Habib Bank Limited (HBL) commenced its operations in the year 1947. It has the privilege of being the first bank to establish itself in Pakistan after independence. From there on, the bank has taken leaps and bounds and has shown tremendous growth in the field of banking. It has now because the largest private sector bank in Pakistan. It has customer base of around five million people. HBL has around 1705 branches across the countries.
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HBL also has international presence in around 26 countries. The bank has subsidiaries in Hong Kong and United Kingdom, it has affiliates in Nepal, Nigeria, Kenya, and Kyrgyzstan. HBL also has representative offices in China, and Iran. The vast international network makes HBL the largest domestic multinational. Such achievements strengthen the position of the bank not only in the domestic market but also brighten the image of the bank in the international market. The company is now planning to expand its operations in UAE, UK, South and Central Asia, Africa, and the Far East. HBL has 55 branches worldwide.
The commodities offered by HBL include product offerings and services in Retail and Consumer Banking. The bank has the honor of holding the largest Corporate Banking portfolio in Pakistan with an active Investment Banking arm. Small Medium Enterprise (SME) and Agricultural lending programs and other banking services are made available to customers residing in urban and rural areas.
The company leads the market by holding a domestic market share of 40 percent. HBL continues to dominate the domestic banking sector with a major share-holding in foreign remittances and loans to SMEs, traders, and farmers.
HBL is currently rated AAA (Long term) and A-1+ (Short term) with ‘stable’ outlook and has a balance sheet size of USD 13.82 billion. It is the first Pakistani bank to raise Tier II Capital from external sources. (Habib Bank Limited, 2012)
HBL has always led the market with example of quality performance and extra ordinary treatment with the clients. It has adapted with the changing times and evolved its practices as well for the betterment of the company. The company has its headquarters in Habib Bank Plaza, Karachi.
Company History
HBL was founded by late Mr. Ismail Habib on 25th August, 1942 at Bombay. At that time it was the first Muslim bank to be established in the Indian Sub-continent. It was initiated with a capital of Rs 2.5 Million with a mere 12 branch network. (Ayaz, 2011)
Prior to Pakistan’s independence, Quaid-e-Azam during his campaigns realized the importance of a bank that was going to cater to the needs of the Muslims residing in Hindustan. He requested the Habib family to establish a commercial bank. Habib Bank Limited was thus created in 1941. The head office was located in Bombay (now Mumbai). The fixed capital was 25,000 rupees. The bank played a vital role in utilizing the funds from the Muslim community to finance The All-Indian Muslim League for the establishment of Pakistan. HBL also helped the refugees who were hurt in the communal riots and violence that preceded the departure of British.
After independence HBL shifted its headquarters to Karachi. Habib Bank Limited’s first international branch was setup in Colombo, Sri Lanka, in 1951. The bank started its international from this year and never looked back after that. In 1975, the company built the Habib Bank Limited building in Karachi to celebrate its 25th anniversary. (Habib Bank Lmited, 2012)
The company was nationalized in Zia-ul-Haq’s era. Prior to nationalization, HBL had a domestic market share of about 40 percent. After nationalization HBL continued to dominate the market and held a major share in inward foreign remittances (55percent) and loans to small industries. The company expanded its international boundaries and covered USA, Singapore, Oman, Belgium, Seychelles, Maldives, and the Netherlands. (Habib Bank Lmited, 2012)
A decade after nationalization, HBL’s annual profit was more than twice the combined profit of all the other commercial banks operating in Pakistan at that time which included United Bank Limited, National Bank of Pakistan, Allied Bank limited and Muslim Commercial Bank. HBL had been a source of rapid economic development in the state since its establishment. It financed various government transport schemes, agricultural schemes and leases over the years and remained the largest and one of the most profitable government entities till its privatization. (Ayaz, 2011)
It is believed that HBL presented a blank cheque to Muhammad Ali Jinnah at the time of birth of Pakistan. The bank also looked over the initial financial matters of the state by assuming the status of the state treasury till the state bank came into existence. HBL therefore had been very close to the government of Pakistan since it was established due to these significant reasons.
Vision
“Enabling people to advance with confidence and success”
(Habib Bank Limited, 2012)
Habib Bank Limited wishes to see its customers excel in their lives with confidence. The vision of HBL is targeted towards the domestic market and focuses on fulfilling their needs and requirements in order to give them satisfaction, confidence, and the comfort they deserve.
According to Rieches, 2012 the vision statement of a coporation provides a platform to inform competent personnel, create strategic alliances, and most importantly loyal customers. It is really a depiction of desired destination. The destination that the corporation wishes to arrive at. It is a long term long goal established by a corporation which reflects where the it wishes to see itself in the future.
