FINANCIAL PERFORMANCE OF HBL

ADNAN ID # 4175

Brief Introduction of the Organization

RESEARCH QUESTION HOW TO IMPROVE THE FINANCIAL PERFORMANCE OF HBL

OBJECTIVES AND AIMS OF THE STUDY The primary focus is likely to determine why the financial .performance of the HBL is inconsistent To understand the Financial Policies and Practices of HBL .To know different terms and conditions for the lending products To determine how the Independent variable affects the financial performance To analyze the satisfaction of employees with the environment .provided by these banks

History of HBL

HBL is the largest commercial bank in Pakistan having an extensive network of 1425 domestic branches the largest in Pakistan and 55 international branches. It has come a long way from its modest beginnings in Bombay in 1941 when it commenced operations with a fixed capital of 25,000 rupees. Start business at Karachi in 1943.

HBL VISSION:

Provide the quality goods and services to the customers.

HBL MISSION
To 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, and granting superior value to our stakeholders, shareholders, customers and employees.

DEPARTMENT OF HEAD OFFICE

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Public Relation Department Personal Administration Department Personal Policy Department Efficiency & Discipline Department Staff Relation & Welfare Department Branches Development & Control Department Credit Operations Department Micro Credit & Spl. Schemes Department Credit Policy Department Recovery Operations Department Recovery policy & Debt Classification Department Budget Department HO Accounts Department Central Accounts Department Head Office Department

16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

Network Development Department System Development Department Data Management Department Hardware Development Department Central Information Department Technical Assistance Department Law Department Special asset Management Department Recovery Litigation Department Building and works Department Administration Department Printing & Stationary Department HBL staff College Karachi Investigation & Complaints Department Planning & Corporate Affairs Department

Liquidity Ratio
2007
Current Ratio Advances to Deposit Ratio 1.06 0.72

208
1.07 0.76

2009 2010
1.07 0.70 1.08 0.62

2011
1.08 0.63

Leverage Ratio
2007
Debt to Equity Ratio Debt to Total Assets Ratio Long Term capitalization 9.94 0.91 0.267

2008
9.08 0.90 0.277

2009 2010
9.23 0.90 0.287 8.61 0.89 0.242

2011
8.94 0.90 0.283

Coverage Ratio

Interest Coverage Ratio

2008
1.83

2007
1.79

2009
1.64

2010
1.78

2011
1.83

Activity Ratio
2007
Advances to interest ratio Total Assets to interest earned Deposit to interest earned 7.57 13.71 10.52

2008
7.21 11.97 9.43

2009
6.00 11.35 8.97

2010
5.65 11.37 9.20

2011
20.53 42.01 32.77

Profitability Ratio
2007
Return on Investment Return on Equity Earning per Share 0.01 0.16 13.18

2008
0.02 0.21 20.47

2009
0.015 0.16 14.70

2010
0.018 0.18 16.78

2011
0.005 0.05 4.95

Ratio Bank Special

2007
Equity capital to total assets 0.091 Deposit times capital Loan to equity 8.40 0.72

2008
0.099 7.94 0.77 0.79

2009
0.097 8.09 0.67 0.78

2010
0.104 7.76 0.65 0.80

2011
0.10 7.76 0.63 0.79

Earning assets to total assets 0.81

Vertical / Common Size Analysis of Balance Sheet Assets

2007 2008
Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Operating fixed assets Deferred tax asset Other assets Total assets

2009 2010 2011

9.24 4.67 0.62 25.10 52.64 1.94 1.10 3.80 100.00 8.83 4.00 3.30 27.60 49.70 1.75 1.00 3.80 100.00 9.42 3.80 0.96 29.90 48.90 1.71 1.00 4.31 100.00

8.01 3.90 0.23 25.70 55.30 2.00 0.96 3.95 100.00

7.50 5.12 0.82 18.23 60.20 1.95 1.50 4.67 100.00

Vertical / Common Size Analysis of Balance Sheet Liabilities

2007 2008 2009 2010 2011
Bills payables Borrowings from financial institution Deposits and other accounts Sub-ordinate loans Other liabilities Total liabilities Net assets

2.23 8.53 76.70 0.57 2.90 90.86 9.14

1.31 6.20 78.80 0.52 3.30 90.00 9.92

1.20 6.08 79.00 0.48 3.46 90.23 9.77

1.10 4.40 80.82 0.46 2.90 89.60 10.40

0.96 7.00 78.00 0.45 3.53 89.90 10.10

Vertical / Common Size Analysis of Balance Sheet Owners Equity

2007 2008 2009 2010 2011
Share capital Reserve Inappropriate profit Total equity attributable to the holders of the bank Minority interest Surplus on revaluation of assets - net of deferred tax Total shareholders equity

1.00 2.86 4.10 7.95 0.14 1.40 9.14

1.00 3.20 5.20 9.40 0.12 0.40 9.92

1.00 3.18 4.50 8.70 0.13 0.93 9.77

1.00 1.17 5.10 9.39 0.13 0.88 10.40

1.00 3.28 4.70 9.10 0.13 0.87 10.10

VERTICAL/COMMON SIZE ANALYSIS OF INCOME STATMENT

2007 2008 2009 2010 2011
Mark up/ interest earned Mark up interest expenses Non-mark up interest income Non-mark up interest expenses Profit before taxation Profit after tax 161.14 61.14 31.99 57.80 48.34 32.19 172.12 72.12 44.53 59.64 59.90 42.45 178.28 78.28 26.15 54.74 50.10 31.40 173.05 73.05 27.16 53.47 57.54 36.24 169.84 69.84 26.23 50.36 58.00 37.71

HORIZENTAL/ INDEX ANALYSIS OF BALANCE SHEET ASSETS

2007 2008
Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Operating fixed assets Deferred tax asset Other assets Total assets

2009 2010 2011

143.90 149.40 136.0 128.00 160.60 134.60 557.30 158.80 121.00 117.70 143.60 149.40 136.70

100.00

101.80

100.00 145.47 100.00 380.40

328.70 1721.00 121.60 119.00 121.70 139.20 150.30 124.80 132.00 111.00 108.00 134.00 118.00 123.00

100.00 77.60 100.00 119.40 100.00 107.00 100.00 100.00 100.00 169.70 129.50 109.50

HORIZENTAL/ INDEX ANALYSIS OF BALANCE SHEET LIABILITIES

2007 2008 2009 2010 2011
Bills payables Borrowings from financial institution Deposits and other accounts Sub-ordinate loans Other liabilities Total liabilities Net assets

100.00 100.00 100.00 100.00 100.00 100.00 100.00

64.50 79.40 112.50 100.00 125.00 108.50 119.00

65.13 89.00 128.50 135.87 149.70 124.00 133.40

58.55 63.40 140.84 100.00 123.00 121.70 140.60

59.30 112.00 139.00 137.70 167.60 89.90 150.10

HORIZENTAL/ INDEX ANALYSIS OF BALANCE SHEET OWNERS EQUITY

2007 2008 2009 2010 2011
Share capital Reserve Inappropriate profit Total equity attributable to the holders of the bank Minority interest Surplus on revaluation of assets - net of deferred tax Total shareholders equity

100.00 100.00

110.00 122.30

132.00 138.87 135.80 136.40 118.40 112.26 133.40

134.00 136.80 154.70 145.67 116.00 105.00 140.00

145.20 156.70 157.20 155.50 128.54 114.20 150.40

100.00 139.00 100.00 100.00 100.00 129.50 92.00 41.70

100.00 119.00

Horizontal/ index analysis of income statement

2007
Mark up/ interest earned Mark up interest expenses Net interest income Non-mark up interest income Non-mark up interest expenses Profit before taxation Profit after tax 100.00 100.00 100.00 100.00 100.00 100.00 100.00

2008
125.40 138.48 117.40 163.40 121.15 145.45 154.83

2009
141.50 163.75 127.89 104.54 121.13 132.56 124.77

2010
148.80 165.54 138.55 117.60 128.20 164.91 156.02

2011
44.61 48.35 42.32 34.69 36.88 50.78 49.58

Data of the Research Questionnaire

Q1: There is a significant relationship between loan recovery process and financial performance of HBL?
12 SA A 10 8 6 4 2 0 N DA SD SA A N DA SD

11 10 03 01 00

SA A N DA SD

?Q2: Financial performance of HBL is affected by companys Policies 05 15 04 01 0 SA A N DA SD

16 14 12 10 8 6 4 2 0 SA N DA SD SA A N DA SD A

?Q3: Bad Debts affect the financial performance of HBL 08 13 03 01 00 SA A N DA SD

14 12 10 8 6 4 2 0 N DA SD SA SA A N DA SD A

Q4: Do you think the Privatization of the bank improved the financial performance? 06 09 05 03 02 SA A N DA SD
10 8 SA 6 4 2 0 N DA SD A SA A N DA SD

Q5: There is significant relationship between financial performance and advances? 09 07 04 04 01 SA A N DA SD

10 8 6 N DA 4 2 0 SD SA A SA A N DA SD

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

10 N SA A N DA SD

05 04 09 04 03

SA A N DA SD

8 6 SA A DA 4 SD 2 0

Q7: HBL should think factoring services to boost up account receivables? 11 10 03 00 01 SA A N DA SD

12 SA A 10 8 6 4 2 0 N SD DA SA A N DA SD

Q8: Financial performance of employees can be improved through motivation? 12 10 03 00 00 SA A N DA SD

14 SA 12 A 10 8 6 4 2 0 N DA D S SA A N DA SD

Q9: There is relationship between financial performance and interest rate of the bank?
16 SA SA A N DA A N SD DA SD

14 03 00 05 03

SA A N DA SD

14 12 10 8 6 4 2 0

Q10: Do you think the Deposits affect the financial performance of the HBL? 12 09 01 01 02 SA A N DA SD
14 12 10 8 6 4 2 0 SD ND A A SA A N DA SD SA

Hypothesis Testing

Note # The dependent Variable (Financial Performance) is constant with the following values. Years 2007 2008 2009 2010 2011 Value (Financial Performance) 32.19 42.45 31.40 36.24 = 179.99 / 5 = 35.99 37.71 179.99

HYPOTHESIS # 1
H0: There is no relationship between financial performance of HBL and deposits. H1: There is relationship between financial performance of HBL and deposits.
YEAR

(X(Deposits
76.7 78.8 79.0 80.82 78.0 393.32

X-X((
3.84 0.019 0.115 4.66 0.435 9.06

= X/n,
= =

393.32/5 78.66

s=

(x-x) /n-1
=

2007 2008 2009 2010 2011

/4

1.Hypothesis testing: 2.Level of significance: 3.Formula: S/n- t=X-

Ho: =35.99 H: 35.99 =0.05(5%) 4.Critical region: t tab=t /2 (n-) t 0.025 (4) = = 2.776

5.Computation:

t= S/n-

X-

= 78.66 35.99 4 / 1.5 42.67 = 0.75 56.89 =

6.Conclusion : As t cal is greater than the t tabulated i-e 56.89> 2.776 so we reject Ho :Explanation 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.
100 80 60 40 20 0 2007 Financial Performance Deposits

2008

2009

2010

2011

HYPOTHESIS # 2 H0: There is no relationship between financial performance of HBL and .Interest rate H1: There is relationship between financial performance of HBL and Interest rate.
X 157.62/4 = = X/n = 46.96/5 9.39
YEAR

s = (x-x) /n-1 = = 6.2

(X(Interest Rate 7.57 7.21 6.00 5.65 20.53 46.96

X-X((
3.31 4.75 11.49 13.98 124.09 157.62

2007 2008 2009 2010

Hypothesis testing: Ho: =35.99.1 H: 35.99 Level of significance: .2 )=0.05(5% 3.Formula: S/n- t=X-

2011

4.Critical region:

t tab=t /2 (n-) = 2.776=

) t 0.025 (4

5.Computation: t =

X- S/n-

6.Conclusion: .As t cal is greater than the t tabulated i-e 8.58>2.776 so we reject Ho :Explanation As the calculated value 8.58 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 Interest rate.
45 40 35 30 25 20 15 10 5 0 2007

= 9.39 35.99 4 /6.2 = - 26.6 3.1

= -8.58

Financial Performance Interest rate

2008

2009

2010

2011

HYPOTHESIS # 3 H0: There is no relationship between financial performance of HBL and advances. H1: There is relationship between financial performance of HBL and advances.
YEAR (X(advances 55.23 60.20 52.64 49.70 48.90 266.67

X-X((
3.61 47.19 0.47 13.17 19.62 84.04

= X/n = = 266.67/5 53.33

s = (x-x) /n-1 = = 84.04/4 4.58

2007 2008 2009 2010 2011

1.Hypothesis testing: Ho: =35.99 H: 35.99 2.Level of significance: =0.05(5%) 3.Formula: t=X- 4.Critical region: S/n-

t tab=t /2 (n-) =t 0.025 (4) 2.776=

5.Computation: t = S/n-

X-

= 53.33 35.99 4.58 / 4 = 17.34 2.29 = 7.57

6.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 we reject Ho and accept H1 that mean there is a relationship between financial performance of HBL and Bad Debts.
7 0 6 0 5 0 4 0 3 0 2 0 1 0 0 20 07 20 08 20 09 21 00 21 01 F a cia in n l P rfo a ce e rm n a vn s d a ce

HYPOTHESIS # 4 H0: There is no relationship between financial performance of HBL and salary. H1: There is relationship between financial performance of HBL and salary
YEAR 2007 2008 2009 2010 2011

= X/n = = 271.12/5 54.22

s =(x-x) /n-1 = = 59.58/4 3.85

(X(salary
58.40 58.04 53.31 51.61 49.76 271.12

X-X((
17.47 14.59 0.828 6.81 19.89 59.58

1.Hypothesis testing: H: 35.99 Level of significance: )=0.05(5% 3.Formula: S/n- t=X-

Ho: =35.99 .2

4.Critical region: t tab=t /2 (n) )t 0.025 (4= 2.776=

5.Computation: t = S/n-

X-

35.99 54.22 = 4 / 3.85 = 18.23 1.92 = 9.49

6.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 we reject Ho and accept H1 that mean there is a relationship between financial performance of HBL and Loaning process.
70 60 50 40 30 20 10 0 2007 2008 2009 2010 2011 Financial performance salary

RECOMMENDATIONS

Companys polices should be changed in order to facilitate its activities. The policies and practices should be made according to the demands of the present era of competition and advancement. Modern rule and the regulations should be developed to survive in the competitive environment. Loan collection process should be improved. HBL should try to develop a repaid process that will help the bank to improve its account receivables.

Bad Debts are a major problem. To decrease the bad debts they should give loan on 100% mortgage and pledge. In order to reduce the bad debts the bank also avail the factoring services of a reputable organization. The bank can increased the deposits by giving the more interest and benefits to the customers both in ways borrower and depositors

Thank You