HBL’s Balance Sheet is the largest in the industry. The Bank’s liquidity is managed by the ALM Desk under guidelines and supervision of the ALCO (Asset & Liability Management Committee). The broad guidelines are to manage the book in line with international best practices and with regulatory standards, while simultaneously ensuring that profitability objectives are met.
The ALM’s functions includes ensuring day-to-day operational liquidity, as well as managing the balance sheet on a strategic basis. In terms of operational liquidity, the ALM Desk functions as the liquidity management center and ensures that all of the bank’s local and foreign currency obligations are met without fail.
Strategic liquidity management caters to the management and structuring of the balance over the business cycle, with appropriate risk management tools to ensure that the balance sheet is robust enough to meet contingencies or market disruptions. This task includes the proactive management of Interest Rate Risk in the Banking Book (IRRBB), a key tenet of Basel standards, requiring actively accumulating, holding, and laying off interest rate risk in the banking book portfolio to ensure that the bank is positioned for the expected future direction of interest rates.
In addition, the Desk works with other businesses to ensure that in all the Bank’s products, Interest Rate and Liquidity Risks are adequately captured and priced accordingly. The Bank’s businesses require benchmark deposit and loan pricing on a daily basis to ensure that the liabilities and assets that are being booked are priced in line with the market and for this the ALM Desk provides reference pricing across the bank daily for both local and foreign currency.
As part of its activity, the ALM Desk manages a large asset book (the largest in the Bank) primarily covering Pakistani Rupee Government Fixed Income Securities (Treasury Bills, Pakistan Investment Bonds - Fixed & Floating Rate, and Government Ijara Sukuks). These are invested in for the purpose of meeting statutory liquidity guidelines as required by the central bank (State Bank of Pakistan) as well as to deploy surplus liquidity generated by the Bank. As part of this activity, the Desk actively participates in the auctions of Government Securities. The activities of the Desk include making markets in the short-dated domestic fixed income and money markets.
The Bank also maintains a Foreign Currency balance sheet, denominated primarily in US Dollars.
The Structured Products Desk offers risk management solutions to clients and counterparties of the bank. The Structured Products Desk is tasked with managing, designing and launching products that make use of derivatives to create a specific set of risk-return profiles for clients. Structured Products not only supports the local client-facing businesses but is also actively developing a suite of products for our foreign branches so that our customers across the network are able to acquire hedges for their existing risk or participate in return profiles that are suited to their risk appetite.
FX Trading manages the overall exposure emanating from the bank’s activity in the FX markets as well as formulates gapping strategies for the FX swap book. The desk is mandated to provide access to bank’s clientele to FX markets through the Treasury Sales. The desk also acts as a market maker for the USDPKR spot and forward curves. The desk proactively manages exposures in the FX ready/spot and swap/forward markets with a view to capitalize on market moves.
Rates Trading is primarily mandated to trade in interest rate risk markets associated with fixed-income investments (made in government securities) classified as Held For Trading (HFT), and certain interest rate derivative products. By design, the desk has a Fixed-Income Trading arm and a Derivatives Trading arm. The fixed-Income Trading business primarily caters to trading in PKR-denominated fixed-income securities issued by the Government of Pakistan. The business actively manages the HFT book in securities, with a view to distribute them to corporate, retail and institutional clients. It also acts as the bank’s face to the domestic sovereign fixed-income market and as a market-maker of the same to the interbank clients. It provides the bank’s corporate clientele access to the domestic sovereign fixed-income assets through the Treasury Sales business and is also a joint custodian of the Primary Dealership (“PD”) license with ALM and Sales businesses. Derivatives Trading primarily caters to derivatives pricing and warehousing in Rates and FX, including the management of linear interest rate risk associated with Interest Rate Swaps (“IRS”) and Cross Currency Swaps (“CCS”) and non-linear risk associated with FX Options. Management of the market risk associated with Derivatives falls under its ambit. The business provides access to and pricing for structured products to end-users for their hedging needs by working closely with Structuring and Treasury Sales teams. Such products may include, but are not limited to, FX Options, Cross Currency Basis Swaps, Interest Rate Swaps and Forward Rate Agreements or as allowed under the bank’s own policy and regulatory guidelines. It is also the joint custodian of the Authorized Derivatives Dealer (“ADD”) license with the Structured Products and Sales businesses.