HBL vision statement is not a very strong vision statement. It does not clearly define where the company wishes to itself in the future. The vision statements are usually one liners and within this limitation the long term goal is defined. HBL however has failed to do so. From the vision statement the readers are not able to gauge about the future plans of the company and what it wants for itself. It does talk about its customers and their benefit. Customers is just one very small part of it. The corporate goal is the most significant thing to be mentioned in the vision statement.
The focus of the company only remains on its customers. The vision to help the customers grow is in the right direction but the other stake holders are being ignored. That however is not a good strategy. It does not mention its shareholders, future plans, furture expansions etc. It also does not mention whether the company wants to remain the market leader or not.
There is immense competition in the local market and it is no longer easy to survive in this fierce competition without having a crystal clear vision. The vision statement of the company is a weak statement and does nor portray or convey the future plans of the Bank. The statement leads to a lot of questions and it has a lot of ambiguities.
Mission
“To make our customers prosper, our staff excel and create value for shareholders”
(Habib Bank Limited, 2012)
The mission of HBL discusses its customers, employees, and the shareholders. The statement mentions three of the most important dimensions of the company. The main aim of a mission statement it to outline the short or medium term goals of an organization so that the employees can make strategies accordingly.
Mission statements are given an enormous importance by the strategists. They consider it to be a reflection of how company is being operated and which direction it intends to take on. It is said to explain the core purpose of company’s existence. Famous names in the field of strategic management consider mission statements to be a corner stone of an organization, and believe that a well thought out mission statements tells a lot about an organization (Wheelen & Hunger, 2010). They identify nine important components of a mission statement. Though all of these might not be included, or be necessary, but their presence in the mission statement does make the mission statement powerful and gives it ability to make an impact a well. These components include customer, products and services, markets, technology, concern of survival, growth & profitability, philosophy, self-concept, concern of public image and concern of employees (Adam, 2009). The researcher has used these nine components as guideline to analyze the existing mission statement of Habib Bank Limited.
HBL mentions the first component, its customers first. It puts the customers and their betterment as a top priority. That is a very sound strategy. The bank is operation in a competitive market and if it does not follow a consumer centric approach then it is likely to experience downfall in its popularity. Therefore placing the customers as the first and foremost priority is a good strategy that is used by the company. The company indirectly promises to work for the success of its customers and make them prosperous in their life.
There is another important dimension covered in the mission statement, the employees of the bank. The employees play a vital role in establishing the company in the market and eventually making it a leader. The mission statement of HBL talks about its employees and providing them with opportunities which would help them excel in their careers. This is a good strategy again. If a company is taking care of its employees it is very likely that the employees are going to work with loyalty for the betterment of the company.
It mentions its customer, but more clarification would have been ideal. Its products and services are not clear at all, whereas other components of a powerful mission statement including markets, technology, concern of survival, growth and profitability, philosophy, self-concept, concern of public image and concern of employees is totally missing. Therefore this is a weak mission statement, which could be improved by incorporating these components in to it. Mission statements are often a little more elaborative, than the one under consideration, which conveys a much clearer picture of the organization’s mission, purpose and objectives to its stakeholders.
Habib Bank Limited should improve its mission statement. Make the component mentions in it more clear and make it more useful for its stakeholders.
Values
“Our values are the fundamental principles that define our culture and are
brought to life in our attitudes and behaviour. It is our values that make
us unique and unmistakable.”
(Habib Bank Limited, 2012)
Value of a company describes the traits and qualities that shape daily actions with the internal community, customers, and suppliers. These values shape corporate culture when they become deeply held driving forces and high priorities. (Rieches, 2012)
Excellence
This is at the core of everything we do. The markets in which we operate are becoming increasingly competitive, giving our customers an abundance of choice. Only through being the very best – in terms of the service we offer, our products and premises – can we hope to be successful and grow. (Habib Bank Limited, 2012)
Integrity
We are the leading bank in Pakistan and our success depends upon our trust. Our customers – and society in general – expect us to possess and steadfastly adhere to high moral principles and professional standards. (Habib Bank Limited, 2012)
Customer Focus
We understand fully the needs of our customers and adapt our products and services to meet these. We always strive to put the satisfaction of our customers first. (Habib Bank Limited, 2012)
Meritocracy
We believe in giving opportunities and advantages to our employees on the basis of their ability. We believe in rewarding achievement and in providing first-class career opportunities for all. (Habib Bank Limited, 2012)
Progressiveness
We believe in the advancement of the society through the adoption of the enlightened working practices, innovative new products and processes, and a spirit of enterprise. (Habib Bank Limited, 2012)
Operational Structure
HBL is one of the largest commercial bank of Pakistan. It accounts for a substantial share (20percent) of the total commercial banking market in Pakistan with a network of 1,705domestic branches; 55 overseas branches in 26 countries spread over Europe, the Middle East, Far East, Asia, Africa and the United States. (Ismail, 2009)
HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT) LTD. Karachi, Habib Finance International Ltd. (Hong Kong) and Habib Finance Australia Ltd. – Sydney; two Joint Ventures namely Habib Nigeria Bank Ltd. (40%) and Himalayan Bank Ltd. (20%).
