Case Study of Bank Al Habib - Latest

Bahadur Ali (55534)Adnan Jamil (54447)FouziaShaikh (53267)Adnan Zakir ( )

Case Study of Bank Al Habib Limited.

Case Study of Bank Al Habib Limited. 2012

Contents

Executive Summary.................................................................................................................................. 2

Letter of Acknowledgement................................................................................................................. 2

Introduction................................................................................................................................................. 2

Introduction of Habib Family.........................................................................................................................2

Habib Family's Business Units......................................................................................................................2BANKING & FINANCE...................................................................................................................................2INSURANCE;....................................................................................................................................................2OTHER;.............................................................................................................................................................2

Introduction of Bank Al Habib Limited.......................................................................................................2

Capsule Information................................................................................................................................ 2

Bank AL Habib Limited Profile......................................................................................................................2

Total no. of branches:......................................................................................................................................2

Registered office:..............................................................................................................................................2

Principal office:..................................................................................................................................................2

Strategy Formulation.............................................................................................................................. 2

Vision Statement...............................................................................................................................................2

Mission Statement............................................................................................................................................2

Critical Views......................................................................................................................................................2

Proposed Mission Statement.........................................................................................................................2

Input Stage..........................................................................................................................................................2The External Audit........................................................................................................................................2

Opportunities.............................................................................................................................................2Threats.........................................................................................................................................................2

Bank ALHabib..........................................................................................................................................................2External Factors Evaluation (EFE) Matrix.........................................................................................2Bank AL HABIB...........................................................................................................................................2Competitor Performance Matrix (CPM) Matrix................................................................................2

Internal Audit..................................................................................................................................................2Management Audit...................................................................................................................................2Marketing Audit.........................................................................................................................................2Financial Audit...........................................................................................................................................2HR Audit.......................................................................................................................................................2Strength.......................................................................................................................................................2

| Conclusion 1


Weaknesses................................................................................................................................................2Bank AL-Habib...........................................................................................................................................2Internal Factors Evaluation (IFE) Matrix...........................................................................................2

Strategies in Action..........................................................................................................................................2Intensive Strategy........................................................................................................................................2Integrative Strategy.....................................................................................................................................2Diversified Strategy.....................................................................................................................................2Defensive Strategy.......................................................................................................................................2

Matching Stage..................................................................................................................................................2BCG Matrix......................................................................................................................................................2IE Matrix...........................................................................................................................................................2Suggestion......................................................................................................................................................2Grand Matrix...................................................................................................................................................2

Decision Stage...................................................................................................................................................2QSPM.................................................................................................................................................................2

Strategy Implementation...................................................................................................................... 2

Annual Objective...............................................................................................................................................2

Policies..................................................................................................................................................................2

Set Standards.....................................................................................................................................................2

Conclusion.................................................................................................................................................... 2

| Conclusion 2


Executive Summary

This report provides an analysis and evaluation of the current and prospective position of Bank Al Habib in the banking industry. This report focuses on the growth and market expansion of the Bank Al Habib Limited. Aspects like strengths, weaknesses, opportunities and threats of Bank Al Habib are highlighted.

Methods of Analysis include IFE, EFE, CPM, BCG, IE, Grand Strategy, and QSPM matrices. After analyzing of matrixes, it is indicated that Bank AL Habib has a strong and stable position and needs to plan a strategy for further growth.

The report finds through QSPM matrix that Horizontal integration is most favorable strategy for growth and expansion of Bank Al Habib. Bank Al Habib is needed to carefully plan an Acquisition and Merger strategy and implement accordingly.

| Conclusion 3


Letter of Acknowledgement

First of all thanks to whom who is most merciful and kind to all of his creations without any discrimination and who make us able to prepare this report.

We are thankful of following personalities for their guidance and help in the preparation of this report

Mr. Shah FarazulHasan; who provided us some useful articles related to our topic.

Mr. AhmerMukhtarHasan who provided us important information about the bank Al Habib.

Mr. Mudassir Khan; who provided us the material related to our project.

In the end special thanks to Mr. MudassirHussain (Our Strategic management instructor) whose unlimited efforts are present in our professional grooming.

| Conclusion 4


Introduction

Introduction of HabibFamily

The Origin of what is now known as the Habib Group of companies can be traced to HabibEsmail, and his association with the firm of KhojaMithabaniNathoo, a leading metals dealer established in Bombay in 1841. Habib joined the firm at the age of 13 for a monthly salary of Rs. 5. Through his hard work and determination he became partner at the age of 18 and also became the president of the Copper and Brass Merchants Association.

He started the firm "Habib& Sons" in 1921 and changed the family name to "Habib". His four sons namely Ahmed Habib, DawoodHabib, Mohammed Ali Habib and Ghulam Ali Habib joined the business. The firm expanded rapidly - banking remained a core business.

1841

HABIB FAMILY STARTS BUSINESS IN BOMBAY, INDIA

1920

HABIB & SONS ESTABLISHED IN BOMBAY

1941

HABIB BANK LIMITED ESTABLISHED IN BOMBAY

1942

HABIB INSURANCE COMPANY ESTABLISHED IN BOMBAY

1947

HABIB FAMILY MIGRATES TO PAKISTAN MOVING HABIB BANK, INSURANCE & OTHER BUSINESSES

1967

HABIB BANK AG ZURICH ESTABLISHED IN SWITZERLAND

1974

HABIB BANK LIMITED NATIONALISED IN PAKISTAN. HABIB FAMILY INVITED BY LATE SHAIKH RASHID TO ESTABLISH HABIB BANK AG ZURICH BRANCHES IN DUBAI

1982

HABIB FAMILY DECENTRALISES BUSINESS UNITS BETWEEN A GROWING FAMILY

1991

PAKISTAN GOVERNMENT INVITES DAWOOD HABIB GROUP TO ESTABLISH "BANK AL HABIB" IN PAKISTAN

Habib Family's Business Units

BANKING & FINANCEBank AL HabibHabibsons Bank LtdHabib Overseas Bank LtdHabib African Bank LtdHabibAsset Management Ltd

(Pakistan)(UK & Switzerland)(South Africa)(Tanzania)(Pakistan)

| Conclusion 5


Axiom FundsAl Habib Capital Markets (Pvt.) Ltd

(UK)(Pakistan)

INSURANCE;Habib Insurance Co. Green shield Insurance Brokers

(Pakistan) (UAE)

OTHER;

Habib Sugar Mills HSM TextileHabibMotorcycles Ltd.

(Pakistan) (Pakistan) (Pakistan)

Introduction of Bank Al Habib Limited

DAWOOD HABIB GROUP, the sponsor of Bank AL Habib Limited, has a long track record in banking which dates back to the 1920's. It was among the founder members of Habib Bank Limited which played a major role in meeting the financial and banking needs of Pakistan, and which was nationalized along withother banks in Pakistan on December 31, 1973.

Under the privatization policy of Government of Pakistan, the DAWOOD HABIB GROUP was granted permission to set up a commercial bank. Bank AL Habib was incorporated as a Public Limited Company in October 1991 and started banking operations in 1992.

It is a venture of the Habib Group, which owns 50% of the shares, 20 % shares are owned by NIT and 30% are owned by the general public. Bank now has a network of 353 branches including 11 Islamic Banking Branches and a Wholesale Branch in the Kingdom of Bahrain, 61 sub-branches, and two Representative Offices, one each in Dubai and Istanbul.

(Late) Hamid D. Habib, grandson of the founder a Habib Group, was the first Chairman of Bank AL Habib Limited. He was a Director in Habib Bank Limited from 1954 and it’s Chairman from 1971 until nationalization. After the death of Mr. Hamid D. Habib in May 2000, Mr. Ali Raza D. Habib, who was Director on the Board, was appointed the Chairman ofthebank.

(Late) Rashid D. Habib, who was the Managing Director of Habib Bank Limited from 1953 till its nationalization, was appointed as the Managing Director & Chief Executive of Bank AL Habib Limited until he expired in 1994. After his death, Mr. Abbas D. Habib who was the Joint

| Conclusion 6


Managing Director and closely associated with the bank since its inception 1991, was appointed as the Managing Director & Chief Executive of the Bank.

Capsule Information

Bank AL Habib Limited Profile

Type

Public limited company

KSE: BAHL

LSE: BAHL

Founded Karachi, 1991

Principal Office Karachi, Pakistan

Industry Banking

ProductsCorporate Banking, Loans, Savings, Consumer

Banking, Islamic Banking etc...

Revenue ▲RS 16.7 Billion(2011)

Employees 6,900

Website www.bankalhabib.com

| Conclusion 7

http://en.wikipedia.org/wiki/File:Bankalhabib.jpg


Current Share Price in Rs. 28.52

Total no. of branches:

Bank now has a network of 353 branches including 11 Islamic Banking Branches and a Wholesale Branch in the Kingdom of Bahrain, 61 sub-branches, and two Representative Offices, one each in Dubai and Istanbul.

Abbotabad Kamalia Sugar Mills (Kamalia) QasbaGujrat

Badin Kandhkot Qazi Ahmed

Bahawalpur Karachi Quetta

Bhiria Road (NausheroFeroz) Karkhana Bazar (Vehari) Rahim Yar Khan

Burewala Kasur Rawalpindi

Chakwal Khanbela RohillanWali

Chenab Nagar Khanewal Sadiqabad

Dadyal (A.K.) Khanpur Sahiwal

Daharki Kharian SalehKhana

Daska Khurrianwala Sanghar

Dera Ghazi Khan Khushab Sargodha

Dinga Kotla Arab Ali Khan Shahdadkot

Faisalabad Kunri Shahdadpur

Fazilpur Lahore ShahpurChakar

Ferozwatoan Lala Musa Sheikhupura

GaggoMandi Larkana Shikarpur

Gawadar MandiBahauddin Sialkot

Gambat MathanichanganSwabi Skardu

Ghakhar Mehar Sukkur

Gharo Mehrabpur Tando Adam

| Conclusion 8


Ghotki MianChannu TandoBagho

Gilgit Mirpur (A.K.) TandoAllahyar

Gujar Khan Mirpurkhas TibbaSultanpur

Gujranwala Moro Toba Tek Singh

Gujrat Multan Turbat

Hafizabad Muridke Uch Sharif

Haripur Muzaffargarh Wazirabad

Hingorja (Khairpur) Narowal WahCantt

Hub Nawabshah ZahirPir

Hyderabad Nooriabad (Jamshoro) Off Shore Branches

Islamabad Okara Export Processing Zone, Karachi

Jacobabad Peshawar Manama, Bahrain

Jhelum PirMahal Representative Office

Joharabad Pull Kharan (Shujabad) Dubai, U.A.E.

Istanbul, Turkey

Registered office:

Address: 126-C, Old Bahawalpur Road Telephone: (92-61) 544539, 111-786-110 Fax: (92-61) 582471

Principal office:

Address: 2nd Floor, Mackinnons Building,Office I.I. Chundrigar Road,Karachi

Telephone: (92-21) 2412986-89 , 2417065-68 , 111-786-110 Fax: (92-21) 2425423 , 2412028

| Conclusion 9

V I S I O N

“To be a quality financial service

provider maintaining the highest

standards in banking practices”.


Strategy Formulation

Vision Statement

| Conclusion 10

MISSION

“To be a strong and stable financial institution

offering innovative products and services while

contributing towards the National economic and

social development”.


Mission Statement

| Conclusion 11


Critical Views

Missing in Mission Statement

Customers. No.Product/Services. Yes.Markets. No.Technology. No.Concern for Survival, Growth, and Profitability Yes.Philosophy. Yes.Self-Concept. Yes.Concern for Public Image. No.Concern for Employee. No.

Proposed Vision

To be a world-class financial services company that helps consumers and businesses achieve their goals

OR

To become the leading, technology-driven and global financial institution, providing distinctively unique range of financial services.

Proposed Mission Statement

To be the preferred provider of targeted financial service in our communities based on strong customer relationships. We will

strengthen these relationships by providing the right solutions that combine our technology, expertise and financial strength. Our goal

is to create customer loyalty, shareholder value and employee satisfaction.

| Conclusion 12


Input Stage

The External Audit

Opportunities

Promote housing finance schemes.

To attract low cost deposits, particularly from individuals & retail customers.

To target trade finance.

More development & enhancement in current IT infrastructure to improve operational activities & customer satisfaction.

Enhancement in Islamic Banking network.

To enter in agricultural sector. Being an agricultural country it is a large segment in Pakistan but still un-served by the Pakistani Banks.

SME sectors also an attractive opportunity for Bank. (Current advances ratio is only 5%).

Consumer bankinghas a huge potential for bank. (Current advances ratio is only 2%).

Micro Finance Banking is also and opportunitiesfor Bank.

Involvement in Bancassurance Products.

More presence in International market.

Mobile Banking services for facilitating & getting the customer satisfaction.

Bank AlHabib has an opportunity to merge with some other bank to be listed in top 5 ranking.

Attractive salary packages & compensation should be awarded to attract good resource from market.

Marketing department should be more aggressive in order to fetch market share. Current market share is around 4.5% (2009: 4.2%) of the total bankingsector assets.

To target commodity finance.

To target foreign trade market.

There is a lot of cushion available for Bank Al-Habib in terms of expanding its network of branches.

| Conclusion 13


Threats

Non aggressive marketing approach.

Rapid growth of Islamic Banking in Pakistan.

Anti-money laundering laws effects asset base of BAHL.

Nonperforming loans (NPL)

Economic situation effect the asset base of BAHL.

Day by day competition is increasing not only of the expansion of the banks but also due to the mergers and acquisitions of the new bank in the market.

Circumstances of Pakistan are a great threat.

The conventional banks those having high growth rate and high market share are always being a threat.

Large business parties have fewer attractions in being a client of BAHL, mainly because of excessive amount of documentation.

A relatively high exposure to textile sector (45%) is mitigated to a certain extent due to diversification withinsector.

| Conclusion 14


Bank ALHabib

External Factors Evaluation (EFE) Matrix

OpportunitiesS. No

Successful Key Factors (S.K.F) Weight Ratting Score

1 Promote housing finance schemes 0.04 4 0.16

2 To attract low cost deposits, particularly from individuals & retail customers.

0.04 3 0.12

3 To target trade finance. 0.04 4 0.16

4 More development & enhancement in current IT infrastructure to improve operational activities & customer satisfaction.

0.02 3 0.06

5 Involvement in Islamic Banking. 0.04 4 0.16

6To enter in agricultural sector. Being an agricultural country it is a large segment in Pakistan but still un-served by the Pakistani Banks.

0.04 4 0.16

7 SME sectors also an attractive opportunity for Bank. (Current advances ratio is only 5%).

0.04 4 0.16

8 Consumer banking has a huge potential for bank. (Current advances ratio is only 2%).

0.04 4 0.16

9 Micro Finance Banking is also and opportunities for Bank. 0.04 4 0.1610 Involvement in Bancassurance Products. 0.03 3 0.0911 More presence in International market. 0.02 4 0.08

12 Mobile Banking services for facilitating & getting the customer satisfaction.

0.03 3 0.09

13Bank - Al Habib has an opportunity to merge with some other bank to increase the number of its branches in Pakistan. 0.02 3 0.06

14Attractive salary packages & compensation should be awarded for motivation of current employees & to attract good resource from market.

0.02 3 0.06

15Marketing department should be more aggressive in order to fetch market share. Current market share is around 4.5% (2009: 4.2%) of the total banking sector assets.

0.03 3 0.09

16 To target commodity finance market. 0.04 4 0.16

17 To target foreign trade market. 0.04 4 0.16

18There is a lot of cushion available for Bank Al-Habib in terms of expanding its network of branches. 0.04 4 0.16

Threats1 Non aggressive marketing approach. 0.04 1 0.04

| Conclusion 15


2 Rapid growth of Islamic Banking in Pakistan. 0.04 2 0.083 Anti-money laundering laws effects asset base of BAHL 0.03 2 0.064 Nonperforming loans (NPL) 0.03 1 0.035 Economic situation effect the asset base of BAHL. 0.03 1 0.03

6Day by day competition is increasing not only of the expansion of the banks but also due to the launching of the new bank in the market.

0.04 2 0.08

7 Circumstances of Pakistan are a great threat. 0.04 2 0.08

8 More and more banks are launching their operations in Pakistanwhich is increasing competition for the Bank AL Habib

0.05 2 0.1

9 The conventional banks those having high growth rate and high market share are always being a threat.

0.04 2 0.08

10 Large business parties have fewer attractions in being a client of BAL-IBD, mainly because of excessive amount of documentation.

0.05 2 0.1

11 A relatively high exposure to textile sector (45%) is mitigated to a certain extent due to diversification within sector

0.05 2 0.1

Total Points 1.00 2.93

Bank AL HABIB

Competitor Performance Matrix (CPM) Matrix

S. No Critical Success Factors Weight

BANKAL FALAH

HABIBMETRO BANK

FAISAL BANK

Rating Score Rating Score Rating Score1 Deposits 0.10 4 0.40 2 0.20 1 0.102 Branches 0.10 4 0.40 2 0.20 2 0.203 Market Share 0.08 4 0.32 2 0.16 2 0.164 Management 0.06 2 0.12 3 0.18 2 0.125 Assets 0.12 3 0.36 2 0.24 1 0.126 Capital 0.12 3 0.36 3 0.36 2 0.247 Customer Services 0.11 2 0.22 3 0.33 4 0.448 Technology 0.13 2 0.26 4 0.52 2 0.269 Return Rate 0.08 2 0.16 2 0.16 2 0.16

10 Islamic Banking 0.10 1 0.10 2 0.20 4 0.40Total Points 1.00 2.70 2.55 2.20

| Conclusion 16


Internal Audit

Management Audit

Bank Al Habib is an organization following centralized planning and controlling. Planning is the responsibility of the senior management group more particularly the board of directors, and to check any deviation from the prescribed plan, there is head office under them.

Marketing Audit

Bank Al-Habib marketing strategies are not aggressive. They should improve interpersonal communication skills, marketing department & provide excellent customer services to get more business by satisfying their customers. Bank has an opportunity to target trade finance & to attract low cost deposits from individuals & retail customers. Bank Al- Habib can easily get business from SME sector, Consumer Banking & Micro Finance Banking by improving their marketing strategy.

Financial Audit

PACRA has maintained the long-term and short-term entity ratings of Bank AL Habib Limited at AA+ (Double A plus) and A1+ (A One plus) respectively.These ratings denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.

The ratings reflect the bank's sustained performance, exceptional asset quality, and satisfactory financial profile. The ratings draw comfort from prudent risk management policies and the management's conservative risk appetite.

HR Audit

There is absence of corporate culture & good HR practices in Bank as compare to other banks. They provide training & promotion to their employees but salary packages & compensation is not good which should be at least market competitive to attract good resource from market.

Strength

| Conclusion 17


Enjoy the association with Habib Family.

PACRA has maintained the long-term and short-term entity ratings of Bank AL Habib Limited at AA+ (Double A plus) and A1+ (A One plus) respectively.

Standing on an asset base of Rs347 billion as of September 30, 2011 Bank AL Habib Ltd (BAHL) is the eighth largest commercial bank in the country.

Secure and easy access to Large numbers of ATMs network of bank Al Habib.

A wide network of 353branches of BankAlHabib.

Young savers account of the bank Al Habib is good source of business for bank Al Habib.

Variety of financial products and services.

Less risk in their banking system because of the conservative approach.

Strong and secure online web based banking system.

Involve in CSR activities, corporate philanthropy amounting to Rs. 24.7 million by way of donations during the year of 2011 for social and educational development and welfare of under-privileged people.

Follow the prudent controlling Standards.

Largest 'Saving Account Category' as compare to other banks.

Bank Al-Habib provides "online as well as physical training" for its employees.

Decent way of dealing with the customers.

Sufficient liquidity position.

Current ratio is above 20% of the total deposits.

Rapid expansion of branches in the different cities of Pakistan.

Implement BASEL II Frame work for capital adequacy. Total regulatory capital should be at least 10 % of risk-weighted assets and the Bank's capitaladequacy ratio is 16.69% (2010: 12.82%).

The paid-up capital requirement as of31 December 2011 is Rs. 8 billion. The Bank's paid-up capital as of 31 December 2011 is Rs. 8.786billion

| Conclusion 18


Weaknesses

Bank Al Habib’s business approach is not aggressive.

Do not believe on the philosophy of ‘Equal opportunity employer’. Hiring of female staff is discouraged.

Absence of corporate culture.

They are not high risk taker in business activities.

Absence of good HR practices.

Less involvement in 'Consumer banking'.

Difficultand lengthy processto applyfor loan product/service.

Low incentives like bonuses overtime pay etc.

No Aggressive marketing for the promotion of their products.

| Conclusion 19


Bank AL-Habib

Internal Factors Evaluation (IFE) Matrix

StrengthsS. No Successful Key Factors (S.K.F) Weight Ratting Score

1 Enjoy the association with Habib Family. 0.03 3 0.092 PACRA has maintained the long-term and short-term entity ratings of

Bank AL Habib Limited at AA+ (Double A plus) and A1+ (A One plus) respectively.

0.05 4 0.2

3 Standing on an asset base of Rs347 billion as of September 30, 2011 Bank AL Habib Ltd (BAHL) is the eighth largest commercial bank in the country.

0.04 4 0.16

4 Secure and easy access to Large numbers of ATMs network of bank Al Habib.

0.03 3 0.09

5 A wide network of 353 branches of Bank Al Habib 0.05 3 0.156 Young savers account of the bank Al Habib is good source of business

for bank Al Habib.0.03 4 0.12

7 Variety of financial products and services. 0.03 3 0.098 Less risk in their banking system because the conservative approach. 0.04 4 0.16

9 Strong and secure online web based banking system. 0.03 3 0.0910 Involve in CSR activities, corporate philanthropy amounting to Rs.

24.7 million by way of donations during the year of 2011 for social and educational development and welfare of under-privileged people.

0.04 4 0.16

11 Follow the prudent controlling Standards. 0.04 4 0.1612 Largest 'Saving Account Category' as compare to other banks. 0.05 4 0.213 Bank Al-Habib provides "online as well as physical training" for its

employees all over world.0.03 3 0.09

14 Decent way of dealing with the customers. 0.02 3 0.0615 No too much threat of the political environment. 0.03 3 0.0916 Sufficient liquidity position. 0.03 3 0.0917 Current ratio is above 20% of the total deposits. 0.03 4 0.1218 The paid-up capital requirement as of31 December 2011 is Rs. 8

billion. The Bank's paid-up capital as of 31 December 2011 is Rs. 8.786billion

0.05 4 0.2

19 Rapidly expansion of branches in the different cities of Pakistan. 0.04 3 0.1220 Implement BASEL II Frame work for capital adequacy. Total regulatory

capital should be at least 10 % of risk-weighted assets and the Bank's capital adequacy ratio is 16.69% (2010: 12.82%).

0.05 4 0.2

| Conclusion 20


Weakness1 Bank Al Habib’s business approach is not aggressive. 0.02 1 0.022 Do not believe on the philosophy of ‘Equal opportunity employer’.

Hiring on female staff is discouraged.0.03 2 0.06

3 Absence of corporate culture. 0.02 1 0.024 They are not high risk taker In business activities. 0.03 2 0.065 Absence of good HR practices. 0.03 2 0.066 Less involvement in 'Consumer Banking'. 0.03 1 0.037 Not Easy application is for applying for a credit card. 0.02 2 0.048 Too much poor Self marketing Department. 0.03 1 0.039 Low incentives like bonuses overtime pay etc. 0.03 1 0.03

10 No Aggressive marketing for the promotion of their products. 0.02 1 0.02Total Points 1 3.01

| Conclusion 21


Strategies in Action

Intensive Strategy

Market Penetration

Through advertisement campaigns, bank is striving to penetrate in the market.

Market Development

The Bank is operating 11 Islamic banking branches in Pakistan.

Product Development

Bank is continuously involved in new product development. Some are as follows

MoneyGram Young saver Account Senior Citizen Account Foreign Currency Saver

Integrative Strategy

Backward Integration: Bank is not involved in horizontal integration.

Forward Integration: Bank is not involved in horizontal integration.

Horizontal Integration: Bank is not involved in horizontal integration.

Diversified Strategy

Related Diversification

The Bank has 66.67% shares holding of AL Habib Capital Markets (Pvt.) Ltd. The bank has 30% shares holding of Habib Asset Management Limited.

Un-related Diversification

The Bank has 6.24% shares holding of HabibSugar Mills.

Defensive Strategy

| Conclusion 22


Currently bank is not involved in any defensive strategy.

| Conclusion 23


Matching Stage

BCG Matrix

PLS MONTHLY PROFIT PLAN

AL HABIB GROWTH CERTIFICATE

AL HABIB BACHAT CERTIFICATE

| Conclusion 24


IE Matrix

4.0 3.01 3.0

2.0 1.0

I II III

3.0

2.93

V VI IV

2.0

1.0

VII VIII IX

SuggestionIFE SCORE = 3.01

EFE Score = 2.93

Bank AL-Habib EFE & IFE Matrix score lies under “I”so bank is suggested to “Grow & Build”.

| Conclusion 25

EFES

core

IFEScore

WEAK COMPETITIVE POSITION


Grand Matrix

RAPID MARKET GROWTH

SLOW MARKET GROWTH

| Conclusion 26

Alternative Strategies:

Market development Market penetration Product development Forward integration Backward integration Horizontal integration Conglomerate diversification

STRONG

COMPETITIVE


Decision Stage

QSPM

S. No CRITICAL SUCCESS FACTORS

WEIGHT

UNRELATED DEVIRSIFICATIO

N

PRODUCT DEVELOPMENT

HORIZONTAL INTEGRATION

AS TAS AS TAS AS TASOPPORTUNITIES

1 Promote housing finance schemes 0.04 1 0.04 0 0 0 0

2 To attract low cost deposits, particularly from individuals & retail customers.

0.04 3 0.12 3 0.12 4 0.16

3 To target trade finance. 0.03 2 0.06 0 0 0 0

4 More development & enhancement in current IT infrastructure to improve operational activities & customer satisfaction.

0.02 4 0.08 3 0.06 4 0.08

5 Involvement in Islamic Banking. 0.04 2 0.08 0 0 4 0.16

6 To enter in agricultural sector. Being an agricultural country it is a large segment in Pakistan but still un-served by the Pakistani Banks.

0.03 3 0.09 0 0 0 0

7 SME sectors also an attractive opportunity for Bank. (Current advances ratio is only 5%).

0.02 2 0.04 3 0.06 0 0

8 Consumer banking has a huge potential for bank. (Current advances ratio is only 2%).

0.04 2 0.08 4 0.16 0 0

9 Micro Finance Banking is also and opportunities for Bank.

0.04 1 0.04 0 0 0 0

10 Involvement in Banassurance Products. 0.02 2 0.04 0 0 0 0

11 More presence in International market. 0.02 4 0.08 3 0.06 4 0.08

12 Mobile Banking services for facilitating & getting the customer satisfaction.

0.01 1 0.01 1 0.01 0 0

13 Bank - Al Habib has an opportunity to merge with some other bank to increase the number of its branches in Pakistan.

0.06 0 0 0 0 4 0.24

| Conclusion 27


14 Attractive salary packages & compensation should be awarded for motivation of current employees & to attract good resource from market.

0.02 3 0.06 1 0.02 4 0.08

15 Marketing department should be more aggressive in order to fetch market share. Current market share is around 4.5% (2009: 4.2%) of the total banking sector assets.

0.03 4 0.12 0 0 4 0.12

16 To target commodity finance market. 0.03 0 0 0 0 0 0

17 To target foreign trade market. 0.04 0 0 0 0 0 0

18 There is a lot of cushion available for Bank Al-Habib in terms of expanding its network of branches.

0.04 2 0.08 0 0 3 0.12

THREATS1 Non aggressive marketing approach. 0.04 4 0.16 4 0.16 4 0.16

2 Rapid growth of Islamic Banking in Pakistan. 0.04 0 0 1 0.04 4 0.16

3 Anti-money laundering laws effects asset base of BAHL

0.03 1 0.03 0 0 3 0.09

4 Nonperforming loans (NPL) 0.03 2 0.06 2 0.06 3 0.09

5 Economic situation effect the asset base of BAHL.

0.03 4 0.12 4 0.12 3 0.09

6 Day by day competition is increasing not only of the expansion of the banks but also due to the launching of the new bank in the market.

0.04 1 0.04 3 0.12 3 0.12

7 Circumstances of Pakistan are a great threat. 0.04 4 0.16 3 0.12 3 0.12

8 More and more banks are launching their operations in Pakistan which is increasing competition for the Bank AL Habib

0.05 2 0.1 4 0.2 3 0.15

9 The conventional banks those having high growth rate and high market share are always being a threat.

0.04 3 0.12 2 0.08 3 0.12

10 Large business parties have fewer attractions in being a client of BAL-IBD, mainly because of excessive amount of documentation.

0.05 0 0 1 0.05 2 0.1

11 A relatively high exposure to textile sector (45%) is mitigated to a certain extent due to diversification within sector

0.04 0 0 0 0 1 0.04

STRENGTH

| Conclusion 28


1 Enjoy the association with Habib Family. 0.03 4 0.12 2 0.06 4 0.12

2 PACRA has maintained the long-term and short-term entity ratings of Bank AL Habib Limited at AA+ (Double A plus) and A1+ (A One plus) respectively.

0.05 0 0 3 0.15 4 0.2

3 Standing on an asset base of Rs347 billion as of September 30, 2011 Bank AL Habib Ltd (BAHL) is the eighth largest commercial bank in the country.

0.04 4 0.16 4 0.16 4 0.16

4 Secure and easy access to Large numbers of ATMs network of bank Al Habib.

0.03 0 0 0 0 1 0.03

5 A wide network of 353 branches of Bank Al Habib

0.05 3 0.15 0 0 2 0.1

6 Young savers account of the bank Al Habib is good source of business for bank Al Habib.

0.03 0 0 0 0 0 0

7 Variety of financial products and services. 0.03 0 0 0 0 0 0

8 Less risk in their banking system because the conservative approach.

0.04 0 0 1 0.04 2 0.08

9 Strong and secure online web based banking system.

0.03 0 0 1 0.03 1 0.03

10 Involve in CSR activities, corporate philanthropy amounting to Rs. 24.7 million by way of donations during the year of 2011 for social and educational development and welfare of under-privileged people.

0.04 1 0.04 1 0.04 0 0

11 Follow the prudent controlling Standards. 0.04 0 0 1 0.04 2 0.08

12 Largest 'Saving Account Category' as compare to other banks.

0.05 0 0 0 0 3 0.15

13 Bank Al-Habib provides "online as well as physical training" for its employees all over world.

0.03 2 0.06 4 0.12 1 0.03

14 Decent way of dealing with the customers. 0.02 0 0 0 0 1 0.02

15 No too much threat of the political environment.

0.03 4 0.12 4 0.12 2 0.06

16 Sufficient liquidity position. 0.03 0 0 0 0 1 0.03

17 Current ratio is above 20% of the total deposits.

0.03 0 0 0 0 3 0.09

18 The paid-up capital requirement as of31 December 2011 is Rs. 8 billion. The Bank's paid-up capital as of 31 December 2011 is Rs. 8.786billion

0.05 0 0 0 0 4 0.2

| Conclusion 29


19 Rapidly expansion of branches in the different cities of Pakistan.

0.04 2 0.08 2 0.08 2 0.08

20 Implement BASEL II Frame work for capital adequacy. Total regulatory capital should be at least 10 % of risk-weighted assets and the Bank's capital adequacy ratio is 16.69% (2010: 12.82%).

0.05 0 0 0 0 3 0.15

WEAKNESSES

1 Bank Al Habib’s business approach is not aggressive.

0.02 4 0.08 4 0.08 4 0.08

2 Do not believe on the philosophy of ‘Equal opportunity employer’. Hiring on female staff is discouraged.

0.03 3 0.09 3 0.09 4 0.12

3 Absence of corporate culture. 0.02 2 0.04 2 0.04 3 0.06

4 They are not high risk taker In business activities.

0.03 3 0.09 3 0.09 3 0.09

5 Absence of good HR practices. 0.03 3 0.09 3 0.09 3 0.09

6 Less involvement in 'Consumer Banking'. 0.03 0 0 3 0.09 1 0.03

7 Not Easy application is for applying for a credit card.

0.02 0 0 0 0 1 0.02

8 Too much poor Self marketing Department. 0.03 4 0.12 4 0.12 3 0.09

9 Low incentives like bonuses overtime pay etc. 0.03 1 0.03 1 0.03 1 0.03

10 No Aggressive marketing for the promotion of their products.

0.02 3 0.06 4 0.08 3 0.06

Sum Total Attractiveness Score 1.00 1.33 1.55 2.28

| Conclusion 30


Strategy Implementation

Annual Objective

Determine Business Plan Drivers

Determine Acquisition Financing Constraints

Develop Acquisition Candidate List

Build Preliminary Valuation Models

Rate/Rank Acquisition Candidates

Review & Approve Acquisition Strategy

Policies

The first and foremost thing is to determine business plan drivers. It is very important to convert business strategies to set of drivers or a source of motivation to help the merger succeed in all possible ways.

There should be a strong understanding of the intended business market, market share, and the technological requirements and geographic location of the business. The company should also understand and evaluate all the risks involved and the relative impact on the business.

Then there is an important need to assess the market by deciding the growth factors through future market opportunities, recent trends, and customer's feedback.

The integration process should be taken in line with consent of the management from both the companies venturing into the merger.

Restructuring plans and future parameters should be decided with exchange of information and knowledge from both ends. This involves considering the work culture, employee selection, and the working environment as well.

At the end, ensure that all those involved in the merger including management of the merger companies, stakeholders, board members, and investors agree on the

| Conclusion 31


defined strategies. Once approved, the merger can be taken forward to finalizing a deal.

Strategy Evaluation

Set Standards

Reviewing internal and external factors that are the bases for current strategy.

Measuring performance.

Taking corrective actions.

| Conclusion 32


Conclusion

After conducting the comparative study of Bank Al Habib Limited, and analyzing three strategies, we concluded that horizontal integration is the most favorable strategy for Bank Al Habib. For this purpose it is important to understand the organization’s capabilities and resources available to plan according to the requirement.

| Conclusion 33

Documents

Case Study of Bank Al Habib - Latest