SPDM Report

7/31/2019 SPDM Report

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STRATEGIC PLANNING & D ECISION MAKING

Spring Semester 2012

P ROJECT R EPORT ON UBL

Submitted to

Mr. Atif Siddiqui

Submitted by

Sarah Akber

Sahar Parveen

Table of Contents

1 Company & Industry Background ............................................................................................... 1

I


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1.1 Vision .................................................................................................................................... 1

1.2 mission .................................................................................................................................. 1

1.3 Core Values ........................................................................................................................... 1

1.4 Strategic Thrust ..................................................................................................................... 2

1.5 The leader in innovative banking ........................................................................................ 2

2 Internal Environment Analysis .................................................................................................... 6

2.1 Analysis of Vision, Mission and Value Statements ............................................................. 6

2.2 Analysis of Strategic Management Process ......................................................................... 6

2.3 Functions at ubl ..................................................................................................................... 7

2.4 Functional Analysis .............................................................................................................. 7

2.4.1 Marketing ....................................................................................................................... 7

2.4.2 Human Resource Management ..................................................................................... 8

2.4.3 Risk Mitigation and Management ................................................................................. 9

2.4.4 Information Technology .............................................................................................. 10

2.4.5 Treasury ....................................................................................................................... 10

2.4.6 Analysis of Core Business Activities .......................................................................... 11

2.5 Financial Performance Analysis ......................................................................................... 12

3 External Environment Analysis ................................................................................................. 12II


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3.1 Economic Forces ................................................................................................................. 12

3.2 Demographic, Social, Cultural and Environmental forces ................................................ 13

3.3 Legal, Governmental and Political Factors ........................................................................ 14

3.4 Human Resource Management ........................................................................................... 14

4 Porters Five Forces Model ....................................................................................................... 14

4.1 Competition amongst Rival Firms ................................................................................ 14

4.2 Bargaining Power of Customers/ Customer Relations ................................................. 15

4.3 Bargaining Power of Suppliers/ Supplier Relations ..................................................... 15

4.4 Threat of Substitutes ...................................................................................................... 15

4.5 Threat of New Entrants .................................................................................................. 16

5 SWOT Analysis ......................................................................................................................... 16

Appendix V Mission, Vision & Core Values Analyses .......................................................... xix

V-1 Analysis ........................................................................................................................... xix

Glossary .......................................................................................................................................... a

Bibliography ................................................................................................................................... b

III


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1 COMPANY &INDUSTRYBACKGROUN

D

Since privatization in 2002, UBL have established new standards of excellence that have

progressively optimized performance across the network, benefiting its customers and other

stakeholders. This is why today UBL stand tall, as one of Pakistans largest private banks

with a potent, global outlook.

.

V ISION

UBL Vision is A World Class Bank Where You Come First , meaning that we believe

that our customers needs comes first, which is why we provide them with world-class services

& products.

MISSION

1. Set the highest industry standard for quality across all areas of operation , on a

sustained basis

2. Optimize people, processes and technology to deliver the best possible financial

solutions to our customers

3. Become the most sought after investment, and be recognized as the employer of choice

C ORE V ALUES

Honesty and integrity


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Commitment and dedication

Fairness and meritocracy

Humility and mutual respect

Caring and socially responsibility

Teamwork and collaborative spirit

S TRATEGIC T HRUST

What makes UBLs vision to become a world-class bank a reality, is the strategic thrust that

drives its impetus from People, Premises, Products and Processes. UBL continues its journey

towards these four pillars by hiring & developing a world-class team, investing in new

premises, launching customer-focused products and continuously improving our processes.

T HE LEADER IN INNOVATIVE BANKING

UBL has emerged as a market leader in Retail Banking and has attracted numerous customers

to its appealing and facilitating products and services.

Their Corporate Banking Group (CBG) stands hand in hand with us in this march towards

success which has redefined our exemplary services based on a one window concept. Apart

from diversifies corporate dealing, UBL has managed to enhance its reach into every household

in a short span of time, providing them with better quality choices at a much facilitated base.


