By

JAVAID AHMED KHAN

21138

To

MR. SHAH M. SAAD HUSAIN

A report is submitted in partial fulfillment of the requirements for the course of Post Graduate

Diploma. To office of teacher, Institute of Business Administration, .

Karachi, October 2020 Background of Company

Founded in 1941, HBL became Pakistan's first commercial bank. In 1951 it opened its first international branch in Colombo, Sri Lanka. In 1972 the bank moved its headquarters to the

Habib Bank Plaza, which became the tallest building in at the time. The Government nationalized the bank in 1974 and privatized it in 2003; at that time the Aga Khan Fund for

Economic Development acquired a controlling share.

As of 2018, HBL has more than 1700 branches with presence in over 25 countries spanning across four continents. It is the largest company in Pakistan in terms of assets, and has repeatedly ranked top Pakistani company in the Forbes Global 2000.

In February 2018, HBL appointed senior banker, Muhammad Aurangzeb (formerly CEO Global

Corporate Bank – Asia Pacific at JP Morgan) as its President & CEO following early retirement of Nauman K. Dar on December 31, 2017, after the bank was marred by a penalty of $225

Million (USD) for its non-compliance with risk management and anti-money laundering rules

Examine Industry Position

Mohammed Ali Jinnah, Pakistan's first Governor General, realized the importance of financial intermediation while he was campaigning for the creation of a separate homeland for the

Muslims. He persuaded the Habib family to establish a commercial bank that could serve the

Muslim community. His initiative resulted in the creation of Habib Bank in 1941, with head office in Bombay (now Mumbai), and fixed capital of 25,000 rupees. The bank played an important role in mobilizing funds from the Muslim community to finance the All-India Muslim League's campaign for the establishment of Pakistan. Habib Bank also played an important role in channeling relief funds to Muslims hurt in the communal riots and violence that preceded the departure of the British from British India and the subsequent partition.

After the formation of Pakistan in 1947, Habib Bank moved its headquarters to Karachi,

Pakistan's first capital, at the urging of Governor-General Jinnah. This gave Karachi its first commercial bank of the newly formed Pakistan. The Habib family would own and manage the bank until the Pakistan government nationalized it on 1 January 1974.

On 13 June 2002, Pakistan's Privatization Commission announced that the Government of

Pakistan would grant the Aga Khan Fund for Economic Development (AKFED), a subsidiary of the Aga Khan Development Network, majority ownership of HBL against an AKFED's investment in the bank.

During 2002, HBL's UK operation came close to being shut down due to regulatory issues with the Financial Services Authority. The issue was resolved by converting the operations to a subsidiary. Then Habib Bank Limited and Allied Bank of Pakistan merged their operations

(Habib contributed its 6 branches and Allied its 4), into a new bank, called Habib-Allied

International Bank, in which Habib Bank has a 90.5% shareholding, while Allied Bank has

9.5%.

In December 2003, the Government of Pakistan granted AKFED rights to 51% of the shareholding in the bank against an investment of PKR 22.409 billion (US$389 million).[9] In

February 2004, Government of Pakistan handed over management control of Habib Bank to

AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the

Chairman and the President/CEO and three Government of Pakistan nominees. In April 2015, the Government of Pakistan sold its 41.5% stake or 609 million shares in the bank for $1.02 billion. According to the finance ministry, the strike price of Rs.168 per share

(compared to the floor price of Rs.166 per share) was recommended by the Privatization

Commission Board. The bank's owners now comprise the Aga Khan Fund for Economic

Development (51%) and the remaining 49% of shares are in free float. CDC Group holds 5% and the International Finance Corporation holds 3% while the rest of the shares are held by individuals, institutions and funds.

On 18 April 2016, HBL received license to operate a subsidiary in Ürümqi, Xinjiang, becoming the first Pakistani bank to operate in China.

Originally established in 1941, HBL moved its operations to Pakistan in 1947 at the request of

Muhammad Ali Jinnah, hence becoming the first commercial bank to lay its foundation in the country. Embarking on a progressive journey, HBL continued to grow and expand in the successive years. The Bank's first international branch opened in Colombo, Sri Lanka in 1951, while the construction of the iconic Habib Bank Plaza was completed in 1972, the year that also marked the commemoration of HBL's 25th anniversary.

With a sizeable domestic share, HBL was nationalized in 1974. The Bank became a trend setter in the banking industry, acquiring the lion's share in inward foreign remittances and a major market share in loans to small industries, traders and farmers. International operations expanded and HBL now operates in over 20 countries across four continents.

In February 2004, the bank was privatized and the management control of the bank was handed over to AKFED. By April 2015, the Government of Pakistan divested its entire shareholding of 41.5% through the Privatization Commission of Pakistan, thereby officially making HBL

Pakistan's largest private bank.

HBL has not just been a pioneer in the banking industry, but has also been a platform that has enabled dreams for millions of people. It has time and again, proven to be a catalyst for change by initiatives that have elevated Pakistan’s image and reputation. From bringing back international cricket to Pakistan through the HBLPSL, to helping strengthen the economy of the country through initiatives like CPEC, HBL continues to enrich lives of Pakistanis around the world.

Organizational Capability

As far as Capability of HBL is concerned, here are some key indicators;

Total Worldwide Branches : 1,743

ATMS : 2,139

Asset Base : PKR 3.0 Trillion

Deposit Base : PKR 2.1 Trillion

Profit in 2018 : PKR 21.6 Billion (Before Taxation)

Customer worldwide : Over 14 Million

RATING & RANKINGS

HBL RATING

HBL Rating Rating Agency JCR-VIS Moody's Long Term Rating AAA Caa1 Short Term Rating A-1+ NP Outlook Stable Stable Country Rating (Pakistan)

Country Rating: Pakistan

Rating Agency Moody's S&P Long Term Rating B3 B

Short Term NP B Rating

The Banking sector of Pakistan is based on around 31 Banks of which five are public sector and four are foreign Banks and 22 are local private banks. Banking sector is continuously expending in Pakistan. However, according to Wikipedia, only 7% of the Pakistani population uses the

Banks, which shows the great expanding potential in this sector in Pakistan. Advance invention has been changed the traditional Banking as now Banking has been connected with ATM

Machine, E-Banking, and more other Changes that change the working shape of the Bank

Employee. These changes in Banking Sector has depreciated the economic, social and psychological scope of the employees who are working in the Banks. According to International

Bankers,

In terms of overall performance, the past decade has been good to the banking industry, with the numbers presenting a positive picture in terms of balance-sheet growth for banks. To quote a few, from 2009 to September 2016:

 Total assets increased from PKR 6,516 billion to PKR 15,134 billion;

 Deposits rose from PKR 4,786 billion to PKR 11,092 billion;

 Lending increased from PKR 3,240 billion to PKR 5,025 billion; and

 Investments exponentially jumped to PKR 7,625 billion from PKR 1,737 billion back in

2009. All of these positives have taken place in a period when the prudential regulation has been quite suffocating for the banks competing in the industry. Over the past decade, the State Bank of

Pakistan has had to make it tough for the banks to operate, given the macroeconomic conditions.

The Government of Pakistan (GOP) privatized HBL in 2004 through which Aga Khan Fund for

Economic Development (AKFED) acquired 51% of the Bank's shareholding and the management control. The remaining 41.5% shareholding by the GOP was divested in April

2015. AKFED continues to retain 51% shareholding in HBL while the remaining shareholding is held by individuals, local and foreign institutions and funds including CDC Group Plc which holds 5% and International Finance Corporation which holds 3%.

With a global presence in over 15 countries spanning across four continents, HBL is also the largest domestic multinational. The Bank’s international footprint is important as it provides opportunities to effectively serve its core customers across its network. HBL is the largest executor of CPEC related financing in Pakistan and coupled with being the first Pakistani bank to start Renminbi (RMB) operations makes the Bank a key player in this economic initiative.

HBL has a balance sheet size of USD 24 billion (FY’16).

Memberships of Industry Associations and Trade Bodies

 Pakistan Banks Association.

 Pakistan Business Council.

 Institute of Bankers Pakistan.

 Pakistan Institute of Corporate Governance.

 Karachi Center for Dispute Resolution. Product Mix

By leveraging on strong local and international franchise, HBL offers a range of products & services to facilitate the demands of our FI/NBFI partners. These include:

1. Trade Finance

 Opening, advising, confirmation and negotiation of letters of credit.

 Discounting of LCs including providing bankers acceptances.

 Trade loan syndications.

 Risk participations.

 Pre/post export financing.

 Issuance of financial guarantees/SBLCs.

 Documentary collections.

2. 2. Cash Management

 Specialized Deposit Slips – conventional collection model.

 Internet Banking – electronic collection (non-individual/business customers).

 Cash In Transit – CIT

 Direct Debit Collection – SIDA (Standing Instructions for Debit Authority).

 Utility Bills Payments – UBP

 HBL At Work (HAW) – payroll solution.

 Vostro account services.

 Commercial Payments – SSI

3. Remittances with a substantial market share in distribution of incoming home remittances into Pakistan, HBL has built-up capacity to serve overseas FIs wishing to remit funds for beneficiaries in Pakistan as well as in other specific locations.

4. Treasury

 Money market placements.

 FX/Swaps.

 Bonds /TFCs.

 Private placements & other debt instruments.

5. Bilateral Loans

Customized bilateral products are available to fulfill financing requirements of NBFIs, which includes term loans and SBLC facilities.

Customer Profile

HBL, Pakistan’s largest bank, was the first commercial bank to be established in Pakistan in

1947. Over the years, HBL has grown its branch network to over 1,700 branches and +2,100

ATMs globally, serving 14 million customers and clients.

HBL will thrive a pivot towards a Technology company with a banking license. The launch of

HBL’s branchless Banking ‘Konnect’ is a massive first step towards digital future. Already serving over 1,400,000 new customers, the platform could account for almost one-third of account base of the Bank in 2009. Our approach to designing product and services with the

Mobile First strategy continues to progress steadily. We work for Pakistan’s best, largest, oldest and most innovate bank. Our 14 million customers and clients, served over 1,700 branches and

+2,100 ATMs share our pride in their association with HBL

SWOT Analysis

Strength Weakness

One of the largest Bank of the country Since HBL is dealing with big data

having the huge network of Branches and without having no system, therefore, the

ATMS, International affiliation is there to processing time of HBL is very high.

get the international footprint.

Opportunities Threat

HBL has the opportunity make new Due to processing time, customer are not

business alliances with different satisfied with the services and

organization such as, Pakistan Post to dissatisfaction in customer is arising day

acquire new customer as well as has the by day.

first choice of the Government Scheme

e.g. Ahsas program etc.

Business Object and Goals

HBL's brand identity is the outward expression of what they stand for as an organization. This is summarized in our vision, mission and is supported by our values.

Vision

"Enabling people to advance with confidence and success" Mission

"To make our customers prosper, our staff excel and create value for shareholders"

Values

HBL's values are the main principles that define its corporate culture. These are brought to life through the Bank's employees' attitudes and behavior.

According to President & CEO of HBL, HBL placed its strategy on six points which reflect the future plans of it. In his message, he shared the collective 6-Point Agenda.i.e.

1) Commitment to deliver on P&L (Profit & Loss)

2) Relentless focus on client experience

3) People agent is our top priority

4) Embedding Risk, Compliance and Control agenda in our business principle

5) Making Innovation the driving force

6) Giving back to the country and the communities that we serve

List and describe the Drivers

Here is the list of drivers

Integrity - Be Ethical and Fair

 We honor our commitments and do what is right

 We are fair, respectful and honest at all times

 We are ethical in our decisions and interactions

 We take responsibility for our actions

 We are prudent and responsible with the assets entrusted to HBL Customer Centric - Deliver Great Experiences

 We value our clients and develop products and services around their needs

 We provide exceptional service to all we serve

 We understand and respect our customers

 We deliver solutions that add value to our customer’s lives

 We consider the impact of our policies and decisions on our customers

 We are fully transparent with our customers

Value People - Respect, Empower, Appreciate

 We treat our people equitably and make decisions on merit

 We invest in people and provide opportunities for learning and growth

 We empower people to do what is needed for success

 We provide a positive and collaborative work environment

 We celebrate our successes and recognize people for their contributions

 We encourage and embrace diversity

Progressive - Innovate and Challenge

 We challenge our thinking to raise the bar

 We encourage our team members to question the status quo

 We innovate and adapt to change

 We positively impact and serve the communities in which we live

Excellence - Be your best

 We lead in our industry

 We take ownership of what we do  We relentlessly pursue quality without compromise

 We consistently adhere to measurable standards and look for ways to exceed them

 We benchmark against the best.

