Swot Analysis
Content
SWOT ANALYSIS:
STRENGTHS:
✔
Large capital base.
✔
Rank in top 10 bank of Pakistan.
✔
Continuous growth in ROE.
✔
The bank’s management realizes the necessity of existence of
effectiveinternal controls to ensure smooth operations in the current
technicaland swift business environment.
✔
Loyal management.
✔
The bank has efficient and experienced management makingsignificant.
✔
Credit rating in long-term “AA+” and in the short term “A1+”.
✔
The financial statements, prepared by the management of the bankpresent
fairly the state of affairs.
✔
Loans are given only to known, reputable clients to avoid chances of fraud.
Very low nonperforming loan.
✔
Effectively handled the current economic recession.
✔
Bank is continuously focusing on developing new and innovativeproducts to
attract their target market.
✔
Strong customer relationship.
✔
Asset utilization is very good.
WEAKNESSES:
✔
Only valued client is important.
✔
Bad portfolio diversification (54% advances to Textile industry)
✔
Advertisement on electronic media has not been seen.
✔
Declining standards of banking after merger. Inter- organizationalconflicts
after merger.
✔
Compromises upon polices to keep customers happy.
✔
Old Management. (No creativity)
✔
No further growth in branches.
✔
Majority of shares are owned by the one family.
✔
Low consumer finance.
✔
Less job satisfaction of employees.
✔
Customers facing problem of NADRA verification while opening
their accounts because its process is time consuming.
Page |53
✔
Promoting generally on seniority basis.
✔
Attitude of senior manager at head office has to change towards
junior staff.
OPPORTUNITIES:
✔
Scope in Islamic Banking.
✔
To go global fully
✔
Low exposure to consumer banking providing opportunity to explore
thesegment.
✔
The year 2010 will prove to be another demanding year for the bankwith
scattered. Diversification, innovation and mission driven approachare the
key to success which bank should adopt.
✔
Progressive but cautious business expansion with strategic branchnetwork
extension and introduction of innovative products in all areas of business.
Branch network need extension.
✔
Should emphasize much on e-banking. Profit margin will be good.
✔
The bank being Swiss incorporated, it bank follows dual bankingregulation
i.e of Pakistan as well as Switzer-land which attracts foreigninvestors.
✔
SBP policy to allow Islamic Banking business separately.
✔
Bank introduces Islamic banking in country that attracts large number
of people.
✔
Greater profitability can be achieved through strong internal control.
✔
New schemes for deposits and finances should be introduced regularly.
✔
Opportunity to open branch in ruler area to increase its branch networkand
gain more profit.
THREATS:
✔
Adverse impact of “Credit Crisis” can badly effect on HMB.
✔
Facing a strong competition by its competitors. High reliability on onlyone
market segment i.e. Textile. (54%)
✔
Inconsistency in government policies.
✔
Increasing competition in the banking sector. Entry of many foreignbanks.
✔
Strict policies of the State Bank of Pakistan.
✔
Geopolitical condition of country.
Page |54
✔
Global liquidity crisis has constrained banks to stop lending.
✔
Current economic crunch.
✔
Political instability.
✔
Rising deposit rates.
✔
Foreign banks in market having more marketing budgets.
✔
People losing trust in banks.
✔
Decline in private and public sector credit due to tight monetary policy
Pest analysis
➢
Political:
Political instability can lead to changes in laws and policies whichcan be in
favor or against the banking sector
•
Monopolies Legislation
•
Taxation Policy
•
Foreign Trade Regulations
➢
Economic
Economy of Pakistan is facing issues about
•
Unemployment,
•
Inflation,
•
Illiteracy,
•
Corruption
•
Business Cycles
•
Interest Rateall the above issues hinders business growth.
➢
Socio Cultural issues
Cultural issues can be there but still as there are a number of multinational
companies there, therefore, culture issues are notprominent.
•
Population Demographics
•
Income Distribution
•
Social Mobility
•
Lifestyle Changes
•
Levels of Educations
Page |57
➢
Technological
•
Speed of Technology Transfer
•
New Discoveries / Development
•
Investment on Research
•
Rate of Obsolescence
RISK MANAGEMENT
Credit risk:
The HMB strategy is to minimize credit risk t
h r o u g h a s t r o n g p r e - disbursement credit analysis, approval
and risk measurement process
addedw i t h p r o d u c t , g e o g r a p h y a n d c u s t o m e r d i v e r s i f i c a
t i o n . T h e B a n k , a s i t s strategic preference, provides loans
only to strong parties. Major portion of the Bank credit portfolio is
Textile industry (54%) which is highly
profitableb u s i n e s s i n P a k i s t a n b u t i t m a y r i s k i e r a n d n o
t a g o o d d i v e r s i f i c a t i o n o f portfolio, if textile industry slump
then it will crash the whole bank. The bankhas very low rate of
Non-performing loans. The ratios of risks are as under and we can
see that they reduce the risk as per their objective.
Market Risk:
Market risk is the possibility that fluctuation in interest rates, foreign
exchangeor stock prices will change the market value of financial products
leading to aloss. The HMB has formalized liquidity and market risk
management policieswhich contain action plans to strengthen the market
risk management system.
