. o Preparation and submission of various weekly / fortnightly / monthly / quarterly / yearly reports to Branch / State Bank of Pakistan (SBP) / Head Office (H.O.) pertaining to Credit Department on regular basis. o Close liaison with various outside agencies namely lawyers, Muccadam companies, evaluators, clearing & forwarding agents etc. in order to keep smooth operation of credit transactions. o Calculation and voucherization of mark up accruals of current finance and term finance on monthly basis and ensure that proper mark up rates have been fed into main system. Also follow up the account officer / customer to ensure recovery of mark up within the stipulated period. o Monitoring the pledged stocks on daily basis including voucherization, calculation of drawing power, issuance of delivery orders, maintenance of commodity rates etc.

Page 64 of 107

o Supervise visits / inspection of pledge / hypo stocks on regular basis for close control and monitoring of banks collateral. Also ensure that securities are properly intact with the bank. o Maintenance of Drawing Power (D. P.) Register, Pledge / Hypo stock reports files including insurance policies, search reports and copies of delivery orders etc. on daily basis. o Preparation of exception report through tickler system / expiry rooster of insurance policies, limits, stock reports, stock inspection reports, mark up recoveries, past due mark up for effective follow up and controls. o Supervise that proper limits, mark up rates, expiries and collateral are fed into the main system and update these records on regular basis upon receipt of renewed sanction advice. o Close interaction with Internal / external / State Bank of Pakistan (SBP) auditors for getting smooth audits and regular follow up of account officer / customer for the compliance of audit objections. o Ensure review of system generated reports on daily basis and highlights exceptions i.e., temporary overdraft, excess over limits etc. on regular basis. o Visits to other banks & saving centers to mark lien on encashable securities whenever required and also for endorsement of US$ bearer bonds for collection of profit. o Close interaction with the account officers / credit manager / chief manager on daily basis for smooth processing of credit transactions. o Responsible for Custodian, balancing and maintenance of adhesive stamps of charge documents. o Monitoring and balancing of markup accruals on weekly basis and identify past due / overdue liabilities in this regard. o Responsible for payments of invoices raised by evaluators, lawyers, Muccadam etc. o Reply to various queries of HOK on regular basis. o Provide supportive role to SAM Department with regard to stuck up loans. o Correspondence and reply of various queries to other banks, Head Office Karachi (HOK) and customers. o To ensure that lien on all registered securities has been marked, signature verification and timely payment of interest thereon to the customer. o Responsible for charge / security documentation related to staff loans and issuance of Disbursement Authorization Certificate (DAC) in this regard. o Supervise filling of charge / security document, calculation of buy back price and signature verification for all borrowing customers. Page 65 of 107

o Effective reliever / back up to look after the facilities of Finance Against Imported Merchandise (FIM), Finance Against Trust Receipt (FATR), Local Bill Purchased-Discounted (LBP-D) and Guarantee section. o Responsible for Registration of Hypothecation / Mortgage Charges with Security Exchange Commission (SECP). o Ensure that effective monitoring systems are in place for deliverance of alarming signals to the Credit Manager / Chief Manager. o To assist account officers / manager credit for marketing of new borrowing clients. o Provide advisory services to almost all the northern region branches pertaining to legal / charge formalities for processing of smooth credit transactions.

No. of Staff Exclusively Performing the Credit Administration Duties


1. 2. 3. 4. Head Regional Credit Administration. Officer Credit Administration (Documentation) Officer Credit Administration (Processing) Officer Credit Administration (MIS)

1. Duty List of (Head Regional Credit Administration):


o Ensure that all legal / banks formalities pertaining to Charge / Security documentation have been completed in accordance with the State Bank of Pakistan (SBP) / Bank policies before disbursement of loan to the customer. o Ensure compliance of related terms and conditions stipulated in Sanction advice. Identify exceptions (if any) in this regard and also highlight those factors which needs regular follow up of credit officer / credit admin. o Preparation and submission of various weekly / fortnightly / monthly / quarterly / yearly reports to Branch / State Bank of Pakistan (SBP) / Head Office (H.O.) pertaining to Credit Department on regular basis and ensure that deadlines in this regard are meticulously met without any error. o Close liaison with various outside agencies namely lawyers, Muccadam companies, evaluators, Clearing & forwarding agents and charge registration companies in order to keep smooth operation of credit transactions. o Ensure effective safeguard controls and safekeeping of all legal / charge Documentation and supervise that record of these documents are regularly maintained in safe in / safe out register. Supervise custodial services of bearer securities of the bank.

Page 66 of 107

o Ensure review of system generated reports on daily basis and highlights exceptions i.e., temporary overdraft, excess over limits etc. regularly. o Supervise calculation of mark up accruals of current finance and demand finance on monthly basis and ensure that proper mark up rates have been fed into main system. Also follow up the account officer / customer to ensure recovery of mark up within the stipulated period. o Preparation of exception report through tickler system / expiry rooster of insurance policies, limits, stock reports, stock inspection reports, mark up recoveries, past due mark up for effective follow up and controls. o Supervise that proper limits, mark up rates, expiries and collateral are fed into the main system and update these records on regular basis upon receipt of renewed sanction advice. o Close interaction with the Relationship Managers / Unit Heads / Regional Corporate Head / Country CAD Head on daily basis for smooth processing of credit transactions. o Supervise visits / inspection of pledge / hypo stocks on regular basis for close control and monitoring of banks collateral. Also ensure that securities are properly intact with the bank. o Ensure that effective monitoring systems are in place for deliverance of alarming signals to the Senior Management. o Provide advisory services to almost all northern region branches pertaining to legal / charge formalities for processing of smooth credit transactions.

2. Duty List of Officer Credit Administrator (Documentation):


o Responsible for feeding / updating limits, mark up rates, expiries for customers and staff loans on regular basis. Also responsible for Custodian, balancing and maintenance of adhesive stamps. o Conduct inspection of pledge / hypo stocks at various mills, private godowns on instruction of Head RCAD / Head CAD North o Preparation of exception report on monthly basis through system generated reports and expiry ticklers / rooster including expiries of credit limits, insurance policies, stock reports, EOL, TOD, past due / overdue principal & mark up. o Preparation and compilation of various weekly / fortnightly / monthly / quarterly / half yearly / yearly reports to Branch / Head Office (H.O.) / State Bank of Pakistan (SBP) and ensure that the deadlines of said reports are met meticulously without any error.

