Financial Performance of Hbl

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FINANCIALFINANCIAL

PERFORMANCE OF HBLPERFORMANCE OF HBL

ADNANADNAN

ID # 4175ID # 4175


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Brief Introduction of theBrief Introduction of the

OrganizationOrganization


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RESEARCH QUESTIONESEARCH QUESTIONHOW TO IMPROVE THE FINANCIAL PERFORMANCE OF HBLHOW TO IMPROVE THE FINANCIAL PERFORMANCE OF HBL

OBJECTIVES AND AIMS OF THE STUDYBJECTIVES AND AIMS OF THE STUDYThe primary focus is likely to determine why the financialThe primary focus is likely to determine why the financial

performance of the HBL is inconsistentperformance of the HBL is inconsistent..To understand the Financial Policies and Practices of HBLTo understand the Financial Policies and Practices of HBL

To know different terms and conditions for the lending productsTo know different terms and conditions for the lending products..To determine how the Independent variable affects the financialTo determine how the Independent variable affects the financial

performanceperformanceTo analyze the satisfaction of employees with the environmentTo analyze the satisfaction of employees with the environment

provided by these banksprovided by these banks..


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History of HBLHistory of HBL

HBL is the largest commercial bank in Pakistan havingHBL is the largest commercial bank in Pakistan having

an extensive network of 1425 domestic branches thean extensive network of 1425 domestic branches the

largest in Pakistan and 55 international branches.largest in Pakistan and 55 international branches. It has come a long way from its modest beginnings inIt has come a long way from its modest beginnings in

Bombay in 1941 when it commenced operations with aBombay in 1941 when it commenced operations with a

fixed capital of 25,000 rupees.fixed capital of 25,000 rupees.

Start business at Karachi in 1943.Start business at Karachi in 1943.


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HBL VISSION:HBL VISSION: Provide the quality goods and services to the customers.

HBL MISSIONTo be recognized as the leading financial institution of

Pakistan, and a dynamic international bank in the

emerging markets, providing our customers with a

premium set of innovative products and services, andgranting superior value to our stakeholders,

shareholders,customers and employees.


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DEPARTMENT OF HEADEPARTMENT OF HEADOFFICEFFICE1.1. Public Relation DepartmentPublic Relation Department

2.2. Personal Administration DepartmentPersonal Administration Department3.3. Personal Policy DepartmentPersonal Policy Department4.4. Efficiency & Discipline DepartmentEfficiency & Discipline Department

5.5. Staff Relation & Welfare DepartmentStaff Relation & Welfare Department6.6. Branches Development & Control DepartmentBranches Development & Control Department7.7. Credit Operations DepartmentCredit Operations Department8.8. Micro Credit & Spl. Schemes DepartmentMicro Credit & Spl. Schemes Department9.9. Credit Policy DepartmentCredit Policy Department

10.10. Recovery Operations DepartmentRecovery Operations Department11.11. Recovery policy & Debt Classification DepartmentRecovery policy & Debt Classification Department12.12. BudgetBudgetDepartmentDepartment13.13. HO Accounts DepartmentHO Accounts Department14.14. Central Accounts DepartmentCentral Accounts Department15.15.

Head Office DepartmentHead Office Department


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16.16. Network Development DepartmentNetwork Development Department

17.17. System Development DepartmentSystem Development Department18.18. Data Management DepartmentData Management Department19.19. Hardware Development DepartmentHardware Development Department20.20. Central Information DepartmentCentral Information Department21.21. Technical Assistance DepartmentTechnical Assistance Department22.22. Law DepartmentLaw Department23.23. Special asset Management DepartmentSpecial asset Management Department24.24. Recovery Litigation DepartmentRecovery Litigation Department25.25. Building and works DepartmentBuilding and works Department26.26. Administration DepartmentAdministration Department27.27. Printing & Stationary DepartmentPrinting & Stationary Department28.28. HBL staff College KarachiHBL staff College Karachi29.29. Investigation & Complaints DepartmentInvestigation & Complaints Department30.30. Planning & Corporate Affairs DepartmentPlanning & Corporate Affairs Department


