FINNAL Internship Report

VIRTUAL UNIVERSITY OF PAKISTAN

BANK AL HABIB

Submitted by: Mohsin Latif

Student ID: mc070201484

Session: Final Semester Fall 2008

The date of the final report

Virtual University of Pakistan

ACKNOWLEDGMENT

Countless thanks to Almighty Allah (The most merciful the most beneficial).

The only creator of universe who enabled me to complete this project, in spite of various

difficulties. All respects to the Holy Prophet (P.B.U.H) who enable us to recognize our

greater and whose spiritual teaching guide us in every matter of the life.

I am immeasurably, indebted to Manager “Mr. Fida Hussain” who kindly provided

program in a good organization like Bank Al Habib Limited. It was valuable experience

for me to do such an interesting work and it was really a delightful job for me to do.

I am esteemed thankful to Mr. Fida for his guidance and suggestions in different phases

of this study.

A special thanks to all the people at Bank Al Habib Limited, who helped me to collect

information, which was necessary for the completion of this report.

Once again, I am thankful to all those who directly or indirectly helped me in writing this

report.

PREFACE

The internship is an essential part of M.B.A degree program because through this training

students come to know the real difference between theory and practice and they also

introduced to the outside business world. An important requirement of this training

program is to compile a report about the activities of that organization in which student

has done the internship.

I have done my internship in Bank Al Habib Limited, Lahore Sargodha Road,

Sheikhupura. The internship provided me great opportunity to equip myself with

knowledge, techniques, application and tools used in an organization.

I have tried to choose suitable words to lighter the subject of this report. Because words

are the symbols used to express ideas. There are the tools of affective writing. There

importance lies in the power, when they have suitably chosen and arranged to convey and

through to other in language, that is the understandable clearly and understood readily.

An important requirement of this report is that it should be comprehensive and written in

good style, I have tried my best to make the style of this report as good, as possible,

because style in writing as in other walks of life, is a quietly peculiar to the individual, as

not to people write alike. Background, training, experience and the way a person thinks

determine it.

The source of information for the preparation of report includes the written notes extracts

from banking literature and verbal discussion with bank officials.

I hope this report will help in understanding various aspects and features of Bank Al

Habib Ltd. and will be equally important for commerce students and persons making

future banking.

Mohsin Latif

M.B.A final semester.

THE PRODUCT LINE

Bank’s performance over the years has seen it excel even when faced with challenging

economic conditions. This has been a result of its highly prioritized and specifically

tailored products and services designed to suit the needs and preferences of our highly

valued customers.

True to its strategy of becoming a highly effective financial supermarket, Bank Al Habib

provides a complete range of products to its corporate clients, commercial enterprises and

to the consumers. For commercial entities bank offer current and saving accounts, on-line

services, commercial credit, trade finance and speedy and personalized service.

Our Consumer Banking product range includes successful products like Car Finance,

Rupees Travelers Cheques, Anmol Saving Certificates, Home Loans for NRPs, Online

Banking and Money Gram Remittance service. To further strengthen our customer's trust

in our innovative abilities, Bank launched a range of products including Credit Cards,

Leasing, ATMs Phone Banking and Debit Cards. Our primary commitment is to

understand and support our client's business objectives and financial needs. At Bank Al

Habib, all this is ensured through constant R & D focus and training & development of

staff.

COMMUNITY DEVELOPMENT

Based on client's trust in our performance, our resolve today is to actively pursue

enrichment of Pakistan’s economy through sophisticated products and high quality

service customized to their needs. This serves to reinforce our vision of carving out a

brighter future for Pakistan, its business enterprises and its people. The Bank sponsors a

number of sporting and community development initiatives to play its part as a

responsible corporate citizen.

THE VISION

To be a quality financial service provider maintaining the highest standards in banking

practices.

Mission

To be a strong and stable financial institution offering innovative products and services

while contributing towards the National economic and social development.

ORGANIZATION PROFILE

Name of the organization: Bank Al Habib Limited

BOARD OF DIRECTORS:

Ali Raza D. Habib Chairman

Abbas D. Habib Chief Executive & Managing Director

Anwar Haji Karim

Hasnain A. Habib

Imtiaz Alam Hanfi

Murtaza H. Habib

Qumail R. Habib Executive Director

Shameem Ahmed

Syed Mazhar Abbas

Tariq Iqbal Khan

Audit Committee

Syed Mazhar Abbas Chairman

Ali Raza D. Habib Member

Anwar Haji Karim Member

Shameem Ahmed Member

Murtaza H. Habib Member

A. Saeed Siddiqui Company Secretary

Statutory Auditors

KPMG Taseer Hadi & Co.

Chartered Accountants

Legal Advisor

Liaquat Merchant Associates

Advocates and Corporate Legal Consultants

Registered Office 126-C, Old Bahawalpur Road, Multan

Principal Office 2nd Floor, Mackinnons Building,

I.I. Chundrigar Road,

Karachi

Share Registrar M/s. Gangjees Registrar Services (Pvt) Ltd.

516, Clifton Centre, Khayaban-e-Roomi,

Block - 5, Clifton, Karachi-75600.

Website www.bankalhabib.com

BRANCH NETWORK

1. LAHORE MAIN BRANCH2. CLOTH MARKET BRANCH3. JODIA BAZAR BRANCH4. NORTH NAPIER ROAD BRANCH5. NEW CHALLI BRANCH6. PAKISTAN CHOWK BRANCH7. KEAMARI BRANCH8. KARACHI STOCK EXCHANGE BRANCH9. KHARADAR BRANCH10. NAYABAD BRANCH11. LEA MARKET BRANCH12. BOULTON MARKET BRANCH13. TIMBER MARKET BRANCH14. STEEL MARKET BRANCH15. BOHRA PIR BRANCH16. M. A. JINNAH ROAD BRANCH17. EIDGAH BRANCH18. SADDAR BRANCH19. REGAL CHOWK BRANCH20. SOLDIER BAZAR BRANCH21. GARDEN BRANCH22. FATIMA JINNAH COLONY BRANCH23. P.I.B. COLONY BRANCH24. ALLAMA IQBAL ROAD BRANCH25. TARIQ ROAD BRANCH26. BAHADURABAD BRANCH27. MUHAMMAD ALI HOUSING SOCIETY BRANCH28. DHORAJI COLONY BRANCH29. SHAHRAH-E-FAISAL BRANCH30. CITI TOWERS BRANCH31. BALOCH COLONY BRANCH32. SHAH FAISAL COLONY BRANCH33. MALIR HALT BRANCH34. MALIR CITY BRANCH35. MEMON GOTH BRANCH36. SAUDABAD BRANCH37. LANDHI BRANCH38. GULSHAN-E-HADEED BRANCH39. PORT QASIM BRANCH40. PAKISTAN STEEL MILLS BRANCH41. CLIFTON BRANCH42. ZAMZAMA BRANCH

43. KHAYABAN-E-SHAMSHEER BRANCH44. KHAYABAN-E-HAFIZ BRANCH45. KHAYABAN-E-RAHAT BRANCH46. BADAR COMMERCIAL AREA BRANCH47. BILAWAL CHOWK BRANCH48. SEA VIEW BRANCH49. KHAYABAN-E-ITTEHAD BRANCH50. GIZRI BRANCH51. DEHLI COLONY BRANCH52. 9TH COMMERCIAL STREET BRANCH53. MEHMOODABAD BRANCH54. KORANGI ROAD BRANCH55. KORANGI INDUSTRIAL AREA BRANCH56. S.I.T.E., BRANCH57. METROVILLE BRANCH58. ORANGI TOWN BRANCH59. SAEEDABAD BRANCH60. SHERSHAH BRANCH61. RIZVIA SOCIETY BRANCH62. GOLE MARKET BRANCH63. PAPOSH NAGAR BRANCH64. HADI MARKET BRANCH65. BARKAT-E-HYDARI BRANCH66. BLOCK-G NORTH NAZIMABAD BRANCH67. BLOCK-L NORTH NAZIMABAD BRANCH68. BUFFER ZONE BRANCH69. SINDHI HOTEL BRANCH70. NORTH KARACHI INDUSTRIAL AREA BRANCH71. U.P. MORE BRANCH72. WATER PUMP BRANCH73. HUSSAINABAD BRANCH74. FEDERAL 'B' AREA BRANCH75. DASTAGIR COLONY BRANCH76. LIAQUATABAD BRANCH77. HASSAN SQUARE BRANCH78. GULSHAN-E-IQBAL BRANCH79. GULSHAN CHOWRANGI BRANCH80. GULSHAN BLOCK-1 BRANCH81. GULISTAN-E-JAUHAR BRANCH82. FORT CORNER BRANCH83. UNIVERSITY ROAD BRANCH84. ABUL HASSAN ISPHAHANI ROAD BRANCH85. CENTRUM SHOPPING MALL BRANCH86. GULSHAN-E-MAYMAR BRANCH87. NEW SABZI MANDI BRANCH88. EXPORT PROCESSING ZONE BRANCH89. ISLAMIC BANKING BRANCH90. GHARO

91. HUB CHOWKI92. LAHORE MAIN BRANCH93. LAHORE STOCK EXCHANGE BRANCH94. NEW GARDEN TOWN BRANCH95. GULBERG BRANCH96. PECO ROAD BRANCH97. CAVALRY GROUND BRANCH98. DEFENCE BRANCH99. G-BLOCK DHA BRANCH G-7100. ALLAMA IQBAL TOWN BRANCH101. SHAHALAM MARKET BRANCH102. CIRCULAR ROAD BRANCH103. CHOWK SHAH ALAM GATE BRANCH104. AZAM CLOTH MARKET BRANCH105. NEW ANARKALI BRANCH106. BRANDRETH ROAD BRANCH107. MCLEOD ROAD BRANCH108. ICCHRA MAIN BRANCH109. BADAMI BAGH BRANCH110. BILAL GANJ BRANCH111. TIMBER MARKET BRANCH112. GULSHAN-E-RAVI BRANCH113. WAPDA TOWN BRANCH114. JOHAR TOWN BRANCH115. THOKAR NIAZ BAIG BRANCH116. BAGHBANPURA BRANCH117. SHADBAGH BRANCH118. ISLAMIC BANKING BRANCH119. REGAL CHOWK BRANCH120. SAMANABAD BRANCH121. ISLAMPURA BRANCH122. SHADMAN COLONY BRANCH123. CHOWK YATEEM KHANA BRANCH124. GHARI SHAHU BRANCH125. SHAHDARA BRANCH126. MODEL TOWN BRANCH127. BUND ROAD BRANCH128. FEROZEPUR ROAD BRANCH129. MULTAN MAIN BRANCH130. HUSSAIN AGAHI BRANCH131. GHALLA MANDI BRANCH132. GULGASHT BRANCH133. ADDA BOSAN BRANCH134. ISLAMIC BANKING BRANCH135. SHAH RUKNE ALAM COLONY BRANCH136. PULL KHARAN137. KHAN BELA BRANCH138. ZAHIR PIR BRANCH139. TIBBA SULTANPUR BRANCH140. GAGGO MANDI141. KARKHANA BAZAR

142. PARCO BRANCH143. SADIQABAD144. RAHIM YAR KHAN145. KHANPUR146. BAHAWALPUR CIRCULAR ROAD BRANCH147. UCH SHARIF TOWN BRANCH148. D.G. KHAN149. BUREWALA150. FAISALABAD MAIN BRANCH151. MILLAT ROAD BRANCH152. MADINA TOWN BRANCH153. KHURRIANWALA154. FEROZWATOAN155. KAMALIA SUGAR MILLS156. SAHIWAL157. OKARA158. KASUR159. SHEIKHUPURA160. GUJRANWALA G.T ROAD161. PEOPLES COLONY162. WAZIRABAD163. SIALKOT164. GUJRAT165. DINGA (DISTT. GUJRAT)166. KHARIAN167. ISLAMABAD MAIN BRANCH168. F-10 MARKAZ BRANCH169. I-8 MARKAZ BRANCH170. I-10 MARKAZ BRANCH171. BARA KAHU BRANCH172. RAWALPINDI MAIN BRANCH173. CITY BRANCH174. MURREE ROAD BRANCH175. WAH CANTONMENT BRANCH176. CHAKLALA SCHEME-III BRANCH177. GUJAR KHAN178. ABBOTTABAD179. PESHAWAR180. JAMRUD ROAD BRANCH181. ASHRAF ROAD BRANCH182. UNIVERSITY ROAD BRANCH183. SALEH KHANA184. MATHANICHANGAN SWABI185. MIRPUR (AZAD KASHMIR)186. MIRPURKHAS187. NAWABSHAH188. QAZI AHMED BRANCH189. SHAHPUR CHAKAR190. HYDERABAD MAIN BRANCH

191. QASIMABAD BRANCH192. MARKET ROAD BRANCH193. NEW SAEEDABAD BRANCH194. HALA NAKA BRANCH195. LATIFABAD BRANCH196. HINGORJA197. SUKKUR198. BHIRIA ROAD199. MORO200. TANDO ADAM201. LARKANA202. MEHRABPUR203. SANGHAR204. DAHARKI205. TURBAT206. QUETTA MANAN CHOWK207. ISLAMIC BANKING BRANCH208. GAWADAR209. FAZILPUR210. JHELUM211. SARGODHA212. MANDI BAHAUDDIN213. CHAKWAL214. TOBA TEK SINGH215. SHIKARPUR216. NAROWAL217. OVERSEAS OPERATION BAHRAIN

HISTORICAL BACKGROUND OF BANK

Credit Rating

PACRA MAINTAINS RATINGS OF BANK AL HABIB LIMITED

Text in Urdu

The Pakistan Credit Rating Agency (PACRA) has maintained the long term and short-

term entity ratings of bank AL Habib Limited (BAHL) at "AA" (Double A) and "A1+"

(A One Plus) respectively. The ratings of the unsecured, subordinated TFC issues of PKR

1,350mln and 1,500mln have also been maintained at "AA-" (Double A Minus). The

ratings denote a very low expectation of credit risk emanating from a very strong capacity

for timely payment of financial commitments.

The rating reflects the bank’s well-preserved asset quality, a demonstration of Habib

group’s hallmark prudent risk management. At the same time, the rating recognize the

management’s demonstrated ability to sustain the bank’s market share in a fast expanding

and challenging banking industry, wherein the bank’s core area of focus – trade finance

to commercial segment – continues to face a high degree of competition.

The Bank: Bank AL Habib’s sponsors are members of the Habib family – the oldest and

a distinguished name in Pakistan’s banking circles. They are actively involved in the

management of the bank. Mr. Abbas D. Habib, the CEO, is with the bank since its

inception. He has over 20 years of experience in domestic and international markets. He

is backed by a team of experienced professionals, most of whom have long association

with the bank.

The bank operates a network of over 200 branches, covering major cities and towns in

Pakistan and a wholesale Branch in the Kingdom of Bahrain.

The TFCs: Bank AL Habib issued its first unsecured subordinated TFC of PKR

1,350mln for a tenor of 8 years in July 2004. The profit Payment is made semi –

annually, based on 6-months KIBOR plus 150bps with a floor of 3.5% and a cap of 10%

Major Principal Redemption will be in three semi-annual installments, commencing from

84th month (July 2011) of the issue. The bank issued its second unsecured subordinated

TFC of PKR 1,500mln in February 2007 for a tenor of 8 years, the profit is payable on

http://www.bankalhabib.com/au_CreditRating_urdu.php

semi – annual basis at 6-months KIBOR plus 195bps with no floor and cap. The Major

principal redemption will be in two equal semi – annual installments, starting from 90th

month (August 2014) of the issue.

MA NAGEMENT SYSTEM

It is fortunate for Bank Al Habib Limited that the leaders e.g. the top management is very

much qualified and has the ability to lead in a good and effective manner. In Bank Al

Habib Limited all kinds of policies and strategies are formulated and worked out by the

board of directors and the executive committee. The leadership style at Bank Al Habib

can rightly be mentioned as the customer oriented. Some individual persons have some

leadership traits in their personality. The top management should have a contact with

such persons, as it will help them in achieving their objectives.

TYPES OF ACCOUNT

Bank AL Habib offers Two Value Added Savings Accounts which are PLS Savings

Account and Monthly Profit Plan.

Features of PLS Savings Account:

Profit is paid out to your Account on six-monthly basis.

There is NO Minimum Balance requirement for PLS Savings Account.

The indicative Return Payable on "PLS Savings Account" deposits with effect

from July 01, 2008 is 5.00 % per annum.

Free Life and Disability Insurance cover for accountholders.

Features of Monthly Profit Plan :

This plan adds to the earning ability of your PLS Savings Account with Bank AL

Habib.

Your profit is paid out / credited every month to your Account instead of six-

monthly as in case of PLS Savings Account.

NO Special forms or applications, NO Minimum Balance requirement.

The indicative Return Payable on "Monthly Profit Plan" deposits with effect from

July 01, 2008 is 5.00 % per annum.

Free Life and Disability Insurance cover for account holders.

Young Pakistanis,

Bank AL Habib has designed a new account specially for you, ... your own Young

Savers Account.

1. This is an account for Young Savers of up to 18 years.

Visit the nearest Bank AL Habib branch with your parent/guardian to open your

Young Savers Account. You can open an account with as little as Rs. 5/=.

2. Rate of return on Young Savers Account is expected to be well above the return

on normal savings accounts. Currently indicative rate of return on balances up to

Rs. 500,000 is 10% P.A and for balances over Rs. 500,000 is 5% P.A, payable six

monthly.

3. Young Savers Account will have Internet Banking facility and ATMlDebit Card

available to your parent/guardian.

4. Young Savers of 16 years and more will also be eligible to receive ATM Cards

and can withdraw money through ATMs, if specifically authorized by their

parents/guardians (certain conditions apply).

5. Until you the Young Savers are a minor, i.e., below 18 years, the account will be

operated by your parent/guardian. When you attain majority, the balance in the

account will be transferred to a new account which you will open and operate

after completing required formalities, including the concurrence of your

parent/guardian.

6. Bank officers will also visit your school to help you open Young Savers Account

and collect your deposit.

Profit would be subject to Zakat, Withholding Tax and other Government Levies unless

exempted.

TERM DEPOSIT SCHEME (TDR)

The term deposit receipts (TDR) is very similar to term/fixed deposit in which money is

kept for a certain specified period (Maximum up to 1 year) on fixed rates. These rates

vary with the duration.

Term Deposit Account makes the most of your money. If you have funds that you can

invest for the long term, this is the ideal option for you. Rates are as follow

Period Rate

1 Month 1.50 %

3 Month 1.75 %

6 Month 2.00 %

1 Year 2.25 %

2 Years 2.50 %

3 Years 2.75 %

4Years 3.00 %

5 Years 3.75 %

Rates on Fixed Term Deposits above Rs 20,000,000 will be quoted by Zonal Office

Guidelines For Term Deposit Account Holder

All rates mentioned above are Per Annum basis.

Profit on Term Deposits exceeding one year will be paid annually.

In the case of term deposits which are not encashed on maturity.

The principal amount will automatically be renewed for the same period for

which the Deposit was originally placed.

On premature withdrawal of Fixed Term Deposits, a penalty at the rate of 2%

from the date of payment to the date of maturity is to be recovered.

In case the profit payable on the deposit becomes negative due to recovery of the

penalty, then no profit should be paid to the customer.

Corporate societies, trusts and even individuals have large funds which are generally idle.

Such funds can be put to work to earn handsome profits via the AL Habib Treasurer's

Account.

This plan is open to Current Deposited Account. Access to such funds requires only a 24

hour notice. Profit is calculated on a daily product basis and credited to your Account

monthly. The applicable rates for the Treasurer's Call Deposited Account, effective

January 1, 2005 are:

Deposit Amount Rate per Annum

On Balances Below Rs. 250,000 Nil

On Balances from Rs. 250,000 to 999,999 1.25%

On Balances from Rs. 1,000,000 to 4,999,999 1.50%

On Balances above Rs. 5,000,000> 1.75%

On Balances above Rs. 50,000,000To be quoted by zonal

office

Bank AL Habib has now introduced “5 Years Growth Certificates” for its customers

which are for a longer tenor at very attractive rates. Receipts may be issued on PLS Term

Deposit Receipts clearly marked “5 Years Growth Certificates”.

Salient Features

Period of Deposits : 5 Years

Profit Payment : Every 6 months

Mode of payment of profit : Credit to Account

KYC for new accounts : Yes

Automatic Renewal : For Principal Amount Only

Rate of Profit at Renewal : Rate applicable on the date of renewal

Tentative Profit Rate

Term Rate

1st 6 months 6.00%

2nd 6 months 6.50%

3rd 6 months 7.00%

4th 6 months 7.50%

5th 6 months 8.00%

6th 6 months 8.50%

7th 6 months 9.00%

8th 6 months 9.50%

9th 6 months 10.00%

10th 6 months 10.50%

Note:

If the deposit is enchased before completing a year, no profit is to be paid. If the profit for

the first six months is already paid, it will be deducted from the principal amount.

Bank AL Habib has introduced Super Saving account to meet your needs.

Features of Super Saving Account

Profit is Paid to your account on a quarterly basis.

Minimum Deposit in the Account must be 500,000 or above.

Expected Rates of Profit

Term Rate

From Rs.500,000 to Rs.1,999,999.99 4% P.A

From Rs.2,000,000 to Rs.9,999,999.99 5% P.A

From Rs.10,000,000 and above 6% P.A

Rules & Regulations:

All other rules applicable to PLS Saving account will apply to AL Habib Super Saving

Accounts including deduction of withholding tax on profit and deduction of Zakat on

applicable accounts.

All those Customers that have balance above Rs. 500,000 may avail of the following

facilities free:

Online Banking

Pay Order Issuance

ATM/Debit Card

** Such account balances are not covered by Free Life Insurance

AL Habib Mahana Munafa Account

High Returns Reliable and Convenient

1 Year Deposit 13.00% p.a*





* Expected Rate of Return for deposits effective November 1st, 2008.

Mahaha Munafa Account can be opened with an amount of Rs. 25,000/-.

Profit will be paid on the 1st working day of each month.

90% financing allowed against deposit.

Free ATM Card

Deposit will be rolled over on maturity for same period at prevailing rates unless

otherwise requested by the customer.

Profit may be drawn through Cheque or ATM at any branch of Bank AL Habib.

Profit is subject to Zakat, Withholding Tax and other Government Levies unless

exempted.

Premature encashment will attract penalty as per rules.

Transfer of old to new deposit will only be allowed with penalty @ 2.00 flat as per

applicable Mahana Munafa Deposit Rules.

AL Habib Senior Citizen PLS Saving Account


In case of a joint account the Senior Citizen will be the primary account holder

and other joint account holders must be between 18 and 60 years of age.

Profit will be paid on the first working day of the next month

Up to 90% financing allowed against deposit..

The indicative return payable on "Senior Citizen's Account" deposit effective

November 01, 2008 is 11% per annum.

Free ATM Card.

Profit may be drawn through Cheque or ATM from any branch of Bank AL

Habib.

Profit is subject to Zakat, Withholding Tax and other Government Levies unless

exempted.

AL Habib Salana Account


AL Habib Salana Account is a fixed deposit account and can be opened with Rs,

25,000/-

All other rules applicable to PLS Savings account will also apply to AL Habib

Salana Account.

If the deposit is encashed before maturity, profit will be calculated and paid for

the period held at the rate applicable to Savings Account.

AL Habib Salana Account profit is paid on yearly basis.

The indicative return payable on “AL Habib Salana Account” deposit effective

November 01, 2008 is 14% per annum.

Up to 90% financing allowed against deposit.

ISLAMIC BANKING

Bank AL Habib Limited is a well established commercial bank in Pakistan, which has

also been licensed by the State Bank of Pakistan to undertake Islamic Banking through its

Islamic Banking branches.

Bank AL Habib’s Islamic Banking Branch offers Deposit Schemes and Islamic Financing

for Individuals / Traders / Industries which are completely based on Islamic Shariah

principles.

All arrangements / documents relating to above are Shariah compliant and have been

approved by our Shariah Advisor. He will regularly monitor all Deposits and Financing

to ensure that these are Shariah compatible.

http://www.bankalhabib.com/IB_DepositSCH.php

Bank AL Habib Limited, Islamic Banking Branch, invites participation in

the following deposit schemes:

AL Habib Current Accounts

AL Habib Saving Accounts

AL Habib Term Deposits

The above deposit schemes are based on the Islamic Shariah principles and have been

approved by our qualified and experienced Shariah Advisor.

a) AL Habib Current Accounts

It is non-profit earning account with cheque book facility.

ATM, Debit Card and Online Banking facilities are available.

Funds will be used for investments and providing finances to trade and industries

on fully Shariah compliant basis.

Regularly reviewed by qualified and experienced Shariah Advisor.

b) AL Habib Saving Accounts

Based on Islamic principles of Musharakah / Mudarabah.

Profits and Losses to be shared as per prescribed rules.

Profits to be paid every six month in January and July.

Profit to be calculated on the basis of weightages, to be announced at periodic

intervals.

ATM, Debit Cards and Online Banking facilities are available.



Regularly reviewed by our qualified and experienced Shariah Advisor.

c) AL Habib Term Deposits

Based on Islamic principles of Musharakah / Mudarabah.

Available in tenures of 3 months, 6 months, 1 year, 3 years and 5 years.

Profit to be paid periodically or on maturity as per rules.

Profit to be shared according to a system of weightages, to be announced at

periodic intervals.



Regularly reviewed by our qualified and experienced Shariah Advisor.

We also offer Islamic Finance for Individual / Traders / Industries, etc.

These finances are offered in the following forms:

Murabaha Finance

Ijarah Finance (Leasing)

All arrangements / documents relating to above are Shariah compliant and have been

approved by our Shariah Advisor.

a) Murabaha Finance

A contract between the Bank and a Customer under which the Customer first purchases

certain goods/commodities/assets as an Agent of the Bank, and the Bank after taking

possession of the goods/commodities/assets sells it to the same Customer by adding

certain profit margin to its cost.

Murabaha Financing is available for:

Local purchase of Assets/Commodities/Goods.

Imports under Letter of Credit/Firm Contract.

Purchase of raw material for exports.

Local purchase of raw materials for production of Goods/Assets.

Shariah Compatibility:

http://www.bankalhabib.com/IB_IslamicFinancing.php

Assets must be Shariah compatible.

All agreements/documents approved by our qualified and experienced Shariah

Advisor and regular monitoring/checking of Murabaha transactions by the

Shariah Advisor.

Customer’s Guidance:

Murabaha is always allowed for fresh purchases.

Goods shall not be used by the Customer before the Murabaha offer and

acceptance are signed.

Rollover in Murabaha is not allowed. However, fresh purchases can be made

under new Murabaha arrangements.

Murabaha price once fixed cannot be changed.

In case of late payment, Customer will have to pay certain amount to charity fund

as per Murabaha Agreement.

b) Ijarah Finance (Leasing)

Ijarah is basically the transfer of usufruct of a fixed/durable asset to another person for an

agreed period, at an agreed consideration. Under Ijarah agreement the asset will be given

to the Customer on rent for the period agreed at the time of contract.

For Vehicles (Commercial/Personal use):

Ijarah agreement and other document approved by our qualified and experienced

Shariah Advisor.

Periodical rentals to be fixed according to Customer needs at very competitive

terms.

Regular monitoring and checking of Ijarah transactions by our Shariah Advisor.

For Machinery & Equipment (Leasing):

Machinery (for small, medium and large industrial units) and office equipment.

Lease agreements and other documents approved by our qualified and

experienced Shariah Advisor.

Periodical rentals to be fixed according to Customer needs at very competitive

terms.

Regular monitoring and checking of Ijarah transaction by our Shariah Advisor.

Declaration of Profit on various Deposits for the Quarter

ended December 31, 2008

Bank AL Habib Limited – Islamic Banking has declared the following Profit Rates:

Products Profit Rates

Saving Deposit (1 – 999,999) 5.17 %

Saving Deposit (1,000,000 – 9,999,999) 5.33 %

Saving Deposit (10,000,000 – 49,999,999) 5.57 %

Saving Deposit (50,000,000 & above) 5.73 %

Term Deposit - 1 month 7.00 %

Term Deposit - 3 months 8.50 %

Term Deposit - 6 months 9.25 %

Term Deposit - 1 year 11.00 %

Term Deposit - 3 years (profit to be paid monthly) 10.75 %

Term Deposit - 5 years / Equity 11.94 %

The above profit rates have been approved by our Shariah Advisor.

http://www.bankalhabib.com/IB_DeclarationofProfit.php

Policy for Distribution of Profit for next three months i.e. from January 1, 2009 –

March 31, 2009

The Bank is currently offering Term Deposits of various maturities in addition to the

Saving Deposits. The term deposits and saving account, will work under the principle of

Mudarabah.

The Bank will calculate the profit of the deposit pool after every quarter. Profit will be

distributed at the Gross Income level. The Gross Income will be calculated after

deducting costs and expenses directly incurred in deriving that Income.

Gross Income of the deposit pool will be shared between the Bank (Mudarib) and

depositors (Rab ul Maal) on the basis of a pre-determined profit sharing ratio.

The Bank’s profit sharing ratio will be 60% of Gross Income and Depositors’ profit

sharing ratio will be 40% of Gross Income.

The profit is distributed among the account holders on the bank’s predetermined

weightages, announced at the beginning of the quarter based on their respective

category/tiers.

At the end of the period, the Bank may unilaterally reduce its profit sharing ratio for the

benefit of depositor(s).

In case of a loss, as per the rules of Mudarabah, the deposit pool will share the loss in the

ratios of investment of depositors.

Moreover, Bank will create a Profit Equalization Reserve (PER) equivalent to 1% of its

Gross Income, i.e. before the distribution of profit between Mudarib and Rab-ul-Maal.

The main purpose to create PER is to maintained profit rates smooth and compatible to

the market. These reserves will be created at each quarter end, and same will be included

in the Gross Income in the subsequent quarter.

Weightages declared for the 1st quarter i.e. (1st January, 2009 – 31st March, 2009) are:

S/n Products Weightages assigned

1 Saving Deposit (1 – 999,999) 0.70

2 Saving Deposit (1,000,000 – 9,999,999) 0.72

3 Saving Deposit (10,000,000 – 49,999,999) 0.75

4 Saving Deposit (50,000,000 & above) 0.80

5 Term Deposit - 7 Days 0.80

6 Term Deposit - 1 month 0.85

7 Term Deposit - 3 months 0.90

8 Term Deposit - 6 months 0.95

9Term Deposit - 1 year (profit to be paid

monthly)1.05

10Term Deposit - 1 years (profit to be paid on

maturity)1.15


monthly)*1.30


maturity)1.35

13 Term Deposit - 5 years 1.50

14 Bank’s Equity / Funds 1.50

* Minimum size of the deposit will be Rs. 100,000/

The above mechanism has been approved by our Shariah Advisor.

COMMERCIAL BANKING

We offer a full range of banking services which include:

Current and deposit accounts for corporate and individual clients.

Foreign currency accounts.

Finance through loans, and other credit facilities to the corporate, private and

public sectors.

Short term finance of foreign trade through Letters of Credit and negotiation of

Bills of Exchange.

Issuance of Guarantees, Bid Bonds, Performance Bonds etc.

Acceptance and placement of funds in the inter-bank market.

Purchase and sale of foreign currencies.

Trade information and research.

Remittances and transfer of funds.

Sui Gas Bills Collection on Direct Debit basis.

MCB Rupee Traveler cheque

The bank also maintains correspondent relations with leading international banks.

These include American Express Bank, USA; Banco Di Roma, Italy; Commerzbank and

Dresdner Bank, Germany; Midland Bank, PLC U.K.; The Royal Bank of Canada,

Canada; Hong Kong and Shanghai Banking Corporation Ltd., Hong Kong.

FOREIGN CURRENCY ACCOUNTS

This department deals with foreign currency. Working in foreign currency department is

as follows:

1. Account opening in foreign currency

2. US$ bonds

3. Foreign remittances

Inward remittances

Outward remittances

4. Issuance of foreign currency traveler’s cheques

5. Term deposit receipts (TDR)

6. Bills for collection

1.ACCOUNT OPENING IN FOREIGN CURRENCY

BAHL opened foreign currency accounts both current account and PLS saving account of

it’s customers.

The procedure for opening the foreign currency account is the same as local currency

account except that minimum requirement for to open foreign currency account in BAHL

is US$ 500/-

Bank AL Habib Limited will encourage all remitters to open account for the beneficiaries

in Pakistan at any BAHL branch to avail following services absolutely free of charge:

No minimum balance required to open and maintain a Savings account

Same day value for remittances received before 1300 Hrs PST for deposit in the

remitter/ beneficiary’s BAHL account.

ATM/Debit Card accepted at over 6000 merchants and 2000 ATMs across

Pakistan.

Free Life Insurance cover for up to PKR 1 million, subject to prevailing terms and

conditions for PKR Savings account holders.

Issuance of Pay Order or Demand Draft.

Direct Debit and Standing Instructions for frequent payments from accounts

Competitive exchange rates for FCY transactions or transfer from US$ account to

PKR account.

NetBanking for round the clock internet banking services from any where at any

time for balance inquiry, statement of account and funds transfer etc.

24X7 Call Center and TeleBanking services.

The Remitters can open their own account while in Pakistan either prior to their departure or while they are visiting Pakistan.

Manage your financial life.

Real time. Any time.

The easiest way to bank online

Bank AL Habib Limited Internet Banking lets you bank “when and where you want” so

you can manage your finances on your schedule - 24 hours a day, 7 days a week. AL

Habib Internet Banking is easy to use, completely secure – and lets you manage your

money where and when it suits you.

It's fast, easy, secure and Best of all it's FREE

No lines No set hours No waiting

Please download the application form and sumbit it to your branch, where your account is

maintained. You will receive your Internet Banking User ID after 5 Buusiness days from

the date submission of the application form at your registered email address.

Bank AL Habib Limited will encourage all remitters to open

account for the beneficiaries in Pakistan at any BAHL branch to avail

following services absolutely free of charge:

No minimum balance required to open and maintain a Savings account

Same day value for remittances received before 1300 Hrs PST for deposit in the

remitter/ beneficiary’s BAHL account.

ATM/Debit Card accepted at over 6000 merchants and 2000 ATMs across

Pakistan.

Free Life Insurance cover for up to PKR 1 million, subject to prevailing terms and

conditions for PKR Savings account holders.

Issuance of Pay Order or Demand Draft.

Direct Debit and Standing Instructions for frequent payments from accounts

Competitive exchange rates for FCY transactions or transfer from US$ account to

PKR account.

NetBanking for round the clock internet banking services from any where at any

time for balance inquiry, statement of account and funds transfer etc.

24X7 Call Center and TeleBanking services.

The Remitters can open their own account while in Pakistan either prior to their departure

or while they are visiting Pakistan.

NRP remitting funds in foreign currency can choose any Currency and Bank listed below

for their foreign currency remittances to their account in Pakistan.

BANK AL HABIB APNI CAR

Bank AL Habib APNI CAR- The car financing facility which gives you complete peace

of mind through convenient repayment plans.

Why wait then, contact us now, our highly skilled sales team is eagerly waiting to assist

you in your car financing decision.

Product Benefits and Features

Easy to apply

Minimum Loan: Rs 250,000, Maximum Loan: Rs. 2,500,000

Maximum loan period 5 years for new & imported cars.

Affordable monthly installments.

Convenient repayment modes

No Pre-payment penalty.

Choice of reputable insurance companies at attractive terms.

Personalized customer service. Our highly trained executives will take care of your

financing requirements. The only thing you need to worry about is choosing the car and

its color.

Auto Loans Eligibility

You can get a car loan from Bank AL Habib to purchase the car of your choice if you are:

Pakistani National Identity Card Holder.

Over 20 years of age (Maximum 60 years in case of salaried and 64 in case of a

business person at the time of maturity of the loan).

Salaried person, Businessman or Self employed.

Documentation Required (Salaried Individual)

Two recent passport size photographs.

Copy of Computerized National Identity Card.

Bank statement for the last 3 months.

Salary certificate/Salary Slip.

Documentation Required (Self - Employed Individual)

Two recent passport size photographs.

Copy of Computerized National Identity Card.

Bank statement for the last 6 months.

Business Proof.

Terms and Conditions

The Auto Loan Facility offered will be subject to the following conditions:

Our Internal credit approvals.

All offers and criteria listed on this website are subject to change without any prior

notice.

CONSUMER BANKING

Bank AL Habib Limited offer Consumer Loan facilities to its eligible customers. These

facilities are tailored to suit customer requirements with competitive rates and an easy

means of payment. We have the solution whether it may be for a brand new car or a

house (building/renovating a house).

The Home where your heart is

Decent homes are difficult to purchase in today’s ever-changing world of real estate

prices. Safe & comfortable shelter is the prime necessity for each individual. So let Bank

AL Habib with its Home Finance solution provide you with the means of buying,

constructing or refurbishing your ideal home.

We Offer

- Home Buying

- Home Construction

- Home Improvement

Rates for Mortgage Loans (re-priced yearly at the anniversary)

Other Details

(Tenure Period

etc.)

Salary

Transfer

Account

Holders

Other Account

Holders

Self Employed

and/or

Businessman

Basis

First Year 13% 13.50% 14% floating

Subsequent

years

12MK

+250 BPS

12MK

+300 BPS

12MK

+350 BPSfloating

HOME BUYING

Realize your dream with the Bank AL Habib Home Buying facility where you can own

your personal property. This scheme offers you to buy & own your dream home

Eligibility Criteria

- Pakistani National

http://www.bankalhabib.com/ps_HImprovement.php

http://www.bankalhabib.com/ps_HConstruction.php

http://www.bankalhabib.com/ps_HBuying.php

- Salaried or Self Employed

- Minimum 23 to Maximum 57 Years Old

- Minimum Net Salary Rupees 20,000/=

Salient Features

Finance Amount

- Maximum amount Rs. 10,000,000/=

Finance Tenure

- Flexibility of up to 20 Years financing

Documents Required

- NIC Copies (Old & New)

- Letter from employer

- Current Salary Slip

- NTN-National Tax Number (optional)

- Bank Statement for last 3 months.

- Last Paid Utility Bill

- Last Paid Credit Card Bill (If Card Holder)

- For Self Employed: 2 Years Proof of Business/Registration

- Passport size Photograph

* Other conditions may apply

HOME CONSTRUCTION

Bank AL Habib will help you as our eligible customer to build the house of your dreams!






Salient Features

Finance Amount


Finance Tenure

- Maximum 20 Years

Documents Required










* Other conditions may apply

HOME IMPROVEMENT

For Bank AL Habib, eligible customers, who wish to renovate their homes to meet the

changing needs of their family.






Salient Features

Finance Amount


Finance Tenure

- Maximum 7 Years

Documents Required










Other conditions may apply

SERVICES

Bank AL Habib offers Online Banking Facility to its account holders at branches all over

Pakistan. Cash may be accepted at a branch for crediting accounts at another branch,

Cheques can be paid by a branch by debiting the customer’s account at another branch.

Following facilities are available at Bank AL Habib’s Online Program for its customers:

1. Payments of Cheques.

2. Cash Receipts.

3. Transfer of Funds through Cheques or Cash between Branches.

The Deposit and Withdrawal Limit for Online Banking Facility is PKR 5,000,000 and

1,000,000 respectively.

Charges of Rs. 50/- Per transactions are applicable per transaction for using Online

Banking Facility.

Please visit the branch where your account is maintained to inquire about your online

banking status.

Bank AL Habib Limited offers safe deposit lockers facilities to its customers in major

cities of Pakistan for safe keeping of their valuables and personal items.

Locker Rates

Allowing different sizes of lockers are available for your convenience.

Complimentary Lockers are available to Deposit Holders for maintaining deposits of Rs.

1 million and above.

Key Deposit: Rs.2000/- (Refundable)

Now your Bank AL Habib ATM Card is not just an ATM Card It’s much more…

Bank AL Habib is a founder member bank of 1 Link, the largest shared ATM network

countrywide, giving you 24-hour access to your account from any ATMs. This network

will keep on expanding to give you unmatched and most convenient services

Useful Information For ATM Card holders:

Available denominations in Bank AL Habib ATMs are Rs.500 & Rs.1000.

Maximum withdrawal per day is Rs.25,000

Maximum withdrawal per transaction is Rs.10,000

The Mini Statement provides last 8 transactions as of last business day.

If card/cash is not removed from the slot within limited time the machine will

retain your card/cash.

Three unsuccessful attempts to enter PIN will disable your Card.

Incase your card is captured, please contact the acquiring branch within 2 working

days or collect from Issuing Branch within next 8 working days.

Incase cash is not properly dispensed please contact the branch where the

transaction took place.

CASH AND DEPOSIT

As name implies it preliminary deals with the cash. It involves payment of cheques

issued by the customer and receipt of the cash deposited by the customer in their

accounts.

The procedure involved in payment and receipt of cash is given below.

CASH PAYMENTS

Payment of cash to customer involves the following procedure

1. The cheque is presented to the cashier first, who takes care of following

precautions

a) It should not be out dated.

b) There should not be any crossing on it, if so the signature should be with cutting.

c) Two signature of the customer receiving the cheque should be in the back of the

cheque.

d) There should not be any difference between the amount and figures

e) It should not be crossed.

f) Finally the cheque goes to the officer, who first, checks the signatures, whatever it

is according to the specimen signature card, he will also check the conditions

mentioned in no.1. If he has any doubt he will reject the transaction.

2. The cheque is entered in the computer by the cashier and customer account is

debited.

3. If the amount of the cheque exceed the customer balance in that account a note

regarding this will automatically appeared on the computer screen. Such entries

are immediately scratched.

4. If every thing goes fine then it passed to second officer who authenticates the

transaction and sign on the cheque.

5. The cheque is finally returned to the cashier for payment.

6. If the cheque is dishonored due to any reason Rs.200 is deducted from the account

of the customer as a penalty for that return.

7. At the start of next day all the cheques, which are honored by the bank on

previous day, are sent to account department for permanent record.

Stop check report

At the end of the day, a stop check report is prepared which is used in the next day. This

list is fed in the computer. This report indicates the special instructions made to honor the

cheque drawn by him to any reason.

Lien marked

Lien marked means a certain amendment, which is freezing in the account of the

customer. So the customer has to keep minimum cash balance with the bank. Lien is

marked usually when the customer has taken a loan from bank or he is required to deposit

a margin amount for the issuance of letter of credit.

Debit Cash Vouchers

When the cash is deducted from a certain account by the instruction of bank, a debit cash

voucher is prepared. Debit cash voucher must be signed by the two responsible bank

officers with the reason for deduction of cash mentioned on it. Usually debit cash

voucher is prepared for the payment of expenses like salary of clearing staff, payment of

demand draft etc.

Cash Paid Register

When all the cheques are paid then all entries regarding payment of cash is entered if the

cash paid register by the cashier & total payment during the day is computed. This sum is

then subtracted from the opening balance of the cash. The responsible officer then

verifies all these entries.

Receipt of Cash

Receipt of cash involves the following procedures.

1. All the cash is deposited on a specific deposit slip. The depositor has to mention

specific deposit account number, name of the account holder and the amount

which he wishes to deposit in his account on this slip.

2. This slip is presented to the cashier along with the currency note, he count the

notes and stamp the slip with “cash received” if he is satisfied, then he enters the

slip in the computer by crediting the account.

3. Finally the transaction regarding deposit of cash is authenticated by the

responsible officer and put his signature on the slip. Now the transaction is

permanently stored in the computer.

4. At the start of next day all deposit slip of the previous day is sent to accounts

department for permanent record.

Cash Received Register

At the end of day when all the cash has received it is manually entered in a cash receipt

register. This sum is added in the opening balance of the cash and hence closing balance

is calculated.

Physical Checking of Closing Balance

(Opening balance + receipt – payment) is physical checking by cashier after closing

hours. There should not be any difference between the two balances, if any he is not

allowed to leave counter unless the reason for difference is traced out.

Cash Required In Emergency

A certain amount of cash is kept in bank lockers for meeting daily requirement but if any

further cash is required in emergency due to some heavy payment, such cash is called

from other branches or from ABP. Such cash reached within one or two hours.

CLEARING DEPARTMENT

Function:

The major functions of clearing department are to receive the cheques, which are drawn

on some other bank. The customers can get many cheques in his account at BAHL from

the cheques drawn on other banks. The bank accepts these cheques and collects the

amount from other bank. Bank charges some commission of these facilities. This

department is controlled by the operation Manager or the Head of the department.

PROCEDURE FOR CLEARING OF CHEQUES

1. Pay-In-Slip:

The customer fills pay-in slip; this slip is just like deposit slip. The cheque number,

account number and amount must be mentioned in this slip.

2. Stanping and Scrutinizing:

The officer on receipt of cheque will stamp ‘cheque received’ and give a

portion of slip to the costumer and remaining portion of attached with original cheque.

The following stamps are affixed in the cheque.

(i) BANK AL HABIB LIMITED

(ii) OBC’ out ward bill for collection’

At the end of the day all cheques are counted and then scrutinized bank wise and sent to

clearing house.

3. Clearing HOUSE:

This is a facility provided by SPB by acting as clearinghouse. A representative of all bank

gathered daily at evening. Each bank collects the cheque on behalf of their customers and

handed over the cheques, which are not drawn on their bank, to their representatives.

Clearinghouse is present in all major cities and where their branches of SPB the National

Bank of Pakistan provides this facility.

Types Of Clearing

1.Inward clearing

2.Outward clearing

3.With in bank transfer

Inward Clearing:

Inward clearing means the cheques, which are to be honored by bank, which are received

through other bank representative. These cheques are honored by the same process

mentioned in each department.

Outward Clearing:

Outward clearing means the collection of cheques on behalf of draw of customers drawn

of other bank. Outstanding cheques are sent through SMS, courier or registered post to

their original source. All the risk and responsibility for the lost of cheques are born by

customer.

With In Bank Transfer:

If the cheque is drawn on BAHL with in of same branch or any other branch, it is called

with in bank transfer. Such cheques are marked with ‘Transfer’ stamp.

BILLS FOR COLLECTION

This department deals with the outstation cheques and payments. All clearing of these

cheques and payment is done by clearing section of cash department through NIFT. The

department keeps record and prepares vouchers for incoming & outgoing cheques for

collection purposes. So this department has two major dealings in

1. Outward bills for collection (OBC)

2. Inward bills for collection (IBC)

Outward Bills for collection

These are the cheques presented BAHL Lahore branch but are drawn on different

banks/or our bank branch outside Lahore. The amount is collected on these cheques.

Inward Bills For Collection

These are the cheques drawn on different banks/Bank Al Habib in Lahore but are

presented in our banks outside Lahore. So, the bank has to pay the amount on these

cheques.

CREDIT DEPARTMENT

INTRODUCTION

The credit department plays a key role in a bank it earns considerate income in form of

mark up on its advances.

SECTIONS

The credit department has been sub-divided into two sections

1.Credit Marketing

2.Credit administration & Monitoring

1.CREDIT MARKETING

The main function of this department is to market a customer for the bank.

Credit Policy of the Bank

The credit policy of any banking institution is the combination of certain globally and

locally accepted time standards and other dynamic factors dictated by realities in ever-

challenging market and industry.

“The extension of a credit facility should add value to the bank’s assets” should be borne

by the bankers. For this purpose the bank takes special care for judging the

1. Ability to repay

2. Willingness to pay

1. Ability to pay

The ability of a client to repay can be judged by the financial statements of the

customer’s company. To avoid the danger of fake statements the SBP has put on some

regulations on all the banks, which are called as prudential regulations. Every financial

institution is bound to follow these rules in advancing loans, e.g. all the credit institutions

is bound to lend the customers having current ratio of their assets equal to minimum 1:1.

2. Willingness to repay

The willingness to repay can be determined by verbal discussion with him or CIB (credit

information bureau) report.

TYPES OF BORROWER

Individuals

Existing account holders

Staff members

Relatives of staff members

Employees of other banks

Joint account

Business entities

Sole proprietorship

Partnership

Limited companies

Joint ventures

Group accounts

Other accounts

Traders

Club/associations

Federal, provincial, local government bodies

Manufactures

Steps Taken in Advancing Loans

The following are the steps taken in advancing loans to its borrowers;

When customer is marketed, the officer takes a sort of interview from its

prospective customer.

The request is written form is received and a visit report is prepared.

If viable, the request is given to the credit officer.

Then the bank request is given to the credit officer.

Then the bank requests the SBP to provide him the CIB report of the customer.

If irregularity occurs the proposal is returned to the customer for

regularization/rectification, and if not then CLP (credit line proposal) is prepared.

Facilities provided by the Bank

The credit marketing provides the customer only with non-funded facilities, i.e. Letter of

Guarantee.

GUARANTEE

A guarantee may be defined as

“An undertaking given by a person to be answerable for the debt, default or miscarriage

of another person”.

Advances against guarantee

Guarantee as a security for advances arises only when the borrower is not able to satisfy

the bank for his credit worthiness. The banker will ask for guarantee only if acceptable

collateral securities are provided to him.

Parties of a guarantee

Are as follows

I. Guarantor

The person who gives the guarantee.

II. Creditor

The person to whom the guarantee is given.

III. Principal debtor

The person for whom the guarantee is given.

TYPES OF GUARANTEE

Performance bond

When the contact is on performance basis.

Bid Bond

When the applicant is bidding for a contract. In this case.2% of the amount of bid has

to be substituted to the bank.

Retention Money Guarantee

In which certain %age of money is withheld pending for satisfactory performance.

Advance Payment Guarantee

In which, the applicant assures the beneficiary for an advance payment up to

signing a deal.

PROCEDURE FOR ISSUING LETTER OF GUARANTEE

The letter of guarantee is opened on request of customer, who is a current

account holder of the bank.

In letter of guarantee all the relevant details are mentioned.

A customer guarantee is taken from the customer authorizing the bank to sell

out the securities held with the bank in case of default.

The bank requires a letter of Lien, pledge and authority for shares, stocks and

securities in case the security is deposited is other than margin (cash).

The guarantee is issued in the name of creditor on a stamp paper after all the

legal documentation showing the date of issue, expiry amount, reference of

the contract between debtor & creditor.

Commission of the Bank

The bank charges commission at a fixed rate i.e. 0.5% per quarter on the amount of

guarantee.

EXPIRY OF LETTER OF GUARANTEE

When the period for which the letter of guarantee was issued expires, the customer brings

the letter of guarantee back to the bank. The bank cancels the letter of guarantee by

drawing two lines across the face of it.

2. CREDIT ADMINISTRATION & MONITORING

The credit administration & monitoring department performs many functions. Some of

them are

a) Perfection of securities

b) Perfection of legal documentation

c) Management information system (MIS)

d) On going monitoring of account

e) Facilities provided by the bank

(a) Perfection of securities

The main function of this department is the security consideration.

SECURITY

“A security is an interest or right in property given to the creditor to convert it into cash,

in case debtor fails to meet the principal amount & interest on the loan”.

MODES OF SECURING ADVANCES

Hypothecation

Pledge

Mortgage

1.Hypothecation

It may be defined as

“A legal transaction whereby goods may be made available as security for a debt without

transferring property or possession to the lender (bank).”

The advancing against goods without taking their possession is very risky for bank on

two grounds;

As the goods are in the custody of the customer (owner), the borrower may take

out the goods without informing the bank.

Secondly, the bank does not have legal claim as it does not have a valid charge

over the goods.

Therefore the bank takes special care in this case.

Rights of the Bank

The bank can exercise the following rights in case of hypothecation;

The bank has the right to inspect the go-downs. It can also demand periodic report

of the stock.

The hypothecation goods are to be issued by customer. In case the are not insured

the bank has right to get them insured and recover those charges from the

borrower.

In case, the bank finds the contract is being violated, it has the right to obtain stop

orders from appropriate authority.

2. PLEDGE

It can be defined as:

“A pledge is a contract whereby a good is deposited with the lender as security for

repayment of the loan”.

Transferring the goods from owner’s go-downs may make the delivery of goods or keys

of owner’s go-downs are handed over to the bank or his appointed Muccaddam.

(Muccaddam is the organization providing the facility of agents on behalf of banks. The

appointed Macadam must be on the list of approved Macadam’s).

Rights of the Bank

The bank can exercise the following rights in case of pledge;

The bank can retain the goods pledge not only for payment but also for the

interest and other charges incurred by bank.

In case of default of customer the bank can dispose of the goods after giving

proper notice to the borrower.

The bank has the right of full value of goods till such time; the entire debt is not

discharged.

3. MORTGAGE

It‘s means

“A mortgage is the transfer of interest in a specific immovable property for the purpose

of securing money advanced by the way of loan, an existing of future debt”.

Condition

The main condition for mortgage is that only the immovable property can be secured.

The lending of money on real estate (immovable property) is not very popular with most

of the commercial banks. However in the last few decades the loan on real estate is

growing.

Difficulties faced by the bank in case of mortgage

The bank has to lock their funds in the loans having long-term maturity. The loans on real

estate lack liquidity. In case of their default, there are no organized markets where that

property and amount recovered to pay off the loan. Since other for unpopularity are as

under;

Legal hindrances

Heavy expenses of legal mortgage

Lack of liquidity

Difficulty in valuation

Delay in recovery of loans

Finding of tenants and their repairs costs

Preliminary inquires for advances against mortgage

To secure its position, the bank takes into account the following inquires in case of real

estate;

Proper valuation of real estate

Inquiry about title to property

Preparation of title deed

Search for prior charges

(b) Perfection of legal documentation

In this department the documentation is checked and analyzed, whether all the terms and

conditions are as per the contract between the customer and bank and no clause of

contract causes may harm to bank’s interest.

(c) Management Information system

The basic purpose of this department is

1. Reporting to state bank of Pakistan about various details of bank’s advance

position that helps in preparing the ultimate CIB report.

2. Reporting to government about total financing of bank for various purposes.

3. Reporting to head office on daily, weekly and monthly basis about

Credit position of each and every customer

Total financing of the bank in the cotton & textile sectors etc.

(d) On Going Monitoring of Customer’s Account

It is the inspection of customer’s account and monitoring securities from time to time.e.g.

Go-downs inspection in case of pledges

Analyzing client’s report about hypothecated goods

Project examination for which the guarantee has been taken

Interim review

(e) Facilities provided by the bank

The credit administration provided the customers with the following fund based facilities;

1. Current Finance/Running Finance/Overdraft

“An overdraft is the right given by a bank to his customer to draw in excess of his current

account up to a certain fixed limit”.

Condition

The bank gives the facility to overdraw by cheques allowed only in current account. The

CF or overdraft facility enable a customer to draw over and above his own balance up to

the extent of limit as agreed, e.g. if there is a credit balance of Rs.6000/- in the current

account of Mr. A and he is sanctioned an o/d limit of Rs.10,000/-, he can draw up

toRs.16,000/- by cheques.

Interest

The customer is given the option to withdraw this amount either in installment or in lump

sum. The interest is charged only on the –ve balance.

Procedure of granting Current finance

The bank does not provide the facility of CF to all the customers.

The bank scrutinize the application

Examine the credit worthiness of client

Then approves the upper limit to overdraw the current account with or without the

security. But generally security is demanded.

2. Term Finance/Cash credit

“A cash credit is an arrangement by which a bank allows his customer to borrow money

up to a certain limit”

The banker determines the limit of TF on considering

The nature and scope of activities of customer

Total turn over of business

Value of assets & liabilities

Evaluation of securities offered

The purpose of loan applied for

Condition

Term finance is self-liquidity commercial loan. Arrangements are usually made against

the securities of goods hypothecated or pledge with the bank.

Procedure of granting Term Finance

1. It is a contractual advance and is operated through a separate TF account.

2. It is advanced to commercial and industrial concerns against hypothecation and

pledges of goods and produce.

3. Before granting TF facility the bank takes special care in

Trust & credit worthiness of customer

Familiarity salable commodities

Familiarity with the fluctuation of prices of goods to be secured against TF

Proper valuation of goods

Insurance of goods pledge

Interest

In TF, the customer is given the facility of withdrawing the whole amount of loan at one

time or partially as and when required. Interest is charged only on the amount actually

withdrawn by the customer. The bank then loses the interest on the un-utilized amount.

To avoid the loss, the bank binds the client in TF agreement to pay interest on the

prevailing rate on ½ or ¼ portion of the amount of TF limit.

Difference between Current & Term Finance

The term finance is an arrangement for a long period for industrial and

commercial concerns doing regular business with the bank, while Current finance

facility is given for a shorter period.

The rate of interest is high in case of Term finance and low in case of current

finance.

The overdraft facility is provided only in the current account, while separate

account to be maintained in the case of cash credit.

FIM (finance against import merchandize)

FATR (finance against trust receipt)

LBP-D (local bills purchased)

Summing up the credit department helps in

Development of bank by earning income in the form of mark-up.

Development of whole economy by financing the development projects both in

private and public sector and help in accelerating the rate of growth.

This department facilitates the trade activities both inside and outside the country

ACCOUNTS DEPARTMENT

INTRODUCTION

The accounts department deals with various routine activities for the bank. The main

activities performed by it are

1. Budgeting

2. Reporting

3. Maintainance & depreciation of fixed assets

4. Miscellaneous function

1. BUDGETING

Accounts department of a bank, for a year makes budget of every branch. Fiscal year of

bank starts from January and ends on December. The accounts department starts

preparing budget from October the next year.

Procedure

The budget is based on forecasting through past performance.

First of all, the bank reviews what are its sources of funds and where it can utilize

these funds?

The main sources of the bank are deposits, securities issued by the bank,

borrowing from other banks, borrowing from SBP, bank’s paid-up capital, its

reserve fund, profit generated by the bank.

The bank may employ these funds in lending to others at a high rate of mark-up.

Investment in securities, placement in inter-bank markets etc.

It also takes into account the income from other sources, cost of funds,

administrative expenses, and utilities expenses.

Then the budget is submitted to the head office for recommendation and

modification.

Monthly budget meeting is held by branch managers to analyze the monthly

performance. Budget and actual performances are employed and variance is

computed for analysis.

Variance can be negative or positive. Variance does not mean that it will have

positive effect on the overall profitability e.g. positive increase in deposits is not

always coupled with positive increase in advances.

The management will then drive the reasons for the variance and take remedial

measures to achieve the targets.

2. REPORTING

The accounts department forms reports of clubs and details of various departments

together. Each and every minute detail is provided in weekly, monthly and annual

reports. The reports are submitted to head office, SBP and to the government.

Kinds of Reports

Following reports are prepared by the accounts department on daily basis.

Statement of affairs

Income & expenditure

New FCY report

Royal profit report

Outstand receipt report

Subsidiary statement

Currency wise deposits report

Sub 66 report

Following are the reports that are prepared on the basis of reports granted from

mainframe. These are very important for proper analysis and feedback.

Daily advance and deposit position

Daily exchange position

Daily fund management

Closing Reports

Monthly assets & liabilities

Monthly budget review report

Monthly monitory statement

Monthly performance review report

Schedule of maturity distribution

3. MAINTAINING OF FIXED ASSETS & THEIR DEPRICIATION

Accounts department maintains the record of all the assets and charges depreciation on

them. The bank normally uses the straight-line method to compute the depreciation.

Department prepares asset purchase report and asset sale report after every 6 months that

helps in changing the depreciation. It is calculated on monthly basis and charged yearly.

Bank not only depreciates the existing assets but also the assets but also the assets

transferred in and transferred out.

The rate of depreciation for different fixed assets is as follows:

Equipment 20%

Building 2.5%

Vehicles 25%

Furniture 10%

Carpets & curtains 25%

4. MISCELLANEOUS FUNCTION

The accounts department also performs some other miscellaneous functions:

a. Daily activity checking

b. Reconciliation statements

c. Test keys

d. Closing entries

e. Foreign exchange forward transaction

(a) Daily Activity Checking

The accounts department the vouchers with daily activity report generated by the

computer. The vouchers are then sorted out into bundles according to their categories and

comparing with the activity report checks the posting of transaction.

(b) Reconciliation statements

The bank prepares reconciliation statement with head office and SBP.

Head office

Reconciliation with head office is done in reconciliation department. The branches

sent out the head office. They check the posting of all the entries if outstanding,

which has not been posted by branch or head office.

The reconciliation is carried out in the head office and accounts department handles

quarries.

State Bank of Pakistan

The SBP keeps the record of every scheduled bank. The bank statements and statements

of SBP are reconciled on daily basis. Reconciliation is basically setting of outstanding

entries. The reconciliation statement contains two sides. One contains entries originated

from bank but not responded by SBP and on the other side entries originated by SBP but

not responded by bank.

(c) Test Keys

Test keys are used to authenticate and secure the transaction. These keys are used for

both inward and outward transactions. In local transfer double coding is used while in

foreign transaction single coding is used.

Each bank to arrive at the code uses separate test keys. Four things must be carefully

checked because code is based these four items;

Branch name

Date

Currency

Amount

The basic purpose of test is to secure the transaction.

(d) Closing Entries

Accounts department also passes the closing entries on monthly, 6 monthly and yearly

bases to calculate the profit and analyze the overall performance for a certain period.

(e) Foreign Exchange Forward Transaction

In the past, the banks has to keep their foreign exchange with SBP on the agreement that

SBP will purchase the foreign exchange on book rate and charge a fee for covering the

risk. This whole transaction was known as foreign transaction. Now this facility is not

available.

To bank on new accounts, but they can avail it by renewing their limit on old accounts

with SBP.

Bank carries out this transaction through Treasury has two options:

They can invest foreign exchange in the international market but they will have to

pay high-risk fee.

They can also deposit with SBP that will offer 3.15% on these new foreign

currency accounts. The bank offers 2.25% to its customers; net saving by the ban

is almost 0.9%.

But it is up to treasury where to invest foreign exchange.

Summarizing up

We can say that the accounts department holds a sort of internal check on the branch

relating to its income and expenditures.

INTERNSHIP ACTIVITIES

This chapter is based on my observation and experience during my internship in Bank AL

Habib Limited, Kashmir Road, Lahore.

ACCOUNT OPENING DEPARTMENT:

In account opening department I learnt about:

Account opening procedure

The persons who are eligible to open an A/C

Kinds of A/C offered by BAHL

Information about Royal profit

Documents required by different categories of persons

Issuance of cheque book

Preparation of debit and credit vouchers

Details about loose cheques

Procedure of closing an A/C

Information about zakat exemption formations

REMITTANCES DEPARTMENT:

In remittances I have learned about transfer of money through

Demand draft (D.D)

Pay order (P.O)

Pay slip (P.S)

Telegraphic transfer (T.T)

Mail transfer (M.T)

Local remittances and outgoing remittances

Schedule of bank charges for remittances

Calculation of taxes on remittances

Calculation of taxes on remittances

How to prepare pay order, demand draft

TERM DEPOSIT AND O.B.C DEPARTMENT:

In term deposit department I learnt about:

Notice of deposit

Term deposit (TDR)

Calculation of profit

Information about royal group

Information about Royal Patriot

Outstation bills for collection

Maintenance of O.B.C register

Procedure of O.B.C

Commission for O.B.C

Lockers facility & its charges

GOVERNMENT SECURITIES:

In government security department I learnt about:

Defense saving certificate

Special saving certificate

Calculation of profit

Commission of BAHL

Zakat implementation of DSC & SSC

Preparation of credit voucher

CLEARING DEPARTMENT:

In this department I learnt about:

Procedure of clearing a cheque

Checking of cheques

Inward and outward clearing

Within bank transfer

Different reason of returning a cheque

Types of clearing stamps

CREDIT DEPARTMENT:


Credit facilities for customers

Long term & short term loans

Employees loan

Securities for credit

How to give credit to customers

Five C’s of credit

How to prepare credit line proposal

Parts of credit file

Facilities for borrowers

Study the prudential register

How to recover the loan

Funded facilities

Non funded facilities

Letter of guarantee and its types

IMPORT DEPARTMENT:

In import department I learnt about:

Issuance of import registration certificate

Parties of L/C

Letter of credit opening procedure

Types of L/c

Import license (registration of import in EPB)

Import bill

Checking an scrutinizing of documents

Mode of payment

EXPORT DEPARTMENT:

There are three sections in export department namely documentation collection and

refinance section in documentation and collection section. Here I learnt about:

Procedure of registration as an exporter

Documents needed for export

Form “E”

Checking of documents

Exchange control regulation

How to make foreign documents bills for collection

How to make export payment realization certificate

How to fill covering letter

Mode of payment

EXPORT REFINANCE DEPARTMENT:


Different kinds of refinance scheme

Procedure of getting the facility

Documents required for the avail the facility

Different fines from SBP

Mark up calculation

RATIO ANALYSIS

Ratio means “one number expressed in term of another a ratio is statistical yardstick by

mean of which relationship between two or various figures can be compared or measured.

The ratio analysis can be done under

1. Profitability ratios

Net profit margin

Return on equity

Return on total assets

Return on fixed assets

Earning per share

2. Liquidity ratios

Current ratio

Current asset to total deposit

3. Coverage ratio

Debt ratio

4. Activity ratios

Fixed asset turnover ratio

Total asset turnover ratio

5. Special bank ratios

Total advances to total deposits

Total advances to total deposits

Fixed assets to total assets

NET PROFIT MARGIN

Net profit margin = Net profit after tax * 100

Total Revenue

1999 2000 2001 2002

Net Profit Margin 8.21% 9.53% 9.16% 9.62%

INTERPRETATION

The ratio provides us with the percentage net profit after tax of the total revenue of the

business. In Bank AL Habib Limited profit margin has increased from 8.21% in 1999 to

9.62% in 2002. Which is good signing its mean; the bank has enough caution to meet its

further obligation. The increase in the net profit margin also shows management

efficiency to control the internal as well as external factors affecting the profit of the

organization.

RETURN ON EQUITY

Return on equity = Net income *100

Shareholder equity

1999 2000 2001 2002

Return On Equity 17.48% 23.91% 22.82% 27.58%

INTERPRETATION

The return on equity indicates the equity utilization of the company to produce profits.

The ratio tells the shares holders about their expected profit on their equity in a business.

The ratio indicates sharply increasing trend of net profit from 17.48% in 1999 to 27.58%.

This sharply increase in the return on equity is a favorable point for the organization and

its shareholders.

Moreover it shows that the bank prefer to pay dividend to its shareholders rather to create

extra reserves.

RETURN ON TOTAL ASSETS

Return On Total Assets = Net Profit After Tax * 100

Total Assets

1999 2000 2001 2002

Return On Total Assets 0.89% 0.89% 0.90% 0.85%

INTERPRETATION

Turn on total assets measures the firms overall effectiveness in generating profit with its

available assets. The higher the company’s return on total assets, the better. The return on

total assets on Bank AL Habib is showing an decrease from 0.89 % in 1999 to 0.85% in

2002 which is not favorable.

RETURN ON FIXED ASSETS

Return on fixed assets = Net profit after tax * 100

Fixed Assets

1999 2000 2001 2002

Return on fixed Assets 13.57% 17.12% 18.20% 25.31%

INTREPRETATION

The ratio increases from 13.57% in 1999 to 25.31% in 2002 which is a decent increase

in Bank AL Habib Ltd. Return on fixed assets.

EARNING PER SHARE

Earning per share = Net income

No. of shares outstanding

1999 2000 2001 2002

Earning Per Share 2.61 3.59 3.65 4.46

INTREPRETATION

The company earnings per share are generally of interest to present or prospective

stockholders and to management. The earning per share represents the number of Rs.

Earned on behalf of each outstanding share. The earning per share of Bank AL Habib

increased from2.61 to 4.46, which is favorable for bank.

CURRENT RATIO

Current Ratio = Current Assets

Current liability

1999 2000 2001 2002

Current Ratio 1.03:1 1.02:1 1.02:1 1.03:1

INTERPRETATION

This ratio tells us about short- term solvency of the organization. Current ratio shows the

availability of the ready current assets to meet the short- term liabilities of the

organization. The current ratio shows continuous increase over four years due to

excessive cash available to banks and moreover the balance maintain by the Bank AL

Habib Ltd. Also increased. On the other hand liabilities are decreasing. This trend

improves the current ratio of the bank.

CURRENT ASSETS TO TOTAL DEPOSIT RATIO

Current assets to total deposits= Current assets

Total deposits

1999 2000 2001 2002

Current asset to total deposit 0.13 1.29 1.28 1.23

INTREPRETATION

Current assets to total deposit show the availability of liquidity to meet its obligation e.g.

deposits, in case of contingencies or normal case as well. Current total assets to total

deposits shows increase in the past two years but the there is a slight decline.

The increasing trend is favorable for the bank.

DEBT RATIO

Debt Ratio = Total liabilities

Total assets

1999 2000 2001 2002

Debt Ratio 92.1% 94.3% 95.7% 94.3%

INTERPRETATION

The debt ratio measures the proportion of total assets financed by the company’s

creditors. The higher is the ratio, the greater is the amount of other people’s money being

used in an attempt to generate profit. So bank is using a great deal of people’s money to

generate profit.

FIXED ASSETS TURNOVER RATIO

Fixed assets Turnover Ratio = Markup Interest

Fixed assets

1999 2000 2001 2002

Fixed Assets Turnover Ratio 1.65 1.83 1.97 2.63

INTERPETATION

Fixed asset turnover indicates the efficiency with which the company uses its assets

to generate sales. Generally, the higher a company’s fixed asset turnover, the more

efficiently its assets have been used. The ratio for bank is favorable.

This ratio determines the return on investment on fixed assets. This ratio is showing an

increase from 1.65 in 1999 to 2.63 in 2002 which is good for Bank AL Habib Ltd.

TOTAL ASSETS TURNOVER RATIO

Total assets turnover = Markup interest

Total assets

1999 2000 2001 2002

Total Assets Turnover Ratio 0.09 0.08 0.08 0.07

INTERPRETATION

Total asset turnover indicates the efficiency with which the company uses its assets

to generate sales. Generally, the higher a company’s total asset turn over, the more

efficiently its assets have been used. The ratio for bank is satisfactory.

TOTAL ADVANCES TO TOTAL DEPOSITS RATIO

Total advances to total Deposits = Total Advances

Total Deposits

1999 2000 2001 2002

Total Advances To Total Deposits 65.27% 74.42% 63.33% 54.79%

INTERPRETATION

This ratio tells us that how much of the bank has advanced. This ratio must not be less

then 100% to be favorable. Otherwise it is unfavorable.

Here the ratio has decreased from 65.28% in 1999 to 54.79% in 2002, which is not

favorable.

TOTAL ADVANCES TO TOTAL ASSETS

Total Advances to total assets = Total advances *100

Total Assets

1999 2000 2001 2002

Total Advances To total Assets 49% 55% 48% 43%

INTERPRETATION

This ratio shows the advances, which the bank makes as the percentage of its total assets.

If the advances of the banks increasing within increase in the total assets it is favorable

for the bank business. Because there are more advances, there is more income of the bank

and respectively more profit.

Total advances to total assets variation is showing increasing trend in the last year’s

whish shows that the management of the bank is increasing the portion of its advances

then compare to increase in the total assets which is favorable

FIXED ASSETS TO TOTAL ASSETS

Fixed Assets to total assets = Fixed Assets * 100

Total assets

1999 2000 2001 2002

Fixed Assets To Total Assets 5.49% 4.46% 4.23% 3.72%

INTERPRETATION

In the bank, another financial institution, fixed assets are comprised of equipment,

furniture and building. These assets have great importance in banks in order to maintain

the working condition that up to that mark.

Fixed assets and total assets both increasing in the last two years, therefore, this ratio is

increasing.

SWOT ANALYSIS

As the Bank AL Habib Ltd is one of the fastest growing banks, its business is growing at

an excellent rate. In the light of situation we can make analysis by using following

factors:

Strengths

Weaknesses

Opportunities

1. STRENGTHS

Following are the strengths of BAHL

1. One of the leading banks in Pakistan due to its fastest growing rate.

2. It’s increasing goodwill and loyal staff.

3. BAHL has strong finical position, as its owner’s are always willing to inject more

equity in it

4. Bank has successfully launch new product with the passage of time.

5. Increasing number of branches in different areas due to its strong financial

position is also major strength.

6. Attractive and fully maintained branches

7. One of the main strength of BAHL is that it have strong relationships with foreign

business organizations and financial institutions

8. Each department of bank is fully allowed to take adequate decision on its own,

saving the time and helps in achieving the objectives.

9. Provide facilities to all types of customers like individuals, firms, company,

associations, etc.

10. Its main policy is to provide excellent customer services

11. Use f modern technology in working which results in more efficient results.

12. Well-experienced and quality staff is another strength of BAHL.

13. Efficient internal communication system

14. The business community more relying on BAHL for their business deals due to

the better services of the bank.

WEAKNESSES

Although the BAHL is very strong bank, and one of the fastest growing bank but there

are also some weaknesses in the bank which the BAHL faced and should remove to

enhance its business. These weaknesses are as under:

1. Lake of modern advertisement techniques

2. Inadequate staff due to which the burden on the existing staff is more which

reduces their efficiency

3. The staff of the BAHL is not satisfied with the salary structure given to them.

4. Lake of suing information technology

5. Negative influence of the management regarding favoritism

6. Gives its employees less record and other benefits. Its results in less efficient team

of workers.

STRESS AND STRAIN

No work can be carried out with, mild level of stress. Therefore, it is some time more

helpful to create some stressful situation for getting more productivity on making people

more stress

As for as Bank AL Habib Limited is concerned there are few situations present at BAHL

which are as follows

1. Excessive load of work.

2. Late sitting

3. Time constraint and responsibilities.

OPPERTUNITIES

Some opportunities BAHL have are as fallows:

1. BAHL can introduce new product

2. With approval of SBP more branches can be opened in different region of the

Pakistan

SUGGESTION AND RECOMMENDATION FOR

BANK AL HABIB LIMITED

Bank AL Habib, one of the leading banks in Pakistan. However, there are some

suggestion for it’s Lahore branch in order to improve its current operation

1. BAHL should improve its marketing department and tried to use modern

advertisement techniques.

2. BAHL should diversify its loan disbursing structure to big as well as small business

houses.

3. IT techniques should be introduced in its branches and proper training should be

provided to its staff.

4. Should try to enhance the public image, goodwill and attraction of customers.

5. E-commerce should be implemented.

6. BAHL should increase number of ATM.

7. Priority should be given to the Masters in Commerce in employment.

8. BAHL recently introduced car financing. This product can capture the market with

proper marketing.

9. Should provide more incentive to big depositors and valued customers.

10. A good communication link between top management and the employees should be

developed.

11. Recruitment for new jobs should be done fairly and on merit.

12. Smoking during working hours should be prohibited as it imparts a healthy and

mannered image to customers.

13. Proper training programs should be introduced to train the less educated old staff.

In the light of above suggestions, I think that Bank AL Habib Limited can improve its

goodwill and reputation in the eyes of every community. More fame of bank means more

trust of people and more trust means more profits of bank.

CONCLUSION

At present there is no such organization in the world that is free from problems and

challenges every concern has to strive and struggle a lot to be the more profitable and to

get a more competitive edge.

The management of BAHL is presently taking significant strategic steps to enable the

bank to emerge as a strong and progressive institution. Concurrently it continues to make

effort to refine its products and operations to make them more compatible. New deposit

scheme has been introduced and an action plans to maintain the revenue growth in place.

Business and economic conditions remain uncertain BAHL continues its effort to develop

the new products like it did during prior years and successfully launched one of them in

current year. Its relative ranking with other banks and its history past success and

prosperous future reveals the facts that where it is standing today.

ALI RAZA D. HABIBChairmanDIRECTORS’ REVIEWOn behalf of the Board of Directors of the Bank, it is my pleasure to present the un-auditedfinancial statements of Bank AL Habib Limited along with the un-audited consolidatedfinancial statements of Bank AL Habib Limited and the Bank's Subsidiary CompaniesM/s. AL Habib Capital Markets (Private) Limited and M/s. AL Habib Financial ServicesLimited for the nine months period ended September 30, 2008.Alhamdolillah, during the period under review, the performance of the Bank continued tobe satisfactory. The deposits increased to Rs.136.9 billion as compared to Rs. 114.8 billionon December 31, 2007. In the same period, advances increased to Rs. 101.2 billion ascompared to Rs. 79.2 billion on December 31, 2007, while investments increased toRs. 39.3 billion from Rs. 35.3 billion on December 31, 2007. Foreign Trade Business alsocontinued to maintain a rising trend. The pre-tax profit of the Bank for the nine monthsperiod ended September 30, 2008 was Rs. 2,690.6 million as compared to Rs. 2,331.2million during the corresponding period last year.Your Bank has a network of 214 branches consisting of 213 branches in major cities andtowns of Pakistan and a Wholesale Branch in the Kingdom of Bahrain. The Bank intendsto open more branches during the last quarter of the year 2008, as per its branch expansionpolicy.Pakistan Credit Rating Agency Limited (PACRA) has maintained the Bank's long term andshort term entity ratings at AA (Double A) and A1+ (A One plus), respectively. These ratingsdenote a very low expectation of credit risk emanating from a very strong capacity for timelypayment of financial commitments.We are grateful to our customers for their continued support and confidence, to the StateBank of Pakistan for their guidance and to our local and foreign correspondents for theircooperation. We also thank all our staff members for their sincere and dedicated services.3On behalf of the Board of DirectorsKarachi: October 28, 20084Note 30-September 31-December2008 2007(Un-audited) (Audited)(Rupees in '000)ASSETSCash and balances with treasury banks 13,935,069 13,766,500Balances with other banks 3,491,208 604,742Lendings to financial institutions –000 4,112,429Investments - net 6 39,348,007 35,287,080Advances - net 7 101,173,219 79,224,380Other assets 3,239,206 2,452,856Operating fixed assets 9,050,152 5,786,287Deferred tax assets - net –000 –000170,236,861 141,234,274LIABILITIESBills payable 1,991,365 2,394,482Borrowings from financial institutions 13,955,487 9,826,525Deposits and other accounts 9 136,866,695 114,818,855Sub-ordinated loans 10 2,846,940 2,848,080Liabilities against assets subject to finance lease 403,922 642,369Other liabilities 2,248,970 1,818,999Deferred tax liabilities - net 941,570 559,646159,254,949 132,908,956NET ASSETS 10,981,912 8,325,318REPRESENTED BYShare capital 4,785,388 3,681,068Reserves 2,943,920 2,527,949Unappropriated profit 1,629,349 1,804,7409,358,657 8,013,757Surplus on revaluation of assets - net of deferred tax 11 1,623,255 311,56110,981,912 8,325,318CONTINGENCIES AND COMMITMENTS 12The annexed notes 1 to 18 form an integral part of these unconsolidated condensed interim financial statements.UNCONSOLIDATED CONDENSED INTERIM BALANCE SHEETAS AT 30 SEPTEMBER 2008ANWAR HAJI KARIMDirector

ALI RAZA D. HABIBChairmanSHAMEEM AHMEDDirectorABBAS D. HABIBChief Executive andManaging Director5UNCONSOLIDATED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT(UN-AUDITED) FOR THE NINE MONTHS PERIOD ENDED 30 SEPTEMBER 2008

N ine months period ended Three months period endedNote 30-September 30-September 30-September 30-September2008 2007 2008 2007(Rupees in '000)Mark-up / return / interest earned 13 9,854,740 7,331,858 3,853,517 2,445,046Mark-up / return / interest expensed 14 (5,423,041 ) (4,268,406 )

(2,074,476 ) (1,462,615 )Net mark-up / return / interest income 4,431,699 3,063,452

1,779,041 982,431(Provision) / reversal against non-performingloans and advances

- Specific (138,741 ) (19,167 ) (107,262 ) (6,585 ) - General (418,968 ) (1,379 ) (406,000 ) –00

Provision for diminution in the value of available for saleinvestments (66,153 ) (579 ) (32,000 ) –00Bad debts written off directly –00 –00 –00 –00

(623,862 ) (21,125 ) (545,262 ) (6,585 )Net mark-up / return / interest income after provisions 3,807,837 3,042,327 1,233,779 975,846NON MARK-UP / INTEREST INCOMEFee, commission and brokerage income 677,037 499,115 236,229 176,990Dividend income 379,680 25,613 121,394 14,934Income from trading in government securities –00 –00 –00

–00Income from dealing in foreign currencies 842,986 462,674 348,836 159,982Other income 15 150,681 568,099 58,408 192,976Total non mark-up / interest income 2,050,384 1,555,501

764,867 544,8825,858,221 4,597,828 1,998,646 1,520,728NON MARK-UP / INTEREST EXPENSESAdministrative expenses (3,165,877 ) (2,266,562 ) (1,138,478

) (802,651 )Other assets written off –00 –00 –00 –00Other charges (1,786 ) (46 ) (59 ) (22 )Total non mark-up / interest expenses (3,167,663 ) (2,266,608 )

(1,138,537 ) (802,673 )PROFIT BEFORE TAXATION 2,690,558 2,331,220 860,109 718,055Taxation - Current (837,731 ) (659,279 ) (388,379

) (220,091 )- Prior years –00 –00 –00 –00- Deferred (30,260 ) (62,275 ) 101,733 (16,113

)(867,991 ) (721,554 ) (286,646 ) (236,204 )PROFIT AFTER TAXATION 1,822,567 1,609,666 573,463 481,851Basic and diluted earnings per share Rupees 3.81 3.36 1.20

1.01The annexed notes 1 to 18 form an integral part of these unconsolidated condensed interim financial statements.ANWAR HAJI KARIMDirectorALI RAZA D. HABIBChairmanSHAMEEM AHMEDDirector

ABBAS D. HABIBChief Executive andManaging Director6

C apital Reserve Revenue ReservesShare Statutory Special General Exchange Unapp- Total

Capital Reserve Reserve Reserve Translation ropriated

Reserve Profit

(Rupees in ‘000)Balance as at 01 January 2007 2,629,334 1,415,212 126,500 540,000 849 1,474,441 6,186,336Changes in equity from Jan. to Sept. 2007Transfer from surplus onrevaluation of fixed assets - net –00 –00 –00 –00 –00 5,525 5,525Exchange difference on translation of netinvestment in foreign branch –00 –00 –00 –00 (123 ) –00 (123 )Profit for the period –00 –00 –00 –00 –00 1,609,666 1,609,666Total recognised income andexpense for the period –00 –00 –00 –00 (123 ) 1,615,191 1,615,068Transfer to Statutory Reserve –00 321,933 –00 –00 –00 (321,933 ) –00Cash dividend - 2006 (final) –00 –00 –00 –00 –00 (394,400 ) (394,400 )Issue of Bonus Shares - 2006 (final) 1,051,734 –00 –00 –00 –00 (1,051,734 ) –00Balance as at 30 September 2007 3,681,068 1,737,145 126,500 540,000 726 1,321,565 7,407,004Changes in equity from Oct. to Dec. 2007Transfer from surplus onrevaluation of fixed assets - net –00 –00 –00 –00 –00 1,842 1,842Exchange difference on translation of netinvestment in foreign branch –00 –00 –00 –00 3,244 –00 3,244Profit for the period –00 –00 –00 –00 –00 601,667 601,667Total recognised income andexpense for the period –00 –00 –00 –00 3,244 603,509 606,753Transfer to Statutory Reserve –00 120,334 –00 –00 –00 (120,334 ) –00Balance as at 31 December 2007 3,681,068 1,857,479 126,500 540,000 3,970 1,804,740 8,013,757Changes in equity from Jan.to Sept. 2008Transfer from surplus onrevaluation of fixed assets - net –00 –00 –00 –00 –00 23,035 23,035Exchange difference on translation of netinvestment in foreign branch –00 –00 –00 –00 51,458 –00 51,458Profit for the period –00 –00 –00 –00 –00 1,822,567 1,822,567Total recognised income andexpense for the period –00 –00 –00 –00 51,458 1,845,602 1,897,060Transfer to Statutory Reserve –00 364,513 –00 –00 –00 (364,513 ) –00Cash dividend - 2007 (final) –00 –00 –00 –00 –00 (552,160 ) (552,160 )Issue of Bonus Shares - 2007 (final) 1,104,320 –00 –00 –00 –00 (1,104,320 ) –00Balance as at 30 September 2008 4,785,388 2,221,992 126,500 540,000 55,428 1,629,349 9,358,657The annexed notes 1 to 18 form an integral part of these unconsolidated condensed interim financial statements.UNCONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY(UN-AUDITED) FOR THE NINE MONTHS PERIOD ENDED 30 SEPTEMBER 2008ANWAR HAJI KARIMDirectorALI RAZA D. HABIBChairmanSHAMEEM AHMEDDirectorABBAS D. HABIBChief Executive andManaging DirectorALI RAZA D. HABIBChairmanABBAS D. HABIBChief Executive andManaging Director7Nine months Nine months

period ended period endedNote 30-September 30-September2008 2007(Rupees in '000)CASH FLOW FROM OPERATING ACTIVITIESProfit before taxation 2,690,558 2,331,220Less : Dividend income (379,680 ) (25,613 )2,310,878 2,305,607Adjustments for:Depreciation 332,347 243,460Amortisation 19,029 38,226Charge for compensated absences 32,000 24,602Provision for diminution in the value ofavailable for sale investments 66,153 579Provision for defined benefit plan 40,000 29,900Provision against non-performing loans and advances 557,709 20,564Financial charges on leased assets 47,617 64,437Gain on disposal of operating fixed assets (11,325 ) (10,013 )Gain on sale of listed securities and mutual funds (38,872 ) (403,406 )1,044,658 8,3493,355,536 2,313,956(Increase) / Decrease in Operating AssetsLendings to financial institutions 4,112,429 5,117,822Advances (22,506,548 ) 2,886,669Other assets (excluding advance taxation) (779,077 ) (195,755 )(19,173,196 ) 7,808,736Increase / (Decrease) in Operating LiabilitiesBills payable (403,117 ) 1,082,226Borrowings from financial institutions 4,128,962 (3,056,147 )Deposits and other accounts 22,047,840 17,939,954Other liabilities (excluding provision for taxation) 107,996 276,04725,881,681 16,242,080Cash inflow before tax 10,064,021 26,364,772Income tax paid (596,892 ) (767,973 )Net Cash Flow from Operating Activities 9,647,129 25,596,799(balance carried forward)UNCONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED)ANWAR HAJI KARIMDirectorSHAMEEM AHMEDDirector8FOR THE NINE MONTHS PERIOD ENDED 30 SEPTEMBER 2008Nine months Nine monthsperiod ended period endedNote 30-September 30-September2008 2007(Rupees in '000)Net Cash flow from Operating Activities(balance brought forward) 9,467,129 25,596,799CASH FLOW FROM INVESTING ACTIVITIESNet investments (4,501,266 ) (22,754,804 )Dividend received 380,370 26,963Investments in operating fixed assets (1,475,484 ) (1,111,709 )Proceeds from sale of operating fixed assets 14,514 12,570Net Cash (used in) / from Investing Activities (5,581,866 ) (23,826,980 )CASH FLOW FROM FINANCING ACTIVITIESSub-ordinated loans (1,140 ) 760,160Payment of lease obligations (286,064 ) (296,058 )Dividend paid (543,024 ) (388,236 )Net Cash (used in) / from Financing Activities (830,228 ) 75,866Increase in Cash and Cash Equivalents 3,055,035 1,845,685Cash and cash equivalents at the beginning of the period 14,371,242 10,579,333Cash and cash equivalents at the end of the period 17,426,277 12,425,018The annexed notes 1 to 18 form an integral part of these unconsolidated condensed interim financial statements.NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS (UN-AUDITED)FOR THE NINE MONTHS PERIOD ENDED 30 SEPTEMBER 20081. STATUS AND NATURE OF BUSINESSBank AL Habib Limited (the Bank) was incorporated in Pakistan on 15 October1991 as a public limited company under the Companies Ordinance, 1984 having

its registered office at 126-C, Old Bahawalpur Road, Multan, with principal placeof business being in Karachi. Its shares are listed on all the Stock Exchanges inPakistan. It is a scheduled bank principally engaged in the business of commercialbanking with a network of 214 branches (2007: 175 branches) including wholesalebranch (2007: 01) in the Kingdom of Bahrain and a branch (2007 :01) in KarachiExport Processing Zone and four (2007: 04) Islamic Banking branches.2. STATEMENT OF COMPLIANCEThese unconsolidated condensed interim financial statements have been preparedin accordance with the approved accounting standards as applicable in Pakistan.Approved accouting standards comprise of such International Financial ReportingStandards (IFRS) issued by International Accouting Standards Board and IslamicFinancial Accounting Standards (IFAS) issued by the Institue of CharteredAccountants of Pakistan as are notified under the Companies Ordinance , 1984,the requirements of Companies Ordinance, 1984, Banking Companies Ordinance,1962 or directives issued by the Securities and Exchange Commision of Pakistanand the State Bank of Pakistan. Wherever the requirements of the CompaniesOrdinance, 1984, Banking Companies Ordinance, 1962 or directives issued bythe Securities and Exchange Commission of Pakistan and the State Bank ofPakistan differ with the requirements of IFRS or IFAS, the requirements of theCompanies Ordinance, 1984, Banking Companies Ordinance, 1962 or therequirements of the said directives prevail.The State Bank of Pakistan, vide its BSD Circular No. 10 dated 26 August 2002has deferred the applicability of International Accounting Standard 39, "FinancialInstruments Recognition and Measurement" and International Accounting Standard40, "Investment Property" for banking companies till further instructions. Accordingly,the requirements of these standards have not been considered in the preparationof these financial statements. However, investments have been classified andvalued in accordance with the requirements prescribed by the State Bank ofPakistan through various circulars.93. BASIS OF PRESENTATIONIn accordance with the directives of the Federal Government regarding the shiftingof the banking system to Islamic modes, the State Bank of Pakistan has issuedvarious circulars from time to time. Permissible forms of trade-related modes offinancing includes purchase of goods by banks from their customers and immediateresale to them at appropriate mark-up in price on deferred payment basis. Thepurchases and sales arising under these arrangements are not reflected in thesefinancial statements as such but are restricted to the amount of facility actuallyutilized and the appropriate portion of mark-up thereon.The financial results of the Islamic Banking branches of the Bank have beenconsolidated in these unconsolidated condensed interim financial statements forreporting purposes, after eliminating intra branch transactions / balances. Keyfinancial figures of the Islamic Banking branches are disclosed on note 17 to theseunconsolidated condensed interim financial statements.These financial statements are un-audited and are being submitted as requiredby Section 245 of the Companies Ordinance, 1984. These are presented incondensed form in accordance with the requirements of approved accountingstandards as applicable in Pakistan relating to the interim reporting and BSDCircular Letter No. 02 dated 12 May 2004 of the State Bank of Pakistan. They donot include all of the information required for full annual financial statements andshould be read in conjunction with the financial statements of the Bank as at andfor the year ended 31 December 2007.4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe accounting policies adopted for the preparation of these financial statementsare the same as those applied in the preparation of the financial statements forthe preceeding year ended 31 December 2007. In addition, the Bank has alsodecided to maintain a general provision in line with the Bank's prudent policies.5. ESTIMATESThe preparation of interim financial statements require management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets and liabilities, income and expenses.

Actual results may differ from these estimates.106. INVESTMENTS

30-September 2008 31-December 2007Held by Given as Total Held by Given as TotalBank Collateral Bank Collateral(Rupees in '000)Available for Sale SecuritiesMarket Treasury Bills 22,747,120 5,183,725 27,930,845 26,213,053 –00

26,213,053Pakistan Investment Bonds 1,408,417 –00 1,408,417 1,408,845 –00

1,408,845Government of Pakistan Bonds 389,196 –00 389,196 306,332 –00

306,332Ordinary shares of listedcompanies and closed endmutual funds 190,357 –00 190,357 258,145 –00 258,145

Ordinary shares of unlisted companies 35,700 –00 35,700 35,700 –00 35,700Term Finance Certificates– Listed 706,815 –00 706,815 537,928 –00 537,928Sukuk Certificates 1,206,312 –00 1,206,312 874,000 –00 874,000Open ended mutual funds 2,455,000 –00 2,455,000 80,000 –00 80,000

S.W.I.F.T. 5,849 –00 5,849 4,750 –00 4,75029,144,766 5,183,725 34,328,491 29,718,753 –00 29,718,753Held to Maturity Securities Pakistan Investment Bonds 2,563,702 –00 2,563,702 2,714,138 –00

2,714,138 Sukuk Certificates 414,504 –00 414,504 333,413 –00 333,413Government of Pakistan Bonds 387,424 –00 387,424 –00 –00 –00

Term Finance Certificates– Listed 406,960 –00 406,960 326,303 –00 326,303– Unlisted 373,953 –00 373,953 403,119 –00 403,119Unlisted WAPDA Bonds –00 –00 –00 600,014 –00 600,014

4,146,543 –00 4,146,543 4,376,987 –00 4,376,987Associated CompaniesListed– Habib Sugar Mills Limited 180,977 –00 180,977 180,977

–00 180,977– First Habib Income Fund 750,000 –00 750,000 750,000 –00

750,000Unlisted– Habib Asset Management Ltd. 33,750 –00 33,750 13,500 –00 13,500

964,727 –00 964,727 944,477 –00 944,477Subsidiary Companies– AL Habib Capital Markets(Private) Limited 200,000 –00 200,000 200,000 –00 200,000

– AL Habib Financial ServicesLimited 62,850 –00 62,850 –00 –00 –00262,850 –00 262,850 200,000 –00 200,000Investments at cost 34,518,886 5,183,725 39,702,611 35,240,217 –00

35,240,217Provision for diminution inthe value of available forsale investment (69,552 ) –00 (69,552 ) (3,399 )

–00 (3,399 )Investments -net of provisions 34,449,334 5,183,725 39,633,059 35,236,818 –00 35,236,818

(Deficit) / surplus on revaluationof available for sale investment (285,052 ) –00 (285,052 )

50,262 –00 50,262Total Investments 34,164,282 5,183,725 39,348,007

35,287,080 –00 35,287,080117. ADVANCESNote 30-September 31-December2008 2007(Rupees in '000)Loans, cash credits, running finances, etc.– In Pakistan 89,022,010 70,536,624– Outside Pakistan 2,922,579 1,184,88891,944,589 71,721,512Net investment in finance lease / ijara financing– In Pakistan 593,398 639,852Murabaha financing / receivable 516,369 1,007,878Bills discounted and purchased(excluding market treasury bills)– Payable in Pakistan 2,132,401 2,625,735– Payable outside Pakistan 6,765,525 3,451,7218,897,926 6,077,456Advances - gross 101,952,282 79,446,698Provision for non-performing advances 7.1 (779,063 ) (222,318 )Advances - net of provisions 101,173,219 79,224,3807.1 Advances include Rs. 532.911 million (December 31, 2007: Rs. 216.628 million)which have been placed under non-performing status as detailed below:12

3 0 -September 2008 31-December 2007Note Domestic Provision Provision Domestic Provision Provision

Required Held Required Held

(Rupees in '000)

Category of ClassificationSubstandard 270,563 67,519 67,519 22,291 5,573 5,573

Doubtful 10,779 5,019 5,019 27,145 13,576 13,576Loss 251,569 251,569 251,580 167,192 167,192 167,192532,911 324,107 324,118 216,628 186,341 186,341

General Provision 7.2 –00 –00 454,945 –00 –00 35,977

532,911 324,107 779,063 216,628 186,341 222,3186.1 The market value of securities classified as held-to-maturity amounted to Rs. 3,832million as at September 30, 2008 (December 31, 2007: Rs. 4,253 million).7.2 The Bank has created general provision for consumer portfolio amounting toRs. 54.945 million (December 31, 2007 : Rs. 35.977 million) in accordance with thePrudential Regulations issued by the State Bank of Pakistan. In addition, the Bankhas created general provision amounting to Rs. 400.00 million (December 31, 2007: Nil) against its loans and advances portfolio.8. OPERATING FIXED ASSETS8.1 Following is the cost of operating fixed assets added during the periodNine months Nine monthsperiod to period to30-September 30-September2008 2007(Rupees in ‘000)Improvements to leasehold buildings 71,106 47,920Land and buildings 1,045,052 206,866

Equipments and furniture and fixtures– Owned 384,110 148,516– Leased –00 209,703384,110 358,219Vehicles– Owned 79,849 314– Leased –00 60,47279,849 60,786Intangible assets 15,611 18,3641,595,728 692,1558.2 Following is the cost of operating fixed assetsdisposed of during the periodEquipments and furniture and fixtures 6,791 3,097Vehicles 3,524 3,10010,315 6,1978.3 During the period, leasehold land and buildings were revalued by M/s. Iqbal A.Nanjee & Co. on the basis of market value which resulted in surplus ofRs. 2,022 million over the book value of assets as on 01 January 2008. Had therebeen no revaluation, the carrying amount of revalued assets would have been asfollows:131410. SUB-ORDINATED LOANSTerm Finance Certificates (TFCs) - I - Quoted, 10.1 1,347,840 1,348,380UnsecuredTerm Finance Certificates (TFCs) - II - Quoted, 10.2 1,499,100 1,499,700Unsecured2,846,940 2,848,08010.1 Term Finance Certificates (TFCs) - I - Quoted, UnsecuredTotal issue Rupees 1,350 millionRating AARatePayable six monthly at average six monthsKIBOR plus 150 bpsFloor 3.50%Cap 10.00%Redemption 6 - 78th month: 0.25%84th, 90th and 96th month: 33.25% eachTenor 8 YearsNote Net Book Value30-September 31-December2008 2007(Rupees in ‘000)Leasehold land 2,230,509 1,673,611Buildings on leasehold land 2,302,464 1,873,1524,532,973 3,546,7639. DEPOSITS AND OTHER ACCOUNTS 30-September 31-December2008 2007(Rupees in ‘000)9.1 Customers– Fixed deposits 55,615,651 40,739,267– Savings deposits 22,035,944 20,628,769– Current accounts - Remunerative 15,990,115 16,580,475– Current accounts - Non-remunerative 40,860,832 35,519,490134,502,542 113,468,0019.2 Financial Institutions– Remunerative deposits 2,293,617 1,111,894– Non-remunerative deposits 70,536 238,9602,364,153 1,350,854136,866,695 114,818,8551510.2 Term Finance Certificates (TFCs) - II - Quoted, UnsecuredTotal issue Rupees 1,500 millionRating AARatePayable six monthly at average six months

KIBOR plus 1.95% without any floor and capRedemption 6 - 84th month: 0.28%90th and 96th month: 49.86% eachTenor 8 Years11. SURPLUS ON REVALUATION OF ASSETS - NETNote 30-September 31-December2008 2007(Rupees in ‘000)Surplus on revaluation of securities- net of tax 11.1 (185,284 ) 32,670Surplus on revaluation of fixed assets- net of tax 11.2 1,808,539 278,8911,623,255 311,56111.1 Federal Government securities (104,037 ) 54,325Quoted shares (78,806 ) (20,493 )Other securities (102,209 ) 16,431Related deferred tax asset / (liability) 99,768 (17,593 )(185,284 ) 32,67011.2 Surplus on revaluation of fixedassets at the begining of the period 395,939 407,273Surplus on revaluation of the Bank’sproperties during the period 2,021,708 –00Transferred to unappropriated profit inrespect of incremental depreciationcharged during the period - net of deferred tax (23,035 ) (7,367 )Related deferred tax liability (12,403 ) (3,967 )(35,438 ) (11,334 )2,382,209 395,939Less: Related deferred tax liability on:– Revaluation of fixed assetsat the begining of the period 117,048 121,015– Revaluation of Bank’s propertiesduring the period 469,025 –00– Incremental depreciation charged during theperiod transferred to profit and loss account (12,403 ) (3,967 )573,670 117,0481,808,539 278,89112. CONTINGENCIES AND COMMITMENTS 30-September 31-December2008 2007(Rupees in ‘000)12.1 Direct Credit SubstitutesAcceptances 6,984,111 5,129,74812.2 Transaction-related Contingent LiabilitiesIncludes performance bonds, bid bonds,warranties, advance payment guarantees,shipping guarantees and standby letters ofcredit related to particular transactionsissued in favour of:– Government 5,122,649 4,560,704– Financial Institutions 529,209 231,879– Others 3,895,835 2,237,9759,547,693 7,030,55812.3 Trade-related Contingent LiabilitiesLetters of credit 32,340,439 35,157,39812.4 Other ContingenciesThe income tax authorities have finalised the income tax assessments of the Bankupto tax year 2004 (accounting year ended 31 December 2003). For tax year2005, 2006, 2007 and 2008 the Bank has filed returns under self assessmentscheme as envisaged in the section 120 of the Income Tax Ordinance, 2001. TheIncome Tax Department has filed appeals against the appellate order relating tothe assessment years 1995-1996, 2000-2001, 2001-2002, 2002-2003 and Taxyears 2003 and 2004 before the Income Tax Appellate Tribunal (ITAT) on whichthe tax liability, if any, of Rs. 40 million may arise. The Bank, based on the earlierdecisions at ITAT level in previous years and the tax advisor's opinion is confident

of a favourable outcome and expects that no additional liability would arise.12.5 Commitments in respect of forward lendingThe Bank offers to extend credit in the normal course of its business but thesebeing revocable do not attract any significant penalty or expense if the facility isunilaterally withdrawn.30-September 31-December2008 2007(Rupees in ‘000)12.6 Commitments in respect of forwardexchange contractsPurchase 5,109,287 7,620,287Sale 4,801,273 6,525,727The maturities of above contracts are spread over a period upto one year.1630-September 31-December2008 2007(Rupees in ‘000)12.7 Commitments for the acquisition of operatingfixed assets 138,493 309,04612.8 Commitments in respect of operating leasesNot later than one year 306 1,683The Bank has entered into operating lease arrangements whereby vehicles areacquired on lease. The lease rentals are payable upto two months.13. MARK-UP / RETURN / INTEREST EARNEDNine months Nine monthsperiod to period to30-September 30-September2008 2007(Rupees in ‘000)On loans and advances to– Customers 6,901,704 4,767,904– Financial institutions 127,713 78,573On investments 2,401,253 2,064,257On deposits with financial institutions 126,771 199,770On securities purchased under resale agreements 249,716 133,850On call money lendings 47,583 87,5049,854,740 7,331,85814. MARK-UP / RETURN / INTEREST EXPENSEDDeposits 4,728,521 3,526,031Securities sold under repurchaseagreement borrowings 67,373 36,120Sub-ordinated loan - TFCs 246,463 235,264Borrowings from State Bank of Pakistan:– Under Export Refinance Scheme 283,911 368,858– Under Long Term Financing forExport Oriented Projects 51,241 47,386Other short term borrowings 45,532 54,7475,423,041 4,268,4061715. OTHER INCOMENine months Nine monthsperiod to period to30-September 30-September2008 2007(Rupees in ‘000)Gain on sale of listed securities 11,981 142,926(Loss) / gain on redemption of units of openended mutual fund (50,853 ) 260,480Gain on disposal of operating fixed assets 11,325 10,013Other receipts 178,228 154,680150,681 568,09916. RELATED PARTY TRANSACTIONSParties are considered to be related if one party has the ability to control the otherparty or exercise significant influence over the other party in making financial or

operational decisions and include major shareholders, subsidiary companies, associatedcompanies with or without common directors, retirement benefit funds, directors, keymanagement personnel and their close family members.The Bank continues to have a policy whereby all transactions with related parties areentered into at arm's length prices using the comparable uncontrolled price methodexcept dividends which have been approved in the Annual General Meeting.The lending policy in case of related parties has been consistent with that of the Bank'soverall credit policy and in line with the Prudential Regulations issued by the StateBank of Pakistan.Transactions with related parties, other than those under the terms of employment,are summarized as follows:1819

3 1 -December 2007Associates Subsidiary Non Key TotalExecutive ManagementDirectors Personnel(Rupees in ‘000)DepositsAt the beginning of the year 165,483 48,014 5,427 14,571

233,495Received during the year 23,906,965 24,369,432 34,334 37,770

48,348,501Repaid during the year (23,869,746 ) (24,255,480 ) (28,093 ) (41,058

) (48,194,377 )At the end of the year 202,702 161,966 11,668 11,283 387,619

AdvancesAt the beginning of the year 247,615 –00 –00 10,906

258,521Given during the year 728,478 599,462 1,586 9,273 1,338,799Repaid during the year (840,950 ) (599,462 ) (1,495 ) (17,579

) (1,459,486 )At the end of the year 135,143 –00 91 2,600 137,834

3 0 -September 2008Associates Subsidiaries Non Key TotalExecutive ManagementDirectors Personnel(Rupees in ‘000)DepositsAt the beginning of the period 202,702 161,966 11,668 11,283

387,619Received during the period 27,155,685 27,354,441 110,021

2,606,535 57,226,682Repaid during the period (26,950,745 ) (27,516,193 ) (94,925 ) (2,576,858 ) (57,138,721 )At the end of the period 407,642 214 26,764 40,960 475,580