Page 67 of 107

o Accrual of mark up for CF /TF credit facilities on monthly basis and their timely recoveries through an effective follow up of account officers / manager credit. o Monitoring and balancing of markup accruals on weekly basis to identify past due / overdue liabilities in this regard. o Review of system generated reports i.e., SOD, Loans, EOL, TOD Link Report, Block Account on daily basis for regular monitoring and identification of exceptions in this regard. o Regular interaction with Relationship Manager / Unit Head regarding smooth operation of credit transactions. o Payments of bills to evaluators, lawyers, Muccadam etc o Reply to queries of Head Office Karachi (HOK) on regular basis. o Visits to other banks & saving centers to mark lien on encashable securities whenever required. o Supportive role to Relationship Manager / Unit Head for smooth operation credit portfolio. o Correspondence and reply of various queries to other banks, Head Office Karachi (HOK) and customers.

3. Duty List of Officer Credit Administration (Processing):


o Provide Custodial services for all legal documents / properties / securities (registered or bearer) held against the finance allowed to customers. o Maintenance and updating of safe in / safe out register on regular basis. o Issuance of Pre Disbursement Perfection Certificate / Observation Memorandum of security and charge documents and identify exceptions, if any, in this regard. o Close co-ordination with various outside agencies for obtaining legal opinion / conducting valuations and completion of other legal formalities for smooth processing of credit transactions. o To ensure that lien on all registered securities has been marked, signature verification and timely payment of interest thereon to the customer. o Close interaction with Internal / external / SBP auditors for getting smooth audits and regular follow up of account officer / customer for the compliance of audit objections. o Preparation and compilation of various weekly / fortnightly / monthly / quarterly / half yearly / yearly reports to Branch / H.O. / SBP and ensure that the deadlines of said reports are met meticulously without any error.

Page 68 of 107

o Responsible for balancing and voucherization of adhesive stamps and other legal documents on regular basis. o Preparation of exception report pertaining to legal / security documents and regular follow up of account officers / manager credit to regularize the said discrepancies. o Supervise filling of charge / security document, calculation of buy back price and signature verification for all borrowing customers. o Supportive role to account officer / manager credit for smooth operation of credit portfolio. o Correspondence and reply of various queries to other banks, Head Office Karachi (HOK) and customers. o Effective reliever / back up to look after the facilities of FIM, FATR, LBP-D and Guarantee section.

4. Duty List of Officer Credit Administration (MIS):


o Monitoring the pledged stocks under NICF (Pledge) on daily basis including voucherization, calculation of drawing power, issuance of delivery orders, maintenance of commodity rates etc. o Maintenance of D. P. Register, Pledge / Hypo reports files including insurance policies, search reports and copies of delivery orders etc. on daily basis. o Preparation of exception report pertaining to insurance policies, stock reports for hypo / pledge stocks etc. and regular follow up of account officers / manager credit to regularize the said discrepancies. o Conduct inspection of pledge / hypo stocks at various mills, private godowns on instruction of Head Regional Credit Administration / CAD Head North o Preparation and compilation of various weekly / fortnightly / monthly / quarterly / half yearly / yearly reports to Branch / H.O. / SBP and ensure that the deadlines of said reports are met meticulously without any error. o Daily interaction with Muccadam companies / customers for processing of delivery orders and disbursement against pledge stocks. o Regular interaction with account officers / manager credit / chief manager regarding smooth operation of credit transactions. o Keeping and updating record of staff loans and perfection of legal / charge documents in this regard. o Responsible for Custodian, balancing and maintenance of adhesive stamps. o Correspondence and reply of various queries to other banks, HOK and customers. o Credit Administration Dept. Page 69 of 107

o Being an officer of Credit Administration, primarily responsible for monitoring of credit portfolio, identify exceptions and regular follow up for removal of the same. Also responsible for MIS pertaining to Credit Dept. including but without limited to SBP, HO Reports, Feeding of limits, expiries, mark up rates etc. into the main system. o Monitoring of expiries of limits, insurances, stock reports, stock inspections and any other requirement under Sanction Advice through tickler system and regular follow up through inter office memos for rectification of the same. o Preparation and compilation of various weekly / fortnightly / monthly / quarterly / half yearly / yearly reports to H.O, required from time to time. Secondary/Additional Responsibilities Preparation of Loan documents of all borrowing clients Preparation of exception report pertaining to legal / security documents and regular follow up of account officers / clients / manager credit to regularize the said discrepancies. Safe in Register. Monitoring Receipts of Stock Reports and Insurance Policies. Supportive role to account officer / manager credit for smooth operation credit portfolio. Conduct stock inspections on request of Manager CAD / Credit as and when required. Review of system generated reports i.e., SOD, Loans, EOL, TOD Link Report, Block A/C on daily basis for regular monitoring and identification of exceptions in this regard. Visit to banks for endorsements on US$ Bearer Bonds and Lien formalities. District office for executions of mortgage related documents. Signing and reviewing of departmental Vouchers Monitoring of Shares on Weekly basis.

Page 70 of 107

SWOT ANALYSIS
An analysis indicating towards the organizations strengths, weaknesses, opportunities and threat is termed as SWOT Analysis. Such an analysis is very important for the management in retaining the strength, overcoming the weaknesses, capitalizing over the emerging market opportunities, and carving ways to successfully tackle with the threats and ultimately converting them in the strengths for the organization. During seven weeks of my stay at UBL I have come across the following SWOT analysis of the bank.

STRENGTHS:
United Bank CBG RCAD is considered to be a very sound bank in the financial circles. A bank, where the customers can safely keep their money, as long as they want. I am pointing some of the major strengths of the bank:

LEADING PRIVATE SECTOR BANK:


UBL is the leading private sector bank in the banking network in Pakistan with many of them online branches in major cities of the country.

AUTOMATIC OPERATIONS:
The operations performed by the bank are highly automated that result in assurance for the customers that their transactions are completed reliably, efficiently and securely.