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Liquidity RatioLiquidity Ratio

2007 208 2009 2010 2011

Current Ratio 1.06 1.07 1.07 1.08 1.08

Advances to Deposit Ratio 0.72 0.76 0.70 0.62 0.63

2007 2008 2009 2010 2011Debt to Equity Ratio 9.94 9.08 9.23 8.61 8.94

Debt to Total Assets Ratio 0.91 0.90 0.90 0.89 0.90

Long Term capitalization 0.267 0.277 0.287 0.242 0.283

Leverage Ratio


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Coverage RatioCoverage Ratio

Interest Coverage RatioInterest Coverage Ratio2007 2008 2009 2010 2011

1.79 1.83 1.64 1.78 1.83

2007 2008 2009 2010 2011Advances to interest ratio 7.57 7.21 6.00 5.65 20.53

Total Assets to interestearned

13.71 11.97 11.35 11.37 42.01

Deposit to interest earned 10.52 9.43 8.97 9.20 32.77

Activity Ratio


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Profitability RatioProfitability Ratio

2007 2008 2009 2010 2011Return on Investment 0.01 0.02 0.015 0.018 0.005

Return on Equity 0.16 0.21 0.16 0.18 0.05

Earning per Share 13.18 20.47 14.70 16.78 4.95

2007 2008 2009 2010 2011

Equity capital to total assets 0.091 0.099 0.097 0.104 0.10Deposit times capital 8.40 7.94 8.09 7.76 7.76

Loan to equity 0.72 0.77 0.67 0.65 0.63

Earning assets to total assets 0.81 0.79 0.78 0.80 0.79

Ratio Bank Special


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Vertical / Common Size Analysis ofVertical / Common Size Analysis ofBalance Sheet AssetsBalance Sheet Assets

2007 2008 2009 2010 2011Cash and balances withtreasury banks

8.01 7.50 9.24 8.83 9.42

Balances with other

banks

3.90 5.12 4.67 4.00 3.80

Lending to financialinstitutions

0.23 0.82 0.62 3.30 0.96

Investments 25.70 18.23 25.10 27.60 29.90Advances 55.30 60.20 52.64 49.70 48.90Operating fixed assets

2.00 1.95 1.94 1.75 1.71

Deferred tax asset 0.96 1.50 1.10 1.00 1.00Other assets 3.95 4.67 3.80 3.80 4.31Total assets 100.00 100.00 100.00 100.00 100.00


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Vertical / Common Size Analysis ofVertical / Common Size Analysis of

Balance Sheet LiabilitiesBalance Sheet Liabilities2007 2008 2009 2010 2011

Bills payables 2.23 1.31 1.20 1.10 0.96

Borrowings fromfinancial institution 8.53 6.20 6.08 4.40 7.00

Deposits and otheraccounts

76.70 78.80 79.00 80.82 78.00

Sub-ordinate loans 0.57 0.52 0.48 0.46 0.45

Other liabilities 2.90 3.30 3.46 2.90 3.53

Total liabilities 90.86 90.00 90.23 89.60 89.90Net assets 9.14 9.92 9.77 10.40 10.10


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Vertical / Common Size Analysis ofVertical / Common Size Analysis of

Balance Sheet Owners EquityBalance Sheet Owners Equity2007 2008 2009 2010 2011

Share capital 1.00 1.00 1.00 1.00 1.00

Reserve 2.86 3.20 3.18 1.17 3.28Inappropriate profit 4.10 5.20 4.50 5.10 4.70

Total equity attributable tothe holders of the bank

7.95 9.40 8.70 9.39 9.10

Minority interest 0.14 0.12 0.13 0.13 0.13Surplus on revaluation ofassets - net of deferred tax

1.40 0.40 0.93 0.88 0.87

Total shareholdersequity 9.14 9.92 9.77 10.40 10.10


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ERTICAL/COMMON SIZEERTICAL/COMMON SIZEANALYSIS OF INCOME STATMENTNALYSIS OF INCOME STATMENT

