INTERNSHIP REPORT EXECUTIVE SUMMERY TABLE OF CONTENTS ON SUBMITTED BY: Qudsia Ashraf 2003-GCUF-1581-3 Specialization: Finance TH 4 SEMESTER MBA DEPARTMENT OF MANAGEMENT SCIENCES, GC UNIVERSITY FAISALABAD. UNION BANK “IN THE NAME OF ALLAH THE MOST GRATIOUS, THE MOST MERCIFUL” Praise to be Allah lord of the creation, the compassionate, the merciful, the king of the judgment day! You alone, we worship, and to you alone we pray for help. Guide us to straight path, the path of those whom you have favored, neither of those who have incurred your wrath, nor of those whom gone astray. (AL-QURAN) INTERNSHIP REPORT ON UNION BANK “IN THE NAME OF ALLAH THE MOST GRATIOUS, THE MOST MERCIFULL”. In the name of thy Lord who created, created man from clot, And Thy Lord is the most bounteous who taught man that he knew nothing. Above all we are indebted to Almighty Allah, Lord of our life and of everything in the universe and His Holy Prophet Muhammad (peace be upon him) whose blessings enabled us to perceive and pursuit higher ideas of ideas of life. The report is the result of good efforts, which I have made to, to complete this informative project. Certainly I have been able to complete this project with the help of numerous factors, which played a key role in it. “I deem it a great honor and privilege to record sense for gratitude to the respected staff at Union Bank, Kotwali Road Branch especially Mr. Jamal Anwar, (the Relationship Manager who was my supervisor during my internship) for their corporation and help.” THE EXORDIUM “TO MY MOST LOVING AND PRECIOUS FAMILY AND FRIENDS” EXECUTIVE SUMMERY This document provided details of my achievements in terms of practical implementation and understanding of working environment in banks. During the course of my internship at Union Bank Kotwali Road branch, I worked in SME department specifically on making of credit approval and customer analysis. And I also got one week experience with Credit Administration Department (CAD) to see that how the documents are handled. A bank is now a financial institution which offers savings and cheque accounts, makes loans and provides other financial services, making profits mainly from the difference between interest paid on deposits and charged for loans, plus fees for accepting bills and other services. The Union Bank was established in 1991 but went through the change in management in August 1999 and through constant expansion Union Bank is rapidly gaining ground in the global financial market. The major operations of Union Bank Kotwali, Road Branch include: Accepting various types of Deposits, Phone Banking, ATM's, Online Banking, Guarantees, Letter of Credit and Leasing. The various departments at Union Bank operate independently. They generate their revenues and after deducting the expenses the net income is transferred to bank by these departments. The Small & Medium Enterprises (SME) operates to provide secured loans to the customers while role of Credit Administration Department (CAD) is provide a supporting service for the other departments. The department maintains records according to “Credit Bulletin” and provides repots to top management. Union Bank offers a wide range of products from account opening to specialized products under the main categories like; Personal Accounts, SME Products and Personal Finance etc. On the whole, Union Bank has given me an intern experience and an insight to practical work environment and therefore, worthwhile learning experience. I believe, there is nothing like getting hands-on experience because it can only prepare you for what the workforce is looking for. TABLE OF CONTENTS Introduction Incorporation of bank Purpose (Mission & Vision) Operations Departments Departments of Union Bank Organogram (Hierarchy of Management) Procedure (SME & CAD) Products Products of Union Bank Comparison SOWT Analysis Policies Lending Policy Customer Analysis Introduction of customer Financial Spread Comments on financial position Concluding Remarks INTRODUCTION Incorporation of bank Purpose (Mission & Vision) Operations Union Bank (Pvt) Limited Introduction and Historical Background The Union Bank was established in 1991 after the start of privatization by government of Mr. Nawz Sharif. Saigol Group incorporated the bank in the city of Faisalabad. The decision to start a bank was due to prior experience in banking sector of Saigol Group. This group owned United Bank Limited, which was taken into custody of government during nationalization process. Union Bank went through the change in management in August 1999. A Middle Eastern Group (. Abdullah Muhammad Abdullah Basodan) bought the controlling stake in the Bank from Saigol Group. According to the new policy, while the bank will remain primarily a working capital lender, the focus will shift towards providing a wide array of financial services and products to large and medium size blue chip companies. Now Mr. Shaukat Train (formerly working with City Bank) is Chief Executive Officer (CEO) and president of the Union Bank. After Mr. Shaukat Train took the charge as CEO, the bank showed unprecedented growth. The management at Union Bank comprises of seasoned professionals in the field of banking and finance thereby encouraging a culture of innovation and total customer satisfaction. Union Bank’s vision is to provide its clients with complete banking solutions. Realizing this vision, Union Bank acquired Bank of America’s operations in Pakistan in year 2000. Keeping the same strategic run in July 2001, Union Bank signed an Independent Operator agreement for American Express Cards in Pakistan. As a result of this agreement, Union Bank now issues, operates and markets American Express Cards in Pakistan. The Bank is also in the business of acquiring merchants accepting VISA, Master Card, American Express and JCB Cards. Another milestone agreement signed in September 2002, Union Bank Acquired the local operations of Emirates Bank International making it one of the largest private sector banking network in Pakistan. Backed by a major Middle Eastern Group, Union Bank is today with 42 branches in 19 cities and a correspondent