FULL DAY BANKING:


One can avail the benefit of the services provided at the bank till 5:00 P.m. which is highly useful for those customers who find it difficult to leave their officers in the morning.

ATM NETWORK:
The bank has the largest ATM Network across the country. The customers of UBL withdraw access their funds any time at all the ATM Sites.

CUSTOMIZED SOLUTIONS:
The management of the bank believes in customer focused banking rather than the product oriented banking. The products and services designed by the bank are specifically tailored to the individual needs of its customers. Page 71 of 107

CUSTOMER ORIENTED BANKING:


The priority banking centers of the bank offer an unmatched where the customer receives highly privileged services in a highly elegant environment. It gives the chance of experiencing new standards in banking. Designed especially for those who appreciate only the finest things in life, Priority Banking offers the very highest levels of personalized banking to match customers unique status.

ELECTRONIC BANKING:
The revolution in the banking in the form of electronic banking operations have opened avenues of excellent, efficient and quick services saving the time and costs of the customers and fortunately UBL is among those few banks who are already reaping the benefits of electronic transactions.

ELECTRONIC FUNDS TRANSFER:


UBL management is quite prepared to adopt the latest advancements in technology resulting in revolution in the banking operations such as check clearing process, computer based teller equipment, automatic teller machines, and electronic funds transfers among the others.

PHONE BANKING:
Phone banking service is very attractive for those classes of customers who dont have time to personally come to the bank i.e. banking on the phone line thus saving the precious time of the customers.

ETHICAL CONCERNS AND PUBLIC IMAGE:


The organizations showing concern for the people, ethics, and environment enjoy good public reputation and are able to reap the benefits in the long run. UBL management is quite sensitive to this issue.

WEAKNESSES:
o As I have thoroughly study the Banks management and financial there is no such major weak point but one point is that there liabilities are increasing from year to year and in 2007 it become very high as compared to the previous year. o Another is Bank is decreasing which in my opinion is a weak point. o Equity to total assets is decreasing from previous year. Page 72 of 107

o In my opinions these are the points that might be detrimental to the efficiency and profitability of the bank.

NOT HIGHLY AUTOMATED:


The bank has still some of the traditional ways of operations in this advanced technological environment.

MANUAL BOOK-KEEPING:
Although the bank has computerized accounting system but, still the bankers use to make their entries in the accounting register.

LOW JOB SATISFACTION:


Understanding and the effective management of the human resources is the most difficult challenge faced not only by the bank but by all the organizations. Even though the people have been sacrificed in the new organizational developments, it is becoming clear that the true lasting competitive advantage comes through human resources and how they are managed. UBL seems to not focusing on this highly critical issue as the job satisfaction level of the employees working at UBL, was quite low.

LACK OF SPECIALISATION:
This famous and useful concept given by Adam Smith in 1776 seems to be missing in the bank. The employees are constantly rotated from one job to another job of totally different characteristic in the view of giving them the know-how of the working in all the departments. But I think this is not a very good tactics used by the management. Otherwise the situation might be like this Jack of all and master of none.

CENTRALIZATION:
There is a high degree of centralization in the bank. Almost all the decision-making is in the hands of the upper management. But centralization is effective up to a certain level otherwise it becomes inefficient and at times costly too. I personally observed that delay occurred in the operations of the employees only due to the fact that they had not got any instructions from the head office.

LACK OF TRAINING FACILITIES:


Presently there is no specific training program arranged for the new recruiters. They have to learn based on their observations and also their mistakes. It takes a bit time for the fresh one to learn the banking the result is huge amount of blunders, mistakes etc. resulting in monetary Page 73 of 107

and non-monetary losses for the bank. There is pressure not only on the new learner but also on the person placed upon with this responsibility.

OPPORTUNITIES:
United Bank Limited CBG RCAD has grown up its business with a very high pace and it has got tremendous popularity. There are many opportunities for the bank and by availing that it can stand amongst the top foreign banks. Pakistan with the new government in power now is going to move towards industrialization and this will thus result in the development of the country. This will generate a new client base for the Bank. No doubt its network has expanded all over the country but opportunities always exist so it should expand its network in those areas where it is lacking due to increase in competition all over the country. There were days when organizations come with quality products and succeed in the market without taking any change in products with time but times have surely changed now the organizations have to introduce new innovative products with high quality to sustain its position in market. So UBL should introduce new innovative products to sustain its position in market. One of the opportunities that UBL has been provided by its competitors is that it has become very much possible for UBL to develop and target a certain market and catch the customers for earning long term profitability. Financial strength is providing to be an effective tool for winning the customers. The major opportunity, which we realized is that it, should consider more on its promotional activities to target profitable customers as well as attract competitors customers, which is major achievement of any organization. As far as opportunities are concerned UBL is growing day by day and its profits are increasing it has an opportunity to develop more branches to expand the business. And there is acceptance of its services so Bank has to increase its services to meet the needs of its customers. Apart from the ones discussed in External Factors Evaluation Matrix, the bank is facing the following threats and opportunities currently: These are positive external environmental factors effecting the organization. It deals in bulk business. A large amount of foreign investment is attracted. Strong potential for growth. Steady increase in Customer Deposits. Overseas Operations. Page 74 of 107

Branches in Remote Areas.

THREATS:
o In Pakistan new banks are constantly coming with new innovative products having high quality so this will result of competition in the banking sector. o Another threat is that banks are improving their customer services by incorporating new informational technology. o The existing banks in the business are providing more innovative services to clients. This threatens the client base of UBL because the clients may switch to a bank offering more variety in the services. o Today the banking sector is improving not only by the hard work of concerned persons but Government is also encouraging the ideas and policies banks implement for the improvement and development of strong financial institutes. As the competition is increasing banks all over the country are moving towards better techniques for collecting and transferring data within the branches and to the head office, as far as UBL is concerned this system needs attention and the present use of better IT technique in other banks is proving to be a serious threat for UBL o Competitors of UBL are banking an aggressive marketing program to get the mind as well as heart share of the UBL clients. o As demand of banking services has increased there is an increase in the debts of Bank so this can be a threat for the Bank and they should look upon this. o Another is that debt ratios are increasing due to increase in debts and other banks have improved ratios so they have to look upon it.

