customer relationship management in the banking sector of

Customer Relationship Management in the Banking Sector of Pakistan

By

Mohammad Majid Mahmood Bagram

NATIONAL UNIVERSITY OF MODERN LANGUAGES ISLAMABAD

June 2010

Customer Relationship Management in the Banking Sector of Pakistan

By

Mohammad Majid Mahmood Bagram

MPA, Quaid-e-Azam University, Islamabad, 1992

A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF

DOCTOR OF PHILOSOPHY

In Management Sciences

To

FACULTY OF ADVANCED INTEGRATED STUDIES AND RESEARCH

(Management Sciences)

NATIONAL UNIVERSITY OF MODERN LANGUAGES, ISLAMABAD

June 2010

© Mohammad Majid Mahmood Bagram, 2010

ii

Name of Student

Degree Name in Full (e.g Master of Philosophy, Doctor of Philosophy)

Name of Discipline

Name of Research Supervisor Signature of Research Supervisor

Name of Dean (FAISR) Signature of Dean (FAISR)

Name of Rector Signature of Rector

NATIONAL UNIVERSITY OF MODERN LANGUAGES FACULTY OF ADVANCED INTEGRATED STUDIES & RESEARCH

DISSERTATION AND DEFENSE APPROVAL FORM

The undersigned certify that they have read the following thesis, examined the defense, are satisfied with the overall exam performance, and recommend the thesis to the Faculty of Advanced Integrated Studies & Research for acceptance: Thesis/ Dissertation Title: Customer Relationship Management in the Banking Sector of Pakistan Submitted By: Mohammad Majid Mahmood Bagram Registration #: 141-Ph.D/MS/2003 (Jan)

Doctor of Philosophy Management Sciences Prof. Dr. Anwar Hussain Siddiqui _______________________________ Prof. Dr. Shazra Munnawer _______________________________ Prof. Dr. Aziz Ahmad Khan _______________________________

_______________________________ Date

iii

CANDIDATE DECLARATION FORM I Mohammad Majid Mahmood Bagram Son of Dr. Mushtaq Ali Bagram Registration # 141-Ph.D/MS/2003 (Jan) Discipline Management Sciences Candidate of PhD in Management Sciences at the National University of Modern Languages do hereby declare that the thesis (Title) Customer Relationship Management in the Banking Sector of Pakistan submitted by me in partial fulfillment of PhD degree, is my original work, and has not been submitted or published earlier. I also solemnly declare that it shall not, in future, be submitted by me for obtaining any other degree from this or any other university or institution.

I also understand that if evidence of plagiarism is found in my thesis/dissertation at any stage, even after the award of a degree, the work may be cancelled and the degree revoked.

_____________________________________ ______________ Signature of Candidate Date Name of Candidate: Mohammad Majid Mahmood Bagram

iv

ABSTRACT

Thesis Title: Customer Relationship Management in the banking sector of Pakistan

Banking sector all over the world facing immense competition and Pakistani banking

sector is not an exception. It is an acceptable fact that acquiring new customer is more costly than retaining the existing customer. The researcher followed the same fact and developed the basic purpose of this research study, that is to discover the major factors that affect customer loyalty, which is a focus of Customer Relationship Management (CRM) for overcoming high competition in the banking sector of Pakistan.

Although there are many aspects of Customer Relationship Management (CRM) in the

banking sector, this research study focuses on its customer part. Understanding customers is the key to success of any bank. Banks having an in-depth understanding of their customers develop a better competitive edge over their competitors. The major focus of CRM is to not only to acquire new customers but also to retain the existing ones. This research study will help banks to build customer loyalty.

Every bank tries its best to acquire and retain their customers but due to increased

competition and rapid improvements in technology, customers have quick access to thousands and thousands of products and services.

The researcher collected data from customers of banks with the help of questionnaire and

for doing demographic, correlation, and regression analysis used SPSS software version 16.00. After detailed analysis and discussions, results of this research study indicate that identified factors do affect customer loyalty and their relationships with each other vary from bank to bank. These identified variations can help banks to overcome their existing weaknesses to develop better customer loyalty strategies.

The researcher identified factors of trust, perceived value, satisfaction, switching barriers,

and culture that affect customer loyalty. After measuring relationships of these factors with each other, researcher responded to this research study`s questions and hypotheses and developed a customer loyalty model for the banking sector of Pakistan for the mutual benefits of customers and banks. Furthermore, this research study`s findings and recommendations contributes towards improvement in existing customer loyalty strategies of banks.

The researcher would also like to mention here that there is hardly any research study in

Pakistan that has seen the affects of customer culture and customer trust on customer loyalty as the results of this research study indicate that these factors affect customer loyalty in the banking sector of Pakistan.

v

TABLE OF CONTENTS

CHAPTER PAGE

Title Page i

Dissertation and Defense Approval Form ii

Candidate Declaration Form iii

Abstract iv

Table of Contents v

List of Appendices xiii

List of Tables xiv

List of Bar Charts xxiii

List of Figures xxiv

List of abbreviations xxv

Acknowledgement xxvi

CHAPTER 1: INTRODUCTION

1.1 Significance of relationships 1

1.2 Customer 2

1.3 Banking 2

1.4 Banking sector of Pakistan 3

1.5 Customer relationships with banks 4

1.6 Customer Relationship Management 4

1.6.1 Characteristics of Customer Relationship Management 6

1.6.2 Customer loyalty as a focus of Customer Relationship

Management 7

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1.7 Background to the study 7

1.8 Significance of the research study 8

1.9 Statement of the problem 8

1.10 Hypotheses of the research study 9

1.11 Research questions 10

1.12 Study procedure: 10

1.12.1 Population 10

1.12.2 Sampling 11

1.12.3 Research instruments 12

1.12.4 Pilot testing of questionnaire 12

1.12.5 Data collection 13

1.12.6 Data analysis 13

1.13 Limitations of the research study 13

CHAPTER 2: REVIEW OF RELATED LITERATURE

2.1 Customers-seller bond 15

2.2 Customer loyalty as a focus of Customer Relationship

Management 16

2.3 Banking sector of Pakistan 18

2.4.1 Customer Relationship Management in banking sector 21

2.4 Customer loyalty 26

2.5 Customer Relationship Management (CRM) and

customer loyalty in the banking sector 28

2.6 Models relating to research study 30

2.7 Offensive and defensive strategies 34

2.8 Factors that affect customer loyalty in the banking sector 35

2.8.1 Customer trust 35

2.8.2 Customer perceived value 35

2.8.3 Customer satisfaction 36

2.8.3.1 Conceptual differences between customer

satisfaction and customer perceived value 37

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2.8.4 Customer switching barriers 37

2.8.5 Customer culture 38

CHAPTER 3: FRAME OF REFERENCE

3.1 Conceptualization 39

3.2 Previous research and models relevant to this research study 40

3.3 Emerged frame of reference 43

CHAPTER 4: RESEARCH METHODOLOGY

4.1 Research Process Onion 45

4.2 Research design: 46

4.2.1 Exploratory research study 46

4.2.2 Descriptive research study 46

4.2.3 Causal research study 46

4.3 Research strategy: 48

4.3.1 Selection of questionnaire survey method 48

4.4 Research study factors: 50

4.4.1 Operational definitions 50

4.5 Operationalization of research study factors: 51






4.5.6 Customer loyalty 53

4.6 Progression of questionnaire`s questions 53

4.7 Time horizon 54

4.8 Population 54

4.9 Sampling: 55

4.9.1 Sample size 56

4.9.2 Sample selection 56

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4.10 Instruments for data collection 58

4.11 Pretesting of questionnaire 58

4.12 Analysis of data: 61

4.12.1 Coding of questions 61

4.12.2 Data analysis techniques 61

4.13 Triangulation 62

4.14 Reliability and validity of the research constructs: 62

4.14.1 Reliability 63

4.14.2 Validity 64

4.15 Field issues during research study 64

CHAPTER 5: EMPIRICAL FINDINGS

5.1 Overview of the National Bank of Pakistan 65

5.1.1 Business profile 66

5.1.2 Responses of customers 67

5.1.3 Challenges and future opportunities 68

5.2 Overview of the Citibank, Pakistan 69




5.3 Overview of the Meezan Bank Limited, Pakistan 70




5.4 Overview of the Habib Bank Limited, Pakistan 73




CHAPTER 6: DATA ANALYSIS AND DISCUSSIONS

6.1 Research instrument 76

ix






6.1.6 Customer loyalty 79

6.2 Demographic analysis 79

6.2.1 Demographic analysis - Citibank, Pakistan 79

6.2.2 Demographic analysis - National Bank of

Pakistan (NBP), Pakistan 84

6.2.3 Demographic analysis - Meezan Bank

Limited, Pakistan 89

6.2.4 Demographic analysis - Habib Bank Limited,

Pakistan (HBL), Pakistan 94

6.3 Correlation analysis 99

6.3.1 Correlation analysis – Citibank, Pakistan 99

6.3.2 Correlation analysis – National Bank of

Pakistan (NBP), Pakistan 105

6.3.3 Correlation analysis – Meezan Bank Limited,

Pakistan 111

6.3.4 Correlation analysis – Habib Bank

Limited (HBL), Pakistan 117

6.4 Multivariate Data Analysis - Citibank, Pakistan 123

6.5 Regression Model - Citibank, Pakistan 124

6.5.1 Customer Perceived Value (PV) 124

6.5.2 Customer Loyalty 126

6.5.3 Customer Satisfaction (CS) 128

6.5.4 Customer Trust 130

6.5.5 Customer Culture 132

6.5.6 Customer Switching Barriers (CSB) 134

x

6.6 Stage-Wise Multiple Regression - Citibank, Pakistan 136







6.7 Multivariate Data Analysis - National Bank of Pakistan,

Pakistan 160

6.8 Regression Model - National Bank of Pakistan (NBP), Pakistan 161







6.9 Stage-Wise Multiple Regression - National Bank of Pakistan,

Pakistan 173







6.10 Multivariate Data Analysis – Meezan Bank Limited, Pakistan 197

6.11 Regression Model – Meezan Bank Limited, Pakistan 198






xi


6.12 Stage-Wise Multiple Regression – Meezan Bank Limited,

Pakistan 210







6.13 Multivariate Data Analysis – Habib Bank Limited (HBL),

Pakistan 234

6.14 Regression Model – Habib Bank Limited (HBL), Pakistan 235







6.15 Stage-Wise Multiple Regression – Habib Bank Limited (HBL),

Pakistan 247







CHAPTER 7: SUMMARY, FINDINGS, CONCLUSIONS &

RECOMMENDATIONS

7.1 Summary 271

7.2 Findings of the research study 274

xii

7.3 Conclusions 281

7.4 Recommendations 282

7.5 Implications for theory and practice 283

7.6 Future directions of research 284

BIBLIOGRAPHY 286

xiii

LIST OF APPENDICES

Appendix-I: Questionnaire for customers of banks 299

Appendix-II: Organogram of the State Bank of Pakistan 303

Appendix-III: Banks/DFIs regulated by the State Bank of Pakistan 304

Appendix-IV: Banking sector performance in Pakistan 321

Appendix-V: Citibank – network 323

Appendix-VI: Milestones of Citibank, Pakistan 327

Appendix-VII: Customer Relationship Management, software 329

Appendix-VIII: Central Board of Directors, State Bank of Pakistan 336

Appendix-IX: Various departments of the State Bank of Pakistan 337

Appendix-X: The Quaid-i-Azam's Speech on the occasion of the opening

ceremony of the State Bank of Pakistan on 1st July, 1948 339

Appendix-XI: Statutory obligations of the State Bank of Pakistan 342

Appendix-XII: Core functions of the State Bank of Pakistan 345

Appendix-XIII: Vision, Mission, & Core Values of the National Bank of Pakistan 351

Appendix-XIV: Awards & achievements - National Bank of Pakistan 352

Appendix-XV: Board of Directors, National Bank of Pakistan 355

Appendix-XVI: Director`s report, National Bank of Pakistan 358

Appendix-XVII: Citi Pakistan’s grants 367

Appendix-XVIII: Citibank - business profile 369

Appendix-XIX: Citi in Pakistan - building communities 370

Appendix-XX: Meezan Bank Limited, vision, mission, & service mission 371

Appendix-XXI: Meezan Bank Limited, branch network 372

Appendix-XXII: Habib Bank Limited, Pakistan, Board of Directors 373

Appendix-XXIII: Habib Bank Limited, Pakistan, services 374

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LIST OF TABLES

Table Page

2.1: Conceptual differences between customer satisfaction and customer

perceived value 37

4.1: Distribution of questionnaire in banks 57

6.1: Measuring customer trust 76

6.2: Measuring customer perceived value 77

6.3: Measuring customer satisfaction 77

6.4: Measuring customer-switching barriers 78

6.5: Measuring customer culture 78

6.6: Measuring customer loyalty 79

6.7: Customer`s gender – Citibank 80

6.8: Customer`s marital status – Citibank 80

6.9: Customer`s income – Citibank 81

6.10: Customer`s age – Citibank 82

6.11: Customer`s education level – Citibank 83

6.12: Customer`s gender - National Bank of Pakistan 84

6.13: Customer`s marital status - National Bank of Pakistan 85

6.14: Customer`s income - National Bank of Pakistan 86

6.15: Customer`s age - National Bank of Pakistan 87

6.16: Customer`s education level - National Bank of Pakistan 88

6.17: Customer`s gender - Meezan Bank Limited 89

6.18: Customer`s marital status- Meezan Bank Limited 90

6.19: Customer`s income - Meezan Bank Limited 91

6.20: Customer`s age - Meezan Bank Limited 92

6.21: Customer`s education level - Meezan Bank Limited 93

6.22: Customer`s gender – Habib Bank Limited 94

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6.23: Customer`s marital status - Habib Bank Limited 95

6.24: Customer`s income - Habib Bank Limited 96

6.25: Customer`s age - Habib Bank Limited 97

6.26: Customer`s education level - Habib Bank Limited 98

6.27: Correlations between customer trust & customer perceived value – Citibank 100

6.28: Correlations between customer trust and customer loyalty – Citibank 101

6.29: Correlations between customer trust and customer satisfaction – Citibank 101

6.30: Correlations between customer perceived value & customer satisfaction

- Citibank 102

6.31: Correlations between customer switching barriers & customer loyalty

– Citibank 103

6.32: Correlations between customer culture & customer loyalty – Citibank 103

6.33: Correlations between customer satisfaction & customer loyalty – Citibank 104

6.34: Correlations between all studied variables – Citibank 105

6.35: Correlations between customer trust & customer perceived value - National

Bank of Pakistan 106

6.36: Correlations between customer trust and customer loyalty - National Bank of

Pakistan 106


- National Bank of Pakistan 107

6.38: Correlations between customer trust and customer satisfaction




6.40: Correlations between customer culture & customer loyalty


6.41: Correlations between customer satisfaction & customer loyalty


6.42: Correlations between all studied factors - National Bank of Pakistan 111

6.43: Correlations between customer trust & customer perceived value

- Meezan Bank Limited 112

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6.44: Correlations between customer trust and customer loyalty


6.45: Correlations between customer trust and customer satisfaction

– Meezan Bank Limited 113





6.48: Correlations between customer culture & customer loyalty


6.49: Correlations between customer satisfaction & customer loyalty - Meezan

Bank Limited 116

6.50: Correlations between all studied factors - Meezan Bank Limited 117

6.51: Correlations between customer trust & customer perceived value

- Habib Bank Limited 118

6.52: Correlations between customer trust and customer loyalty - Habib

Bank Limited 118

6.53: Correlations between customer trust and customer satisfaction – Habib

Bank Limited 119





6.56: Correlations between customer culture & customer loyalty - Habib Bank

Limited 121

6.57: Correlations between customer satisfaction & customer loyalty - Habib Bank

Limited 121

6.58: Correlations between all studied factors - Habib Bank Limited 122

6.59: Multivariate Data Analysis - Citibank, Pakistan 123

6.60: Regression Model - Customer Perceived Value (PV), Citibank, Pakistan 125

xvii

6.61: Regression Model - Customer Loyalty, Citibank, Pakistan 127

6.62: Regression Model - Customer Satisfaction (CS), Citibank, Pakistan 129

6.63: Regression Model - Customer Trust, Citibank, Pakistan 131

6.64: Regression Model - Customer Culture, Citibank, Pakistan 133

6.65: Regression Model - Customer Switching Barriers (CSB), Citibank, Pakistan 135

6.66: Stage-Wise Multiple Regression Model - Customer Perceived Value (PV),

Citibank, Pakistan 136

6.67: Stage-Wise Multiple Regression Model - Model Summary, Customer

Perceived Value (PV), Citibank, Pakistan 137

6.68: Stage-Wise Multiple Regression Model - ANOVA, Customer Perceived

Value (PV), Citibank, Pakistan 139

6.69: Stage-Wise Multiple Regression Model - Customer Loyalty, Citibank,

Pakistan 140


Loyalty, Citibank, Pakistan 141

6.71: Stage-Wise Multiple Regression Model - ANOVA, Customer Loyalty,


6.72: Stage-Wise Multiple Regression Model - Customer Satisfaction (CS),



Satisfaction (CS), Citibank, Pakistan 145

6.74: Stage-Wise Multiple Regression Model - ANOVA, Customer Satisfaction (CS)

, Citibank, Pakistan 147

6.75: Stage-Wise Multiple Regression Model - Customer Trust, Citibank,

Pakistan 148

6.76: Stage-Wise Multiple Regression Model - Model Summary, Customer Trust


6.77: Stage-Wise Multiple Regression Model - ANOVA, Customer Trust


6.78: Stage-Wise Multiple Regression Model - Customer Culture,


xviii


Culture, Citibank, Pakistan 153

6.80: Stage-Wise Multiple Regression Model - ANOVA, Customer Culture


6.81: Stage-Wise Multiple Regression Model - Customer Switching Barriers

(CSB), Citibank, Pakistan 156


Switching Barriers (CSB), Citibank, Pakistan 157

6.83: Stage-Wise Multiple Regression Model - ANOVA, Customer Switching

Barriers (CSB), Citibank, Pakistan 159

6.84: Multivariate Data Analysis - NBP, Pakistan 160

6.85: Regression Model - Customer Perceived Value (PV), NBP, Pakistan 162

6.86: Regression Model - Customer Loyalty, NBP, Pakistan 164

6.87: Regression Model - Customer Satisfaction (CS), NBP, Pakistan 166

6.88: Regression Model - Customer Trust, NBP, Pakistan 168

6.89: Regression Model - Customer Culture, NBP, Pakistan 170

6.90: Regression Model - Customer Switching Barriers (CSB), NBP, Pakistan 172


NBP, Pakistan 173


Perceived Value (PV), NBP, Pakistan 174


Value (PV), NBP, Pakistan 176

6.94: Stage-Wise Multiple Regression Model - Customer Loyalty, NBP,

Pakistan 177


Loyalty, NBP, Pakistan 178


NBP, Pakistan 180


NBP, Pakistan 181

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Satisfaction (CS), NBP, Pakistan 182


, NBP, Pakistan 184

6.100: Stage-Wise Multiple Regression Model - Customer Trust, NBP,

Pakistan 185


, NBP, Pakistan 186


, NBP, Pakistan 188


NBP, Pakistan 189


Culture , NBP, Pakistan 190


, NBP, Pakistan 192


(CSB), NBP, Pakistan 193


Switching Barriers (CSB), NBP, Pakistan 194


Barriers (CSB), NBP, Pakistan 196

6.109: Multivariate Data Analysis - Meezan, Pakistan 197

6.110: Regression Model - Customer Perceived Value (PV), Meezan, Pakistan 199

6.111: Regression Model - Customer Loyalty, Meezan, Pakistan 201

6.112: Regression Model - Customer Satisfaction (CS), Meezan, Pakistan 203

6.113: Regression Model - Customer Trust, Meezan, Pakistan 205

6.114: Regression Model - Customer Culture, Meezan, Pakistan 207

6.115: Regression Model - Customer Switching Barriers (CSB), Meezan, Pakistan 209


Meezan, Pakistan 210

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Perceived Value (PV), Meezan, Pakistan 211


Value (PV), Meezan, Pakistan 213

6.119: Stage-Wise Multiple Regression Model - Customer Loyalty, Meezan,

Pakistan 214


Loyalty, Meezan, Pakistan 215






Satisfaction (CS), Meezan, Pakistan 219


, Meezan, Pakistan 221

6.125 Stage-Wise Multiple Regression Model - Customer Trust, Meezan,

Pakistan 222








Culture , Meezan, Pakistan 227




(CSB), Meezan, Pakistan 230


xxi

Switching Barriers (CSB), Meezan, Pakistan 231


Barriers (CSB), Meezan, Pakistan 233

6.134: Multivariate Data Analysis - HBL, Pakistan 234

6.135: Regression Model - Customer Perceived Value (PV), HBL, Pakistan 236

6.136: Regression Model - Customer Loyalty, HBL, Pakistan 238

6.137: Regression Model - Customer Satisfaction (CS), HBL, Pakistan 240

6.138: Regression Model - Customer Trust, HBL, Pakistan 242

6.139: Regression Model - Customer Culture, HBL, Pakistan 244

6.140: Regression Model - Customer Switching Barriers (CSB), HBL, Pakistan 246


HBL, Pakistan 247


Perceived Value (PV), HBL, Pakistan 248


Value (PV), HBL, Pakistan 250

6.144: Stage-Wise Multiple Regression Model - Customer Loyalty, HBL,

Pakistan 251


Loyalty, HBL, Pakistan 252

6.146 Stage-Wise Multiple Regression Model - ANOVA, Customer Loyalty,

HBL, Pakistan 254


HBL, Pakistan 255


Satisfaction (CS), HBL, Pakistan 256


, HBL, Pakistan 258

6.150: Stage-Wise Multiple Regression Model - Customer Trust, HBL,

Pakistan 259


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, HBL, Pakistan 260


, HBL, Pakistan 262


HBL, Pakistan 263


Culture , HBL, Pakistan 264


, HBL, Pakistan 266


(CSB), HBL, Pakistan 267

6.157: Stage-Wise Multiple Regression Model - Model Summary, Customer Switching

Barriers (CSB), HBL, Pakistan 268


Barriers (CSB), HBL, Pakistan 270

7.1: Correlation analysis of the data collected from customers of the studied

banks 278

xxiii

LIST OF BAR CHARTS

Bar Chart Page

6.1: Customer`s gender frequencies – Citibank 80

6.2: Customer`s marital status frequencies – Citibank 81

6.3: Customer's income frequencies – Citibank 82

6.4: Customer's age frequencies – Citibank 83

6.5: Customer`s education level frequencies – Citibank 84

6.6: Customer`s gender frequencies - National Bank of Pakistan 85

6.7: Customer`s marital status frequencies – National Bank of Pakistan 86

6.8: Customer`s income frequencies – National Bank of Pakistan 87

6.9: Customer`s age frequencies – National Bank of Pakistan 88

6.10: Customer`s education level frequencies – National Bank of Pakistan 89

6.11: Customer`s gender frequencies – Meezan Bank Limited 90

6.12: Customer`s marital status frequencies – Meezan Bank Limited 91

6.13: Customer`s income frequencies – Meezan Bank Limited 92

6.14: Customer`s age frequencies – Meezan Bank Limited 93

6.15: Customer`s education level frequencies – Meezan Bank Limited 94

6.16: Customer`s gender frequencies – Habib Bank Limited 95

6.17: Customer`s marital status frequencies – Habib Bank Limited 96

6.18: Customer`s income frequencies – Habib Bank Limited 97

6.19: Customer`s age frequencies – Habib Bank Limited 98

6.20: Customer`s education level frequencies – Habib Bank Limited 99

xxiv

LIST OF FIGURES

Figure Page

2.1: Financial services customer segmentation 16

2.2: Loyalty model 31

2.3. The integrated framework for customer value and CRM performance. 32

2.4: The employee-customer-profit chain at Sears 33

2.5: The CRM value chain (Buttle, 2004) 33

2.6: Offensive and defensive strategies (Fornell, 1992) 34

3.1: Loyalty model (Beerli, Martin & Quintana, 2004) 40

3.2: The Integrated Framework for Customer Value and CRM Performance

(Wang et al., 2004, p. 171) 41

3.3: The Employee-Customer-Profit Chain at Sears 41

3.4: Offensive and defensive strategies, (Fornell, 1992) 42

3.5: Customer loyalty model developed by the researcher 44

2: Research Process Onion (Saunders et al., 2003) 45



xxv

LIST OF ABBREVIATIONS

ATM – Automated Teller Machine

CC - Customer Culture

CL - Customer Loyalty

CRM – Customer Relationship Management

CS - Customer Satisfaction

CSB - Customer Switching Barriers

CT - Customer Trust

DFIs - Development Finance Institutions

FFM - Fullerton Fund Management

FIB - First Investment Bank

HBL – Habib Bank Limited

KSE – Karachi Stock Exchange

MFBs - Microfinance Banks

NBFCs - Non-Banking Finance Companies

NBP – National Bank Of Pakistan

PV - Perceived Value

SBP – State Bank Of Pakistan

SSTs - Self-Service Technologies

UNB - United National Bank

xxvi

ACKNOWLEDGEMENT

The researcher has prepared this thesis with the blessings of Almighty Allah. The

researcher would also like to acknowledge many personalities who guided during the entire

research process. Firstly, the researcher would like to thank his supervisor Prof. Dr. Anwar

Hussain Siddiqui, President, International Islamic University, Islamabad, Pakistan whose

academic support and guidance made this possible.

The researcher would like to specially thank Prof. Dr. Shazra Munnawer, Dean, Faculty

of Advanced Integrated Studies & Research, and Prof. Dr. Rasheed Ahmad Khan, Dean, Faculty

of Management Sciences, National University of Modern Languages (NUML), Islamabad,

Pakistan for their encouragement and academic guidance during this research study.

The researcher would also like to thank all customers and concerned employees of banks

who gave their most valuable responses without which this research study would not be possible.

Finally, the researcher would like to thank his father Dr. Mushtaq Ali Bagram and dearest

mother for their never-ending motivation.

The researcher dedicates this research study to his beloved wife and son Mohammad

Aayan Ali for their immeasurable persistence during the entire period of this research study.

(Mohammad Majid Mahmood Bagram)

1

CHAPTER 1

INTRODUCTION

1.1 SIGNIFICANCE OF RELATIONSHIPS

Defining relationship is a difficult work and mostly defining relationship at academic and

practical level is avoided (Bagozzi, 1995). Operationally, relationship consists of a number of

episodes and that buying a service twice is a minimum requirement for relationships (Liljander and

Strandvik, 1995). Similarly, a relationship exists when a series of interactions between customer

and organization occur (Storbacka, 1994).

Relationships plays vital role in human`s daily and professional lives, for example, choosing

careers, involvement in work, etc. Generally, people make major decisions in their lives based on

their relationships with organizations and persons.

Based on the above criteria, firstly it shows clearly that there is commitment on both sides

that is commitment on the side of bank as well as on the side of its customers. Secondly, banks

accommodate customers as best as it can. Thirdly, there is trust on both sides, that is customer and

bank trust each other. Fourthly, both parties that is customers and banks respect each other, fifthly,

there is affection among customers and banks, sixthly, there is effective communication between

banks and customers like verbal and non-verbal communication. Seventhly, banks give priority to

its customers and try to take care of the various interests on its customers with banks. Eighth, banks

try to support its customers and if a customer has a strong relationship with their banks, they also

support their banks like mouth reference etc. Finally, banks try to assist their customers in

achieving their long-term goals.

2

1.2 CUSTOMER

A customer is a person who buys goods or services from a shop or business (Oxford English

Dictionary, 2009). One that purchases a commodity or service is called a customer (Customer,

2009).

Customers buy and leave, so it may be easy to say that since the organization is able to sell

its product or deliver its services hence it is a successful organization. Actually, it is not that easy to

say as almost all the businesses depend on repeated purchases of customers hence if customers do

not return then what happens? Therefore, organizations need to understand all the touch points of

their customers. Mostly customers choose those banks that offer the best services though their touch

points (Dyche, 2001).

The world is changing rapidly and there is a shift of power from seller to buyer, hence for

the success of any organization, understanding customer has become the most important factor. It is

important to know what customers think about products, services, and about organizations

providing those products and services. Therefore, if customers have a good experience with any

organization through its various touch points then they not only buy more but they also become that

organization`s marketing volunteers. Hence, customer`s touch points with your organization are

most important areas where organizations need to focus more.

As it is generally known that customers provide their personal information to only those

organizations that they trust, otherwise they are not willing to provide majority of the information.

In addition, most banks do not have complete information about their customers; hence, these banks

lose the most important competitive advantage over their competitors. Therefore, to obtain detailed

information about customers, the banking sector has begun to develop and strengthen their

relationships with their customers.

1.3 BANKING

The banking sector all over the world has a key role in the economy of any country.

Banking sector all over the world is changing rapidly due to many internal and external forces

3

(Gentle, 1993, Nellis, 1998). The most popular saying that customer is the real king is true for the

banking sector as well. High competition in the banking sector has forced banks to act according to

the customer`s needs and wants. These days, customers are much aware about various products and

services hence banks need to respond according to customer`s preferences about products and

services.

1.4 BANKING SECTOR OF PAKISTAN

In Pakistan, there are 9,115 branches of different banks; it includes 1,722 branches of public

sector banks, 6,770 branches of local private banks, 534 branches of specialized banks, and 89

branches of foreign banks. The total assets of all these banks during 2008-09 was Rs. 5652.7

billions; it includes assets of Rs. 1064.0 billions of public sector banks, Rs. 4229.2 billions of local

private banks, Rs. 127.6 billions of specialized banks, and Rs. 231.7 billions of foreign banks in

Pakistan (Ministry of Finance, 2008-09). Financial performance indicators of the banking sector in

Pakistan are capital adequacy, asset quality, earnings, and liquidity as briefly shown in Appendix-

IV (State Bank of Pakistan, 2009).

At present, banks in Pakistan are facing high competition and they are trying to retain and

increase their customers in order to survive in the market. Banks/ development finance institutions

in Pakistan comprises of the following seven categories regulated by the State Bank of Pakistan as

shown in Appendix-III (State Bank of Pakistan, 2009):

1) Public sector banks

2) Specialized banks

3) Private banks

4) Islamic banks

5) Foreign banks

6) Micro finance banks / institutions

7) Development finance institutions

4

1.5 CUSTOMER RELATIONSHIPS WITH BANKS

There are facts to recommend that customers give importance to relationships with their

banks. Barnes (1997) explored the relationships of customers with their banks by doing research at

400 banks and their customers. Bank`s customers give importance to their relationships with their

banks (Colgate, 1996).

The performance of banks depends on the level of their understanding of their customers.

Banks that have detailed information about their customers are in a better position than those banks

lacking information about their customers. Customer Relationship Management (CRM) helps to

integrate various activities of banks for improved efficiency and effectiveness.

The above researchers prove that bank customers not only want close relationships with

their banks, they also value this relationship. In Pakistan, there are more trends of savings in banks

so it is really of most importance for banks to develop and build relationships with their customers

as bank`s success depend on long-term relations with their customers.

1.6 CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

Organizations have various sources of information like internal sources of information and

external sources of information (Galbreath & Rogers, 1999). All the information collected from

internal sources information and external sources of information is processed by Customer

Relationship Management (CRM) application. This collected information from all possible sources

is used for developing and improving products and services better than competitors and as per

needs and wants of customers. Customer Relationship Management (CRM) has no proper definition

yet that can describe it completely as still work on Customer Relationship Management (CRM) is

going on in the world (Zineldin, 2000).

In business world, Customer Relationship Management (CRM) is not new. In various

businesses all over the world, many models remained in use for decades. Traditional models

focused more on selling efforts but current Customer Relationship Management (CRM) focuses on

5

the real objective of the businesses that is “customer loyalty”. Now Customer Relationship

Management (CRM) focuses on customer loyalty through identification of target customers, getting

new customers and retaining the existing customers through developing strong relationships with

them. These relationships development with customers give organizations a competitive edge that

help them satisfy their customers and make profits.

The basic difference between the traditional and current Customer Relationship

Management (CRM) models is that the traditional models mostly work independent of one another

whereas current models are integrated models. New CRM models integrate all business activities at

one platform whereas traditional models were unable to do this effectively. In traditional models,

information gained from customers about selling could not be shared with other departments in the

organization effectively.

Technology advancements have made it possible through Customer Relationship

Management (CRM) that now different departments can share and use each others information

collectively for making efficient and effective strategies for their customers (Given, 2006). These

new technologies have made it possible for organizations to collect customer`s data from all

company`s customer touch points, and use this information at all levels for improved performance

in all areas. Therefore, traditional Customer Relationship Management (CRM) has been changed

with most efficient and effective modern Customer Relationship Management (CRM) strategy.

“The activities a business performs to identify, qualify, acquire, develop and retain

increasingly loyal and profitable customers by delivering the right product or service, to the right

customer, through the right channel, at the right time and the right cost is called CRM (Galbreath &

Rogers 1999, p162)”.

Therefore, for unbeaten Customer Relationship Management (CRM), organizations should

include all of their functions in CRM application (Hamel & Prahalad, 1994).

Hence, in simple words, CRM used by different organizations to seek, obtain, and retain

customers. Therefore, CRM helps organizations to manage their relations with customers in a better

6

way. A winning Customer Relationship Management (CRM) system focuses on customer loyalty as

a focus of Customer Relationship Management (CRM). Customer Relationship Management

(CRM) helps organizations to integrate their entire functions in a better way and the result is

customer loyalty.

Most competitive organizations use Customer Relationship Management (CRM) software

(Appendix-VII) (2020software.com, 2009). CRM software helps organizations to retain their

customers better than their competitors do by providing most customized product and service

offerings.

Customer Relationship Management helps organizations to know their customers well in

order to satisfy their needs (Patton, 2005). At present, customers are well informed about various

products and services than ever, by clicking computer mouse can give them thousands and

thousands of choices. This rapid development of technology has increased competition in every

field of life.

Customer Relationship Management is needed when organizations do not have in-depth

understanding of their customers like what are their present and future needs (Patton, 2005).

Therefore, organizations should focus more on understanding their customers better than their

competitors and that is possible through Customer Relationship Management (CRM) system.

1.6.1 Characteristics of CRM

The major characteristic of Customer Relationship Management (CRM) is customer

therefore, the prime focus of organizations should be their customers, some customers give more

profit to organizations and some give less profit, and customers have changing needs and wants

(Wong, et al, 2003).

Therefore, if organizations are more aware about their customers then they can make better

strategies resulting in improved and new products and services.

7

1.6.2 Customer loyalty as a focus of Customer Relationship Management

Success of banks depends largely on building customer loyalty (Khirallah, 2001).

Consequently, banks should emphasize on building customer loyalty, which is a focus of Customer

Relationship Management (CRM) because it creates a superior competitive advantage.

Knowing customers better and then developing relations with them is important for every

organization these days. The major focus of Customer Relationship Management (CRM) in any

organization is to build loyal customers. There are certain factors that affect customer loyalty hence

in order to build customer loyalty, understanding the relationships between those factors that affect

customer loyalty, which is a focus of Customer Relationship Management (CRM), is of most

significance.

To build customer loyalty, banks need to improve their relations with their customers.

Since, products and services offered by banks cover the long-term needs of their customers so this

relationship becomes more important. Banks need to focus on offering customized products and

services better than their competitors in order retain their customers.