Habib Bank Limited also has two representative offices in Iran and Egypt.
(Ismail, 2009)
Organization Structure
Organization structure defines how job tasks are formally divided, grouped, and coordinated. There are six key elements that managers need to address: work specialization, departmentalization, chain of command, span of control, centralization, decentralization, and formalization. (Robbins, Judge , & Sanghi, 2010)
Chairman
President
Board of Directors
Senior Vice President
Senior Vice President
(Finance & Audit)
Senior Vice President
(Asset Remedial)
Senior Vice President
(Corporate Banking)
Senior Vice President
(Corporate Banking, Financial Institute, & Project Finance)
Senior Vice President
(Credit Policy)
Senior Vice President
(Retail Banking)
Decision Making
The decision making process at HBL is centralized. All the decisions are taken at the top level of the management without any consultation with the lower levels of the hierarchy. According to Famous names in the field of organization behavior define centralized decision making of being concentrated at a single point in the organization. (Robbins, Judge , & Sanghi, 2010) The lower-level managers simply have to carry out the top management’s directives. A centralized structure reflects a more rigid and strict culture at the organization. It is not considered to be a very responsive structure.
Chain of Command
“The chain of command is an unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom.” (Robbins, Judge , & Sanghi, 2010) Chain of command identifies which employee is to report to whom. In HBL chain of command is clear and every employee knows their direct supervisor and to whom he can report. The company is using a unity of command chain of command. This particular type keeps the concept of unbroken line safe and ensures that the employee has one supervisor only to whom the employee is to report. If the unity of command gets broken then the employee might have to respond to the demands of two or more supervisors.
Organizational Strategies
There are primarily two main types of strategies adopted by the human resource department of an organization. In an interview with the
Following are the two main strategies followed by the Human Resource department of Habib Bank Limited:
Corporate Strategy
HBL focus on two types of corporate strategies
Geographic Expansion
In this new era of 21st century it would not be wrong to call the world a global village. With the introduction of revolutionary technology the ends of the world are able to communicate with just a click. HBL is trying to capture different international markets by geographically expanding its operations.
Diversification
In today’s competitive world only those companies are able to survive who are the fittest. The key is to either target a particular untapped market or target the needs of several different segments. The latter strategy ensures a wider coverage of the market and as a result increases the market share. HBL is following diversification strategy to tap different segments in the market which possess different needs. HBL introduces different services in intervals to entertain the needs of its diversified customer line.
Business Unit Strategies
Following are the business unit strategies for Habib Bank Limited:
Cost Leadership
The cost leadership strategy allows the firm to develop a competitive advantage in the market by keeping the costs as low as possible. The company is able to achieve cost leadership through efficient and effective production system. HBL follows this strategy by providing services to customers at costs lowers than the competitors.
Differentiation
Differentiation according to Micheal Porter is highlighting the distinctive competencies in a firm which would make the firm stand out from its competitors. HBL is following this strategy to provide unique services to its customer in the banking industry.
Human Resource Department
According to (Dessler & Varkkey, 2012) “Human resource is the process of acquiring, training, appraising, and compensating employees, and of attending to their labor relations, health and safety, and fairness concerns” The human resource department of HBL tries to perform the same duties as mention by Dessler & Varkkey. The department plays a significant role in creating value for the bank. HBL has a very efficient and active human resource department. It consists of competent employees who formulate strategies according to the local and global needs of the industry and employees. The department also skillfully tackles different problems related to the HR department. The department plays an active role in making the bank more successful every day.
Over the years, HBL has adopted customer oriented approach in the recent years due to the changing market dynamics. In order to cater to the needs of these customers, the employees of HBL play a vital role. Therefore, in order to keep the employees happy and satisfied with their work, the HR department tries to take care of their needs and requirements in timely fashion. The department takes care of the company’s asset – the employees and hopes that the asset would pay the company back with full interest.