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UBL offers a diverse mix of agriculture based financial products. Financing is available for all

seasonal crops across Pakistan. UBL Agriculture Finance aims to facilitate farmers via

production and development loans-with flexible tenors and large amounts. There are also

available Non-Farm loans for livestock and fisheries financing. UBL also provides loans under

the Small Business Scheme to individuals who wish to set up their own small business.

Investment Banking :

Established in 2002, UBL Investment Banking Group is one of the largest and most

experienced investment banking groups in Pakistan. UBL is the only Pakistani commercial

bank with an investment-banking desk in the GCC region. A dedicated specialist team of 19

investment bankers, with diversified academics and experience in Pakistan and UAE, has the

expertise to cater to the needs of both domestic and regional clientele.

UBL Net Banking:

UBL netbanking offers a simple, convenient and secure way to manage bank accounts 24/7

from anywhere in the world. UBL netbanking is the most trusted Internet Banking portal in the

country primarily because of its uniquely strong security features and an attractive list of

transactions and activities available.

Deposit Products:

UBL deposit product portfolio offers an eclectic mix for all types of financial requirements for

example

UBL Business Partner

UBL Business Partner Plus

UBL UniFlex


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strategy. As you can see from below, the HR Strategy is very well integrated with the overall

Business Strategy. This shows how well the role of HR has emerged from a Personal Division

to Business Partner and now Talent Management.

There was seen a strategic back flaw occurred when management decided to forcefully lay off

senior, experienced employees to inject fresh blood into the organization. However, this

strategy has backfired since branches (even PROXIMA branches) have under-experienced

and under-trained employees. There is no feedback mechanism in place to evaluate the

candidates trained and deployed in the branches.

2.4.3 Risk Mit iga tion and Management

Risk Management Framework augments the entire financial control unit of the bank. UBL has

an elaborate credit and market risk division. Different risks that the banks are exposed to are

Credit Risk, Market Risk, Operational Risk and Liquidity Risk.

The credit risk department comes in parallel to CAD while the market risk department works in

parallel of the treasury department. UBL has been aggressive on the risk management front

where by an evolving framework has been laid down in light of the BASEL II framework as

stated by Annexure 8 and Annexure 12 of SBP (State Bank of Pakistan). Other risks that are

monitored closely and report to management include liquidity risk, maturity mismatch risk. The

Capital Adequacy Requirement till June 2008 was 8% of total risk weighted assets and has


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2.4.6 Analys is of Core Business Act iv it ies

2.4.6.1 RETAIL BANKING

The retail portfolio comprises a full range of consumer lending products. These are: UBL Drive

(Auto loans), UBL Address (Mortgage backed home & business financing), UBL Credit Cards,

UBL Money (Personal loans) and UBL Cashline (running finance). Key differentiators in UBL

consumer products have been innovation (chip-cards, picture-cards Galleria) as well as

loyalty programmes with other consumer brands and automobile manufacturers. With trying

economic conditions and threats of deteriorating asset quality on the rise, the focus of the

consumer bank has shifted to strengthening controls, risk management and collections efforts,

taking away from the leading and innovative spirit of product management.

2.4.6.2 CORPORATE BANKING

The CBG department of UBL defines corporate banking in Pakistan. Amongst the local banks

UBL CBG is the pioneer in providing innovative solutions to its diversified and satisfied

customer base. UBL CBG is considered to be a major player in the financial market of

Pakistan.

The Corporate Banking Group focuses on attracting and servicing large portfolio customers.

Our forte is providing exemplary customer service using the "Single Window" concept and

product superiority. The Relationship Management team manned by highly qualified

individuals from the industry has steadily expanded our customer base and continues to

enhance our cordial relations with our esteemed clients.

2.4.6.3 INVESTMENT BANKING

UBL has the largest investment bank setup in Pakistan. IBG provides innovative and unique

solutions to its clients enabling them to meet the challenges of an ever- changing market.


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It has dedicated specialist team investment bankers and is supported by over 50 relationship

managers in six different locations in Pakistan alone.

F INANCIAL P ERFORMANCE A NALYSIS

UBL has been a very profitable bank and has proved itself to be among top 5 local banks. With

a stable credit long term rating of AA+ and short term rating of A1+ , it is considered to one

foundation stone of banking sector of Pakistan.

3 EXTERNALENVIRONMENTANALYSIS

E CONOMIC F ORCES

Pakistan has historically exhibited rapid growth in terms of GDP a sustained growth rate of

about 6% for several years and is currently gone down to 4.2%. The main causes for this were

rapid accumulation of physical capital, positive contribution of labor force growth, increased

competition from external trade and general policy of economic liberalization since 1978.

Pakistan continued to run large fiscal deficits during this period, and in the pre-privatization era

bank deposits were mainly used for government financing and loans to government

corporations.

Large scale privatization of banks in the late 90s, along with SBP banking reforms (corporate

governance, capital strengthening, consumer financing, e-banking & payment systems)

strengthened the banking system and helped fuel economic growth. Consumer-driven demand

necessitated expansion in many industries, especially the Telecom sector and automobile


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industry. Consumer banking witnessed exponential growth, and loan penetration has also rose

increasing the competition among banks.

D EMOGRAPHIC , S OCIAL , C ULTURAL AN D E NVIRONMENTAL FORCES

During the past decade, social perceptions of Pakistanis towards banking have changed a great

deal. Tendency towards Islamic Banking ( Riba-free) has increased. Banking transactions made

over the Internet (e-Banking) are rapidly getting common amongst businesses entities and

masses and has seen a growth in volume when compared with the last fiscal year. At the retail

level, most transactions use paper-based instruments. Another new trend on the horizon is

mobile banking , where both the banking industry and the mobile phone industry are working

to remove barriers and develop workable systems (SBP has published a guidelines framework

for this purpose), so that the huge unbanked population of the country (in which mobile phone

use is spreading rapidly) can benefit. Pakistan is moving with impressive speed to cut red tape

and link the banking and telecom industries in ways that could have a major impact on

commerce, especially for small businesses and ordinary individuals.

Increasing consumer awareness about investment avenues and asset management, brokerage,

investment advisory, wealth management companies opening up, the consumer has a wider

array of products to choose from. The culture of saving versus borrowing is also emerging,

with consumers preferring to invest for the future rather than living on credits & loans.

Demographics show a favorable change. The population has increased which gives the

industries a bigger market to target. With majority of people in the age bracket of 15-64,

education increasing and government addressing the employment rate, things look bright for

many industries. Income per capita is now higher and this gives an opportunity for banking to

thrive. The socio-cultural analysis of the environment points towards an increasing acceptance


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and preference of credit-based products. Another trend is the penetration of commercial banks

in rural areas.

L EGAL , G OVERNMENTAL AN D P OLITICAL F ACTORS

Increase in reserve requirements by SBP (State Bank of Pakistan) is aimed at reducing the

money supply and to curb inflation. This coupled by a high trade deficit and drastic reduction

in foreign remittances has caused a liquidity crunch pressurizing banks and limiting their profit

making avenues. The reserve requirements have been kept low in the last 6-7 years following

an expansionary monetary policy allowing an increase in the money supply.

H UMAN R ESOURCE M ANAGEMENT

The influx of multinational firms and globalization via communication have led to an

enhancement in the Human Resource structure of the local organizations as they are attempting

to emulate the policies implemented on an international level. Human Resource department in

all major banks like HBL, NBP and UBL are going about revamping their HR functions by

trainings, updated HR policies and automating their process by using systems like Oracle

HRMS (UBL currently under implementation).

4 PORTERS FIVE FORCES MODEL

4.1 Competition amongst Rival Firms

Until 1990, there were only seven domestic banks, all owned by the government, operating in

the country along with seventeen foreign banks. After the introduction of laws aimed at

liberalization of Pakistans financial sector, the number of domestic banks slowly started

increasing. A number of already existing government owned banks were also denationalized,

UBL being one of them. During the 1990s, new banks have been entering into the industry,


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thus leading to a number of active competitors. Owing to increasing competition in general,

and among each other in particular UBL, MCB, HBL, NBP and ABL have been offering

innovative products and attractive interest rates to attract customers.

