1

PREFACE:
The field of banking has always been a source of inspiration for me during my entire academic career. To work in a bank, to acquaint with its working mechanism was always a point of interest for me and God gave me a golden opportunity to complete my internship at UBL, one of the leading bank in Pakistan and well known in world due to its appearance in the international markets. I had a general idea about the banking, but once I practically started the internship in banking field I observed much about banking, I realized the importance and significance of commercial banking for the development of economy. To adjust myself in such a large commercial organization was not an easy task, but by the grace of Almighty Allah aid my internship in a befitting manner and I learned a lot about the overall banking arena. This expanded my vision about the banking sector, which in turn enabled me to make an appraisal of the economic situation of our country. This report is a thorough essence of my rigorous studies which I undergone through in a period of two months in a commercial bank. I have exclusively studied and observed the operations/ functioning of the bank and tried my best to abreast myself with all the dimensions of the banks. The purpose of this report is to evaluate the performance of UBL in diversified avenues and give concrete recommendation for further improvement. Although the bank is functioning satisfactory, but the path to ultimate success is still full of threats and hurdles. It was a great experience to work there and contribute handsomely in the process of appraising its pros and cons and feeling to be a significant part of the bank. I am thankful to all those who helped me in one-way or the other and guided me in the preparation and compilation of this report in a presentable fashion.

LIST OF CONTENTS
PREFACE TABLE OF CONTENTS LIST OF TABLES LIST OF GRAPHS LIST OF ACRONYMS EXECUTIVE SUMMARY

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

Section # 1

10 10 10 10 10 11

CHAPTER 2

Section # 2

Introduction to UBL 2.1 2.2 2.3 Banking History Banking in Pakistan Towards Islamization of Economy 12 12 12

2.4 2.5 2.6 2.7 2.8 2.8

Birth of UBL Number of Branches Subsidiaries Functions of UBL Role of UBL in Banking Sector Computerization of UBL

14 14 14 15 15 16

CHAPTER 3
Deposits, Remittances, Credit & Clearing Departments 3.1 Deposit Department 3.1.1 3.1.2 3.1.3 3.2

Section # 2

20 20 20 20 22 22 23 23 23 23 24 24 24 25

Functions performed by Deposit Department Types of Accounts Nature of Accounts

Remittances Department 3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.2.6 Demand Draft Telegraphic Transfer Mail Transfer Pay Order Rupee Travelers Cheque Uniremote

3.3

Credit Department of UBL 3.3.1 3.3.2 Credit department of UBL Procedure for Financing

3.4

Clearing Department 3.4.1 3.4.2 3.4.3 3.4.4 Procedure for clearing of Cross Cheques IBC LBC OBC

27 27 28 28 28

CHAPTER 4
Financial Analysis 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 Group and its Operations Basis of Presentation Significant Account Policies Risk Management Concentration of Credits and Deposits Investment Portfolio Profitability Financial Analysis 4.8.1 4.8.2 4.8.3 Common size analysis of Balance Sheet

Section # 3

29 29 30 32 33 33 33 33 34 34 34

Common size analysis of Income Statement Financial Ratios

CHAPTER 5
Qualitative Analysis 5.1 5.2 Qualitative Analysis of UBL SWOT Analysis 5.2.1 5.2.2 5.2.3 5.2.4 Strengths Weaknesses Opportunities Threats

Section # 3

41 44 44 45 46 46

CHAPTER 6
Recommendations 6.1 Recommendations 6.1 6.2 Human Resource Department Credits and Advances

Section # 4

48 48 51

CHAPTER 7
Implementation Plan 7.1 Action Plan 1 7.1.1 7.2 Franchise Agriculture Supplies Stores

Section # 5

56 56 58 58 61 66

Action Plan 2 7.2.1 Techniques for effective Management and Recovery of Advances

7.3 Action Plan 3 Bibliography Annexure

LIST OF TABLES
1 2 3 4 Common size Analysis of Balance Sheet Financial Ratios Cost Schedule of Action Plan Cost/revenue schedule Marketing Plan 35 36 37 37

LIST OF GRAPHS & CHARTS

1 2 Organizational Hierarchy of UBL Senior Management of UBL 18 19

LIST OF ACRONYMS
AD ATM ATR AVP AOF BOG BOD CA CP DAC Authorized Dealer. Automated Teller Machine Asset Turn Over Assistant Vice President Account Opening Form Board of Governor Board of Director Credit approval Credit Proposal Disbursement Authorization Certificate

DD DP Note EBIT ESVP EVP FDD FMT FTDR FTT GM GOP GPM LC NPM OG1 PLS PO RF RM ROI RTC STDR

Demand Draft Demand Promissory Note Earnings before Interest & Tax Executive Senior Vice President Executive Vice President Foreign Demand Draft Foreign Mail Transfer Foreign term Deposited Receipt Foreign Telegraph Transfer General Manager Government of Pakistan Gross Profit Margin letter Of Credit Net profit Margin Officer Grade 1 Profit & Loss Saving Account Pay Order Running Finance Relationship Manager Return on Investment Rupee Traveler Cheque Special term Deposited Receipt

EXECUTIVE SUMMARY
1. Banking operations and services are one of the basic needs of an economy. These include acceptance of deposits and disbursement of advances to individuals and others at higher rates. Banks perform various fundamental factions, which are directly or indirectly contributory towards economic and social development of countries. UBL, a commercial bank was established in 1959 as result of reckless efforts made by Agha Hassan Abidi. The UBL has shown the fastest growth pattern and in a period of just 27 years became the second largest bank of Pakistan. The bank image however adversely destroyed when it suffered heavy losses during its nationalization period due to political and factors. The bank is showing other re-emerging indications as is evident from its financial

statements. UBL on October 19, 2002 was privatized and bought by two financially sound parties of international repute i.e. best way group and Abu Dhabi group holding 51% of the banks share and thus has emerged as the largest private bank surpassing MCB. 2. The purpose of this report is to study operations and analyze performance of UBL to see whether the bank is successful in its operational performance or not, and recommending possible solutions for problems. For meeting the purpose both secondary and primary data have been used 3. The whole report has been divided into five main sections as describe below: Section I: is introduction to the report and briefly describes the scope, purpose, methodology and limitations faced during the preparation of the report Section II: is the review portion and contains five chapters. First chapter is introducing the organization, UBL which came in to being in 1959. Remaining four chapter are explaining operations and relevant broader but comprehensive set of information of the functional departments of the bank. An attempt has been made so that readers of this report should be able to gain sufficient knowledge of the processing and procedures of the operations carried out by these departments. However in the chapter pertaining to foreign exchange department main focus is places on the payments regulations and procedures of letter of credits in the light of foreign exchange regulation Act, 1947. Section III: the analysis part of the report and is comprising of two chapters. Chapter 5 is the critical analysis of the departments and its functions. SWOT analysis is an integral part of this chapter. As an internee I was deeply concerned about the performance level of the UBL and therefore tried to analyze the bank financial performance that is included in chapter 4, this chapter reveals that the bank is trying to regain its position in the present

more dynamic and competitive environment. Major findings are included in this summary which is the outcome of these analysis Section IV: is the recommendation part and is derived from the previous section. Major findings are stated in the later part of this summary. Three action plans are included in section V with the hope that if implemented properly will enhance the bank's overall productivity and will also enable it to compete more efficiently and effectively. These plans are related to exploration of new opportunity present in the agriculture sector, effective management and recovery of advances and marketing activities respectively. 4. During the study, findings extracted are listed below: i. Mark up expense of the bank has reduced and administrative expenses have shown increase. ii. Non-performing advances have reduced; deposits show consistency. iii. Due to lack of job rotation opportunity and lack of informal group existence, employees do not share each other workload. iv. The recent downsizing hustle and bustle trends have affected banks efficiency due to lay-off survival syndrome. v. Presently about 1100 employees have been placed in surplus pools that are unaware of their future. vi. Motivation level of employees is not satisfactory which effects their own and as well as performance of the organization. vii. In proportion to number of accounts and functions performed sizes of branchs buildings are small. viii. Newly developed account opening form carries restricted space where only two applicants names can be incorporated.