banking network of over 300 banks in 85 countries, Union Bank is rapidly gaining ground in the global financial market. Vision Statement To be the premier financial institution in Emerging Markets. Mission Statement To be the premier bank, responsive to the need of our target market customers, recognized for consistently superior service quality and innovative products, thereby delivering superior value to our stakeholders. Core Values… Customer Focus: Relentless focus on understanding and fulfilling customer needs through superior service. Innovation: Continually generate, validate and implement creative solutions to business challenges. Meritocracy: Ensure a fair recruitment process and closely link recognition and reward to performance against goals, irrespective of personal relationships, gender, religion or ethnicity. Integrity: Uncompromising financial and intellectual honesty to the organization and oneself with relationships based on mutual trust and openness. Team-work: Willingness to share the glory of achievements as well as responsibility for failure. Humility: Display self-belief as well as modesty and be respectful to all customers, colleagues and business partners. Company Information: Directors and Chairman Mr. Mueen Afzal Chairman Mr. Shaukat Tarin President & Group Chief Executive Officer Mr. Muneer Kamal Chief Operating Officer International Operations Dr. Abdullah Mohammad Abdullah Basodan Mr. Munnawar Hamid OBE Mr. Qazi Mazharul Haque Mrs. Lubna Majeed Main Office Union Bank Limited th 5 floor, New Jubilee Insurance House, I.I. Chundrigar Road, Karachi Registered Office Union Bank Limited P-69, Kotwali Road, Faisalabad. Operations of Union Bank: From the Italian banca meaning 'bench', the table at which a dealer in money worked. A bank is now a financial institution which offers savings and cheque accounts, makes loans and provides other financial services, making profits mainly from the difference between interest paid on deposits and charged for loans, plus fees for accepting bills and other services. In Pakistan, banks are financial institutions authorized under the Banking Companies Ordinance 1962. The State Bank of Pakistan (the central bank) has a wide range of powers over the banking sector. In Pakistan the banks are providing different types of services to their customers and as the competition is becoming stronger day by day banks are offering new and improved services to their customers and no one to left behind in this race. So banks are offering variety of services to attract more customers. Union Bank is also focusing to offer variety of services to existing customers and new improved services including complete business solutions to attract new customers. The bank is committed to provide quality service to the customers through all its operations. It is offering all the facilities from account opening to business loans and to latest services of Phone Banking, ATM's, Online Banking. The major operations of Union Bank Kotwali, Road Branch are: Accepting various types of Deposits Phone Banking, ATM's, Online Banking Guarantees Letter of Credit Provides medium and long term finances Provides loans and advances Leasing Trade Finance DEPARTMENTS Departments of Union Bank Organogram (Hierarchy of Management) Procedure (SME & CAD) Departments of Union Bank: The various departments at Union Bank are: Branch Banking. Cash Department Accounts Department Small and Medium Enterprise Department ( SME) Corporate Banking Group Department (CBG) Leasing Department Credit Administration Department (CAD) Trade Finance Consumer Banking Structure of the Organization: The organizational structure of Union Bank is different from most of all other banks. The bank is divided into six different departments that have their own sources of revenues and after deducting the expenses the net income is transferred to bank by these departments. The Heads of these departments are called group heads report to president of bank. These six departments are: Central Operation Division (COD), Corporate Banking Group (CBG), Small and Medium Enterprise (SME), Branch Banking., Consumer Banking and Credit Administration Department (CAD). Hierarchy of Management President Group head CAD Group head CBG Group head COD Branch Manager Group Head Consumer Banking County Head Group head SME Regional Head Unit Head Relationship manager Small & Medium Enterprises (SME) Group Union Bank has a group of highly trained and professional individuals to form an exclusive Small & Medium Enterprises (SME) Group for personalized service to companies who have diverse needs. SME Group strives to apply a unique blend of finance, industry and technological expertise to keep pace with dynamic markets and translating insights into solutions that meet the diverse financial needs. For a more focused approach to the unique needs of different markets &/or geographical areas, SME Group have four Regional Heads who oversee customers in their region as per follows Northern Region: Islamabad, Rawalpindi, Mardan, Peshawar, Swat Western Region: Lahore, Raiwind, Gujrat, Sargodha, Mirpur, Jhelum Eastern Region: Lahore, Sialkot, Gujranwala Central Region: Faisalabad, Multan, Vehari, Sahiwal Southern Region I: Karachi, Hyderabad Southern Region II: Karachi, Quetta Each Regional Head is supported by a team of talented and well-trained Relationship Managers who act as financial consultants for SME customers to understand and offer them a result oriented package to their financial needs. A typical SME customer would be a proprietorship/ partnership/company which: Has an Annual Turnover of less than Rs. 250 Million. Requires financial assistance for Working Capital Lines, Term Loans, Bridge Financing, Underwriting, Export Refinance, Bank Guarantees and full menu of Import & Export related credit and processing facilities. Would like to place surplus liquidity, generated through its own sources, for added income. Is interested in wealth management of savings of it Proprietor/ Partners/ Directors. Procedure: Loans are basically of two types: secured loans and unsecured loans. A secured loan is one for which collateral