1.7 BACKGROUND TO THE STUDY

Up to 80% of organizations lack understanding about how Customer Relationship

Management (CRM) helps them to make their customers loyal (Kirkby, 2002). Due to this, most of

the organizations are unsuccessful to build customer loyalty. Therefore, this high rate of failure has

forced experts and researchers to find out the factors that build and influence customer loyalty as

banks depend on lasting relations with customers. Furthermore, inadequate understanding among

the management and employees about customer loyalty, which is a focus of Customer Relationship

Management (CRM), become reasons for failure (Caulfield, 2001).

Even organizations having enormous data warehouses also lack in-depth understanding

about their customer`s loyalty factors (Davenport et al. 2001). Hence, these organizations do not get

the maximum benefit of this data for better mutual benefits of their customers and for themselves.

8

1.8 SIGNIFICANCE OF THE RESEARCH STUDY

Building and strengthening relations with customers is vital in banks (Zineldin,1995). If

banks build up and maintain firm relationships with their customers, it is hard for their competitors

to beat them (Gilbert,2003).

The most significant area for banks these days is to make their customers loyal. Banks

depend on lifelong relationships with their customers as the customer grows, generally profits also

grow so customer loyalty ultimately increases bank`s profits.

Bank`s basic purpose is to make profit and to remain successful, making customers loyal

become vital for these banks as loyal customers contribute more towards profits of the banks. Loyal

customers also recommend their bank to their family and friends and through this mouth

referencing, bank is able to acquire and retain more customers. Increase in customer retention

increases more profits (Reichheld, 1992, 1996), and Storbacka, 1994). Customer loyalty is more

important than increasing number of customers in a bank (Colgate, 1999).

A critical review of banking sector indicates that customer loyalty has been neglected in the

banking sector especially in public sector banks in Pakistan. The researcher developed his interest

and found that a research study would be of much significance to be undertaken within the capacity

limits of the researcher to discover the major factors that affect customer loyalty, which is a focus

of Customer Relationship Management (CRM) for overcoming high competition in the banking

sector of Pakistan. Findings of this research study will be of great use for banking sector. The

results of this research study will also be helpful in improving CRM application in banks. This

research study will also be helpful for banks to make their customers loyal to overcome high

competition in the banking sector of Pakistan.

1.9 STATEMENT OF THE PROBLEM

To overcome high competition in the banking sector, banks need to strengthen relations

with their customers to make their customers loyal (Bose, 2002). Banks should focus constantly on

9

building relationship with their customers, because it is the only competitive advantage remaining

to them (Xu, 2002).

As world has become a global village, it results in tough competition between organizations

and formed a climate of continuous change, gaining and retaining customers has become vital for

the success of any organization and Pakistan is no exception. Customers now have more awareness

and choice of various products and services due to newer channels of communication like Internet

etc than ever before. So due to increased customer awareness, customers are more demanding, and

those banks having strong relationships with their customers have strong competitive edge over

other banks. Therefore, customer loyalty, which is a major focus of Customer Relationship

Management (CRM), gives these banks a competitive advantage over other banks.

It is also a fact that acquiring a new customer costs more than to retain the existing

customer. Therefore, in order to overcome high competition in banks, building customer loyalty is a

challenging area faced by banks these days. The researcher will try to discover the major factors

that affect customer loyalty, which is a focus of Customer Relationship Management (CRM) for

overcoming high competition in the banking sector of Pakistan for mutual benefits of customers

and banks.

1.10 HYPOTHESES OF THE RESEARCH STUDY

The researcher has developed following hypotheses based on the purpose of this research:

H1: there is significant influence of customer trust on customer perceived value.

H2: there is significant influence of customer trust on customer satisfaction.

H3: there is significant influence of customer trust on customer loyalty.

H4: there is significant influence of customer perceived value on customer satisfaction.

H5: there is significant influence of customer satisfaction on customer loyalty.

H6: there is significant influence of customer switching barriers on customer loyalty.

H7: there is significant influence of customer culture on customer loyalty.

10

1.11 RESEARCH QUESTIONS

This research study`s basic aim is to discover the major factors that affect customer loyalty,

which is a focus of Customer Relationship Management (CRM) for overcoming high competition

in the banking sector of Pakistan. Following research questions will help the researcher to achieve

this research study`s purpose:

1) What are the factors that affect customer loyalty, which is a focus of Customer

Relationship Management (CRM) in the banking sector of Pakistan?

2) What is the relationship between the factors that affect customer loyalty in the

banking sector of Pakistan?

3) How to build a customer loyalty model for the banking sector of Pakistan?

1.12 STUDY PROCEDURE

1.12.1 Population

A population consists of all elements-individuals, items, or objects-whose characteristics are

being studied. The population that is being studied is also called the target population (Mann,

1995).

The population of this research study consists of customers of banks in Pakistan. Banks/

development finance institutions in Pakistan comprises of seven categories, which are regulated by

the State Bank of Pakistan (Appendix-III) (State Bank of Pakistan, 2009). In the first category,

government owns public sector banks and they do the commercial tasks, which are described in the

Pakistani banking rules. The second category, specialized banks that are the same as the first group

but their activities are more focused on some special tasks, like agriculture, industries, house and

buildings, etc. Third category banks are called private banks owned by a person or a group of

persons. Fourth category, Islamic banks, fifth category, foreign banks and finally sixth & seventh

categories, micro finance institutions and Development Finance Institutions respectively perform

11

some limited tasks and activities. State Bank of Pakistan regulates all these banks / development

finance institutions.

The researcher has chosen customers of the following banking categories as population of

this research study that offer their services to public at large, and have a large market-share:

1) Public banks,

2) Private banks,

3) Islamic banks, and

4) Foreign banks.

1.12.2 Sampling

Following sampling criteria is adopted for the selection of banks from the research study`s

population:

� Banks with highest business achievements

� Banks having diversified target customers, and different groups

� Banks having branches in major areas in Pakistan

� Banks having national and/or international representation

� Researcher`s time, money, and other resource constraints

Based on the above sampling criteria, following banks are selected for this research study:

1) National Bank of Pakistan (NBP) serving as a public bank.

2) Habib Bank Limited (HBL), Pakistan serving as a private bank.

3) Meezan Bank Limited, Pakistan serving as an Islamic bank.

4) Citibank serving as a foreign bank in Pakistan.

12

1.12.3 Research instrument

Questions given in questionnaire for bank`s customers as an instrument for data collection

are adopted from the existing literature relating to the basic purpose of this research study. The

researcher has made minor changes in this adopted questionnaire after three phase pilot testing.

To measure customer trust, the researcher uses the measure of Hess (1995), Jarvenpaa &

Tractinsky (1999), Gurviez & Korchia (2002), Gefen et al. (2003), and Chiou & Droge (2006). The

researcher uses the measures of Wang et al. (2001) and Llosa (1996) to measure customer

satisfaction. The researcher uses the measures of Lassar et al. (1995) scale to measure customer

perceived value. The researcher uses the measures of Kim, et. al., (2003) to measure customer

switching barriers. The researcher uses the measure of Hofstede (1980; 1994) scale to measure

customer culture. Lastly, the researcher uses the measures of Boulaire and Mathiew (2000),

Srinivasan et al. (2002) and Huang (2008) to measure customer loyalty.

1.12.4 Pilot testing of questionnaire

The purpose of the pilot testing of the questionnaire is to refine questionnaire for more

accurate responses (Saunders et al., 2000). Based on this purpose of pilot testing of questionnaire,

the researcher did three-stage pilot testing of questionnaire from the customers of banks.

With the help of pilot testing of questionnaire, respondents are comfortable in responding to

questions asked in the questionnaire. For a single researcher with lack of resources, it is not

possible to take response from entire population hence a sample size is selected according to

sampling criteria.

Pilot testing of questionnaire is of high importance for any researcher. A minimum

respondents should be 30 in any pilot testing of questionnaire. The researcher did three-stage pilot

testing of questionnaire. During the first stage of the pilot testing of questionnaire, the researcher

got responses from randomly selected regular customers and experienced employees of selected

banks.

13

The researcher received various comments/suggestions regarding this research study`s

questionnaire. The researcher did minor changes in the questionnaire as per comments/suggestions.

During the secong stage of the pilot testing of the questionnaire, the researcher distributed again 30

questionnaires to randomly sleeted customers of four banks. The researcher again received

comments/suggestions from respondents and revised questionnaire.

During the final third stage of questionnaire pilot testing, the researcher gave 30

questionnaires to customers of banks; and finally got positive response. It is to mention here that

respondents of pilot testing of this questionnaire were excluded for having unbiased responses.

1.12.5 Data collection

Data collection was a difficult process as respondents raised many questions like privacy

and usage of their responses. The researcher persuaded and ensured respondents about the privacy

and appropriate usage of the information provided by these respondents. The researcher visited all

the selected banks personally in order to ensure the quality of work.

1.12.6 Data analysis

For data analysis, the researcher will use SPSS software for doing demographic analysis,

correlation analysis, and regression analysis. For easier understanding, the researcher will use

tables, figures, and bar charts followed by discussions on each analysis.

1.13 LIMITATIONS OF THE RESEARCH STUDY

This study is confined to the basic purpose of this research study, that is, to discover the

major factors that affect customer loyalty, which is a focus of Customer Relationship Management

(CRM) for overcoming high competition in the banking sector of Pakistan. Based on sampling

criteria, researcher will examine four categories of banks in Pakistan namely National Bank of

Pakistan (NBP) serving as a public bank, Habib Bank Limited (HBL), Pakistan serving as a private

bank, Meezan Bank Limited, Pakistan serving as an Islamic bank, and Citibank serving as a foreign

14

bank in Pakistan. The researcher distributed questionnaires to customers of banks for on the spot

filling and return. This may not have given enough time to customers to think more about their

answers. Only willing customers were given questionnaires. This research study is limited to

Islamabad & Rawalpindi areas because of researcher`s time, costs and other resource constraints.

Finally, this research study will look at the bank`s customers views.

The researcher will do his best that these identified limitations will have no impact on this

research study`s results.

15

CHAPTER 2

REVIEW OF RELATED LITERATURE

2.1 CUSTOMERS-SELLER BOND

A research about customers-seller bond gave the following three levels of customer-seller

bond (Berry and Parasuraman, 1991):

1) Financial bond: In this financial bond between customer and seller, they have a

strongly connected via price factor;

2) Social bond: In the social bond between customer and seller, they are strongly

connected via social relations like attachments, friendships; and

3) Structural bond: In this structural bond between customer and seller, they have a

strongly connected via partnership.

Furthermore, the connection between a bank and a customer can be of following three types

(Berry and Parasuraman, 1991):

1) Using of bank`s ATM machines or using other technologies to interact with bank`s

customers.

2) Customer-bank connection via bank`s representatives, for instance front desk bank`s

officers interaction with bank`s customers, bank`s customer services representatives

interaction with bank`s customers, and

3) Both 1 & 2 above.

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2.2 CUSTOMER LOYALTY AS A FOCUS OF CUSTOMER

RELATIONSHIP MANAGEMENT

It is generally known that customers who are loyal to any organization’s products and

services become the major profit giver to that organization. Customers become loyal when they are

satisfied and they believe that they are getting the best value from that product or service. Customer

loyalty as a focus of Customer Relationship Management (CRM) helps banks to compete better in

the highly competitive banking sector.

Organizations are trying their best to have closest relations with their customers by focusing

more on satisfying their needs and wants better than their competitors (El Sawy and Bowles, 1997).

Organizations need to focus more on the existing customers and to strengthen relations with

existing customers rather than focusing on the entire market (Peppers and Rogers, 1995). Similarly,

organizations should focus on customer loyalty, as loyal customer is less costly than obtaining a

new customer (Reichheld and Sasser, 1990).

Banks generally do segmentation of their customers based on age, income level, education

etc but these factors are not very strong to identify the needs of customers. Organizations (Figure

2.1) try to group their customers according to similarities and customers having similar

characteristics are placed one group and so on (Machauer, A. and Morgner, S., 2001). The basic

purpose of is to achieve improved customer loyalty and less cost.

Figure 2.1: Financial services customer segmentation (Machauer, A. and Morgner, S., 2001)

17

A model of “Customer-Centric philosophy in Customer Relationship Management (CRM)

evaluation”, presents a customer-focused viewpoint that focuses on customer loyalty as a focus of

Customer Relationship Management (Kim, 2003).

In the present age of globalization, almost all the businesses depend on the regular

customers and not on the occasional customers therefore, in order to remain and compete in the

present highly competitive environment, customer loyalty is vital. Mostly businesses are of the

view that people know about me so they will come to me in any case but it is not true as your

competitors are also there in the market so they can reach customers before you do.

For example, car manufacturer`s showrooms in Pakistan may send reminders to their

existing customers about new features about new or existing products and services as well about

their car tuning dates. Therefore, these reminders not only make their customers much delighted but

also strengthen their relations with them.

If any occasional customer turns into a loyal customer then of course organization`s profit

will increase much. These loyal customers not only buy more but also at the same do your

marketing as a volunteer by mouth reference. In a country like Pakistan, personal references about

any product or service are considered of higher importance than any other effort.

Customer frequency depends on the type of product or service. For instance, daily or on

alternate days, going to buy bread is a good frequency and buying shoes after 6 to 8 months is

considered a good frequency.

Loyal customers open great opportunities for organizations as loyal customers buy more,

buy other products and services offered by the same seller, and also become organization`s

volunteer marketer by recommending organization`s products and services to their friends and

relatives. Furthermore, organizations may go for joint ventures that result in effective customer

loyalty.

18

Everyone is not buying all the time, so organizations should keep in contact with their

customers so whenever customers are willing to buy, there are better chances that your

organization’s products and services will be their first preference.

At present, almost all the persons are busy and new improved products and services are

easily available in the market or via internet or telephone etc, so if an organization is already in

contact with their customers then their chances are better than their competitors who are not in

contact with their customers.

2.3 BANKING SECTOR OF PAKISTAN

Banks all over the world have the most significant impact on the economic development of

any country. For instance, banks provide financial resources to various industries and sectors for

their development. Banks also provide employment and tries to reduce poverty. In other words,

banking sector has a control on providing financial resources to almost all sectors of an economy.

World is a global village and almost every organization is facing high competition and

banking sector is no exception. Therefore, banks are trying their best to compete and perform better

than their competitors. Hence, banks are focusing on new methods of interactions with their

customers.

It is easily observed that banking sector is changing rapidly due to the advancement of new

channels of communication, internet, online accounts, and so on. Due to technological

advancements, competition among banks has increased a lot.

The financial sector in Pakistan comprises of Commercial Banks, Development Finance

Institutions (DFIs), Microfinance Banks (MFBs), Non-banking Finance Companies (NBFCs)

(leasing companies, Investment Banks, Discount Houses, Housing Finance Companies, Venture

Capital Companies, Mutual Funds), Modarabas, Stock Exchange and Insurance Companies (State

Bank of Pakistan, 2008). The Central Board of Directors of the State Bank of Pakistan (SBP)

comprises of seven members, one corporate secretary, and board’s Chairman is the Governor. The

19

Organogram and details of Central Board of Directors of the State Bank of Pakistan (SBP) is at

Appendix-II and Appendix-VIII respectively. It is functioning in areas of agriculture, onsite

inspections, policy and regulations, Surveillance, and so on; its complete detail is shown in

Appendix-IX.

The Quaid-i-Azam Muhammad Ali Jinnah in his address to the SBP on 1st July, 1948,

emphasized its major role and responsibilities in socio-economic development of Islamic Republic

of Pakistan, details at Appendix-X.

The major statutory obligations of the State Bank of Pakistan (SBP) are statutory cash

reserve, statutory liquidity requirement, maintenance of liquidity against certain liabilities,

submission of annual audited accounts, annual accounts, minimum capital requirements, and

submission of returns as shown in Appendix-XI.

The State Bank of Pakistan (SBP) monitors and supervises banks, Development Finance

Institutions (DFIs), and Microfinance Banks (MFBs) whereas all other financial institutions

supervised by Securities and Exchange Commission and Controller of Insurance.

At present, there are 41 scheduled banks, 6 Development Finance Institutions (DFIs), and 2

Microfinance Banks (MFBs) operating in Pakistan whose activities are regulated and supervised by

the State Bank of Pakistan. The commercial banks comprise of 3 nationalized banks, 3 privatized

banks, 15 private sector banks, 14 foreign banks, 2 provincial scheduled banks, and 4 specialized

banks (State Bank of Pakistan, 2008).

The banking industry’s assets have risen to over $60 billion, and almost 81% of banking

assets are in the private hands (Akhtar, 2007). Now banks are trying to make all of their accounts

profitable. Core Functions of the State Bank of Pakistan are regulation of liquidity, regulation and

supervision, exchange rate management and balance of payments, and developmental role of state

bank as described in detail at Appendix-XII.

20

Banking sector in Pakistan in an effort to reduce cost of services is now moving towards

adopting most advanced technologies. Now customers of banks can operate their accounts online

but there are issues like online frauds etc so banks need to have most secure online systems. Many

of the new technologies may give immediate benefits to banks but in the long run, the only

competitive advantage banks can have is their strong relations with their customers.

There is less human interaction of banks with their customers due to new technologies

(Puccinelli, 1999). Customers needs and wants change rapidly and this forces banks to act

accordingly. Those banks that are taking care of their customers better than their competitors are

ahead in competition.

On the other side, technology has a vital impact on service delivery; customers get

immediate information and response from banks.

It is generally seen that new technology is replacing employees like Automated Teller

Machines (ATMs) have replaced cashiers, and so on. Technology is replacing human interactions

because banks are trying to provide services as quickly as possible to remain ahead of their

competitors.

Banks are trying to strengthen their relations with their customers (Durkin, M., 2004).

Banks are using different technologies like emails to respond to their customers. Customers are

provided immediate response of their queries through these emails managed by artificial

intelligence system. In case of any unsolved or unique issue, these artificial intelligence systems

direct the said emails of customers to bank concerned employees for their individual attention.

The impact of new technology is immense on the financial sector (Sherif, 2002). Banks

were dependent on manual work and branch operations for the last many decades but since 1980,

new technology has changed working of banks and as a result, computers are replacing humans in

most of the banking operations.

21

Globalization has brought creativity and innovation in doing business as well as new

challenges to the banks. In order to remain competitive or in some cases, in order to survive in the

market, banks need to react rapidly to these global challenges.

As we know that customer is the real king or the real boss, is very true for the banking

sector as well. It is the customer who decides what you offer and how you offer, not the bank

therefore, its vital to develop a comprehensive data base of customers in order to not only know

customer`s changing needs and wants but also banks can use this customer`s data base to predict

their future needs and wants.

Government rules and regulations have also increased customer rights so it is also important

to fulfil their rights better than competitors. As we also observe that internet has also changed the

behaviour of customers, their lifestyles, and most importantly their awareness regarding banking

services.

2.3.1 Customer Relationship Management in the banking sector

These days, banks are focusing on Self-Service Technologies (SSTs). In SSTs, customers

can use bank services when and where they want without time or place barriers, without any

personal contact with the banks (Durkin, & Howcroft (2003).

Organizations are focusing on strengthening their relations with their customers (Palmer,

2001; Robertson & Kellow, 2001). Organizations focusing on customer loyalty which is a major

competitive advantage (Galbreath & Rogers, 1999; Valentine, 1999).

Developing and strengthening relations with customers is not only a software or technical

issue, it is the communication of all business activities with customers in the most efficient and

effective manner.

Customer correct need identification helps CRM work effectively. Following are the major

needs of customers of banks in Pakistan:

22

a) customers need to get better bank services at low cost;

b) customers having more than one bank accounts should have convenience in

managing their accounts.;

c) banks should offer the best products and services to satisfy and retain customers.

Companies should focus on the integration of people, processes and technology to gain

long-term competitive edge over competitors and in order to earn profit (Bygstad, 2002 cited

Ciborra and Failla, 2000). At present, Customer Relationship Management (CRM) is under

energetic thoughts of organizations all over the world (Fox, 2001). Customer focus is the basic

concept behind Customer Relationship Management (CRM).

All over the world, there are quick changes due to changes in the business environment. Due

to globalization, there is a tight completion in the business world. Therefore, in order to remain and

beat competitors, companies need to keep on improving their strategies.

Banks in Pakistan are already using various CRM activities like communicational and

operational CRM. For example, checking account balances, checking bank account records, getting

check books, transferring funds, payment to others, paying utility bills, and paying bank credit card

bills. In banks in Pakistan, following are the major channels of communication with the customers:

1) Bank branches: there is a face-to-face communication between customers and banks in

various bank branches.

2) Automated Teller Machine (ATM): customers of banks can draw cash from these

machines round the clock.

3) Internet banking: customers can access their accounts and do transactions while sitting

in their offices, homes, or from anywhere with the help of computers.

4) Mobile banking: customers can access their accounts and do transactions from anywhere

with the help of their mobiles.

5) Technological help: in case of any problem, customers of banks can get support and help

from technological help centers via telephone or in person.

23

6) Marketing channels: various marketing channels like print and electronic media are used

by banks these days to reach and satisfy their customers better than their competitors.

7) Follow-up: after sales services to customers through customer follow-ups.

These contact points provide required information immediately that results in more

customer satisfaction. Customers spend less time to get more information, as these days, almost

everyone is busy doing something so when a bank saves precious time of its customers, it makes its

customers more loyal (Lindgreen, 2005).

Almost all businesses are going through quick changes that demands long-term competitive

strategies in the world. Due to increased technology, customers are well informed about products

and services and it is easy to access information within seconds about any product or service.

Hence, banks are moving towards customer-centric strategies. As customer is the real source of

information, so the methods of working have changed. Therefore, banks do what their customers

need and want.

E-banking is categorized into following 4 categories (Jayawardhena, 2000):

1) Account balances or credit transfers viewing,

2) Account control functions,

3) New services, and

4) Reconciliation functions.

1- Account balances or credit transfers viewing:

Mostly customers need to view their account balances or credit transfers. This view-only

function allows customers to view their account information at any time. Before this function, bank

employee’s maximum time spent on providing this account balance information to their customers

but now due to this function, workload on bank employees have decreased a lot and on the other

side, customers also get the required information immediately at their own convenience.

24

2- Account control functions:

Few controls of customers like payment of utility bills, account transfers between different

bank accounts or transferring amount to other`s bank accounts are some of the functions of this

account control function.

3- New services:

Any new customer is allowed to fill new bank account opening forms in this function.

However, due to some legal requirements, new customers have to visit banks for signatures and

providing attested hardcopies of required documents.

4- Reconciliation functions:

Now banks offer downloading and other relevant services to their customers through this

function. Customers can download their account related information from the bank website to their

personal documents.

Customer Relationship Management applications generally include (Reynols, 2002):

� Call Center Automation,

� Campaign Management,

� Contact Management,

� Data Warehousing,

� Email Management,

� Field Service Automation,

� Knowledge Management,

� Marketing Automation,

� Personalization, and

� Sales Force Automation.

25

At present, banks are using the best available technology resulting in the best use of each

customer contact more effectively than ever. As described by many researchers, an effective CRM

application helps organizations to manage their customers in better manner by focusing on

customers that are more profitable that result in improved profitability.

Banks use Customer Relationship Management (CRM) techniques to obtain following

results (Foss, 2002):

1) To develop customer-centric environment in banks;

2) To develop and strengthen relations with their customers;

3) To deliver best products and services to customers; and

4) To identify the cost-effective customers in banks.

Firstly, almost all the major organizations including banks are focusing on customers as it is

the customer who can really strengthen your bank. Hence, as Foss has mentioned above that having

a more customer focused culture can enable the banks to achieve their objectives better than their

competitors can. Secondly, as earlier discussed, relationships play a vital role in human lives so it is

almost impossible for banks to ignore this most important factor of their customers. Thirdly, by

delivering and providing the best services to customers can help banks achieve their financial goals,

and finally Customer Relationship Management (CRM) helps to indentify and focus on the most

profitable customers.

Increasing competition and decreasing margins have made it mandatory for banks to adopt

Customer Relationship Management (CRM) strategies and technologies with the purpose of

satisfying ever-increasing needs of their shareholders and customers. More recently, banks have

begun to realize its fundamental value as it facilitates banks:

� To focus on those customers that give the maximum profit

� To focus on those customers who have a higher frequency

� To focus on the what and how much buying of customers

� To know better their customers

26

� To know their needs, wants, desires

� To know their family size, likes, dislikes, background etc, and

� To develop proactive strategies regarding their customers, products, and

services

If banks have a comprehensive awareness of their customers then this definitely can bring a

better change as earlier described in Customer Relationship Management (CRM). Understanding

customer is not an easy task for banks as now competition among banks is on building their

customers loyal. Customer Relationship Management (CRM) helps banks to target and reward most

profitable customers.

2.4 CUSTOMER LOYALTY

Today in almost every field, there is high competition and all organizations are trying to do

their best in the market if they want to remain and grow in the market. If organizations need to

develop, strong long-term competitive edges then they have to make their customers loyal. Making

customers loyal is not easy for the organizations because of high awareness of today`s customers.

Print & electronic media and other sources of information has increased customer`s knowledge and

awareness about most advanced most attractive products and services offering a benchmark quality

in the markets. New and improved products and services enter market rapidly so its becoming

really hard for organizations to compete on the basis of most rapid changes therefore the only

competitive long-term edge they may have is to build their customer`s loyalty.

Customer`s loyalty means that customers have a commitment to repurchase product/service

even other organizations are offering better products/services and doing a lot of marketing but your

customers remain with you (Oliver, 1999).

Customers loyalty is the positive attitude of customers toward repurchase (Lin and Wang,

2006).

During the past many decades, organizations got customers because of lack of competition

or no competition at all. Generally customers have no choices or options or substitutes and the

markets were growing rapidly and mostly organizations didn’t worry about the customer`s

27

satisfaction. Organizations thought that there will be high demand of their products and services

and if they are unable to retain 200 customers, they get 2000 more customers quickly and this goes

on for many years. Organizations believed that there are always new customers to replace the

defecting ones (Kotler p. 405).

Customer loyalty has become the most important aspect of organizations because getting a

new customer costs much higher than retaining an existing customer so organizations should focus

more on customer loyalty in order to be profitable (Ro King, 2005).

In most of the organizations, like banks, losing only few most profitable customers may

result in big loss as compare to losing many average customers. Therefore, customer loyalty results

in profit as well as collection of further data about customers. This large customer data helps

organizations like banks to communicate better with its customers, developing better strategies

about their products and services, more customer satisfaction, prediction of customer wants

resulting in more purchases by the customers.

The basic objective of any business is to create a customer (Peter Drucker, 1973). Five

percent enhancement of loyalty enhances twenty five percent to ninety five percent worth (Dawkins

and Reichheld, 1990). This most surprising finding brought a rapid change in the market regarding

significance of customer loyalty. Therefore, organizations realized the vital importance of customer

loyalty and almost all the major organizations developed various customer loyalty strategies

according to their own business environments.

Customer loyalty is the most important objective of especially those organizations that are

involved in Customer Relationship Management and it can be most beneficial for companies in this

highly competitive world (Grönroos, 1991; and Coviello et al., 2002). They further reported that

loyal customers of any company might pay even higher prices of offered products and services as

compare to new customers who are not willing to pay higher price. Therefore, the result is

increased profits. This was a major finding in the area of customer loyalty in the world.

Organizations then started focusing more on customer loyalty in order to improve their profits by

developing long-term relations with their customers.

28

Another most significant finding is that retaining a customer is 10 times less costly than

getting a new customer, whereas to bring new customer on the same profit level is sixteen times

more costly (Lindgreen, 2000).

Customer’s complaints are like a treasure to any organization. When any customer

complains, the concerned organization gets the most important information about its weak areas

without spending millions and millions of rupees on identification of their weak areas. Therefore,

organizations through improved customer problem handling system have a better chance to fix that

problem by working on the root causes of that identified problem. After identification of the root

causes, organizations try to solve customer’s problems to make them loyal.

Customer`s increase in loyalty means that customers wants to stay with the current provider

of products and services. Customer`s loyalty mostly depend on his/her values and successful

organizations act accordingly. Therefore, organizations offering the most valued products and

services to their customers have more loyal customers than their competitors.

If any organizations need to have, loyal customers then they should take measures to

involve customers with them. Involvement results in increased loyalty (Zeithaml et al., 1988).

When the customer-seller service is of long-term then these relationships become the most

important for the organization (Zeithaml, 1981). These effective relationships between the customer

and the service provider can result in customer retention. Furthermore, customer`s level of

participation with the service provider can decide their level of customer-provider relationships

(Farquahar, 2004; Ennew & Martin R. Binks, 1996).

2.5 CUSTOMER RELATIONSHIP MANAGEMENT AND CUSTOMER

LOYALTY IN THE BANKING SECTOR

The major focus of Customer Relationship Management (CRM) in any organization is to

build relations with customers (Rigby, Reichheld & Dawson, 2003). The basic purpose is to

understand customers and factors that affect customer loyalty. Loyal customers for any company

can always give a better competitive advantage than any other factor. Chances of customer accounts

29

also grow with the age of customers so if those customers growing customers remain with their

banks then it gives a strong long-term competitive edge to their banks.

As the Customer Relationship Management (CRM) helps banks to make their customers

loyal, and customer loyalty depends on certain factors that affect customer loyalty. Understanding

and knowing those factors and their relationships with each other can help banks to develop better

customer-centric strategies, which is a focus of Customer Relationship Management (CRM).

During last few decades, major changes occurred in the banking sector like privatization,

and same is true for Pakistan. Many public banks have been privatized that results in high market

competition.

Banks use new technology to provide quick services to their customers but on the other side,

this technology results in decreased relations between the banks and their customers. Those banks

that did not change or improve their products and services have lost their major market share.

Hence, banks that are not considering this fast changing environment to maintain strong position

are likely to lose their customers.

Banks have started realizing that no bank is excellent for all so banks are trying to explore

innovative competitive advantage to compete and beat their competitors (Olsen, 1992). At present,

strong relationships with customers have become vital, none of the banks can avoid it otherwise

retaining, and increasing customers becomes very difficult. If a bank needs to have a competitive

position then its relations with its customers becomes the most significant factor.

Customer’s loyalty is decreasing in different sectors including the banking sector. The basic

reasons behind this customer`s declining loyalty towards different sectors are (Payne, Christopher,

Clark, & Peck, 1999):

1) Use of latest technology:

2) High competition

3) Customers increased awareness

30

1) Use of latest technology:

There is rapid improvement and innovation of technology in the world than

ever, mostly companies using latest technology like internet, telemarketing, auto-

answering machines, and so on to satisfy their customers resulting in decreased

loyalty as customers are more used to interact with machines.

2) High competition:

There is high competition in the market due to new banks entering as well as

cellular companies providing financial services like “easy paisa” by Telenor Cellular

Company in Pakistan.

3) Customers increased awareness:

These days, customers are well informed than ever due to rapid expansion of

print and electronic media in Pakistan. Media has increased customers awareness

about what is going on in the world, and this increased awareness about financial

services has increased customer demands and changed their behaviours towards

financial services.

Relationship in the banking sector is becoming more and more significant (Colgate,

Alexander, Marks & Spencer, 1998 ).

2.6 MODELS RELATING TO RESEARCH STUDY

Many philosophers presented customer loyalty models. In the loyalty model (Figure 2.2),

presented by Beerli, Martin and Quintana, (2004) variables that impact customer`s loyalty namely

perceived quality, satisfaction, and switching cost are shown. As shown in this model of loyalty,

perceived quality influences customer satisfaction and in turn, customer satisfaction influences

31

customer loyalty. Switching cost also influence customer loyalty (Beerli, Martin and Quintana,

2004).

Figure 2.2: Loyalty Model (Beerli, Martin & Quintana, 2004)

The integrative framework for customer value and CRM performance model (Figure 2.3) is

developed by Wang et al., 2004. According to this model, if these four customer values are met

then it results in customer satisfaction that turns into brand loyalty.

Here the researcher comments that customer satisfaction is the major influencing factor in

the model presented by Wang et al. (2004) and also in the loyalty model presented by Beerli,

Martin and Quintana (2004).

Perceived Quality

Satisfaction

Switching

cost

Loyalty

32

Figure 2.3. The Integrated Framework for Customer Value and CRM Performance.

Source: Wang et al., 2004, p. 171

According to this model, employees’ behaviors depend on their attitude so we need to take

care of the attitude of our employees if we want to increase profitability of our business resulting

from customer retention.

33

Figure 2.4: The Employee-Customer-Profit Chain at Sears

“The CRM Value Chain Model”, (Figure 2.5) presented by Francis Buttle (2004) as a

guideline to apply CRM in organizations to improve their profits. The CRM Value Chain Model

comprises of five primary stages and four supporting conditions Figure 2.5:

Figure 2.5: The CRM Value Chain (Source: Buttle 2004)

34

The major objective of this model is establishing positive mutually beneficial relations

between the customers and organizations.

2.7 OFFENSIVE AND DEFENSIVE STRATEGIES

The service providers have offensive and defensive strategies to manage their relationships

with their customers (Fornell, 1992).

Fornell (1992) says that, in offensive strategy, a service provider attracts new customers

whereas in defensive strategy, a service provider tries to retain the existing customers. Following

Figure 2.6 presented by Fornell (1992) shows these offensive and defensive strategies:

Figure 2.6: Offensive and defensive strategies, Fornell, 1992, p-8

Generally, companies used to allocate more resources and energies towards getting new

customers but presently that concept has changed and now the companies try to apply both the

offensive and defensive strategies in a better manner than their competitors do. The possible result

of these strategies is customer retention.

35

2.8 FACTORS THAT AFFECT CUSTOMER LOYALTY IN THE

BANKING SECTOR

Researcher here discusses the major influences of factors that affect customer loyalty in the

banking sector.

2.8.1 Customer Trust

Closer relations between bank and its customer, higher the customer trust and vice versa.

This close relationship between customer and bank is not due to any bias but it is due to a

relationship between customer and bank that results in customer loyalty. Therefore, customer trust

influences customer loyalty and higher the customer trust higher the customer loyalty.

It is a general truth that if you know and trust a person, you definitely give him/her

importance in your decisions. Same is true for customers as those customers who knows your

company`s products and services and trust you, they become regular customers. Any company that

has effective channels of communications with its customers like customer services, company’s

website, etc has better chances that its customers will trust them and this trust converts into loyalty.

2.8.2 Customer Perceived Value

There is rapidly growing interest in companies regarding customer value. Customer value is

the most influencing factor (Watchword, 1990). Customer value is the core of marketing (Andreas

Eggert and Wolfgang Ulaga, 1990).

Customer satisfaction has arisen many questions in the minds of researchers like there are

many examples that, where there is high customer satisfaction but on the other hand, companies’

market-shares are going down. Many researchers found it surprising and here critics have argued

that old customer satisfaction models focused only on the existing customers’ satisfaction and those

models completely ignored possible customers, new customers, non-customers, and competitors.

This ignorance resulted in failures in achieving company`s objectives. Furthermore, customer`s

thinking about 4Ps of marketing that is product, price, place, and promotion should also be

36

considered. Therefore, in developing marketing strategies, customer perceived value has a vital role

(Gross, 1997).

The researcher after going through detailed literature review found that there are generally

three common elements of perceived value namely value components, value perceptions, and

importance of competition.

As humans are different, so their perceptions are also different. Generally, people

perceptions about any same product are different and so is the customer perceived value.

Finally, any company offering better value of their products and services than competitors

can develop a competitive advantage. Generally, customers go for those products and services that

offer better value in the market.

In Pakistan, customers also buy products and services due to their emotional attachments

with a particular product and service. For example, customers buying shoes from Bata Shoe

Company in Pakistan is also a result of emotional attachment with Bata Shoe Company and hence

that results in more value and better perception about those company products.

Customer perceived value is closely related with the customer satisfaction and customer

satisfaction in turn is closely related with customer loyalty. Customer`s satisfaction generally

require his/her previous product/service experiences, price factors etc whereas customer`s perceived

value is not dependent on customer`s previous experiences of products and services.

2.8.3 Customer Satisfaction

If there is no difference between customer satisfaction and customer`s expectations than the

customer is satisfied, otherwise customer is not satisfied. Companies try to not only minimize the

difference between these factors but also trying to provide products and services to their customers

that exceed their expectations in order to retain them as loyal customers (Jamal and Kamal, 2002).

37

Customer satisfaction is an important factor in customer retention. If customer satisfied then

he/she may become volunteer marketer of that product or service.

Customer develops an attitude after using any product or service and it is called customer

satisfaction (Jamal and Kamal, 2002).

Customer performs an emotional assessment about various products and services before

buying and after using it (Lin, 2003). Customers have expectations about products and services they

use and these expectations are developed from their previous buying, from friends and relatives

opinions. If customer’s expectations are met then he/she is satisfied otherwise dissatisfied.

Customer satisfaction is important and it is significant source of loyalty and retention.

2.8.3.1 Conceptual differences between customer satisfaction and customer perceived

value

The literature review shows that customer satisfaction and customer perceived value are

complementary, yet different constructs. Following Table 2.1 shows the conceptual differences

between customer satisfaction and customer perceived value:

Table 2.1: conceptual differences between customer satisfaction and customer perceived value.

Customer Satisfaction Customer Perceived Value

1. Emotional factor

2. After buying customer`s viewpoint

3. Existing customers

1. Cognitive factor

2. Before buying customer`s viewpoint

3. Both existing customers and possible customers

2.8.4 Customer Switching Barriers

There are many switching barriers of customers like emotional barriers, cost barriers, time

shortage barriers, and so on (Selnes, 1993).

Customer`s options availability plays an important role in his/her buying decision. Options

availability of different products and services also influence customer`s loyalty. If any customer has

38

more options available then his/her loyalty may also change as compare to a customer who has less

or no other options available of other same products and services offered by some other providers.

Loyalty is linked to customer`s behaviour and customer`s attitude.

2.8.5 Customer Culture

Culture (from the Latin cultura stemming from colere, meaning, "to cultivate) is a term that

has different meanings. Culture can be defined in 164 ways (Alfred Kroeber and Clyde Kluckhohn,

1952).

Culture is basically, the common values, habits, attitudes, and behaviors of a group of

people, or a company.

It is a fact that culture affects customer’s attitudes and customer`s behaviours (Hofstede,

1980). Therefore, customers who have proneness to any bank may become loyal customers. Here

most of the philosophers are also of the view that customers who have stronger culture have high

loyalty for banks.

The researcher being a Pakistani has observed that mostly Pakistani people are strong in

certain values of their culture. It is generally seen that people develop certain habits due to their

culture and if banks discover those values of culture then it may help banks to develop better

customer loyalty strategies, which is a focus of Customer Relationship Management.

39

CHAPTER 3

FRAME OF REFERENCE

3.1 CONCEPTUALIZATION

A conceptual framework (Miles & Huberman, 1994, p.18):

“Explains, either graphically or in narrative form, the main things to be studied.”

Hence, in order to reach this research study`s purpose, the following research questions are

stated:






The researcher has developed following hypotheses based on the purpose of this research:








40

3.2 PREVIOUS RESEARCH AND MODELS RELEVANT TO THIS

RESEARCH STUDY

The researcher now describes previous researches, and models that relates to his research

study`s purpose.

The customer loyalty model presented by Beerli, Martin and Quintana (2004) is shown in

Figure 3.1. They have shown the influence of different factors on customer loyalty. The researcher

based on literature review, comments here that the most influencing factor shown in this loyalty

model is customer satisfaction. It is also a fact that when a customer is satisfied then the chances of

loyalty are higher as compare to when a customer is dissatisfied.

In the following model Figure 3.1, Martin and Quintana (2004) have also given another

factor that influences on customer loyalty that is switching cost. Here the researcher again based on

literature review comments that almost every customer has some switching cost to pay whenever

customer wants to switch to another product or service. For instance, times, money, legal

restrictions, distance are some of the costs a customer has to pay is customer switches to another

product or service.

Figure 3.1: Loyalty Model (Beerli, Martin & Quintana, 2004)

Perceived Quality

Satisfaction

Switching

cost

Loyalty

41

The next model “The integrated framework for customer value and CRM performance”

presented by Wang et al. (2004) focuses on four customer values, when these values are fulfilled,

customer satisfaction is achieved and customer satisfaction in turn creates customer loyalty as

shown in Figure3.2.

Figure 3.2: The Integrated Framework for Customer Value and CRM Performance. Source:

Wang et al., 2004, p. 171

Model as shown Figure 3.3 presented by Rucci, Kirn, & Quinn (1999) shows the

relationships between behaviours of employees and customers.

Figure 3.3: Employee-Customer-Profit Chain at Sears

42

The researcher based on literature review, comments here that there is cause and effect

relationship in banks. If employees are satisfied with the bank then in turn employees make their

customers happy, hence, there is a cause and effect relationship here.

Relationship of customers with their banks is of two type namely offensive strategy and

defensive strategy (Fornell, 1992). Banks try to acquire new customer in offensive strategy whereas

when a bank tries to keep existing customer then it is called defensive strategy as shown in Figure

3.4.

Figure3.4: Offensive and defensive strategies, Fornell (1992, p.8)

As the researcher earlier discussed in the previous chapter on the review of related literature

about the following factors affect customer loyalty in the banking sector of Pakistan:

1) Customer trust,

2) Customer perceived value,

3) Customer satisfaction,

4) Customer culture, and

5) Customer switching barriers.

43

The researcher predict that the relationship between these factors also affect customer

loyalty, customer trust has an influence on customer perceived value, customer satisfaction, and on

customer loyalty as shown in the emerged frame of reference Figure 3.5. Customer perceived value

also influences customer satisfaction and customer satisfaction in turn influences customer loyalty.

Customer switching barriers and customer culture also influence customer loyalty as shown in

Figure 3.5.

3.3 EMERGED FRAME OF REFERENCE

A frame of reference according to Miles and Huberman (1994) explains the main things to

be studied, the key factors, constructs, or variables and the presumed relationship between them.

Consequently, a frame of reference presents the theories and models that are most suitable for the

research problem.

The researcher anticipates that based on this emerged frame of reference, there will be better

CRM utilization in banking sector, and banks will be able to build customer loyalty in order to have

a better long-term competitive edge over their competitors.

The Figure 3.5 presents the research variables used in the research questions and the chosen

operational definitions.

According to the above discussions and emerged frame of reference as shown in Figure 3.5,

the researcher would be in a better position to study this research study`s questions and hypotheses.

44

Figure 3.5: Emerged frame of reference

Source: Researcher`s own construction

H

H

H

H

H

CUSTOMER TRUST

CUSTOMER PERCEIVED VALUE

CUSTOMER

SATISFACTION

CUSTOMER LOYALTY

CUSTOMER SWITCHING BARRIERS

CUSTOMER CULTURE

45

CHAPTER 4

RESEARCH METHODOLOGY 4.1 RESEARCH PROCESS ONION

According to the Research Process Onion presented by Saunders et al, 2003, Figure2, first

layer research onion shows research philosophy that is positivism, realism, and interpretivism,

second layer shows the various research approaches like inductive or deductive research approach,

third layer shows research strategies such as experiment, survey, case study, grounded theory,

ethnography, and action research, forth layer shows time horizons like cross-sectional, and

longitudinal, the fifth layer shows various primary and secondary data collection methods, and

finally, reliability & validity of the research is measured.

Figure 2: Research Process Onion presented by Saunders et al. (2003)

46

Positivism and phenomenology are the 2 major research processses (Saunders et al., 2000).

Scientific discoveries made during the 18th and 19th centuries have a deep impact on positivism

approach. During 18th and 19th centuries, it seemed apparent that the body of knowledge existed

independently of whether people knew it or not, and the scientific task was to find out this

knowledge. People believed that there are laws that manage the operation of the social world and

these laws can be discovered. It was also assumed that there is hidden absolute truth and if we find

absolute truth then it can be used to create a better society.

In this research study, in order to discover the major factors that affect customer loyalty,


in the banking sector of Pakistan, positivism is the philosophy.

4.2 RESEARCH DESIGN

Research design describes the data collection methods and its analysis (Burns & Bush,

2002).

4.2.1 Exploratory research study

In exploratory research study is conducted when a problem is not clear and it

being used to get deeper understanding of any issue (Saunders et al., 2006).

4.2.2 Descriptive research study

In the descriptive research study, actual situation described and is also known

as statistical research, and it answers the questions who, what, where, when and how

(Saunders et al., 2006).

4.2.3 Causal Research Study

Causal Research discovers the effect of one factor on another and it is used to

forecast with the help of results that what will influence a business in future (DJS

Research Ltd, 2008).

47

When any factor or variable influences on another factor or variable and brings some

changes then it is called causal relationship between these two factors or variables. These changes

are measured and analyzed by researchers for making profitable decisions of companies.

Following research questions will help the researcher to achieve this research study`s

purpose:






Consequently, the researcher has developed following hypotheses based on the purpose of

this research:








Therefore, in order to accomplish the research purpose and respond to stated research

questions and hypotheses, the researcher will begin with a descriptive research study and this

descriptive research study will help the researcher to design a causal research study.

Furthermore, this research study relates to causal research study, as the researcher needs to

find out the influence of factors on one another. The researcher is going to discover relationship

among different factor that affect customer loyalty that is customer trust, customer perceived value,

48

customer satisfaction, customer switching barriers, and customer culture. Therefore, causal research

study is the most appropriate research study for finding these kinds of relationships Parasuraman

(1991).

4.3 RESEARCH STRATEGY

The research strategy is used to address the research questions of any research study

(Saunders et al., 2000).

4.3.1 Selection of questionnaire survey method

Grounded theory involves various data collection stages, data refinement and observing

interrelationship of different categories of collected data (Creswell, 2003; p. 14). The researcher

tries to develop a theory here out of data gathered. The basic feature of grounded theory is the

constant interaction between data collection and data analysis (Myers, 1997). The grounded theory

strategy is not suitable for the present research study because this grounded theory takes more time

for data collection as data needs to be gathered many times and the researcher has limited

timeframe, so this was not a suitable option.

In order to approve or disapprove new hypotheses or theories, experiments are used

(Devine, 2006). To respond research questions or examine problems, experiments are carried out

(Griffith, W. Thomas, 2001).

In surveys, researchers collect data from a sample of a population e.g., we may study

Allama Iqbal Open University`s students, or all the customers of banks in Pakistan. As these

populations as given in these examples are too large so it is not possible for researcher to study the

entire population so researchers use questionnaire surveys of only samples and these samples are

selected according to a specified criteria.

49

In ethnography, it is compulsory for an ethnographer to spend more time in the field.

Ethnographers deeply involve themselves in people lives they study (Lewis 1985, p. 380). This is

obviously more time consuming so due to time limitation, its not possible for the researcher to

consider this option.

In action research, firstly, the problem is researched, necessary changes are made, and this

process repeats many times until the problem is solved (Garson, 1997). Action research is time

consuming as well it costs more which constraints researcher to use this option.

Case study research can be defined in many ways. Case study research is a "systematic

inquiry into an event or a set of related events which aims to describe and explain the phenomenon

of interest" (Bromley, 1990, p.302). The use of case studies is widespread in management research.

Based on the above detailed arguments, the researcher used questionnaire survey method,

the researcher selected National Bank of Pakistan (NBP), Pakistan serving as a public bank, Habib

Bank Limited (HBL), Pakistan serving as a private bank, Meezan Bank Limited, Pakistan serving

as an Islamic bank, and Citibank serving as a foreign bank in Pakistan according to the sampling

criteria. The researcher used close-ended questions on 5-Point Likert Scale. The researcher used

self-administered questionnaire for getting responses from 400 customers of these banks. Almost all

possible options were given to respondents in this questionnaire; researcher also added few open

questions asking about customer’s comments/suggestions in order to find out any other possible

option, which is not given in the questionnaire. Therefore, in this way, it makes this questionnaire

more effective.

The researcher experienced Customer Relationship Management (CRM) settings in the

banks during working hours. The researcher collected data relevant to his research study like bank

annual reports, public documents, marketing literature, and other relevant banks reports. The

researcher also had few opportunities to observe Customer Relationship Management (CRM) team

meetings at different banks, which proved vital for the existing research study.

50

The researcher selected questionnaire survey method due to the reasons presented by Aaker

et al. (2000), as they said that the selection of a questionnaire survey method depends on nature of

the research study and its purpose. The selection of a questionnaire survey method also depends on

the type of questions asked from the customers, culture of customers, and resources involved. The

researcher adopted personally administered questionnaire method due to the following factors:

1) Customers of banks may ask for any clarification of questions asked on the spot. Due to

any misunderstandings, customers may give incorrect responses due to misunderstands

so it is very important to clarify any question asked in the questionnaire in order to

convey correct understanding of the questions asked in the questionnaire.

2) Customers are more interested in giving their responses due to the presence of

researcher.

3) All the questionnaires are taken back immediately after filling without missing any

questionnaire, and

4) The researcher persuaded respondents that the information provided by them will be

used for academic purpose only.

In questionnaire survey, the researcher asked customers of banks about their age, income,

marital status, and education levels. The researcher then included questions in the questionnaire

relating to this research study`s purpose.

4.4 RESEARCH STUDY FACTORS

4.4.1 Operational definitions

Operational definitions are required for data collection questionnaire (Davis & Cosenza,

1993). It means that every factor that influences customer loyalty should have specific questions to

be asked. For measuring factors or constructs of this research study namely customer trust,

customer perceived value, customer satisfaction, customer switching barriers, customer culture, and

customer loyalty, operationalisation is used.

51

4.5 OPERATIONALIZATION OF RESEARCH STUDY FACTORS


For measuring customer trust, following 7 questions are asked from respondents (Hess,

1995; Jarvenpaa & Tractinsky, 1999; Gurviez & Korchia, 2002; Gefen et al., 2003; and Chiou &

Droge, 2006):

1) This bank keeps its promises

2) This bank is honest

3) This bank is reliable

4) This bank meets my needs

5) This bank seems capable to manage transactions on line

6) This bank seems to have solid knowledge in its field

7) I trust the know-how of this bank

Based on the above, this research study has seven items customer trust construct.


For measuring customer satisfaction, following 4 questions are asked from respondents

(Wang et al., 2001; and Liosa, 1996):

1) I am satisfied with this bank

2) This bank leaves me a pleasant impression

3) I want to return to this bank in the future

4) I will advise this bank to my friends

Based on the above, this research study has four items customer satisfaction construct.

52


For measuring customer perceived value, following 3 questions are asked from respondents

(Lassar et al., 1995):

1) The price of services offered by this bank is fair

2) Comparing to what I pay, I receive much more in terms of money, effort and time

3) On the base of simultaneous consideration of what I pay and what I gain, I consider

that bank service is of value

Based on the above, this research study has three items customer perceived value construct.


For measuring customer switching barriers, following 5 questions are asked from

respondents (Kim, et. al., 2003):

1) In general switching to a new bank would be a hassle.

2) It would cost me a lot of money to switch from my current bank to another bank.

3) It would cost me a lot of time to switch from my current bank to another bank.

4) Prices of other banks are higher.

5) It would cost me a lot of effort to switch from my current bank to another bank.

Based on the above, this research study has five items customer switching barriers construct.


For measuring customer culture, following 4 questions are asked from respondents

(Hofstede, 1980, 1994):

1) You have a top priority towards personal goals

2) You feel uncomfortable in unusual situations

53

3) You buy what you desire without worrying about how others feel or think

4) You buy what you like and stick to your brand

Based on the above, this research study has four items customer culture construct.

4.5.6 Customer Loyalty

Finally, for measuring customer loyalty, following 6 questions are asked from respondents

(Boulaire et Mathieu, 2000; Srinivasan et al., 2002; and Huang, 2008):

1) I regularly visit this bank

2) I seldom think of changing this bank to another one

3) I use this bank each time I need to make any financial transaction

4) I consider this bank as my preferred one

5) I like to use this bank

6) Each time I want to make any financial transaction, this bank is my first choice

Based on the above, this research study has six items customer loyalty construct.

4.6 PROGRESSION OF QUESTIONNAIRE`S QUESTIONS

The researcher has used simple sequence of questions for better understanding of customers

of banks. In the beginning, the researcher has asked questions relating to age, income, marital

status, and educational level. After this, researcher has asked questions about each of the following

factors that affect customer loyalty in the following sequence:

1) Customer perceived value

2) Customer satisfaction

3) Customer switching barriers

4) Customer culture

5) Customer trust

54

6) Customer loyalty

The basic purpose of this above sequence of questions is to motivate the respondents by

asking simple most interesting questions in the beginning then customer culture, customer trust, and

customer loyalty questions are given that generally takes more time to respond.

4.7 TIME HORIZON

Methods of descriptive research are cross-sectional & longitudinal (Saunders et al., 2000).

Here the researcher had to choose between longitudinal research or cross sectional research. Cross-

sectional research helps researchers to measure variable(s) in a shorter time so that these

measurements may be viewed as contemporaneous (Baltes, Reese, & Nesslroade, 1988; and

Creswell, 1998). Therefore, the major benefits of using cross-sectional research are that it is more

time saving and more cost saving as compare to longitudinal research study. On the other hand, in

longitudinal studies, repeated observations are made of the same items over a very long period,

mostly covering many decades. It is mostly used in psychology and in sociology. For instance, in

the field of psychology, human’s psychological trends over their entire lives are studied, and

in sociology, it is used to study generation to generation various life events. In longitudinal studies,

same humans are studied mostly their entire life span resulting in more accurate results than any

other research study and these results are mostly not influenced by their cultures or any other factor.

Based on the above discussions and researches, the researcher has used cross-sectional

research study for this research study.

4.8 POPULATION

A population consists of all elements-individuals, items, or objects-whose characteristics are

being studied. The population that is being studied is also called the target population (Mann,

1995).

55

Banks/ development finance institutions in Pakistan comprises of seven categories, which

are regulated by the SBP (Appendix-III) (State Bank of Pakistan, 2009). In the first category,

government owns public sector banks, second category, specialized banks that are the same as the

first group but their activities are more focused on some special tasks, like agriculture, industries,

house and buildings, etc. Third category banks are called private banks owned by a person or a

group of persons. Fourth category, Islamic banks, fifth category, foreign banks and finally sixth &

seventh categories, micro finance institutions and Development Finance Institutions respectively

perform some limited tasks and activities. State Bank of Pakistan regulates all these banks /

development finance institutions.

The researcher has chosen customers of the following banking categories as population of

this research study that offer their services to public at large, and have a large market-share:

1) Public banks,

2) Private banks,

3) Islamic banks, and

4) Foreign banks.

4.9 SAMPLING

Selection of sampling technique depends on the probability of collecting data to address

research`s questions & research objectives from the entire population (Saunders et al, 2000).

In census, data is collected from entire population, which is not possible for the researcher

due to resource constraints. It is not possible for researcher to study all customers of all banks

serving in Pakistan hence a sampling criteria is used as it provides valid alternative to the census

(Saunders etal., 2000).

For achieving this research study`s purpose, the researcher has chosen customers of four

banking categories namely public banks, private banks, Islamic banks, & foreign banks according

to the following sampling criteria:

� Banks with large market-share,

56

� Banks offering services to public at large,

� Banks having network of branches,

� Banks having nationwide and/or worldwide representation, and

� Researcher`s resource constraints.

According to the above mentioned sampling criteria, National Bank of Pakistan (NBP)

serving as public bank, Habib Bank Limited (HBL), Pakistan serving as private bank, Meezan Bank

Limited, Pakistan serving as an Islamic bank, and Citibank serving as a foreign bank in Pakistan

fulfilled the above-mentioned sampling criteria hence this will make the sample representative of

the population as a whole (Egan, 2007, p. 133). Furthermore, banks fulfilling sampling criteria as

mentioned above similar to Beerli et al. (2004) were chosen.

The researcher collected data personally from customers of above mentioned banks from the

areas of Islamabad and Rawalpindi because of the researcher`s time, money, and other resource

constraints.

4.9.1 Sample size

A sample size of 300 respondents is good (Comrey & Lee, 1992; and Tabachnick & Fidell,

2001). A sample of 200 to 500 is considered adequate for most customer surveys (Hill and

Alexander, 2000 p. 88). 5 to 10 responses from each item are adequate (Hair, Anderson, Tatham, &

Black, 1998). Therefore, the researcher keeping in mind all these researchers sample size criteria,

finalized sample size of 400.

4.9.2 Sample selection

The researcher then randomly selected two branches of each bank as shown in Table 1. The

researcher decided that every 10th customer-entering bank would be taken as respondent of this

research study and the researcher continued the process like this for few weeks until 400 responses

were received as shown in Table 4.1.

57

Table 4.1: Distribution of questionnaire in banks

S # Bank No. of Branches No. of Customers

1

NBP branches:

1) NBP, branch code 0341, civic centre

Br. G-6, Islamabad), Pakistan

2) NBP, G-9 branch, branch code 1932,

Al-Markaz G-9,Br. Islamabad, Pakistan

02

100

(50 customers of each

branch)

2

Habib Bank Limited (HBL), Pakistan:

Branches:

1) Habib Bank Limited (HBL), 4th Floor,

Habib Bank Tower, Jinnah Avenue,

Islamabad, Pakistan.

2) Habib Bank Limited (HBL), 5-C plaza,

F-10 Markaz, Islamabad, Pakistan.

02

100


branch)

3

Meezan Bank Limited, Pakistan:

Branches:

1) Meezan Bank Limited, F-10 Markaz

Branch, Plot # 2-F, Super Trade Centre,

F-10 Markaz, Islamabad, Pakistan.

2) Meezan Bank Limited, Jinnah Avenue

Branch, 32 Sohrab Plaza, Blue Area,

Islamabad, Pakistan

02

100


branch)

4

Citibank, Pakistan:

Branches:

1) Citibank, 94 West, Jinnah Avenue

Blue Area, Islamabad, Pakistan.

2) Citibank, 168-D, Adamjee Road,

Rawalpindi, Pakistan

02

100


branch)

TOTAL: 08 BRANCHES 400 CUSTOMERS

58

4.10 INSTRUMENTS FOR DATA COLLECTION

A self-administered questionnaire was developed as attached at Appendix-I as an instrument

for data collection from customers of four major banks in Pakistan namely National Bank of

Pakistan (NBP), Habib Bank Limited (HBL), Meezan Bank Limited, and Citibank, Pakistan. These

banks were selected according to the criteria as earlier specified. In order to get true response from

the customers of these banks, the researcher included brief instructions in the beginning of

questionnaire. Likert 5-point scale was used to determine the perceived relative importance of the

services provided by banks in Pakistan, as well as to evaluate the relative importance of the

attributes commonly used in selecting a bank. Open-ended questions were also given in the

questionnaire to find out any other factors, if not included in the close-ended questions.

Data collected for this research study was personally administered and collected by the

researcher. The researcher provided clarifications to respondents, if they asked.

4.11 PRETESTING OF QUESTIONNAIRE

Pretesting of the questionnaire improves it and customers easily respond (Saunders et al.,

2000). For small-scale questionnaires, it is not likely to have ample time or financial resources for

such testing (Fink, 1995). However, it is still important to have the questionnaire pilot tested. For

most questionnaires, the minimum number for a pilot testing is 30. Therefore, during first stage of

pilot testing of questionnaire, the researcher took help from experts of the selected banks as well as

from randomly selected customers of banks. They gave their comments on researcher`s

questionnaire. During second stage of pilot testing of questionnaire, the researcher gave 30

questionnaires as per Fink (1995), each to randomly selected customers of banks. During this

second stage, the researcher personally got feedback from each customer and noted down various

comments. After the second stage, the researcher again revised this questionnaire.

During the final third stage of questionnaire pilot testing, the researcher gave 30

questionnaires to customers of banks; and finally got positive response. It is to mention here that

respondents of pilot testing of this questionnaire were excluded for having unbiased responses.

59

Questionnaire for customers of banks includes various factors and these factors have 29

items according to defined measurement scales as shown in the following proposed model of

customer loyalty in Figure 4.1. These questions relate to customer trust (7 items), customer

perceived value (3 items), customer satisfaction (4 items), customer switching barriers (5 items),

customer culture (4 items), and customer loyalty (6 items)

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Figure 4.1: Customer loyalty model developed by the researcher

H

H

H

H

H

CUSTOMER TRUST

CUSTOMER PERCEIVED VALUE CUSTOMER

SATISFACTION

CUSTOMER LOYALTY


CUSTOMER CULTURE

61

At the end of the questionnaire, 2 open-ended questions were given to find out any further

comments and suggestions of the customers of banks.

4.12 ANALYSIS OF DATA

For the analysis of data from respondents, researcher followed the following procedure:

4.12.1 Coding of questions

The researcher did coding of questions before entering these into SPSS software version

16.00. For questions relating to customer perceived value, researcher coded these as PV1, PV2, and

PV3. For questions relating to customer satisfaction, researcher coded these as CS4, CS5, CS6, and

CS7. For questions relating to customer switching barriers, researcher coded these as CSB8, CSB9,

CSB10, CSB11, and CSB12. For questions relating to customer culture, the researcher coded these

as CC13, CC14, CC15, and CC16. For questions relating to customer trust, the researcher coded

these as CT17, CT18, CT19, CT20, CT21, CT22, and CT23. Finally, for questions relating to

customer loyalty, the researcher coded these as CL24, CL25, CL26, CL27, CL28, and CL29.

4.12.2 Data analysis techniques

A data analysis statistical technique is dependent on the purpose of research study

(Malhotra, 1999). Researcher used statistical techniques like correlation and regression analysis

The researcher has used SPSS software for applying relevant tests to these factors to

measure their relationships. The researcher entered all the data of this research study in SPSS

software version 16.00 for doing data analysis of each element of factors. Researcher did

correlation analysis to find out Pearson Correlation and Sig. (2-tailed) of the various elements of

research study`s factors. Then researcher did the Regression Model, Multivariate Data Analysis, and

Stage-Wise Multiple Regression analysis that includes model summary in which, R and R Square were

calculated. Then with the help of ANOVA, the researcher calculated df, Sig., F, and Mean Square.

Finally, standardized coefficients Beta, t-test and significance of factors were measured.

62

To explore relationships between the research`s factors, correlation analysis was done as it

helps to understand the relationships between these factors.

Likert Scales are suitable to measure responses as Likert scales gives better results than any

other method (Aaker et al., 2000; Wong, 1999; Hayes, 1998; Garland, 1991; Burns & Bush, 2002;

Zikmund, 2000; and Kassim, 2001).

The researcher collected responses from customers of banks with the help of 5-point Likert

Scale with a series of statements. Finally, the researcher gave descriptive analysis of each item of

this research study`s factors.

4.13 TRIANGULATION

In research, triangulation means using two or more research theories, using multiple data

sources, collecting data from different places and at different times, data collection from different

managerial levels, different individuals, or groups of people, for a research study (Hilton, 2005).

For increased data reliability and validity, the researcher collected data from multiple

sources like data collection with the help of questionnaire, bank reports, expert opinions of bank

employees, and regular customers of banks. Triangulation is a broad strategy of data collection and

analysis within which a range and variety of techniques can be utilized (Elliott, 2009).

The supposition at this point is that people comprehend the situation in different ways

according to their practical good and concerns. Thus, any broad view of a situation needs to

consider these manifold perspectives.

4.14 RELIABILITY & VALIDITY OF THE RESEARCH CONSTRU CTS

In research design, reliability and validity factors have to paid attention in order to minimize

possibility of getting incorrect responses (Saunders etal., 2000).

63

The researcher has used Cronbach coefficient alpha for the evaluating the different

measures of the research questionnaire. Cronbach coefficient alpha for research instrument should

be 0.70 or higher if it is reliable (Hair et al., 1995; Pallant, 2001).

4.14.1 Reliability

Threats to reliability are (Robson, 1993):

1) Subject error: Generally, time selection for taking questionnaire response from the

customers of banks for research study is inappropriate like asking customers to fill

questionnaires during early or near to closing timings of banks.

2) Subject bias: In some situations, customers respond what others ask them to say

instead of what they really want to say.

3) Observer error: This error can be minimized by improving structure of the

questionnaire.

4) Observer bias: This concerns with how the researcher interprets data.

In order to minimize subject error, the researcher took customers responses with the help of

questionnaire on the convenience of customers only and not on researcher’s personal convenience.

Subject error was minimized by taking confidence of customers by persuading them that this

research study is for academic purpose and data collected will not be quoted anywhere else except

in this research report without the prior consent of the customers and the concerned organizations,

names confidentiality was also given so in this way, most of the customers gave true responses.

Finally, unbiased interpretations were made to overcome observer bias.

In this research study, the Cronbach`s Alpha value of all constructs is higher than 0.70 that

indicates reliability of the research instrument.

64

4.14.2 Validity

To assess the content validity, the researcher got feedback from bank`s experts and bank`s

most regular customers on questionnaire and made changes accordingly. A three-stage pilot testing

of questionnaire was also performed for improvements/changes in this questionnaire. Furthermore,

in order to have increased validity, the researcher personally administered all the questionnaires and

in case of any misunderstanding, customers were given immediate clarifications.

The researcher used review of related literature for the validity and scope of factors of this

research study. For increased validity, and before going for pilot testing of questionnaire, the

researcher also got pertinent experts suggestions from various universities in Pakistan.

4.15 FIELD ISSUES DURING RESEARCH STUDY

During data collection, the researcher faced different problems and some of these problems

were unexpected. For instance, some customers hesitated to fill questionnaire but most of the

customers were not hesitant. The researcher finally convinced almost all the customers that the data

collected is purely for academic purpose.

Generally, customers are in a hurry while visiting banks and mostly they are unwilling to fill

any questionnaire so this also created certain difficulties for the researcher.

Few branches of banks didn’t allow the researcher to get responses from their customers as

these bank`s managers thought that the researcher may provide responses of their customers to their

competitors and it may create problems for their banks. The researcher was able to convince most

of the bank managers but few managers did not allow getting responses of their customers.

Mentioning these field issues during data collection has two main reasons, firstly, researcher

want to create awareness about the practical problems during data collection, secondly, other

researchers may learn lesson from these difficulties experienced. In addition, these issues justifies

the long time taken to prepare this research study.

65

CHAPTER 5

EMPIRICAL FINDINGS

5.1 OVERVIEW OF THE NATIONAL BANK OF PAKISTAN (NBP)

NBP is a public sector bank having 1250 branches in Pakistan and abroad covering almost

all areas of Pakistan. The services of the National Bank of Pakistan (NBP) are available to all

including small account holders to multinational companies serving in Pakistan and abroad and its

unique feature is, NBP also acts as SBP agent. It clearly shows trust of SBP on NBP (NBP, 2009).

At Present, customer`s needs are not easy to identify and met due to high level of

complexity as these needs and wants changes with the passage of time. Therefore, these rapid

changes forced all banks including the “National Bank of Pakistan” to emphasize more on

developing and strengthening relations with its customers.

The NBP is also listed on the KSE. According to the management of NBP, NBP is

committed to serve its customers better than their competitors. This bank also addresses the low-

income level class in Pakistan with its schemes like Karobar, Saiban, Kisan Dost, and Cash & Gold

(NBP, 2009).

NBP`s vision describes its commitment as well as social responsibilities & its mission

focuses on merit, creating unique identity in the market, following benchmarks, improving

customer`s value and creating excellent national and international repute (NBP, 2009).

Its basic core values are creating benchmarks, teamwork, best services, training and

development of human resources, and community development. The vision, mission, and core

values details of the National Bank of Pakistan (NBP) are attached as Appendix-XIII.

The National Bank of Pakistan (NBP) can get a competitive edge over its major competitors

in Pakistan and abroad if it recognizes the truth that well-trained employees and CRM-based

66

business processes are essential for its success. Since NBP has a large network of 1250 branches,

hence it is most important for National Bank of Pakistan (NBP) to strengthen its customer retention

strategies as banks are redefining their role in the world.

5.1.1 Business profile

NBP has 1250 branches in our country and abroad. The joint ventures of the NBP are with

UNB UK, FIB UK, and with FFM of Singapore (NBP, 2009).

The NBP got many awards & made big achievements since its establishment. Details of its

awards and achievements are attached as Appendix-XIV. Details of the NBP`s Director`s Board is

attached at Appendix-XV.

The Director`s Report about major areas NBP prepared by S. Ali Raza, Chairman &

President on behalf of Board of Directors of NBP attached at Appendix-XVI. This report briefly

highlights major functional areas of NBP like corporate and investment banking, commercial &

retail banking, overseas banking, agriculture finance, treasury management, Islamic banking, global

home remittances management, equity investment division, operations, special assets management,

information technology, human resource management, audit & inspection, credit and risk

management, compliance, domestic branches network, credit rating, social responsibility, profit &

loss appropriation, audit committee, HR management committee, pattern of share holding,

appointment of auditors, risk management framework, and finally it presents statement of internal

controls (NBP, director`s report, 2009).

Generally, NBP uses some of the gathered information about their customers for analysis

and decision making purposes. NBP provides normal services to all of their customers but special

services are offered to big customers having big accounts in their bank. Especially during closing of

financial years, the bank managers and all other concerned employees focus more on targeting their

big customers for high deposits.

One interesting factor about NBP is that, some of the bank employees have developed

personal relations with their customers and in case, that employee moves to some other bank, their

high deposit customers also move to that new bank with all of their deposits immediately.

67

For corporate customers, NBP offers many investment options. According to top-level

management of NBP, branches are closer to their customers than Head Office of NBP as branches

deal regularly and directly with majority of their customers.

NBP uses different channels of communication with its customers, for instance, NBP

communicates with its customers through its large network of branches all over Pakistan and

abroad, through print and electronic media, via telephone, and through personal contacts that

improves its performance. According to one of the managers of NBP, customers can contact us

round the clock through our website and from morning till evening through telephone.

5.1.2 Responses of customers

Now researcher is going to present briefly major responses from the customers of this bank

regarding different factors that affect customer loyalty.

Since the National Bank of Pakistan has a large network of branches and also a public bank

so most of its customers responded that they do trust this bank and they have a convenience and

easy accessibility to its various branches but they are also dissatisfied because of its poor services.

Majority customers responded that their perceived value do not match with the services

provided by this bank as other banks are offering high value products and services in Pakistan.

Regarding customer satisfaction, some respondents were pleased due to its low prices but

majority were dissatisfied.

Since NBP is a Pakistani bank so majority of its customers being Pakistani want to remain

with this bank. Furthermore, most of its customers are existing government employees or retired

government employees and their salaries are transferred by their organizations in this bank so they

have no other bank choice. Another major barrier is of those government employees who have their

pension accounts here. These pensioners have no choice to switch their accounts to some other

bank for better services. There are other customers like business customers or individuals who are

serving in private sector in Pakistan. These customers do not want to switch to some other bank

because they responded in the questionnaire that since the price of services of the National Bank of

68

Pakistan is less than other banks so it is affordable and they cannot afford higher prices of other

banks. Another switching barrier that the researcher found with the help of questionnaire that since

this bank has a very large numbers of branch hence it is easily accessible hence customers want to

remain with NBP.

5.1.3 Challenges and future opportunities

The main issue here at NBP is, most of its employees are not aware about how to build

customer loyalty. The management of NBP is flexible in accepting and implementing new ideas

and technologies. Top management of NBP is trying to bring change in their systems through

ad1option of CRM in all of their branches in Pakistan and abroad.

There is high resistance from employees at NBP because they do not want to do customer`s

data entry as they believe that its more time consuming without any financial gains.

Lack of employees’ interest in trainings is another challenge for NBP. Another problem

faced by bank these days is of load shedding, so extra money is spent on using other sources of

energy in large network of NBP branches all over Pakistan.

NBP can convert its weaknesses into strengths by focusing more on effectively training their

employees. Financial and non-financial rewards may be provided to NBP employees who perform

well and achieve their assigned targets in time.

According to the management of NBP, they are strictly committed to their vision, mission,

and core values. Employees are provided on-going trainings in different areas. NBP also showed its

commitment towards all its stakeholders.

Since the top management of NBP is already of the view that CRM can bring excellent

results especially in the area of customer retention, hence the bank is in the process of

implementing CRM in all of its branches all over Pakistan and abroad.

69

5.2 OVERVIEW OF THE CITIBANK

Citibank is operating in more than hundred countries in the world and it is one of the biggest

banks in the world (Current News - Citibank, 2009). Citibank works on proactive strategies

regarding all its operations. It has a true customer-centric approach.

Citibank started its operations in Pakistan in 1961 and earned the most respectable repute in

few years. Citibank is known for setting benchmarks and its highest standards all over the world

and in Pakistan has made it one of the best banks serving in Pakistan. The high motivation of

human resources has helped Citibank to be the leading bank. In almost all areas of banking,

Citibank has set benchmarks.

Its worldwide consumer bank and global corporate investment bank are the most reputable

brands in the financial world. Citibank in Pakistan has offered its customers many new services and

at present, more than 1000 employees are serving Citibank, Pakistan.


These days, customers are much aware about different products and service offerings than

ever. It means that if a bank needs to be the first choice of customers then it has to strengthen its

relations with its customers. Strong relations matters most in current business world specially

retaining customers have become the prime objective of most competitive organizations all over the

world. Major details of the business profile of the Citibank is attached at Appendix-XVIII.

Citibank provides grants to different areas like poverty alleviation, education, health and so

on. Details of these grants is attached at Appendix-XVII. Furthermore, brief details of Citibank`s

building communities is attached at Appendix-XIX.

Citibank has a large global network in Africa, Asia Pacific, Central America / Caribbean,

Europe, South America, North America, and Middle East. Details attached at Appendix-V.

70


Now the researcher is going to present very briefly major responses from the customers of

the Citibank regarding different factors that affect customer loyalty:

Majority of the customers responded that they trust this bank because of its high quality

reliable services much better than other banks in Pakistan. Another reason they gave that this bank

has strong international repute and they believe that their accounts are much safer here.

According to majority customers, this bank matches or sometimes exceeds their perceived

value. After using services of Citibank, most of the customers are satisfied, as they believe that they

are getting the world class banking services in this bank.

Most of the customers of this bank belong to at least high middle-income level as

questionnaire response shows. Some customers responded that they do not have time to check the

services of other banks.


Citibank has set highest standards in Pakistani banking sector and according to the Citibank

management, these milestones will continue. Details of the Citibank Pakistan's Milestones is

attached at Appendix-VI.

Although Citibank provides the best quality in Pakistan but prices of its products and

services as compare to other banks serving in Pakistan are higher. So making it affordable for

public should be the strategy of Citibank.

Other major challenges faced by Citibank are maintaining and developing the existing

quality of its products and services.

5.3 OVERVIEW OF THE MEEZAN BANK LIMITED, PAKISTAN

The Islamic banking sector is growing rapidly worldwide. For instance, Citibank has also

established branches in different countries in the world as per Sharia’h principles.

71

Meezan Bank Limited, Pakistan is a large bank with 201 branches at 54 places in Pakistan

(Meezan Bank, 2009).

Meezan Bank`s vision focuses on fair and justice to humanity through Islamic banking.

Finally, the service mission of this bank focuses on development of commitment of bank for

providing the best products and services (Meezan Bank, 2009). A detail of the vision and mission

of the Meezan Bank Limited, Pakistan is attached at Appendix-XX.

Meezan Bank Limited, Pakistan is growing rapidly in Pakistan and it shows the rapid

growth of Islamic banking in Pakistan (Meezan Bank, 2009). A detail about the complete branch

network of Meezan bank is attached at Appendix-XXI. Meezan Bank Limited has a good image in

the minds of its customers as its customers showed their satisfaction through questionnaire.


Meezan Bank Limited is a publicly listed company. Meezan Bank is the largest Islamic

Bank in Pakistan with a network of 201 branches in 54 cities.

The bank has achieved a strong balance sheet with outstanding working profitability, as well

as a capital adequacy ratio that places the bank at top of the banking sector with a long-term entity

rating of A+, and a short-term entity rating of A1.

The key shareholders of the Meezan Bank Limited are leading local and international

financial institutions. The Bank has an internationally renowned, high calibre and pro-active

Shariah Supervisory Board presided over by Justice (Retd.) Muhammad Taqi Usmani.


Now the researcher is going to present briefly major responses from the customers of the

Meezan Bank Limited, Pakistan regarding different factors that affect customer loyalty:

72

Mostly customers trust this bank because of its Islamic banking functions. Some of the

customers responded that they do not trust this bank because it is a comparatively new Islamic bank

in Pakistan.

Majority customers responded that their perceived value almost matches with the services

and products offered by this bank.

Majority of the customers of Meezan Bank Limited showed their satisfaction with this bank

but they also responded that services offered by this bank are not of high standard as offered by

other good banks in the country.

Culture in Pakistan also supports Islamic banks hence the result is, majority of the

customers of this bank are also culturally motivated to keep their accounts here.

There are almost no switching barriers according to the majority respondents of this bank.

The one is same like customers of other banks that they believe that it is a hassle to change banks.

According to some customers, they have no time to check services of other banks that is why they

do not want to switch to some other bank. Meezan Bank Limited needs to improve its services in

order to get more market-share.


Meezan Bank Limited, Pakistan faces few challenges like, all of its branches are not online

and certain online branches are not functioning adequately. Service charges of this bank are little

high as compare to other Islamic banks serving in Pakistan. Ongoing training of employees is

another challenge here at Meezan. Its marketing department is not using its maximum potential.

Meezan Bank is going to launch a new product called RibaFree. The launching of RibaFree

has been scheduled to coincide with Hujjat ul Wida, the last sermon delivered by Prophet

Mohammad (PBUH) in which the interest was declared forever as "Haram".

Meezan Bank is a premier Islamic investment bank in Pakistan operating firmly under the

principles of Islamic Sharia'a. It offers innovative Sharia’a well-matched products and services to

73

satisfy its customers. People working here at Meezan Bank are highly committed and dedicated

towards their work.

5.4 OVERVIEW OF THE HABIB BANK LIMITED (HBL), PAKIS TAN

Habib Bank Limited (HBL), Pakistan started its operations in Pakistan in 1947. Over the

years, HBL has grown its branch network and become the largest private sector bank with over

1,450 branches across the country and a customer base exceeding five million relationships.

The Government of Pakistan privatized HBL in 2004 through which Aga Khan Fund for

Economic Development (AKFED) acquired 51% of the Bank's shareholding and management

control. HBL is majority owned (51%) by the Aga Khan Fund for Economic Development, 42.5%

of the shareholding is retained by the Government of Pakistan (GOP), whilst 6.5% is owned by the

general public. Habib Bank Limited (HBL) needs improvements like all other banks.

Board of Directors of the Habib Bank Limited (HBL), Pakistan comprises of One Chairman,

President & CEO, and five directors, details attached at Appendix-XXII (HBL, 2009).


Habib Bank Limited is the “Best Emerging Market Banks in Asia”

(GlobalFinanceMagazine,2009) as it has earned various awards.

With a presence in 25 countries, subsidiaries in Hong Kong and the UK, affiliates in Nepal,

Nigeria, Kenya and Kyrgyzstan and rep offices in Iran and China, HBL is also the largest domestic

multinational. The Bank is expanding its presence in principal international markets including the

UK, UAE, South and Central Asia, Africa and the Far East (HBL, 2009).

Habib Bank Limited offers best facilities in different areas to its customers including

business and individual customers. A detail of these services is attached at Appendix-XXIII.

74


Now the researcher is going to present briefly major responses from the customers of the

Habib Bank Limited (HBL), Pakistan regarding different factors that affect customer loyalty:

Majority of the customers responded that they trust this bank because of its most reliable

history and strong image in Pakistan.

Majority customers responded that this bank provides them best services as per their

perceived value. Mostly customers responded their satisfaction with services & products offered by

Habib Bank Limited.

Pakistani culture also supports this bank as shown by questionnaire responses of the

customers of HBL. Same like Citibank, there is almost no major switching barrier here at this bank

according to majority of the customers of this bank.


Soundness of any bank depends on its efficiency and effectiveness in its all areas. As the

researcher discussed in detail that there is high competition in the banking sector all over the world

and Pakistan is no exception. Therefore, banks not only have national but international competition

in all areas.

Strengthening of bank depends on relations with its customers, and same is the issue here at

Habib Bank Limited, Pakistan. Understanding customers is a big challenge and an opportunity for

HBL.

Other issues include modernization of payment system, arresting bad debts, continuous

improvements in all areas, and up-gradation of risk management system. Habib Bank Limited needs

to focus more on customer loyalty as there is ever growing competition in the banking sector of

Pakistan.

As the competition in banking system has become severe and the profit margins on

conventional modes of doing business are under pressure, therefore, HBL is moving towards

75

modern modes of doing business. These new areas require building customer loyalty, expertise,

systems and procedures, controls, technology and risk management techniques.

76

CHAPTER 6

DATA ANALYSIS AND DISCUSSIONS

6.1 RESEARCH INSTRUMENT

The researcher collected data from 400 customers of banks in Pakistan through self-

administered questionnaires. Research questionnaire`s questions are adopted from the existing

literature relating to this research study`s purpose. Researcher has made minor changes in this

adopted questionnaire after three-phase pilot testing as earlier described in introduction chapter, and

made minor changes accordingly.

For measuring factors or constructs of this research study namely customer trust, customer

perceived value, customer satisfaction, customer switching barriers, customer culture, and customer

loyalty, operationalisation is used.


For measuring customer trust, following 7 questions are asked from respondents

(Hess, 1995; Jarvenpaa & Tractinsky, 1999; Gurviez & Korchia, 2002; Gefen et al., 2003;

and Chiou & Droge, 2006) as shown in the following Table 6.1:

Table 6.1: measuring customer trust

TRUST

Hess(1995), Jarvenpaa & Tractinsky (1999), Gurviez & Korchia (2002), Gefen et al. (2000), Chiou

& Droge (2006)

1 This bank keeps its promises

2 This bank is honest

3 This bank is reliable

4 This bank meets my needs

77

5 This bank seems capable to manage transactions on line

6 This bank seems to have solid knowledge in its field

7 I trust the know-how of this bank


For measuring customer perceived value, following 3 questions are asked from

respondents (Lassar et al., 1995) as shown in the following Table 6.2:

Table 6.2: measuring customer perceived value

PERCEIVED VALUE

Lassar et al. (1995)

1 The price of services offered by this bank is fair

2 Comparing to what I pay, I receive much more in terms of money, effort and time

3 On the base of simultaneous consideration of what I pay and what I gain, I consider that bank

service is of value


For measuring customer satisfaction, following 4 questions are asked from

respondents (Wang et al., 2001; and Liosa, 1996) as shown in the following Table 6.3:

Table 6.3: measuring customer satisfaction

SATISFACTION

Wang et al. (2001), Llosa (1996)

1 I am satisfied with this bank

2 This bank leaves me a pleasant impression

3 I want to return to this bank in the future

4 I will advise this bank to my friends

78


For measuring customer switching barriers, following 5 questions are asked from

respondents (Kim, et. al., 2003) as shown in the following Table 6.4:

Table 6.4: measuring customer-switching barriers

SWITCHING BARRIERS

Kim, et. al., 2003

1 In general switching to a new bank would be a hassle.

2 It would cost me a lot of money to switch from my current bank to another bank.

3 It would cost me a lot of time to switch from my current bank to another bank.

4 It would cost me a lot of effort to switch from my current bank to another bank.

5 Prices of other banks are higher.


For measuring customer culture, following 4 questions are asked from respondents

(Hofstede, 1980, 1994) as shown in the following Table 6.5:

Table 6.5: measuring customer culture

CULTURE

Hofstede (1980; 1994)

1 You have a top priority towards personal goals

2 You feel uncomfortable in unusual situations

3 You buy what you desire without worrying about how others feel or think

4 You buy what you like and stick to your brand

79


Finally, for measuring customer loyalty, following 6 questions are asked from

respondents (Boulaire et Mathieu, 2000; Srinivasan et al., 2002; and Huang, 2008) as shown

in the following Table 6.6:

Table 6.6: measuring customer loyalty

LOYALTY

Boulaire et Mathieu (2000), Srinivasan et al. (2002), Huang (2008).

1 I regularly visit this bank

2 I seldom think of changing this bank to another one

3 I use this bank each time I need to make any financial transaction

4 I consider this bank as my preferred one

5 I like to use this bank

6 Each time I want to make any financial transaction, this bank is my first choice

6.2 DEMOGRAPHIC ANALYSIS

6.2.1 Demographic Analysis - Citibank, Pakistan

The demographic data analysis of the customers of Citibank, Pakistan is as below:

According to the following Table 6.7, 62% of the respondents are males (N=62), and

females constitute 38% (N=38) of the total sample. It indicates that majority customers of this bank

are males that is 62%.

80

Table 6.7: Customer`s Gender - (N=100), Citibank

Frequency Percent Valid Percent Cumulative Percent

Valid Male 62 62.0 62.0 62.0

Female 38 38.0 38.0 100.0

Total 100 100.0 100.0

Following bar chart 6.1 shows customer`s gender frequencies:

According to the following Table 6.8, 37% of the respondents are single (N=37), and 63%

are married i.e. (N=63). It indicates that majority of the customers of this bank are married.

Table 6.8: Customer`s marital status - (N=100), Citibank


Valid single 37 37.0 37.0 37.0

married 63 63.0 63.0 100.0

Total 100 100.0 100.0

81

Following bar chart 6.2, shows customer`s marital status frequencies:

According to the table 6.9, the higher percentage lies in the category of Rupees 51,000 and

above making 44% (N=44), while only 3% lies in the category of Rupees 21000 to 30,000 (N=3).

Table 6.9: Customer`s income - (N=100), Citibank


Valid 21000-30000 3 3.0 3.0 3.0

31000-40000 16 16.0 16.0 19.0

41000-50000 37 37.0 37.0 56.0

51,000 and above 44 44.0 44.0 100.0

Total 100 100.0 100.0

82

Following bar chart 6.3 shows customer's income frequencies:

According to Table 6.10, 13% of the individuals in the sample were between the age of 20-

30 (N=13), 30% of the individuals in the sample were between the age of 31-40 (N=30), 26% of

the customers in the sample were between the age of 41-50 (N=26), and 31% of the customers in

the sample were between the age of 51 and above (N=31). It indicates that majority of customers

fall in the category of 51 years and above.

Table 6.10: Customer`s age - (N=100), Citibank


Valid 20-30 13 13.0 13.0 13.0

31-40 30 30.0 30.0 43.0

41-50 26 26.0 26.0 69.0

51 and above 31 31.0 31.0 100.0

Total 100 100.0 100.0

83

Following bar chart 6.4 shows customer's age frequencies:

Table 6.11, clearly shows, most the customers were bachelors degree holders i.e., 52%

(N=52), rest of the ccustomers with their education levels are shown in this table 6.11.

Table 6.11: customer`s education level - (N=100), Citibank


Valid Intermediate and Below 6 6.0 6.0 6.0

Bachelors 52 52.0 52.0 58.0

Masters and Above 42 42.0 42.0 100.0

Total 100 100.0 100.0

84

Following bar chart 6.5 shows customer`s education level frequencies:

6.2.2 Demographic Analysis - National Bank of Pakistan (NBP), Pakistan

The demographic data analysis of the customers of the NBP is as below:

As per following Table6.12, 68% of the respondents are males (N=68), and females

constitute 32% (N=32) of the total sample. It indicates that majority of the customers of this banks

are males that is 68%.

Table 6.12: customer`s Gender - (N=100), National Bank of Pakistan


Valid male 68 68.0 68.0 68.0

female 32 32.0 32.0 100.0

Total 100 100.0 100.0

85


According to the following Table 6.13, 25% of the respondents are single (N=25), and 75% are

married i.e. (N=75). It indicates are majority number of customers (75%) are married.

Table 6.13: customer`s marital status - (N=100), National Bank of Pakistan


Valid single 25 25.0 25.0 25.0

married 75 75.0 75.0 100.0

Total 100 100.0 100.0

86

Following bar chart 6.7 shows customer`s marital status frequencies:


above that is 60% (N=60), while only 6% lies in the category of less than 10,000 (N=6).

Table 6.14: customer`s income - (N=100), National Bank of Pakistan


Valid less than 10,000 6 6.0 6.0 6.0

10000-20000 3 3.0 3.0 9.0

21000-30000 8 8.0 8.0 17.0

31000-40000 12 12.0 12.0 29.0

41000-50000 11 11.0 11.0 40.0

51,000 and above 60 60.0 60.0 100.0

Total 100 100.0 100.0

87

Following bar chart 6.8 shows customer`s income frequencies:






Table 6.15: customer`s age - (N=100), National Bank of Pakistan


Valid 20-30 13 13.0 13.0 13.0

31-40 17 17.0 17.0 30.0

41-50 23 23.0 23.0 53.0

51 and above 47 47.0 47.0 100.0

Total 100 100.0 100.0

88

Following bar chart 6.9 shows customer`s age frequencies:

As per following Table6.16, mostly the customers were bachelors degree holders i.e., 49%

(N=49), rest of the customers with their education levels are shown in this table.

Table 6.16: customer`s education level - (N=100), National Bank of Pakistan



Bachelors 49 49.0 49.0 59.0


Total 100 100.0 100.0

89


6.2.3 Demographic Analysis - Meezan Bank Limited, Pakistan

The demographic data analysis of the customers of Meezan Bank Limited, Pakistan is as

below:

According to the following Table 6.17, 54% of the customers are males (N=54), and

females constitute 46% (N=46) of the total sample. It indicates that majority customers of this bank

are males.

Table 6.17: customer`s gender - (N=100), Meezan Bank Limited


Valid male 54 54.0 54.0 54.0

female 46 46.0 46.0 100.0

Total 100 100.0 100.0

90


According to the following Table 6.18, 44% of the customers are single (N=44), and 56%

are married i.e. (N=56). It indicates that number of married males that is 56% is higher than single

customers of this bank.

Table 6.18: customer`s marital status- (N=100), Meezan Bank Limited


Valid single 44 44.0 44.0 44.0

married 56 56.0 56.0 100.0

Total 100 100.0 100.0

91

Following bar chart 6.12 shows customer`s marital status frequencies:


above making 43% (N=43), while only 5% lies in the category of less than Rupees 10,000 (N=5).

Table 6.19: customer`s income - (N=100), Meezan Bank Limited


Valid less than 10,000 5 5.0 5.0 5.0

10000-20000 6 6.0 6.0 11.0

21000-30000 12 12.0 12.0 23.0

31000-40000 18 18.0 18.0 41.0

41000-50000 16 16.0 16.0 57.0

51,000 and above 43 43.0 43.0 100.0

Total 100 100.0 100.0

92







Table 6.20: customer`s age - (N=100), Meezan Bank Limited


Valid 20-30 14 14.0 14.0 14.0

31-40 15 15.0 15.0 29.0

41-50 31 31.0 31.0 60.0

51 and above 40 40.0 40.0 100.0

Total 100 100.0 100.0

93


From the Table6.21, shows that mostly customers are bachelors degree holders i.e., 51%

(N=51), rest of the respondents with their education levels are shown in this table.

Table6.21: customer`s education level - (N=100), Meezan Bank Limited



Bachelors 51 51.0 51.0 62.0


Total 100 100.0 100.0

94


6.2.4 Demographic Analysis - Habib Bank Limited, Pakistan (HBL), Pakistan

The demographic data analysis of the customers of Habib Bank Limited, Pakistan (HBL) is

as below:

According to the following Table 6.22, 71% of the customers are males (N=71), and

females constitute 29% (N=29) of the total sample. It indicates that male customers are more than

female customers in this bank that is 71%.

Table 6.22: customer`s gender - (N=100), Habib Bank Limited


Valid Male 71 71.0 71.0 71.0

female 29 29.0 29.0 100.0

Total 100 100.0 100.0

95


According to the following Table 6.23, 27% of the customers are single (N=27), and 73%

are married i.e. (N=73). It indicates that majority of the customers of this bank are married that is

73%.

Table 6.23: customer`s marital status - (N=100), Habib Bank Limited


Valid single 27 27.0 27.0 27.0

married 73 73.0 73.0 100.0

Total 100 100.0 100.0

96

Following bar chart 6.17, shows customer`s marital status frequencies:


above making 48% (N=48), while only 3% lies in the category of Rupees 21000 to 30,000 (N=3).

Table 6.24: customer`s income - (N=100), Habib Bank Limited


Valid 21000-30000 3 3.0 3.0 3.0

31000-40000 13 13.0 13.0 16.0

41000-50000 36 36.0 36.0 52.0

51,000 and above 48 48.0 48.0 100.0

Total 100 100.0 100.0

97


According to Table 6.25, 9% of the individuals in the sample were between the age of 20-30

(N=9), 21% of the individuals in the sample were between the age of 31-40 (N=21), 22% of the

customers in the sample were between the age of 41-50 (N=22), and 48% of the customers in the

sample were between the age of 51 and above (N=48). It indicates that majority of customers fall in

the category of 51 years and above.

Table 6.25: customer`s age - (N=100), Habib Bank Limited


Valid 20-30 9 9.0 9.0 9.0

31-40 21 21.0 21.0 30.0

41-50 22 22.0 22.0 52.0

51 and above 48 48.0 48.0 100.0

Total 100 100.0 100.0

98


Table 6.26, shows most customers were bachelors degree holders i.e., 48% (N=48), rest of

the respondents with their education levels are shown in this table.

Table 6.26:customer`s education level - (N=100), Habib Bank Limited



Bachelors 48 48.0 48.0 61.0


Total 100 100.0 100.0

99


6.3 CORRELATION ANALYSIS

The Correlation and Regressions analysis of data obtained through self-administered

questionnaire from customers of the following four banks is presented as below:

1) Citibank, Pakistan

2) National Bank of Pakistan (NBP)

3) Meezan Bank Limited, Pakistan

4) Habib Bank Limited (HBL), Pakistan

6.3.1 Correlation Analysis – Citibank, Pakistan

In following Table 6.27, the correlation analysis suggests that a moderate positive

correlation exists between customer trust and customer perceived value that is 0.387 yielding the

fact that customer trust has a significant impact on customer perceived value, which in turn

100

generates customer satisfaction, which is a strong driving factor of customer loyalty. As

significance is less than 0.05, so the researcher also concludes that, the correlation between

customer trust and customer perceived value is significant.

Table 6.27: Correlations between customer trust & customer perceived value - Citibank (N-100)

PV TRUST

PV Pearson Correlation 1 .387**

Sig. (2-tailed) .000

N 100 100

TRUST Pearson Correlation .387** 1


N 100 100

In Table 6.28, the correlation analysis suggests that a moderate positive correlation exist

between customer trust and customer loyalty that is 0.474 yielding the fact that customer trust has a

significant impact on customer loyalty. As significance is less than 0.05, so the researcher also

concludes that the correlation between customer trust and customer loyalty is significant.

101

Table 6.28: Correlations between customer trust and customer loyalty - Citibank (N-100)

LOYALTY TRUST

LOYALTY Pearson Correlation 1 .474**


N 100 100



N 100 100

**. Correlation is significant at the 0.01 level (2-tailed).


between customer trust and customer satisfaction that is .573 yielding the fact that customer trust

has a significant impact on customer satisfaction. As significance is less than 0.05, so the researcher

also concludes that, the correlation between customer trust and customer satisfaction is significant.

Table 6.29: Correlations between customer trust and customer satisfaction - Citibank (N-100)

CS TRUST

CS Pearson Correlation 1 .573**


N 100 100



N 100 100


102


between customer perceived value & customer satisfaction that is 0.665 yielding the fact that

customer perceived value has a significant impact on customer satisfaction, which is a strong

driving factor of customer loyalty. As significance is less than 0.05, so the researcher concludes

that, the correlation between customer perceived value & customer satisfaction is significant.

Table 6.30: Correlations between customer perceived value & customer satisfaction

- Citibank (N-100)

CS PV



N 100 100

PV Pearson Correlation .665** 1


N 100 100



between customer switching barriers & customer loyalty value that is 0.487 yielding the fact that

customer-switching barriers have a significant impact on customer loyalty. As significance is less

than 0.05, so the researcher concludes that, the correlation between customer switching barriers &

customer loyalty value is significant.

103

Table 6.31: Correlations between customer switching barriers & customer loyalty

- Citibank (N-100)

LOYALTY CSB



N 100 100

CSB Pearson Correlation .487** 1


N 100 100



between customer culture & customer loyalty that is 0.446 yielding the fact that customer culture

has a significant impact on customer loyalty. As significance is less than 0.05, so the researcher also

concludes that, the correlation between customer culture & customer loyalty is significant.

Table 6.32: Correlations between customer culture & customer loyalty - Citibank (N-100)

LOYALTY CULTURE



N 100 100

CULTURE Pearson Correlation .446** 1


N 100 100


104


between customer satisfaction & customer loyalty that is .657 yielding the fact that customer

satisfaction has a significant impact on customer loyalty. As significance is less than 0.05, so the

researcher concludes that, the correlation between customer satisfaction & customer loyalty value is

significant.

Table 6.33: Correlations between customer satisfaction & customer loyalty - Citibank (N-100)

LOYALTY CS



N 100 100

CS Pearson Correlation .657** 1


N 100 100


The table 6.34 shows the correlation values yielded from data analysis of 100 customers of

Citibank. A significant and positive relationship found to exist between all studied variables. The

table 6.34 shows the details of correlation analysis of all the studied variables. As significance is

less than 0.05 as shown earlier in this chapter, so the researcher also concludes that, the correlation

between all studied factors is significant.

105

Table 6.34: Correlations between all studied variables - Citibank (N-100)

Customer

Trust

Customer

Perceived

Value

Customer

Satisfaction

Customer

Switching

Barriers

Customer

Culture

Customer

Loyalty

Customer

Trust 1 0.387 0.573 0.474

Customer

Perceived

Value

1 0.665

Customer

Satisfaction 1 0.657

Customer

Switching

Barriers

1 0.487

Customer

Culture 1 0.446

Customer

Loyalty 1

6.3.2 Correlation Analysis – National Bank of Pakistan (NBP), Pakistan


between customer trust and customer perceived value that is 0.305 yielding the fact that customer

trust has a significant impact on customer perceived value, which in turn generates customer

satisfaction, which is a strong driving factor of customer loyalty. As significance is less than 0.05,

so the researcher also concludes that, the correlation between customer trust and customer

perceived value is significant.

106

Table 6.35: Correlations between customer trust & customer perceived value - NBP (N-100)

PV TRUST



N 100 100



N 100 100



between customer trust and customer loyalty that is 0.419 yielding the fact that trust has a


concludes that, the correlation between customer trust and customer loyalty is significant.

Table 6.36: Correlations between customer trust and customer loyalty - NBP (N-100)

LOYALTY TRUST



N 100 100



N 100 100


107


between customer perceived value & customer satisfaction that is 0.354 yielding the fact that


driving factor of customer loyalty. As significance is less than 0.05, so the researcher also

concludes that, the correlation between customer perceived value & customer satisfaction is

significant.

Table 6.37: Correlations between customer perceived value & customer satisfaction - NBP (N-100)

CS PV



N 100 100



N 100 100






108

Table 6.38: Correlations between customer trust and customer satisfaction - NBP (N-100)

CS TRUST



N 100 100



N 100 100



between customer switching barriers & customer loyalty that is 0.439 yielding the fact that


than 0.05, so the researcher also concludes that, the correlation between customer switching barriers

& customer loyalty is significant.

Table 6.39: Correlations between customer switching barriers & customer loyalty - NBP (N-100)

LOYALTY CS



N 100 100



N 100 100


109


between customer culture & customer loyalty that is .365 yielding the fact that the customer culture



Table 6.40: Correlations between customer culture & customer loyalty - NBP (N-100)

LOYALTY CULTURE



N 100 100



N 100 100



between customer satisfaction & customer loyalty that is 0.439 yielding the fact that customer

satisfaction has a significant influence on customer loyalty. As significance is less than 0.05, so the

researcher also concludes that, the correlation between customer satisfaction & customer loyalty is

significant.

110

Table 6.41: Correlations between customer satisfaction & customer loyalty - NBP (N-100)

LOYALTY CS



N 100 100



N 100 100



the National Bank of Pakistan (NBP). A significant and positive relationship found to exist between

all studied factors. The table 6.42 shows the details of correlation analysis of all the studied

variables. As significance is less than 0.05 as shown earlier in this chapter, so the researcher also

concludes that, the correlation between all studied factors is significant.

`

111

Table 6.42: Correlations between all studied factors - NBP (N-100)

Customer

Trust

Customer

Perceived

Value

Customer

Satisfaction

Customer

Switching

Barriers

Customer

Culture

Customer

Loyalty

Customer

Trust 1 0.305 0.336 0.419

Customer

Perceived

Value

1 0.354

Customer


Customer

Switching

Barriers

1 0.493

Customer

Culture 1 0.365

Customer

Loyalty 1

6.3.3 Correlation Analysis – Meezan Bank Limited, Pakistan


correlation exist between customer trust and customer perceived value that is .333 yielding the fact

that customer trust has a significant impact on customer perceived value, which in turn generates

customer satisfaction, which is a strong driving factor of customer loyalty. As significance is less

than 0.05, so the researcher also concludes that, the correlation between customer trust and

customer perceived value is significant.

112

Table 6.43: Correlations between customer trust & customer perceived value - Meezan (N-100)

PV TRUST



N 100 100



N 100 100






Table 6.44: Correlations between customer trust and customer loyalty - Meezan (N-100)

LOYALTY TRUST



N 100 100



N 100 100


113





Table 6.45: Correlations between customer trust and customer satisfaction – Meezan, (N-100)

CS TRUST



N 100 100



N 100 100



between customer perceived value & customer satisfaction that is .352 yielding the fact that




significant.

114

Table 6.46: Correlations between customer perceived value & customer satisfaction

- Meezan (N-100)

CS PV



N 100 100



N 100 100



between customer switching barriers & customer loyalty that is .349 yielding the fact that customer-

switching barriers have a significant impact on customer loyalty. As significance is less than 0.05,

so the researcher also concludes that, the correlation between customer switching barriers &

customer loyalty is significant.

Table 6.47: Correlations between customer switching barriers & customer loyalty

Meezan (N-100)

LOYALTY CSB



N 100 100



N 100 100


115


between customer culture & customer loyalty that is 0.483 yielding the fact that customer culture



Table 6.48: Correlations between customer culture & customer loyalty - Meezan (N-100)

LOYALTY CULTURE



N 100 100



N 100 100



between customer satisfaction & customer loyalty that is 0.418 yielding the fact that customer



significant.

116

Table 6.49: Correlations between customer satisfaction & customer loyalty - Meezan (N-100)

LOYALTY CS



N 100 100



N 100 100



the Meezan Bank Limited, Pakistan. A significant and positive relationship found to exist between

all studied factors. The Table 6.50 shows the details of correlation analysis of all the studied

variables. As significance is less than 0.05 as shown earlier in this chapter, so the researcher also

concludes that, the correlation between all studied factors is significant.

117

Table 6.50: Correlations between all studied factors - Meezan (N-100)

Customer

Trust

Customer

Perceived

Value

Customer

Satisfaction

Customer

Switching

Barriers

Customer

Culture

Customer

Loyalty

Customer

Trust 1 0.333 0.330 0.419

Customer

Perceived

Value

1 0.352

Customer


Customer

Switching

Barriers

1 0.349

Customer

Culture 1 0.483

Customer

Loyalty 1

6.3.4 Correlation Analysis – Habib Bank Limited (HBL), Pakistan


correlation exist between customer trust and customer perceived value that is 0.359 yielding the fact

that customer trust has a significant impact on customer perceived value, which in turn generates

customer satisfaction, which is a strong driving factor of customer loyalty. As significance is less

than 0.05, so the researcher also concludes that, the correlation between customer trust and

customer perceived value is significant.

118

Table 6.51: Correlations between customer trust & customer perceived value - HBL (N-100)

PV TRUST



N 100 100



N 100 100






Table 6.52: Correlations between customer trust and customer loyalty - HBL (N-100)

LOYALTY TRUST



N 100 100



N 100 100


119





Table 6.53: Correlations between customer trust and customer satisfaction – HBL, (N-100)

CS TRUST



N 100 100



N 100 100



between customer perceived value & customer satisfaction that is .605 yielding the fact that




significant.

120

Table 6.54: Correlations between customer perceived value & customer satisfaction - HBL (N-100)

CS PV



N 100 100



N 100 100



between customer switching barriers & customer loyalty that is 0.446 yielding the fact that


than 0.05, so the researcher also concludes that, the correlation between customer switching barriers

& customer loyalty is significant.

Table 6.55: Correlations between customer switching barriers & customer loyalty - HBL (N-100)

LOYALTY CSB



N 100 100



N 100 100


121


between customer culture & customer loyalty that is .403 yielding the fact that customer culture has

a significant impact on customer loyalty. As significance is less than 0.05, so the researcher also


Table 6.56: Correlations between customer culture & customer loyalty - HBL (N-100)

LOYALTY CULTURE



N 100 100



N 100 100



between customer satisfaction & customer loyalty that is .615 yielding the fact that customer



significant.

Table 6.57: Correlations between customer satisfaction & customer loyalty - HBL (N-100)

LOYALTY CS



N 100 100



N 100 100


122

The following table 6.58 shows the correlation values yielded from data analysis of 100

customers of Habib Bank Limited, Pakistan. A significant and positive relationship found to exist

between all studied factors. The following Table 6.58 shows the details of correlation analysis of all

the studied variables. As significance is less than 0.05 as shown earlier in this chapter, so the

researcher also concludes that, the correlation between all studied factors is significant.

Table 6.58: Correlations between all studied factors - HBL (N-100)

Customer

Trust

Customer

Perceived

Value

Customer

Satisfaction

Customer

Switching

Barriers

Customer

Culture

Customer

Loyalty

Customer

Trust 1 0.359 0.587 0.447

Customer

Perceived

Value

1 0.605

Customer


Customer

Switching

Barriers

1 0.446

Customer

Culture 1 0.403

Customer

Loyalty 1

123

6.4 MULTIVARIATE DATA ANALYSIS - CITIBANK, PAKISTAN

The first component Customer Loyalty explains 57% variance of the total variation alone.

The second component Customer Satisfaction (CS) explains 18% variance of the total variation

alone. The first & second components together explain 76% variance of the total variation. The

third component Customer Perceived Value (PV) explains 11% variance of the total variation

alone. The second and third components together explain 87% variance of the total variation. The

fourth component Customer Trust explains 7% variance of the total variation alone. The third and

fourth components together explain 94% variance of the total variation. The fifth component

Customer-Switching Barriers (CSB) explains 3% variance of the total variation alone. The fourth

and fifth components together explain 97% variance of the total variation. Finally, sixth component

Customer Culture explains 2% variance of the total variation alone. The fifth and sixth components

together explain 100% variance of the total variation as shown in Table 6.59.

Table 6.59

Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 3.989 57.654 57.654 3.989 57.654 57.654

2 1.546 18.546 76.2 1.546 18.546 18.546

3 .876 11.001 87.201

4 .678 7.594 94.795

5 .765 3.104 97.899

6 .320 2.101 100.000

Extraction Method: Principal Component Analysis.

124

6.5 REGRESSION MODEL - CITIBANK, PAKISTAN

6.5.1 Customer Perceived Value (PV)

In the first regression model, Independent Variables Customer Loyalty and the constant both

are significant; the coefficient of Customer Loyalty is .786 as shown in Table 6.60.

In the second regression model, Independent Variables Customer Loyalty and Customer

Satisfaction (CS) both are significant and constant is also significant, the coefficient of Customer

Satisfaction (CS) is .658, Customer Loyalty is .526, and constant is .299 as shown in Table 6.60.

In the third regression model, Independent Variables Customer Loyalty, Customer

Satisfaction (CS), and Customer-Switching Barriers (CSB) are significant and constant is also

significant, the coefficient of Customer-Switching Barriers (CSB).542, Customer Satisfaction (CS)

is .368, Customer Loyalty is .524, and constant is .214 as shown in Table 6.60.

In the fourth regression model, Independent Variables Customer Loyalty, Customer

Satisfaction (CS), Customer-Switching Barriers (CSB), and Customer Trust are significant and

constant is also significant, the coefficient of Customer Trust is .521, Customer-Switching Barriers

(CSB) is .254, Customer Satisfaction (CS) is .521, Customer Loyalty is .625, and constant is .547 as

shown in Table 6.60.

In the fifth regression model, Independent Variables Customer Loyalty, Customer

Satisfaction (CS), Customer-Switching Barriers (CSB), Customer Trust, Customer Culture and the

constant are significant, the coefficient of Customer Culture is .458, Customer Trust is .485,

Customer-Switching Barriers (CSB) is .215, Customer Satisfaction (CS) is .412, Customer Loyalty

is .524, and constant is .526 as shown in Table 6.60.

125

Table 6.60

Coefficientsa

Model

Unstandardized Coefficients

t Sig. B Std. Error

1 (Constant) 1.765 .251 6.002 .000

Loyalty .786 .214 13.214 .000

2 (Constant) .301 .264 1.528 .000

Loyalty .526 .124 12.548 .000

CS .658 .521 6.548 .000

3 (Constant) .214 .214 .528 .000

Loyalty .524 .478 6.258 .000

CS .368 .462 5.658 .000

CSB .542 .467 3.584 .000

4 (Constant) .547 .471 1.998 .000

Loyalty .625 .154 6.528 .000

CS .521 .418 4.889 .000

CSB .254 .447 4.584 .000

Trust .521 .214 2.528 .000

5 (Constant) .526 .325 2.998 .000

Loyalty .524 .145 7.154 .000

CS .412 .552 4.558 .000

CSB .215 .125 3.589 .000

Trust .485 .325 3.002 .000

Culture .458 .854 3.002 .000

a. Dependent Variable: PV

126


In the first regression model, Independent Variables Customer-Switching Barriers (CSB)

and the constant both are significant, the coefficient of Customer-Switching Barriers (CSB) is .985

as shown in Table 6.61.

In the second regression model, Independent Variables Customer-Switching Barriers (CSB)

and Customer Satisfaction (CS) both are significant and constant is also significant, the coefficient

of Customer Satisfaction (CS) is .528, Customer-Switching Barriers (CSB) is .542, and constant is

.452 as shown in Table 6.61.

In the third regression model, Independent Variables Customer-Switching Barriers (CSB),

Customer Satisfaction (CS), and Customer Perceived Value (PV) are significant and constant is

also significant, the coefficient of Customer Perceived Value (PV).478, Customer Satisfaction (CS)

is .356, Customer-Switching Barriers (CSB) is .589, and constant is .354 as shown in Table 6.61.

In the fourth regression model, Independent Variables Customer-Switching Barriers (CSB),

Customer Satisfaction (CS), Customer Perceived Value (PV), and Customer Trust are significant

and constant is also significant, the coefficient of Customer Trust is .552, Customer Perceived

Value (PV) is .475, Customer Satisfaction (CS) is .374, Customer-Switching Barriers (CSB) is

.542, and constant is .458 as shown in Table 6.61.

In the fifth regression model, Independent Variables Customer-Switching Barriers (CSB),

Customer Satisfaction (CS), Customer Perceived Value (PV), Customer Trust, Customer Culture

and the constant are significant, the coefficient of Customer Culture is .452, Customer Trust is .436,

Customer Perceived Value (PV) is .487, Customer Satisfaction (CS) is .358, Customer-Switching

Barriers (CSB) is .475, and constant is .521 as shown in Table 6.61.

127

Table 6.61

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.884 .251 5.524 .000

CSB .985 .254 14.115 .000

2 (Constant) .452 .452 2.002 .000

CSB .542 .421 12.986 .000

CS .528 .462 6.115 .000

3 (Constant) .354 .265 .652 .000

CSB .589 .426 9.225 .000

CS .356 .436 5.524 .000

PV .478 .265 4.254 .000

4 (Constant) .458 .524 2.524 .000

CSB .542 .264 8.254 .000

CS .374 .259 4.895 .000

PV .475 .555 4.568 .000

Trust .552 .456 2.988 .000

5 (Constant) .521 .221 3.526 .000

CSB .475 .187 8.524 .000

CS .358 .196 5.256 .000

PV .487 .168 3.002 .000

Trust .436 .152 2.986 .000

Culture .452 .256 2.865 .000

a. Dependent Variable: Loyalty

128

6.5.3 Customer Satisfaction (CS)


are significant, the coefficient of Customer Loyalty is .652 as shown in Table 6.62.


Perceived Value (PV) both are significant and constant is also significant, the coefficient of

Customer Perceived Value (PV) is .452, Customer Loyalty is .569, and constant is .335 as shown in

Table 6.62.


Perceived Value (PV), and Customer-Switching Barriers (CSB) are significant and constant is also

significant, the coefficient of Customer-Switching Barriers (CSB).356, Customer Perceived Value

(PV) is .289, Customer Loyalty is .399, and constant is .356 as shown in Table 6.62.


Perceived Value (PV), Customer-Switching Barriers (CSB), and Customer Trust are significant and


(CSB) is .288, Customer Perceived Value (PV) is .336, Customer Loyalty is .445, and constant is


In the fifth regression model, Independent Variables Customer Loyalty, Customer Perceived

Value (PV), Customer-Switching Barriers (CSB), Customer Trust, Customer Culture and the


Customer-Switching Barriers (CSB) is .251, Customer Perceived Value (PV) is .325, Customer

Loyalty is .452, and constant is .365 as shown in Table 6.62.

129

Table 6.62

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.254 .184 5.214 .000

Loyalty .652 .081 12.521 .000

2 (Constant) .335 .012 2.542 .000

Loyalty .569 .032 11.251 .000

PV .452 .014 6.245 .000

3 (Constant) .356 .199 .224 .000

Loyalty .399 .054 7.254 .000

PV .289 .021 5.521 .000

CSB .356 .047 2.854 .000

4 (Constant) .458 .202 2.888 .000

Loyalty .445 .032 5.251 .000

PV .336 .078 4.251 .000

CSB .288 .045 4.365 .000

Trust .451 .038 3.254 .000

5 (Constant) .365 .285 3.254 .000

Loyalty .452 .047 7.258 .000

PV .325 .024 3.584 .000

CSB .251 .035 2.852 .000

Trust .229 .054 2.765 .000

Culture .287 .487 2.012 .000

a. Dependent Variable: CS

130







Table 6.63.






Perceived Value (PV), Customer-Switching Barriers (CSB), and Customer Satisfaction (CS) are

significant and constant is also significant, the coefficient of Customer Satisfaction (CS) is .166,




Value (PV), Customer-Switching Barriers (CSB), Customer Satisfaction (CS), Customer Culture

and the constant are significant, the coefficient of Customer Culture is .294, Customer Satisfaction

(CS) is .184, Customer-Switching Barriers (CSB) is .285, Customer Perceived Value (PV) is .259,

Customer Loyalty is .273, and constant is .391 as shown in Table 6.63.

131

Table 6.63

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.569 .152 4.665 .000

Loyalty .452 .078 13.469 .000

2 (Constant) .241 .182 2.562 .000

Loyalty .485 .052 11.562 .000

PV .412 .042 5.628 .000

3 (Constant) .351 .326 .425 .000

Loyalty .456 .045 6.695 .000

PV .228 .199 5.986 .000

CSB .315 .255 3.521 .000

4 (Constant) .287 .269 3.895 .000

Loyalty .386 .487 5.478 .000

PV .256 .102 3.885 .000

CSB .288 .054 4.454 .000

CS .166 .077 2.658 .000

5 (Constant) .391 .262 2.787 .000

Loyalty .273 .087 6.269 .000

PV .259 .094 3.895 .000

CSB .285 .099 2.173 .000

CS .184 .096 2.992 .000

Culture .294 .654 1.568 .000

a. Dependent Variable: Trust

132



are significant, the coefficient of Customer Loyalty is .369 as shown in Table 6.64




Table 6.64.











Value (PV), Customer-Switching Barriers (CSB), Customer Satisfaction (CS), Customer Trust and

the constant are significant, the coefficient of Customer Trust is .162, Customer Satisfaction (CS) is

.251, Customer-Switching Barriers (CSB) is .299, Customer Perceived Value (PV) is .352,


133

Table 6.64

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.562 .251 4.265 .000

Loyalty .369 .056 10.526 .000

2 (Constant) .445 .197 1.256 .000

Loyalty .547 .066 9.025 .000

PV .458 .025 5.652 .000

3 (Constant) .215 .265 .558 .000

Loyalty .469 .054 8.652 .000

PV .284 .187 5.025 .000

CSB .269 .286 3.658 .000

4 (Constant) .277 .293 2.898 .000

Loyalty .395 .397 5.658 .000

PV .265 .057 3.487 .000

CSB .296 .054 3.896 .000

CS .158 .064 2.659 .000

5 (Constant) .389 .287 2.776 .000

Loyalty .352 .099 6.542 .000

PV .299 .065 3.261 .000

CSB .251 .048 2.854 .000

CS .162 .089 2.548 .000

Trust .284 .449 1.958 .000

a. Dependent Variable: Culture

134

6.5.6 Customer Switching Barriers (CSB)







Satisfaction (CS), and Customer Perceived Value (PV) are significant and constant is also

significant, the coefficient of Customer Perceived Value (PV).521, Customer Satisfaction (CS) is

.326, Customer Loyalty is .569, and constant is .251 as shown in Table 6.65.


Satisfaction (CS), Customer Perceived Value (PV), and Customer Trust are significant and constant

is also significant, the coefficient of Trust is .256, Customer Perceived Value (PV) is .254,

Customer Satisfaction (CS) is .369, Customer Loyalty is .454, and constant is .487 as shown in

Table 6.65.


Satisfaction (CS), Customer Perceived Value (PV), Customer Trust, Customer Culture and the


Customer Perceived Value (PV) is .233, Customer Satisfaction (CS) is .325, Customer Loyalty is


135

Table 6.65

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.254 .205 6.521 .000

Loyalty .458 .075 15.251 .000

2 (Constant) .658 .285 2.548 .000

Loyalty .421 .066 14.589 .000

CS .458 .084 6.251 .000

3 (Constant) .251 .296 .658 .000

Loyalty .569 .087 9.251 .000

CS .326 .069 5.254 .000

PV .521 .099 4.895 .000

4 (Constant) .487 .285 1.795 .000

Loyalty .454 .088 7.895 .000

CS .369 .054 4.695 .000

PV .254 .097 3.885 .000

Trust .256 .078 2.695 .000

5 (Constant) .587 .363 2.254 .000

Loyalty .541 .089 8.251 .000

CS .325 .095 4.652 .000

PV .233 .087 3.251 .000

Trust .205 .095 2.956 .000

Culture .382 .185 2.589 .000

a. Dependent Variable: CSB

136

6.6 STAGE-WISE MULTIPLE REGRESSION - CITIBANK, PAKI STAN


Stage-Wise Multiple Regression Model Suggests that all the five Independent Variables

namely Customer Loyalty, Customer Satisfaction (CS), Customer-Switching Barriers (CSB),

Customer Trust, and Customer Culture have a significant effect on Dependent Variable Customer-

Perceived Value (PV) and their Regression Coefficients are also significant at 5% level of

significance as shown in Table 6.66.

Table 6.66

Variables Entered/Removeda

Model

Variables

Entered

Variables

Removed Method

1 LOYALTY

Stepwise (Criteria: Probability-of-F-to-enter <= .050,

Probability-of-F-to-remove >= .100).

2 CS



3 CSB



4 TRUST



5 CULTURE




137

In Table 6.67, the first model gives 79% R Square; it means that Customer Loyalty is the

most influential variable on Customer-Perceived Value (PV). The second model gives 81% R

Square; it means that Customer Satisfaction (CS) influences Customer-Perceived Value (PV). The

third model gives 89% R Square; it means that Customer-Switching Barriers (CSB) influences

Customer-Perceived Value (PV). The fourth model gives 95% R Square; it means that Customer

Trust influences Customer-Perceived Value (PV). The fifth model gives 97% R Square; it means

that Customer Culture influences Customer-Perceived Value (PV).

Table 6.67

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .812a .798 .765 .40212

2 .866b .812 .872 .40987

3 .871c .899 .767 .41275

4 .889d .951 .874 .42354

5 .892e .972 .899 .43867

a. Predictors: (Constant), Loyalty

b. Predictors: (Constant), Loyalty, CS

c. Predictors: (Constant), Loyalty, CS, CSB

d. Predictors: (Constant), Loyalty, CS, CSB, Trust

e. Predictors: (Constant), Loyalty, CS, CSB, Trust, Culture

138

The overall regression for model 1 is significant it means that Customer Loyalty has a

significant influence on Customer Perceived Value (PV) as F value that is 190.251 shows the

significance of the factor implied in the study with a significance of 0.000 as shown in Table 6.68.

Overall regression for model 2 is significant it means that Customer Satisfaction (CS) has a



Overall regression for model 3 is significant it means that Customer-Switching Barriers

(CSB) has a significant influence on Customer Perceived Value (PV) as F value that is 181.524

shows the significance of the factor implied in the study with a significance of 0.000 as shown in

Table 6.68.

Overall regression for model 4 is significant it means that Customer Trust has a significant

influence on Customer Perceived Value (PV) as F value that is 150.254 shows the significance of

the factor implied in the study with a significance of 0.000 as shown in Table 6.68.

Overall regression for model 5 is significant it means that Customer Culture has a



139

Table 6.68

ANOVA f

Model Sum of Squares df Mean Square F Sig.

1 Regression 32.756 1 32.756 190.251 .000a

Residual 16.878 98 .251

Total 49.634 99

2 Regression 34.765 2 17.521 185.985 .000b

Residual 14.869 98 .255

Total 49.634 99

3 Regression 36.879 3 12.548 181.524 .000c

Residual 12.755 97 .224

Total 49.634 98

4 Regression 37.879 4 10.524 150.254 .000d

Residual 11.755 98 .351

Total 49.634 99

5 Regression 38.521 5 8.221 98.251 .000e

Residual 11.113 96 .254

Total 49.634 98






f. Dependent Variable: PV

140


Stage-Wise Multiple Regression Model suggests that all the five Independent Variables

namely Customer-Switching Barriers (CSB), Customer Satisfaction (CS), Customer Perceived

Value (PV), Customer Trust, and Customer Culture have a significant effect on Dependent Variable

Customer Loyalty and their Regression Coefficients are also significant at 5% level of significance


Table 6.69


Model

Variables

Entered

Variables

Removed Method

1 CSB



2 CS



3 PV



4 TRUST



5 CULTURE




141

In Table 6.70, the first model gives 70% R Square; it means that Customer-Switching

Barriers (CSB) is the most influential variable on Customer Loyalty. The second model gives 75%

R Square; it means that Customer Satisfaction (CS) influences Customer Loyalty. The third model

gives 78% R Square; it means that Customer Perceived Value (PV) influences Customer Loyalty.

The fourth model gives 79% R Square; it means that Customer Trust influences Customer Loyalty.

The fifth model gives 81% R Square; it means that Customer Culture influences Customer Loyalty.

Table 6.70

Model Summary


1 .810a .703 .521 .39521

2 .853b .755 .611 .38565

3 .861c .786 .647 .37584

4 .830d .794 .659 .35854

5 .854e .812 .729 .33421

a. Predictors: (Constant), CSB

b. Predictors: (Constant), CSB , CS

c. Predictors: (Constant), CSB , CS, PV

d. Predictors: (Constant), CSB , CS, PV, Trust

e. Predictors: (Constant), CSB , CS, PV, Trust, Culture

142

The overall regression for model 1 is significant it means that Customer-Switching Barriers

(CSB) has a significant influence on Customer Loyalty as F value that is 189.521 shows the



significant influence on Customer Loyalty as F value that is 176.251 shows the significance of the

factor implied in the study with a significance of 0.000 as shown in Table 6.71.

Overall regression for model 3 is significant it means that Customer Perceived Value (PV)

has a significant influence on Customer Loyalty as F value that is 164.251 shows the



influence on Customer Loyalty as F value that is 121.854 shows the significance of the factor

implied in the study with a significance of 0.000 as shown in Table 6.71.




143

Table 6.71

ANOVA f


1 Regression 33.524 1 33.524 189.521 .000a

Residual 19.253 97 .251

Total 52.777 98

2 Regression 34.589 2 15.547 176.251 .000b

Residual 18.188 99 .216

Total 52.777 97

3 Regression 36.568 3 10.254 164.251 .000c

Residual 16.209 96 .122

Total 52.777 98

4 Regression 37.684 4 7.548 121.854 .000d

Residual 15.093 95 .225

Total 52.777 98

5 Regression 38.025 5 6.524 85.147 .000e

Residual 14.752 96 .281

Total 52.777 99






f. Dependent Variable: Loyalty

144



namely Customer Loyalty, Customer Perceived Value (PV), Customer-Switching Barriers (CSB),

Customer Trust, and Customer Culture have a significant effect on Dependent Variable Customer

Satisfaction (CS) and their Regression Coefficients are also significant at 5% level of significance


Table 6.72


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 TRUST



5 CULTURE




145


most influential variable on Customer Satisfaction (CS). The second model gives 68% R Square; it

means that Customer Perceived Value (PV) influences Customer Satisfaction (CS). The third model

gives 71% R Square; it means that Customer-Switching Barriers (CSB) influences Customer

Satisfaction (CS). The fourth model gives 74% R Square; it means that Customer Trust influences

Customer Satisfaction (CS). The fifth model gives 78% R Square; it means that Customer Culture

influences Customer Satisfaction (CS).

Table 6.73

Model Summary


1 .822a .675 .652 .38521

2 .828b .684 .524 .37254

3 .829c .710 .689 .36281

4 .888d .745 .854 .35214

5 .891e .780 .548 .32545


b. Predictors: (Constant), Loyalty, PV

c. Predictors: (Constant), Loyalty, PV, CSB

d. Predictors: (Constant), Loyalty, PV, CSB, Trust

e. Predictors: (Constant), Loyalty, PV, CSB, Trust, Culture

146


significant influence on Customer Satisfaction (CS) as F value that is 175.542 shows the



has a significant influence on Customer Satisfaction (CS) as F value that is 170.526 shows the



(CSB) has a significant influence on Customer Satisfaction (CS) as F value that is 165.251 shows

the significance of the factor implied in the study with a significance of 0.000 as shown in Table

6.74.


influence on Customer Satisfaction (CS) as F value that is 84.521 shows the significance of the



significant influence on Customer Satisfaction (CS) as F value that is 79.524 shows the significance

of the factor implied in the study with a significance of 0.000 as shown in Table 6.74.

147

Table 6.74

ANOVA f


1 Regression 36.251 1 36.251 175.542 .000a

Residual 16.521 99 .225

Total 52.772 98

2 Regression 34.432 2 16.521 170.526 .000b

Residual 18.34 97 .228

Total 52.772 98

3 Regression 35.435 3 12.254 165.251 .000c

Residual 17.337 98 .188

Total 52.772 99

4 Regression 37.564 4 10.215 84.521 .000d

Residual 15.208 96 .215

Total 52.772 97

5 Regression 38.786 5 8.521 79.524 .000e

Residual 13.986 98 .158

Total 52.772 99






f. Dependent Variable: CS

148




Customer Satisfaction (CS), and Customer Culture have a significant effect on Dependent Variable

Customer Trust and their Regression Coefficients are also significant at 5% level of significance as


Table 6.75


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 CS



5 CULTURE




149


most influential variable on Customer Trust. The second model gives 71% R Square; it means that

Customer Perceived Value (PV) influences Customer Trust. The third model gives 75% R Square;

it means that Customer-Switching Barriers (CSB) influences Customer Trust. The fourth model

gives 78% R Square; it means that Customer Satisfaction (CS) influences Customer Trust. The fifth

model gives 80% R Square; it means that Customer Culture influences Customer Trust.

Table 6.76

Model Summary


1 .814a .655 .562 .39589

2 .825b .712 .458 .38548

3 .846c .754 .489 .36478

4 .862d .784 .596 .34589

5 .878e .801 .648 .33632




d. Predictors: (Constant), Loyalty, PV, CSB, CS

e. Predictors: (Constant), Loyalty, PV, CSB, CS, Culture

150


significant influence on Customer Trust as F value that is 188.251 shows the significance of the



has a significant influence on Customer Trust as F value that is 182.212 shows the significance of



(CSB) has a significant influence on Customer Trust as F value that is 179.564 shows the








151

Table 6.77

ANOVA f


1 Regression 38.521 1 38.521 188.251 .000a

Residual 12.251 98 .154

Total 50.772 99

2 Regression 39.251 2 19.521 182.212 .000b

Residual 11.521 96 .125

Total 50.772 97

3 Regression 40.121 3 16.251 179.564 .000c

Residual 10.651 99 .158

Total 50.772 98

4 Regression 41.251 4 14.251 99.254 .000d

Residual 9.521 99 .668

Total 50.772 97

5 Regression 42.258 5 10.251 85.245 .000e

Residual 8.514 97 .253

Total 50.772 98






f. Dependent Variable: Trust

152




Customer Satisfaction (CS), and Customer Trust have a significant effect on Dependent Variable

Customer Culture and their Regression Coefficients are also significant at 5% level of significance


Table 6.78


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 CS



5 TRUST




153


most influential variable on Customer Culture. The second model gives 65% R Square; it means

that Customer Perceived Value (PV) influences Customer Culture. The third model gives 77% R

Square; it means that Customer-Switching Barriers (CSB) influences Customer Culture. The fourth

model gives 86% R Square; it means that Customer Satisfaction (CS) influences Customer Culture.

The fifth model gives 89% R Square; it means that Customer Trust influences Customer Culture.

Table 6.79

Model Summary


1 .829a .521 .569 .39652

2 .842b .652 .632 .38452

3 .866c .775 .521 .37548

4 .878d .865 .594 .35645

5 .897e .897 .599 .33265





e. Predictors: (Constant), Loyalty, PV, CSB, CS, Trust

154


significant influence on Customer Culture as F value that is 187.251 shows the significance of the



has a significant influence on Customer Culture as F value that is 181.215 shows the significance of



(CSB) has a significant influence on Customer Culture as F value that is 168.542 shows the






influence on Customer Culture as F value that is 90.251 shows the significance of the factor implied

in the study with a significance of 0.000 as shown in Table 6.80.

155

Table 6.80

ANOVA f

Model

Sum of

Squares Df Mean Square F Sig.

1 Regression 35.521 1 35.521 187.251 .000a

Residual 11.254 99 .156

Total 46.775 98

2 Regression 34.209 2 16.254 181.215 .000b

Residual 12.566 97 .165

Total 46.775 96

3 Regression 35.654 3 13.251 168.542 .000c

Residual 11.121 97 .187

Total 46.775 98

4 Regression 36.654 4 11.584 94.251 .000d

Residual 10.121 98 .285

Total 46.775 99

5 Regression 37.444 5 9.251 90.251 .000e

Residual 9.331 97 .195

Total 46.775 98


b. Predictors: (Constant), Loyalty,

PV




f. Dependent Variable: Culture

156



namely Customer Loyalty, Customer Satisfaction (CS), Customer Perceived Value (PV), Customer

Trust, and Customer Culture have a significant effect on Dependent Variable Customer-Switching

Barriers (CSB) and their Regression Coefficients are also significant at 5% level of significance as


Table 6.81


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 CS



3 PV



4 TRUST



5 CULTURE




157


most influential variable on Customer-Switching Barriers (CSB). The second model gives 67% R

Square; it means that Customer Satisfaction (CS) influences Customer-Switching Barriers (CSB).

The third model gives 70% R Square; it means that Customer Perceived Value (PV) influences

Customer-Switching Barriers (CSB). The fourth model gives 74% R Square; it means that

Customer Trust influences Customer-Switching Barriers (CSB). The fifth model gives 78% R

Square; it means that Customer Culture influences Customer-Switching Barriers (CSB).

Table 6.82

Model Summary


1 .810a .645 .526 .39562

2 .832b .675 .654 .38562

3 .848c .702 .755 .36254

4 .859d .745 .787 .35265

5 .884e .789 .763 .34585


b. Predictors: (Constant), Loyalty , CS

c. Predictors: (Constant), Loyalty , CS, PV

d. Predictors: (Constant), Loyalty , CS, PV, Trust

e. Predictors: (Constant), Loyalty , CS, PV, Trust, Culture

158


significant influence on Customer-Switching Barriers (CSB) as F value that is 181.251 shows the






has a significant influence on Customer-Switching Barriers (CSB) as F value that is

150.254 shows the significance of the factor implied in the study with a significance of 0.000 as



influence on Customer-Switching Barriers (CSB) as F value that is 90.568 shows the significance





159

Table 6.83

ANOVA f


1 Regression 36.254 1 36.254 181.251 .000a

Residual 15.251 97 .188

Total 51.505 98

2 Regression 35.356 2 16.215 180.256 .000b

Residual 16.149 98 .152

Total 51.505 99

3 Regression 37.243 3 13.215 150.254 .000c

Residual 14.262 97 .154

Total 51.505 98

4 Regression 37.968 4 10.254 90.568 .000d

Residual 13.537 97 .165

Total 51.505 98

5 Regression 38.411 5 7.998 77.256 .000e

Residual 13.094 98 .185

Total 51.505 99

a. Predictors: (Constant), CS

b. Predictors: (Constant), CS, PV

c. Predictors: (Constant), CS, PV, CULTURE

d. Predictors: (Constant), CS, PV, CULTURE, TRUST

e. Predictors: (Constant), CS, PV, CULTURE, TRUST, LOYALTY

f. Dependent Variable: CSB

160

6.7 MULTIVARIATE DATA ANALYSIS - NATIONAL BANK OF

PAKISTAN, PAKISTAN




third component Customer Perceived Value (PV) explains 9% variance of the total variation alone.

The second and third components together explain 66% variance of the total variation. The fourth

component Customer Trust explains 5% variance of the total variation alone. The third and fourth

components together explain 72% variance of the total variation. The fifth component Customer-

Switching Barriers (CSB) explains 20% variance of the total variation alone. The fourth and fifth

components together explain 92% variance of the total variation. Finally, sixth component



Table 6.84


Component



1 2.254 46.521 46.521 2.254 46.521 46.521

2 1.548 10.215 56.736 1.548 10.215 10.215

3 .785 9.845 66.581

4 .265 5.584 72.165

5 .654 20.251 92.416

6 .321 7.584 100.000


161

6.8 REGRESSION MODEL - NATIONAL BANK OF PAKISTAN,

PAKISTAN





















162

Table 6.85

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.221 .199 5.251 .000

Loyalty .665 .205 10.514 .000

2 (Constant) .215 .222 1.002 .000

Loyalty .452 .021 11.555 .000

CS .452 .358 5.521 .000

3 (Constant) .125 .204 .452 .000

Loyalty .452 .412 6.112 .000

CS .236 .365 5.114 .000

CSB .448 .325 2.45 .000

4 (Constant) .478 .369 1.251 .000

Loyalty .558 .117 6.021 .000

CS .442 .354 4.854 .000

CSB .201 .365 4.114 .000

Trust .416 .211 2.051 .000

5 (Constant) .447 .295 2.124 .000

Loyalty .412 .129 6.542 .000

CS .398 .421 4.142 .000

CSB .215 .021 3.184 .000

Trust .462 .248 2.325 .000

Culture .396 .562 2.225 .000


163























164

Table 6.86

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.251 .201 5.002 .000

CSB .652 .200 12.251 .000

2 (Constant) .412 .325 1.996 .000

CSB .447 .321 11.235 .000

CS .496 .362 5.215 .000

3 (Constant) .311 .165 .524 .000

CSB .456 .326 10.256 .000

CS .316 .396 5.221 .000

PV .410 .185 3.965 .000

4 (Constant) .398 .494 2.214 .000

CSB .489 .184 7.256 .000

CS .324 .211 4.112 .000

PV .426 .425 4.142 .000

Trust .405 .402 2.269 .000

5 (Constant) .458 .199 3.145 .000

CSB .356 .120 8.269 .000

CS .325 .112 4.256 .000

PV .418 .154 2.658 .000

Trust .401 .108 2.256 .000

Culture .403 .206 2.159 .000


165







Table 6.87.















166

Table 6.87

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.003 .169 4.526 .000

Loyalty .524 .045 11.652 .000

2 (Constant) .299 .002 2.021 .000

Loyalty .446 .012 10.215 .000

PV .396 .011 6.002 .000

3 (Constant) .310 .154 .125 .000

Loyalty .365 .045 6.885 .000

PV .202 .010 5.426 .000

CSB .321 .032 2.625 .000

4 (Constant) .368 .158 2.214 .000

Loyalty .359 .011 4.251 .000

PV .302 .054 3.251 .000

CSB .201 .039 4.115 .000

Trust .421 .021 3.114 .000

5 (Constant) .301 .269 3.254 .000

Loyalty .403 .022 7.145 .000

PV .299 .015 3.256 .000

CSB .208 .026 2.485 .000

Trust .198 .039 2.652 .000

Culture .242 .466 1.899 .000


167







Table 6.88.















168

Table 6.88

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.002 .122 4.325 .000

Loyalty .365 .062 12.526 .000

2 (Constant) .211 .151 2.136 .000

Loyalty .411 .032 10.254 .000

PV .351 .028 5.214 .000

3 (Constant) .309 .310 .226 .000

Loyalty .401 .026 6.421 .000

PV .211 .136 5.254 .000

CSB .299 .201 3.125 .000

4 (Constant) .241 .234 3.265 .000

Loyalty .325 .404 5.021 .000

PV .221 .054 2.154 .000

CSB .254 .032 3.256 .000

CS .122 .041 1.215 .000

5 (Constant) .324 .212 2.025 .000

Loyalty .238 .025 5.248 .000

PV .224 .055 3.625 .000

CSB .254 .021 1.251 .000

CS .155 .064 2.025 .000

Culture .262 .521 1.198 .000


169







Table 6.89.















170

Table 6.89

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.256 .211 3.584 .000

Loyalty .315 .045 9.521 .000

2 (Constant) .417 .125 1.112 .000

Loyalty .445 .042 8.256 .000

PV .325 .010 5.265 .000

3 (Constant) .115 .225 .458 .000

Loyalty .365 .036 7.369 .000

PV .158 .142 4.258 .000

CSB .214 .225 3.358 .000

4 (Constant) .212 .274 2.254 .000

Loyalty .385 .348 5.145 .000

PV .241 .026 3.325 .000

CSB .223 .047 3.025 .000

CS .101 .026 2.114 .000

5 (Constant) .321 .255 2.471 .000

Loyalty .322 .044 6.022 .000

PV .226 .042 1.236 .000

CSB .211 .036 2.325 .000

CS .128 .078 2.214 .000

Trust .218 .431 1.326 .000


171















Table 6.90.






172

Table 6.90

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.365 .198 6.356 .000

Loyalty .325 .025 15.021 .000

2 (Constant) .542 .224 2.365 .000

Loyalty .318 .045 13.451 .000

CS .325 .063 5.251 .000

3 (Constant) .221 .225 .521 .000

Loyalty .478 .074 8.521 .000

CS .258 .062 4.562 .000

PV .456 .078 4.568 .000

4 (Constant) .365 .271 1.225 .000

Loyalty .425 .035 7.118 .000

CS .321 .025 4.659 .000

PV .211 .045 3.215 .000

Trust .225 .052 2.154 .000

5 (Constant) .415 .348 2.058 .000

Loyalty .421 .045 8.014 .000

CS .289 .070 4.654 .000

PV .199 .029 3.221 .000

Trust .186 .077 2.486 .000

Culture .269 .168 2.029 .000


173

6.9 STAGE-WISE MULTIPLE REGRESSION - NATIONAL BANK OF

PAKISTAN, PAKISTAN







Table 6.91


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 CS



3 CSB



4 TRUST



5 CULTURE




174








Table 6.92

Model Summary


1 .801a .662 .625 .38524

2 .810b .695 .699 .39521

3 .825c .721 .712 .40215

4 .856d .764 .788 .41452

5 .879e .872 .812 .41988






175










Table 6.93







176

Table 6.93

ANOVA f


1 Regression 30.521 1 30.521 182.214 .000a

Residual 12.214 97 .221

Total 42.735 98

2 Regression 32.251 2 15.251 171.252 .000b

Residual 10.484 96 .125

Total 42.735 97

3 Regression 33.269 3 11.125 165.214 .000c

Residual 9.466 97 .201

Total 42.735 98

4 Regression 35.525 4 9.251 140.212 .000d

Residual 7.21 97 .286

Total 42.735 98

5 Regression 35.885 5 7.256 96.251 .000e

Residual 6.85 98 .211

Total 42.735 99







177







Table 6.94


Model

Variables

Entered

Variables

Removed Method

1 CSB



2 CS



3 PV



4 TRUST



5 CULTURE




178







Table 6.95

Model Summary


1 .803a .652 .485 .38215

2 .821b .708 .562 .37214

3 .836c .752 .578 .36521

4 .842d .762 .584 .35584

5 .849e .799 .658 .34215






179
















180

Table 6.96

ANOVA f


1 Regression 30.221 1 30.221 172.695 .000a

Residual 12.214 98 .214

Total 42.435 99

2 Regression 31.251 2 12.251 160.485 .000b

Residual 11.184 97 .210

Total 42.435 98

3 Regression 32.252 3 9.225 154.251 .000c

Residual 10.183 98 .102

Total 42.435 99

4 Regression 33.251 4 7.251 112.569 .000d

Residual 9.184 96 .199

Total 42.435 97

5 Regression 34.584 5 6.028 79.265 .000e

Residual 7.851 97 .200

Total 42.435 98







181







Table 6.97


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 TRUST



5 CULTURE




182








Table 6.98

Model Summary


1 .811a .565 .526 .37251

2 .819b .625 .456 .36251

3 .822c .699 .569 .35487

4 .848d .710 .785 .34521

5 .865e .742 .521 .33265






183










6.99.







184

Table 6.99

ANOVA f


1 Regression 31.112 1 31.112 171.251 .000a

Residual 11.412 98 .156

Total 42.524 99

2 Regression 32.521 2 15.251 162.252 .000b

Residual 10.003 97 .158

Total 42.524 98

3 Regression 33.215 3 11.548 148.215 .000c

Residual 9.309 96 .108

Total 42.524 97

4 Regression 34.589 4 9.259 81.269 .000d

Residual 7.935 98 .165

Total 42.524 99

5 Regression 36.264 5 8.112 74.584 .000e

Residual 6.26 97 .1004

Total 42.524 98







185







Table 6.100


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 CS



5 CULTURE




186







6.101

Model Summary


1 .811a .621 .465 .38542

2 .819b .689 .488 .37856

3 .825c .721 .512 .36235

4 .836d .755 .536 .35214

5 .854e .798 .598 .34586






187
















188

Table 6.102

ANOVA f


1 Regression 31.524 1 31.524 179.254 .000a

Residual 10.254 97 .021

Total 41.778 98

2 Regression 32.521 2 12.258 175.214 .000b

Residual 9.257 98 .102

Total 41.778 99

3 Regression 34.256 3 11.251 171.022 .000c

Residual 7.522 98 .125

Total 41.778 99

4 Regression 36.254 4 9.215 96.021 .000d

Residual 5.524 96 .445

Total 41.778 97

5 Regression 39.568 5 8.215 75.251 .000e

Residual 2.21 97 .211

Total 41.778 98







189







Table 6.103


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 CS



5 TRUST




190







Table 6.104

Model Summary


1 .801a .514 .456 .37526

2 .814b .589 .526 .36256

3 .820c .652 .425 .35142

4 .835d .712 .489 .34852

5 .846e .756 .526 .32654






191
















192

Table 6.105

ANOVA f

Model

Sum of


1 Regression 33.521 1 33.521 184.256 .000a

Residual 10.589 98 .121

Total 44.11 99

2 Regression 34.209 2 11.521 172.526 .000b

Residual 9.901 97 .122

Total 44.11 98

3 Regression 35.654 3 10.221 154.265 .000c

Residual 8.456 98 .153

Total 44.11 99

4 Regression 36.654 4 9.214 89.235 .000d

Residual 7.456 98 .242

Total 44.11 99

5 Regression 37.444 5 8.256 80.569 .000e

Residual 6.666 96 .152

Total 44.11 97



PV





193







Table 6.106


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 CS



3 PV



4 TRUST



5 CULTURE




194








Table 6.107

Model Summary


1 .812a .548 .548 .39202

2 .825b .612 .598 .38562

3 .836c .689 .698 .37254

4 .849d .712 .702 .36255

5 .878e .758 .788 .35215






195

















196

Table 6.108

ANOVA f


1 Regression 30.586 1 30.586 175.584 .000a

Residual 12.589 98 .128

Total 43.175 99

2 Regression 33.526 2 15.565 162.247 .000b

Residual 9.649 96 .132

Total 43.175 97

3 Regression 34.526 3 11.254 140.569 .000c

Residual 8.649 97 .035

Total 43.175 98

4 Regression 35.259 4 9.256 88.547 .000d

Residual 7.916 98 .058

Total 43.175 99

5 Regression 36.589 5 7.658 74.569 .000e

Residual 6.586 98 .128

Total 43.175 99







197

6.10 MULTIVARIATE DATA ANALYSIS – MEEZAN BANK LIMIT ED,

PAKISTAN




third component Customer Perceived Value (PV) explains 9% variance of the total variation alone.

The second and third components together explain 62% variance of the total variation. The fourth

component Customer Trust explains 16% variance of the total variation alone. The third and fourth

components together explain 79% variance of the total variation. The fifth component Customer-

Switching Barriers (CSB) explains 5% variance of the total variation alone. The fourth and fifth

components together explain 84% variance of the total variation. Finally, sixth component

Customer Culture explains 15% variance of the total variation alone. The fifth and sixth

components together explain 100% variance of the total variation as shown in Table 6.109.

Table 6.109


Component



1 1.989 41.461 41.461 1.989 41.461 41.461

2 1.214 11.024 52.485 1.214 11.024 11.024

3 .525 9.845 62.33

4 .458 16.889 79.219

5 .754 5.255 84.474

6 .789 15.526 100.000


198

6.11 REGRESSION MODEL – MEEZAN BANK LIMITED, PAKIST AN





















199

Table 6.110

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.115 .154 4.521 .000

Loyalty .458 .195 9.245 .000

2 (Constant) .195 .195 1.001 .000

Loyalty .354 .011 10.265 .000

CS .369 .245 5.021 .000

3 (Constant) .101 .156 .336 .000

Loyalty .354 .369 5.215 .000

CS .202 .321 4.585 .000

CSB .401 .287 2.01 .000

4 (Constant) .421 .322 1.032 .000

Loyalty .511 .100 5.216 .000

CS .424 .321 3.215 .000

CSB .199 .308 3.265 .000

Trust .369 .187 1.023 .000

5 (Constant) .354 .226 1.452 .000

Loyalty .358 .104 5.225 .000

CS .248 .365 3.265 .000

CSB .199 .015 2.548 .000

Trust .398 .227 2.458 .000

Culture .295 .501 1.569 .000


200























201

Table 6.111

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.004 .195 4.265 .000

CSB .521 .195 10.215 .000

2 (Constant) .325 .321 1.215 .000

CSB .324 .285 10.639 .000

CS .357 .306 4.896 .000

3 (Constant) .289 .122 .421 .000

CSB .412 .331 9.236 .000

CS .278 .352 4.112 .000

PV .375 .141 3.221 .000

4 (Constant) .345 .402 2.154 .000

CSB .440 .141 6.215 .000

CS .289 .145 4.112 .000

PV .348 .365 3.596 .000

Trust .396 .385 1.254 .000

5 (Constant) .326 .155 2.589 .000

CSB .311 .021 7.589 .000

CS .284 .105 3.965 .000

PV .356 .126 2.021 .000

Trust .378 .102 2.115 .000

Culture .398 .201 2.021 .000


202







Table 6.112.















203

Table 6.112

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.221 .145 4.452 .000

Loyalty .452 .001 9.236 .000

2 (Constant) .159 .021 2.145 .000

Loyalty .400 .002 8.215 .000

PV .342 .001 5.215 .000

3 (Constant) .215 .165 .251 .000

Loyalty .325 .025 5.215 .000

PV .198 .045 5.321 .000

CSB .269 .021 2.652 .000

4 (Constant) .321 .198 2.452 .000

Loyalty .341 .045 3.251 .000

PV .287 .066 2.514 .000

CSB .185 .078 3.256 .000

Trust .365 .065 2.362 .000

5 (Constant) .215 .202 2.541 .000

Loyalty .365 .054 6.526 .000

PV .247 .025 2.216 .000

CSB .145 .035 2.021 .000

Trust .165 .030 2.452 .000

Culture .202 .302 1.785 .000


204







Table 6.113.















205

Table 6.113

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.652 .100 5.256 .000

Loyalty .356 .045 13.251 .000

2 (Constant) .201 .151 1.253 .000

Loyalty .362 .022 12.562 .000

PV .314 .023 4.521 .000

3 (Constant) .289 .287 .452 .000

Loyalty .369 .020 10.256 .000

PV .184 .114 4.256 .000

CSB .208 .174 4.526 .000

4 (Constant) .201 .230 2.562 .000

Loyalty .278 .354 4.526 .000

PV .201 .025 1.023 .000

CSB .263 .045 2.215 .000

CS .101 .056 1.021 .000

5 (Constant) .265 .201 2.558 .000

Loyalty .216 .056 4.256 .000

PV .224 .041 2.596 .000

CSB .215 .065 1.252 .000

CS .121 .052 1.089 .000

Culture .201 .425 2.562 .000


206







Table 6.114.















207

Table 6.114

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.852 .215 3.145 .000

Loyalty .215 .452 9.321 .000

2 (Constant) .452 .125 1.021 .000

Loyalty .365 .021 8.012 .000

PV .225 .030 5.045 .000

3 (Constant) .289 .202 .322 .000

Loyalty .365 .045 6.425 .000

PV .102 .132 4.021 .000

CSB .201 .201 3.114 .000

4 (Constant) .176 .266 2.215 .000

Loyalty .289 .315 5.102 .000

PV .232 .012 3.311 .000

CSB .201 .037 3.002 .000

CS .154 .041 2.101 .000

5 (Constant) .215 .242 3.125 .000

Loyalty .256 .033 5.251 .000

PV .115 .012 1.115 .000

CSB .452 .033 2.321 .000

CS .251 .015 2.121 .000

Trust .142 .402 1.222 .000


208















Table 6.115.






209

Table 6.115

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.251 .162 5.526 .000

Loyalty .322 .012 14.215 .000

2 (Constant) .502 .202 2.021 .000

Loyalty .299 .032 12.021 .000

CS .312 .051 4.256 .000

3 (Constant) .177 .215 .425 .000

Loyalty .365 .025 10.252 .000

CS .225 .041 4.002 .000

PV .401 .063 4.132 .000

4 (Constant) .341 .254 1.232 .000

Loyalty .325 .010 7.014 .000

CS .215 .014 4.121 .000

PV .189 .022 3.121 .000

Trust .184 .012 1.236 .000

5 (Constant) .325 .215 1.252 .000

Loyalty .398 .021 7.215 .000

CS .245 .050 4.251 .000

PV .152 .013 3.112 .000

Trust .141 .062 2.332 .000

Culture .226 .148 1.121 .000


210

6.12 STAGE-WISE MULTIPLE REGRESSION – MEEZAN BANK

LIMITED, PAKISTAN







Table 6.116


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 CS



3 CSB



4 TRUST



5 CULTURE




211








Table 6.117

Model Summary


1 .812a .562 .562 .39524

2 .815b .578 .599 .38154

3 .825c .658 .625 .39652

4 .874d .699 .687 .40215

5 .885e .785 .745 .41214






212










Table 6.118.







213

Table 6.118

ANOVA f


1 Regression 30.251 1 30.251 175.214 .000a

Residual 9.215 98 .128

Total 39.466 99

2 Regression 30.889 2 13.214 166.214 .000b

Residual 8.577 97 .025

Total 39.466 98

3 Regression 31.251 3 10.214 141.251 .000c

Residual 8.215 97 .125

Total 39.466 98

4 Regression 32.125 4 8.125 132.652 .000d

Residual 7.341 98 .198

Total 39.466 99

5 Regression 33.154 5 7.542 80.269 .000e

Residual 6.312 97 .165

Total 39.466 98







214







Table 6.119


Model

Variables

Entered

Variables

Removed Method

1 CSB



2 CS



3 PV



4 TRUST



5 CULTURE




215







Table 6.120

Model Summary


1 .811a .562 .396 .39652

2 .832b .632 .485 .38542

3 .841c .689 .512 .36325

4 .848d .721 .522 .34251

5 .859e .758 .547 .33269






216
















217

Table 6.121

ANOVA f


1 Regression 29.256 1 29.256 164.251 .000a

Residual 9.251 97 .121

Total 38.507 98

2 Regression 30.251 2 9.214 145.269 .000b

Residual 8.256 98 .112

Total 38.507 99

3 Regression 30.998 3 7.521 131.251 .000c

Residual 7.509 98 .021

Total 38.507 99

4 Regression 31.215 4 6.231 105.251 .000d

Residual 7.292 97 .125

Total 38.507 98

5 Regression 31.889 5 5.215 73.652 .000e

Residual 6.618 98 .185

Total 38.507 99







218







Table 6.122


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 TRUST



5 CULTURE




219








Table 6.123

Model Summary


1 .854a .452 .425 .38251

2 .865b .558 .325 .37548

3 .875c .699 .458 .36253

4 .879d .785 .625 .35144

5 .885e .825 .546 .34562






220










6.124.







221

Table 6.124

ANOVA f


1 Regression 28.251 1 28.251 181.215 .000a

Residual 9.265 97 .215

Total 37.516 98

2 Regression 29.265 2 12.215 167.589 .000b

Residual 8.251 98 .121

Total 37.516 99

3 Regression 30.215 3 10.562 145.589 .000c

Residual 7.301 97 .021

Total 37.516 98

4 Regression 31.698 4 8.256 77.562 .000d

Residual 5.818 98 .221

Total 37.516 99

5 Regression 32.485 5 7.263 66.542 .000e

Residual 5.031 98 .125

Total 37.516 99







222







Table 6.125


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 CS



5 CULTURE




223







Table 6.126

Model Summary


1 .823a .662 .362 .39652

2 .845b .698 .345 .38542

3 .878c .741 .425 .36256

4 .892d .789 .468 .34521

5 .952e .812 .547 .33265






224
















225

Table 6.127

ANOVA f


1 Regression 33.251 1 33.251 166.256 .000a

Residual 8.551 98 .112

Total 41.802 99

2 Regression 34.215 2 10.254 152.142 .000b

Residual 7.587 97 .265

Total 41.802 98

3 Regression 35.212 3 9.235 137.586 .000c

Residual 6.59 98 .102

Total 41.802 99

4 Regression 36.015 4 8.425 85.265 .000d

Residual 5.805 98 .325

Total 41.802 99

5 Regression 37.521 5 7.256 71.256 .000e

Residual 4.281 97 .198

Total 41.802 98







226







Table 6.128


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 CS



5 TRUST




227







Table 6.129

Model Summary


1 .822a .452 .389 .38562

2 .835b .442 .452 .36251

3 .842c .562 .489 .35265

4 .859d .632 .526 .35125

5 .868e .688 .547 .34521






228
















229

Table 6.130

ANOVA f

Model

Sum of


1 Regression 30.521 1 30.521 168.256 .000a

Residual 9.251 97 .221

Total 39.772 98

2 Regression 31.521 2 10.252 154.256 .000b

Residual 12.589 98 .115

Total 44.11 99

3 Regression 32.252 3 9.235 144.333 .000c

Residual 11.858 98 .102

Total 44.11 99

4 Regression 33.256 4 8.526 87.521 .000d

Residual 10.854 97 .218

Total 44.11 98

5 Regression 34.241 5 7.562 75.215 .000e

Residual 9.869 98 .089

Total 44.11 99



PV





230







Table 6.131


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 CS



3 PV



4 TRUST



5 CULTURE




231







Square; it means that Customer Culture influences Customer-Switching Barriers.

Table 6.132

Model Summary


1 .852a .552 .452 .39236

2 .862b .589 .488 .38452

3 .885c .647 .596 .36325

4 .892d .678 .612 .35485

5 .897e .852 .698 .35215






232

















233

Table 6.133

ANOVA f


1 Regression 28.251 1 28.251 162.221 .000a

Residual 9.215 97 .021

Total 37.466 98

2 Regression 29.215 2 10.251 139.521 .000b

Residual 8.251 96 .102

Total 37.466 97

3 Regression 30.256 3 9.256 122.521 .000c

Residual 7.21 98 .021

Total 37.466 99

4 Regression 31.252 4 8.542 81.215 .000d

Residual 6.214 98 .044

Total 37.466 99

5 Regression 32.236 5 7.263 71.256 .000e

Residual 5.23 97 .104

Total 37.466 98







234

6.13 MULTIVARIATE DATA ANALYSIS - HABIB BANK LIMITE D,

PAKISTAN




third component Customer Perceived Value (PV) explains 10% variance of the total variation

alone. The second and third components together explain 83% variance of the total variation. The

fourth component Customer Trust explains 7% variance of the total variation alone. The third and

fourth components together explain 91% variance of the total variation. The fifth component

Customer-Switching Barriers (CSB) explains 6% variance of the total variation alone. The fourth

and fifth components together explain 97% variance of the total variation. Finally, sixth component



Table 6.134


Component



1 3.346 55.764 55.764 3.346 55.764 55.764

2 1.041 17.345 73.109 1.041 17.345 73.109

3 .637 10.616 83.725

4 .456 7.594 91.319

5 .380 6.340 97.658

6 .140 2.342 100.000


235

6.14 REGRESSION MODEL - HABIB BANK LIMITED, PAKISTA N





















236

Table 6.135

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.095 .182 5.764 .000

Loyalty .694 .055 12.987 .000

2 (Constant) .299 .198 1.769 .000

Loyalty .496 .049 11.212 .000

CS .334 .057 5.656 .000

3 (Constant) .121 .213 .443 .000

Loyalty .448 .041 7.345 .000

CS .281 .053 4.321 .000

CSB .211 .052 3.998 .000

4 (Constant) .259 .212 1.001 .000

Loyalty .332 .038 6.294 .000

CS .218 .055 4.021 .000

CSB .231 .073 3.358 .000

Trust .165 .042 2.432 .000

5 (Constant) .319 .299 2.336 .000

Loyalty .227 .048 7.453 .000

CS .223 .058 4.321 .000

CSB .199 .065 2.786 .000

Trust .175 .076 2.321 .000

Culture .198 .997 2.001 .000


237



and the constant both are significant; the coefficient of Customer-Switching Barriers (CSB) is .663




















238

Table 6.136

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.095 .190 4.665 .000

CSB .663 .044 12.098 .000

2 (Constant) .299 .202 1.778 .000

CSB .497 .039 10.986 .000

CS .339 .057 5.023 .000

3 (Constant) .129 .226 .499 .000

CSB .441 .043 8.001 .000

CS .198 .055 4.657 .000

PV .197 .059 3.998 .000

4 (Constant) .311 .212 1.221 .000

CSB .355 .041 7.021 .000

CS .220 .044 4.231 .000

PV .299 .066 3.222 .000

Trust .131 .050 2.002 .000

5 (Constant) .318 .301 2.321 .000

CSB .421 .040 7.291 .000

CS .239 .049 4.332 .000

PV .199 .063 2.765 .000

Trust .130 .047 2.234 .000

Culture .202 .101 2.034 .000


239







Table 6.137.















240

Table 6.137

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.121 .176 4.876 .000

Loyalty .567 .055 11.857 .000

2 (Constant) .238 .198 1.768 .000

Loyalty .434 .034 10.543 .000

PV .331 .055 5.541 .000

3 (Constant) .221 .200 .398 .000

Loyalty .345 .038 6.213 .000

PV .245 .043 4.333 .000

CSB .209 .038 2.765 .000

4 (Constant) .232 .247 2.546 .000

Loyalty .303 .021 5.453 .000

PV .229 .054 3.998 .000

CSB .226 .073 3.767 .000

Trust .146 .025 2.221 .000

5 (Constant) .299 .267 2.001 .000

Loyalty .234 .058 6.553 .000

PV .287 .054 3.324 .000

CSB .190 .059 2.435 .000

Trust .128 .071 2.021 .000

Culture .154 .870 1.971 .000


241







Table 6.138.















242

Table 6.138

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.009 .198 4.112 .000

Loyalty .465 .049 10.978 .000

2 (Constant) .212 .179 1.656 .000

Loyalty .399 .012 9.898 .000

PV .309 .043 5.434 .000

3 (Constant) .202 .199 .377 .000

Loyalty .321 .022 6.003 .000

PV .198 .123 4.094 .000

CSB .218 .212 2.565 .000

4 (Constant) .243 .254 2.876 .000

Loyalty .323 .321 5.453 .000

PV .211 .044 3.454 .000

CSB .200 .048 3.675 .000

CS .132 .022 2.333 .000

5 (Constant) .343 .212 2.121 .000

Loyalty .213 .054 6.232 .000

PV .223 .043 3.435 .000

CSB .188 .023 2.232 .000

CS .112 .057 2.121 .000

Culture .232 .546 1.232 .000


243







Table 6.139.















244

Table 6.139

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.122 .188 3.567 .000

Loyalty .343 .037 9.322 .000

2 (Constant) .432 .169 1.232 .000

Loyalty .233 .011 8.765 .000

PV .403 .038 4.665 .000

3 (Constant) .199 .198 .312 .000

Loyalty .434 .013 5.998 .000

PV .177 .125 4.001 .000

CSB .204 .221 2.432 .000

4 (Constant) .202 .234 2.221 .000

Loyalty .321 .329 5.021 .000

PV .203 .042 3.223 .000

CSB .210 .023 3.121 .000

CS .122 .017 2.112 .000

5 (Constant) .340 .256 2.021 .000

Loyalty .199 .043 6.002 .000

PV .202 .039 3.232 .000

CSB .167 .045 2.223 .000

CS .109 .041 1.998 .000

Trust .233 .453 1.675 .000


245















Table 6.140.






246

Table 6.140

Coefficientsa

Model


t Sig. B Std. Error

1 (Constant) 1.125 .191 5.878 .000

Loyalty .714 .053 13.498 .000

2 (Constant) .390 .216 1.806 .000

Loyalty .588 .052 11.311 .000

CS .352 .065 5.444 .000

3 (Constant) .130 .238 .547 .000

Loyalty .474 .056 8.489 .000

CS .290 .062 4.682 .000

PV .294 .073 4.049 .000

4 (Constant) .325 .243 1.335 .000

Loyalty .421 .058 7.247 .000

CS .270 .061 4.437 .000

PV .246 .073 3.358 .000

Trust .177 .068 2.583 .000

5 (Constant) .417 .375 2.447 .000

Loyalty .449 .059 7.645 .000

CS .268 .060 4.478 .000

PV .218 .073 2.985 .000

Trust .168 .067 2.497 .000

Culture .211 .103 2.054 .000


247

6.15 STAGE-WISE MULTIPLE REGRESSION - HABIB BANK LI MITED,

PAKISTAN







Table 6.141


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 CS



3 CSB



4 TRUST



5 CULTURE




248








Table 6.142

Model Summary


1 .802a .680 .688 .39869

2 .841b .792 .876 .38797

3 .865c .840 .790 .38768

4 .877d .872 .801 .40021

5 .887e .899 .768 .43212






249










Table 6.143.


influence on Customer Perceived Value (PV) as F value that is 88.342 shows the significance of the





250

Table 6.143

ANOVA f


1 Regression 30.564 1 30.564 177.324 .000a

Residual 15.770 97 .162

Total 46.334 96

2 Regression 33.397 2 16.224 168.765 .000b

Residual 12.937 97 .133

Total 46.334 99

3 Regression 36.222 3 11.321 102.887 .000c

Residual 10.112 95 .115

Total 46.334 98

4 Regression 36.337 4 9.492 88.342 .000d

Residual 9.997 94 .113

Total 46.334 99

5 Regression 37.677 5 7.543 70.997 .000e

Residual 8.657 95 .100

Total 46.334 98







251







Table 6.144


Model

Variables

Entered

Variables

Removed Method

1 CSB



2 CS



3 PV



4 TRUST



5 CULTURE




252







Table 6.145

Model Summary


1 .808a .720 .599 .40293

2 .855b .772 ..654 .39453

3 .869c .791 .724 .37879

4 .838d .802 .798 .35675

5 .876e .832 .803 .33435






253





significant influence on Customer Loyalty as F value that is 167.543shows the significance of the











254

Table 6.146

ANOVA f


1 Regression 30.119 1 30.119 176.543 .000a

Residual 16.890 98 .154

Total 47.009 99

2 Regression 34.072 2 16.564 167.543 .000b

Residual 12.937 98 .128

Total 47.009 99

3 Regression 35.959 3 11.333 103.454 .000c

Residual 11.050 97 .108

Total 47.009 98

4 Regression 36.684 4 8.657 76.232 .000d

Residual 10.325 94 .100

Total 47.009 98

5 Regression 37.127 5 7.434 70.231 .000e

Residual 9.882 96 .101

Total 47.009 98







255







Table 6.147


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 TRUST



5 CULTURE




256








Table 6.148

Model Summary


1 .800a .610 .567 .37687

2 .832b .722 .546 .36576

3 .832c .770 .675 .37564

4 .897d .792 .778 .34543

5 .899e .843 .664 .39876






257










6.149.







258

Table 6.149

ANOVA f


1 Regression 32.768 1 33.453 179.675 .000a

Residual 14.881 98 .137

Total 47.649 99

2 Regression 34.432 2 15.123 175.876 .000b

Residual 13.217 96 .101

Total 47.649 98

3 Regression 35.435 3 10.342 168.978 .000c

Residual 12.214 94 .109

Total 47.649 98

4 Regression 37.564 4 9.768 90.675 .000d

Residual 10.085 97 .111

Total 47.649 98

5 Regression 38.786 5 7.657 82.879 .000e

Residual 8.863 97 .137

Total 47.649 99







259







Table 6.150


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 CS



5 CULTURE




260







Table 6.151

Model Summary


1 .805a .690 .668 .39657

2 .833b .742 .643 .38767

3 .867c .780 .567 .36565

4 .876d .802 .661 .35543

5 .887e .823 .652 .34576






261
















262

Table 6.152

ANOVA f


1 Regression 34.546 1 34.546 180.565 .000a

Residual 13.654 99 .137

Total 48.2 98

2 Regression 34.432 2 14.543 177.524 .000b

Residual 13.217 97 .100

Total 48.2 98

3 Regression 35.435 3 10.001 172.582 .000c

Residual 12.214 95 .112

Total 48.2 99

4 Regression 37.564 4 8.765 95.524 .000d

Residual 10.085 98 .121

Total 48.2 99

5 Regression 38.786 5 6.765 88.654 .000e

Residual 8.863 96 .122

Total 48.2 98







263







Table 6.153


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 PV



3 CSB



4 CS



5 TRUST




264







Table 6.154

Model Summary


1 .811a .600 .665 .38765

2 .834b .732 .632 .37876

3 .864c .780 .553 .35654

4 .853d .812 .565 .34345

5 .843e .843 .554 .32343






265
















266

Table 6.155

ANOVA f


1 Regression 33.454 1 33.454 178.542 .000a

Residual 12.543 98 .112

Total 45.997 99

2 Regression 34.209 2 12.251 176.548 .000b

Residual 11.342 96 .112

Total 45.997 97

3 Regression 35.654 3 11.253 172.254 .000c

Residual 10.343 96 .119

Total 45.997 97

4 Regression 36.654 4 10.524 96.524 .000d

Residual 9.343 97 .241

Total 45.997 98

5 Regression 37.444 5 8.524 89.256 .000e

Residual 8.553 96 .114

Total 45.997 97






f. Dependent Variable: Custom Culture

267







Table 6.156


Model

Variables

Entered

Variables

Removed Method

1 LOYALTY



2 CS



3 PV



4 TRUST



5 CULTURE




268








Table 6.157

Model Summary


1 .806a .650 .647 .41515

2 .856b .732 .727 .36521

3 .878c .771 .764 .33928

4 .887d .786 .777 .32968

5 .892e .795 .784 .32423






269

















270

Table 6.158

ANOVA f


1 Regression 31.403 1 31.403 182.204 .000a

Residual 16.890 98 .172

Total 48.293 99

2 Regression 35.356 2 17.678 132.543 .000b

Residual 12.937 97 .133

Total 48.293 99

3 Regression 37.243 3 12.414 107.849 .000c

Residual 11.050 96 .115

Total 48.293 99

4 Regression 37.968 4 9.492 87.332 .000d

Residual 10.325 95 .109

Total 48.293 99

5 Regression 38.411 5 7.682 73.078 .000e

Residual 9.882 94 .105

Total 48.293 99







271

CHAPTER 7

SUMMARY, FINDINGS, CONCLUSIONS & RECOMMENDATIONS

7.1 SUMMARY

Building and strengthening relations with customers is essential (Zineldin,1995). The more

stronger the relations of banks with their customers, higher the chances of their success.

If banks build and maintain strong relationships with their customers, it is difficult for competitors

to beat them (Gilbert,2003). Therefore, building and maintaining close relations with customers is

of high importance for any organization.

Although there are many aspects of Customer Relationship Management (CRM) in the

banking sector, this research study focuses on its customer part. The major focus of CRM in banks

is to not only to acquire new customers but also to build customer loyalty in the existing ones. This

research study will help banks to build customer loyalty, which is a major focus of Customer

Relationship Management (CRM).

Customer loyalty is more important than increasing number of customers in a bank

(Colgate,1999). Having many customers without loyalty with their bank can result in loss of

customers anytime as competing banks are trying their best to attract your existing customers as

well. To overcome high competition in the banking sector, banks need to strengthen relations with

their customers to make their customers loyal (Bose,2002). Banks should focus constantly on

building relationship with their customers, because it is the only competitive advantage remaining

to them (Xu,2002).

Banks having more knowledge about their customers gives them a better position than their

competitors who have lack of knowledge about their customers. This thorough understanding of

customers results in better strategies development. As the most successful organizations these days

272

focus on their customers and intensely observe any change in their customer`s lifestyles, wants,

income level, age, preferences, etc so that they can respond to those changes immediately than their

competitors.

Banking sector all over the world facing immense competition and Pakistani banking sector

is not an exception. It is an acceptable fact that acquiring new customer is more costly than

retaining the existing customer. The researcher followed the same fact and developed the basic

purpose of this research study that is to discover the major factors that affect customer loyalty,


in the banking sector of Pakistan. Following research questions helped the researcher to achieve this

research study`s purpose:



2) What is the relationship between the factors that affect customer loyalty in the banking

sector of Pakistan?


The population of this research study consists of customers of banks. Different researchers

have recommended different sample sizes. For instance, 300 respondents are good (Comrey & Lee

,1992; Tabachnick & Fidell, 2001). A sample of 200 to 500 is considered adequate for most

customer surveys (Hill and Alexander, 2000). The sample size should allow at least five responses

for each item and a more acceptable sample size would allow ten responses for each item to be

analyzed (Hair, Anderson, Tatham, & Black, 1998). Therefore, the researcher keeping in mind all

of these researchers sample size criteria, finalized sample size of 400 customers of the four banks

namely National Bank of Pakistan (NBP) serving as a public bank, Habib Bank Limited (HBL),

Pakistan serving as a private bank, Meezan Bank Limited, Pakistan serving as an Islamic bank, and

Citibank serving as a foreign bank in Pakistan.

Operational definitions are required for data collection questionnaire (Davis & Cosenza,

1993). It means that every factor that influences customer loyalty should have specific questions to

273

be asked. For measuring factors or constructs of this research study namely customer trust,

customer perceived value, customer satisfaction, customer switching barriers, customer culture, and

customer loyalty, operationalisation is used.

To measure customer trust, the researcher uses the measure of Hess (1995), Jarvenpaa &

Tractinsky (1999), Gurviez & Korchia (2002), Gefen et al. (2003), and Chiou & Droge (2006). The

researcher uses the measures of Wang et al. (2001) and Llosa (1996) to measure customer

satisfaction. The researcher uses the measures of Lassar et al. (1995) scale to measure customer

perceived value. The researcher uses the measures of Kim, et. al., (2003) to measure customer

switching barriers. The researcher uses the measure of Hofstede (1980; 1994) scale to measure

customer culture. Lastly, the researcher uses the measures of Boulaire and Mathiew (2000),

Srinivasan et al. (2002) and Huang (2008) to measure customer loyalty.

A well-structured, self-administered questionnaire was developed as attached at Appendix-I

as an instrument for data collection from customers of banks. The researcher included brief

instructions in the beginning of questionnaire for improved response with Likert 5-point scale.

Pretesting of the questionnaire improves it and customers easily respond (Saunders et al.,

2000). Hence, the researcher did three-stage pilot testing of the questionnaire.

In the research design, reliability and validity factors have to paid attention in order to

minimize possibility of getting incorrect responses (Saunders et al., 2000). In this research study,

the Cronbach`s Alpha value of all constructs is higher than .70 that indicates reliability of the

research instrument.

The validity of a measurement instrument refers to how well it captures what it is designed

to measure (Rosenthal & Rosnow, 1984). For the validity of the research instrument, the researcher

has used review of related literature for the validity of factors of this research study. The researcher

found the scope of factors of this research study through detailed related literature review.

Researcher also got relevant experts suggestions from various universities in Pakistan for reviewing

this research study`s questionnaire before going for the pilot-testing.

274

To assess the content validity, the researcher got feedback from bank`s experts and bank`s

most regular customers on questionnaire and made changes in this questionnaire accordingly. A

three-stage pilot testing of questionnaire as mentioned above was also performed for improvements

in questionnaire.

The researcher-entered data collected from customers of the selected banks namely

Citibank, National Bank of Pakistan (NBP), Meezan Bank Limited, and Habib Bank Limited

(HBL), Pakistan in SPSS software version 16.00 for demographic analysis, correlation analysis, and

regression analysis. ANOVA, F, Beta, t-test, significance, and coefficient tests were performed to

measure the affects of customer trust, customer perceived value, customer satisfaction, customer

switching barriers, and customer culture on customer loyalty and also to measure the relationships

between these factors.

After detailed analysis and discussions, results of this research study indicate that customer

trust, customer perceived value, customer satisfaction, customer switching barriers, and customer

culture does affect customer loyalty and relationships between these factors vary from bank to

bank.

After measuring relationships of these factors with each other and their affect on customer

loyalty, the researcher responded to this research study`s questions and hypotheses and developed a

customer loyalty model for the banking sector of Pakistan for the mutual benefits of customers and

banks.

7.2 FINDINGS OF THE RESEARCH STUDY

According to the customer loyalty model developed by the researcher as shown in the

Figure 7.1, the affect of studied factors on customer loyalty and their affect on each other vary from

bank to bank, and this variation can help banks to understand their weaknesses, in order to build

and strengthen loyalty of their customers.

Firstly, customer loyalty model developed by the researcher as shown in the Figure 7.1

clearly shows that the affect of customer trust on customer perceived value in case of Citibank is

275

.387, in case of National Bank of Pakistan (NBP) is .305, in case of Meezan Bank Limited is .333,

and in case of Habib Bank Limited is .359. Here a clear variation is seen as the highest affect of

customer trust on customer perceived value is in the case of Citibank that is .387. Therefore, it

proves that customer trust affects customer perceived value and it also proves this research study’s

hypothesis H1 that customer trust has a significant influence on customer perceived value.

Secondly, the model shows that the affect of customer trust on customer satisfaction in case

of Citibank is .573, in case of National Bank of Pakistan (NBP) is .336, in case of Meezan Bank

Limited is .330, and in case of Habib Bank Limited is .587. Here a clear variation is seen as the

highest affect of customer trust on customer satisfaction is in the case of Habib Bank Limited that is

.587. Therefore, it proves that customer trust affects customer satisfaction and it also proves this

research study’s hypothesis H2 that customer trust has a significant influence on customer

satisfaction.

Thirdly, the model shows that the affect of customer trust on customer loyalty also varies

from bank to bank. The affect of customer trust on customer loyalty, in case of Citibank is .474, in

case of National Bank of Pakistan (NBP) is .419, in case of Meezan Bank Limited is .419, and in

case of Habib Bank Limited is .447. Here a clear variation is seen as the highest affect of customer

trust on customer loyalty is in the case of Citibank that is .474. Therefore, it proves that customer

trust affects customer loyalty and it also proves this research study’s hypothesis H3 that customer

trust has a significant influence on customer loyalty.

Fourthly, the model shows that the affect of customer perceived value on customer

satisfaction also varies from bank to bank. The affect of customer perceived value on customer

satisfaction, in case of Citibank is .665, in case of National Bank of Pakistan (NBP) is .354, in case

of Meezan Bank Limited is .352, and in case of Habib Bank Limited is .605. Here a clear variation

is seen as the highest affect of customer perceived value on customer satisfaction is in the case of

Citibank that is .665. Therefore, it proves that customer perceived value affects customer

satisfaction and it also proves this research study’s hypothesis H4 that customer perceived value has

a significant influence on customer satisfaction.

276

Fifthly, the model shows that the affect of customer satisfaction on customer loyalty also

varies from bank to bank. The affect of customer satisfaction on customer loyalty, in case of

Citibank is .657, in case of National Bank of Pakistan (NBP) is .439, in case of Meezan Bank

Limited is .418, and in case of Habib Bank Limited is .615. Here a clear variation is seen as the

highest affect of customer perceived value on customer satisfaction is in the case of Citibank that is

.657. Therefore, it proves that customer satisfaction affects customer loyalty and it also proves this

research study’s hypothesis H5 that customer satisfaction has a significant influence on customer

loyalty.

Sixthly, the model shows that the affect of customer switching barriers on customer loyalty

also varies from bank to bank. The affect of customer switching barriers on customer loyalty, in

case of Citibank is .487, in case of National Bank of Pakistan (NBP) is .493, in case of Meezan

Bank Limited is .349, and in case of Habib Bank Limited is .446. Here a clear variation is seen as

the highest affect of customer switching barriers on customer loyalty is in the case of National Bank

of Pakistan (NBP) that is .493. Therefore, it proves that customer-switching barriers affects

customer loyalty and it also proves this research study’s hypothesis H6 that customer switching

barriers has a significant influence on customer loyalty.

277

Citibank .665 NBP .354 Meezan .352 HBL .605

Citibank .387 NBP .305 Meezan .333 HBL .359 Citibank .573

NBP .336 Meezan .330 HBL .587


Citibank .474 NBP .419 Meezan .419 HBL .447 Citibank .487

NBP .493 Meezan .349 HBL .446


Figure 7.1: Customer loyalty model developed by the researcher

`

4 items

3 items 4 items

5 items

H7

H6

H3

H2

H4

H5

H

H

H

CUSTOMER TRUST

CUSTOMER PERCEIVED VALUE

CUSTOMER SATISFACTION

CUSTOMER LOYALTY


CUSTOMER CULTURE

7 items

6 items

H1

278

Seventhly, the model shows that the affect of customer culture on customer loyalty also

varies from bank to bank. The affect of customer culture on customer loyalty, in case of Citibank is

.446, in case of National Bank of Pakistan (NBP) is .365, in case of Meezan Bank Limited is .483,

and in case of Habib Bank Limited is .403. Here a clear variation is seen as the highest affect of

customer culture on customer loyalty is in the case of Meezan Bank Limited that is .483. Therefore,

it proves that customer culture affects customer loyalty and it also proves this research study’s

hypothesis H7 that customer culture has a significant influence on customer loyalty.

The Table 7.1 shows the findings of the joint correlation analysis of data collected from the

customers of banks namely Citibank, National Bank of Pakistan (NBP), Meezan Bank Limited, and

Habib Bank Limited (HBL), Pakistan.

Table 7.1: correlation analysis of the data collected from the customers of the studied banks namely

Citibank, National Bank of Pakistan, Meezan Bank Limited, & Habib Bank Limited, Pakistan

customer

trust

customer

perceived

value

customer

satisfaction

customer

switching

barriers

customer

culture

customer

loyalty

Customer

Trust 1 0.346 0.457 0.440

Customer

Perceived

Value

1 0.494

Customer


Customer

Switching

Barriers

1 0.444

Customer

Culture 1 0.424

Customer

Loyalty 1

279

As Table 7.1 shows that few factors affect customer loyalty more than other factors. Here

the researcher sees that customer satisfaction is the most correlated element with customer loyalty

having a value of .532. It indicates that customer loyalty will decrease if there is a decrease in

customer satisfaction; and customer loyalty will increase more if there is an increase in the

customer satisfaction and this also proves this research study`s hypothesis H5 that there is

significant influence of customer satisfaction on customer loyalty. Beerli, Martin and Quintana,

(2004), in their loyalty model are also of the view that the customer satisfaction has strong

influence on the customer loyalty. Customer satisfaction helps more to build customer loyalty than

any other factor (Ehigie, 2006). The researcher emphasizes that banks should focus more on the

customer satisfaction being the highest influencer on the customer loyalty. Customer satisfaction

builds customer loyalty and helps to achieve more profit (Jamal and Naser, 2002; Reichheld, 1993;

Federal Express, 1992; Winstanley, 1997). Furthermore, in review of related literature, the

researcher already discussed that customer satisfaction has most influence on customer loyalty as

according to the loyalty models presented by Jamal & Kamal (2004), Levesque & Mc Dougall

(1996), and Moutinho & Smith (2000).

Trust has influence on perceived value, satisfaction, and loyalty (Morgan & Hunt, 1994;

Kaacbachi, 2006). According to Table 7.1, the researcher indicates that correlation between

customer trust and customer perceived value is 0.346 which proves this research study`s hypothesis

H1 that there is significant influence of customer trust on customer perceived value.

According to Table 7.1, the correlation between customer trust and customer satisfaction is

0.457 which proves this research study`s hypothesis H2 that there is significant influence of

customer trust on customer satisfaction, and correlation between customer trust and customer

loyalty is 0.440 which proves this research study`s hypothesis H3 that there is significant influence

of customer trust on customer loyalty. Customer trust correlations with customer perceived value,

customer satisfaction, and customer loyalty factors show that there is a significant influence of

customer trust on customer loyalty. The researcher here emphasizes that banks should focus on

customer trust that directly and indirectly enhances customer loyalty and the result is more loyal

customers, which is the focus of Customer Relationship Management (CRM).

280

In the model presented by Beerli, Martin and Quintana, (2004), customer perceived value

influences customer satisfaction. According to the researcher`s proposed model, correlation

between customer perceived value and customer satisfaction is 0.494 (Table 7.1) meaning that

customer perceived value also influences the customer satisfaction and then customer satisfaction

influences customer loyalty therefore it proves this research study`s hypothesis H4 that there is

significant influence of customer perceived value on customer satisfaction. This finding indicates

that customer perceived value has a strong influence on customer satisfaction, and as earlier

discussed, that the customer satisfaction that is 0.532 (Table 7.1) has the highest correlation than

other factors hence customer perception value role becomes highly significant.

Correlation between customer satisfaction and customer loyalty is 0.532 (Table 7.1) and that

also proves this research study`s hypothesis H5 that there is significant influence of the customer

satisfaction on the customer loyalty. It indicates that customer satisfaction strongly affects the

customer loyalty hence banks in Pakistan should focus more on customer satisfaction.

According to the proposed model, correlation between customer switching barriers and

customer loyalty is 0.444 (Table 7.1) as also presented in the model by Beerli, Martin and

Quintana, (2004) and that also proves this research study`s hypothesis H6 that there is significant

influence of the customer switching barriers on the customer loyalty. It indicates that customer-

switching barriers affect the customer loyalty hence banks in Pakistan should focus on this aspect as

well.

Correlation between customer culture and customer loyalty is 0.424 that finally proves this

research study`s hypothesis H7 that there is significant influence of customer culture on customer

loyalty whereas in the model presented by Beerli, Martin and Quintana, (2004), culture factor is not

given. According to the review of related literature, Pakistani culture has a significant influence on

Pakistani customers. This finding indicates that customer loyalty is influenced by customer culture

as well and in case of cultural differences, this influence becomes more significant.

The t-value in all the findings of this research study is higher than 2 which mean that the

relationship between each question and relevant factor is valid. Therefore, based on all these

281

findings, analysis, and arguments, it proves that researcher`s proposed model of customer loyalty as

shown in Figure 7.1 is valid for the banking sector of Pakistan.

7.3 CONCLUSIONS

A well-integrated process of Customer Relationship Management (CRM) in any bank is not

effective until banks recognize and observe the drivers of customer trust, customer perceived value,

customer satisfaction, customer switching barriers, customer culture, and customer loyalty as this

research study found that these factors affect each other and have a strong influence on building

customer loyalty.

This research study contributes in identifying the affects of customer trust, customer

perceived value, customer satisfaction, customer switching barriers, and customer culture on

customer loyalty in the banking sector of Pakistan. The researcher has also indentified the affect of

these factors on customer loyalty that vary from bank to bank in his customer loyalty model.

Therefore, with the help of this customer loyalty model, banks can understand the causes of these

variations. It is also a fact that precondition to customer loyalty is customer satisfaction as this

research study has also proved it.

Dissatisfied customers of any bank easily switch to another bank at any time therefore it is

essential for banks to understand and recognize the value of customer switching barriers. This

research study proved that if customer-switching barriers are high then the chances of switching

customers to other banks decreases and if the customer switching barriers are low then the chances

of switching customers to other banks increases. Therefore, with the help of this research study,

banks can increase customer-switching barriers to make their customers loyal.

The researcher would also like to mention here that there is hardly any research study

conducted in Pakistan that has seen the affects of customer culture and customer trust on customer

loyalty as the findings of this research study indicates that customer culture and customer trust

affect customer loyalty in the banking sector of Pakistan.

282

Analyses also indicate that relationship of these factors with each other also vary from bank

to bank. The researcher added factors to the existing loyalty model of Beerli, Martin & Quintana

(2004) which improved this existing model.

7.4 RECOMMENDATIONS

Based on the findings of this research study, major recommendations for the banking sector

of Pakistan are:

1) The researcher has indentified variations among key factors namely customer trust,

customer perceived value, customer satisfaction, customer switching barriers, and customer

culture that affect customer loyalty in the banking sector of Pakistan. These identified

variations can help the banking sector of Pakistan to understand real causes of their

weaknesses so that they can overcome these in order to build their customers loyalty.

2) Based on the different responses of customers, banks need to do vigilant segmentation of

customers in order to provide the right products and services to the right customers.

3) This research study proves that customer satisfaction has a significant influence on customer

loyalty, and satisfied customers rarely switch to any other bank. Therefore, in order to

satisfy bank customers better than their competitors, banks have to keep on improving their

existing customer satisfaction strategies.

4) This research study proves that the customer trust affects customer perceived value,

customer satisfaction, and customer loyalty. Therefore, banks by strengthening trust of their

customers can increase customer perceived value, customer satisfaction, and customer

loyalty.

5) Customer perceived value has a significant influence on customer satisfaction hence; banks

should emphasize on improving customer perceived value that results in increased customer

satisfaction.

283

6) As proved by this research study, customer-switching barriers have a significant influence

on customer loyalty. If customer-switching barriers decrease than the chances of leaving

customers are high so banks should keep on improving their products and services to

increase their customer-switching barriers. Therefore, if a bank`s products and services are

of high quality and better than their competitors then it becomes hard for their customers to

switch to some other bank.

7) Banks should focus more on the customer satisfaction being the highest influencer on the

customer loyalty as proved by the customer loyalty model developed by the researcher. This

model also indicates that customer loyalty will decrease if there is a decrease in customer

satisfaction; and customer loyalty will increase more if there is an increase in the customer

satisfaction.

8) Customer culture has a significant influence on customer loyalty as proved by this research

study. It also proves that majority customers of banks in Pakistan believe on collectivism.

Therefore; banks need to focus more on cultural aspects of their customers in order to build

and strengthen customer`s loyalty.

At present, there is intense competition in the banking sector; these recommendations can

help banks to build customer loyalty, as it is one of the major competitive advantages remaining to

banks.

7.5 IMPLICATIONS FOR THEORY AND PRACTICE

Findings and contributions of this research have several implications for theory and practice

as the findings of this research study contribute towards current knowledge on customer loyalty in

the banking sector of Pakistan.

This research identifies the key factors that affect customer loyalty, therefore, banks should

invest resources to enhance customer trust, customer perceived value, customer satisfaction,

customer switching barriers, and customer culture leading to customer loyalty.

284

The researcher strongly believes on the basis of the findings of this research study that

variations among customer trust, customer perceived value, customer satisfaction, customer

switching barriers, and customer culture in banks can help the banking sector of Pakistan to

overcome their existing weaknesses, and improve and develop their existing business strategies in

order to build and strengthen customer loyalty.

This research study`s findings and results will also help banks to better understand cultural

aspects of host countries.

Building customer loyalty is not a simple thing to do for any bank as there is tough

competition going on as every bank is trying its best to absorb customers. Failures of many banks

these days have proved that previous models and traditional methods of working and handling

customers are not working well and banks have to bring change in their strategies to build and

strengthen relations with their customers because it is the only major competitive advantage

remaining.

The findings of this research study will help banks to build customer loyalty of their

customers and it will benefit both the customers and their banks. Furthermore, this research study`s

findings and recommendations contribute towards improvement in existing customer loyalty

strategies of banks.

7.6 FUTURE DIRECTIONS OF RESEARCH

The researcher collected data with the help of questionnaire manually. This research study

could be improved if a web-based survey is conducted to concurrently assess customer`s reactions

to their banks while they interact with bank`s websites. Therefore, another possible direction for

further research might be to use an instant web-based survey in order to enhance validity.

Further research could be conducted to identify the business value of establishing and

developing relationships with varying groups of customers in different countries.

285

This research could be applied more widely to verify to what extent the results can be

transposed to other regions of the world.

The researcher is confident about the implications of his research study but it may be noted

that this research study is based on data collected from only few areas in Pakistan and has a sample

of 400 customers of banks in Pakistan; future research study may focus on data collection from an

entire country or from different countries for better generalization.

The researcher also believes based on this research study`s findings that there may be other

factors that also affect customer loyalty, therefore, research to discover further factors that affect

customer loyalty is recommended.

1

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14

Appendix-I

Questionnaire for customers of banks

Dear Sir/Madam,

Thanks for your most valuable time for filling this questionnaire. Firstly, let me introduce myself, I

am PhD scholar at the National University of Modern Languages (NUML), Islamabad, Pakistan. As

a requirement of my PhD thesis, I am doing this research study to discover the major factors that

affect customer loyalty, which is a focus of Customer Relationship Management (CRM) for

overcoming high competition in the banking sector of Pakistan.

The basic purpose of this questionnaire is to get your feedback about your experience with your

bank.

This survey is anonymous and your responses will be held in the strictest confidence. I thank you

for your time and most useful feedback.

(Mohammad Majid Mahmood Bagram)

PhD scholar

National University of Modern Languages (NUML),

Islamabad, Pakistan

[email protected], 03335188677

15

QUESTIONNAIRE FOR CUSTOMERS OF BANKS (Thanks for your most valuable time and feedback)

� Kindly tick the relevant: GENDER:

1) Male ___________ 2) Female ___________

MARITAL STATUS:

1) Single _______________ 2) Married ______________ INCOME:

1) 21000-30000 _____________ 2) 31000-40000 _____________ 3) 41000-50000 _____________ 4) 51,000 and above _____________

AGE:

1) 20-30 years ________ 2) 31-40 years ________

3) 41-50 years ________ 4) 51 and above years ________

EDUCATION LEVEL: 1) Intermediate and below ________ 2) Bachelor degree ________ 3) Masters and above ________

16

Kindly tick only one best option (in your point of view) out of five given options (Please indicate your level of agreement or disagreement with each statement in this questionnaire)

Strongly

Agree Agree Neutral Disagree

Strongly Disagree

PERCEIVED VALUE Lassar et al. (1995)

5 4 3 2 1

1 The price of services offered by this bank is fair

2 Comparing to what I pay, I receive much more in terms of money, effort and time

3 On the base of simultaneous consideration of what I pay and what I gain, I consider that bank service is of value

SATISFACTION Wang et al. (2001), Llosa (1996)

4 I am satisfied with this bank 5 This bank leaves me a pleasant impression 6 I want to return to this bank in the future 7 I will advise this bank to my friends SWITCHING BARRIERS Kim, et. al., 2003

8 In general switching to a new bank would be a hassle.

9 It would cost me a lot of money to switch from my current bank to another bank.

10 It would cost me a lot of time to switch from my current bank to another bank.

11 It would cost me a lot of effort to switch from my current bank to another bank.

12 Prices of other banks are higher. CULTURE Hofstede (1980; 1994)

13 You have a top priority towards personal goals

14 You feel uncomfortable in unusual situations

15 You buy what you desire without worrying about how others feel or think

16 You buy what you like and stick to your brand

17

TRUST Hess(1995), Jarvenpaa & Tractinsky (1999), Gurviez & Korchia (2002), Gefen et al. (2000), Chiou & Droge (2006)

17 This bank keeps its promises 18 This bank is honest 19 This bank is reliable 20 This bank meets my needs 21 This bank seems capable to manage

transactions on line

22 This bank seems to have solid knowledge in its field

23 I trust the know-how of this bank LOYALTY Boulaire et Mathieu (2000), Srinivasan et al. (2002), Huang (2008).

24 I regularly visit this bank 25 I seldom think of changing this bank to

another one

26 I use this bank each time I need to make any financial transaction

27 I consider this bank as my preferred one 28 I like to use this bank 29 Each time I want to make any financial

transaction, this bank is my first choice

OPEN ENDED QUESTIONS 1. What are your comments regarding current services provided by this bank (you may attach

additional sheets if required)? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

2. Any suggestions for improvement of various services offered by this bank (you may attach

additional sheets if required): ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

Thanks again for your most valuable time & feedback.

18

Appendix-II,

State Bank of Pakistan (SBP) - Organogram

19

Appendix-III

BANKS/ DEVELOPMENT FINANCE INSTITUTIONS REGULATED B Y THE

STATE BANK OF PAKISTAN

S# BANKS

1 PUBLIC

SECTOR BANKS

First Women Bank Limited

Mrs. Shafqat Sultana, President

Dr. Syedna Tahir Saifuddin Memorial Foundation Building,

CL-10/20/2

Beaumont Road, Civil Lines, Karachi

Telephone Office:021-35657681, 35657683

Fax Number:021-35657755

Website :- http://www.fwbl.com.pk

UAN: 111-676-767

National Bank of Pakistan

Syed Ali Raza, President

Head Office, I.I. Chundrigar Road, Karachi

Telephone Office: 021-99212200 & 99212208

Fax Number: 021-99212774

Website :- http://www.nbp.com.pk

The Bank of Khyber

Mr. Bilal Mustafa, Managing Director

24- The Mall, Head Office, Peshawar Cantt.


Fax Number: 091-5276838

20

Website :- http://www.bok.com.pk

UAN: 111-95-95-95

The Bank of Punjab

Mr. Naeemuddin Khan, President

Head Office, BOP TOWER, 10-B, Block E-11, Main

Boulevard Gulberg-III, Lahore

Telephone Office:042-35783711 & 35783712

Fax Number:042-35783713

Website :- http://www.bop.com.pk

2 SPECIALIZED

BANKS

Industrial Development Bank of Pakistan

Mr. Jamal Nasim, Acting Managing Director

State Life Building No. 2, Wallace Road

Off. I. I. Chundrigar Road, Karachi

Telephone Office: 021-99213615

Fax Number: 021-99213617

Website :- http://www.idbp.com.pk

SME Bank Limited

Mr. R. A. Chughtai, President / Chief Executive Officer

40,Jang Building, A. K. Fazal-ul-Haq Road

Blue Area, Islamabad

Telephone Office:051-9203962

Fax Number: 051-9206735

Website :- http://www.smebank.org

UAN: 111-11-00-11

The Punjab Provincial Cooperative Bank Ltd

Mr. Maqsood Qadir Shah, President / Chief Executive Officer

Bank Square, Shahrah-e-Quaid-e-Azam

21

The Mall, Lahore


Fax Number: 042-99211442

Zarai Taraqiati Bank Limited

Mr. Muhammad Zaka Ashraf, President / Chief Executive

Officer

Head Office, 1-Faisal Avenue, P. O. Box No.1400, Islamabad


Fax Number: 051-9252737

Website :- http://www.ztbl.com.pk

3 PRIVATE

BANKS

Allied Bank Limited

Mr. Mohammad Aftab Manzoor, President / Chief Executive

Officer

Central Office, Main Clifton Road

Bath Island, Karachi

Telephone Office: 021-35874221-021-35871339

Fax Number: 021-35835525

Website :- http://www.abl.com

UAN: 111-110-110

Arif Habib Bank Limited

Mr. Husain Lawai, President / Chief Executive Officer

23 Arif Habib Centre, M.T. Khan Road, Karachi

Telephone Office: 021- 32463570

Fax Number: 021-32463575

Website :- http://www.arifhabibbank.com/

UAN: 111-124-725

22

Askari Bank Limited

Mr. Mohammad Rafiquddin Mehkari, President/Chief

Executive Officer

1st Floor, AWT Plaza, The Mall, Rawalpindi.


Fax Number: 051-9271982

Website :-http://www.askaribank.com.pk

UAN: 111-000-786

Atlas Bank Limited

Mr. Abdul Aziz Rajkotwala, President / Chief Executive

Officer

3rd Floor, Federation House

Abdullah Shah Ghazi Road, Clifton, Karachi

Telephone Office: 021-35369283, 35369264

Fax Number: 021-35290274

Website :- http://www.atlasbank.com.pk

Bank Alfalah Limited

Mr. Sirajuddin Aziz, Chief Executive Officer

Head Office, 2nd Floor, B.A. Building

I.I. Chundrigar Road, Karachi

Telephone Office: 021-32416966, 32416795

Fax Number: 021-32434183

Website :- http://www.bankalfalah.com

UAN: 111-777-786

Bank Al Habib Limited

Mr. Abbas D. Habib

Chief Executive/Managing Director

Mackinnons Building

23


Telephone Office: 021- 32419216

Fax Number: 021- 32419752 & 32441881

Website :- http://www.bankalhabib.com

UAN: 111-014-014

Faysal Bank Limited

Mr. Naved A. Khan

President/Chief Executive

Faysal House, ST-02, Commercial, Main Shahrah-e-Faisal,

Karachi


Fax Number: 021-32793131

Website :- http://www.faysalbank.com

UAN: 111-747-747

Habib Bank Limited

Mr. R. Zakir Mahmood


22-Habib Bank Plaza


Telephone Office: 021 - 3241 2128

Fax Number: 021- 3241 1566

Website :- http://www.habibbankltd.com

Habib Metropolitan Bank Limited

Mr. Anjum Zahoor Iqbal


Spencer Building

I. I. Chundrigar Road, Karachi.


24

Fax Number: 021-32630496

Website :- http://www.hmb.com.pk

UAN: 111-18-18-18

JS Bank Limited

Mr. Naveed Qazi

President / Chief Executive

1st Floor, Shaheen Commercial Complex

Dr. Ziauddin Ahmed Road, Karachi

Telephone Office: 021-32635208/32633820

Fax Number: 021-32631803

Website :- http://www.jsbl.com

UAN: 111-777-999

KASB Bank Limited

Mr. Muneer Kamal

President/CEO

Principal Office, Business & Finance Centre


Registered Office, Razia Sharif Plaza (Basement), Jinnah

Avenue, 90 Blue Area, Islamabad

Telephone Office: 021-32446800, 99217082, 051-2276827-30

Fax Number: 021-99217588, 051-2270727

Website :- http://www.kasbbank.com

UAN: 111-555-666

MCB Bank Limited

Mr. Atif Aslam Bajwa


• 22nd Floor, MCB Tower, I.I. Chundrigar Road, Karachi

• 9th Floor, MCB House, 15-Main Gulberg, Lahore

25

Telephone Office: 021-32270075-76 & 042-36041900-01

Fax Number: 021-32270078 & 042-35776619

Website :- http://www.mcb.com.pk

UAN: 111-000-111

Mybank Limited

Mr. Muhammad Bilal Sheikh

President/Chief Executive Officer

2nd Mezzanine Floor, Business & Finance Centre, I. I.

Chundrigar Road, Karachi


Fax Number: 021-32471951

Website :- http://www.mybank.com

UAN: 111-443-111

NIB Bank Limited

Khawaja Iqbal Hassan

President / Chief Executive Officer

Muhammadi House, I. I. Chundrigar Road Karachi

Telephone Office: 021-32420333/021-32427887

Fax Number: 021-32472258

Website :- http://www.nibpk.com

UAN: 111-333-111

SAMBA Bank Limited

Mr. Tawfiq A. Husain


6th Floor, Sidco Avenue Centre, Maulana Deen Muhammad

Wafai Road, Karachi

Telephone Office: 021-35686267, 021-35683059

Fax Number: 021-35658059

26

Website :- http://www.samba.com.pk

UAN: 111-999-333

SILKBANK Limited

Mr. Azmat Shahzad Ahmed Tarin


Central Office, Saudi Pak Building


6-Q Block, Gulberg II, Lahore


:042-35757190-1

Fax Number: 021-32460464

: 042-35761112

Website :- http://www.saudipakbank.com

UAN: 111-00-1987

Soneri Bank Limited

Mr. Safar Ali K. Lakhani


Central Office, 5th Floor, Al-Rahim Tower



Fax Number: 021-32439561

Website :- http://www.soneri.com

UAN: 111-567-890

Standard Chartered Bank (Pakistan) Limited

Mr. Badar Kazmi


3rd Floor, Main Branch, P. O. Box No. 5556

I. I. Chundrigar Road, Karachi

27

Telephone Office: 021-32450288-89

Fax Number: 021-32414914

Website :- http://www.standardchartered.com.pk

UAN: 111-002-002

The Royal Bank of Scotland Limited

Mr. Shehzad Naqvi

Chief Executive Officer

16 Abdullah Haroon Road, Karachi


Fax Number: 021-35683432

Website:-www.rbs.com.pk

United Bank Limited

Mr. Atif R. Bokhari

President & CEO

Head Office, 8th Floor, State Life Building No.1, I.I.

Chundrigar Road, Karachi


Fax Number: 021-32413492

Website :- http://www.ubl.com.pk

UAN: 0800-11-825

4 ISLAMIC

BANKS

BankIslami Pakistan Limited

Mr. Hasan Bilgrami

Chief Executive Officer

11th Floor, Executive Tower, Dolmen City Marine Drive,

Block-4, Clifton, Karachi

Telephone Office: 021-35379797 & 111-247-111 Ext-2001

Fax Number: 021-35379796

Website :-http://www.bankislami.com.pk

28

UAN: 111-247-111

Dawood Islamic Bank Limited

Mr. Pervez Said


3rd Floor, Trade Centre, I. I. Chundrigar Road, Karachi


Fax Number: 021-32272466

Website :- http://www.dawoodislamic.com/

Dubai Islamic Bank Pakistan Limited

Mr. Mohammad Ahmed Mannan

President / Chief Executive

Hassan Chambers, 3rd Floor, Plot DC-7

Block-7, Kehkashan Clifton, Karachi

Telephone Office: 021 -35308923

Fax Number: 021 -35821071 & 35308921

Website :- http://www.dibpak.com/

Emirates Global Islamic Bank Limited

Syed Tariq Hussain


Plot No. 162, Bangalore Co-operative Housing Societies Ltd

(Bangalore Town), Block 7 & 8, Shahrah-e-Faisal, Karachi.

Telephone Office: 021-34307000- 7001/251

Fax Number: 021-34530981

Website :- http://www.egibl.com

Meezan Bank Limited

Mr. Irfan Siddiqui

President & Chief Executive Officer

29

2nd Floor, PNSC Building, M. T. Khan Road Karachi


Fax Number: 021-35610676

Website :- http://www.meezanbank.com

UAN: 111-331-331

5 FOREIGN

BANKS

Albaraka Islamic Bank B.S.C. (E.C.),

Mr. Shafqaat Ahmed

Country Head Pakistan

95-B Hali Road, Gulberg II, Lahore


Fax Number: 042-35756877

Website :- http://www.albaraka.com.pk

UAN: 111-742-742

Barclays Bank PLC

Mr. Mohsin Ali Nathani

Country Head & Managing Director

Dawood Centre, M.T.Khan Road,

Karachi


Fax Number: 021-35634039

Website :-www.barclays.pk

Citibank N.A. - Pakistan Operations

Mr. Arif Usmani

Managing Director & Citi Country Officer

1st Floor, AWT Plaza



Fax Number: 021-32638211

Website :- http://www.citibank.com.pk

30

UAN: 111-333-333

Deutsche Bank AG - Pakistan Operations

Mr. Shazad Dada

Chief Country Officer

Avari Plaza, Fatima Jinnah Road

Karachi -75530


Fax Number: 021-35658325

Website :- http://www.db.com/pakistan/

UAN: 111-555-777

HSBC Bank Middle East Limited - Pakistan Operations

Mr. Muhammad Tahir Sadiq

Chief Executive Officer Pakistan

Bahria Complex III, 9th Floor, M.T. Khan Road, Karachi


Fax Number: 021- 35615226

Website :- http://www.hsbc.com.pk

UAN: 111-852-852

Oman International Bank S.A.O.G -

Pakistan Operations

Mr. Aziz Abbas

Acting Country Manager Pakistan

Ground Floor, Nadir House Building



Fax Number: 021-32418920

Website :- http://www.oiboman.com

31

The Bank of Tokyo-Mitsubishi UFJ Limited - Pakistan

Operations

Mr. Satoshi Hirano

General Manager

1st Floor, Shaheen Complex

M.R. Kayani Road, Karachi


Fax Number: 021-32631368

Website :- http://www.bk.mufg.jp

6 MICRO

FINANCE

BANKS /

INSTITUTIONS

KASHF Microfinance Bank Limited

Mr. Ghazanfar Azzam

President

387-E, Mollana Shoukat Ali Road, Johar Town, Lahore

Telephone Office: 042- 35222784,

042-37747913

Fax Number: 042-35222851

Khushhali Bank Limited

Mr. Muhammad Ghalib Nishtar

President

94 West, 4th Floor, Amir Plaza, Jinnah Avenue Blue Area, P.

O. Box 3111, Islamabad


Fax Number: 051-9206080

Website :- http://www.khushhalibank.com.pk/

UAN: 111-092-092

Network Microfinance Bank Limited

Mr. M. Moazzam Khan


Head Office

32

202-Azayam Plaza, Opp. FTC Building, S.M.C.H.S. Shahrah-

e-Faisal, Karachi

Telephone Office: 021-34311720 - 21

Fax Number: 021-34311722

Website: www.networkmicrobank.com

Pak Oman Microfinance Bank Limited

Mr. Munawar Suleman


Head Office, 2nd Floor, Tower C, Finance & Trade Centre,

Shahrah-e-Faisal, Karachi


Fax Number: 021-35630949

Website :- http://www.pomicro.com/

Rozgar Microfinance Bank Limited

Mr. Azmat Khan

Acting President / Chief Executive Officer

Business Executive Centre

F-17/3, Block-8 Clifton, Karachi


Fax Number: 021-35865145

Website :-http://www.rozgarbank.com/

The First Micro Finance Bank Limited

Mr. Hussain Tejany


62-C, Tauheed Commercial Area

25th Commercial Street, DHA Phase V

Karachi


33

Fax Number: 021-35822434

Website :- http://www.mfb.com.pk

Tameer Micro Finance Bank Limited

Syed Nadeem Hussain


15-A, Block 7 & 8, Central Commercial Area

K.C.H.S. Union, Karachi

Telephone Office: 021 – 34325576

& 111-111-004 Ext-1111

Fax Number: 021- 34325575

Website :- http://www.tameerbank.com/

7. DEVELOPMENT

FINANCE

INSTITUTIONS

House Building Finance Corporation Limited

Syed Azhar Abbas Jaffri

Managing Director / Chief Executive Officer

3rd Floor, Finance & Trade Centre, Tower 'B' Sharea Faisal,

Karachi -74400

Telephone Office:021-99202314

Fax Number: 021-99202360

Website :- http://www.hbfc.com.pk

UAN: 0800 50005

Pak Brunei investment Company Limited

Ms. Ayesha Aziz


Khadija Towers, Plot No. 11/5, Block No.2, Scheme No.5,

Clifton, Karachi


Fax Number: 021-35361213

Website :- http://www.pakbrunei.com.pk

34

Pak-China Investment Company Limited

Mr. Chen Jianbo


13th Floor, Saudi Pak Tower,61-A, Jinnah Avenue, Islamabad

Telephone Office: 051-2800291/688Fax Number: 051-

2800277

Pak Iran Joint Investment Company Limited

Mr. Aizaz Sarfraz


507-508, 5th floor, Progressive Plaza, Beaumont Road, Civil

Lines, Karachi


Fax Number: 021-35638589

Website :- http://www.pijicl.com

Pakistan Kuwait Investment Company Limited

Mr. Shamsul Hasan


4th Floor, Block C, FTC Building

Shahrea Faisal, Karachi


Fax Number: 021-35630939-40

Website :- http://www.pkic.com

UAN: 111-611-611

Pak Libya Holding Company Limited

Mr. Kamal Uddin Khan


5th Floor, Block 'C' Finance & Trade Centre Shahrea Faisal,

Karachi

35


Fax Number: 021-35630654

Website :- http://www.paklibya.com.pk

UAN: 111-111-115

Pak Oman Investment Company Limited

Mr. Agha Ahmed Shah

Managing Director & Chief Executive Officer

1st Floor, Tower 'A', Finance & Trade Centre, Shahrea Faisal,

Karachi

Telephone Office: 021-35630960 & 35630971-75

Fax Number: 021-35630961

Website :- http://www.pakoman.net/

Saudi Pak Industrial & Agricultural Investment Comp any

Limited

Mr. Muhammad Rashid Zahir


19th Floor, Saudi Pak Tower, 61/A

Jinnah Avenue, Blue Area, Islamabad


Fax Number: 051-2800308

Website :- http://www.saudipak.com

UAN: 111-222-003

36

Appendix-IV

37

Appendix-IV

38

Appendix-V

Citibank - network

Citibank

Global locations

Africa 1) Algeria

2) Cameroon

3) Congo, Democratic Republic of

4) Egypt

5) Gabon

6) Ghana

7) Ivory Coast

8) Kenya

9) Morocco

10) Nigeria

11) Senegal

12) South Africa

13) Tanzania

14) Tunisia

15) Uganda

16) Zambia

Asia Pacific 17) Australia

18) Bangladesh

19) Brunei

20) China, People’s Republic of

21) Guam

22) Hong Kong

23) India

24) Indonesia

39

25) Japan

26) Korea

27) Macau

28) Malaysia

29) New Zealand

30) Philippines

31) Singapore

32) Sri Lanka

33) Taiwan

34) Thailand

35) Vietnam

Central America / Caribbean 36) Bahamas

37) Barbados

38) Cayman Islands

39) Costa Rica

40) Dominican Republic

41) El Salvador

42) Guatemala

43) Haiti

44) Honduras

45) Jamaica

46) Nicaragua

47) Panama

48) Puerto Rico

49) Trinidad and Tobago

Europe 50) Austria

51) Belgium

52) Bulgaria

53) Czech Republic

40

54) Denmark

55) Finland

56) France

57) Germany

58) Greece

59) Hungary

60) Ireland

61) Italy

62) Jersey

63) Kazakhstan

64) Luxembourg

65) Monaco

66) Netherlands

67) Norway

68) Poland

69) Portugal

70) Romania

71) Russia

72) Serbia

73) Slovakia

74) Spain

75) Sweden

76) Switzerland

77) Turkey

78) Ukraine

79) United Kingdom

Middle East 80) Bahrain

81) Israel

82) Jordan

83) Kuwait

41

84) Lebanon

85) Pakistan

86) Qatar

87) United Arab Emirates

North America 88) Canada

89) Mexico

90) United States

South America 91) Argentina

92) Bolivia

93) Brazil

94) Colombia

95) Ecuador

96) Paraguay

97) Peru

98) Uruguay

99) Venezuela

Source: (citigroup.com, 2009)

42

Appendix-VI

Citibank Pakistan Milestones

CITIBANK PAKISTAN'S MILESTONES

The nineties were a decade of domination and leadership for Citibank in the Pakistani marketplace

and the trend continues into the new millennium.

1990 • Consumer Bank was established.