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CH # 1
INTRODUCTION TO THE REPORT
1.1 INTRODUCTION:
Students of M.B.A are required to undergo an internship program of at least 6 to 8 weeks duration. This is an essential academic requirement. The internship is followed by comprehensive report writing, required to submit to the AIOU Department of Business Administration. This report is properly evaluated on the basis of its description and analytical capabilities by internal and external examiners. I did my internship in United Bank Limited colony Branch Tarbela Dam Project.

1.2 PURPOSE OF STUDY:

The purpose of the study is to work in real life situation and learn banking practice by doing. In this context its objectives are: i. To analyze banking operations i.e. operational analysis, financial analysis. ii. To develop concrete and feasible recommendations. iii. To improve report writing skills.

1.3 SCOPE OF STUDY:

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

1.4 LIMITATION OF STUDY:

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

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1.5 METHODOLOGY OF STUDY:

Both primary and secondary data were used in compilation of the report. Methodological tools used were: i. Primary Data: Personal Observations Discussion with Bank Personnel ii. Secondary Data: Brochures/ Manuals of the bank Annual Report State Bank Foreign Exchange Manual Bank internship reports on UBL available in library Journals, newspapers and books Internet

1.6 SCHEME OF REPORT:

The report is divided into five sections as under: Section-I consists of chapter 1, which includes background, purpose, scope, limitations, methodology and scheme of the report. Section-II consists of five chapters (Chapter 2-3) and includes organizational review. In this section background history of UBL, its organizational structure; and department operations are discussed. Section-III consists of chapter 4 and Chapter 5, which include operational and financial analysis of UBL respectively. Section-IV summarizes the findings and recommendations of the study.

12

Section-V deals with action plan to implement the recommendations, identified in the previous section.

CH # 2
INTRODUCTION TO UBL
2.1 BANKING HISTORY:
Consensus on the origination of word Bank is not yet reached at. Some authors opinion is that this word is derived from the words Bancus or Banque, which mean a bench and they further relate banking business inception to Jews in Lombardy. Other authorities state that the word Bank is derived from the German word Back which means Joint Stock fund and later on due to German occupation of Italy, this word was italianated into Bank. Authors quote Babylonians (few quotes Chinese) who developed banking system as early as2000. B.C1

2.2 BANKING IN PAKISTAN:

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

2.3 TOWARDS ISLAMIZATION OF ECONOMY2:

Interest based transactions/businesses are Haram in Islam. The GOP has shown. Interest to eliminate interest from its economy by developing various alternatives. To achieve this objective various efforts are made with the following outcomes:
1
2

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

2.3.1 Deposits: PLS (Modarba) Accounts Current Accounts: (with no return paid)

13

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

2.3.3 Trade Related Modes of Finances: Bai Muajjuai; purchases of goods by banks and their sale to clients at appropriate mark-up in prices. Bai-Salam; purchase of goods from clients by banks and their resale to the client at increased prices, to be paid in future. Financing for development of property on the basis of developmental charges Purchase of trade bills. Ijara: leasing. Hire purchase

2.3.4 Investment Type of Modes of Finances: Musharaka: financing on the basis of profit and loss sharing. Modaraba: equity sharing of borrower profit and loss on basis of purchase of modaraba certificates. Rent sharing. Equity participation through purchase of shares

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

14

operation, Nauman Hussain by the newly privatized bank. Senior management of the bank is shown in the chart given at the end of chapter.

2.5 NUMBER OF BRANCHS:

UBL has a large network of branches, which extends to the remotest areas of the country. In December 1983, there were 1623 branches whereas in 1974 it had only 1238 branches and in October 2003 these figures show total number of1007 branches 3. UBL has been very active in increasing its overseas branches network. The first foreign branches were established in London in 1963. Now UBL has branches in Bahrain, Qatar, Saudi Arabia, United Arab Emirates, and Yemen Arab Republic, UK Switzerland, Egypt, Oman and the United States. These branches are playing a significant role in channeling home remittances and foreign trade of Pakistan.

2.6 SUBSIDIARIES:
UBL has four subsidiaries, namely: United National Bank Limited (UNB), UK United Bank AG (Zurich), Switzerland United Executers and trustees Company Limited United Bank Financial Services (Private) Limited

________________________________

UBL (2003) Annual Report

2.7 FUNCTIONS OF UBL:

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

15

General Utility Services Underwriting of loans raised by the Government or public bodies and trading by corporations etc.

Providing specialized services to customers, and Hajj-related services

2.8 ROLE OF UBL BANKING SECTOR:

The impressive growth and development, which UBL achieve, present it undoubtedly the most dynamic and progressive. In a very shorter period of time it became one of the leading banks overtaking several other older and its competitor banks 4. The major contributions5 the bank has made are enlisted below: Record setting performance and commitment to serve the customers Personalized service and dynamic approach Catalyst of changes Professional management Modern banking policy Human resource development Small loans (or) micro credits Pacesetter in economic research established in 1967, department for economic research. Utility bills collection Credit cards (unicard-1970) Travelers Cheques (Humarah-1971) Diaries and calendars received prizes too

16

Promotion of sports

2.9 COMPUTERIZATION OF UBL:

UBL has taken leading start in the introduction of computers in (1966-1968)6 in important cities. Its three computers centers Rawalpindi, Lahore and Karachi are equipped with the modern mainframe computers of various capacities. Every branch has been decorated with microcomputers. The use of computers has enabled the bank to save time and efforts raise efficiency and deliver the goods speedily to its customers. This has also allowed the bank to maintain its leadership within the industry. UBL - On line System6: Themes of this service is Access anytime, anywhere, any device which symbolizes comfort, convince and connectivity. UB-Online a web based service that can be accessed through multiple media link like, (i) PC via internet (00) Mobile phone with WAP or free SMS) (iii) Personal Digital (iv) assistants and (v)Plain telephone; following are some of the exciting features: Accounts statement & electronic data interchange Graphical analysis Alerts service /facility, search facility and activity long

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________________
6

UBL, (October 8, 2002). PPI Circular. Karachi

The banks as another computer-based system known as UIBANK 7, which is a well-develop on-line branch-banking package. The system automatically prepares various report, central bank returns, and statement of accounts for customers. Money Gram facility: The bank has recently employed money gram service system, which can affect money transfers within minutes. Similarly the system used for local transfer of money transactions is called uniremote. Hajj service: Keeping to its tradition is august 1982 provided electronic facility at its Hajj booth and has installed now modern computers at designated branches (Hajis) and increasing efficiency. This facility has reduced the service time to less than six minutes per Haji compare to about half-an-hour to 45 minutes per Haji earlier.

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_______________
7

www.ubl.com

2.10 FUNCTION HIERARCHY:

Chart 2.1 Organizational Hierarchy of UBL Chairman Deputy Chairman Board of Directors Executive Committee Managing Director SEVP EVP

VP Officer GradeI Non Clerical Clerical Staff Officer Grade-II Officer Grade-III

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

Chart No 2.2 Senior Management of UBL

Atif R .Bokhari President

BOD

Audit Committee
Shabbir Hussan Chairman Ameer Karachiwala

Risk Management Committee Ali Sameer Chairman Ameer Karachiwala

HR

Tariq Kirmani Chairman Muhammad Ali Chief Executive Mohammad Asghar Director

Tariq Kirmani

Shabbir Hussan

Saeed Iqbal

Mir Muhammad Ali

Saeed Iqbal

Shabbir Hussan Director Ameer karachiwala

Ali Sameer Director Saeed Iqbal Director

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CH # 3
CASH, REMITTENCES, CREDIT & CLEARING DEPARTMENTS:
3.1 DEPOSITE DEPARTEMNT
As per the definition of Banking under see 5(b) of BCO 1992 one of the main functions of a bank is to accept deposit. Deposits are the backbone of any bank; other functions of the bank primarily depend upon the type and size of deposits. 3.1.1: Function perfumed by cash and deposit department in UBL UBL colony Branch accepts deposits under the following three accounts. i. Current account ii. PLS saving account iii. Terms Deposits 3.1.2: Opening of Account: To open an account in UBL the customer will have to fill an account opening form in front of bank officer. He has to sign in all required places in front of the officer. 3.1.2.1: Documents Required in Account Opening: i. N.I.C Copy. ii. Account opening form (provided by bank) iii. Two photograph (in case of illiterate person) iv. Specimen Signature card (Provided By Bank) v. Cheque Requisition Form vi. Introduction of Account.