Foreign Exchange Risk:
Foreign Exchange Risk is the probability of loss resulting from
adversemovement is exchange rates. The HMB is not in the business of
activelytrading and market making activities but a conservative risk
approach and theBank’s business strategy to work with export oriented
(Textile) client’s givesthe ability to meet its foreign exchange needs.
Interest rate risk:
Page |58
Interest rate risk is the risk that the value of the financial instrument
willfluctuate due to changes in the market interest rates. The HMB’s
interest rateexposure is low due to the short-term nature of the majority of
businesstransactions. Interest rate risk is also controlled through flexible
credit pricingmechanism and variable deposit rates.
Liquidity risk:
HMB manages the liquidity position on a continuous basis. The
Bank’sliquidity position is based on “self reliance” with a wide branch
network toexpand the Bank deposit base. The Bank’s liquidity profile
generally consistsof short-term, secured assets, in line with the Bank’s
credit strategy.
RECOMMENDATIONS
➢
Diversify the portfolio
Page |59
ntroduction of new products/services in the market
➢
Hire new management
➢
Give importance to all customers
➢
Increase the branches all over the country
➢
Improve standard of banking
➢
Start advertisement as soon as possible
Conclusion
➢
Major factors like global financing disorder, economic slowdown andstrict
monetary policy were on the top but Pakistan bank caters allthese
problems. HMB is one of the top ten banks it is expected toplay a major
role in pioneering these newer markets.
➢
Currently, the banking sector is facing two major problems. The
firstone is the decline in credit demand due to slowdown in the
economica c t i v i t i e s d u e t o p o o r l a w a n d o r d e r s i t
u a t i o n , p o w e r c r i s i s , inflationary pressure, and high
interest rates. The other problem
ist h e m o u n t i n g a m o u n t o f N P L s ( n o n p e r f o r m i n g l o a n s ) . W i t h t h e exception of a few banks all the
banks are exhibiting
considerabler i s e i n N P L s . T h e s e t w o i s s u e s a r e c o l l e c t i
v e l y d a m p e n i n g t h e banking sector s performance.
Page |60
➢
HMB offers branch banking,e-banking,consumer bankinginternational
banking and also offers Islamic banking to facilitate their cutomers
➢
At year-end, HMB s equity stands at Rs 18.9 billion at a comfortable11.9%
capital adequacy level against the required 10%.
➢
The credit ratings denote a very high credit quality, a very lowexpectation of
credit risk and a very strong capacity for timelypayment of financial commit
STRENGTHS:
✔
Large capital base.
✔
Rank in top 10 bank of Pakistan.
✔
Continuous growth in ROE.
✔
The bank’s management realizes the necessity of existence of
effectiveinternal controls to ensure smooth operations in the current
technicaland swift business environment.
✔
Loyal management.
✔
The bank has efficient and experienced management makingsignificant.
✔
Credit rating in long-term “AA+” and in the short term “A1+”.
✔
The financial statements, prepared by the management of the bankpresent
fairly the state of affairs.
✔
Loans are given only to known, reputable clients to avoid chances of fraud.
Very low nonperforming loan.
✔
Effectively handled the current economic recession.
✔
Bank is continuously focusing on developing new and innovativeproducts to
attract their target market.
✔
Strong customer relationship.
✔
Asset utilization is very good.
WEAKNESSES:
✔
Only valued client is important.
✔
Bad portfolio diversification (54% advances to Textile industry)
✔
Advertisement on electronic media has not been seen.
✔
Declining standards of banking after merger. Inter- organizationalconflicts
after merger.
✔
Compromises upon polices to keep customers happy.
✔
Old Management. (No creativity)
✔
No further growth in branches.
✔
Majority of shares are owned by the one family.
✔
Low consumer finance.
✔
Less job satisfaction of employees.
✔
Customers facing problem of NADRA verification while opening
their accounts because its process is time consuming.
Page |53
✔
Promoting generally on seniority basis.
✔
Attitude of senior manager at head office has to change towards
junior staff.
OPPORTUNITIES:
✔
Scope in Islamic Banking.
✔
To go global fully
✔
Low exposure to consumer banking providing opportunity to explore
thesegment.
✔
The year 2010 will prove to be another demanding year for the bankwith
scattered. Diversification, innovation and mission driven approachare the
key to success which bank should adopt.
✔
Progressive but cautious business expansion with strategic branchnetwork
extension and introduction of innovative products in all areas of business.
Branch network need extension.
✔
Should emphasize much on e-banking. Profit margin will be good.
✔
The bank being Swiss incorporated, it bank follows dual bankingregulation
i.e of Pakistan as well as Switzer-land which attracts foreigninvestors.
✔
SBP policy to allow Islamic Banking business separately.
✔
Bank introduces Islamic banking in country that attracts large number
of people.
✔
Greater profitability can be achieved through strong internal control.
✔
New schemes for deposits and finances should be introduced regularly.
✔
Opportunity to open branch in ruler area to increase its branch networkand
gain more profit.
THREATS:
✔
Adverse impact of “Credit Crisis” can badly effect on HMB.
✔
Facing a strong competition by its competitors. High reliability on onlyone
market segment i.e. Textile. (54%)
✔
Inconsistency in government policies.
✔
Increasing competition in the banking sector. Entry of many foreignbanks.
✔
Strict policies of the State Bank of Pakistan.
✔
Geopolitical condition of country.
Page |54
✔
Global liquidity crisis has constrained banks to stop lending.
✔
Current economic crunch.
✔
Political instability.
✔
Rising deposit rates.
✔
Foreign banks in market having more marketing budgets.
✔
People losing trust in banks.
✔
Decline in private and public sector credit due to tight monetary policy
Pest analysis
➢
Political:
Political instability can lead to changes in laws and policies whichcan be in
favor or against the banking sector
•
Monopolies Legislation
•
Taxation Policy
•
Foreign Trade Regulations
➢
Economic
Economy of Pakistan is facing issues about
•
Unemployment,
•
Inflation,
•
Illiteracy,
•
Corruption
•
Business Cycles
•
Interest Rateall the above issues hinders business growth.
➢
Socio Cultural issues
Cultural issues can be there but still as there are a number of multinational
companies there, therefore, culture issues are notprominent.
•
Population Demographics
•
Income Distribution
•
Social Mobility
•
Lifestyle Changes
•
Levels of Educations
Page |57
➢
Technological
•
Speed of Technology Transfer
•
New Discoveries / Development
•
Investment on Research
•
Rate of Obsolescence
RISK MANAGEMENT
Credit risk:
The HMB strategy is to minimize credit risk t
h r o u g h a s t r o n g p r e - disbursement credit analysis, approval
and risk measurement process
addedw i t h p r o d u c t , g e o g r a p h y a n d c u s t o m e r d i v e r s i f i c a
t i o n . T h e B a n k , a s i t s strategic preference, provides loans
only to strong parties. Major portion of the Bank credit portfolio is
Textile industry (54%) which is highly
profitableb u s i n e s s i n P a k i s t a n b u t i t m a y r i s k i e r a n d n o
t a g o o d d i v e r s i f i c a t i o n o f portfolio, if textile industry slump
then it will crash the whole bank. The bankhas very low rate of
Non-performing loans. The ratios of risks are as under and we can
see that they reduce the risk as per their objective.
Market Risk:
Market risk is the possibility that fluctuation in interest rates, foreign
exchangeor stock prices will change the market value of financial products
leading to aloss. The HMB has formalized liquidity and market risk
management policieswhich contain action plans to strengthen the market
risk management system.
Foreign Exchange Risk:
Foreign Exchange Risk is the probability of loss resulting from
adversemovement is exchange rates. The HMB is not in the business of
activelytrading and market making activities but a conservative risk
approach and theBank’s business strategy to work with export oriented
(Textile) client’s givesthe ability to meet its foreign exchange needs.
Interest rate risk:
Page |58
Interest rate risk is the risk that the value of the financial instrument
willfluctuate due to changes in the market interest rates. The HMB’s
interest rateexposure is low due to the short-term nature of the majority of
businesstransactions. Interest rate risk is also controlled through flexible
credit pricingmechanism and variable deposit rates.
Liquidity risk:
HMB manages the liquidity position on a continuous basis. The
Bank’sliquidity position is based on “self reliance” with a wide branch
network toexpand the Bank deposit base. The Bank’s liquidity profile
generally consistsof short-term, secured assets, in line with the Bank’s
credit strategy.
RECOMMENDATIONS
➢
Diversify the portfolio
Page |59
ntroduction of new products/services in the market
➢
Hire new management
➢
Give importance to all customers
➢
Increase the branches all over the country
➢
Improve standard of banking
➢
Start advertisement as soon as possible
Conclusion
➢
Major factors like global financing disorder, economic slowdown andstrict
monetary policy were on the top but Pakistan bank caters allthese
problems. HMB is one of the top ten banks it is expected toplay a major
role in pioneering these newer markets.
➢
Currently, the banking sector is facing two major problems. The
firstone is the decline in credit demand due to slowdown in the
economica c t i v i t i e s d u e t o p o o r l a w a n d o r d e r s i t
u a t i o n , p o w e r c r i s i s , inflationary pressure, and high
interest rates. The other problem
ist h e m o u n t i n g a m o u n t o f N P L s ( n o n p e r f o r m i n g l o a n s ) . W i t h t h e exception of a few banks all the
banks are exhibiting
considerabler i s e i n N P L s . T h e s e t w o i s s u e s a r e c o l l e c t i
v e l y d a m p e n i n g t h e banking sector s performance.
Page |60
➢
HMB offers branch banking,e-banking,consumer bankinginternational
banking and also offers Islamic banking to facilitate their cutomers
➢
At year-end, HMB s equity stands at Rs 18.9 billion at a comfortable11.9%
capital adequacy level against the required 10%.
➢
The credit ratings denote a very high credit quality, a very lowexpectation of
credit risk and a very strong capacity for timelypayment of financial commit