2007 2008 2009 2010 2011

Mark up/ interestearned161.14 172.12 178.28 173.05 169.84

Mark up interestexpenses61.14 72.12 78.28 73.05 69.84

Non-mark up interestincome31.99 44.53 26.15 27.16 26.23

Non-mark up interestexpenses 57.80 59.64 54.74 53.47 50.36Profit before taxation 48.34 59.90 50.10 57.54 58.00Profit after tax 32.19 42.45 31.40 36.24 37.71


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HORIZENTAL/ INDEX ANALYSISORIZENTAL/ INDEX ANALYSISOF BALANCE SHEET ASSETSF BALANCE SHEET ASSETS

2007 2008 2009 2010 2011Cash and balances withtreasury banks

100.00 101.80 143.90 136.0 160.60

Balances with otherbanks 100.00 145.47 149.40 128.00 134.60

Lending to financialinstitutions

100.00 380.40 328.70 1721.00 557.30

Investments 100.00 77.60 121.60 132.00 158.80Advances 100.00 119.40 119.00 111.00 121.00Operating fixed assets

100.00 107.00 121.70 108.00 117.70

Deferred tax asset 100.00 169.70 139.20 134.00 143.60Other assets 100.00 129.50 150.30 118.00 149.40Total assets 100.00 109.50 124.80 123.00 136.70


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HORIZENTAL/ INDEX ANALYSISORIZENTAL/ INDEX ANALYSISOF BALANCE SHEET LIABILITIESF BALANCE SHEET LIABILITIES

2007 2008 2009 2010 2011Bills payables 100.00 64.50 65.13 58.55 59.30

Borrowings fromfinancial institution 100.00 79.40 89.00 63.40 112.00

Deposits and otheraccounts

100.00 112.50 128.50 140.84 139.00

Sub-ordinate loans 100.00 100.00 135.87 100.00 137.70

Other liabilities 100.00 125.00 149.70 123.00 167.60

Total liabilities 100.00 108.50 124.00 121.70 89.90Net assets 100.00 119.00 133.40 140.60 150.10


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HORIZENTAL/ INDEX ANALYSIS OFORIZENTAL/ INDEX ANALYSIS OFBALANCE SHEET OWNERS EQUITYALANCE SHEET OWNERS EQUITY2007 2008 2009 2010 2011

Share capital 100.00 110.00 132.00 134.00 145.20

Reserve

100.00 122.30 138.87 136.80 156.70Inappropriate profit 100.00 139.00 135.80 154.70 157.20

Total equity attributable tothe holders of the bank

100.00 129.50 136.40 145.67 155.50

Minority interest 100.00 92.00 118.40 116.00 128.54

Surplus on revaluation ofassets - net of deferred tax

100.00 41.70 112.26 105.00 114.20

Total shareholdersequity 100.00 119.00 133.40 140.00 150.40


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Horizontal/ index analysis of incomeorizontal/ index analysis of incomestatementtatement2007 2008 2009 2010 2011

Mark up/ interestearned100.00 125.40 141.50 148.80 44.61

Mark up interestexpenses 100.00 138.48 163.75 165.54 48.35Net interest income 100.00 117.40 127.89 138.55 42.32Non-mark up interestincome

100.00 163.40 104.54 117.60 34.69

Non-mark up interestexpenses100.00 121.15 121.13 128.20 36.88

Profit before taxation 100.00 145.45 132.56 164.91 50.78

Profit after tax 100.00 154.83 124.77 156.02 49.58


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Data of the Research QuestionnaireData of the Research Questionnaire

S A

A

N

D

S D

0

2

4

6

8

1 0

1 2

S A

A

N

D A

S D

Q1: There is a significant relationship between loan recoveryprocess and financial performance of HBL?

SA1 A0 N3DA1 SD0


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Q2: Financial performance of HBL is affected by companys Pol icie?

SA

A

N

DASD

0

2

4

6

8

10

12

14

16

SA

A

N

DA

SD

SA5 A5 N4 DA1 SD

Q3: Bad Debts affect the f inancial performance of HBL?SA8

A3 N3 DA1 SD0SA

A

N

DASD

0

2

4

6

8

10

12

14

SA

A

N

DA

SD


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SA

A

N

DA

SD

0

2

4

6

8

10

SA

A

N

DA

SD

Q4: Do you think the Privatization of the bank improved the financialperformance?