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3.1.2.2. Types of Account: a. Individual Account In this account a single customer operates the account. The banker will run the account according to the rules, but if the customer gives special instructions the Bank will have to follow it. b. Joint account: In this type of account two or more than two persons will open the account. The account will be operated by one account holder in case of (either of the survival). If the instructions are not given, all the account holders will have to sign the check. 3.1.3 NATURE OF ACCOUNTS IN UBL COLONY BRANCH A) Current Account: These are non-profitable demand accounts. The account can be opened with minimum amount of rupees 1000/-. These accounts are usually maintained for business purpose. Due to enormous competition UBL has introduced daily profit current account for corporate clients called (UNISEVER) minimum balance required is Rs.100,000/-. If minimum balance requirement is not met, bank is authorized to recover predetermined charges. B) PLS Saving Account These accounts were intended with the aim of encouraging thrift among people. These accounts can be opened either in Pakistani rupees or in few major currencies of the world. Bank offers (4%- 6%) return on these accounts. The basic feature is the profit and loss sharing as according to non-interest based banking system. These accounts can be opened in the name of; individuals, joint names, trust accounts, charitable organizations. Unlike current accounts, Zakat is applicable on local currency saving accounts. Minors accounts can be opened on the condition that their guardians shall operate these accounts. C) Term Deposits: Term deposits are also called fixed deposits. These can be withdrawn after a specified period of time. Interest is paid to the depositor on all fixed or term deposits. The rate of return varies with the duration for which the amount is kept with bank

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There are two types of term deposits. i. STDRS Special Term Deposit Receipt (local currency): Special Term Deposit Receipts are issued for different periods of maturity ranging from one month to 5 years, having attractive returns. There is no limit on denominations. ii. 3.2.3.2 NTDRs Notice Term Deposit Receipt (local currency): These are term deposit with special features that these can be withdrawn any time but after giving a predetermined and pre agreed early notice.

3.2 REMITANCES DEPARTEMNT:

Current business trends demand fast movement from one geo-graphic end to another. Latest technology and telecom data transmission has made it possible to make such transactions with in minutes. UBL Remittances Department performs following functions. 3.2.1 Demand draft (D.D) D.D is a negotiable instrument issued by branch of the bank drawn on other branch of the same bank. A) Procedure for D.D.: Purchaser is asked to fill in an application form duly singed by applicant. Three things should be maintained in the form. Name of Payee Place of payment Amount of D.D Commission is charged on D.D as bank income. The applicant is asked to deposit the cash specified on the application form to the teller. After depositing cash the remittances in charge prepare a D.D. That is singed by two officers must having power of attorney. Bank also provides this facility to general public who dont have account in UBL. They will have to submit a N.I.C copy along with D.D application form.

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3.2.2 Telegraphic transfer (T.T): Transfer of funds to another branch of the same bank with the help of test numbers. If the test number agrees the bank make payment to the party. A) Procedure for T.T: The procedure for T.T is same as D.D. But in D.D it is given on a printed-paper and singed by two officers but, in T.T, only test number is given to the customer. 3.2.3. Mail Transfer (MT) When the money is not required immediately, the remittances can also be made by MT. Here the selling officer of the bank sends instructions in writing by mail to the paying bank for the payment of a specified amount of money. The payment under transfer is made by debiting the buyers account at the sending office and crediting it the recipients account at the paying bank. UBL takes mail charges from the applicant where no excise duty is charged. 3.2.4 Pay Orders: Pay order is banker cheque issued favoring a named beneficiary. The issuance bank is discharged by payment in due course. Application for the PO stamped and the customers account balance is checked or cash received for the amount PO and other charges. Pay Order leaf is typed and crossed if required and signed by two authorized persons. Thereafter it is delivered to the customer. PO can be cancelled at original purchasers request in writing and surrender the instrument, which then marked canceled along with other documents and prior entries. 3.2.5 Rupee Traveler Cheques: UBL has launched R.T.C Brand named Hamrah in November 1996. These are issued to applicants with varied denominations without excise duty and commission. When issued HO account is credited and on encashment the same account is debited. RTCs lost cases are communicated to HO and client is either repaid or new RTCs are issued to him/her. 3.2.6 Uni Remote: This is a new tool for the transfer of money. This is a step towards the online banking taken by UBL. This tool transfers money from one branch of UBL to other through electronic transfer. The customer will have to fill the deposit slip. On the slip he will write the name and account number of

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the person to whom the money will transfer, the name of the branch is also written. The amount is deposited with teller and the receipt is shown to remittance in charge. One I.D copy is also attached with slip. The remittances in charge will transfer if by using device (computer) through online service. The fund transfer is must be supervised by another authorized officer. Every time for this is five minutes.

3.3 CREDIT DEPARTMENT OF UBL

General Credit extension is the principal function of a bank, through which pace of activity is accelerated in the various sectors of economy. Also the indicators, which mainly reflect the high quality of banks management, are its prudent financing decisions, proper control of finance and prompt recovery. In this regard the credit policy of a bank play a very important role as it provides the overall framework, responsibilities, and authorities and facilitates decision-making. Credit department performance is subject to a defined policy on credit control exercised by the SBP. SBP affect credit decisions through the weapons of bank rate, open market operations, variable reserve requirements, selective credit restrictions and prudential regulations. UBL Credit Policy: Credits operations are undertaken in accordance to banks credit policy. The policy strictly prohibits violation of SBP/Local central banks rules and suggests financing of self-liquidating, cash flow supported and well collateralized transactions, which equate the principle of lending (safety, liquidity, dispersal, remunerations and suitability).

3.3.1 CREDIT DEPARTMENT OF UBL NOWSHERRA BRANCH

Facilities offered by UBL Running Finance (for one year) Demand Finance (3to 5 years)

3.3.2 Procedure for Financing from UBL

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

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3.3.2.1 Purpose:
In this the party mentions the purpose; they want to apply for the finances. No lending is done without purpose.

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

3.3.2.3 Security:
The bank will secure itself against the lending. There can be two type of security. Commercial Residential The bank prefers commercial security. Relationship Manager (RM) is mainly responsible for the relationship between the bank and party. He acts like a bridge between the two. In the first instance the party would prepare the following property documents. AKS Shajarah Naqsha Tasveeri Approved Building Plan Tresh fard Intaqal Naqal The party is asked to contact any valuator on the panel of UBL. ICM&L and. The valuator will visit the site and set market value and FSV of the said property. He prepares report of at least three pages. This document sent for one page legal opinion to any layer on the panel of UBL. Having clear legal opinion RM start preparing credit Approval (CA) . The documents are singed by the RM & AM and then forwarded to UBLRHQ in Peshawar. Here SRM examines the CA if he found some exception he will send it back to the respective Rm.RM rectifies the acceptation and send it back to

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SRM. SRM studied and pass it to credit officer. He has three hours of time to study the CA and if found correct then he pass it to another credit officer. After his examination the CA is passed on to the credit risk manager. He checks the CA and after signing it sent to CAD. He forwards the CA to SCO. Whose office is at UBL RUCO at Lahore, after his signature the C.A is sent back to RCAD.RCAD make a check less list and asked the RM to contact the party to complete the said documents they are. Letter of continuity Personal Guarantee Letter of hypothecation of stock D.P Note Mortgage Deed NIC of executants and witness Stock report Insurance policy Party profile After completion of charge document RM send it to RCAD when they found it correct, they issues DAC. A copy of DAC is sent to RM and NICF account is opened and debit transaction starts.

3.4. CLEARING OF BILLS:

General: Bank can make payments of only open Cheques on the counter payment. Payment of cross Cheques cannot be made on counter its payment is possible through collecting bankers. The function of clearing department is divided into two main classes. Inter Branch Transaction Inter Bank Transaction

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3.4.1 Procedure of Clearance of Cross (Cheques):

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

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

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

3.4.4 OBC
When the bank receives the cheque from its customer or from any other spoke branch drawn on any other bank of any other city. They sent the cheque to the UBL main branch of that city, after receiving OBCA the bank will pass the following entry. In case of his own customers Ho a/c. Dr Customer a/c. Cr In case of spoke branch Ho a/c. Dr Spoke Branch a/c. Cr

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CH # 4
FINANCIAL ANALYSIS:
INTRODUCTION These section efforts have been made to cover all relevant aspects of the financial performance of UBL. Overtime comparison and Common Size analysis are carried out with the view to extract concrete conclusion to describe financial standing and performance of the bank.

4.1 THE GROUP AND ITS OPERATIONS

The group consists of a) Holding Company United Bank Limited, Pakistan b) Subsidiary Companies United National Bank Limited, UK United Bank AG (Zurich), Switzerland United Executers and Trustees Company Limited United Bank Financial Services (Pvt) Limited

4.2 BASIS OF PRESENTATION

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

4.3 SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition Returns on advances and investments are recorded on accrual basis. Debts securities purchased at premium or discount are amortized over their maturity periods. Dividend income is recognized on accrual basis of declaration of dividend up to the year-end. Returns on classified assets are recorded

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on receipt basis, rescheduled and restructured loans are treated in accordance to SBP regulations. Fees/commissions etc. on Letter of Credit and others are recorded on accrual basis. Advances These items are stated net of provisions against non-performing loans as per SBP PR IIIV. Investments: UBL classify its investments as stated below; a) Held for trading b) Held to maturity c) Available for sale-other than the above two types In the light SBP regulations quoted securities are shown at market values and any changes arising are taken to profit and loss account only upon actual realization. Unquoted securities are valued at the lower of cost and breakup value and difference is charged to income. Provisions for diminution in the values are made after permanent impairment, if any. Lending/Borrowing from Financial Institutions a) Sales under Purchase Obligation: These are reflected as liabilities and the charges against these are recorded as an expense on pro rata basis. b) Purchase under Resale Obligation: The differential of the contracted price and resale price is amortized over the period of their contract and recorded as income. Fixed Assets and Depreciation a. Owned Such assets are showed at their cost or revalued amount less accumulated depreciation and impairment loss, if any. No depreciation is charged on freehold land. During the year, amendment related to section 235 of the Companies Ordinance 1984, surplus on revaluation can now be reversed to the extent of incremental depreciation charged. As a result such differentials are now transferred to retained earnings/accumulated losses as per the Securities and Exchange Commission of Pakistans (SECP) clarifications.

31

Gains and losses on sale of fixed assets are included in income currently, except that the related surplus on revaluation of fixed assets is transferred directly to retained earnings/accumulated losses. b. Leased Assets under financial leases are stated at cost. The outstanding obligations are shown as a liability. The finance charges are allocated to accounting periods in a manner so as to provide a constant periodic rate of charge on the outstanding liability. Taxation a) Current Provision is based on the taxable income for the year or minimum tax computed on the basis of turnover, whichever is higher. b) Deferred The bank accounts for deferred taxation on major timing differences, using the liability method in respect of those timing differences, which may reverse in the foreseeable future. Deferred tax debits are, however, recognized only if there is reasonable expectation of realization of the amount. c) Foreign Currencies: Balances are translated into rupees at the applicable rate of exchange prevailing at the balance sheet date or where applicable at contractual rates. During year transactions are converted into Pak rupees applying the exchange rate at the date of respective transactions. Gains and losses are included in income currently. d) Deferred Cost and Lease Payments These are amortized over a period of five years. Rental obligations under operating leases are charged to profit and loss account as incurred.

4.4 RISK MANAGEMENT

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

32

For the purpose of efficient management of this risk, the group enters into ready, spot, forward and swaps transactions in the interbank market and with the State Bank of Pakistan in order to kedge its assets and liabilities and cover its foreign exchange position. Credit Risk Management Out of the total assets of Rs.183, 139.879M assets subject to credit risk amounted to Rs.178; 958.323M. The banks major credit risk is concentrated in textile sector. To manage it the bank applies credit limits to its customers and obtains collaterals. Credit risk in the portfolio is monitored by the CRM who formulate appropriated policies and procedures to ensure building and maintaining quality credits and efficient credit process. The banks financial institution risk management unit assesses, recommends financial institutions and also controls cross border/country risk. Interest rate Risk Management The group is mainly exposed to mark up interest rate risk on its deposit liabilities and its loans and advances and investment portfolios. The asset liability committee of the bank reviews the portfolio of the bank to ensure that risk is managed within acceptable limits. Most of the loans and advances portfolio comprises of working capital, which are reprised on a periodical basis. The groups interest is limited since the majority of customers deposits are retrospectively reprised on a six monthly basis due to the profit and loss sharing principles.

4.5 CONCENRATION OF CREDIT AND DEPOSITS1

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

4.6 INVESTMENT PORTFOLIO2

UBL employs diversified investment portfolio. The bank invests its funds both in risk free assets as well as in risky assets. This enables it to minimize its unsystematic risk to a great extent. UBL values its security holding on market value, in accordance with the guidelines given in SBP circular. Any unrealized surplus/deficit arising on such revaluation is taken directly to Surplus/Deficit on revaluation of securities in the balance sheet. Where an active market is not available, securities

33

continue to be stated at cost. Provision for diminution in the value of these securities is made after considering permanent impairment, if any, in their value. Where securities are sold subject to commitment to repurchase them at a predetermined price, they remain on the balance sheet and a liability is recorded in respect of the consideration received in Borrowing from Bank or Deposits as appropriate. Conversely, securities purchased under analogous commitments to resell are not recognized on the balance sheet and consideration paid is record in lending to financial institutions or loans and advances as appropriate.

4.7 PROFITABILITY3
The operating profit before provisions and write offs increased by 80%, whereas the profit before tax and extraordinary items increased by 62% as compared to last year. The increase is mainly attributed to 14% increase in the net revenue from funds (NRFF), 10% increase in fee and brokerage income and 75% reduction inn write offs/provisions for non-performing assets as compared to year 2002. Performing advances increased by Rs.2 billion as compared to previous year while NPAs decreased
2

UBL (2003) Annual Reports UBL (2003) Annual Reports

by 53%. Presently NPA constitutes 7.4% as compared to 14.6% in 2002 of the total loan portfolio. The branches reduced to 1077 from 1112. The bank handled over Rs.96 billion of import and export business during the year, an increase of 24.7% as compared to last year. 4.8 FINANCIAL ANALYSIS Financial statements are the principal means of reporting the financial condition and results of operations of a business entity. These statements are meant to assist various parties in decision making who are interested in the activities of the business. These statements are means to an end of helping stakeholders in decision-making. To improve the quality of decision making proper analysis of these statements helps a lot. Financial statements analysis helps in determining the financial conditions at any particular points in time and effectiveness of operations of a firm during a specific period.

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The various stakeholders of business are interested in the analysis of financial statements. But the focus of interest of all is not the same. For example, creditors and credit reporting agencies are interested in finding out the credit worthiness of the firm to which they have extended credit or intend to extend credit. Short term creditors are interested in short term liquidity of the business and long term creditors are interested in the long term cash flow which the firm can generate over the long period of time. Investors are interested in the firms ability to sustain profitability over a period of time. Government agencies analyze financial data for tax purposes. The internal users of financial statements like management also analyze financial data for planning and control. 4.8.1 COMMON SIZE ANALYSIS OF BALANCE SHEET Common size analysis is an analysis of financial statements where the total assets divide all balance sheet items of asset side and all credit side balances divided by all liability items, and all income statement items are divided by net sales/revenues. Common size analyses are extremely helpful to highlight changes over the time in financial performance and financial conditions of the company.

