CBG Corporate Banking Group Finance Essay

The writer declares that this research paper is original work. All the documents, studies and other stuff consulted during the readying of this paper are punctually acknowledged. The writer understands the plagiarism policy at Lahore School of Economics and has followed good academic patterns.

Saba Javed Hayat

Recognitions

I would wish to show my sincere gratitude to my supervisor ; Professor Fareed. A. Fareedy who guided me at every measure in composing this research paper. I genuinely appreciate his digesting forbearance, encouragement and rational penetration during the preparation phases of this paper. His feedback for each question broadened my position about this research and made it a priced enterprise for me.

I would besides wish to thank all the authors/researchers whose work has formed a foundation to this research. A sincere attempt has been made to admit their work wheresoever cited in this paper.

Last I would wish to thank my parents ; Muhammad Javed Hayat and Zahida Javed, for their univocal support and great forbearance at all times.

For any errors/inadequacies that may stay in this concern research paper, the exclusive duty lies on me.

Executive Summary

Table of Contentss

Acronym

ABL Allied Bank Limited

ALM Asset Liability Management

CBG Corporate banking Group

CLA Corporate Law Authorities

DCMS Debt Capital Markets and Syndications Division

DMU Decision Making Unit

FI Financial Institution

IBG Investment Banking Group

MCB Muslim Commercial Bank

NAV Net Asset Value

OMO Open Market Operations

PBC Pakistan Banking Council

SBP State Bank of Pakistan

T1capital Tier one capital

UBL United Bank Limited

YTD Year to Date

Chapter 1: Introduction

1.1. Current Standing of Banking Industry in Pakistan

The banking industry in Pakistan has been through the origin, nationalisation and station nationalisation stages. During all the stages, it has been involved in pull offing the three nucleus portfolios ; sedimentation portfolio, loan portfolio and investing portfolio. The direction of plus and liabilities as under ALM has become a cardinal characteristic for the commercial every bit good as specialised Bankss in Pakistan. Due to planetary integrating of fiscal markets and systems, the impact of misdirection can take to terrible reverberations for the fiscal establishment. Furthermore, in this clip the Bankss are besides more prone to external fiscal hurt than of all time before.

The fiscal system of Pakistan comprises of private commercial Bankss, specialised Bankss, public Bankss, foreign Bankss, NBFIs, renting companies, insurance companies, securities houses and the similar. The commercial Bankss ; irrespective of their ownership construction, play a important function as the other channels are yet under developed and as per State Bank of Pakistan, about 80 % of money supply is held by these Bankss. The vertex organic structure for the banking sector is State Bank of Pakistan which sets the prudential ordinances for their working. The fiscal system is excessively bank centered in Pakistan and therefore the battalion of impact of activity in this sector has important branchings for the economic system at big.

In present economic status of Pakistan, Banking industry is confronting a battalion of macro factors that are doing a bottleneck in the nucleus concern of Bankss as the nonvoluntary defaults are taking to damage of the loan portfolio. Electricity deficits, devaluating currency, heightened rising prices and political agitation is badly impacting the concern of the Bankss. Hence forth the banking industry is undergoing a displacement in plus mix ; off from loan portfolio towards investing portfolio. It can be safely stated that on the supply side, Bankss are taking a pes back from loaning and are demoing a penchant to keep higher liquidness. Furthermore on the demand side, corporations are confronting macro job prevalent in economic system and an unsure concern environment.

Harmonizing to Banking Surveillance Department at SBP, the profitableness of Bankss has increased by 23 % but it has been attributed by top five Bankss harmonizing to the plus construction. The addition in profitableness is maintained by displacement in plus mix towards quality investings chiefly authorities Treasury bills and exchequer bonds. It seems that Bankss are less eager to widen loans to the private sector and are more aroused to put in the hazard free authorities documents in the presence of really high damages on their existing loan portfolios. Although at present, the thought of the displacement in plus portfolio mix is bring forthing equal income sing the macroeconomic state of affairs prevailing in the state but it is besides switching the focal point off from the development of parallel banking channels which can lend to non funded income taking to more profitableness.

1.2. Business Research Problem and Relevance of Study

The concern research job is “ to measure the investing portfolio of United bank Limited to find the nature of displacements in plus towards risk free authorities securities at the disbursal of lower development of alternate bringing channels and nucleus banking maps as possible avenues of net income for the bank. “

Commercial Bankss in Pakistan are maneuvering towards increasing their investing portfolio and squashing their loan portfolios in the past few to hedge the economic reverberations in local economic system after the beginning of fiscal crisis in planetary market in 2008 which had its contagious disease consequence on the local fiscal market despite the weak linkages between the two markets. As per Moody ‘s Rating Agency ( 2012 ) , big Bankss in Pakistan have about 430 per centum of T1 capital as direct exposure in authorities bonds while the exposure in Public sector endeavors is another whacking 139 per centum of T1 capital. This hypertrophied exposure influences their hazard profile in foreign market as the Bankss will hold to confront more rigorous conditions in the international markets.

The nucleus map of loaning has besides been neglected despite the fact that imparting to private sector, as an activity, is normally able to bring forth higher spread due to engagement of higher hazard. The first attending is geared towards investing in hazard free securities which give a good return as the PLS history ‘s sedimentation is kept by the State Bank of Pakistan at 6 % . Hence Bankss are gaining good spread and are continuously increasing exposure to authorities securities as the authorities is progressively financing its debt through the declared instruments.

Furthermore the continued focal point on development of Investment portfolio is taking the focal point off from the development of alternate bringing channels for the bulk of unbanked population of Pakistan which account for around 85 % of population. Although the a few Bankss are taking a pes in front with the development but the volume wise enlargement in alternate net income bring forthing avenues is really little. Harmonizing to Qayyum ( 2005 ) , these channels are besides low hazard supplements but the development focal point has been really little due to development of other countries peculiarly investing portfolio as a low hazard prospectus. The gravitation of state of affairs is huge as it will find the future profitableness of Bankss as the rates on sedimentations are practically fixed by the cardinal Bankss and the derived function can be earned by higher involvement and non involvement income.

1.3. Theoretical Justification of the Business Research

It is of import to analyze the subject as the Bankss ‘ nucleus map is intermediation of financess which is chiefly exhibited by the sedimentation and loan portfolio. The normal operations of Bankss have been geared towards these two sets but by under the station reforms ordinances of State Bank of Pakistan, the Bankss are allowed to pull off their foreign currencies and can actively pull off their investing portfolios. Though there is bound on overall investing portfolio as a per centum of entire assets but the categorization within the portfolio is non barred. Hence the composing is based on the exclusive discretion of banking governments. Due to show high returns on hazard free investing portfolios the profitableness is on rise but the alterations in price reduction rates can exchange the odds and the deficiency of focal point on other net income bring forthing avenues will be studied.

The survey will pull attending to fact that is the displacement towards risk free securities is doing a immense impact on the public presentation of fiscal markets and will give response to the myths refering to power of big Bankss in act uponing capital markets.

Furthermore the survey will pull attending to a freshly germinating low hazard phenomenon of alternate bringing channels in the banking sector and its prospective function in instance of inauspicious state of affairss for the investing and loan portfolio.

1.4. Cardinal Definitions

Term

Beginning

Definition

Investing portfolio

Glossary Banking & A ; Finance by Shakil Faruqi,

Published by State Bank of Pakistan.

Investing in a assortment of assets, chiefly fiscal assets such as portions, stocks, bonds, authorities or corporate securities, measures, commercial documents & A ; other fiscal instruments, existent estate and investing in belongings.

Treasury bills

Glossary Banking & A ; Finance by Shakil Faruqi,

Published by State Bank of Pakistan.

Short term debt issued by authorities to raise financess for the authorities or to modulate money supply through OMO of cardinal bank.

Impaired Loan

Glossary Banking & A ; Finance by Shakil Faruqi,

Published by State Bank of Pakistan.

A NPL with over dues of chief and involvement for 90 yearss and beyond ; or when a loan is secured by impaired collateral or with a loan security of dubious value, which turns out deficient to cover the accumulated over dues.

Advances/Loan Portfolio

Glossary Banking & A ; Finance by Shakil Faruqi,

Published by State Bank of Pakistan.

Of a bank or lending establishment consists of all loans ; disbursed and outstanding of different adulthoods ; assorted types of loans extended to assorted types of borrowers of Bankss ; the sum of loans advanced.

Securities Markets

Glossary Banking & A ; Finance by Shakil Faruqi,

Published by State Bank of Pakistan.

Is market for stocks, bonds and other securities, composed of purchasers and Sellerss of securities, and market shapers who may carry on their minutess at stock exchange, or OTC, non needfully tied to a specific topographic point

1.5. United Bank Limited

United Bank Limited ( UBL ) is my Decision doing unit as it is one of the six big Bankss of Pakistan and has a commanding market portion. UBL has tried to maintain up with the advanced image by working on undertaking Genesis, Bloomberg Electronic Bond platform and Enterprise Banking Suite while maintaining a path of costs as the overall economic conditions are instead disputing. Furthermore it has been actively take parting in the enlargement of investing portfolio through purchase of hazard free investings. Hence a research survey conducted on the enlargement in investing portfolio in the recent old ages can be of great usage across Bankss with similar size, operations and ownership construction.

1.5.1. Vision and Mission

Harmonizing to the United Bank Limited Annual Report 2010, it has a vision “ to be a universe category bank dedicated to excellence and to excel the highest outlooks of the clients and all other stakeholders ” and mission of puting “ the highest industry criterion for quality, across all countries of our operation, on a sustained footing ” by optimising “ people, procedures and engineering to present the best possible fiscal solutions to our clients ” to “ go the most sought after investing and be recognized as the employer of pick. ”

1.5.2. Core Valuess

To accomplish this long-run vision UBL has formed a steadfast stance by following six sets of nucleus values including “ Honesty and unity, Commitment and dedication, Fairness and meritocracy, Teamwork and collaborative spirit, Humility and common regard, and, Caring and socially responsible ” .

1.6. Banking Operationss

UBL has broad banking operations in retail, Islamic, corporate, investings, international and branchless classs.

1.6.1. Retail banking

Retail banking at UBL encompasses subdivision banking concern, domestic sedimentations, consumer loaning, commercial loaning and Agri-Lending. Harmonizing to Banking Surveillance Department ‘s Quarterly Performance Review ( Dec, 2012 ) , retail banking grew exceptionally in 2011 with 17 % addition sedimentations and with add-on of 87 full subdivisions and 14 bomber subdivisions. CASA and fee income besides followed an upwards flight. It besides established Signature Priority Banking in nine sofas across Pakistan and introduced a Platinum Credit card for flush client.

1.6.2. Islamic Banking

Harmonizing to Banking Surveillance Department ‘s Quarterly Performance Review ( Dec, 2012 ) , under Islamic Banking, UBL Ameen is going a precedence merchandise in the niche. Low cost sedimentations have exhibited a growing of 85 % . On contrary the client sedimentations have risen by 15 % merely. Ameen is endeavoring to go the most dependable and efficient Shariah Compliant Islamic Banking Solution Provider.

1.6.3. Corporate Banking

Corporate Banking has become a nucleus map at UBL as loan book is managed proactively with enhanced focal point on NPL recovery in the current hard times by the Corporate Banking Group ( CBG ) . Furthermore with great relationship theoretical account and focussed operations bank is able to supply quality services to corporate clients for their demands of trade funding, place remittals, hard currency direction etc.

1.6.4. Investing Banking

Investing banking is chiefly geared towards overseas markets as the markets are decelerating down in Pakistan. The biggest part of fee income under investing banking came in from Debt Capital Markets and syndications. Then the undertaking and structured finance concern has made some major parts to the fee income under investing banking country.

1.6.5. International Banking

International banking is conducted majorly in the UAE and Qatar markets as there are positive sentiments within the banking industry. There is cautious attack held in Bahrain and Yemen. CBG is working good across states and the loaning portfolio is unimpaired mostly. Retail portfolio is adequately provisioned but the residential mortgage portfolio in Dubai saw a rise in commissariats due to new demands by Central Bank.

1.6.6. Branchless banking

Branchless banking is besides on rise as Omni is turning into a profitable venture as its Dukaan web has increased from 2300 to over 4600 mercantile establishments. Furthermore it has besides launched Global Net-banking merchandise in 2011 to put the foundation of cyberspace banking platform and incorporate the system internationally.

1.7. External Environment Analysis – Banking Industry in Pakistan

A PESTEL analysis of banking industry is conducted to cognize about the banking industry in Pakistan. This environmental analysis helps to understand the concern jobs more elaborately and to acknowledge menaces, avoid dazes, place chances, and develop better long-run and short-run planning.

The political impact on the banking industry is sizably reduced after the practical liberty of cardinal bank whereby the State bank of Pakistan has autonomy in doing policies for the banking sector. But political forces do play in auction of Treasury bills and authorities securities in footings of credence sums as the authorities is making more than 60 % shortage funding from commercial Bankss. Economic factors like involvement rate discounting by 150 bits per seconds and deprecating rupee dollar exchange rate is switching the kineticss of the industry. Social factors have a somewhat turning portion to play as the societal category which now can entree banking merchandises has started to widen up. Fiscal inclusion through alternate bringing channels is a possible gateway in front. Technologically the industry is at par with international criterions where the top Bankss in industry are maintaining themselves automated by utilizing systems like Symbols, Unibank, LOS scheduling and other fiscal integrating package environmental factors have no direct impact on the industry but they can indirectly impact the Bankss by doing amendss to their clients. The legal position of Bankss at big is secured by SBP wher the Bankss are penalized as per the prudential ordinances and particular tribunals are besides available in instance of fiscal undiscipline on portion of FIs or their clients.

Chapter 2: Literature Reappraisal

Development of Banking Industry in Pakistan

Banking industry in Pakistan has played a important function in the patterned advance of economic system. It has been impacting the growing of assorted sectors in economic system and hence is non merely a sector but a system. Harmonizing to Wachtel ( 2001 ) , Bankss perform core map of intermediation and hence investment is a secondary map. The division depends on the cardinal bank ordinances and hazard return profile. Jaffe and Levonian ( 2011 ) say that Bankss determine plus allotment based on the hazards and associated costs every bit good as their use in bring forthing value.

Haque ( 1997 ) says that nationalized Bankss had lower efficiency due to non diversified group of assets. In position of Qayyum, A. ( 2005 ) , the degenerated banking industry at origin was turned into publicly owned endeavor in nationalisation stage. Later it was privatized easy to bring forth a mix of public and private owned Bankss. In nationalisation stage the banking industry was chiefly involved in serving the demands of authorities with secondary focal point on the corporate concerns. Furthermore nationalisation wiped out the private sector. Harmonizing to Khan, A H. ( 1995 ) , due to tag regressive effects in economic system, nationalisation policy was repealed.

Qayyum, A. ( 2005 ) , farther says that ab initio banking industry was regulated by SBP, PBC and CLA. In pre reform epoch, PBC was modulating the commercial Bankss of public sector and CLA regulated the capital markets and SBP was the vertex organic structure. After that SBP assumed the complete function in modulating the commercial Bankss in Pakistan. In his position, the SBP was subsequently required to execute quarterly public presentation reappraisal of all Bankss. Subsequently the Bankss were regulated under the revised Banking Companies Ordinance ( 1962 ) and amended State Bank of Pakistan Act ( 1976 ) . After this, SBP rose as apex organic structure for commercial Bankss with SECP as regulative organic structure for capital markets.

Banking Sector Reforms

The banking sector underwent nationalisation giving complete control of operations and portfolio direction to the authorities. Harmonizing to Qayyum, A. ( 2005 ) , this period was marked by concentrated ownership of assets, induction of excessively subsidized recognition strategies with political motives, limitation on private commercial Bankss, debut of recognition ceilings and controlled involvement rate government which lead to demise of banking system in Pakistan. The revenue enhancement rate of 35 % besides contributed to additions in loaning rate during the nationalisation stage.

Hayat, S. ( 2011 ) , discusses that rectification in the banking system patterns was brought approximately by the fiscal sector reforms which were done in two sets of stages. The first stage of reforms were introduced in 1991 opening doors of banking concern to private investor to cut down to negative sentiments created by nationalisation. Consequently, foreign first tier Bankss were allowed to do entry in the market. State Bank played a important function to regulative every bit good as be aftering organic structure to cut down the branchings of nationalisation and planned the recovery way for the banking system at big.

The 2nd stage was marked with suspension of Banking Council and State bank of Pakistan became the exclusive regulative authorization. International evaluations like CAELS and CAMELS were introduced. The of import reforms pertained to denationalization, equity sufficiency theoretical account for the Bankss, better corporate administration and subsidized funding of non conventional sector. Harmonizing to State Bank of Pakistan ( 2011 ) , Banking Sector Strategy ( BSS ) has been strategized for the coming decennary. BSS focuses on 10s core countries that include execution of a fiscal inclusion plan, Strengthening consumer protection, Strengthening competition and efficiency, beef uping and consolidating the banking sector, Strengthening prudential ordinance and supervising, debut of a model for amalgamate supervising, development of a fiscal safety cyberspace, Strengthening of powers of SBP to keep fiscal and pecuniary stableness, intensifying fiscal intermediation and developing the fiscal substructure, particularly payment systems.

Fiscal Standing of Banking Industry in Pakistan

Harmonizing to Financial Sustainability Review ( 2011 ) , “ The plus base of the banking system has soared by 8 per centum ( Rs. 577 billion ) , the most important rise in a half twelvemonth since 2007, on the dorsum of a robust addition in investings, overpoweringly in authorities documents ” . This justifies the issue at manus and overall investing in the authorities documents. Overall banking sedimentations have increased by 9.4 % aggregative.

Furthermore net incomes are lifting and the overall part of top five Bankss in Pakistan is falling. Hence the smaller Bankss are besides demoing amore part in aggregative banking net incomes. A surprising component is that the earning from investing in authorities securities has become 30 % of entire involvement income as compared to 24 % in last twelvemonth. The tendency in authorities securities enlargement beneficial to authorities as it is able to maintain the shortage funding within SBP prescribed bounds. But harmonizing to Financial Sustainability Review ( 2011 ) , this tendency is non sustainable as it subdues the nucleus map of intermediation and its profitableness is hinged upon the price reduction rate.

Further Financial Sustainability Review ( 2011 ) says that “ rise in investings ( 22.4 per centum ) outpacing the growing in progresss ( 1.04 % ) by a broad border, progresss to sedimentations ratio ( ADR ) of the banking sector has farther come off, dropping from 61.4 to 56.7 per centum during H1-CY11. ” This shows that Bankss have equal liquidness and besides shows that Bankss are risk averse to the entire progresss to private sector. Private sector investing is herding out and tendency can be reversed merely by better macro economic conditions.

NPLs are lifting increasingly despite contraction in the loan portfolio. Credit hazard pertains high and infection ratio though high is good curtailed.

Capital adequateness as determined by CAR is demoing favourable motions in the numerator and the denominator. This has improved the solvency profile of Bankss as CAR has increased from 11 % to 14 % .

Investing Portfolio of Banks – Anecdote of Last Decade

Commercial Bankss are puting to a great extent in the fiscal markets of Pakistan, largely in currency and money markets. Harmonizing to Faruqi, S. ( 2011 ) , Bankss have monopolized the short term money markets including t-bills market, financess market and repo market. They are besides active in authorities bonds market puting to a great extent in T – measures. He farther says that Bankss are non active in the stock market of Pakistan for the investor hazard and SBP imposed ordinances. This breaks the myth of Bankss commanding the stock markets.

Harmonizing to Watchel, P. ( 2001 ) , big Bankss tend to avoid undue exposure to securities market and invest merely in less hazardous securities: Treasury bills, authorities bonds and AAA rated bonds. In world, even though separately the exposure to stock market is little but is considered aggregate, the exposure to securities market is significant making to around one tierce by the terminal of last twelvemonth.

Faruqi, S. ( 2011 ) says that mean one-year growing rate has been about 20 % over the decennary. It was faster in 2nd half of decennary where it outpaced the plus growing rate of 14 % . In 2010, the investing was at around 43 % of the entire investing hence connoting that the Bankss are preferring to heighten their exposure to securities market than to heighten their exposure in the recognition markets.

Investing Portfolio of Banks – Share of Risk free Instruments

Investing portfolio is concentrated in authorities securities and within those chiefly in Treasury bills. As per Financial Sustainability Review ( 2011 ) , more than 50 % of investing portfolio is held in Treasury bills. Though it is hard to estimate the overall investing flow as it is short term but stock follows of Treasury bills rose from 106 billion rupees to 1120 billion rupees over the last decennary. Harmonizing to Faruqi, S. ( 2011 ) , there is considerable reshuffle of securities every bit good as size of those securities with a primary focal point on shorter term Treasury bills.

Furthermore Bankss are besides puting in authorities bonds ; t-bonds and Sukuks. Faruqi, S. ( 2001 ) says that the proportion of investing in investing portfolio is worsening and has taken a nosedive from 41 % in start of decennary to 11 % in the terminal of decennary.

The relative portion of investing in securities to entire assets of banking inclusive of all types of assets has grown from 16 per centum in 2000 to 28 per centum in 2010. There has been a steady displacement in composing of Bankss in favour of securities.

Faruqi, S. ( 2001 ) says that rise portion of investings has occurred with matching diminution in portion of banking recognition and other plus, chiefly hard currency balances held, inter-bank loaning and loans to fiscal establishments and the similar.

Even though the overall exposure is lifting in the terminal, but exposure is really volatile in instance of both for long and short term securities. The exposure of securities of full banking system is reported at 30 per centum of securities market.

Development of Alternate Delivery Channels as a Source of Revenue – Performance Reappraisal

Harmonizing to the Infosyst Limited Report ( 2011 ) , “ Channelize through channels ” is the new mantra for present twenty-four hours Bankss, which older yearss relied entirely on the subdivision web to carry through minutess, sell merchandises and get clients. Before ADCs, spread outing the concern meant adding more subdivisions at high existent estate and licensing costs. Channelss like the Kiosk, ATM and Internet Banking have enabled Bankss to make a wide consumer base across geographicss with small clip and attempt.

Valluri ( 2011 ) says that in international market, there is a turning demand for channel and back uping engineering. Banks are incorporating channels in order to vouch truth and unity of dealing informations. Channelss are agencies of client service every bit good as the agency for gross revenues and client acquisition. With wealth banking clients going more engineering understanding, their use of alternate channels of banking is increasing. Banks are besides puting in nomadic banking applications to enable wealth banking clients transact over smart-phones.

As per the Infosyst Limited Report ( 2011 ) , Bankss around the universe are seeking for solutions that can cut down costs without impacting client service. It is of import that Bankss expeditiously manage sellers for different service bringing channels along with the versions of package. Although alternate channels are non the most effectual at bring forthing new gross revenues, they improve client satisfaction and keeping. With the aid of engineering, the banking industry can develop or spread out into new channels to last in the current competitory environment.

Any new channel involves cost and in alternate channels, engineering plays a critical function in footings of supplying a close to ramify experience to the intelligent wealth direction client.

Alternate bringing channels by United bank Limited

Harmonizing to Aurora ( 2012 ) , UBL has developed alternate bringing channels easy by supplying the chance to clients of utilizing the cyberspace banking, booths, ATMs and branchless banking. Harmonizing to Branchless Banking Regulations announced by the State Bank of Pakistan ( SBP ) in June 2011, introduced a Level ‘0 ‘ branchless banking history to convey the low income section into the fiscal services loop.A As one of the two major suppliers of branchless banking services in Pakistan, UBL Omni was the first to present Level 0 histories. ( Telenor EasyPaisa is presently in the preparative stage of establishing these histories. )

Harmonizing to the latest edition of the SBP ‘s Branchless Banking Newsletter ( April-June 2012 ) , UBL Omni ‘s Level 0 histories have been so popular that the branchless banking section experienced a record growing of 37 % in the 2nd one-fourth of 2012 in footings of the figure of nomadic banking histories opened. The Newsletter says that “ the growing is attributable to a noteworthy addition of 370 % in Level 0 histories opened wholly by UBL Omni. ” Apart from the Level 0 histories and ATM card, UBL Omni has achieved a great trade more in the last two old ages giving the new run stronger legs to stand on.

Chapter 3: Fiscal Analysis – United Bank Limited

UBL has been able to accomplish higher net income twelvemonth on twelvemonth footing and it has been able to bring forth Net Income of around 15.5 billion and has a big pretax net income amounting to 24.2 billion. Despite the disruptive state of affairs in the economic system due to financial undiscipline, inflationary force per unit areas and power outages, UBL has managed to turn by 10 % in its domestic web and has showed 37 percent addition in the pretax net income.

Profitableness

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The five twelvemonth information analysis shows that UBL has been able to increase its overall involvement income with a little dip in 2010 and an 18 per centum addition from last twelvemonth. Similar consequences have transferred into entire net gross as the involvement expensed out was non of the line. After accounting for operational disbursals and other losingss, the pre-provision net income was besides 24 % higher than last twelvemonth. Provisioning done under both the general and specific caputs, lead to 37 % rise in pretax net income screening that lesser provisioning was required by the regulative organic structures due to better quality assets.

Tax return on Assetss

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

Due to really high net income in comparing with the last old ages ‘ figure, the bank was able to bring forth a really high return on its assets base. Due was partially due to command disbursals, prudent loaning and addition in better quality investings. Furthermore the proportion of gaining assets in balance sheet is 87 % hence the return received are high on every rupee invested as plus.

Tax return on equity

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

Furthermore the return on equity is well big. Despite a little autumn in 2009 in return on equity due to macroeconomic fiscal convulsion, UBL has been able to travel in front and is lifting once more on the flight. Harmonizing to the the largest shareholding in UBL is of Best-way group which have a dominating portion of 51 % . The following largest stockholder is State bank of Pakistan ( SBP ) with a shareholding of 19.5 % and the following in line is general public with 13.7 % interest in equity.

Expenses Trend

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

Due to the cost direction attempts at UBL, it has been able to accomplish higher net incomes as compared to last twelvemonth. It has managed to command the growing in the administrative disbursals to increase its subdivision web. It has somewhat improved its cost to entire gross ratio from 42 % to 40 % due to its quarterly mark of cost to income ratios. Furthermore, the forces disbursals have besides decreased over 5 old ages from 20 % in 2007 to 16 % in 2011. The heaviest cost that the bank pays is one pertaining to revenue enhancement and is adhering upon the bank. In 2011, 36 % of pre-tax net incomes were given as revenue enhancements.

Growth in Total Assets – From Lending & A ; Investment Portfolios

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The day of the month analysis shows that despite the macroeconomic instability, the bank was able to accomplish a growing rate of 11.2 % in its assets in 2011 as compared to 2.42 % in 2009 where the growing was merely 2.42 % .

It is interesting to look at the growing in advances/ fundss as the last three twelvemonth growing rates are negative with – 1.98 % in 2011. On the other manus, the growing in investings has been phenomenal in last two old ages with 48 % growing in investings in 2011.

Government Securities V. Fundss

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The break-up of entire assets into fundss and authorities securities shows that approximately 60 % assets were the progresss while merely 18 % of assets were authorities securities. By the terminal of last twelvemonth, the tendencies seemed to return back where the entire fundss were merely 46 % of entire assets while authorities securities amounted to a astonishing 33 % of entire assets. This shows that UBL is keeping back from the hazardous loans in the present economic times and it is puting to a great extent in the authorities securities to cut down its exposure to risky loaning.

Growth in Investments

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The overall investing growing is besides immense based on twelvemonth on twelvemonth footing. The last two old ages have witnessed an investing addition of 79 % and 48 % severally. The primary investing is done in authorities backed securities for both long term and short term but basic focal point is on shorter adulthood investing securities like authorities Treasury bills.

Intermediation Efficiency

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The Net Interest border Ratio is reasonably stable for the clip frame of 2009 to 2011 at around 60 % . The ratio is stable because the addition in net involvement is being matched by the addition in the norm gaining assets due to increase in the regional web.

Earned Spread

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The bank is holding a maintained spread of around 6 % during the past four old ages. The spread in 2007 was larger due to increased loaning at better rates. Since Bankss are looking to hold safer and lesser hazardous securities by which they can do sufficient net incomes, therefore the spread is falling due to alter in hazard soaking up willingness of UBL in spread outing its loan portfolio.

Growth in Gross Finances and NPLs

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The ground of bottleneck in loan portfolio can be gauged from the impaired loaning growing rates. These are besides referred to as non-performing loans in different texts. The growing rate in NPLs has been phenomenal due to big sum of nonvoluntary defaults owing to the electricity crisis and stammering monetary value rising prices. The growing in NPLs has been 261 % in 2010 and 83 % in 2011 screening that the sum thereof is well big and hence explains partially the ground of bottleneck of loan portfolio.

NPLs Analysis

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The NPLs as per centum of gross fundss are highest in the last two old ages with standing at 3 % in 2011 but due to increase in the equity as per the SBP regulative demands and Basel III organizing its footfalls for ordinance, the NPLs as per centum of equity have fallen to 3 % ( 2012 ) from a high of 15 % ( 2007 ) . Similarly their proportion is smaller as per centum of equity adjusted for reappraisal of held to adulthood fiscal instruments.

Commissariats as proportion of Impaired Lending

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The commissariats ( both for particular and general intents ) have been made and they were able to cover the NPLs to 100 % .

Capital Adequacy

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

United Bank Limited is able to cover its regulative demands of capital adequateness. Hence the bank is adequately capitalized in signifier of both tier 1 and tier 2 capital to absorb any losingss and act as a shock absorber for fiscal daze. The bank has been able to bring forth a Capital Adequacy Ratio of 14.88 % in 2011 which is above the minimal demand of 13 % by State bank of Pakistan. Furthermore the grade I CAR has improved from 10.3 % to 10.4 % from 2010 to 2011. The equity is 9 % of entire assets in 2011 and due to positive reappraisal impact the adjusted equity is 10.2 % of entire assets.

Liquidity Position

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The sedimentations largely composed of current sedimentations ( about 50 % – 70 % of entire sedimentations ) and to keep liquidness is a nucleus map for the direction to guarantee the eloquence of day-to-day operations. The entire liquid assets as per centum of entire sedimentations and borrowing are on a rise since 2008 from 32 % to 55 % in 2011.

Liquid Hazard

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The liquidness hazard is closely monitored in Basel III Accord due to its contagious disease consequence on full fiscal system. The gross loans as per centum of sedimentations have fallen from around 80 % to 56 % over a period of last five old ages. It shows that the liquidness place is instead satisfactory as higher progresss can increase liquidness hazard. The demand sedimentations are increasing as per centum of entire sedimentations. These are practically no cost sedimentations and Bankss look for them. Even after including SBP Refinancing Facility in widening loans, the liquidness hazard is non significant due to SBPs handiness of loaner of last resort provided that the SBP has 2nd highest commanding shareholding of UBL.

Chapter 4: Fiscal Analysis – ( Peer Analysis of UBL with MCB and ABL )

The pick of mention DMUs ( Decision Making Units ) was taken based the size of bank, similarity in operations and subdivision web. Two closest equals of United Bank Limited were Muslim Commercial Bank Limited ( MCB ) and Allied Bank Limited ( ABL ) .

4.1. Return on Assetss

Beginning: Published Annual Reports of MCB, UBL and ABL ( 2011 )

The return on assets ratio shows that the United Bank Limited is able to bring forth more net income per unit of input due to its higher earning ability and better cost controls than its equals.

4.2. Growth Rates ( 2009 vs. 2011 )

Beginning: Published Annual Reports of MCB, UBL and ABL ( 2009 & A ; 2011 )

The growing in entire assets for MCB and ABL has remained reasonably near to 15 % from 2009 to 2011 but UBL assets have shown a lower growing rate of 2.4 % in 2009 but around 11 % growing in 2011. The gross fundss have experienced a negative growing rate in instance of all three DMUs. Even though the tendency is relentless for past three old ages in instance of MCB and UBL, ABL had an enlargement in fundss in 2009. Furthermore NPLs for all Bankss have a positive growing rate in both old ages but NPL direction should be a cause of concern at UBL. Investings have been on rise for all the three DMUs with 150 % growing in investings of ABL. Customer sedimentations are besides turning steadily with crisp rise in UBL client sedimentations. Equity growing is besides in appropriate over all old ages.

4.3. Gaining spread

Beginning: Published Annual Reports of MCB, UBL and ABL ( 2011 )

The gaining spread as measured by the derived function in plus output and cost of financess is positive for all Bankss demoing that they are profitable in their involvement gaining operations from the loaning portfolio and investing portfolio while cresting their involvement disbursal in their sedimentation portfolio.

4.4. NIMR

Beginning: Published Annual Reports of MCB, UBL and ABL ( 2011 )

The NIMR/avg. gaining assets is besides big for all Bankss and is largest for the MCB bank due to larger net involvement border.

4.5. Net income from noncore operations

Beginning: Published Annual Reports of MCB, UBL and ABL ( 2011 )

Other runing income as per centum entire net gross is besides higher for ubl screening that UBL is able to better pull off its non nucleus activities. ABL is closely undermentioned UBL at.21 and.24 severally.

4.6. Car

Beginning: Published Annual Reports of MCB, UBL and ABL ( 2011 )

The CAR ratio above 13 % for all Bankss as it shows that all Bankss have sufficient grade I and tier II and they are carry throughing the regulative demands of SBP.

4.7. Equity Proportions

Beginning: Published Annual Reports of MCB, UBL and ABL ( 2011 )

Capital adequateness measured from the ratio of equity as per centum of entire assets shows that the MCB has highest proportion of its assets financed by equity and hence explains the 40 % CAR. ABL has managed to maintain 7.3 % equity as per centum of entire assets and for UBL it is 9 % . This snapshot across DMUs validates the snapshot received from CAR.

4.8. Adjusted Equity Proportions

Beginning: Published Annual Reports of MCB, UBL and ABL ( 2011 )

After seting for the impact of reappraisal of securities, the adjusted equity of all three Bankss comes closer to each other. The crisp difference in equity and adjusted equity shows shortage on reappraisal of assets on the balance sheet of CB.ABL and UBL have both received a net positive reappraisal excess.

4.9. Government Securities Proportions

Beginning: Published Annual Reports of MCB, UBL and ABL ( 2011 )

All three big Bankss have about 33 % of their assets parked into hazard free authorities securities. MCB has invested the most to a great extent in hazard free securities due to the growing trends in impaired loaning.

Chapter 5: Business Research Problem and Research Methodology

5.1. Business Research Problem

The research job is to “ measure the investing portfolio of United bank Limited to find the nature of displacements in plus towards risk free authorities securities at the disbursal of lower development of alternate bringing channels and nucleus banking maps as possible avenues of net income for the bank. ”

Presently the commercial Bankss in Pakistan are routing towards enlargement in their investing portfolio on disbursal of their loan portfolios in the past few old ages as a agency to hedge the economic reverberations in local economic system. The tendency is more marked in the larger Bankss as apparent by the recent ruin in Moody ‘s evaluation of five Pakistani commercial Bankss while maintain a negative mentality for them in the close hereafter. The ground stated in a published article in The News International ( 2012, July 19 ) explains that “ the five affected Bankss hold ample direct and indirect exposure to Pakistani authorities, which links the strength of their balance sheets closely to that of Pakistan ‘s, whose downgrade to Caa1 implies a greater chance of default over the short term ” .

Harmonizing to Moody ‘s Rating Agency ( 2012 ) , these top Bankss have about 252 to 430 per centum of T1 capital direct exposure in authorities bonds entirely. Exposure in Public sector endeavors is another 63 to 139 per centum of T1 capital. This hypertrophied exposure influences their hazard profile in foreign market as the Bankss will hold to confront more rigorous conditions in the international markets. The declared state of affairs is sedate because our fiscal system is a portion of planetary fiscal system in footings of inter-related minutess. A autumn in recognition evaluation makes the Bankss ‘ foreign currency sedimentation ceiling to take down farther. This will impact their fiscal activities in the international fiscal markets as the foreign Bankss look at the evaluation really earnestly before set uping a contact.

The nucleus loaning map has besides taken a back place in present times even though it is usally able to bring forth higher spread due to higher hazard involved in loaning to private sector. The major concentration is geared towards the hazard free securities which are giving a good return provided the ceiling of involvement disbursal on PLS histories for Bankss is kept at 6 % by the State Bank of Pakistan. Hence Bankss are gaining good spread and are continuously increasing exposure to authorities securities as the authorities is progressively financing its debt through the declared instruments.

Furthermore the continued focal point on development of Investment portfolio is taking the focal point off from the development of alternate bringing channels for the bulk of unbanked population of Pakistan. Although the a few Bankss are taking a pes in front with the development but the volume wise enlargement in alternate net income bring forthing avenues is really little. The gravitation of state of affairs is huge as it will find the future profitableness of Bankss as the rates on sedimentations are practically fixed by the cardinal Bankss and the derived function can be earned by higher involvement and non involvement income.

Harmonizing to Faruqi ( 2011 ) , this enlargement in investing portfolio is predicted to be a impermanent phenomenon which will return back as the economic system additions momentum. They say that the financial consolidation can take topographic point on portion of authorities if financial subject is observed. They say that capital influxs can be managed by the floaty remittals inflow and therefore the trust on investing is a impermanent phenomenon. As the economic system improves the exposure to loans will outnumber the entire exposure in investing portfolio.

But another school of idea led by hazard analysts at Moody ‘s considers it as a more of a lasting phenomenon where the Bankss are geared towards acquiring the fee based income from investing portfolio enlargement while avoiding the recognition hazard part tagged with loaning activities. This school strongly believes that now the unfavourable operating environment is here to prevail as trade shortage is lifting and capital influxs are falling due to political uncertainnesss and digesting structural inflationary force per unit areas.

5.2. Research Aims

This concern research aims to happen replies to following myths about the banking industry in Pakistan and to happen that whether the development of two most promising beginnings of profitableness i.e. Alternate Delivery channels will go on to increase profitableness of Bankss. The Myths along with relevant hypothesis are stated below.

Whether the enlargement in investing portfolio important in sum and growing rate.

Holmium: Investing portfolio enlargement is undistinguished.

H1: Investing portfolio enlargement is important.

Whether this portfolio is really geared towards the investings in the hazard free authorities securities.

Holmium: Investing portfolio is non geared towards hazard free authorities instruments.

H1: Investing portfolio is geared towards hazard free authorities instruments.

Whether the profitableness from investing portfolio is equal and is this phenomenon sustainable in the dynamic fiscal environment while comparing with the loan portfolio.

Holmium: Profitableness of investing portfolio is non equal and sustainable in relation to loan portfolio

H1: Profitableness of investing portfolio is equal and sustainable in relation to loan portfolio

Whether the development of alternate bringing channel will ensue as an surrogate sustainable profitableness beginning.

Holmium: Alternate bringing channels will non be an equal and sustainable profitableness beginning

H1: Alternate bringing channels will be an equal and sustainable profitableness beginning

Research Methodology

The above stated concern research objectives clearly stipulate that the one method of research will non be suffice for the accurate and valid decision hence a combination of research methods will be applied as Hansen & A ; Cottle ( 1998 ) have stated that a good research should non curtail to one method but should use the research method that is most appropriate be it a remarkable method or a combination of methods.

Harmonizing to Saunders, M. , P. Lewis, et Al ( 2007 ) , both the quantitative and qualitative aspects of research method is necessary for this concern research paper as “ Mode Two Knowledge ” is produced by this paper which is practical and applied cognition coming from the strict analysis of concern state of affairs.

Study scenes are natural and hence are non-contrived. For this ground for this paper a deductive, interpretivist and objectivist attack is used and Greener ( 2008 ) defines these three footings as coevals of research from a theory, power of subjective analysis of state of affairs and ability to look into facts as they are severally.

Henceforth to prove the first two research aims, a wholly deductive and quantitative analysis is required to explicate a numerical footing for the approval/disapproval of hypothesis. The last three inquiries require a combination of qualitative and quantitative research methods with major focal point on deductive qualitative primary analysis.

For the secondary/Content analysis, information is collected from published studies Bankss under survey had no cognition of the possibility of this survey hence there are no unreal scene in the information pool. Cross sectional information is collected on three Bankss ; United Bank Limited, Muslim Commercial Bank and Allied Bank Limited, over FY 2009 to FY 2011. The content research explores past three twelvemonth tendency in the investing portfolio in footings of capitalisation and constituents at UBL while besides discuss the investing financess managed by United bank Limited in both money and capital markets.

To bring forth equal response for the last two research aims, qualitative/survey research methods are adopted under which two experience studies, twenty five questionnaires and one focal point group is conducted. Questionnaires are conducted in the investing banking section and recognition expense sections.

5.1.5. Data Reliability and Sources of Potential Biases

The information is collected from punctually audited fiscal statements of Bankss and official web site of State Bank of Pakistan. Due to divergent involvement of research worker and aggregator, the information is assumed to be dependable and without any important prejudice.

Chapter 6: Contented Research Finding

The content research is conducted to cognize the growing existent interrupt up of investing portfolio of Bankss to cognize the exact allotment to put on the line free and hazardous investings over past five old ages from ( 2007 to 2011 ) . Furthermore the form of securities held in UBL investing financess is analyzed to deduce about the penchant of fund directors at United Bank even for general investing intent.

6.1. Investing Portfolio and its Components

Investing PortfolioDec-07

31-Dec-11

31-Dec-10

31-Dec-09

31-Dec-08

31-Dec-07

PKR mio

PKR mio

PKR mio

PKR mio

PKR mio

Entire

294,410.66

224,578.56

136,145.524

116,328.29

115,585.65

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The investing portfolio of United Bank Limited has been spread outing continuously since 2007. In FY 07 to FY 08 the growing in portfolio was minimum due to the convulsion economic state of affairs and instable domestic capital and equity markets. But as the state of affairs improved, Bankss increased their exposure bit by bit in FY 09 at rate of 17.2 % but from FY09 to FY 10, the growing impulse was 64.7 % twelvemonth on twelvemonth footing. This was chiefly because of sudden addition in NPLs from the debitors of the bank who were non able to keep their concerns given the inflationary force per unit area, autumn in international concern chances, lag in foreign direct investing and political instability.

This portfolio remains profitable for UBL and the positive market conditions for the investings encouraged the bank to providentially put in the money, capital and equity markets in the approaching old ages. The tendency persists in FY 11. It is interesting to province that all big commercial Bankss have taken immense exposures in the investing side of their balance sheet over the past three old ages.

The exposure in each market and each type of merchandise is explored farther in the survey.

6.1.1. Government Securities as portion of Investment Portfolio

Government Securities

31-Dec-11

31-Dec-10

31-Dec-09

31-Dec-08

31-Dec-07

PKR mio

PKR mio

PKR mio

PKR mio

PKR mio

Federal Government Securities

235,037,038.00

160,179,234.00

77,673,427.00

82,375,853.00

86,029,117.00

Others

4,385,444.00

4,333,444.00

Foreign Securities

29,239,118.00

24,590,740.00

20,281,469.00

21,238,594.00

5,827,330.00

Provision for decline in value of investings

( 2,726,226.00 )

( 2,658,000.00 )

( 2,252,653.00 )

( 2,536,770.00 )

( 351,191.00 )

Deficit on reappraisal of available for sale investings

( 2,763,193.00 )

( 3,320,862.00 )

( 3,046,955.00 )

( 9,781,967.00 )

( 365,741.00 )

Deficit on reappraisal for trading investings

( 43,750.00 )

( 38,365.00 )

( 3,006.00 )

( 19,547.00 )

( 15,755.00 )

Entire Government Securities

258,742.99

178,752.75

92,652.28

95,661.61

95,457.20

As Percentage of entire Investings

87.89 %

79.59 %

68.05 %

82.23 %

82.59 %

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The information clearly shows that the full investing portfolio is to a great extent geared towards puting in federal authorities securities which are issued by the cardinal bank. Almost 80 % of entire investings travel into authorities securities. Of the entire authorities securities invested in, more than 80 % is invested in federal authorities low hazard securities irrespective of entire proportion of authorities securities in the investing portfolio and the size of entire portfolio.

It is worthwhile to detect that bank is confronting losingss on the values of securities both in held for trading portfolio and available for sale portfolio and has been doing purveying all along.

6.1.2. Equity Investments as portion of Investment Portfolio

Equity Investings ( including Mutual Funds ‘ Unit of measurements )

31-Dec-11

31-Dec-10

31-Dec-09

31-Dec-08

31-Dec-07

PKR mio

PKR mio

PKR mio

PKR mio

PKR mio

Listed Companies

6,193,076.00

3,638,227.00

3,639,088.00

6,229,255.00

3,449,960.00

Unlisted Companies

445,474.00

445,382.00

441,574.00

441,465.00

441,106.00

Entire Equity Investment

6,638.55

4,083.61

4,080.66

6,670.72

3,891.07

Entire Equity Investment as % of Investing

2.25

1.82

3.00

5.73

3.37

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

Equity investings including common financess form a really infinitesimal portion of entire portfolio runing between 2 % to 6 % . Maximal exposure ( about 90 % ) is taken in listed securities due to their active secondary market and possible to drop at a better rate and in quicker clip.

6.1.3. TFCs, Debentures, Bonds and PTCs as portion of Investment Portfolio

TFCs, Debentures, Bonds and PTCs31-Dec-07

31-Dec-11

31-Dec-10

31-Dec-09

31-Dec-08

31-Dec-07

PKR mio

PKR mio

PKR mio

PKR mio

PKR mio

TFCs/PTCs – Listed

2,686,884.00

2,437,296.00

2,667,774.00

1,309,341.00

985,184.00

TFCs – Unlisted

3,291,556.00

26,833,263.00

24,570,114.00

5,778,897.00

6,000,195.00

Entire TFCs, Debentures, Bonds and PTCs

5,978.44

29,270.56

27,237.89

7,088.24

6,985.38

TFCs, Debentures, Bonds and PTCs as per centum of Investings

2.03

13.03

20.01

6.09

6.04

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

Chemical bonds, TFCs and PTCs are besides an built-in portion of investing portfolio. TFCs if issued by good companies are invested in even without their listing on stock exchange. UBL has a larger exposure in unlisted TFCs as the Bankss normally syndicate while assisting to publish TFCs. Their concentration varies based on adulthood of TFC and the frequence of induction. Hence they are non the make up one’s minding factor in the investing portfolio composing.

6.1.4. Other Investments as portion of Investment Portfolio

Other Investments1-Dec-07

31-Dec-11

31-Dec-10

31-Dec-09

31-Dec-08

31-Dec-07

PKR mio

PKR mio

PKR mio

PKR mio

PKR mio

Common Fund units

2,114,075.00

164,662.00

191,299.00

211,583.00

262,201.00

Preferable Shares

477,816.00

463,977.00

188,895.00

Investing in associates

18,859,065.00

9,584,140.00

9,123,028.00

5,101,611.00

8,249,575.00

Investings in commercial documents

50,438.00

Shares Repo

Sukuk Bonds

1,534,237.00

2,235,268.00

2,640,040.00

1,549,648.00

685,000.00

Unsecured bonds

4,392.00

4,392.00

4,592.00

6,676.00

8,300.00

Participation Term Certificates

10,661.00

19,202.00

26,838.00

38,205.00

46,920.00

Entire other Investings

23,050.68

12,471.64

12,174.69

6,907.72

9,252.00

other investings as Percentage of entire Investings

7.83

5.55

8.94

5.94

8.00

Beginning: Published Annual Reports of UBL ( 2007-2011 ) .

The investing in other securities is besides non a to a great extent argued capable as the denomination in each bomber class is based on hazard return profile of each class and the little PKR denomination that each of them has. In other investings, the most important point is investing in associates and UBL has two associate companies in which it has continues to maintain a old by taking its investing placed over at that place. The overall exposure in other investings has non been more than 8.00 % over past five old ages.

6.2. UBL Investing Fundss

UBL has been continuously pull offing investing financess in both money market every bit good as capital market to bring forth net incomes. The fund activity gives a brief about how these financess are managed, their nonsubjective and the plus allotment. The allotment of resources within the financess will besides give a position about how UBL perceives its investing aim to be. A few financess managed by United Bank Limited are discussed as under.

6.2.1. UBL Government Securities Fund

Harmonizing to Fund Manager Report ( 2011 ) this fund grew by about 16 % to PKR 4.9 bio due to high investor assurance. The aim of this fund was to bring forth competitory return with minimal hazard. Hence the composing of plus allotment is given in the tabular array below.

Asset allotment

Dec 11

Placement with Bankss

11 %

PIB/GOP Ijara

8 %

Treasury bills

71 %

Cash

10 %

Beginning: Fund Directors Report ( Dec, 2011 )

This fund has invariably outperformed the bench grade of 10.67 % and its YTD comes out to be 14 % . The authorities securities have invariably made a higher net income and yielded a better return despite little hazard attached to them.

6.2.2. UBL Liquidity Plus Fund

This fund is chiefly geared towards puting in low hazard assets to accomplish relatively higher day-to-day returns while pull offing high liquidness. The ULPF generated a return of 11.14 % while the benchmark as defined in Fund Manager Report ( 2011 ) was 10.24 % . The plus allotment of fund is given below

Asset allotment

Dec 11

Placement with Bankss

28 %

Treasury bills

67 %

Cash

5 %

Beginning: Fund Directors Report ( Dec, 2011 )

Again this fund has a really high proportion of hazard free Treasury bills and its deliberate YTD is coming out to be 12.06 % which is really high than the benchmark of 10.24 % .

6.2.3. UBL Saving Income Fund

It is an unfastened ended fund with aim of supplying competitory returns with moderate degree of hazard. The fund size has been around PKR 5 bio buttocks per Fund Mangers Report ( 2011 ) . The plus allotment as per NAV comes out to be as following.

Asset allotment

Dec 11

Placement with Bankss

15 %

PIB/GOP Ijara

7 %

Treasury bills

69 %

Cash

9 %

Beginning: Fund Directors Report ( Dec, 2011 )

The deliberate monthly YTD comes out to be 13.34 % and surpasses the benchmark rate of 12.66 % even though about 70 % investing is done in low hazard return instrument like Treasury bill while 7 % in authorities bonds turn outing that the rate of return on these instruments are well favourable for the Bankss.

6.2.3. UBL Growth & A ; Income Fund

UBIF was established with aim of long term, superior, hazard adjusted returns by puting in medium to long term fixed instruments. The plus allotment as per NAV comes out to be as following.

Asset allotment

Dec 11

TFC/SUKUK

36 %

Placement with NBFIs

4 %

Cash

9 %

Treasury bills

29 %

PIB/GoP IJARAH SUKUK

20 %

Others

25

Beginning: Fund Directors Report ( Dec, 2011 )

As per computation, the YTD came out to be -30.18 % due to coerce from curtailing of corporate TFCs and Sukuks. But fund tried to draw its twine by puting about half of its NAV in the authorities securities to control losingss. The investing in Treasury bills does n’t fall in the medium to long term standards of adulthood defined in fund aim.

6.2.4. UBL Islamic Income Fund

The UIIF is an Islamic aggressive fund with nonsubjective to derive superior returns from the fixed income instruments every bit good as money market instruments.

The plus allotment as per NAV comes out to be as following.

Asset allotment

Dec 11

SUKUK

52 %

GoP IJARAH SUKUK

21 %

Cash

20 %

Others

6 %

Beginning: Fund Directors Report ( Dec, 2011 )

The YTD computations once more give a negative return of -14.46 % and benchmark is 9.08 % . This return is distressed as one of the major issuer had been undergoing reconstit