SA6 A9 N5 DA3 SD2

SA

A

N

SD

DA

0

2

4

6

8

10

SA

A

N

DA

SD

Q5: There is significant relationship between financial performanceand advances?

SA9 A7 N4 DA4 SD1


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SA

A

N

DA

SD

0

2

4

6

8

10

SA

A

N

DA

SD

Q6: There should be involvement of employee in derivation ofcompanys policies?

SA5 A4 N9 DA4 SD3

S AA

N

D AS D

0

2

4

6

8

1 0

1 2

S A

A

N

D A

S D

Q7: HBL should think factoring services to boost up accountreceivables?

SA1 A0 N3 DA0 SD1


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S A

A

N

D AS D

0

2

4

6

8

1 0

1 2

1 4

S A

A

N

D A

S D

Q8: Financial performance of employees can be improved throughmotivation?

SA2 A0 N3 DA0 SD0

SA

A

N

DA

SD

0

2

4

6

8

10

12

14

16

SA

A

N

DA

SD

Q9: There is relationship between financial performance and interestrate of the bank?

SA4 A3 N0 DA5 SD3


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S A

A

N D A

S D

0

2

4

6

8

1 0

1 2

1 4

S A

A

N

D A

S D

Q10: Do you think the Deposits affect the financial performance ofthe HBL?

SA2 A9 N1 DA1SD2


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Hypothesis Testingypothesis Testing Note #ote # The dependent Variable (Financial Performance)he dependent Variable (Financial Performance)is constant with the following values.s constant with the fol lowing values.

Years Value (Financial Performance)ears Value (Financial Performance)2007 32.19007 32.192008 42.45008 42.452009 31.40009 31.40 2010 36.24 = 179.99 / 5 = 35.99010 36.24 = 179.99 / 5 = 35.992011011 37.7137.71179.9979.99


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HYPOTHESIS # 1YPOTHESIS # 1 H0:0: There is no relationship between financial performance of HBLThere is no relationship between financial performance of HBL

and deposits.and deposits. H1:1: There is relationship between financial performance of HBL andThere is relationship between financial performance of HBL anddeposits.deposits.

YEAR X(Deposits (X-X

2007 76.7 3.84

2008 78.8 0.019

2009 79.0 0.115

2010 80.82 4.66

2011 78.0 0.435

393.32 9.06

X = X/n, s = (x-x) /n-1

= 393.32/5 = 4 = 78.66 =

1.Hypothesis testing: Ho: =35.99H: 35.992.Level of significance: =0.05(5%)

3.Formula: t = X - S/n-

4.Critical region: t tab=t /2 (n-)=t 0.025 (4)

= 2.776


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5.Computation:.Computation: t =t = X -X -

S/n-S/n-

= 78.66

35.991.5 /4

=56.89=42.670.75.Conclusion:

As t cal is greater than the t tabulated i-e 56.89> 2.776 so we reject Ho

Explanation:

0

20

40

60

80

100

2007 2008 2009 2010 2011

Financial Performance

Deposits

As the calculated value 56.89 is grater than tabulated value 2.776,so we reject Ho and accept H1 that mean there is a relationship

between financial performance of HBL and deposits.


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HYPOTHESIS # 2H0: There is no relationship between financial performance of HBL andInterest rate.

H1: There is relationship between financial performance of HBL andInterest rate.YEAR X(Interest Rate (X-X

2007 7.57 3.31

2008 7.21 4.75

2009 6.00 11.49

2010 5.65 13.98

2011 20.53 124.09

46.96 157.62

X = X/n s = (x-x) /n-1 = 46.96/5 =157.62/4

= 9.39 = 6.21.ypothesis testing: Ho: =35.99

H: 35.992.evel of significance:

=0.05(5%)

3.Formula: t = X - S/n-

4.Crit ical region: t tab=t /2 (n-)=t 0.025 (4)

=2.776


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5.Computation: t = X - S/n-

= 9.39 35.996.2 /4

= - 26.6 = -8.583.16.Conclusion:As t cal is greater than the t tabulated i-e 8.58>2.776 so we reject Ho.

Explanation:

0

5

10

15

20

25

30

3540

45

2007 2008 2009 2010 2011

Financial

Performance

Interest rate

As the calculated value 8.58 is grater than tabulated value 2.776, sowe reject Ho and accept H1 that mean there is a relationshipbetween financial performance of HBL and Interest rate.


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HYPOTHESIS # 3H0: There is no relationship between financial performance of HBL andadvances.

H1: There is relationship between financial performance of HBL andadvances.

YEAR X(advances (X-X

2007 55.23 3.61

2008 60.20 47.19

2009 52.64 0.472010 49.70 13.17

2011 48.90 19.62

266.67 84.04

X = X/n s = (x-x) /n-1

= 266.67/5 = 84.04/4= 53.33 = 4.58

1.Hypothesis testing: Ho: =35.99H: 35.99

2.Level of significance:=0.05(5%)3.Formula: t = X -

S/n-4.Critical region: t tab=t /2 (n-)

=t 0.025 (4)

=2.776


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= 53.33 35.99 4.58/ 4= 17.34 = 7.57

2.296.Conclusion:As t cal is greater than the t tabulated i-e 7.57> 2.776 so we reject Ho

Explanation:As the calculated value 7.57 is grater than tabulated value 2.776, so wereject Ho and accept H1 that mean there is a relationship betweenfinancial performance of HBL and Bad Debts.

0

10

20

30

40

50

60

70

2007 2008 2009 2010 2011

Financial

Performance

advances


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HYPOTHESIS # 4H0: There is no relationship between financial performance of HBL and salary.H1: There is relationship between financial performance of HBL and salary

YEAR X(salary (X-X

2007 58.40 17.47

2008 58.04 14.59

2009 53.31 0.828

2010 51.61 6.81

2011 49.76 19.89

271.12 59.58

X = X/n s =(x-x) /n-1

= 271.12/5 = 59.58/4= 54.22 = 3.85

1.Hypothesis testing: Ho: =35.99H: 35.99

2.evel of significance:=0.05(5%)3.Formula: t = X -

S/n-

4.Critical region: t tab=t /2 (n-)

=t 0.025 (4)

=2.776


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=54.2235.993.85 /4

= 18.23 = 9.491.926.Conclusion:

As t cal is greater than the t tabulated i-e 9.49> 2.776 so we reject Ho.

Explanation:As the calculated value 9.49 is grater than tabulated value 2.776, so wereject Ho and accept H1 that mean there is a relationship betweenfinancial performance of HBL and Loaning process.

0

10

20

30

40

50

60

70

2007 2008 2009 2010 2011

Financial

performance

salary


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RECOMMENDATIONSECOMMENDATIONS Companys polices should be changed in order to facilitateCompanys polices should be changed in order to facilitate

its activities. The policies and practices should be madeits activities. The policies and practices should be madeaccording to the demands of the present era ofaccording to the demands of the present era of

competition and advancement. Modern rule and thecompetition and advancement. Modern rule and theregulations should be developed to survive in theregulations should be developed to survive in thecompetitive environment.competitive environment.

Loan collection process should be improved. HBL shouldLoan collection process should be improved. HBL shouldtry to develop a repaid process that will help the bank totry to develop a repaid process that will help the bank toimprove its account receivables.improve its account receivables.


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Bad Debts are a major problem. To decrease the badBad Debts are a major problem. To decrease the baddebts they should give loan on 100% mortgage anddebts they should give loan on 100% mortgage andpledge.pledge.

In order to reduce the bad debts the bank also avail theIn order to reduce the bad debts the bank also avail thefactoring services of a reputable organization.factoring services of a reputable organization.

The bank can increased the deposits by giving the moreThe bank can increased the deposits by giving the moreinterest and benefits to the customers both in waysinterest and benefits to the customers both in waysborrower and depositorsborrower and depositors


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Thank YouThank You

Financial Performance of Hbl

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