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

2010 ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Deferred tax asset - net Other assets 66,068,46 9 11,781,93 8 12,498,51 8 169,145,9 60 343,339,9 70 22,172,17 2 722,575 19,452,87 8 645,182,4 80 4,101,657 47,522,17 7 499,891,7 23 11,987,77 6 18,116,59 3 581,619,9 26 63,562,55 4 12,241,79 8 20,203,75 0 22,579,80 3 55,025,35 1 8,537,203 14,489,34 3 558,807,3 28 60,936,72 3 11,128,90 7 18,959,53 7 22,187,80 2 52,276,24 6 8,660,477 17,087,44 1 571,311,7 25 49,395,66 4 10,117,18 8 17,256,06 1 17,703,32 7 47,121,16 5 2274499 61,160,67 8 5,407,470 23,162,13 0 136,145,5 24 354,091,7 13 21,925,66 9 608,876 17,241,99 1 619,744,0 51 5,147,259 35,144,82 3 492,036,1 03 11,989,80 0 50,143,57 0 14,540,30 6 22,805,34 1 115,057,0 90 377,945,3 66 19,926,91 5 2,164,148 18,124,65 3 620,707,3 89 5,210,870 44,749,69 0 492,267,8 98 11,993,84 8 2009 (Rupees in '000) 2008

LIABILITIES Bills payable Borrowings from financial institutions Deposits and other accounts Sub-ordinated loans Deferred tax liability - net Other liabilities

NET ASSETS REPRESENTED BY Share capital Reserves Inappropriate profit

Surplus on revaluation of assets - net of deferred tax

36

63,562,55 4

60,936,72 3

49395664

4.8.2 COMMON SIZE ANALYSIS OF INCOME STATEMENT The common size analysis of income statement is given in the table. This shows that the UBL has been able to control its interest or markup expense. As a result of decrease in markup expense as a percentage of total revenues the gross profit margin has shown a trend of continuous increase. The increasing G/P Margin shows efficiency of the bank in controlling cost of sales (Markup expense) and better strategy of pricing, products and services. The provision for non-performing loans has a decreasing trend making no provision for nonperforming loans and diminution in value of investment, which increases the profit of current year. The reduction in provision is a good sign, which shows that the bank is recovering its disbursed advances. It shows the good credit management of the bank. There is a great increase in non-markup income, which is about 23%. Among its individual components investment income has shown a large increase as a percentage of sales. Non markup expenses also show a rising trend in absolute amount though the common size in percentages has shown a mixed trend due to the changes in revenue figures. The non-performing expanses also increased to about 25%, which is a very high percentage, but the other aspect of this is that it increased the efficiency and credit management of the staff. 4.8.3 FINANCIAL RATIO ANALYSIS The user of financial statements finds it helpful to calculate ratios when they interpret companys financial statements. A financial ratio is simply one quantity divided by another. Ratios focus on special relationship between two items of balance sheet, income statement or one from each. Ratios make it easier to understand a specific relationship between various items of financial statements

37

then looking simply at the raw numbers themselves. The number of financial ratios that might be created is virtually limitless, but there are certain basic ratios that are frequently used, these ratios can be placed into six different classes. Liquidity Ratio Asset Turnover Ratio Leverage Ratios Coverage Ratios Profitability Ratios Market Value Ratios 4.8.3.1 CURRENT RATIO: UBLs current ratio is increasing over the time. Higher the current ratio higher the ability to meet the short-term obligations as they come due. The change is occurring due to increase in short term investment and decrease in short term borrowings. 4.8.3.2 ASSETS TURNOVER: This shows revenue generated per rupee investment in total assets. UBLs assets turnover ratio has shown a little decrease. This is because of increase in total assets with proportionate increase in revenue. Banks have relatively low ATR capital, as they are selective in advancing loans and generating smaller sales. 4.8.3.3 DEBT TO ASSET RATIO: The analysis of total debt to assets ratio, there has been decrease of one percent as compared to previous year. Although the decrease is not large enough but it is a good sign for banks creditors. The decrease may be attributed to the substantial decrease in borrowings from financial institutions but the affect was weakened by an increase in bills payable and other liabilities. 4.8.3.4 DEBT TO EQUITY: This ratio measures how the company is leveraging its debt against the capital employed by its shareholders. Analysis of debt to equity ratio indicates that the current position for the debt to

38

equity is that for every one rupee in equity provided by the shareholders the bank has Rs. 13.5 as a debt. This shows that the bank is heavily relying on debt financing. 4.8.3.5 COVERAGE RATIO: This ratio shows the number of times a company can cover or meet its financial charges or obligations. One of the most commonly used ratios is the interest coverage ratio that measures the number of times the income is available to pay interest charges. The UBL interest coverage ratio has shown significant improvement in these three years.

4.8.3.6 GROSS PROFIT MARGIN: Gross profit margin is the difference between the revenue and cost of goods sold. Gross profit is critical because it represents the amount of money remaining to pay operating expenses financing cost and taxes. UBLs gross profit margin per rupee has shown rising trend in last three years. 4.8.3.7 NET PROFIT MARGIN: This ratio shows the profit that is available from each rupee of the sale. After all expanses have been paid. Net profit margin is also showing an increasing trend. UBL has improved net profit margin in the current years. 4.8.3.8 RETURN ON INVESTMENT: This ratio measures the profitability per rupee of investment in assets. UBLs return on investment has shown an improvement more than 100%. Although the assets have increased but the operational recovery of the bank is main cause of increasing this ratio. 4.8.3.9 RETURN ON EQUITY: This ratio shows the profit as a proportion of the book value of the common shareholders. The return on equity is also shown a great deal of positive change. 4.8.3.10 ADVANCES TO DEPOSIT RATIO: This ratio shows the companies advances employed per unit of deposit. This ratio of UBL over the recent three years shows a decreasing trend

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4.8.3.11 INVEST TO DEPOSIT: This ratio shows the companys investment employed per unit of deposit. 4.8.3.12 CASH RATIO: It is the ratio of cash and cash equivalent of current liabilities. It shows that how much cash is available to meet the current liabilities. Although the current liabilities also increased but the increase in cash is very high.

Spreads and key operating ratios for the bank are shown below: Table4.2

Pattern of Shareholding The pattern of shareholding as required u/s 236 of the Companies Ordinance, 1984 and Article (xix) of the Code of Corporate Governance is given in table no 4.2: Table4.3

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CH # 5
QUALITATIVE ANALYSIS
5.1 QUALITATIVE ANALYSIS OF UBL During my two months of internship period I have tried to fully commit myself in the learning process. I kept critically observing the things that I could analyze and the result of the exercise is presented as below. A) Organizational: Existing organizational hierarchy hinders vertical communication and blocks flow of information among the levels of management. The workload is not equally distributed. Coordination level among divisions/departments and employees are poor, particularly speaking of between the top and lower levels of management.

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There is centralization of authority and branch managers are bound and restricted to take initiative. Due to overlapping nature of duties and jobs there exists chaos and confusion in branches. B) Departmental: During my internship period in UBL, in various departments, I noticed following departmental problems. Cash Department: i. Not very frequently but there are instances of fake currency notes, being identified. At times notes received from other branches were found to have certain fake currency notes. ii. Counting mistakes occur due to overcrowding particularly during the collection of utility bills. Manual counting system also affects efficiency of the bank. iii. Code of conduct of cashiers is found unsatisfactory. iv. There is generally the lacking in observing and practicing banks relevant procedures and SOPs. Remittances Department: i. Application of tests for authentication of TTs is not known to all concerned individuals that reduces the efficiency and further the wrong application of tests prevent payments and the delay could dissatisfy customers. ii. Telegraphic messages require specific skills and training. The employees are partially equipped of such knowledge. iii. Preparation, execution and management of TTs and MTs and particularly DDs ask for mastering applicable rules and regulations and most of the staff was found ignorant of those. Deposit Department: i. Newly designed AOF has an inbuilt deficiency of restricted space and cannot accommodate more than two names.

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ii. Identification of customers signature is very important particularly when cash is to be withdrawn by him. Manual practices pose problems in those branches where automation has not been done yet. iii. In cases where the presence of customer himself is must, is sometime compromised due to influences of\r fear of loss of customer. Clearing Department: i. Wrong endorsement and stamping causes loss to the customers and extra efforts for the bank to repeat the procedures. ii. Reasons for the return of the cheque at times are not mentioned on the return memos. iii. At times due to lack of training wrong stamps are applied on instruments. Credit Department: i. Timelines in cash disbursement is very important which is compromised due to lengthy processing and documentation requirements. ii. Relationship Managers need to be fully equipped with the requisite knowledge and skills as presently plain BA/B.Sc. qualified individuals are performing jobs of MBAs. iii. Lack of infrastructure for carrying out computerized financial analysis of borrowers business. iv. Large pool of potential borrowers cannot apply for loans due to lack of collaterals. Heavy collateral requirements restrict credit business of the bank. v. The credit proposal and other documents at times are not properly and sufficiently prepared before taking approval. vi. Filing and record maintenance of credit related documents are not done efficiently. Bills Department: i. Bills are sent to other cities; therefore, extra care should be exercised in making entries and stamp affixing. ii. Proper scrutiny at times is not carried out and it causes loss to the bank or increase procedural timings.

