Internship report on habib bank ltd- need for structural and strategic changes to grow in the competitive market

Internship report on need for structural and strategic changes to grow in the competitive market on Habib bank ltd

Habib Bank Limited, local subsidiary of the global financial group, Habib Bank Group, established itself in Bangladesh in 1976. The bank is a leading name in Pakistan with an extensive network of 1425 domestic branches. In Bangladesh, HBL has four branches: two in Dhaka, the other in Chittagong and Sylhet. Globally, the bank has operations in 25 countries with 55 international branches.
The bank was initially owned by the Government of Pakistan; but at a later stage, 49% of the shareholding was owned by the Aga Khan Foundation for Economic Development (AKFED). On January 3, 2004, AKFED increased their percentage holding by 2% to 51% of the bank, worldwide.

In this report, the bank was introduced in terms of its global structure and operation with special emphasis on Bangladesh operation.
The objectives of the report were to examine the bank’s present structure of operations, culture and strategic position; analyze the bank’s financial and market performance; define the problems the bank is facing in the core areas / departments of the bank; develop a set of new objectives and suggest strategies for meeting competitive pressure.
HBL is a full-fledged bank in Bangladesh with 0.2% market share (and 1% of the foreign banks pie). Its structure involves corporate, treasury, trade finance, credit administration, cash management, human resources and IT. However, although the bank has its departments in place, there are some core issues regarding its structure that demands attention of the management. These were highlighted in the report. These core areas of concern include bank’s loss in vision, structural ineffectiveness, mediocre market positioning and outdated technology base.
In order to address these issues, in this report, a new set of objectives and strategies were suggested.
The vision of the bank is defined as “the power to lead” – this is what the group believes in and this should be what HBL, Bangladesh should strive for. And, in order to achieve this “power”, the bank needs to first redefine its structure:

Structural changes of the bank, as have been suggested, include:
- Development of a structured Human Resources Department
- Segregation of marketing from Credit Administration Department
- Structuring of Treasury Unit with separation in back-office vs. relationship maintaining tasks
- Strengthening of IT unit

With a structured Human Resources Department, the bank should focus on employee training, recruitment of qualified individuals and motivation. Motivation is a core issue of the bank. At present, the bank’s hierarchies involve three levels of management (Officers Grade I, II and III); with this structure, employees are not given much opportunity to be promoted. The salary structure is also not much of a motivational tool with salary of a non-officer grade staff being higher than that of a department head. These issues need to get corrected.
In the market, the bank has a conservative approach. This has led to the decline of the bank’s asset and deposit base. Although the bank is still maintaining a profit base above Tk.30 million in the last two years, there are opportunities in the market that HBL is missing out on.
Suggested strategy in this regard includes higher participation in syndication deals and a concerted effort to build a diversified portfolio. The clientele of the bank now includes a handful of (around ten) big borrowing groups. These are also mostly owned by non-bengoli communities, which has been loosely defined as the bank’s niche.
The bank also maintains a low profile in the market at present; increased promotion for building its brand name has also been given as a suggested objective for the bank.
These objectives and strategies described in the report have been recommended with the intention of opening the management’s mind regarding some issues that have been continuing over a long time. They were not addressed before and now, with AKFED taking over the operation of the bank, in Bangladesh, its impact will be felt through probable merge of the bank with IPDC, some changes are inevitable. Through identification of core problems and through suggestions made in the report, if these are carried out, it is expected that employees’ morale will improve, bank will have a defined focus that will be transmitted in various levels of management and growth will at last be seen in the horizon.

Habib Bank Limited (HBL) first started operation in 1941 in Bombay and has been around in Bangladesh from as early as the 1960s. At that time, the bank was a nationalized bank under the Government of Pakistan. After liberation of the country, in 1971, the bank was taken over by the Government of Bangladesh and Agrani Bank was formed. HBL reentered the financial market of Bangladesh in 1976. It has four branches in Dhaka,Chittagong and Sylhet.

Globally, the bank has operations in 26 countries across the world. The bank is recognized as one of the leading financial institutions in South Asia, and a dynamic international bank in the emerging markets, providing customers with a premium set of innovative products and services.

In a recent turn of events, the worldwide operation of the bank was bought over by the Aga Khan Group, now having 51% shareholding.

The report on HBL will be based upon the bank’s performance in the current market scenario of Bangladesh and what obstacles the bank is facing. In the competitive financial market within the country, where there are as many as 52 players – banks, and not counting the non-banking financial institutions, HBL needs structural and strategic changes to move forward. This report will address these issues.
To examine the bank’s present structure of operations, culture, strategic position;
¨ To analyze the bank’s performance in terms of financial outputs in the last three years and market standing;
¨ To define the problems in the core areas / departments of the bank;
¨ To develop objectives for the bank on a long-term basis.
¨ To suggest strategies (both on long-term and short-term basis) and structural changes (if necessary) for HBL.

The scope of the report includes looking into the present structure of the bank and strategies being followed, and identifying the impediments / core problems in this structure that are hindering the bank from making progress in the competitive market. Based on the problems identified, new vision and objectives will be set and strategies developed to address them.
Primary information were gathered by interviewing the employees and top management of the bank; and secondary data on the market were collected from the Bangladesh Bank journals and other publications.

The only limitation of the report cropped up while acquiring information regarding the bank’s existing systems. While the employees of different departments were all very helpful, information relating to the bank’s goals, strategies, appraisal system etc could not be obtained as concrete pieces of information since these are not documented anywhere. They were collected through interviews without much specificity in the information. This has resulted in the report portraying certain information quite vaguely.