is pledge in order to reduce the risk to the lender and an unsecured loan is any loan that is not backed by collateral (Property or assets made available by a borrower as security against a loan). Small & Medium Enterprises (SME) Group provides secured loans to the customers. Relationship Manager (RM) is responsible for providing financial assistance to the customers for their entire satisfaction. As a result of credit marketing efforts of Relationship Manager (RM) when a customer approaches to get the loan, the first responsibility of Relationship Manager (RM) is to make sure that customer meets the following SME Qualification Criterion: Total No of employees For manufacturing concern < = 250 For trading / service concern < = 50 Total assets at cost excluding land and building For manufacturing concern < = RS. 100 Million For trading / service concern < = RS. 50 Million Total sales < = RS. 300 Million Then, the Relationship Manager (RM) prepares Credit Approval (CA) proposal for that customer, which includes following details and documents: Credit Approval (CA) Basic Information Report (BIR) Ownership Directors and Management History Banking and other financing arrangements Facilities Products and product mix Selling and distribution terms Affiliated companies and related business Management Assessment Form Financial Spread and Statements Credit Memorandum Purpose Relationship Background Relationship Profitability Relationship Strategy Management Assessment Financial Analysis Industry Outlook Risk Analysis Conclusion / Recommendations Site Visit Report Latest Valuation Report This credit Approval (CA) is sent to Lahore for the approval. As soon as the Relationship Manager (RM) receives the approval (CA), it is sent to CAD and customer is also intimated about approval and is asked to fulfill the remaining formalities and documents required. An account is opened in the name of customer and a Cheque Book is issued to him. Relationship Manager (RM) is also responsible for monitoring of customer accounts to ensure the interest payments to bank. In the case the customer is not paying his liabilities he is asked to pay his obligations. Even after repeated calls .the customer fails to pay, the Relationship Manager (RM) has authority to send his case to Special Asset Management Group for further proceedings. The major portion of customers of SME Department Kotwali Road Branch relate from: Textile Industry Chemical Industry Tourism Industry Job Description Relationship Manager: The major responsibilities of relationship Manager are as follows: Develop new business by contacting prospects and customers Develop relationship plans for these prospects and customers. Interview customers and prospects describing all relevant loan products, and explaining loan options, rates, terms, and collateral requirements. Analyze financial and related data to determine the needs of the customer for proper structuring of the products and services. Evaluate and structures loan requests, determining appropriate documentation for approved loans. Negotiate terms including costs, repayment method, and collateral requirements. Ensure that extension of credit and delivery of services is in accordance with corporate policies, pricing guidelines and portfolio considerations. Ensure adequate documentation Ensure that proper and accurate disclosures are provided to all applicants within required timeframes. Follow-up after closing to ensure all documents are completed and in file. Assure compliance with all regulations. Monitor loan repayment activities and takes necessary action to collect from past due accounts. Advise customers, where possible, on business management and other financial matters. Credit Administration Department (CAD) Basically Credit Administration Department (CAD) works as a supporting department for Small & Medium Enterprise (SME) and Corporate Banking Group (CBG). The functions of Credit Administration Department (CAD) include holding credit documents of customers both from SME and CBG and keep the files according to “Credit Bulletin”(policies) releasing credit line for the customers, in case of pledge Credit Administration Department (CAD) is also responsible for the administration and release of pledged asset. Procedure: When a Credit Approval (CA) proposal is approved for SME and CBG by their respective authorities the CA is sent to Credit Administration Department (CAD ), which fulfill the formalities for the purpose of mortgage (a mortgage is a legal instrument in which property serves as security for the repayment of a loan) and then afterwards releases the credit line (a credit limit is the maximum amount of money that a bank or other lender will lend to a particular individual or company) for that particular customer. In case of pledge when Credit Administration Department (CAD) receives an application for the release of the asset for example cotton, CAD reviews the request and stock records and the rates at which they are held. Where the customer does not specifies the rate to be charged the highest rate is applied and stock is deducted from stock and documents are approved by CAD’s head. And intimation sent to “Muqudam” (a person appointed by the bank to hold the pledged stocks) of the bank to release the said quantity of stock in favor of that customer. The customer is also informed to about approval of his request. PRODUCTS Products of Union Bank Comparison SOWT Analysis PRODUCTS The strong competition in the banking sector led banks to offer specialized products in consumer finance and business customers. Union Bank also offers a wide range of products from account opening, credit card and other personal and business loans, Visa Debit Card, American Express Credit Cards and VISA Credit Cards and other specialized products. The specialized products provide an easy solution to customers. The major specialized products of Union Bank are: Personal Accounts Business Account Mahana Izaafa Saving Account Munafa Max Personal Finance Ready Cash UniCar SME Products Business Power My Home Tana Bana Rang hi Rang Agri Deal Business Account (Current Account) Business Account is a flexible current account. It is a secure way of transferring fund anywhere in Pakistan without the hassles of carrying Cash or Travelers Cheques. Through Business Account customers can deposit and withdraw funds from any of 53 branches across 20 cities. Through Business Account customers can; Get Pay Orders/ Demand Drafts anywhere in Pakistan Immediate access to account information Faster Cheque Clearing Mahana Izaafa (Saving Account) Mahana Izaafa is a rupee saving account which combines a high rate of monthly profit, flexibility of withdrawal and convenience, all in one. The special tiering structure ensures a higher profit on higher deposits. The profit is credited to Mahana Izaafa account every month. The customers can get extra cash at their disposal. The profit is calculated on a daily product basis. The customers have the privilege of having account in any single Union Bank branch and still are able to withdraw from and deposit money (with some conditions) in Union Bank branches all over Pakistan as Union Bank Limited is online with all its 53 branches across 20 cities. Union Bank's Saving Account Union Bank's Saving Account is the latest addition to Union Bank's ever-increasing portfolio of products. This product combines a good rate of return, profit paid out on a six-monthly basis, and outstanding services offered by Union Bank all-in-one with Inter-branch Transaction Facility. Profit on Saving Account is on a minimum balance basis and is credited to the account every January and July. The minimum average balance required is Rs. 50,000. Munafa Max Munafa Max is a branded long-term savings deposit, with profit payment at maturity. Additional value added features give customers the flexibility to meet their interim liquidity needs. It is a product suited to corporate as well as individual clients who want a good return on their money. Munafa Max is a fixed deposit account with profit paid at maturity. The available tenures are 3 months, 6 months and 1 year. It has a specially designed tiered structure. This means the higher the investment, the higher the return. After three months from the date of opening the account, customers can withdraw as per need, in multiples of Rs. 25,000 while continuing to earn the rate of profit (applicable on the tier customers are in), on the remaining portion. The customers can obtain a loan against their deposit up to 75% of the total invested amount, or even up to 95% with additional collateral. PERSONAL FINANCE Ready Cash Union Bank's Ready Cash is an evergreen personal line of credit that gives financial power with unmatched freedom and flexibility. The customers can withdraw cash from your credit line using a Cheque or your VISA Debit / ATM card. Customers meeting the eligibility criteria, and can receive an instant credit line of Rs. 75,000 to 500,000. Credit will be automatically transferred into Ready Cash account. And customer will receive VISA Debit / ATM card and Cheque book – giving him the freedom to use it as and when required. Ready Cash gives instant access to cash from any of our 42 branches in Pakistan. In addition, Union Bank VISA Debit cards are issued to all customers, which can be used at all 1-Link and M- NET ATMs. Union Bank's Ready Cash offers the freedom of revolving credit on a daily utilization basis. This means that payment markup only on the amount utilized and for the number of days in use. There are no penalties on early repayment Ready Cash gives the flexibility to revolve credit line by only repaying 3% principal in addition to the 1.58% mark up payment every month. The repaid principal will be available in credit line for use again. Union Bank's Ready Cash is available to Pakistani nationals residing in Karachi, Lahore, Rawalpindi, Islamabad, Hyderabad, Sialkot, Faisalabad and Peshawar, having a gross monthly income of Rs. 15,000. UniCar UNICAR offers a leasing facility to buy Brand New car , With the greatest flexibility, to choose from anywhere between 1 - 5 years leasing / financing period, with and additional option for an extended 6 - 7 years lease / finance period. The Down Payment is as low as 10% of the value of the vehicle With the UNICAR. A large variety of cars are offered under Unicar, so customers can choose the car according to their choice. A completely filled in Application form, NIC Copy, 2 recent Photographs, Salary slip with complete break up and last 6 months Bank Statement are required documents The minimum eligibility criteria for UniCar is a Pakistani national between the age of 21 - 65 years of age, A salaried individual, a businessman or a self employed professional and continuously employed for at least 6 months (salaried) or self employed for at least a year Small & Medium Enterprise Products Business Power (Business Loan) Business Power is a 'Running Finance Facility' offered against residential property to businessmen and self-employed professionals. The product provides a flexible source of funds to businesspersons to meet day to day working capital requirements. Business Power is a 'Running Finance Facility' and the collateral required is a residential property. Business Power gives the freedom to pay mark-up only on the amount utilized and for the number of days the funds is used , and not on the entire credit line. Customers only need to pay the Mark-up at the month end. And Payback the principal amount utilized whenever it suits to customers. The credit line offered ranges from Rs. 1 million to Rs. 20 million depending on the market value of the property. Residential property is assessed on the market value and up to a maximum of 60% of its value can be released as the financing line. A resident Pakistani living in Karachi, Lahore, Islamabad, Rawalpindi, Peshawar, Gujranwala, Gujrat, Sialkot, Faisalabad or Multan., Age limit 25 -55 years, Running his present business for the last 3 years, Earning a net monthly income of at least Rs. 36,000 and willing to provide his own or co borrower’s residential property as a security is eligible to apply for this loan. My Home At an unbelievably low rate of interest and with the most flexible terms of payment, "My Home" is yet another product from Union Bank, which turns dreams of “My Home” into reality. The salaried, self employed professional or a businessman residing in Pakistan, between 23-65 years of age and meeting the minimum monthly income requirement can qualify for "My Home". With tailor made installments and the facility to make partial repayments twice a year. Customers can stretch installments over a leisurely 20 years, or pay back in just 3 years, its all up to customers Build, buy or renovate, it is all up to customers. Customers can use the "loan transfer facility" to transfer existing home loan of any other bank or financial institution to Union Bank's "My Home" to avail its lowest mark-up and flexibility. Tana Bana Tana Bana is a loan facility for the weavers to purchase yarn. To apply for Tana Bana a person should be a Pakistani with age limit between 22 to 60 years having a unit of minimum 24 loams (auto/ power) and loams width of at least 72 inches. He should be in business form at least 3 years and owner of residential/ industrial property in Faisalabad The businesses meeting these Qualifications can get the credit line of 5, 00,000 to 70,000,000. The markup is calculated on the daily basis on the amount withdrawn from the account and for the number of days the funds are used, and not on the entire credit line. The documents required are: an application form for Tana Bana filled with a photocopy of National Identity Card, Passport Size Photos (only in case of proprietorship or unregistered partnership), Electricity Bills of last six months and other documents as per the regulations of State Bank of Pakistan. Rang Hi Rang Rang Hi Rang is a loan facility offered to dying and processing units. To apply for Rang Hi Rang a person should be a Pakistani with age limit between 22 to 60 years with 5 years work experience have monthly expenses (Gas and Electricity) are at least RS.250, 000 and willing to mortgage your property. The credit line is up to 2,000,000. It gives the freedom to pay mark-up only on the amount utilized and for the number of days the funds are used, and not on the entire credit line. The markup is calculated on daily basis. The documents required are: an application form for Rang Hi Rang filled with a photocopy of National Identity Card, Three Passport Size Photos Of principal (only in case of proprietorship or unregistered partnership), Basic fact sheet (as per regulations of State Bank of Pakistan) Electricity and Gas Bills of last one year and other documents as per the regulations of State Bank of Pakistan. AgriDeal Seed, Fertilizer and Pesticide dealers are the target market for AgriDeal: The eligibility criteria for the customers to get loan under AgriDeal is: a Pakistani with age limit between 22 to 65 years with 5 years work experience as a Seed, Fertilizer or Pesticide dealer, purchases of Seed, Fertilizer or Pesticide are at least 30, 00, 000 and willing to mortgage your property. Mark-up will be only on the amount utilized and for the number of days the funds are used, and not on the entire credit line. Free on-line transaction and demand draft/pay order facility up to a specified limit is as an additional facility for AgriDeal account holders Credit card Business: Union Bank’s shopping card American Express Charge Card American Express Credit Card Union Bank Online: Union Bank Online is a state-of-the-art customer contact center which offers the real time advantage. With Union Bank Online customers no longer have to take time out to visit the branch for your routine banking needs. On single phone call customers have access to a wide range of Tele-banking solutions and personalized banking services. Key benefits: Simple and Convenient banking solutions over phone Instant access to banking services from anywhere at anytime Saves time and money Toll-Free Access 0800-66-666 (For prospective customers) 0800-44-444 (For all existing customers) The official website of Union Bank is www.unionbank.com.pk SME Business: Union Bank has handpicked a group of highly trained and professional individuals to form an exclusive Small & Medium Enterprises (SME) Group for personalized service to companies who have diverse needs. SME Group strives to apply a unique blend of finance, industry and technological expertise to keep pace with dynamic markets and translating insights into solutions that meet the diverse financial needs. The Corporate Banking Group at Union Bank is dedicated to providing its clients the highest level of service possible. Through committed Relationship Managers, Union Bank is dedicated towards developing relationships with corporate clients to service their financial needs worldwide. The Corporate Banking Group manages a high quality asset portfolio being an active player in many sectors including textile, sugar, leather, pharmaceutical, fertilizer, petrochemical, power, automotive, telecommunications, oil and gas distribution, marketing and refining and fast moving consumer goods industries. Union Bank has one of the largest correspondent banking networks which combined with our advanced technological systems makes us the premier correspondent bank Products Offered Working Capital/Term Loan Loan Structure & Syndication Trade Services Guarantees Cash Management Comparison of Products: (Between Union Bank’s Business power and United Bank’s Business line) Features of Businessline It is a ‘Credit Line/ OD Facility’ against Residential Property. It is an evergreen credit line that the customer can use for his/her business expansion The customer can utilize up to Rs.10 million UBL Businessline offers the facility of availing a financing of up to 70 % of property value. Businessline gives you the facility to pay mark up only on the amount that you utilize. The more customer spends the less he pays because the interest rates decreases. Eligibility Criteria: Minimum monthly income is Rs. 25,000 and above Age limit is between 25 to 65 years A Pakistani resident Self Employed Professional / Self Employed Businessman Features of Business Power Business Power is a 'Running Finance Facility'. Business Power can extend the customer a credit line from Rs. 1 million to Rs. 20 million. Business Power is a stand-alone, one of its kind product where the only collateral required is a residential property. Pay only when customer wants to. He only needs to pay the Mark-up at the month end. The customers can payback the principal amount utilized whenever it suits him. Business Power offers a credit line between Rs. 1 million and Rs. 20 million. The financing amount can be up to a maximum of 60% of the market value of your residential property No matter where the customer is, he can access his account and deposit or withdraw cash from any of the Union Bank branches across Pakistan. Business Power gives the freedom to pay mark-up only on the amount utilized and for the number of day the funds are used and not on the entire credit line. Eligibility Criteria The customer can avail this powerful facility if he is: A resident Pakistani living in Karachi, Lahore, Islamabad, Rawalpindi, Peshawar, Gujranwala, Gujrat, Sialkot, Faisalabad or Multan. Between 25-55 years old. Running his present business for the last 3 years. Earning a net monthly income of at least Rs. 36,000. Willing to provide his own or co borrower’s residential property as a security Both products are quite similar with each other; these products provide loan facility against residential property. As noted above credit limit for Business Power is10 million higher than Business line. Business line is offering 10% more of market value property than business power. The minimum earning requirement for a customer to become eligible for the loan facility is quiet low for Businessline as compared to business power and also the maximum age limit for businessline is 65 years so, it is offered to a wider customer range (larger target market) than business power. One other major strength in the case of business power is the on-line access from no of branches of union bank. But the selection depends upon the customer needs, and the market efforts made by both banks and quality of service especially if current customers are making a consideration to get the loan facility. Obviously the customer that requires higher credit limit would prefer Business Power and it would also depend upon the mark up rates offered by the banks. SWOT Analysis STEP 1: Factor Listing Strengths: Seasoned professionals in top Management Phone Banking, ATM's and Online Banking Continuous expansion by acquiring other banks Making easiest ways of loan disbursement Good financial position Weaknesses: Low motivation and morale in employees On-line banking service is not in all branches No initiative towards Islamic Banking Opportunities: Internet Banking Global Financial Markets can be explored. On-line banking service in all branches Islamic Baking is in demand Consumer finance is an emerging market\ Threats: Large and increasing competition in banking sector through better customer service and more focus on consumer productsIslamic Banks and foreign banks Privatization of Nationalized banks thereby increasing the no of private banks Step 2: SWOT Matrix Strengths - Opportunities (SO) Union bank has its strength in expansion as it has acquired Emirates Bank International American Express Cards and Bank of America in last few years. Bank is in position to expand its operation towards to widen customer base by providing the facilities of on-line banking in all branches as no of branches are already working on-line. The internet banking is yet a big opportunity for bank by providing 24 hours banking service to the customers. This service is very important for business sector customers especially for the exporters as they can get the advantage to make their transactions at any time and will not suffer from time differences. The bank which will enter at first in this service will definitely get “first mover advantage’. Union Bank in good financial position can make the expenses and capitalize this opportunity. Strengths - Threats (ST) Major threat is already strong competition in the banking industry as banks are offering new and innovative products and better customer service to capture customers but Union Bank can meet he challenge by its On-line banking services as in today’s business world “Time is Money” so a bank with on-line services will be the first choice by the businessmen. Weaknesses – opportunities (WO) The high turnover of employees during the last year is major threat for the bank. There seems the lack of motivation and morale among employees and due high turnover team building and work has also suffered. As the adjustment with new employees require time cost and slow down the speed of as well. The bank needs to focus on the intrinsic motivation of employees to capture the opportunities. Weaknesses – Threats (WT) Relatively higher turnover of employees is a weak point for Union Bank. Due this problem the experienced people in lower levels are lacking and enhancing the threat by other banks in the industry with experienced employees. Step 3: Critical Region The critical region in this case is Weakness- Opportunities (WO). The bank needs to focus on its weaknesses to improve the employee motivation as by using motivation tools, the most important is to utilize intrinsic motivation. If employees will be motivated they will perform best for the organization and it would be easier for the bank to utilize its strengths to say welcome to forthcoming opportunities and threats as well. Bank can utilize its strengths to capture the opportunity for Internet banking. Step 4: Managerial Decision The managerial decision is to first focus the efforts to motivate employees as reduce turnover of employees and to enter in the field of Internet banking to provide better service to its customers and build closer relationship with the customers whish is in line with core value (Customer Focus) of bank that requires the relentless focus on understanding and fulfilling customer needs through superior service. Lending Policy Lending Policy for SME department: The main guidelines for the lending policy of Union Bank are as following; Solicitation from Relationship Manger. Information often requested by bank includes: History of business.2-3 years historical financial statements (preferably audited), Information/background on key individuals, Key supply arrangements. Key customer arrangements. Details of trade terms. Security (and valuations). Business plans/strategy. Industry analysis. Credit arrangements with other banks/ and financial institutions. Relationship managers complete an assessment: the assessments cover the factors including: General remarks/narrative. Business plans. Financial statements, Industry analysis, Management assessment and make credit analysis of the customer including cash flows and quality of assets Make a Site Visit. Check Collateral offered and prepare a valuation report. Documents should be properly signed. Credit Approval made by Relationship managers is sent to the Regional Head for approval Loan Committee Approves/Disapproves: the minimum requirement that three members including the chairman should approve the credit facility for a given customer. Relationship managers have the responsibility for communicating the decisions which bank's make in response to applications from borrowers. The relationship manager will typically work with the customer to explain why the application was declined and to explore options, where appropriate, for modifying the application. Loan monitoring will be on continuous basis while the annual review will focus on: movements in balance sheet items; cash flow; analysis of financials (preferably audited); and discussions with the borrower The Bank offers refinancing privileges on the terms that are consistent with State Bank of Pakistan Policies. The Bank ordinarily sets loan rates at the time funds are disbursed. Industry Specific Requirements; Textile Industry including Ginning Mills, Spinning Mills over 17,000 spindles and export oriented products, dyeing, Printing and Finishing Mills, Composite Knitwear Units, Apparel and Stitching, Garments Manufacturers and Weaving Mills. Current Ratio > = 1.1times Leverage < = 2.5 times Cash Conversion Cycle < = 180 days Interest coverage Ratio >= 1.5 times Introduction of customer Financial Spread Comments on financial position CUSTOMER ANALYSIS COTTON ARTS (PVT) LTD Introduction: Cotton Arts (Pvt) LTD was incorporated on May 05, 1986 with joint stock companies, Lahore. Mr. Ateeq Ahmed was nominated as Chief Executive of the company. Since its incorporation, company is involved in export business and exporting its products to U.K., Holland, and America. Their main products are embroidered quilts and Bed sheet sets. Initially, this was a small unit consists of few embroidery and stitching machines. However, during the business operational period of last two decades, they have registered smooth growth in terms of sales, profits, and business expansion. Considering their improved business needs in year 2001, they imported power looms for weaving unit from Japan and Korea. To erect this unit, they acquired land on lease, which is situated at Razaabad, Faisalabad. This is an industrial area where many units are operating. Last year they had imported Shuttle less Sulzer looms. These looms have been installed at company’s Khurraianwala Jarranwala Road, unit. This unit is spread over an area of more than 160 kanals. Company’s weaving unit is working on two shift basis, each of 12 hours. Besides weaving unit, company holds stitching and embroidery machines. Stitching and embroidery unit is situated at Maqbool Road, Sumundiry Road, Faisalabad. This unit is working on two shifts basis, each of 8 hours. Last year management of the company purchased 5 embroidery machines from Japan to cater increased business needs. These machines were imported against LC of 180 days, which was opened by Union Bank. Presently, new embroidery machines are working at company’s Maqbool Road unit, where no of machines have increased from three to eight. .They buy yarn different agency holders of spinning mills as well as from different brokers of Yarn market, Faisalabad. They get yarn from local sizing units. Moreover, printing and processing of their own woven cloth are done from different local processing and printing units. Comments on financial position Balance Sheet There is continuous improvement in the company’s fixed assets. The company has acquired new assets in 2004, which increased its production capacity. In 2004, there is 99.28%increase in the fixed assets in shape of machinery and construction of additional building. There is also an increase in freehold plant and machinery. The company improved its assets in view of expected international competition after the application of WTO. With addition in fixed assets their exports in 2004 increased by 31%as compared to previous year. Their aim is to continue its growth in exports in future scenario also. The capital wok in progress which consists of building and civil work has decreased from PKR8, 407,433 in 2003 to PKR 2,517,307 in 2004 showing that 75% work has been completed and remaining 25%work in process will hopefully be completed in 2004. There is an increase of 291% in advances and prepayments from PKR 5,522,513 in 2003 to PKR21, 584,879 in 2004. Major increase ids due to advances paid to suppliers which are Rs. 20.561 M. There is a significant increase of Rs. 2.595 M in long term deposits from PKR 850,000 in 2003 to PKR 3,445,000 in 2004. This shows its increase in fixed investment. Receivable turnover ratio is 14 days in 2004, which has decreased from the previous year at the same time the company’s sales are increasing. This is a healthy sign for the company because it means that the company started managing its cash cycle more effectively. The inventory turnover is 66 days, which also decreased from 92 days in 2003. This means that the company is not locking extra investment in form of inventory. It is maintaining its level of inventory to support its sales. If we look towards the liquidity position of the company , there is minor increase in current ratio from 0.9 in 203 to 1.0 in 2004 and this is due to increase in current assets, quick ratio has increased from 0.5 to 0.7 in 2004 which is a healthy sign of financial activities. Creditors, accrued and other liabilities reduced by 16.73% from 10.809 M to 9.000M in 2004. Major change occurred in LC, creditors, accrued charges, Director’s current account and advances from customers. The LC amounting RS. 7.736 M as on 30.06.2003 stands adjusted during 2004. Account payable increased almost 3 times. Accrued charges increased by 9 times. Director’s current accounts swell by 77% as compared to last year. Days of account payable increased from 3 days in 2003 to 10 days in 2004. Accrued and other liabilities have also increased because of advances from customers overdue lease installments. Current portions of long term liabilities have increased by 4.68 times with induction of lease finance of Rs. 6.873M. Long term finance of Rs. 10.510M and addition of Lease Finance of Rs. 11.926 M was made in the year 2004. The company has acquired long term loans in shape of Demand Finance repayable in 4 years period from HBL and liabilities against assts subject to finance lease have also shown increase because company has purchased more machinery during the year under lease finance. Paid up capital has increased by 18.900M from PKR 9,450,000 in 2003 to PKR 28,350,000 in 2004 because company issued 189,000 ordinary share of Rs. 100 each fully paid as bonus shares. These bonus shares are issued from general reserve of Rs. 10 M and unappropriated profit of Rs. 8.900M that is why the balance of general reserve is zero in 2004. The company also inducted Share Deposit Money to the extent of Rs. 10M. Net worth of the company has also increased to 47.67% this has increased because new assts are acquired. The capital lease to expand their manufacturing unit. Income Statement The company’s sales have shown 30.9% boost in 2004 because of their good quality products and timely delivery. Cost of goods sold decreased by 5.05% due to economies of scale. There is 25% rise in admin expenses as compared to the previous year from PKR 4,186,537 in 2003 to 5,245,003 in 204. this rise is occurred in Director’s remuneration and Lease rentals as the company has started paying Director’s remuneration and Lease rentals has gone double because the company ‘s Lease Finance has enhanced. Profitability ratios show a steady increase from 2003 to 2004. Net profit margin has increased from 1.1% in 2003 to 4.6% in 2004. Operating profit margin has also increased due to reduction in CGS with respect to sales. Interest paying capability of the company has increased as interest coverage ratio rose from 1.4 times to 1.9 times. Debt service coverage ratio of the company is constant at 1.9 times. Cash Flow Statement The cash flow of operations is showing fluctuations from 2004 to 2004. in 2004 cash generated and total operating needs have increased but net operating cash generated has become negative in 2004. The reason for this is that its interest payment and other current assets have increased. Investment has increased from PKR 24,840,000 to PZKR 91,695,000 in 2004; this is due to the increase in capital expenditures and long term deposits. This is good sign for the company as it shows company’s investment activities are increasing. This also means that in future the management of the company believes that its sales will further increase. So, the company is expending its production capacity and improving its quality. Cash flow from financing has increased in 2004 which occurred in both long term and short term loans. The net cash balance is negative in 2004 and as discussed above it is due to decrease in cash flow form operations and increasing investment and financing activities. But the management is quite hopeful that its net cash flow will be improved during 2005. Conclusion: My experience as an internee at union Bank has been a wonderful and unique learning experience. What I found at Union Bank was cooperative staff that allowed me to have hands-on experience. I was given my own office space with a computer. The bank has a pretty good working environment. The typical concept of boss and subordinates was not there; instead the subordinates have opportunity to convey their view point to their super ordinates. Because the staff here at Union Bank, I was able to work one-on-one with the supervisor, and was willing to answer of my questions about the field. During my Eight-week internship at Union Bank, and under the guidance of my supervisor, I made analysis of various clients that improved my analytical ability and I also had to opportunity to learn through observation the client relations and dealings. In Credit Administration Department (CAD) I had an opportunity to closely observe the documents handling procedure and administration and release of pledged assets. The unique organizational structure is an other feature of Union Bank. The organizational structure is very different form the one that is prevailing in the banking industry that is branch management. The Union Bank is divided into six different departments that earn their revenues and after deducting the expenses the net income is transferred to bank by the departments. The group heads report to president of bank. This unique structure is helpful to improve the efficiency of organization and the open work environment. It is said that the need and room for improvement is always there. Union Bank enjoys many strengths but a few weaknesses are also there which serve as hurdle to exploit the opportunities. The foremost is boost employee morale thorough intrinsic and extrinsic motivation for them so that they become committed and loyal to their organization. There is need to improve Online banking service in order to be competitive in this ever expanding and full of competition banking industry. On the whole, Union Bank has given me an intern experience and an insight to practical work environment. It was an interesting, valid and worthwhile learning experience. The experience that I have gained at the conclusion of my internship exceeded what I believe one could learn in the classroom. There is nothing like getting hands-on experience because it can only prepare you for what the workforce is looking for.