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iii. Employees at times mismanage their time and fail to forward bills promptly. Foreign Exchange Department: i. Problems of bills and remittances departments equally apply to foreign exchange department. There is overlapping of functions and complete separation of function has not been achieved thus leading to a state of confusion and conflict among employees. ii. Employees of this department are lacking computer-operating skills. iii. Knowledge and educational background of employees working in this department do not match with the job they are doing. iv. Most of the employees of this department lack the ability to handle the Letters of Credit. Marketing Department i. Lack of marketing at desk due to lack of training and awareness among employees. ii. Lack of promotional activities. iii. Little attention to the apparent conditions of the bank exterior, interior layouts and design of furniture in most of the branches.

5.2 SWOT ANALYSIS:

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

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

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It is involved in both corporate and retail banking. The bank is actively emerging and is engaged in international trade and foreign exchange transactions. Foreign trade volume showed an increase of 17% over the previous year. Advances investment of the bank shows a constant growth pattern. The current years growth rate is 32%. The overall efficiency of the bank operations and management ability can be noticed by looking at to its income pattern and provisions/write off practices. Net revenue from funds increased by 18% for the current period. Provisions decreased by 14%. Total income increased by 16%. UBL is actively participating in international markets and has recently introduced credit cards in UAE, Bahrain, and Qatar, being backed up by 24 hours call center out of UAE. The bank is owned by parties of financial repute and credit worthiness like, SBP with 48.69% interest, Best Way group and Abu Dubai group with 25.50% of interest each. Others are GOP, NBP Trustee Department, State Life Insurance Corporation etc. The bank is run by highly professional recruited from and trained by foreign banks like Citi Bank.

5.2.2 WEAKNESSES:
Due to risks such as political, economic and legal etc. the bank has suffered losses the main reason was that of piling up of large amount of unrecoverable loans and debts which has adversely affected the image of the UBL. Accumulated losses pushed the bank to cut down its promotional activities in order to reduce expenses for last few years. During the nationalization life span of the bank political lords used influence in bank business and selection of employee at each level and thus adversely affected the banks efficiency and effectiveness.

45

Administrative expenses are 51% of the mark up revenue. Promotions are carried out on annual basis ignoring the importance of capabilities and performance outputs. The bank has large number of employees who are simple graduates with no banking knowledge. Ineffective system of recruiting and selection. Lengthy credit processing and documentation procedures. Unsatisfactory working conditions.

5.2.3 OPPERTUNITIES:
Growing policies of the GOP on business and economic sectors provide UBL an opportunity to efficiently meet with the business people requirements of instant cash facilities e.g. the government intentions of developing housing and agriculture sectors. The efficiency of stock market and sound exchange reserve level is providing a good opportunity for effective investment decisions. Foreign remittances are another area as present worldwide control systems over transfer of currencies through illegal channels has facilitated the area for the banks. Reconstruction of Afghanistan is a golden opportunity where the bank can effectively participate. Expansion of IT platform and internet based banking system. Interest of businesses in leasing facilities provides a healthy opportunity for banks. There is a large pool of unemployed MBAs who can be hired to achieve professionalism on its organizational culture. Outsourcing of promotional companies or use of available excellent promotional facilities. Entering new market segments. Increase the product range to meet the broader range of customers needs.

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5.2.4 THREATS:
Increase in competition due to increasing number of foreign and domestic private banks offering highly specialized and attractive services. Growing global technological advancements and adaptation of modern style of management in banking sectors. Extensive promotion campaigns run by competitors. Unemployment, lower level of income and prices like problems in the motherland coupled with low rate of industrialization, geo political adverse conditions, religious factor, and lack of consistency in policies due to political instability are some of the other major threats. This SWOT analysis is a mirror image of the banks present conditions. Some efforts are made and others are still required to be made in order to improve the situation. The management can develop elaborate strategic plans for capitalizing the available opportunities. The bank should maintain principal of professional management and adhere to sound and sophisticated banking rules and regulations so that confidence and trust of the public in the institutions could be re earned.

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CH # 6
RECOMMENDATIONS
Recommendations are considered to be the most important part of an internship report, without which no report is considered complete and meaningful. This part of the report is based on the previous sections i.e. review and analysis. Moreover, for bringing suggestions, discussions have been conducted with the staff of UBL officers, who not only provided the basis for recommendations but also pointed out some areas, where the change for the development is utmost important. Realizing the importance of this section, efforts have been made to give feasible recommendations, which are categorized under the following headings. 6.1 HUMAN RESOURCE DEPARTMENT The importance of manpower cannot be denied in any organization. In case of banks it is the most valuable asset, because the bank is very sensitive organization and to be in harmony with this sensitivity, need for proper human resource is felt badly. Critical analysis of UBL necessities recommending suggestions that would increase banks efficiency and effectiveness. Development of Managerial Leadership

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In services industries like banks the need of managerial skill is much more important. It makes positive contribution towards higher effective results. Without development of managerial leadership, the effective utilization of the human resource will be impossible. UBL should also focus on this area and should avoid deficiencies in managerial leadership, by applying the modern styles of management. Political interference: The political intervention in the bank needs to be stopped so that the top hierarchy as well as the personnel placed at other important levels of the institution is not changed Just on political grounds and the ongoing developmental work is not obstructed. It will enable the management to formulate long term strategies and their proper implementation because the long term policies, accurately based on calculated risk, have proved the pivotal role players for organizational sustainable development. Basis for Promotion: A sizeable portion of the officers of UBL, are promoted in without test and interviews to officers cadre. The promotion policy must be too tight and transparent that no one may have the chance to be promoted on criteria other than the required qualification, experience and performance. As for the present excess staff those not found up to the required criteria, may be given GHS etc. Management Changes on Merit: In UBL, though vary rare fresh recruitments are made, and the bank faces saturation in personnel, now clipping will be more helpful. This downsizing will leave the bank with the staff, to be retained on the basis of ultimate meritocracy with zero tolerance of incompetence. Now in this remaining workforce, a cultural change right from the top management down to the front line, that better suits to the present day needs of banking environment could be included through proper discipline and training. Needs of change in Recruitment Policy: It is important to say that the external level market is full of the required talent like MBA, M. Com etc. But on the country only graduation with simple subjects is still the requisite qualification for officers cadre, which has already worked amply in the devastation of UBL. Therefore the recruitment qualification to the officers framework should be enhanced for simple graduation, to professionally qualify preferably Masters in their respective fields.

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Refresher Courses: The Human of the bank should frequently conduct meaningful refresher courses, seminars and workshops with a view to improve the knowledge of the staff. Due to severe competition and technological developments, the banking business is experiencing rapid changes therefore the HRD should have arrangements for staff trainings to cope with the new changes that may become threats for the interest of the bank. Computer Trainings: The present conventional and orthodox training programs need to be made more comprehensive and reinforced with inclusion of computer training courses.

Training for Credit Management: Special trainings on credit management should be imparted to the finance dealing staff. Financing is main fountain banks income. Sound finance are extremely necessary for opening of springs of the smooth inflow of the income. Training with Clear Objectives: Training needs assessment is necessary so that only the relevant staff is sent for the training courses. Change in Appraisal System: The present performance appraisal system is good. However, it needs to be implemented in true sense. The drawbacks that are obvious like nepotism and favoritism etc. need to rooted out and the culture of ultimate meritocracy in appraising needs be inculcated. Introduction of New Courses: The human recourses division of the bank should focus on the restoration of the corporate image of the bank by floating programs such as, marketing excellence, courses on corporate culture and others. Usually in businesses the wholesalers, retailers and other intermediaries are finished by opening a network of the business own outlets. It works as profit maximization devise. In my opinion the above two programs marketing excellence and corporate culture, added with the best

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counter service and outdoor informal relationship with the potential customers by the line managers will save the sum of money spent on various media of advertisement. Cheaper means for Postings etc. The culture of attachment of hopes with the elements outside UBL, for promotion, transfers, postings, and other benefits requires eradication from the roots. Customers Orientation: Every entrepreneur if concerned about the success of his business has to understand, recognize, carefully and appropriately that his customer is The King of the business system and the original spring of the business revenue. UBL should recognize its customers as the mainstream of the banks revenue. They need to be provided the deserved respect, quality and in time service and to be politely dealt with. Career Development: As a matter of personnel policy HRD of UBL should prepare a plan showing the future growth potential of employees on the job performance and evaluation and it should be made known to the employees. In this regard, employees should be given opportunities to show their performances, which would help in their career development.

6.2 CREDITS AND ADVANCES DEPARTMENT:

The defaulted loans have showered the process of development of banking sectors in Pakistan and have reduced the lending capacities of banks. In result of which economic growth has reduced and rate of industrialization has become lowered. Defaulted loans being the major cause for this depression, various suggestions and recommendations have been given with focus on UBL to overcome the drawbacks of this department. Training for RMs: Exclusive mandatory training concerning all possible aspects like, financial management and organizational management etc. is required to be developed and designed to achieve i. Risk assessment ability

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ii. Understanding of all legal matters iii. Early detection ability Skill of any loans becoming bad iv. Ability to develop and suggest sound strategies when needed. Fake financial presentation: The bank should confirm that the provided figures by the borrowing organization are fairly audited and that the auditors are on the approved list of the bank and they have clear opinion about the affairs of company and nothing has been made secret. The bank should have expert to examine various changes and developments for years in areas of the borrowing corporation like; i. Financial condition ii. Cash generation iii. Ability to pay back iv. Operational performance The focus should be on identifying and explaining significant changes and developments in payback of loans, profit maximization, capital flow and operating expenses etc. the bank should take critical view of the financial and should assess changes occurred during the favorable and slack reason for the company. Poor Management: A large number of industrial units and projects become sick because of poor management. When a business becomes sick or fails it is unable to return the loans, it has taken, and as a result such loans become bad debts, to avoid this, it is the responsibility of UBL, to ensure that the company to which loan is sanctioned enjoys good management skills and reputation. This can only be confirmed, if the bank assesses the management of the borrower party by taking care of i. Length and type of experience ii. Qualification and integrity iii. Reputation of managerial skills and style of management being used iv. SWOT analysis

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v. Financial procedures and documentation followed by employees vi. Span of authority and responsibility vii. Decision making skills of employees viii. Risk management of employees Proper Documentation: Loans become irrecoverable through court of law in case of default when the bank fails to prove their claims against the delinquent borrower. If documents are obtained properly as per terms of the loan it is not difficult for the counsel of the bank to get decree against the defaulter. For proper and valid documentation the following aspects must be kept in mind. i. The bank should confirm that standard loan documentation is in place for each credit facility prior to disbursement. If the documents required are different from the banks standard approved format, arrangement for vetting of the legal counsel. ii. Bank should ensure that the documentation are correct, complete and correspond with the approved facilities. Also to ensure that blank spaces are filled, documents are dated, signed and stamped, the signer is authorized to execute such documents and signatures are verified. iii. Act as custodian for legal borrowing documentation, lodging the documents in vault, maintaining records as per bank operating procedure. iv. Keep track of expiry of borrowing documents, insurance policies etc. and follow up for regulation of any approved documentation deferrals. v. Maintain documentation checklist, updating it properly each time new documentation received. vi. Maintaining computerized record of documentation. vii. Division of documentation on the basis of sector, to which loan is given. Securities: i. Physical verification of the property offered as a security is must rather to rely on the documents. Investigation should also be conducted if the property is of ancestral nature or joint property.

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ii. The competent consultants should do valuation of the property and mere completion of formatives should not be taken into account. iii. Maintain in safe custody all collateral i.e. shares, govt. securities, property title deeds, mortgage documents etc. iv. Bank must ensure receipt of periodical statements of stock and receivables from customers, as per frequency specified in the credit approval. v. Bank should also do the periodic physical checking and evaluation of pledged inventories as per terms of the approvals, i.e. using applicable margins, such that the drawing power adequately covers out standings amount at all times. vi. Bank officials must ensure that the goods hypothecated or pledged are covered through a valid insurance policy with appropriate risk coverage, adequately covering the banks amount. vii. Concerned bank staff should ensure compliance with the institutional credit policies and procedures as lay down in the policy book or credit manual and advised from time to time by the credit committee or top management. viii. Ensure compliance with local regulatory requirements. ix. Confirm timely submission of correct information in the prescribed format as may be required by the central bank. Administrative Reforms: i. Fast resolving of loan defaults cases is must. ii. Immediate steps to appoint more banking courts judges. iii. Exclusive judges are required for Lahore, Peshawar, Baluchistan, Sindh High Courts. iv. Informal body to be set up by the banks jointly with the bar councils and chamber to monitor and publish performance of the banking courts. This body will need statutory authority for protection from contempt. v. Use of debt recovery agencies regulated by law is to allow.

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CH # 7
IMPLEMENTATION PLAN:
Every organization has its own strengths, weaknesses and opportunities for improvements. Nothing is impossible in this world. Possible can become impossible if untried. To ensure feasibility of a project, any suggestion or recommendation given for it should be supported by its implementation plan. An implementation plan consists of action oriented tools and procedures, which are specific and clear. An implementation plan means that everything except resources and taking of step to start work is ready which shows that implementation plan is the soul of a project. A good implementation plan consists of all the steps needed for the accomplishment of a task or tasks, it is clear and helps in identifying the problems to be faced in carrying practical work and provides a full picture of activities and events.

7.1 ACTION PLAN 1:

7.1.1 Franchised Agriculture Supplies Shops:

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In order to exploit opportunities available in the existing agriculture market the following steps should be taken. Establishing franchised supplier shops UBL should concentrate efforts towards major agriculture union councils and develop franchised shops; those should provide essential farmer services including leasing of sophisticated farm machinery and advising farmers how to improve productivity. Location of franchised supplier shops Preferably such shops should be in close proximity of UBL branches in the area. These branches should extend credit to the shops for their supplies and equipments and to farmer customers, at market rates, which are well below the 50%to 90% charged by the arties (informal sector).

Agri-Officers in Branches: Such agri credit officers should be employed who possesses requisite knowledge and know how both of the agricultural field and bank credit fields. The bank already has such assets, available in its existing HR factory and others can be trained for, if so required. These officers should be provided with motorbikes with per month fixed mileage limit. Cost Schedule The above-mentioned plan has two major cost categories as given below: a) Credit amount extension This amount will be disbursed as per requirement and is to be recovered with added return. b) Operation cost Details of the cost are tabulated below and following points are of significance; i. Fixed cost, cost of motorbike less tax saving due to depreciation expense should be amortized for a period of five years and distributed equally on average number of customers a mobile agri credit officer will deal with.

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ii. Variable cost which includes petrol and maintenance charges should be incorporated in pricing of the facility extended on average basis. Table: 7-1 Cost Schedules of Action Plan

Fixed Cost Mileage/year Dep. M/Cycle @50km/day 15000 18000

undertaken.

Total Variable Cost Total Cost Petrol/Year Petrol Cost Repair Maintenance @40km/day Rs.85/litre Per year TVC+TFC 450 38250 500 53750

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

c) Pakistan loses a significant portion of its agriculture land each year through high soil salinity and poor water treatment. The bank can finance projects equipped with measures to treat saline/soda water and soils so as to render if efficacious for agricultural purposes. d) The bank may help farmers to acquire needed equipment of saline soil treatment thus enhancing their ability to bring more land under cultivation and improve per area yield. e) The bank may finance projects such as better storage and marketing services.

7.2 ACTION PLAN 2

7.2.1 Technique for Effective Management and Recovery of Advances: Banks are highly leveraged bodies where advances constitute a major portion of their assets. Effective management and recovery of advances has to be an ongoing process, if the bank is to maintain good quality of its assets. In this regard following plan is advised for effective management and recovery. Through Assessment of Advances: Bench marketing technique should be used to develop comprehensive proposal perform, though the existing Performa is not a bad one. Following factors should be carefully examined. a. Principle of good lending This includes safety, desirability, liquidity and profitability.

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b. Compilation of credit information report Through investigation of the borrowers personal and business related aspects should be conducted. Proper and effective Documentation: Safety of advances depends upon correct documentation. In addition to compliance with all relevant legal rules and regulations following aspects should be deeply dig into. a) Executants Borrowers/executants should be legally authorized to enter into the contract. b) The Banks printed charge Form The appropriate charge forms such as letters of pledge and hypothecation etc. should be properly completed and executed.

c) Stamps Charge form should be properly stamped in accordance with the stamp duty as applicable in the province, where the documents are executed. d) Execution and Documents: These charge documents should be executed in the bank premises and should be signed in full as per borrowers specimen signatures. e) Registration of Charged Documents: Certain charged documents for example, mortgage deed are required to be registered at the office of registrar. Such registrations must be affected within 21 days of the creation of the charge. Careful Monitoring As a preventive measure, systematic and continuous evaluation helps to identify potential problem cases before they reach a critical stage. It is, therefore, essential to monitor advances. Following could prove good sources for effective monitoring. i. Financial statements, accounting and management policies.

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ii. Bank accounts operations. iii. Personal contacts and site inspections. iv. Analysis of overall economic environment. v. Analysis of industry specific environment. Review Function: This is periodic monitoring function that should be conducted under following broader guidelines. i. ii. Analysis of operations on financing account credit report - bearing up to date information

iii. Financial statements analysis iv. Inspection and analysis stocks reports v. Review and updating charge documents vi. Analysis, revaluation of securities vii. Other correspondence with borrowers viii. Study of previous review files ix. Analyzing validity of insurance documents Handling of Delinquent Advances Through careful monitoring and periodic reviews delinquent advances could be recognized and should be tactfully and effectively handled. Good relations with such customers should be maintained endeavors should be focused on ways and means of obtaining repayment without resort to litigation. Borrowers situation should be analyzed and suggestions for improvement should be given. It is a well-established fact that legal suits cost both money and time, which could be used for more productive endeavors. Recovery of Advances through realization of securities

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At times due to unforeseen circumstances beyond the control of the borrower, the normal plan for repayment may not work out. Then the bank has to rely upon the realization of security to liquidate the advances. Following steps should be followed. i. A notice for sale of security, bearing full particulars of the loans and security should be served to borrower. ii. Sufficient time should be given to borrower. iii. Notice should be issued by registered post, acknowledgement due and should be retained as evidence. iv. Reputed surveyors should do through, valuation of security. v. Written offers from several dealers should be invited. vi. In case of auction, it should be well advertised. vii. The offer closest to market value should be accepted 7.3 ACTION PLAN FOR MARKETING DEPARTMENT: This will help the bank to take long-term perspective for its marketing activities, with consideration on strategic approach of the bank. There are various steps involved in the given implementation plan, which will come in order, according to their importance and subjection on one another. Moreover, to bring order and efficiency to the difficult task of implementation plan. It has been broken down into the steps, which believed to be needed, when developing a disciplined action/implementation plan for launching financial products. Step 1: Business Review As we early discussed that this implementation plan will focus on marketing activities of UBL and as a part of the marketing background component, the business review is must. It includes the marketing database not only of UBL but also of other banks. To develop marketing database, we first need to understand the scope of banking followed by a comprehensive situational analysis of the financial product, and market place, which is relevant to the target market and competition situation. This will be accomplished through secondary research in Pakistan.

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UBLs own record of financial products and very often-primary research surveys of potential customers and focus group information. The business review provides a qualitative and quantitative decision activities and a rational for all the strategic marketing decisions with in the plan. Step 2: Problems and Opportunities The problems and opportunities step of UBL is a summary of the challenges that will emerge from the marketing database. In this step the data collected from the business review is shaped into meaningful summary points that form the basis of the implementation plan. Step 3: Quantifiable deposits Collection Target Collection of deposits as an objective represents projected levels of services to be sold. Setting this objective is critical because it is the first task of this implementation plan and it sets the tone of the entire implementation plan for the bank. Everything that follows in the plan is designed to meet the objective of collecting deposits through financial product from defining the size of the specific target market establishing marketing objectives. This will also determine the amount of advertising and money spent on it in a quantifiable manner, e.g. 400 million advertisement expenses in a year, for the first 5 years of its start. Step 4: Target Markets and Marketing The target market and marketing objective both are inducted in one step due to their critical link to one another. Target Market: Once the deposits collection being developed as quantifiable objective, the staff of marketing department at the Hub branches and Head Office of bank must determine to whom they will be selling their new financial packages. In response to which bank will raise deposits, making this determination is really defining a target market. This is a group of people with common characteristics. This part of implementation plan is concerning on marketing efforts towards the portion of population with similar banking needs and saving habits. Marketing Objectives: Marketing objectives for UBL clearly defines what the bank wants from its target market and potential customers. This part of implementation plan focuses on the behavior of customers that will help in setting the marketing objectives. Step 5: Plan Structure

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To compete with other banks, UBL needs to set strategies for its new product by including the postings strategy, it will help in image building of the financial package to be launched. Posting: Once the bank has defined its potential market and has established marketing objectives, it must need to develop posting of its financial product. Position is the desired perception of the product within the market target of the bank for example, if the product is launched. Its position should be done in such a way, that customer is fully aware of its major characteristics the bank has stained to build the image of its products as highly profitable package. This positioning strategy is supported by the strategic consideration on various marketing mix tools e.g. advertisement, publicity etc. Marketing Strategies: though marketing strategies are descriptive and non- qualitative yet has a major impact over getting competitive advantage. These marketing strategies guide to the development and selection of various tactical marketing mix tools and provide direction in broadening the target market, set by the bank. Step 6: Informational Goals: All steps of this implementation plan are highly dependent, but step 5, 6 & 7 are much more. Informational goals means to set the target and the market awareness and attitudes package and fulfill the marketing objective of the bank. Another purpose is to provide direction for what is to be accomplished by each strategic tool in term of informational context. Step 7: Strategic Marketing Mix: This step is highly concerned with getting attention of the customers towards the service of the UBL offering. Here we are concerned with a new package launched by the bank. Focus will be on that financial product. This step of disciplined implementation plan provides some strategic plans for marketing of the product. These strategic and tactical plans incorporate marketing executed. When implemented, will allow the bank to meet its marketing objectives and fulfill the overall marketing strategies and information and communication guidelines, established in the start of the plan. Selection of each marketing tool has its own objective and strategies. Following are the marketing mix tools included in strategic planning process. Financial package/Product

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This is the service which is provide by the bank as a result of which bank gets deposits and customer takes profit and keeps his money safe Branding Branding is the naming of new-marketed financial products e.g. present products of UBL i.e., UBL Sahara, UBL Hamrah Travelers Cheque. This brand or name of service associates with it should be such, which could communicate some message and attract the customers. Profit Percentage This is the percentage of profit, which the customer expects receives from the bank against his deposits in a scheme of financial package. Advertising Media Promotional campaigns provide added incentive, encouraging the target market to perform some incremental behavior, which is highly necessary. Communication with the target market should be always there and Electronic and Print Media should be used for promotion of financial product. Following is some financial tabulation for UBL based on some data taken from an advertising agency. This will show the importance of advertising and its benefits in terms of figures. This table gives the plan for one year and is for one financial product, for example, a product of UBL like SAHARA. A conservative approach has been followed to get a framework for reality, and to help in avoiding the slack season of economy. Table: 7-2 Cost/revenue schedule Marketing Plan

Cost of Advertising No. Of Customers Average deposits LendingbyBank Total Depositsin Attached byCustomers Year 48 Million 1Million 5000 2%of D= 100 5billion (b x

Difference (Revenue) (E-A)=52

i. The banks revenue in the F column does not include advertisement expense, which is a major cost here in this comparison.

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ii. 2% given in column E is the difference of percentage between lending and borrowing which is again a conservative approach. iii. Many things in the comparison have been kept constant to understand the importance of advertisement.

BIBLIOGRAPHY
Aswathpa, K, (2003) Human Resource and Personnel Management: New Delhi: Tata McGraw Hill Gibson, Charles H, (2002), 7th. Ed, Financial Statement Analysis, Prentice Hall International Corporation. Meenai, S A, Money & Banking in Pakistan, Karachi: the Elahis Book Corporation. Siddiqui, A H, 6th Edition. Practice and law of banking in Pakistan, Royal Book Company, Karachi. UBL Credit Manual. Karachi. UBL Deposit Manual. Karachi. UBL Annual Report. Karachi.

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Van Horne, J. C & J.M Wachowicz, (1998), 10th Edition. Fundamentals of Financial Management. New York, Prentice Hall International Corporation. http/. www.ubl.com.pk