AdvancesAt the beginning of the period 135,143 –00 91 2,600

137,834Given during the period 3,384,573 2,309,178 1,129 2,943

5,697,823Repaid during the period (3,198,746 ) (2,304,522 ) (1,056 ) (5,132

) (5,509,456 )At the end of the period 320,970 4,656 164 411 326,20120

N ine months period to 30-September 2007Associates Subsidiary Non Key TotalExecutive ManagementDirectors Personnel(Rupees in ‘000)Markp-up earned 21,998 1,127 –00 779 23,904Mark-up expensed 16,811 641 219 3,231 20,902Bank charges and commission 1,133 45 10 29

1,217Salaries and allowances –00 –00 –00 47,864 47,864Bonus –00 –00 –00 7,265 7,265Compensated absences –00 –00 –00 212 212

Contribution to definedcontribution plan –00 –00 –00 1,851 1,851Contribution to defined benefit plan –00 –00 –00 1,402 1,402Staff provident fund –00 –00 –00 –00 37,583Directors' fee –00 –00 530 –00 530Insurance claim received 2,888 –00 –00 –00 2,888Insurance premium paid 88,094 –00 –00 –00 88,094Dividend income 2,672 –00 –00 –00 2,672Dividend paid 6,560 –00 –00 –00 6,560Rental income –00 1,662 –00 –00 1,662Commission expense –00 363 –00 –00 363

N ine months period to 30-September 2008Associates Subsidiaries Non Key TotalExecutive ManagementDirectors Personnel(Rupees in ‘000)Mark-up earned 28,273 4,277 10 37 32,597Mark-up expensed 14,440 1,181 1,067 2,643 19,331Bank charges and commission 6,565 50 4 7

6,626Salaries and allowances –00 –00 –00 49,585 49,585Bonus –00 –00 –00 10,969 10,969Compensated absences –00 –00 –00 –00 –00Contribution to definedcontribution plan –00 –00 –00 1,761 1,761Contribution to defined benefit plan –00 –00 –00 1,252 1,252Staff provident fund –00 –00 –00 –00 51,681Directors' fee –00 –00 650 –00 650Insurance claim received 61,320 –00 –00 –00 61,320Insurance premium paid 71,698 –00 –00 –00 71,698Dividend income 71,420 –00 –00 –00 71,420Dividend paid 10,318 –00 –00 –00 10,318Rental income –00 1,662 –00 –00 1,662Commission expense –00 25 –00 –00 25ANWAR HAJI KARIMDirectorALI RAZA D. HABIBChairmanSHAMEEM AHMEDDirectorABBAS D. HABIBChief Executive andManaging Director2117. ISLAMIC BANKING BUSINESSThe Bank is operating with four Islamic Banking branches (2007: 04). The key financialfigures of Islamic Banking business at period end are as follows:30-September 31-December2008 2007(Rupees in ‘000)Islamic Banking Funds 250,000 250,000Deposits and Other Accounts 1,493,713 835,725Due to Head Office 251,471 1,322,230Murabaha Financing 516,369 1,007,878Ijara Financing 593,398 639,852Diminishing Musharaka 430,052 233,42318. DATE OF AUTHORIZATIONThese unconsolidated condensed interim financial statements were authorized forissue by the Board of Directors in their meeting held on October 28, 2008.22

Bank AL Habib LimitedandSubsidiary Companies

Consolidated Financial StatementsANWAR HAJI KARIMDirectorALI RAZA D. HABIBChairmanSHAMEEM AHMEDDirectorABBAS D. HABIBChief Executive andManaging DirectorNote 30-September 31-December2008 2007(Un-audited) (Audited)(Rupees in '000)ASSETSCash and balances with treasury banks 13,935,084 13,766,513Balances with other banks 3,552,684 615,031Lendings to financial institutions –00 4,112,429Investments - net 7 39,111,167 35,277,864Advances - net 8 101,298,197 79,240,057Other assets 3,336,023 2,473,693Operating fixed assets 9,115,956 5,852,648Deferred tax assets - net –000 –000170,349,111 141,338,235LIABILITIESBills payable 1,991,365 2,394,482Borrowings from financial institutions 13,955,487 9,826,525Deposits and other accounts 10 136,865,736 114,818,032Sub-ordinated loans 11 2,846,940 2,848,080Liabilities against assets subject to finance lease 407,164 646,557Other liabilities 2,249,873 1,830,648Deferred tax liabilities - net 944,279 560,491159,260,844 132,924,815NET ASSETS 11,088,267 8,413,420REPRESENTED BYShare capital 4,785,388 3,681,068Reserves 2,959,226 2,527,949Unappropriated profit 1,621,629 1,788,270Minority interest 108,537 104,8709,474,780 8,102,157Surplus on revaluation of assets - net of deferred tax 12 1,613,487 311,26311,088,267 8,413,420CONTINGENCIES AND COMMITMENTS 13The annexed notes 1 to 19 form an integral part of these consolidated condensed interim financial statements.CONSOLIDATED CONDENSED INTERIM BALANCE SHEETAS AT 30 SEPTEMBER 200823ANWAR HAJI KARIMDirectorALI RAZA D. HABIBChairmanSHAMEEM AHMEDDirectorABBAS D. HABIBChief Executive andManaging Director24CONSOLIDATED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT(UN-AUDITED) FOR THE NINE MONTHS PERIOD ENDED 30 SEPTEMBER 2008

N ine months period ended Three months period endedNote 30-September 30-September 30-September 30-September2008 2007 2008 2007(Rupees in '000)Mark-up / return / interest earned 14 9,867,769 7,346,261 3,861,030 2,452,541Mark-up / return / interest expensed 15 (5,422,156 ) (4,268,608 )

(2,074,410 ) (1,462,190 )Net mark-up / return / interest income 4,445,613 3,077,653

1,786,620 990,351(Provision) / reversal against non-performing

loans and advances- Specific (138,741 ) (19,167 ) (107,262 ) (6,585

)- General (418,968 ) (1,379 ) (406,000 ) –00Provision for diminution in the value of available for saleinvestments (66,153 ) (579 ) (32,000 ) –00Bad debts written off directly –00 –00 –00 –00

(623,862 ) (21,125 ) (545,262 ) (6,585 )Net mark-up / return / interest income after provisions 3,821,751 3,056,528 1,241,358 983,766NON MARK-UP / INTEREST INCOMEFee, commission and brokerage income 705,067 533,925 239,769 187,804Dividend income 380,170 25,647 121,493 14,934Income from trading in government securities –00 –00 –00

–00Income from dealing in foreign currencies 842,986 462,674 348,835 159,982Other income 16 170,945 534,964 61,385 190,792Total non mark-up / interest income 2,099,168 1,557,210

771,482 553,5125,920,919 4,613,738 2,012,840 1,537,278NON MARK-UP / INTEREST EXPENSESAdministrative expenses (3,208,779 ) (2,300,195 ) (1,152,340

) (813,468 )Other assets written off –00 –00 –00 –00Other charges (1,786 ) (46 ) (59 ) (22 )Total non mark-up / interest expenses (3,210,565 ) (2,300,241 )

(1,152,399 ) (813,490 )2,710,354 2,313,497 860,441 723,788Share of profit of associates 8,083 10,029 (16,632 )

2,121PROFIT BEFORE TAXATION 2,718,437 2,323,526 843,809 725,909Taxation - Current (851,391 ) (662,691 ) (390,697

) (222,278 )- Prior years –00 –00 –00 –00- Deferred (32,062 ) (63,335 ) 99,932 (16,374 )

(883,453 ) (726,026 ) (290,765 ) (238,652 )PROFIT AFTER TAXATION 1,834,984 1,597,500 553,044 487,257Attributable to:Equity holders of parent 1,831,317 1,592,258 553,171

486,015Minority interest 3,667 5,242 (127 ) 1,242

1,834,984 1,597,500 553,044 487,257Basic and diluted earnings per share Rupees 3.83 3.34 1.16

1.02The annexed notes 1 to 19 form an integral part of these consolidated condensed interim financial statements.ANWAR HAJI KARIMDirectorALI RAZA D. HABIBChairmanSHAMEEM AHMEDDirectorABBAS D. HABIBChief Executive andManaging Director25

C apital Reserve Revenue ReservesShare Statutory Special General Exchange Unappro Total Minority TotalCapital Reserve Reserve Reserve Translation -priated

InterestReserve Profit(Rupees in ‘000)Balance as at 01 January 2007 2,629,334 1,415,212 126,500

540,000 849 1,472,490 6,184,385 99,109 6,283,494

Changes in equity from January to September 2007Transfer from surplus on revaluation of fixed assets-net –00 –00 –00 –00

–00 5,525 5,525 –00 5,525Exchange difference on translation of net investment in foreign operations –00 –00 –00 –00

(123 ) –00 (123 ) –00 (123 )Profit for the period –00 –00 –00 –00 –00

1,592,258 1,592,258 5,242 1,597,500Total recognised income and expense for the period –00 –00 –00 –00 (123

) 1,597,783 1,597,660 5,242 1,602,902Transfer to Statutory Reserve –00 321,933 –00 –00

–00 (321,933 ) –00 –00 –00Cash dividend - 2006 (final) –00 –00 –00 –00 –00

(394,400 ) (394,400 ) –00 (394,400)

Issue of Bonus Shares - 2006 (final) 1,051,734 –00 –00 –00 –00 (1,051,734 ) –00 –00 –00

Balance as at 30 September 2007 3,681,068 1,737,145 126,500 540,000 726 1,302,206 7,387,645 104,351

7,491,996Changes in equity from Octoberto December 2007Transfer from surplus on –00 –00 –00 –00 –00

1,842 1,842 –00 1,842revaluation of fixed assets-netExchange difference on translation of –00 –00 –00 –00

3,244 –00 3,244 –00 3,244net investment in foreign operationsProfit for the period –00 –00 –00 –00 –00

604,556 604,556 519 605,075Total recognised income and expense for the period –00 –00 –00 –00 3,244

606,398 609,642 519 610,161Transfer to Statutory Reserve –00 120,334 –00 –00

–00 (120,334 ) –00 –00 –00Balance as at 31 December 2007 3,681,068 1,857,479 126,500

540,000 3,970 1,788,270 7,997,287 104,870 8,102,157

Changes in equity from Januaryto September 2008Transfer from surplus onrevaluation of fixed assets-net –00 –00 –00 –00

–00 23,035 23,035 –00 23,035Exchange difference on translation of –00 –00 –00 –00

66,764 –00 66,764 –00 66,764net investment in foreign operationsProfit for the period –00 –00 –00 –00 –00

1,831,317 1,831,317 3,667 1,834,984Total recognised income and expense for the period –00 –00 –00 –00 66,764

1,854,352 1,921,116 3,667 1,924,783Transfer to Statutory Reserve –00 364,513 –00 –00

–00 (364,513 ) –00 –00 –00Cash dividend - 2007 (final) –00 –00 –00 –00 –00

(552,160 ) (552,160 ) –00 (552,160)

Issue of Bonus Shares - 2007 (final) 1,104,320 –00 –00 –00 –00 (1,104,320 ) –00 –00 –00

Balance as at 30 September 2008 4,785,388 2,221,992 126,500 540,000 70,734 1,621,629 9,366,243 108,537

9,474,780The annexed notes 1 to 19 form an integral part of these consolidated condensed interim financial statements.CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED)FOR THE NINE MONTHS PERIOD ENDED 30 SEPTEMBER 2008ALI RAZA D. HABIBChairmanABBAS D. HABIBChief Executive andManaging DirectorNine months Nine months

period ended period ended30-September 30-September2008 2007(Rupees in '000)CASH FLOW FROM OPERATING ACTIVITIESProfit before taxation 2,718,437 2,323,526Less : Dividend income (380,170 ) (25,647 )2,338,267 2,297,879Adjustments for:Depreciation 335,910 246,587Amortisation 19,107 38,226Charge for compensated absences 32,000 24,602Provision for diminution in the value ofavailable for sale investments 66,153 579Provision for defined benefit plan 40,000 29,900Provision against non-performingloans and advances 557,709 20,564Financial charges on leased assets 47,914 64,819Share of profit from associates (8,083 ) (10,029 )Gain on disposal of operating fixed assets (11,325 ) (10,013 )Gain on remeasurement of held for trading investment (52 ) (209)Gain on sale of listed securities and mutual funds (25,252 ) (371,724 )1,054,081 33,3023,392,348 2,331,181(Increase) / Decrease in Operating AssetsLendings to financial institutions 4,112,429 5,117,822Advances (22,615,849 ) 2,824,671Other assets (excluding advance taxation) (870,146 ) (50,084 )(19,373,566 ) 7,892,409Increase / (Decrease) in Operating LiabilitiesBills payable (403,117 ) 1,082,226Borrowings from financial institutions 4,128,962 (3,056,147 )Deposits and other accounts 22,047,704 17,951,584Other liabilities (excluding provision for taxation) 347,225 117,21926,120,774 16,094,882Cash inflow before tax 10,139,556 26,318,472Income tax paid (610,547 ) (771,197 )Net Cash Flow from Operating Activities 9,529,009 25,547,275(balance carried forward)CONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED)26ANWAR HAJI KARIMDirectorSHAMEEM AHMEDDirector27Nine months Nine monthsperiod ended period ended30-September 30-September2008 2007(Rupees in '000)Net Cash flow from Operating Activities(balance brought forward) 9,529,009 25,547,275CASH FLOW FROM INVESTING ACTIVITIESNet investments (3,866,069 ) (22,650,885 )Dividend received 380,780 26,997Investments in operating fixed assets (2,129,281 ) (1,162,308 )Proceeds from sale of operating fixed assets 23,256 13,729Net Cash (used in) / from Investing Activities (5,591,314 ) (23,772,467 )CASH FLOW FROM FINANCING ACTIVITIESSub-ordinated loans (1,140 ) 760,160Payment of lease obligations (287,307 ) (296,715 )Dividend paid (543,024 ) (388,236 )Net Cash (used in) / from Financing Activities (831,471 ) 75,209Increase in cash and cash equivalents 3,106,224 1,850,017Cash and cash equivalents at the beginning of the period 14,381,544 10,579,333Cash and cash equivalents at the end of the period 17,487,768 12,429,350The annexed notes 1 to 19 form an integral part of these consolidated condensed interim financial statements.FOR THE NINE MONTHS PERIOD ENDED 30 SEPTEMBER 20081. STATUS AND NATURE OF BUSINESS

The Group consists of:- Bank AL Habib Limited (Holding Company)- AL Habib Capital Markets (Private) Limited (Subsidiary Company)- AL Habib Financial Services Limited (Subsidiary Company)Bank AL Habib Limited (the Bank) was incorporated in Pakistan on 15 October 1991as a public limited company under the Companies Ordinance, 1984 having its registeredoffice at 126-C, Old Bahawalpur Road, Multan, with principal place of business beingin Karachi. Its shares are listed on all the Stock Exchanges in Pakistan. It is a scheduledbank principally engaged in the business of commercial banking with a network of214 branches (2007: 175 branches) including a wholesale branch (2007: 01) in theKingdom of Bahrain and a branch (2007 : 01) in Karachi Export Processing Zone andfour (2007: 04) Islamic Banking branches.The Bank has invested in 66.67% sharesof AL Habib Capital Markets (Private) Limited. The principal objective of the companyis to engage in the business of equity, money market and foreign exchange brokerage,equity research and corporate financial advisory and consultancy services. AL HabibCapital Markets (Private) Limited (the Company) was incorporated in Pakistan as a(Private) Limited Company on 23 August 2005 under the Companies Ordinance, 1984and started operations from 14 December 2005.AL Habib Financial Services Limited is a wholly owned subsidiary of the Bank.Theprincipal objective of the company is to engage in arranging / advising on financialproducts and services. AL Habib Financial Services Limited was incorporated in Dubaion 05 March 2008.2. STATEMENT OF COMPLIANCEThese consolidated condensed interim financial statements have been prepared inaccordance with the approved accounting standards as applicable in Pakistan. Approvedaccouting standards comprise of such International Financial Reporting Standards(IFRS) issued by International Accouting Standards Board and Islamic FinancialAccounting Standards (IFAS) issued by the Institue of Chartered Accountants ofPakistan as are notified under the Companies Ordinance , 1984,the requirements ofCompanies Ordinance, 1984, Banking Companies Ordinance, 1962 or directivesissued by the Securities and Exchange Commision of Pakistan and the State Bankof Pakistan. Wherever the requirements of the Companies Ordinance, 1984, BankingCompanies Ordinance, 1962 or directives issued by the Securities and ExchangeCommission of Pakistan and the State Bank of Pakistan differ with the requirementsof IFRS or IFAS, the requirements of the Companies Ordinance, 1984, BankingCompanies Ordinance, 1962 or the requirements of the said directives prevail.The State Bank of Pakistan, vide its BSD Circular No. 10 dated 26 August 2002 hasdeferred the applicability of International Accounting Standard 39, "Financial InstrumentsRecognition and Measurement" and International Accounting Standard 40, "InvestmentProperty" for banking companies till further instructions. Accordingly, the requirementsof these standards have not been considered in the preparation of these financial28NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS (UN-AUDITED)FOR THE NINE MONTHS PERIOD ENDED 30 SEPTEMBER 2008statements. However, investments have been classified and valued in accordancewith the requirements prescribed by the State Bank of Pakistan through variouscirculars.3. BASIS OF PRESENTATIONIn accordance with the directives of the Federal Government regarding the shiftingof the banking system to Islamic modes, the State Bank of Pakistan has issued variouscirculars from time to time. Permissible forms of trade-related modes of financingincludes purchase of goods by banks from their customers and immediate resale tothem at appropriate mark-up in price on deferred payment basis. The purchases andsales arising under these arrangements are not reflected in these financil statementsas such but are restricted to the amount of facility actually utilized and the appropriateportion of mark-up thereon.The financial results of the Islamic Banking branches of the Bank have been consolidatedin these consolidated condensed interim financial statements for reporting purposes,after eliminating intra branch transactions / balances. Key financial figures of theIslamic Banking branches are disclosed on note 18 to these consolidated condensedinterim financial statements.These financial statements are un-audited and are being submitted as required bySection 245 of the Companies Ordinance, 1984. These are presented in condensed

form in accordance with the requirements of approved accounting standards asapplicable in Pakistan relating to the interim reporting and BSD Circular Letter No. 02dated 12 May 2004 of the State Bank of Pakistan. They do not include all of theinformation required for full annual financial statements and should be read in conjunctionwith the financial statements of the Bank as at and for the year ended 31 December2007.4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe accounting policies adopted for the preparation of these financial statements arethe same as those applied in the preparation of the financial statements for thepreceeding year ended 31 December 2007. In addition, the Bank has also decidedto maintain a general provision in line with the Bank's prudent policies.5. ESTIMATESThe preparation of interim financial statements require management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets and liabilities, income and expenses.Actual results may differ from these estimates.6. BASIS OF CONSOLIDATIONThe basis of consolidation of the financial statements of subsidiaries is same as thatapplied in the preparation of the consolidated financial statements of the Group forthe year ended 31 December 2007.297. INVESTMENTS

30-September 2008 31-December 2007Held by Given as Total Held by Given as Total

Bank Collateral Bank Collateral(Rupees in '000)Available for Sale SecuritiesMarket Treasury Bills 22,747,120 5,183,725 27,930,845 26,213,053 –00

26,213,053Pakistan Investment Bonds 1,408,417 –00 1,408,417 1,408,845 –00

1,408,845Government of Pakistan Bonds 389,196 –00 389,196 306,332 –00

306,332Ordinary shares of listedcompanies and closed endmutual funds 214,512 –00 214,512 270,745 –00 270,745

Ordinary shares of unlisted companies 35,700 –00 35,700 35,700 –00 35,700Term Finance Certificates– Listed 706,815 –00 706,815 537,928 –00 537,928Sukuk Certificates 1,206,312 –00 1,206,312 874,000 –00 874,000Open ended mutual funds 2,455,000 –00 2,455,000 80,000 –00 80,000

S.W.I.F.T. 5,849 –00 5,849 4,750 –00 4,75029,168,921 5,183,725 34,352,646 29,731,353 –00 29,731,353Held to Maturity Securities Pakistan Investment Bonds 2,563,702 –00 2,563,702 2,714,138 –00

2,714,138 Sukuk Certificates 414,504 –00 414,504 333,413 –00 333,413Government of Pakistan Bonds 387,424 –00 387,424 –00 –00 –00

Term Finance Certificates– Listed 406,960 –00 406,960 326,303 –00 326,303– Unlisted 373,953 –00 373,953 403,119 –00 403,119Unlisted WAPDA Bonds –00 –00 –00 600,014 –00 600,014

4,146,543 –00 4,146,543 4,376,987 –00 4,376,987Associated Companies

Listed– Habib Sugar Mills Limited 194,555 –00 194,555 180,977

–00 180,977– First Habib Income Fund 749,329 –00 749,329 756,889

–00 756,889Unlisted– Habib Asset Management Ltd. 32,466 –00 32,466 10,152 –00

10,152976,350 –00 976,350 948,018 –00 948,018Held for TradingOrdinary shares of listed companies –00 –00 –00 172,715 –00 172,715Investments at cost 34,291,814 5,183,725 39,475,539 35,229,073 –00

35,229,073Provision for diminution inthe value of availablefor sale investment (69,552 ) –00 (69,552 ) (3,399

) –00 (3,399 )Investments-net of provisions 34,222,262 5,183,725 39,405,987 35,225,674 –00 35,225,674Surplus on revaluation ofheld for trading securities –00 –00 –00 2,227

–00 2,227(Deficit) / surplus on revaluation ofavailable for sale investment (294,820 ) –00 (294,820 )

49,963 –00 49,963Total Investments 33,927,442 5,183,725 39,111,167

35,277,864 –00 35,277,86430317.1 The market value of securities classified as held-to-maturity amounted to Rs. 3,832million as at September 30, 2008 (December 31, 2007: Rs. 4,253 million).8. ADVANCESNote 30-September 31-December2008 2007(Rupees in '000)Loans, cash credits, running finances, etc.– In Pakistan 89,146,988 70,552,301– Outside Pakistan 2,922,579 1,184,88892,069,567 71,737,189Net investment in finance lease / ijara financing– In Pakistan 593,398 639,852Murabaha financing / receivable 516,369 1,007,878Bills discounted and purchased(excluding market treasury bills)– Payable in Pakistan 2,132,401 2,625,735– Payable outside Pakistan 6,765,525 3,451,7218,897,926 6,077,456Advances - gross 102,077,260 79,462,375Provision for non-performing advances 8.1 (779,063 ) (222,318 )Advances - net of provisions 101,298,197 79,240,0578.1 Advances include Rs. 532.911 million (December 31, 2007: Rs. 216.628 million)which have been placed under non-performing status as detailed below:

3 0 -September 2008 31-December 2007Note Domestic Provision Provision Domestic Provision Provision

Required Held Required Held

(Rupees in '000)Category of ClassificationSubstandard 270,563 67,519 67,519 22,291 5,573 5,573

Doubtful 10,779 5,019 5,019 27,145 13,576 13,576

Loss 251,569 251,569 251,580 167,192 167,192 167,192532,911 324,107 324,118 216,628 186,341 186,341

General Provision 8.2 –00 –00 454,945 –00 –00 35,977

532,911 324,107 779,063 216,628 186,341 222,3188.2 The Bank has created general provision for consumer portfolio amounting toRs. 54.945 million (December 31, 2007: Rs. 35.977 million) in accordance withthe Prudential Regulations issued by the State Bank of Pakistan. In addition, theBank has created general provision amounting to Rs. 400.00 million (December31, 2007 : Nil) against its loans and advances portfolio.9. OPERATING FIXED ASSETS9.1 Following is the cost of operating fixed assets added during the periodNine months Nine monthsperiod to period to30-September 30-September2008 2007(Rupees in ‘000)Improvements to leasehold buildings 71,106 47,920Land and buildings 1,045,051 206,866Equipments and furniture and fixtures– Owned 385,829 148,689– Leased –00 209,703385,829 358,392Vehicles– Owned 81,403 314– Leased –00 60,47281,403 60,786Intangible assets 15,737 18,3641,599,126 692,3289.2 Following is the cost of operating fixed assetsdisposed of during the periodEquipments and furniture and fixtures 6,791 3,622Vehicles 3,524 3,10010,315 6,7229.3 During the period, leasehold land and buildings were revalued by M/s. Iqbal A.Nanjee & Co. on the basis of market value which resulted in surplus ofRs. 2,022 million over the book value of assets as on 01 January 2008. Had therebeen no revaluation, the carrying amount of revalued assets would have been asfollows:Net Book Value30-September 31-December2008 2007(Rupees in ‘000)Leasehold land 2,230,509 1,673,611Buildings on leasehold land 2,314,970 1,886,2024,545,479 3,559,813323310. DEPOSITS AND OTHER ACCOUNTS Note 30-September 31-December2008 2007(Rupees in ‘000)10.1 Customers– Fixed deposits 55,615,651 40,739,267– Savings deposits 22,035,768 20,628,769– Current accounts - Remunerative 15,990,115 16,580,475– Current accounts - Non-remunerative 40,860,049 35,518,667134,501,583 113,467,17810.2 Financial Institutions– Remunerative deposits 2,293,617 1,111,894– Non-remunerative deposits 70,536 238,9602,364,153 1,350,854

136,865,736 114,818,03211. SUB-ORDINATED LOANSTerm Finance Certificates (TFCs) - I - Quoted, 11.1 1,347,840 1,348,380UnsecuredTerm Finance Certificates (TFCs) - II - Quoted, 11.2 1,499,100 1,499,700Unsecured2,846,940 2,848,08011.1 Term Finance Certificates (TFCs) - I - Quoted, UnsecuredTotal issue Rupees 1,350 millionRating AARatePayable six monthly at average six monthsKIBOR plus 150 bpsFloor 3.50%Ceiling 10.00%Redemption 6 - 78th month: 0.25%84th, 90th and 96th month: 33.25% eachTenor 8 Years11.2 Term Finance Certificates (TFCs) - II - Quoted, UnsecuredTotal issue Rupees 1,500 millionRating AARatePayable six monthly at average six monthsKIBOR plus 1.95% without any floor and capRedemption 6 - 84th month: 0.28%90th and 96th month: 49.86% eachTenor 8 Years12. SURPLUS ON REVALUATION OF ASSETS - NETNote 30-September 31-December2008 2007(Rupees in ‘000)Surplus on revaluation of securities- net of tax 12.1 (195,052 ) 32,372Surplus on revaluation of fixed assets- net of tax 12.2 1,808,539 278,8911,613,487 311,26312.1 Federal Government securities (104,037 ) 54,325Quoted shares (88,574 ) (20,493 )Other securities (102,209 ) 16,430Related deferred tax asset / (liability) 99,768 (17,890 )(195,052 ) 32,37212.2 Surplus on revaluation of fixedassets at the begining of the period 395,939 407,273Surplus on revaluation of the Bank’sproperties during the period 2,021,708 –00Transferred to unappropriated profit inrespect of incremental depreciationcharged during the period - net of deferred tax (23,035 ) (7,367 )Related deferred tax liability (12,403 ) (3,967 )(35,438 ) (11,334 )2,382,209 395,939Less: Related deferred tax liability on:– Revaluation of fixed assetsat the begining of the period 117,048 121,015– Revaluation of Bank’s propertiesduring the period 469,025 –00– Incremental depreciation charged during theperiod transferred to profit and loss account (12,403 ) (3,967 )573,670 117,0481,808,539 278,8913413. CONTINGENCIES AND COMMITMENTS 30-September 31-December2008 2007(Rupees in ‘000)13.1 Direct Credit SubstitutesAcceptances 6,984,111 5,129,748

13.2 Transaction-related Contingent LiabilitiesIncludes performance bonds, bid bonds,warranties, advance payment guarantees,shipping guarantees and standby letters ofcredit related to particular transactionsissued in favour of:– Government 5,122,649 4,560,704– Financial Institutions 529,209 231,879– Others 3,895,835 2,237,9759,547,693 7,030,55813.3 Trade-related Contingent LiabilitiesLetters of credit 32,340,439 35,157,39813.4 Other ContingenciesThe income tax authorities have finalised the income tax assessments of the Bankupto tax year 2004 (accounting year ended 31 December 2003). For tax year2005, 2006, 2007 and 2008 the Bank has filed returns under self assessmentscheme as envisaged in the section 120 of the Income Tax Ordinance, 2001. TheIncome Tax Department has filed appeals against the appellate order relating tothe assessment years 1995-1996, 2000-2001, 2001-2002, 2002-2003 and Taxyears 2003 and 2004 before the Income Tax Appellate Tribunal (ITAT) on whichthe tax liability, if any, of Rs. 40 million may arise. The Bank, based on the earlierdecisions at ITAT level in previous years and the tax advisor's opinion is confidentof a favourable outcome and expects that no additional liability would arise.3513.5 Commitments in respect of forward lendingThe Bank offers to extend credit in the normal course of its business but thesebeing revocable do not attract any significant penalty or expense if the facility isunilaterally withdrawn.30-September 31-December2008 2007(Rupees in ‘000)13.6 Commitments in respect of forwardexchange contractsPurchase 5,109,287 7,620,287Sale 4,801,273 6,525,727The maturities of above contracts are spread over a period upto one year.30-September 31-December2008 2007(Rupees in ‘000)13.7 Commitments for the acquisition of operatingfixed assets 138,493 309,04613.8 Commitments in respect of operating leasesNot later than one year 306 1,683The Bank has entered into operating leasearrangements whereby vehicles are acquired onlease. The lease rentals are payable over a periodupto two months.13.9 Other CommitmentsCommitment in respect of resale transactions oflisted equity securities 126,235 58,056363715. MARK-UP / RETURN / INTEREST EXPENSEDDeposits 4,727,341 3,526,031Securities sold under repurchaseagreement borrowings 67,373 36,120Sub-ordinated loan - TFCs 246,463 235,265Borrowings from State Bank of Pakistan– Under Export Refinance Scheme 283,911 368,858– Under Long Term Financing forExport Oriented Projects 51,241 47,386Other short term borrowings 45,827 54,9485,422,156 4,268,60814. MARK-UP / RETURN / INTEREST EARNED

Nine months Nine monthsperiod to period to30-September 30-September2008 2007(Rupees in ‘000)On loans and advance to– Customers 6,904,700 4,781,682– Financial institutions 127,713 78,573On investments 2,401,253 2,064,257On deposits with financial institutions 127,359 200,395On securities purchased under resale agreements 259,161 133,850On call money lendings 47,583 87,5049,867,769 7,346,26116. OTHER INCOMEGain on sale of listed securities 25,600 111,244(Loss) / gain on redemption of units ofopen ended mutual fund (50,853 ) 260,480Gain on redemption of held for trading investments 52 209Gain on disposal of operating fixed assets 11,325 10,013Other receipts 184,821 153,018170,945 534,96438

3 0 -September 2008Associates Non Key TotalExecutive ManagementDirectors Personnel(Rupees in ‘000)DepositsAt the beginning of the period 202,702 11,668 11,283

225,653Received during the period 27,155,685 110,021 2,606,535 29,872,241Repaid during the period (26,950,745 ) (94,925 ) (2,576,858

) (29,622,528 )At the end of the period 407,642 26,764 40,960 475,366AdvancesAt the beginning of the period 135,143 91 2,600

137,834Given during the period 3,384,573 1,129 2,943

3,388,645Repaid during the period (3,198,746 ) (1,056 ) (5,132 )

(3,204,934 )At the end of the period 320,970 164 411 321,54517. RELATED PARTY TRANSACTIONSParties are considered to be related if one party has the ability to control the otherparty or exercise significant influence over the other party in making financial oroperational decisions and include major shareholders, associated companies with orwithout common directors, retirement benefit funds, directors, key managementpersonnel and their close family members.The Bank continues to have a policy whereby all transactions with related parties areentered into at arm's length prices using the comparable uncontrolled price methodexcept dividends which have been approved in the Annual General Meeting.The lending policy in case of related parties has been consistent with that of the Bank'soverall credit policy and in line with the Prudential Regulations issued by the StateBank of Pakistan.Transactions with related parties, other than those under the terms of employment,are summarized as follows:

3 1 -December 2007Associates Non Key TotalExecutive ManagementDirectors Personnel(Rupees in ‘000)DepositsAt the beginning of the year 165,483 5,427 14,571

185,481Received during the year 23,906,965 34,334 37,770

23,979,069

Repaid during the year (23,869,746 ) (28,093 ) (41,058 )(23,938,897 )

At the end of the year 202,702 11,668 11,283 225,653AdvancesAt the beginning of the year 247,615 –00 10,906

258,521Given during the year 728,478 1,586 9,273 739,337Repaid during the year (840,950 ) (1,495 ) (17,579 )

(860,024 )At the end of the year 135,143 91 2,600 137,83439

N i n e Months period to 30-September 2008

Associates Non Key TotalExecutive ManagementDirectors Personnel(Rupees in ‘000)Mark-up earned 28,273 10 37 28,320Mark-up expensed 14,440 1,067 2,643 18,150Bank charges and commission 6,565 4 7

6,576Salaries and allowances –00 –00 54,535 54,535Bonus –00 –00 10,969 10,969Compensated absences –00 –00 –00 –00Contribution to defined contribution plan –00 –00 1,761

1,761Contribution to defined benefit plan –00 –00 1,582

1,582Staff provident fund –00 –00 –00 52,233Directors’ fee –00 650 –00 650Insurance claim received 61,320 –00 –00 61,320Insurance premium paid 71,698 –00 –00 71,698Dividend income 71,420 –00 –00 71,420Dividend paid 10,318 –00 –00 10,318Brokerage and advisory income –00 992 –00

99240

N i n e Months period to 30-September 2007

Associates Non Key TotalExecutive ManagementDirectors Personnel(Rupees in ‘000)Mark-up earned 21,998 1 779 22,778Mark-up expensed 16,811 219 3,231 20,261Bank charges and commission 1,133 10 29

1,172Salaries and allowances –00 –0 51,933 51,933Bonus –00 –0 7,265 7,265Compensated absences –00 –00 212 212Contribution to defined contribution plan –00 –0 2,121

2,121Contribution to defined benefit plan –00 –0 1,402

1,402Staff provident fund –00 –0 –00 38,073Directors’ fee –00 530 –00 530Insurance claim received 2,888 –0 –00 2,888Insurance premium paid 88,094 –0 –00 88,094Dividend income 2,672 –0 –00 2,672Dividend paid 6,560 –0 –00 6,560Brokerage and advisory income –00 –0 –00

–004118. ISLAMIC BANKING BUSINESSThe Bank is operating with four Islamic Banking branches (2007: 04). The key financialfigures of Islamic Banking business at period end are as follows:30-September 31-December2008 2007(Rupees in ‘000)Islamic Banking Funds 250,000 250,000

Deposits and Other Accounts 1,493,713 835,725Due to Head Office 251,471 1,322,230Murabaha Financing 516,369 1,007,878Ijara Financing 598,398 639,852Diminishing Musharaka 430,052 233,42319. DATE OF AUTHORIZATIONThese consolidated condensed interim financial statements were authorized for issueby the Board of Directors in their meeting held on 28, October 2008.ANWAR HAJI KARIMDirectorALI RAZA D. HABIBChairmanSHAMEEM AHMEDDirectorABBAS D. HABIBChief Executive andManaging Director

FINNAL Internship Report

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