Human Resource Strategies
The Human resource department of Habib Bank Limited has six main strategies:
Workflows
In order to maximize the profits, HBL has planned a mix of long term and short term goals. These goals are designed in a manner that they would help HBL achieve a competitive edge over its competitors. The following measures are considered for this regard:
Risk Management
Unified Information Technology System
Intensive Training and Professional Recruitment
Re-organization of the Consumer and Retail Banking Business
Information Technology system enhancement
Product offering enhancement
Advancement of Operations in urban areas
Recruitment and Staffing
Employment planning is where the recruitment and selection process commences at HBL. This process starts with the forecasting and planning of human resource required for the current and future positions. The process of selection and recruitment process is carried out tactfully and all the dimensions of the candidate are analyzed carefully. Future prospects are also identified while hiring the candidate. Skills, personality, attitude, knowledge are some of the aspects of the candidate which are judged carefully during the recruitment process.
Vacant PositionRecruitment Process
Forecasting of Positions
Identify Pool of Candidates
Develop pool of candidates
Monitoring, Tailoring & Development
Screening / Short Listing
Final Selection
Recruitment and Selection
Source: (Shahid, 2012)
Employee Separations
HBL has started a program which offers voluntary retirement schemes to employees. The employees get a golden handshake in return. The new term for golden handshake is Voluntary Separation Scheme (VSS). This scheme offers a special incentive to the employees who opt for the scheme and provides them a lump sum amount which equals to the salary of twelve months. Employees who work with the bank for a decade or more are entitled to the pension plan. This plan is going to help the employees in a manner that they will have no financial obligations after they have retired.
Performance Appraisal
Evaluating an employee’s current and past performance relative to its performance standards is called performance appraisal. A process that consolidates goal settings, performance appraisal and development into a single common system to ensure that employee’s performance is according to company’s aims is called performance management. Ratings as practiced in HBL consist of following five kinds of factors. The following factors are put into consideration while reviewing the performance of an employee and making an appraisal:
Productivity
Attributes
Technology
Customer Service
Personal
Training
According to (Dessler, A Framework for Human Resource Management, 2011), “training refers to the methods employers use to give new or present employees the skills they need to perform their jobs.”
HBL follows the follows a four step following process. The training process is as follows:
Needs Analysis
Identify job performance skills needed, assesses skills of prospective trainees and develop objectives.
Instructional Design
Produce the training program content, including workbooks, exercises, and activities.
Implementation
In this step the process gives an opportunity to the trainees to experience situations close to practical life.
Evaluation
In this step the success or failure of the program is assessed.
Source: (Shahid, 2012)
Training and Development Programs
HBL uses the following practices for training and development of its employees:
Management Trainee
Management Trainee Officer (MTO) program looks for highly motivated candidates who exhibit the potential to become future leaders. At HBL, the MTO program offers extensive interactive classroom training, on the job rotations and personal mentoring from senior management to provide a comprehensive learning experience.
Management Associate
Management Associate Program at HBL is a training and rotational program. The program particularly focuses on handling the branch banking requirements. It also provides numerous opportunities across HBL’s network of Retail, Corporate, and Commercial Banking.
Cash officers
Candidates in this program are the bank ambassadors. Therefore they are required to have exemplary skills when interacting with the clients. The program involves an extensive one-month training period based on branch banking operations before placement in one of the branches.
Types of Processes
On the Job Training
It is when the new employee learns about the job by actually doing it. Methods of on the job training are as follows:
Understudy
Job rotation
Special assignments
Action learning
Understudy
It is also known as coaching. Under this method the employee is placed under the supervision of a professional employed at the organization. The professional provides guidance to the new employee. At HBL, the trainee works under the supervision of a senior manager. The trainee may also work with the employee to be replaced. It takes place at all the levels of the job. New and old, both the types of employees are trained with the help of this method.
Job Rotation
Job rotation is when an employee is moved from one department to another to not only broaden the skills of the employees but also to analyze the strong and weak points of the employee. HBL’s manager associate program makes use of this type of training.
Special Assignments
Special assignments are given to the employee by the supervisor. These are assignments or tasks to be done within the premises of the branch. Based on the way the task is completed the supervisor analyzed the performance of the employee.
Action learning
This method is only to be used for the employees based at the managerial level. Under this method, the employees are to work full time in one department. The employees are assigned to take care of the problems which arise and provide relevant solutions for the problems.
Compensation
The salaries, rewards, bonuses, and incentives on the basis of job and performances are called compensations. HBL’s compensation and benefits strategy combines the need to maintain a high performance culture along with market competitiveness. According to performance each employ gets benefits and compensation. Tenure duration is less preferred as compared to the performance of employees. Employees are paid in two forms:
Direct Payments
These are the payment in the form of wages, salaries, incentives, commissions, and bonuses.