Reward Strategies to achieve the goal of the organization

We will make a strategy that believes in a Pay for Performance culture that rewards employees for their contribution towards achieving the overall objectives of the organization. With an aim to enhance the transparency and promote the employees who are capable to take future challenges, the process of performance review and promotions was modified.

There would be three main components of our reward strategy that is appearing in following grid;

Reward Strategy Definition

Compensation

 Base Pay  Wages and Salaries

 Merit Pay  Base pay increases based on employee performance

 Incentives  Cash Bonuses based on employee performance

 Promotion  Promotion will be granted based on result of KPIs

 Base-pay increases based on length of service with  Pay Increase the organization

Benefits

 Health and welfare  Payment for injuries and illness both on and off the

job  Paid time off  Payment for vacation time or excused days from

work

 Payment for work no longer performed based on  Retirement length of employment

Personal Growth

 Skill development through on- or off-the-job

 Training instruction  On-the-job coaching to develop skills

 Career development  Ongoing goal setting and feedback to

 Performance develop skills

management

This reward strategy will be implemented in four phases

Phase one - Assessment

First we have to assemble our project team, it’s time to start the implementation process. During the assessment phase, the project team evaluates the company’s current total rewards system and generates ideas for improving it. To carry out this phase effectively, your project team must take responsibility for a lengthy series of tasks. These tasks include conducting focus groups and industry benchmark surveys, examining current reward strategies and employee attitudes toward them, reviewing rewards related literature, and creating a report documenting the team’s findings and recommendations.

We will also work on the following component in this phase;

 Conducting Focus Groups  Using Industry Benchmark Surveys

 Examining Current Policies

 Surveying Employee Attitudes Toward Rewards

Phase two - Design

During the design phase, the project team identifies which employee and organizational attributes to reward. and which types of rewards to offer. The team should consider the full range of reward strategies, including compensation, benefits, personal and professional development, and work environment.

We will also work on the following component in this phase;

 Compensation

 Pay Increases

 Incentives

 Benefits

 Job Design

 Recognition

 Work/Life Balance

Phase three - Execution

Once the project team has designed a total rewards system, it moves to the execution phase of the implementation process—putting the new system in place in the organization. During this phase, the team must consider numerous issues, each examined below.

The following are the main component of this phase;

 Eligibility  Top Management Support

 Measurement

 Project Management

Phase Four - Evaluation

Probably the most often overlooked phase of total rewards implementation is evaluation. In this phase, the project team compares the actual results of the executed total rewards strategies against the desired results. The hope is that by conducting this evaluation, you can show top management that the company’s investment in its total rewards system has paid off. Of course, conducting an evaluation can be unnerving if you fear that the selected reward strategies are in fact not delivering as anticipated. To get the most from the evaluation phase, encourage your project team to measure the outcomes of the executed total rewards system and to interpret the findings correctly.

The following are the main component of this phase;

 Measuring the Outcomes

 Interpreting Your Findings

 Conclusion Here is the graphic demonstration of Implementing a rewards program; Four Phases

Evaluation Assessment

Execution Design

How this reward strategy will support our business goal?

In a globalized economy with millions of businesses competing for talented workforce, HBL must be able to motivate and properly compensate employees or risk their being poached by their competitors. This prompts the need to examine the application of reward strategy in organizations with a view to ascertaining its efficacy on employees ‘performance, retention and productivity. From the study, two types of organizational rewards were identified: financial and non-financial rewards. Some researches verified the positive correlation between rewards and employees ‘performance, retention and productivity in the organization. However, the study observed that if organizational rewards plan is perceived to be inequitable and bias, it may de- motivate employees in the organization. Based on this, the study proposes: that rewards system in the organization should be designed with articulated strategies that should be embedded in the organization ‘s culture; management should identify employees ‘needs/preferences in developing organizations ‘compensation structure. The application of these notions when matched with a good managerial disposition will enable organizations to formulate effective, sustainable strategies that will address equitable and adequate reward for employees, which in turn will enhance employees ‘performance, retention and productivity in the organization.