4.2 Bargaining Power of Customers/ Customer Relations

Increased customer awareness and education has resulted in customers demanding more

innovative products. Customer service has become one of the most important needs of

customers as evident through numerous state of the art call centers opening for every major

bank. Due to the wide spread between the borrowing and lending interest rates all the banks arenow under increasing pressure from the State Bank to increase the deposit interest rates and

pass on some of their spectacular profit numbers minimum guaranteed return of 5% on branch

banking deposits. However, UBL does have a large asset base, so it can control large-size

investors by being one of the few in the market who can fulfill large capital investment

projects.

4.3 Bargaining Power of Suppliers/ Supplier Relations

A bank is supplied with money by its depositors. UBL with its huge branch network across the

country commands a strong position with its suppliers. In cities other banks may give UBL

competition, but in rural areas where most of the population still resides, UBL may be the only

bank present.

4.4 Threat of Substitutes

The banking sector in Pakistan has largely uniform product offerings across banks. Nearly

every product offered by one is available in one form or the other as part of some other banks

product portfolio as well. Similarly, traditional interest-based credit offerings face competition

from substitute Islamic banking products. On the whole however, product features are largely


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instruments as well as derivatives.

Non Interest Income with major contributions from recurringcommissions on loans, dividend

income and income from bank subsidiaries.

Opportunities O

Un tapped rural market in terms of micro financing

More product offering throughBranchless banking initiative converting non bankers to bankers

Expanding consumer base due toincreasing population of professionalespecially the women sector.

Thriving International bankingscenario.

Threats T

Global economic recession andresulting liquidity crunch

Rising interest rates

High credit risk due to the currentmacroeconomic scenario

Political and Social uncertainty andinsecurity

Rapidly declining Investor confidence

Capital flight

Strategies SO

To capitalize on its stronginfrastructure and branch spread byextending complete financial solutionsto consumers of all sectors. Thisincludes providing more featuresthrough branchless banking UBLOmni and entering into new marketsegments.

Tap onto the growth in professional population especially women sector bycreating customized offerings to cater to their specific needs.

Increase presence in the international banking market taking advantage of itsstable international operations.

Strategies WT

Revisit the existing salary structure oncompetitive terms to retain skilledworkforce as far as sales team isconcerned including the branchless

banking team.

Develop and administer comprehensive training and orientation

programs for newly recruitedworkforce especially the sales front inthe branchless banking area and

proxima implementation.

Devise strategies to increasecoordination amongst the variousorganizational functions so thatduplication of efforts and conflicts donot rise.


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APPENDIX V MISSION,VISION &

COREVALUESANALYSES

V-1 A NALYSISCriteria Vision Mission

Narrow or broad Broad SpecificEverybody should relate to it Y N

Customer orientation Y YDeclaration of attitude Y YImbued with emotion Y Y/NInspiring Y YPhilosophy Y YClarity, cogent Y YDeclaration of social policy N Y/NTechnology N YQuality Y YProducts and Services N Y

Markets Y YGrowth, survival and profitability Y YSelf concept Y YConcern for employees Y Y Core values Vision Mission

Honesty and Integrity N Y/NCommitment and dedication Y YFairness and meritocracy N YHumility and mutual respect Y/N N

Caring and Socially responsible Y/N NTeamwork and collaborative Spirit Y Y

Appendix VIII | [xix]


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GLOSSARY

CAD Corporate Asset Division

Genesis Core Banking Project Initiative

iMAL Islamic Banking System

PROXIMA Branch restructuring and centralization project

RTGS Real time Gross Settlement

SOA Service Oriented Architecture

SYMBOLS Core Banking Product by SUNGARD

UBL Address Home Loans Product

UBL Business Line Business Loans Product

UBL Cards Credit Cards Product

UBL Cash Line Personal Loan Product

UBL Drive Credit Cards Product

UNIBANK UBLs legacy core banking system

VaR Value at Risk

References | [a]


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