High Employees Turnover:


As discussed above, the job satisfaction level of the employee is very low resulting in high turnover, which is bad for any organization as there are huge monetary and non-monetary costs involved in the fresh recruitments.

High charges:
The schedules of charges indicate that the fees charged by the bank on the various services it provides are extremely high. It may result in decrease in the number of its existing customers. Furthermore, this could be very alarming situation for the bank in case some of the competitors grasped the opportunity and lowered its rates. The result would be either the loss of market share or decrease in the charges resulting in lowering the banks income.

Stiff Competition:

Page 75 of 107

UBL is currently facing strict competition from the foreign banks especially the American who banks enjoy a good market position. Collectively U.S. banks hold approximately 9 percent of all commercial banks' assets. At present, three American banks are operating in Pakistan: Standard Charted Bank; Bank of America and Citibank. The SWOT analysis of the UBL signifies that its strengths overcome its weaknesses and its opportunities are more than its threats. This is a positive sign for any organization!!!

Page 76 of 107

100 80 60 40 20 0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr


East West North

Page 77 of 107

FINANCIAL ANALYSIS
Financial statements like an income statement and balance sheet provide the more significant information about the position of business and the result of its operations. The parties that are more interested to know the result and financial position of the company are: o Stockholder of the Company. o Management of the Company. o Creditors such as Banks and Other Financial Institutions from those Companies have borrowed short, medium and long term funds. o Government agencies such as income tax department. o Employees of the Companies. o General Public including students and researcher. o Generally, above mentioned parties are interested to know Solvency position of the Company. Stability of the Company. Profitability. Comparisons and analysis can be made on a number of different bases. I have analyzed the financial statement of the United Bank, Limited. By using the following methods: o Financial Statement Analysis. o Ration Analysis.

[ Unconsolidated Statement of Financial Position As at December 31, 2010 ]


Page 78 of 107

2010 2008

2009 ----- (Rupees in 000) -----

605,072,482ASSETS

Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Performing Non-performing - net of provision

67,461,668 18,192,142 12,384,778 224,578,556 318,673,884 15,058,288 333,732,172 22,424,072 1,298,403 18,713,188 698,784,979

61,470,047 5,407,470 23,162,130 136,145,524

50,069,965 7,497,174 22,805,341 116,328,288

Operating fixed assets Deferred tax asset net Other assets


605,072,482

361,863,689 342,663,339 9,275,986 11,428,374 354,091,713 371,139,675 18,021,445 21,925,669 2,055,609 608,876 17,154,985 16,905,004 619,716,433 605,072,482

LIABILITIES
Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Other liabilities
5,045,815 45,104,849 550,645,767 11,985,748 17,587,735 630,369,914 5,147,259 35,144,823 492,036,103 11,989,800 14,461,725 5,194,449 44,195,886 483,560,062 11,993,848 16,265,478

NET ASSETS

68,415,065

558,779,710 561,209,723 60,936,723 43,862,759

REPRESENTED BY: Share capital 10,117,188 Reserves 15,501,513 Unappropriated profit 16,604,076
42,222,777

12,241,798 21,688,637 26,250,489 60,180,924

11,128,907 18,959,537 22,187,802 52,276,246 8,660,477

Surplus on revaluation of assets -net of deferred tax 1,639,982

8,234,141

68,415,065 43,862,759

60,936,723

Page 79 of 107

[ Unconsolidated Profit and Loss Account For the year ended December 31, 2010 ]
2010 2008 Mark-up / return / interest earned 52,253,361 Mark-up / return / interest expensed 24,117,702 Net mark-up / interest income 28,135,659 Provision against loans and advances net Provision against lending to financial institutn Provision for diminution in value of investments net Bad debts written off directly 8,097,285 Net mark-up / return / interest income after provisions
20,038,374

2009 ----- (Rupees in 000) ----61,107,025 28,163,787 32,943,238

59,331,761 25,223,253 34,108,508

6,803,355 204,573 996,772 8,004,700

9,623,204 560,852 945,342 1,485,976 12,615,374

4,509,956 2,219,815 1,367,514

26,103,808

20,327,864

Non Mark-up / Interest Income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities net Unrealized loss on revaluation of investments classified as held for trading Other income Total non mark-up / return / interest income 10,401,394 30,439,768 Non Mark-up / Interest Expenses Administrative expenses Other provisions / write offs net Workers' Welfare Fund Other charges Total non mark-up / interest expenses 16,565,344 Profit before taxation 13,874,424 Taxation Current - Prior years

6,337,745 591,017 1,653,793 158,885 (38,365) 1,417,557 10,120,632 36,224,440 17,765,056 63,233 413,542 240,391 18,482,222 17,742,218 6,805,506 415,136

5,925,082 606,347 1,213,881 629,418 (3,006) 3,047,849 11,419,571 31,747,435

6,304,927 587,989 1,819,250 254,046 (19,547) 1,454,729

16,608,561 642,274 397,547 64,552

15,519,634 450,390 336,999 258,321

17,712,934 14,034,501

Page 80 of 107

- Deferred 6,582,288 5,541,304 Profit after taxation 8,333,120 4,841,814

(638,354)

11,159,930

6,930,585 76,328 (2,165,099) 9,192,687

6,090,351 435,072 (984,119)

----- (Rupees) ----Restated

Earnings per share - basic and diluted


8.24

9.12

7.51

[ Unconsolidated Statement of Comprehensive Income For the year ended December 31, 2010 ]
2010 2009 ----- (Rupees in 000) ----Profit after taxation 9,192,687 Other comprehensive income / (loss): Exchange differences on translation of net investment in foreign branches 1,549,269 11,159,930

419,851

Net gain on cash flow hedges Related deferred tax liabilityon cash flow hedges 77,263 70,218 497,114 1,619,487 11,657,044 10,812,174 Comprehensive income transferred to equity - net of tax

118,866 (41,603)

108,028 (37,810)