The e-Trading Solutions desk is a focal element within Treasury & Global Markets, focused primarily on leveraging technology and bringing digital solutions for both internal and external stakeholders. This desk is responsible for executing the core strategies of HBL by digitizing processes and products offered by the treasury space for both domestic and international clients. The launch of HBL Infinity® was a pioneering development in the domestic financial market; another platform for fixed income products is under development and is set to launch by Q1, 2022. Through new developments and consistent upgrades, the e-Trading Solutions desk intends to ensure that HBL paves and leads the digital space thereby embedding transparency and ease of doing business for our valued customers.
Treasury Sales at HBL liaises with clients for their Treasury needs. These include Foreign Exchange, Liquidity & Investments and Derivatives. We are located in 3 offices – Karachi, Lahore & Islamabad – giving us direct access and coverage to all our client segments across the country. Markets are constantly evolving and frequently volatile. Our trained and qualified Sales personnel work closely with our clients to formulate their hedging strategies and transactional requirements. The Bank has led the way in bringing value addition to Corporate and Commercial clients in Pakistan, including: Rollout of HBL Infinity®, Pakistan’s only FX trading & execution portal for corporates and institutions. This has helped our valued clients keep a track of exchange rates in fast-moving markets, and to execute their transactions in a quick and secure manner. Seminars for our clients, in partnership with the Equities & Research team, providing insights into economic and market developments. A diverse set of Fixed Income investment & liquidity management solutions for customers has helped HBL secure No 1. position in SBP’s Primary dealer rankings in 8 out of the past 10 Years.
The Equities and Research Desks are clubbed together at HBL’s Treasury & Global Markets department.
The Equities Desk is responsible for managing the trading and long-term equity investment book of HBL (other than Strategic Investments). The Bank generally looks to buy and hold blue-chip stocks over the course of time to generate capital gains and receive consistent dividend stream.
The Research Desk is responsible for carrying out macro-economic research and other equity investment related research for internal use of the Bank. The Research team provides in-depth coverage of key macro-economic variables which include inflation, interest rate forecast, fiscal and monetary stance which is used by internal as well as external clients. Moreover, the Research desk liaisons with different research houses to analyze external research publications and in turn assists the Equities Desk in portfolio management.
HBL is currently present in 12 locations outside Pakistan. As part of the strategy and focus on the International Businesses, HBL has implemented a matrix organizational structure whereby the Treasuries in the international locations report into the International Treasury desk in H.O. The objectives of this structure are to ensure that the desired support is available to the international locations from HBL head office and to allow the International Treasury network to benefit from the breath and depth of cumulative experience at the head office. Acting as a hub for overseas treasuries, International Treasury governs and supervises both liquidity and treasury activities undertaken at HBL’s international locations and subsidiaries. International Treasury also serves the international locations with new products and initiatives that can be integrated in different business environments.
Islamic Treasury is established as a separate “branch” within the domain of Treasury & Global Markets to provide access to Shariah compliant Treasury products, as approved by the bank’s Shariah Board. It is responsible for Asset and Liability Management of the Islamic Banking balance sheet, ensuring that the liquidity of the bank is effectively utilized through Shariah compliant products. Islamic Treasury acts as the front-end executor for money market and fixed income (Sukuks) transactions. Further, the branch provides Shariah compliant FX solutions to the customers. The Money Market and FX Sales Desk deals in all related local and foreign currency products duly approved by the Shari’ah Board including but not limited to: