The World- -Class Bank, Where you come first

Strategic Management Project on UNITED BANK LTD PAKISTAN

Presented by:

Presented To:

Outline
UBL Introduction
Brief History Brief Company Overview Organizational Structure UBL Today Products & Services Values At UBL

Internal Assessment
Strength and Weakness IFE

Strategy Analysis
SWOT Matrix SPACE Matrix BCG Matrix Grand Strategy Matrix

Mission, Vision
Existing Why change? Proposed

Decision Stage
QSPM Strategy Evaluation Recommendations

External Assessment
List of Competitors
Opportunities and Threats EFE Matrix Competitive Profile Matrix (CPM) Porter's Five Forces Model

 AGHA HASAN ABEDI(MAY 14,1922 Luknow India-AUGUST 5,1995 Karachi Pakistan) Was a Banker who started his Career With HBL before Independence. He brought significant changes in Pakistans banking culture when he founded the UNITED BANK LIMITED in 1959. MR ABEDI pioneered close economic collaboration in the Private sector B/w PAKISTAN and UAE. UAE president SHEIKH ZAYED BIN SULTAN AL NAHYAN extended his patronage To UBL operations both in PAKISTAN and Abroad.

Overview of Pakistani Banking Industry

At present there are 41 scheduled banks, The commercial banks comprise of 3 nationalized banks,3 privatized banks, 15 private sector banks, 14 foreign banks, 2 provincial scheduled banks, and 4 specialized banks. Total deposists of Pakistani schedule banks. Total investments of Pakistani banking industry. Total advances of Pakistani banking industry.

History of UBL

Agha khan Abedi founded the bank in Nov 7,1959 Govt of Pakistan Nationalized in 1971 Privatized on Oct 2002 sponsors include Best way Group with 25.5% shares Abu Dahbi Group with 25.5% shares Govt. of Pakistan and General public hold the balances

Cont..

Successful banking history of over 47 year Represented in 10 countries worldwide Through 22 offices All most 1100 branches through Pakistan UBL has Assets approx Rs.300 billion UBL has high level contacts with government and regulatory authorities
8

UBL TODAY
UBL has the largest domestic branch network with over 1,450 branches 55 international branches in 25 countries Domestic market share of 40% 55% inward foreign remittance through UBL Paid up capital Rs . 86.8 (B) (2010) Total Assets: 9.24 Trillion (2010) More than 17000 employees HBL present rating: AA+ (by PACRA) Profit after tax: 3.81 (B) (2010) Over 5.5 million customer Award: Best Emerging Market Banks Award in Pakistan 2010

Product & Services

 Signature Priority Banking UBL BetterLife Bancassurance UBL Wiz UBL netbanking UBL e-statement Humrah UBL Wallet UBL Online (for corporate customers only) Charity/ Donations & Flood Relief Comments & Suggestions UBL Pay Partner UBL Cash Collect

UBL ORGANIZATIONAL CHART

16

Vision of UBL
To be a world class bank dedicated to excellence, and to surpass the highest expectations of our customers and all other stakeholders

Analysis of Vision Statement.

Is it brief, short and one sentence? Is it provide base for mission? Does it reflects future prospective? Yes Yes No

18

Vision Statement Evaluation To become a dynamic and efficient bank providing integrated solutions in order to be the first choice bank for the customers

19

 Set the highest industry standard for quality, across all areas of operation, on a sustained basis
Optimize people, processes and technology to deliver the best possible financial solution to our customers Become the most sought after investment, and

UBLs Mission

Be recognized as the employer of choice

Components of UBLs Mission

Components of Mission Statement
1) Customer 2) Product 3) Market 4) Technology 5) Concern for survival , growth and profitability 6) Philosophy 7) Self Concept 8) Concern for public Image

UBL Mission
Yes No No No Yes

Yes
No Yes

9) Concern for employee

Yes

PROPOSED MISSION
We are committed to provide value added services and high tech innovative solutions to customers. To create sustainable value through growth, efficiency and diversity for all stakeholders. To provide a challenging work environment and reward dedicated team members according to their abilities and performance. To play a proactive role in contributing towards the society.

External Assessment

Major Competitors of UBL

Muslim Commercial Bank Limited (MCB) Allied Bank Limited (ABL) Habib Bank Limited (HBL) These three banks are privatized banks of Pakistan like UBL.

25

26

27

Opportunities:
Implementation of Basel II Accord by SBP i-e product and market development through acquisition Growing no of people using banking facilities, especially in peripheral areas. Wide range of online network of branches can be used to cater low cost deposit. Shift of Pakistans economy to a service economy Increase client base globally through joint ventures and acquisition and mergers (3.2 M Pound from UK) Diversification towards Islamic banking and non banking services

Threats:
Constant tight monetary policy/ High discount rate Attitude of people towards customer service Collapse of local industry led banks with little avenues to invest. Withholding tax on banking transaction Peoples propensity to save/High Inflation/Price fluctuations Social pressure on Govt. to reduce banks spread Anti Money Laundering Laws Low per capita income

Competitor Profile Matrix(CPM)

Factors (Internal and External)

Weight

UBL Rating Score

MCB Rating Score

ABL Rating Score

HBL Rating Score

Financial position

0.18

.72

.72

.54

.54

Service quality Management Market share Customer loyalty Price competitivene ss Expansion Advertising/Pr omotion

0.14 0.10 0.12 0.10 0.10

2 3 4 2 3

.28 .30 .46 .20 .30

3 3 3 3 2

.42 .30 .36 .30 .20

2 3 2 2 2

.28 .30 .24 .20 .20

2 3 3 2 2

.28 .30 .36 .20 .20

0.14 0.06

4 3

.40 .18

2 2

.28 .12

2 1

.28 .06

3 1

.42 .06

New Product

0.06

.18 3.04

.12 2.82

.18 2.28

.18 2.54

Forces

High/ Low

Rivals

High

Bargaining Power of Suppliers

Low

New Entrants

High

Bargaining Power of Buyers

Low

Substitutes

High

EXTERNAL FACTOR EVALUATION MATRIX

.

External Factor (General and Specific)

Weight

Rating

Weighted Score

Opportunities Implementation of Basel II Accord by SBP i-e product and market development through acquisition Growing no. of people using banking facilities, especially in peripheral areas. Wide range of online network of branches can be used to cater low cost deposit. Shift of Pakistans economy to a service economy Increase client base globally through joint ventures and acquisition and mergers Diversification towards Islamic banking and non banking services 0.08 3 0.24

0.09 0.07 0.06 0.08 0.07

4 4 2 2 3

0.36 0.28 0.12 0.16 0.21

Threats/Challenges
Constant tight monetary policy/ High discount rate Attitude of people towards customer service Collapse of local industry led banks with little avenues to invest. Withholding tax on banking transaction 0.09 0.07 0.09 0.06 3 3 3 2 0.27 0.21 0.16 0.12

Peoples propensity to save/High Inflation/Price fluctuations

Social pressure on Govt. to reduce banks spread Anti Money Laundering Laws Low per capita income Total

0.08
0.07 0.04 0.05 1.00

3
3 3 2

0.24
0.21 0.12 0.10 2.80

The above score shows that UBL is responding to opportunities and threats present in its industry because its score is more than average score of 2.50.

Internal Assessment

Strengths:
Highest deposit: 747 (B), ABL= 371 (B), MCB = 431(B) and HBL = 567 (B) Largest network of branches: 1455 , ABL= 863, MCB = 1275 and HBL = 1157 High total Assets: 946 (B), ABL= 449 (B), MCB = 484(B) and HBL = 725 (B) Banking software: Mysis, purchased of Rs. 5 Billion in 2005 Trusted brand: more than 5.5 (M) customer Human resource (Trainings and pay band system) Diversified customer portfolio

Weaknesses:
High ratio of high cost deposit to total deposit (57%, net profitability as compared to HBL) Poor customer service (As per service audit of UBL 2010, every 11th customer has complained about customer service) High Non performing loan (1.4 Billion for year 2010) High turnover of employees Always increasing bank service charges The physical environment of HBL branches is not attractive to the people

INTERNAL FACTOR . EVALUATION MATRIX

Internal Factor
Strengths
Highest deposit Largest network of branches Highest total Assets Best banking operating system, named Mysis ---- paper less banking

Weight

Rating

Weighted Score

0.09 0.10 0.09 0.08

3 4 4 4

0.27 0.40 0.36 0.32

Human resource Trusted brand

0.06 0.08

3 4

0.18 0.32

Diverse customer portfolio

0.06

0.18

Weaknesses

High Non performing loan (1.4 Billion for year 2010)

0.09

0.09

High ratio of high cost deposit to total deposit

0.10

0.10

Customer service

0.07

0.07

High turnover of employees

0.05

0.10

Always increasing bank service charges

0.06

0.12

The physical environment of HBL branches is not attractive to internal position. the people Total

As the score is above than average score i-e 2.50, which means HBL has better
0.07 2

0.14

1.00

2.65

Strategy Formulation

Financial Strength Leverage --- 1 Earning Per Share--- 1 Profitability-----1 Retained Earning ----- 2 Total Average

Rating 1 1 1 2 5 1.25

Industrial Strength Profit Potential Growth Potential Financial Stability Ease of Entrance in the Market

Rating 4 5 3 3 15 3.75

SPACE MATRIX X- Axis: CA+ IS = (-2.5) + 3.75 1.25

Competitive Advantage Brand Image Innovation Customer Loyalty Product Quality Total Average

Rating -3 -2 -3 -2 -10 -2.5

Environmental Stability Technological Changes Rate of Inflation Competitive Pressure Demand Variability

Y- Axis: ES + FS = (-2) + 1.25 (-0.75)

Rating -3 -2 -1 -2 -8 -2

Space Matrix Average Score Table Internal Strategic Position External Strategic Position Financial Strengths (FS)
ROI Total Assets Total Deposits Total Advance Average : +4 +5 +6 +5 20/4= 5

Financial Strengths (FS) Demand variability -3 Rate of inflation -3 Competitive pressur -4 Barrier to entry into market -2 Average: -12/4= -3 Space Matrix X axis: IS +CA = 3.75 + (-2) =1.75 Y axis: FS+ES = 5+ (-3) = 2

Competitive Advantage (CA) Market share -1 Service quality -3 Trusted brand -2 Technological knowhow -2 Average: -8/4= -2

Industry Growth (IS) Growth potential +5 Profit potential +5 Ease of entry into market +1 Financial stability +4 Average : 15/4= 3.75

SPACE

FS
8 7 6 5 4 3 2 1

Aggressive Strategies
Integration Market Penetration Market Development Diversification

CA
-8 -7 -6 -5 -4 -3 -2 -1
-1 -2 -3 -4 -5 1

IS
2 3 4 5 6 7 8

-6
-7 -8

ES

SWOT MATRIX
1) 2) 3) 4) 5) 6) 7)
1) 2) 3) 4) 5) 6)
Opportunities-O Implementation of Basel II Accord by SBP Growing no of people using banking facilities, especially in peripheral areas. Wide range of online network of branches can be used to cater low cost deposit. Shift of Pakistans economy to a service economy Expand globally Diversifaction towards islamic banking and nonbanking services Strengths -S Highest deposit Largest network of branches Best banking operating system, Human resource Trusted brand Highest total assets Diverse customer portfolio

1) 2) 3) 4) 5) 6)

Weaknesses-W High Non Performing Loan High ratio of high cost deposit to total deposit Customer service High turnover of employees Always increasing bank service charges The physical environment of UBL branches is not attractive to the people

1)

2)

SO Strategies WO Strategies Acquire banks which are not in a 1)Take over an islamic bank having better customer service position to meet Basel II and low NPL( W1,W3,O6) (Horizontal Intergration) requirements (S1,S3,S4, O1) (Horizontal Intergration) Provide banking facility to those people who are not using this facility at the movement(S2,O2) (Market Development)

1) 2) 3) 4) 5) 6) 7) 8)

Threats-T Tight monetary policy Customer service purification Collapse of local industry led banks with little avenues to invest. Withholding tax on banking transaction Peoples low propensity to save/High Inflation Social pressure on Govt. to reduce banks spread Anti Money Laundering Laws Low per capita income

1)

ST Strategies Use large branch network to cater 1) lowcost deposit from market by 2) introducting new products(T3, S2) Product development

WT Strategies Lending should be prudent to avoid NPL (W1, T1) High cost deposit should be avoided (T3, W2)

Matching Stage

Grand Strategy Matrix(GSM)

BCG MATRIX

We shall Award UBL A Star

Strategic Alternative

Internal Factor
Strengths Highest deposit Largest network of branches

Weight

Rating

Weighted Score

0.09 0.10

3 4

0.27 0.40

Highest total Assets

Best banking operating system, named Mysis ---- paper less banking

0.09
0.08

4
4

0.36
0.32

Human resource Trusted brand

0.06 0.08

3 4

0.18 0.32

Diverse customer portfolio

0.06

0.18

Quantitative strategic Planning Matrix(QSPM)

Strategic Alternatives Key Factors Weight AS TAS AS TAS Market Development Opportunities: Implementation of Basel II Accord by SBP i-e product and market development through acquisition Growing no. of people using banking facilities, especially in peripheral areas. Wide range of online network of branches can be used to cater low cost deposit. Shift of Pakistans economy to a service economy Increase client base globally through joint ventures and acquisition and mergers Diversification towards Islamic banking and non banking services Threats: Constant tight monetary policy/ High discount rate Attitude of people towards customer service Collapse of local industry led banks with little avenues to invest. Withholding tax on banking transaction Peoples propensity to save/High Inflation/Price fluctuations Social pressure on Govt. to reduce banks spread Anti Money Laundering Laws Low per capita income 0.08 0.09 0.07 0.06 0.08 0.07 0.09 0.07 0.09 0.06 0.08 0.07 0.04 0.05 1.00 3 4 3 2 4 1 1 2 2 2 1 2 0.24 0.36 0.21 0.12 0.32 0.07 0.09 0.14 0.18 0.16 0.07 0.10 Product Development 2 4 3 3 2 3 2 3 3 2 0.16 0.36 0.21 0.18 0.16 0.21 0.18 0.27 0.24 0.10

Strengths: Highest deposit Largest network of branches Highest total Assets Best banking operating system, named Mysis ---- paper less banking Human resource Trusted brand Diverse customer portfolio Weaknesses: High Non performing loan (1.4 Billion for year 2010) High ratio of high cost deposit to total deposit Customer service High turnover of employees Always increasing bank service charges The physical environment of HBL branches is not attractive to the people 0.09 0.10 0.07 0.05 0.06 0.07 1.00 2 2 0.20 0.14 4.08 1 4 1 3 3 0.09 0.40 0.07 0.18 0.21 4.28 0.09 0.10 0.09 0.08 0.06 0.08 0.06 3 4 3 3 3 4 0.27 0.40 0.27 0.24 0.18 0.32 2 3 2 2 3 2 0.18 0.30 0.18 0.16 0.32 0.12

The sum of Total Attractiveness Score shows that product development is slightly better alternative then market development.

Treasury Rate Sheet

Wednesday, March 31,2011

Recommended Strategies
We will recommend UBL management to use following growth strategies: Product Development Market penetration Horizontal Diversification

Strategy Implementation

Annual Objectives Policies Resource allocation Managing conflicts Organizational design Change Marketing issues Financial Issues

Strategy Evaluation
Strategy Evaluation Frame work Published Sources of strategy evaluation Information Effective Evaluation System Auditing