Surplus / (deficit) arising on revaluation of assets has been reported in accordance with the requirements of the Companies Ordinance, 1984 and the directives of the State Bank of Pakistan in a separate account below equity

Page 81 of 107

[ Unconsolidated Cash Flow Statement For The Year Ended December 31, 2010 ]
2010 2008 ----- (Rupees in 000) ---CASH FLOW FROM OPERATING ACTIVITIES Profit before taxation 13,874,424 Less: Dividend income 587,989 13,286,434 Adjustments: Depreciation Amortization Workers Welfare Fund Provision for retirement benefits Provision against loans and advances Provision against lending to financial institutions Provision for diminution in value of investment Reversal of provision in respect of investments disposed off during the year Provision against off balance sheet items Gain on sale of fixed assets Bad debts written-off directly Amortization of cash flow hedge reserve Unrealized loss on revaluation of investments classified as held for trading Provision / (reversal of provision) against other assets 2009

17,742,218 591,017 17,151,201

14,034,501 606,347 13,428,154

1,492,922 221,047 413,542 16,638 6,803,355 204,573 (337,899) (16,248) 996,772 118,866 38,365 63,233 10,015,166

1,471,525 184,241 397,547 462,726 9,623,204 560,852 945,342 (1,208,712) 20,250 (30,856) 1,485,976 108,028 3,006 622,024 14,645,153 28,073,307

1,236,031 156,178 336,999 19,969 4,509,956 2,219,815

42,966 (14,298) 1,367,514

19,547 196,026

10,090,703 27,166,367 23,377,137 Decrease / (increase) in operating assets Lendings to financial institutions Held for trading securities

Page 82 of 107

Advances Other assets (excluding advance taxation) 9,666,706 7,327,985 (85,611,555) (Decrease) / increase in operating liabilities Bills payable Borrowings Deposits and other accounts Other liabilities (excluding current taxation) 69,981,309

10,777,352 (12,484,294) 12,559,414 (1,185,766)

(917,641) 743,410 5,938,782 1,563,434


(47,190) (9,051,063) 8,476,041 (1,383,783)

1,976,382 (4,312,626) (77,662,409) (5,612,902) (884,892) (14,907,464) 82,585,523 3,188,142

(101,444) 9,960,026 58,609,664 2,697,443

71,165,689 107,998,762 7,746,892 Staff retirement benefits received / (paid) (637,322) (193,417) Income taxes paid (7,165,283) Net cash inflow from operating activities 23,099,432 388,192 977,691

(2,005,995) 33,395,297

(8,906,105) 100,070,348

(9,658,543)

[ Unconsolidated Cash Flow Statement For The Year Ended December 31, 2010 ]
2010 2008 ----- (Rupees in 000) ----CASH FLOW FROM INVESTING ACTIVITIES Net investment in securities Dividend income received Investment in operating fixed assets Sale proceeds from disposal of property and equipment Net cash outflow from investing activities (10,439,645) CASH FLOW FROM FINANCING ACTIVITIES Repayments of principal of sub-ordinated loans Receipt of sub-ordinated loan Dividends paid Net cash used in financing activities 2,051,449 Exchange differences on translation of net
(8,085,605) 584,769 (3,077,157) 138,348

2009

(76,127,684) 591,017 (2,263,630) 96,850

(13,565,270) 620,499 (1,550,661) 172,876

(77,703,447

(14,322,556)

(4,052) (4,006,407)

(4,048) (1,011,719)

(2,848) 6,000,000 (3,945,703)

(4,010,459)

(1,015,767)

Page 83 of 107

investment in foreign branches 3,849,564 Increase in cash and cash equivalents (4,150,440)

419,851 18,776,293

1,549,269 9,310,378

Cash and cash equivalents at beginning of the year 61,717,579

66,877,517

57,567,139

Cash and cash equivalents at end of the year 57,567,139

85,653,810

66,877,517

[ Unconsolidated Cash Flow Ended December 31, 2010 ] [The Year Ended December 31, 2010 ]

[ Unconsolidated Statement of Changes in Equity For the year ended December 31, 2010 ]
Capital reserves Share capita l
Statutor y reserve

Exchange translatio n reserve

Reserv e for issue of bonus shares

Cash flow hedge reserv e

Unappro p Ratted profit

Tota l

Changes in equity for 2008 Profit after taxation for the year ended December 31, 2008 8,333,120 Transfer from surplus on revaluation of fixed assets to un

8,333,120

(276,633)

253,018

253,018 (276,633)

Page 84 of 107

3,849,564

3,849,564

appropriated profit - net of tax Net loss on cash flow hedges - net of deferred tax Exchange differences on translation of net Net income recognized investment in directly in equity foreign branches

3,849,564 )

(276,633

253,018

3,825,94 9

Total recognized income and expense for the year ) 10,117,188 42,222,777 Transfer to statutory reserve (1,666,624) Balance as at December 31, 2008

8,709,751 5,401,771 1,666,624

(276,633) 18,270,700

10,117,188

10,376,375 5,401,771

(276,633)

16,604,076

42,222,777

Balance as at January 1, 2009


42,222,777

10,117,188

10,376,375 5,401,771

(276,633)

16,604,076

Final cash dividend for the year ended December 31, 2008declared subsequent to year end at Re.1.00 per share
(1,011,719) (1,011,719)

1,011,719

1,011,719
(1,011,719) -

Transfer to reserve for issue of bonus share (1,011,719) Issue of bonus shares at 10%
-

Changes in equity for 2009 Profit after taxation for the year ended December 31, 2009 Other comprehensive income net of tax Total comprehensive income 10,812,174
Transfer from surplus on revaluation of fixed assets to un appropriated profit - net of tax

1,549,269

70,218

9,192,687

9,192,687 1,619,487

1,549,269

70,218

9,192,687

253,014
(1,838,537)

253,014
Transfer to statutory reserve Balance as at December 31, 2009 52,276,246 1,838,537 -

11,128,907 12,214,912

6,951,040

(206,415)

22,187,802

Capital reserves Share capita l


Statutory reserve

Exchange translation reserve

Reserve for issue of bonus shares

Cash flow hedge reserv e

Unappro p Rated profit

Tota l

Page 85 of 107

Balance as at December 31, 2009 52,276,246 Final cash dividend for the year ended December 31, 2009 declared subsequent to year end at Rs.2.50 per share (2,782,227) Interim cash dividend for the half year ended June 30, 2010 declared at Re. 1.00 per share (1,224,180) Transfer to reserve for issue of bonus shares (1,112,891)

11,128,907

12,214,912

6,951,040

(206,415)

22,187,802

(2,782,227)

(1,224,180)

1,112,891

Issue of bonus shares at 10% 1,112,891 Changes in equity for 2010 Profit after taxation for the year ended December 31, 2010 Other comprehensive income - net of tax
Total comprehensive income 11,159,930 11,657,044 -

(1,112,891)

419,851
419,851

11,159,930 11,159,930 497,114

77,263 77,263

Transfer from surplus on revaluation of fixed assets to un appropriated Profit - net of tax 254,041

254,041

Transfer to statutory reserve


(2,231,986) -

2,231,986

Balance as at December 31, 2010 26,250,489 60,180,924

12,241,798 14,446,898

7,370,891

(129,152)

Page 86 of 107

VERTICAL ANALYSIS
Vertical analysis is that analysis in which each items within the financial statement so the company is expressed in terms of a percentage of a base amount. For example, in income statement selling expenses are shown as percentage of total expenses and in Balance Sheet individual assets are shown as percentage of total assets. For the purpose of analysis and comparison current year data shown in percentage is compared with the data in percentage of the last year. One can easily judge the favorable and unfavorable changes in two years financial statements. I have used the two years financial statement data years ending 2006 and 2007 and compared the each item of the financial statements and showed the Banks trend from one year to another.

Page 87 of 107

Vertical Analysis of Balance Sheet Rupees in 000Rs

Items
ASSETS:
Cash and balance with treasury bank Balance with other banks Lending to financial institutions Investments Advances Other assets

2010
9.65% 2.60% 1.77% 32.14% 47.75% 2.68%

2009
9.91% 0.87% 3.74% 21.98% 57.14% 2.72%

2008
8.27% 1.24% 3.73% 19.22% 61.38%

Change
+tive -tive -tive

-tive +tive +tive

2.84% -tive

Fixed assets Deferred tax assets

3.21% 0.20%

3.55% 0.09%

2.98% -tive 0.34%

TOTAL ASSETS LIABILITIES


Bills payable Borrowings Deposits & other accounts Sub-ordinated loans Other liabilities

100.00% 100.00% 100.00%

0.72% 6.45% 78.80% 1.72% 2.52%

0.83% 5.67% 79.40% 1.93% 2.33%

0.85% 7.30% 79.92% 1.98% 2.60%

-tive -tive

-tive -tive -tive

NET ASSETS

9.79%

9.84%

7.26%

-tive

TOTAL LIABILITY

100%

100%

100.00%

FINANCIAL RATIOS
Financial ratios can be divided into the following six parts. Page 88 of 107

1) 2) 3) 4) 5)

Liquidity Ratios Activity Ratios Leverage Ratios Profitability Ratios Investor Ratios

1. Liquidity Ratios:
o Current ratios o Quick ratios o Absolute Liquid ratio

2. Activity Ratios:
o o o o Inventory turnover ratio Average collection period Average payment period Total assets turnover ratio

3. Leverage Ratios:
o o o o o Debt ratio Debt to Equity ratio Debt to Tangible net worth ratio Debt to Funds ratio

External-Internal Equity ratio

4. Profitability Ratios:
o o o o o o o o o Return on total assets Return on-equity Return on investment Return on fixed assets Average profit per branch Net profit Margin Interest income to total income Interest expense to total expense Return on advances

5. Investor Ratios:
o o o o o Earnings per share. P/E ratio. Dividend per share. Dividend yield ratio. Dividend payout ratio.

Page 89 of 107

Page 90 of 107

LIQUIDITY RATIOS
Liquidity ratios are used to measure a firms ability to meet short term obligations. They compare short term obligations with short-term (or current) resources available to meet these obligations. From these ratios, much insight can be obtained into the present cash solvency in the event of Adversity. Liquidity ratios includes Current Ratio Quick Ratio

CURRENT RATIO
= 100
Year Current Assets Current Liabilities Ratio

2010(000) 675,062,504 618,384,166 1.09%

2009 (000) 597,181,888 546,789,910 1.09%

2008(000) 584,995,428 549,215,875 1.06%

QUICK RATIO

100

Year Current Assets Current Liabilities Ratio

2010(000) 675,062,504 618,384,166 1.09%

2009 (000) 597,181,888 546,789,910 1.09%

2008(000) 584,995,428 549,215,875 1.06%

Page 91 of 107

1.

LEVERAGE ANALYSIS

SOLVENCY

Solvency analysis of a firm indicates the amount of the other peoples money being used to generate profit. In general, these analyses are more concerned with long term debts, because these commit the firm to a stream of payments over the long run. Solvency analysis includes: Debt to Total Assets Debt to Equity ratio

DEBT TO TOTAL ASSETS


=
Year Total Debt Total Assets Ratio 630,369,914 698,784,979 0.90

Total Debt Total Assets


2010(000) 2009 (000) 558,779,710 619,716,433 0.90 2008(000) 561,209,723 605,072,482 0.92

TOTAL DEBT TO EQUITY


= Total Debt Equity
Year Total Debt Equity Ratio 630,369,914 68,415,065 9.21

2010(000)

2009 (000) 558,779,710 60,936,723 9.16

2008(000) 561,209,723 43,862,759 12.81

Page 92 of 107

SOLVENCY ANALYSIS
SOLVENCY ANALYSIS Debt to Total Assets Debt to Equity ratio 0.90 9.21 2010(000) 2009 (000) 0.90 9.16 2008(000) 0.92 12.81

INTERPRETATION
The overall leverage position is showing poor trend as compare to previous year. The contribution of equity in total assets is decreasing, while the debt contribution is increasing which is not better for business. Equity ratio is decreased which not show the better condition of the bank. Solvency Ratio is in not good condition. So we can say that overall Solvency condition of the UBL is not better with the comparison to the previous year.

Page 93 of 107

PROFITABILITY ANALYSIS
Profitability analysis of a firm indicates the overall efficiently of the management. Without profit a company cannot attract the outside capital. Profitability analysis includes: Return on total assets Return on-equity Return on investment Return on advances Return on fix assets

1. RETURN ON TOTAL ASSETS


=
Year Net profit After tax Total Assets Return

2010(000) 11,159,930 698,784,979 1.60%

2009 (000) 9,192,687 619,716,433 1.48%

2008(000) 8,333,120 605,072,482 1.38%

2. RETURN ON EQUITY
=
Year Net profit After tax Equity Return


2010(000) 2009 (000) 9,192,687 60,936,723 15.08% 2008(000) 8,333,120 43,862,759 18.99%

11,159,930 68,415,065 16.31%

Page 94 of 107

3. RETUEN ON INVESTMENT
=
Year Net profit After tax Investments Return


2010(000) 2009 (000) 9,192,687 136,145,524 6.75% 2008(000) 8,333,120 116,328,288 7.16%

11,159,930 224,578,556 4.97%

RETURN ON TOTAL ADVANCES

=
Year


2010(000) 2009 (000) 9,192,687 354,091,713 2.60% 2008(000) 8,333,120 371,139,675 2.25%

Net profit After tax Total Advances Return

11,159,930 333,732,172 3.34%

RETURN ON FIX ASSETS


=

Year Net profit After tax Fix Assets Return

2010(000) 11,159,930 22,424,072 49.77%

2009 (000) 9,192,687 21,925,669 41.93%

2008(000) 8,333,120 18,021,445 46.24%

Page 95 of 107

PROFITABILITY RATIOS
Profitability Analysis Return On Total Assets Return On Equity Return On Investment Return On Fix Assets Return On Advances 2010 1.60% 16.31% 4.97% 49.77% 3.34% 2009 1.48 15.08% 6.75% 41.93% 2.60% 2008 1.38% 18.99% 7.16% 46.24% 2.25%

INTERPRETATION
Profitability analysis shows the entire performance of a business and if we study the profitability trend of bank then it will clear to us that it showing a positive trend. Net profit after tax is increased as compare to previous year, due to it return on assets, equity and investment is increasing. Not only overall profit is increasing but also average profit of all the branches is increasing. Bank interest income is also increasing due to more advances in this year. This year bank total deposits are also increased and thats why interest expenses are showing upward trend.

Page 96 of 107

INVESTOR ANALYSIS
Investor analysis or market analysis are related to firm market valve, as measure by its current share price to certain accounting values. Investor analysis includes: Earnings per share Dividend per share Dividend payout ratio Breakup value/Book value per share

Earnings per Share


=

Year Net profit After tax No Of Shares Earning

2010(000) 11,159,930 5,180,000 2.15

2009 (000) 9,192,687 5,180,000 1.77

2008(000) 8,333,120 5,180,000 1.61

1. DIVIDEND PER SHARE:


=
Year Total Dividend No Of Shares Earnings 1,224,180 5,180,000 0.23

2010(000)

2009 (000) 2,782,227 5,180,000 0..54

2008(000) 1,011,719 5,180,000 0.20

Page 97 of 107

DIVIDEND Pay Out Ratio


=
Year Dividend Per Share Earning Per Shares Earnings 0.23 2.15 10.69%

DPS EPS

100

2010(000)

2009 (000) 0..54 1.77 30.50%

2008(000) 0.20 1.61 12.42%

BOOK VALUE PER SHARE


= Equity No. of Shares

Year Equity No Of Shares Earnings 60,180,924 5,180,000 11.60

2010(000)

2009 (000) 52,276,246 5,180,000 10.10

2008(000) 42,222,777 5,180,000 8.15

Page 98 of 107

INVESTOR ANALYSIS
Investor Analysis Earnings Per Share Dividend Per Share Dividend Pay Out Ratio Book Value Per Share 2010 2.15 0.23 10.69% 11.60 2009 1.77 0.54 30.50% 10.10 2008 1.61 0.20 12.42% 8.15

INTERPRETATION
UBL has also has good investment opportunities for the investors. This bank has more attraction for investors as compare to previous year. Earnings per share are increased due to increase in profit. Book value and market valve of one share in also increased as compare to 2006. Only Dividend payout and dividend per share ratio are decreased because bank declared fewer dividends as compare to last year but it is also in favor of investors because it will increase wealth of shareholders and ultimate benefit to investors

Page 99 of 107

BANK SPECIAL ANALYSIS


Bank ratio analysis is little bit different from other organizations and if we want to see the real picture of a bank we have to focus on given special ratios. Earning assets to total assets Return on earning assets Net margin to earning assets Loan loss coverage ratio Equity to total assets Deposit time equity Loan to deposit ratio

SPECIAL BANKING RATIOS

Special Bank Analysis EQUITY TO TOTAL ASSETS DEPOSIT TIME EQUITY LOAN TO DEPOSIT

2010 9.97% 9.21 2.17%

2009 9.16 0.12 2.43%

2008 7.25% 12.81 2.48%

Page 100 of 107

EQUITY TO TOTAL ASSETS:


Year Equity Total Assets Ratio 68,415,065 698,784,979 9.97%

2010(000)

2009 (000) 60,936,723 619,716,433 9.83%

2008(000) 43,862,759 605,072,482 7.25%

INTERPRETATION
This ratio shows the position of equity in total assets of business. In both years this ratio is almost same. But the bank should increase its equity by increasing the wealth of shareholders.

DEPOSIT TIME EQUITY:



2010(000) 630,369,914 68,415,065 9.21 2009 (000) 558,779,710 60,936,723 9.16 2008(000) 561,209,723 43,862,759 12.81

=
Year Total Debt Equity Ratio

INTERPRETATION
This ratio is also known as debt to equity ratio. This shows how much outsiders share in business total equity. Lesser ratio is better for a business and this year bank ratio is decreasing which showing better trend as compare to previous years.

LOAN TO DEPOSIT:
Loan Page 101 of 107 Deposit

100

Year Loan Deposit Ratio 11,985,748 550,645,767 2.17%

2010(000)

2009 (000) 11,989,800 492,036,103 2.43%

2008(000) 11,993,848 483,560,062 2.48%

INTERPRETATION
Loans or advances are the major assets of a bank while deposits are major liabilities of a bank. Higher ratio shows the better solvency of bank. This ratio is increased instead of previous years because advances of the bank are increased as previous years although deposits are also increased this years but its ratio is less.

Page 102 of 107

PERSONAL RECOMMENDATION
Here I am putting some suggestions , which will enable the bank to compete with other Banks more effectively and efficiently.

Planned and Healthy Competitions:


UBL should become very specific about its competitors, so that it can understand who its competitor is in the first degree and who is in the second degree. Then the first-degree competitors should be watched closely.

Formation of a Research Cell:


A research cell should be established that continuously try to gather information about the present action about its competitors and expected future actions. So in this way more effective strategies can be formulated.

Reward system:
The performance reward linkage should be making strong as it is said, "A happy employee delivers more than he receives from the organization." The UBL should also try to make its employees happier. Besides these, some other recommendations are as follow:

There is immediate need, to reconstruct the personnel policies. Selection should


be through newspaper advertisements. In this way more intelligent, efficient and qualified staff can be formulated.

It is strongly recommended that UBL should go for computerization rather than


manual work, which is very slow and time, consuming process. In this age UBL even does not have a partially computerized system where as other new competitor banks are now going towards on-line banking services.

Govt. should take keen interest to promote Islamic Banking. Along with the officers, the training must also be given to the clerical staff. Working conditions must be improved for the employees. Bank will definitely
get more benefits after some expenditure on the working conditions as it improves efficiency and productivity of the employees.

UBL should flourish certain marketing plans to attract the customers by giving
them certain incentives and beneficial schemes to the customers as other competitor banks are doing so.

There is also a need of proper recruitment and selection program. New young
talent should be introduced to inject the new ideas. Page 103 of 107

Special attention should be given to the behavior of the employees towards the
customers, as customer is the most important person for any bank.

There are many employees who are working on ad-hoc basis creating
dissatisfaction. The deserved should be made permanent employees.

Political influences in the bank should be eliminated. To motivate the employees of the bank, regular bonuses and incentives should
be given to them.

There must be a friendly environment among all the employees as it enhances


the trust and sincerity.

UBL should be focusing its attention towards the share of traveler cheque. The recruitment policy should be fair and transparent. Management should increase the branch limit of expenditure to fulfill the
necessary expenditure of personnel relation.

There is another recommendation about the bank that there is no proper timing
of the bank and there is made an unnecessary delay in the banking transactions, which might not be a good sign for the bank from future prosperity point of view.

Staff turnover particularly of trained staff result in financial and other losses.
The amount spent by the bank on employment, induction and training of outgoing officers constitutes to beat till another officer should ready prove this work. The exodus of bank officer in the past has worsened the situation.

Most of the bank employees, are sticking to one seat only with the result that
they become master of one particular job and lose their grip on other banking operation. In my opinion all the employees should have regular job experience all out-look towards banking. The promotion policy should be adjusted.

Refresher Courses for the staff are most important in any international
organization. Alt the employees should have these courses according to their requirement. Foreign experts can also be called for this purpose.

Every year some of the employees should be sent for training to other countries
and employees from other branches should be brought here. Some more reading material should be provided. The purpose should be to

Educate the employees with the advance studies in their field. The employee
should be provided the opportunities to attend and participate in seminars and lectures on banking.

Bank should give some more incentive to its employees in order to remove the
conflict between lower and higher officers and should try to improve the working condition of the bank.

As such system should be designed that every employee who has some
problems with his officers can communicate it to the higher management and some steps must be taken to improve that.

Recruitments should be strictly on merit basis and induction should be after


Page 104 of 107

proper and extensive training.

Old and lazy staff should be replaced by young, qualified and energetic staff. More Foreign branches should be opened in order to capture the international
market and to earn international repute for the bank.

Working environment, equipment, furniture and staff dressing should be


according to the modern banking style.

Proper attention should be paid to upgrade customer services. Bank should adopt the global organizational banking structure to meet the
international standards of banking sector.

Before sanctioning and issuing and issuing any loans to the borrowers, the credit
worthiness of the client be assured seeing that theyre past dealing with other banks in the area. This would certainly help in deducing risk of default.

The customers who have continuous interaction with the bank and have sound
deposits in their accounts should be given value and due importance. This would greatly help in saving the time of both the bank and the customer.

The overall services should be improved to a greater extent and the customers
are accommodated in a courteous and friendly manner.

Proper securities should be obtained as guarantees to secure loan in favor of


bank.

All the branches should be equipped with modern facilities like tax consultancy,
interest and computers.

A qualified and skilled staff should be introduced and strategies should be


developed to divert to quality banking rather than quantity. The branches having continuous insufficient cash balances should be closed.

The employees should be provided the opportunities to attend and participate in


seminars and lectures on banking.

Proper remedies for delays or dishonor of cheque is passed at proper time in


order to make good reputation in the eyes of the customers.

Customer should be facilitated at the time of payment of utility bills to avoid


rush and mismanagement.

The bank is also in process of computerizing its records which is good sign but
it is going on with small progress Computerization must be done on early basis. This will help in increasing efficiency of work don, customers satisfaction decreases the stationary cost and resultantly it will increase profits.

Employees Training programmed must be introduced on continuous basis so


that Employees have understanding with the latest developments especially with the customers.

Bank should introduced incentive plans for employees on regular basis so that
if employees may work whole heartedly for the welfare of their organization. While giving incentives qualification, work, experience, hard work and such other factors must be considered. Page 105 of 107

Mismanagement of resources must be avoided as much as possible as it


decreases profit but also discourage hard worker and honest employees.

Fresh graduates must be recruited. As the combination of Experienced and fresh


can produce better results and it will improve the efficiency of management.

Page 106 of 107

REFERENCES
Websites: www.ubl.com.pk en.wikipedia.org www.sbp.org.pk Books.google.com.pk Library: Magazines, Newspapers and Others. UBLs General Literature Professors

Page 107 of 107

You might also like