Indirect Payments
This mode of payment includes the benefits and perks that are given to the employees for example medical, car, insurance, residence, car fuel, easy loans etc.
Industry Analysis
The Banking sector is an integral part of the country’s financial services industry. The banking sector experienced growth in 2001 – 03. During this tenure the deposits rose almost by a 100 percent. The competition is high in the industry with the presence of local and foreign banks.
Almost a decade ago, opportunities for foreign banks, especially in consumer and retail banking, were greater than ever before. In the financial year of 2004-05, the banking sector experienced growth rates of 21% and 36% in its deposit and advances portfolio respectively. This helped improve the stability of the banking sector as compared to 2003 – 04. (Pakistan Banking Sector, 2009)
“A significant shift of focus from industrial lending to consumer products has allowed the banks to enjoy enormous spreads. However, the manufacturing sector is still enjoying the highest share in credit facilities extended by the banking industry” (Pakistan Banking Sector, 2009). Initially the banking sector was only catering to the needs of big corporations and the government. However after the reforms the sector is now entertaining the middle class as well.
The industry was passing through a transitional period from long established patterns and norms to the unknown land of threats and opportunities. The following are the few areas in the banking industry which have witnessed change over the years:
Diversity within the commercial banking industry
The following segments have experienced change in the few years: operations, market focus, advertising, and use of information technology. The banks are now concentrating more on developing and establishing distinctive image as compared to their competitors. The banks are doing this by introducing unique products in the market.
Intensifying Competition
The competition in the banking industry has deepened over the years. It has become fierce over the years. There are a few factors who have contributed to the increasing competition. Increased consumer awareness about the different products and services being offered by the banks has increased the competition. The banks in such a situation can no more enjoy saving the deposits of the consumers at lower rates. Such situations may actually force the banks to lend their money to customers which might have a high risk.
Profit trends
The ratios indicate a growth in the market. There have been a few dips in the market but overall the industry has seen an upward trend over the years.
Soaring Loan Losses
Troubled loans are regarded as a cancer for this industry. The quality loans are the ultimate goal for bankers in the 21st century.
Mergers
Mergers have taken their toll in this country. Over the years the country has witnessed many mergers for example Union Bank with Standard Chartered etc. The purpose is to hold on to as much market share as possible and to tame the increasing competition. however there are some setbacks as well for example, the economies of scale after a certain level of expansion no longer exist for the merger.
Structure of the Banking Industry
Pakistan being a developing country has a relatively low level of income. The required growth rate as a result is also low because of low savings. The standard of living and quality of life are terms still stranger to the people of this country. The foreign aids have been the bridging gap for us between our savings and investments. “Nevertheless these aids have become the drowning forces for our country. IMF’s main objective for Pakistan is to maintain stable exchange rates, multi-lateral credit system and international liquidity in order to recover from its worst economic crisis.” (Pakistan Banking Sector, 2009)
Structure of the Pakistani banking sector has substantially changed in the last decade, particularly following the privatization of the state-owned banks. In 1990, the banking system was dominated by five commercial banks which were all state-owned. The 1990 amendments to the Banking Companies Ordinance launched the process of financial sector reforms by allowing privatization of the state-owned banks. During the first round of reform, two of the state-owned banks, Muslim Commercial Bank (MCB) and Allied Bank (ABL), were privatized between 1991 and 1993. The reforms process was subsequently delayed for several years and resumed significantly only in the early 2000s. With the privatization of the third large bank, United Bank (UBL), in2002, the domination of the state-owned banks was ended. As of September 2003, the asset share of local private banks and public sector commercial banks was 47 percent and 41 percent respectively. Another large state-owned bank, Habib Bank (HBL), completed its privatization n process in February 2004. As a result of this privatization, the share of banking system assets held by public sector commercial banks decreased to less than 25 percent. The largest bank in the country, National Bank of Pakistan (NBP), with a market share of approximately 20 percent, remains state-owned and its privatization prospects are uncertain at this stage, although the government divested approximately 25 percent of its capital in 2001-03.
A lot of endeavor has been put in the sector in recent years to promote Islamic banking in Pakistan. Numerous conventional banks have also opened up their branches to provide financial services to the consumers.
Lately, the banking sector has diversified its product base and carried out a lot of innovation. They have included different customers like the agriculture sector, SMEs, mortgage financing and consumer financing in their customer list. Not only that this diversified lending portfolio mitigates risks but it also raises the purchasing power of a large segment of population that was completely shut out from credit markets. Pakistan’s auto industry has expanded its car production by a multiple of five times in the last four years as auto finan
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