1992 • Consumer Asset Business is launched.

• Car Financing is introduced.

• Citigold Priority Banking is established.

• CitiPhone Banking launched.

1994 • Citibank Visa Card (Gold and Silver) is launched.

1995 • Self-Service Banking launched.

1996 • Citibank, N.A. launches its Intranet System in April.

• First bank to launch a Photo Credit Card.

1997 • Citibank wins over 35 awards under the Euromoney Excellence Awards. These

awards included "Best Bank" and "Best Emerging Market Bank" for two successive

years.

43

• Citibank Credit Cards acquire 100,000 members in less than 3 years. This milestone

was achieved faster than any other Citibank business in the Asia Pacific Region.

• Citibank and IBA develop an MBA program focused on Marketing of Financial

Services (MFS).

• Citibank, N.A. undertakes a three year support program for fund raising for the Lady

Dufferin Hospital.

• Citibank, N.A. pledges a donation to LUMS for their "Students Aid Program".

• Citibank, N.A. in November holds its first ever Car Financing Dealer conference in

Bhurban.

• Citibank, N.A. opens its sixth branch on Shahra-e-Faisal in Karachi in December.

This branch has the first 24-hour zone with ATMs and CitiPhone booths.

1998 • Citibank launched Pakistan's first affinity card known as the "Citibank-Shaheen

Credit Card".

1999 • First foreign bank to launch MasterCard in Pakistan.

• Citibank Home Loans is launched.

• Car Financing Product Feature enhancement (25% Down Payment, Free Pre-

approved Credit Card with each car).

• 0% Down Payment product for your second car.

• Complaint Tracking System (CTS) launched.

44

Appendix-VII

Customer Relationship Management

Software

TOP 7 CRM SOFTWARE WITH BRIEF DESCRIPTIONS

CRM Software Brief Description

1 Epicor Sales

Management

Advantages of Epicor - Sales Management

Software: Epicor is optimized for rapid installation, low

training costs, simple operation, easy modification and cost-

effective expansion.

Epicor - Sales Management Technology: Epicor offers

you the choice of a SQL or Progress database, as well as the

ability to run on Windows, Unix or Linux. Epicor also offers

software delivery on-premise, web based, or hosted.

Epicor - Sales Management Software Modules: Web

2.0, Epicor Tools and Technology, Service

Management, Sales Management, Production

Management, Product Data Management, Planning &

Scheduling, Master Data Management, Human Capital

Management, Enterprise Performance

Management, Customer Relationship

Management, Compliance Management, Supply Chain

Management, Financial Management

Epicor - Sales Management Software Pricing: $4,000 -

$500,000+

2 NetSuite

CRM+

NetSuite CRM+

Advantages of NetSuite CRM+ Software: NetSuite is the

45

only web-based CRM system to provide a complete view of

your customers and prospects. NetSuite helps your sales and

service teams sell more effectively improve customer

service, and increase upsell revenue.

NetSuite CRM+ Technology: NetSuite CRM+ is web-

based SaaS (Software as a Service) software, allowing you

to focus on managing your business — not your software.

NetSuite CRM+ Software Modules: Sales Force

Automation, SFA: Order Management, SFA: Upsell/Cross-

Sell, SFA: Incentive Management, Customer Support &

Service, Partner Relationship Management, Real-time

Dashboards, Business Intelligence, Marketing

Automation, Productivity tools, Document Management &

Publishing, Self-Service Customer Portal, Website and

Analytics, Job & Project Tracking, NetFlex

NetSuite CRM+ Software Pricing: $129/ user/ month

(includes maintenance & support)

3 SAP CRM

2007

SAP CRM 2007

Advantages of SAP CRM 2007 Software: SAP CRM

excels because it provides the flexibility to create unique

customer experiences, enables a wide range of end-to-end

business processes to address an array of marketing, sales,

and service situations, and can be deployed step-by-step to

create a more distinctive customer experience.

SAP CRM 2007 Technology: SAP CRM, powered by the

SAP NetWeaver platform, allows for adaptability to

46

changing business needs & to drive customer & user-centric

sales, services, & marketing with an open & flexible

architecture to foster innovation, connect with partners &

suppliers, & run your business more cost-efficiently.

SAP CRM 2007 Software Modules: Business

Communications Management, Sales Capability, Service

Capability, Marketing Capability, Web Channel

Capability, Partner Channel Management Capability

SAP CRM 2007 Software Pricing: Register now to obtain

SAP pricing

47

4 Sage

SalesLogix

Sage SalesLogix

Advantages of Sage SalesLogix Software: With Sage

SalesLogix®, your sales, marketing, and support teams get

everything they need to target, close, and retain customers

for life. You'll sell more, sell faster, and sell smarter.

Sage SalesLogix Technology: Written for the Microsoft

Windows environments, utilizing the Microsoft SQL and

Oracle DBMS'.

Sage SalesLogix Software

Modules: Sales, Marketing, Customer

Service, Support, Mobile Solutions, Dashboards and Sales

Reporting, Application Integration, Outlook®

Integration, Windows Client Requirements, Business

Alerts & Notifications

Sage SalesLogix Software Pricing: Not Available

5 ACT! by Sage

2010

ACT! by Sage 2010

Advantages of ACT! by Sage 2010 Software: With ACT!,

you can organize all the details of your customer

relationships in one place—from basic contact information

to detailed notes on past interactions—for a complete view

of the people you do business with. Take action on your

most qualified sales leads with total visibility and control of

your pipeline.

48

ACT! by Sage 2010 Technology: ACT! includes both

Windows® and Web-based options. ACT! is built on .NET

technology and uses a Microsoft® SQL Server Database.

The ACT! SDK (Software Developer Kit) enables powerful

customized solutions. ACT! Seamlessly integrates with

popular applications like Microsoft® Office.

ACT! by Sage 2010 Software Modules: ACT!

2010, ACT! Corporate Edition 2010, ACT! for Real Estate

2009 (11.0), ACT! for Financial Professionals 2009

(11.0), ACT! Premium 2010

ACT! by Sage 2010 Software Pricing: From $229.99

MSRP

49

6 Sage

SageCRM /

SageCRM.com

Sage SageCRM / SageCRM.com

Advantages of Sage SageCRM / SageCRM.com

Software: With SageCRM your sales, marketing, and

support teams get everything they need to target, close, and

retain customers for life. You'll sell more, sell faster, and

sell smarter.

Sage SageCRM / SageCRM.com Technology: Written for

the Microsoft Windows environments, utilizing the

Microsoft SQL and Oracle DBMS'.

Sage SageCRM / SageCRM.com Software

Modules: Advanced Features, Customer Care, Marketing

Automation, Microsoft Outlook Integration, Offline

Synchronization, Sales Automation, Wireless PDA

Access, Customer Care, Marketing Automation, Sales

Automation, Why On-Demand CRM, Wireless PDA

Access

Sage SageCRM / SageCRM.com Software Pricing: Not

Available

7 Microsoft

Dynamics

CRM

Microsoft Dynamics CRM

Advantages of Microsoft Dynamics CRM

Software: Microsoft Dynamics CRM is customer

relationship management (CRM) software used to create a

clear picture of customers. Its sales, marketing and customer

50

service modules drive measurable improvements, enhance

relationships and increase profitability.

Microsoft Dynamics CRM Technology: Microsoft

Dynamics Retail Management System (RMS) offers small

and mid-market retailers a complete point-of-sale (POS).

Microsoft Dynamics CRM Software Modules: Microsoft

Dynamics CRM Sales Solution, Microsoft Dynamics CRM

Services Solution, Microsoft Dynamics CRM Marketing

Solution, Guardian Management LLC, Sandhills

Publishing, WebTrends

Microsoft Dynamics CRM Software Pricing: $5,000 to

$50,000

(Top 7 CRM software, 2020software.com, 2009)

51

Appendix-VIII

Central Board of Directors,

State Bank of Pakistan (SBP)

1 Governor Chairman 2 Mr. Salman Siddique Member 3 Mr. Kamran Y. Mirza Member 4 Mr. Zaffar A. Khan Member 5 Mirza Qamar Baig Member 6 Mr. Asad Umar Member 7 Mr. Waqar A. Malik Member 8 Mr. Aftab Mustafa Khan Corporate Secretary

52

Appendix-IX

Various departments of the State Bank of Pakistan (SBP)

VARIOUS DEPARTMENTS OF THE STATE BANK OF PAKISTAN ( SBP)

Agricultural Credit Department

Banking Inspection (On-Site) Department

Banking Policy & Regulations Department

Banking Surveillance Department

Business Support Services Department

Domestic Market & Monetary Management Department

Economic Analysis Department

Exchange Policy Department

External Relations Department

Finance Department

Financial Markets Strategy & Conduct Department

Financial Stability Department

General Counsel's Office

Human Resource Department

Information Systems & Technology Department

Infrastructure / Housing Finance Department

Internal Audit & Compliance Department

International Markets & Investments Department

Islamic Banking Department

Monetary Policy Department

Museum & Art Gallery Department

NIBAF Karachi & Islamabad

53

Office of the Corporate Secretary

Off-site Supervision & Enforcement Department

Payment System Department

Research Department

Risk Management and Compliance Department.

Real Time Gross Settlement System (RTGS System)

Microfinance Department

SME Finance Department

Statistics and Data Warehouse Department

Strategic and Corporate Planning Department

Training & Development Department

Treasury Operations (Back Office) Department

54

Appendix-X

Quaid-i-Azam's Speech

On the occasion of the Opening Ceremony of The State Bank of Pakistan on 1st July, 1948

"Mr. Governor, Directors of State Bank, Ladies and Gentlemen.

The opening of the State Bank of Pakistan symbolises the sovereignty of our State in the

financial sphere and I am very glad to be here today to perform the opening ceremony. It

was not considered feasible to start a Bank of our own simultaneously with the coming into

being of Pakistan in August last year. A good deal of preparatory work must precede the

inauguration of an institution responsible for such technical and delicate work as note issue

and banking. To allow for this preparation, it was provided, under the Pakistan Monetary

System and Reserve Bank Order, 1947, that the Reserve Bank of India should continue to be

the currency and banking authority of Pakistan till the 30th September, 1948. Later on it was

felt that it would be in the best interests of our State if the Reserve Bank of India were

relieved of its functions in Pakistan, as early as possible. The State of transfer of these

functions to a Pakistan agency was consequently advanced by three months in agreement

with the Government of India and the Reserve Bank. It was at the same time decided to

establish a Central Bank of Pakistan in preference to any other agency for managing our

currency and banking. This decision left very little time for the small band of trained

personnel in this field in Pakistan to complete the preliminaries and they have by their

untiring effort and hard work completed their task by the due date which is very creditable

to them, and I wish to record a note of our appreciation of their labours.

As you have observed, Mr. Governor in undivided India banking was kept a close preserve

of non-Muslims and their migration from Western Pakistan has caused a good deal of

dislocation in the economic life of our young State. In order that the wheels of commerce

and industry should run smoothly, it is imperative that the vacuum caused by the exodus of

55

non-Muslims should be filled without delay. I am glad to note that schemes for training

Pakistan nationals in banking are in hand. I will watch their progress with interest and I am

confident that the State Bank will receive the co-operation of all concerned including the

banks and Universities in pushing them forward. Banking will provide a new and wide field

in which the genius of our young men can find full play. I am sure that they will come

forward in large numbers to take advantage of the training facilities which are proposed to

be provided. While doing so, they will not only be benefiting themselves but also

contributing to the well-being of our State.

I need hardly dilate on the important role that the State Bank will have to play in regulating

the economic life of our country. The monetary policy of the bank will have a direct bearing

on our trade and commerce, both inside Pakistan as well as with the outside world and it is

only to be desired that your policy should encourage maximum production and a free flow

of trade. The monetary policy pursued during the war years contributed, in no small

measure, to our present day economic problems. The abnormal rise in the cost of living has

hit the poorer sections of society including those with fixed incomes very hard indeed and is

responsible to a great extent for the prevailing unrest in the country. The policy of the

Pakistan Government is to stabilise prices at a level that would be fair to the producer, as

well as the consumer. I hope your efforts will be directed in the same direction in order to

tackle this crucial problem with success.

I shall watch with keenness the work of your Research Organization in evolving banking

practices compatible with Islamic ideas of social and economic life. The economic system

of the West has created almost insoluble problems for humanity and to many of us it

appears that only a miracle can save it from disaster that is not facing the world. It has failed

to do justice between man and man and to eradicate friction from the international field. On

the contrary, it was largely responsible for the two world wars in the last half century. The

Western world, in spite of its advantages, of mechanization and industrial efficiency is today

in a worse mess than ever before in history. The adoption of Western economic theory and

practice will not help us in achieving our goal of creating a happy and contended people.

We must work our destiny in our own way and present to the world an economic system

56

based on true Islamic concept of equality of manhood and social justice. We will thereby be

fulfilling our mission as Muslims and giving to humanity the message of peace which alone

can save it and secure the welfare, happiness and prosperity of mankind.

May the Sate Bank of Pakistan prosper and fulfil the high ideals which have been set as its

goal.

In the end I thank you, Mr. Governor, for the warm welcome given to me by you and your

colleagues, and the distinguished guests who have graced this occasion as a mark of their

good wishes and the honour your have done me in inviting me to perform this historic

opening ceremony of the State Bank which I feel will develop into one of our greatest

national institutions and play its part fully throughout the world."

Quaid-i-Azam Muhammad Ali Jinnah

1st July, 1948

57

Appendix-XI

STATUTORY OBLIGATIONS OF

THE STATE BANK OF PAKISTAN (SBP)

STATUTORY OBLIGATIONS

STATUTORY CASH RESERVE

In terms of Section36(1) SBP Act, 1956, every scheduled bank is required to maintain with

State Bank a balance the amount of which shall not at the close of business or any day be

less than such percentage of Time & Demand Liabilities in Pakistan as may be determined

by State Bank.

Presently the requirement is 5% on weekly average basis subject to daily minimum of 4% of

Time & Demand Liabilities (reference BPRD Circular No.27 dated 2nd July,1999).

STATUTORY LIQUIDITY REQUIREMENT

In terms of Section 29(1) of Banking Companies Ordinance, 1962 every banking company

shall maintain in Pakistan in cash, gold or un-encumbered approved securities valued at

price not exceeding "the lower of cost or the current market price" an amount which shall

not at the close of business in any day be less than such percentage of the total of its time &

demand liabilities in Pakistan, as may be notified by State Bank from time to time.

Presently the requirement is 15% (excluding 5% statutory cash reserve) of the total of its

time and demand liabilities in Pakistan (BPRD Circular No.26 dated 2nd July, 1999).

MAINTENANCE OF LIQUIDITY AGAINST CERTAIN LIABILITIE S

In terms of Rule 6 of NBFIs Rules of Business, all NBFIs are required to invest 14% of their

liabilities defined in the Rule, in Government Securities, NIT Units, shares of listed

companies or listed debt securities in the prescribed manner. For the purpose of this rule,

58

liabilities shall not include NBFIs equity, borrowings from financial institutions including

accruals thereon, lease key money, deferred taxation not payable within 12 months,

dividend payable within two months, advance lease rentals and deposits from financial

institutions. In addition, they are also required to maintain cash balance with State Bank,

which shall not be less than 1% of their liabilities as defined above.

SUBMISSION OF ANNUAL AUDITED ACCOUNTS BY NBFIs

Under Rule 17 of NBFIs Rule of Business, all NBFIs are required to invest to submit their

annual audited accounts within a period of 6 months after the close of their accounting year.

ANNUAL ACCOUNTS

At the expiration of each calendar year every banking company incorporated in Pakistan, in

respect of all business transacted by it, and every banking company incorporated outside

Pakistan, in respect of all business transited through its branches in Pakistan, shall prepare

with reference to that year a balance-sheet and profit and loss account as on the last woking

day of the year in the prescribed forms(Section 34 of Banking Companies Ordinance, 1962).

SUBMISSION OF RETURNS.

The accounts and balance-sheet referred to in section 34 together with the auditor’s report as

passed in the annual General Meeting shall be published in the prescribed manner, and three

copies thereof shall be furnished as returns to the State Bank within three months of the

close of the period to which they relate (Section 36 of Banking Companies Ordinance,

1962).

MINIMUM CAPITAL REQUIREMENTS

In terms of Section 13 of Banking Companies Ordinance, 1962 no banking company shall

commence business unless it has a minimum paid up capital as may be determined by the

State Bank or carry on business unless the aggregate of its capital and unencumbered

general reserves is of such minimum value within such period as may be determined and

59

notified by the State Bank from time to time for banking companies in general or for a

banking company in particular.

As present, all banks operating in Pakistan are required to maintain capital and

unhecumbered general reserve, the value of which is not less than 8% of their risk weighted

assets. Additionally they are also required to maintain a minimum paid up capital of Rs.500

million.

60

Appendix-XII

CORE FUNCTIONS OF STATE BANK OF PAKISTAN

State Bank of Pakistan is the Central Bank of the country. While its constitution, as

originally laid down in the State Bank of Pakistan Order 1948, remained basically

unchanged until 1st January 1974 when the Bank was nationalised, the scope of its functions

was considerably enlarged. The State Bank of Pakistan Act 1956, with subsequent

amendments, forms the basis of its operations today.

Under the State Bank of Pakistan Order 1948, the Bank was charged with the duty to

"regulate the issue of Bank notes and keeping of reserves with a view to securing monetary

stability in Pakistan and generally to operate the currency and credit system of the country

to its advantage". The scope of the Bank’s operations was considerably widened in the State

Bank of Pakistan Act 1956, which required the Bank to "regulate the monetary and credit

system of Pakistan and to foster its growth in the best national interest with a view to

securing monetary stability and fuller utilisation of the country’s productive resources".

Under financial sector reforms, the State Bank of Pakistan was granted autonomy in

February 1994. On 21st January, 1997, this autonomy was further strengthened by issuing

three Amendment Ordinances (which were approved by the Parliament in May, 1997)

namely, State Bank of Pakistan Act, 1956, Banking Companies Ordinance, 1962 and Banks

Nationalisation Act, 1974. The changes in the State Bank Act gave full and exclusive

authority to the State Bank to regulate the banking sector, to conduct an independent

monetary policy and to set limit on government borrowings from the State Bank of Pakistan.

The amendments in Banks Nationalisation Act abolished the Pakistan Banking Council (an

institution established to look after the affairs of NCBs) and institutionalised the process of

appointment of the Chief Executives and Boards of the nationalised commercial banks

(NCBs) and development finance institutions (DFIs), with the Sate Bank having a role in

their appointment and removal. The amendments also increased the autonomy and

accountability of the Chief Executives and the Boards of Directors of banks and DFIs.

61

Like a Central Bank in any developing country, State Bank of Pakistan performs both the

traditional and developmental functions to achieve macro-economic goals. The traditional

functions, which are generally performed by central banks almost all over the world, may be

classified into two groups: (a) the primary functions including issue of notes, regulation and

supervision of the financial system, bankers’ bank, lender of the last resort, banker to

Government, and conduct of monetary policy, and (b) the secondary functions including the

agency functions like management of public debt, management of foreign exchange, etc.,

and other functions like advising the government on policy matters and maintaining close

relationships with international financial institutions. The non-traditional or promotional

functions, performed by the State Bank include development of financial framework,

institutionalisation of savings and investment, provision of training facilities to bankers, and

provision of credit to priority sectors. The State Bank also has been playing an active part in

the process of islamization of the banking system. The main functions and responsibilities

of the State Bank can be broadly categorised as under.

REGULATION OF LIQUIDITY

Being the Central Bank of the country, State Bank of Pakistan has been entrusted with the

responsibility to formulate and conduct monetary and credit policy in a manner consistent

with the Government’s targets for growth and inflation and the recommendations of the

Monetary and Fiscal Policies Co-ordination Board with respect to macro-economic policy

objectives. The basic objective underlying its functions is two-fold i.e. the maintenance of

monetary stability, thereby leading towards the stability in the domestic prices, as well as

the promotion of economic growth.

To regulate the volume and the direction of flow of credit to different uses and sectors, the

Bank makes use of both direct and indirect instruments of monetary management. Until

recently, the monetary and credit scenario was characterised by acute segmentation of credit

markets with all the attendant distortions. Pakistan embarked upon a program of financial

sector reforms in the late 1980s. A number of fundamental changes have since been made in

the conduct of monetary management which essentially marked a departure from

62

administrative controls and quantitative restrictions to market-based monetary management.

A reserve money management programme has been developed. In terms of the programme,

the intermediate target of M2 would be achieved by observing the desired path of reserve

money - the operating target. While use in now being made of such indirect instruments of

control as cash reserve ratio and liquidity ratio, the program’s reliance is mainly on open

market operations.

ENSURING THE SOUNDNESS OF FINANCIAL SYSTEM:

REGULATION AND SUPERVISION

One of the fundamental responsibilities of the State Bank is regulation and supervision of

the financial system to ensure its soundness and stability as well as to protect the interests of

depositors. The rapid advancement in information technology, together with growing

complexities of modern banking operations, has made the supervisory role more difficult

and challenging. The institutional complexity is increasing, technical sophistication is

improving and technical base of banking activities is expanding. All this requires the State

Bank for endeavoring hard to keep pace with the fast-changing financial landscape of the

country. Accordingly, the out dated inspection techniques have been replaced with the new

ones to have better inspection and supervision of the financial institutions. The banking

activities are now being monitored through a system of ‘off-site’ surveillance and ‘on-site’

inspection and supervision. Off-site surveillance is conducted by the State Bank through

regular checking of various returns regularly received from the different banks. On other

hand, on-site inspection is undertaken by the State Bank in the premises of the concerned

banks when required.

To deepen and broaden financial markets as also to diversify the sources of credit, a number

of non-bank financial institutions (NBFIs) were allowed to increase substantially. The State

Bank has also been charged with the responsibilities of regulating and supervising of such

institutions. To regulate and supervise the activities of these institutions, a new Department

namely, NBFIs Regulation and Supervision Department was set up. Moreover, in order to

63

safeguard the interest of ultimate users of the financial services, and to ensure the viability

of institutions providing these services, the State Bank has issued a comprehensive set of

Prudential Regulations (for commercial banks) and Rules of Business (for NBFIs).

The "Prudential Regulations" for banks, besides providing for credit and risk exposure

limits, prescribe guide lines relating to classification of short-term and long-term loan

facilities, set criteria for management, prohibit criminal use of banking channels for the

purpose of money laundering and other unlawful activities, lay down rules for the payment

of dividends, direct banks to refrain from window dressing and prohibit them to extend fresh

laon to defaulters of old loans. The existing format of balance sheet and profit-and-loss

account has been changed to conform to international standards, ensuring adequate

transparency of operations. Revised capital requirements, envisaging minimum paid up

capital of Rs.500 million have been enforced. Effective December,1997, every bank was

required to maintain capital and unencumbered general reserves equivalent to 8 per cent of

its risk weighted assets.

The "Rules of Business" for NBFIs became effective since the day NBFIs came under State

Bank’s jurisdiction. As from January, 1997, modarbas and leasing companies, which are

also specialized type of NBFIs, are being regulated/supervised by the Securities and

Exchange Commission (SECP), rather than the State Bank of Pakistan.

EXCHANGE RATE MANAGEMENT AND BALANCE OF PAYMENTS

One of the major responsibilities of the State Bank is the maintenance of external value of

the currency. In this regard, the Bank is required, among other measures taken by it, to

regulate foreign exchange reserves of the country in line with the stipulations of the Foreign

Exchange Act 1947. As an agent to the Government, the Bank has been authorised to

purchase and sale gold, silver or approved foreign exchange and transactions of Special

Drawing Rights with the International Monetary Fund under sub-sections 13(a) and 13(f) of

Section 17 of the State Bank of Pakistan Act, 1956.

64

The Bank is responsible to keep the exchange rate of the rupee at an appropriate level and

prevent it from wide fluctuations in order to maintain competitiveness of our exports and

maintain stability in the foreign exchange market. To achieve the objective, various

exchange policies have been adopted from time to time keeping in view the prevailing

circumstances. Pak-rupee remained linked to Pound Sterling till September, 1971 and

subsequently to U.S. Dollar. However, it was decided to adopt the managed floating

exchange rate system w.e.f. January 8, 1982 under which the value of the rupee was

determined on daily basis, with reference to a basket of currencies of Pakistan’s major

trading partners and competitors. Adjustments were made in its value as and when the

circumstances so warranted. During the course of time, an important development took

place when Pakistan accepted obligations of Article-VIII, Section 2, 3 and 4 of the IMF

Articles of Agreement, thereby making the Pak-rupee convertible for current international

transactions with effect from July 1, 1994.

After nuclear detonation by Pakistan in 1998, a two-tier exchange rate system was

introduced w.e.f. 22nd July 1998, with a view to reduce the pressure on official reserves and

prevent the economy to some extent from adverse implications of sanctions imposed on

Pakistan. However, effective 19th May 1999, the exchange rate has been unified, with the

introduction of market-based floating exchange rate system, under which the exchange rate

is determined by the demand and supply positions in the foreign exchange market. The

surrender requirement of foreign exchange receipts on account of exports and services,

previously required to be made to State Bank through authorized dealers, has now been

done away with and the commercial banks and other authorised dealers have been made free

to hold and undertake transaction in foreign currencies.

As the custodian of country’s external reserves, the State Bank is also responsible for the

management of the foreign exchange reserves. The task is being performed by an

Investment Committee which, after taking into consideration the overall level of reserves,

maturities and payment obligations, takes decision to make investment of surplus funds in

such a manner that ensures liquidity of funds as well as maximises the earnings. These

reserves are also being used for intervention in the foreign exchange market. For this

65

purpose, a Foreign Exchange Dealing Room has been set up at the Central Directorate of

State Bank of Pakistan and services of a ‘Forex Expert’ have been acquired.

DEVELOPMENTAL ROLE OF STATE BANK

The responsibility of a Central Bank in a developing country goes well beyond the

regulatory duties of managing the monetary policy in order to achieve the macro-economic

goals. This role covers not only the development of important components of monetary and

capital markets but also to assist the process of economic growth and promote the fuller

utilisation of a country’s resources.

Ever since its establishment, the State Bank of Pakistan, besides discharging its traditional

functions of regulating money and credit, has played an active developmental role to

promote the realisation of macro-economic goals. The explicit recognition of the

promotional role of the Central Bank evidently stems from a desire to re-orientate all

policies towards the goal of rapid economic growth. Accordingly, the orthodox central

banking functions have been combined by the State Bank with a well-recognised

developmental role.

The scope of Bank’s operations has been widened considerably by including the economic

growth objective in its statute under the State Bank of Pakistan Act 1956. The Bank’s

participation in the development process has been in the form of rehabilitation of banking

system in Pakistan, development of new financial institutions and debt instruments in order

to promote financial intermediation, establishment of Development Financial Institutions

(DFIs), directing the use of credit according to selected development priorities, providing

subsidised credit, and development of the capital market.

66

Appendix-XIII

NATIONAL BANK OF PAKISTAN (NBP)

VISION, MISSION, & CORE VALUES

VISION

National Bank of Pakistan`s (NBP) vision is “ to be recognized as a leader and a brand synonymous

with trust, highest standards of service quality, international best practices and social responsibility”

(NBP, 2009).

MISSION

National Bank of Pakistan`s (NBP) mission is stated as:

� Institutionalizing a merit and performance culture

� Creating a distinctive brand identity by providing the highest standards of services

� Adopting the best international management practices

� Maximizing stakeholders value

� Discharging our responsibility as a good corporate citizen of Pakistan and in countries

where we operate (NBP, 2009)

CORE VALUES

National Bank of Pakistan`s (NBP) core values are:

� Highest standards of Integrity

� Institutionalizing team work and performance culture

� Excellence in service

� Advancement of skills for tomorrow’s challenges

� Awareness of social and community responsibility

� Value creation for all stakeholders (NBP, 2009)

67

Appendix-XIV

AWARDS & ACHIEVEMENTS

THE NATIONAL BANK OF PAKISTAN

"Best Foreign Exchange Bank

2008” awarded by world's leading financial

journal “Global Finance."

Stable AAA/A-1+(Triple A/A-One Plus)

rating (Standalone Basis) by JCR-VIS (July

2007)

Best Return on Capital for 2006 amongst all

Banks in Asia . -“ Banker Magazine” in July

2007

World's leading financial journal, “Global

Finance” has named NBP as the Best

Emerging Market Bank from Pakistan for

the year 2006 .

"Best Foreign Exchange Bank –

Pakistan” award for the year 2006 by world's

leading financial journal “Global Finance ” .

Due to consistent improvement in NBP's

Core Profitability , Asset Quality and

Economic Capitalization in recent years

,Moody's Investors Service upgraded the

Financial Strength Rating (FSR) rom E+ to

D-, in November 2005 .

“ Best Foreign Exchange Bank –

“ Euromoney” Magazine, a leading and

prestigious journal, published from London ,

UK , in its issue of March 2005 has

published Moody's Investors

Service rankings in which NBP is the only

Pakistani bank which has been ranked among

the Top 100 banks of Asia for it performance

in the fiscal year 2003

WEBCOP-AASHA, an alliance against

gender discrimination at workplace, presented

a Recognition Award to National Bank of

Pakistan on December 18, 2004 for having

a Gender Sensitive Management .

In May 2004, NBP's standalone long-term

rating was upgraded by JCR-VIS Credit

Rating Agency to AA (double A) from AA -(

double A minus) with “stable outlook”, while

standalone short-term rating was maintained at

A-1+(A one plus). This is now the best

rating for a local commercial bank in

Pakistan .

In its issue of March 2004, “Global

Finance” has also declared NBP as “The Best

Foreign Exchange Bank” in Pakistan .

The “Banker Magazine” in July 2003

68

Pakistan” award for the year 2005 by world's

leading financial journal “Global Finance ”.

“ Best Bank - Pakistan” award for the year

2005 by world's leading financial

journal “Global Finance ”.

The Asian Banker, a reputable financial

journal, has published the report of its research

project on the ranking of 300 of Asia 's

Strongest Banks based on a 11-Dimensional

Dynamic Scoring Criteria has adjudged

National Bank of Pakistan as theStrongest

Bank in Pakistan .

On the basis of overall financial performance

during 2004, NBP has been listed “Amongst

top 1000 banks in the world” and“ Number

1 Bank in Pakistan” by the

prestigious “Banker Magazine” in its issue of

July 2005 .

The “Banker Magazine” in July 2005

recognized NBP as the10th Best Bank in

terms of ‘Profit on Capital' in the world .

“ Bank of the Year” awarded for the

year 2005 by the world renowned “The

Banker” magazine owned by the Financial

Times Group, London.

On an all Pakistan basis National Bank of

recognized NBP as the bank with the highest

return on capital in Asia and No.8 in the

world.

World's leading financial journal, “Global

Finance”after a worldwide survey declared

NBP in its issue of May 2003 as one of

the best banks in the emerging markets.




Times Group, London




Times Group, London

President's Awards:

1) Mr. S. Ali Raza, Chairman & President,

NBP was awarded “The Asian Banker

Leadership Achievement Award 2007” by

Asian Banker ( an internationally reputed

Financial Journal) in its issue of June 2007

2) Mr. S. Ali Raza Chairman & President,

NBP, was conferred Sitara-i-Imtiaz by the

President of Pakistan , General Pervaiz

Musharraf on August 14, 2005

3) “ Business Week” of “The McGraw Hill

69

Pakistan was awarded the “Kissan Times

Award” for the year 2005 by the Prime

Minister , Mr. Shaukat Aziz, for its services in

the Agriculture Sector .World's leading

financial journal, “Global Finance” in an

exclusive survey has named NBP as the Best

Emerging Market Bank from Pakistan for

the year 2005 .

“ Bank of the Year” award for the

year 2004 by the world renowned “ The


Times Group , London .

Companies” in its July 11,2005 edition has

adjudged Mr. S. Ali Raza, Chairman

President, NBP as one of the twenty

five Leaders of Asia at the & Forefront of

Change and has identified them as Stars of

Asiaincluding the President of Indonesia

4) Mr. S. Ali Raza's (Chairman & President,

NBP) capabilities were also recognized by

the Institute of Bankers in Pakistan when he

was awarded a gold medal in 2003 .

70

Appendix-XV

Board of Directors

National Bank of Pakistan

Syed Ali Raza

Chairman & President

Syed Ali Raza is the Chairman and President of National Bank of

Pakistan (NBP), the largest commercial bank of the country. Mr. Raza is

a graduate of the London School of Economics and M.Sc. in Admn.

Sciences as well as a Fellow Member of The Institute of Bankers in

Pakistan. He started his career in 1974 with Bank of America, arising to

become Managing Director and Regional Manager for the Middle East,

North Africa and Pakistan for Bank of America.

Mr. Tariq Kirmani

Director

Soon after completing his Masters in Business Administration (MBA)

Mr. Kirmani embarked upon a rewarding career, starting with a multi-

national Oil Company (Caltex later Chevron Pakistan) in 1969 and

worked for seven years in the United States of America, United Arab

Emirates and Australia in different senior management positions in

Marketing Operations and Finance. In 1991, Mr. Kirmani became the

first Pakistani to be elected as a Company Director of the mentioned

multi-national company.

71

Mrs. Haniya Shahid Naseem

Director

Mrs. Haniya Shahid Naseem is an MBA with more than fifteen years

experience of working in the education, social, industrial textile and

agriculture sectors of Pakistan. She has served for 5 years on the Board

of a textile company, having a turnover of more than one Billion Rupees.

Presently she is actively involved in the administration of Pakistan Public

School Multan. She is a progressive agriculturist and actively participates

in the management of her family’s agricultural farms. She is a member

of the Multan Chamber of Commerce and Industry, and is also on the

guest faculty of IBA, Multan.

Ms. Nazrat Bashir

Director

Ms. Nazrat Bashir belongs to District Management Group of Civil

Services of Pakistan. She is Masters in Economics from New York

University, New York, USA and Master in Psychology from Peshawar

University, Peshawar

She has extensively traveled abroad and has attended various

international Seminars and Conferences such as on Micro Finance, Anti

Money Laundering, Instruments of Financial Markets etc. Domestically

too she has attended various programmes in some of very prestigious

institutions of Pakistan.

Mr. Ekhlaq Ahmed

Secretary Board of Directors

Mr. Ekhlaq Ahmed, EVP is the Company Secretary of the Bank and also

the Secretary of Credit & Operations Committees. He is M.A.

(Economics) from Rajshahi University, Bangladesh (former East

Pakistan). He is a Diplomaed Associate Institute of Bankers, Pakistan

(DAIBP) and secured overall 1 st position in order of merit and won

72

Muslim Commercial Bank Prize in the subject of “Foreign Trade &

Foreign Exchange”. He is an Associate of Institute of Corporate

Secretaries of Pakistan (ACIS). He is also a “Certified Director” on the

panel of Pakistan Institute of Corporate Governance (PICG) since

November, 2007. Mr. Ekhlaq Ahmed is the first senior executive of the

Bank who has achieved the status of “Certified Director”.

73

Appendix-XVI

Director`s Report

The National Bank of Pakistan

Corporate and Investment Banking

Corporate & Investment Banking Group enjoys robust relationship with premier corporate

clients. The length and breadth of our corporate clientele has been built on corporate strategy

of providing comprehensive and customized financial solutions to our corporate customers.

Varied banking and investment products are offered to the corporate clients from working

capital financing to infrastructure project, structured and syndicated financing, divestitures,

financial restructuring, mergers and acquisitions assignments and associated financing

solutions.

Audit & Inspection

Internal Auditing is an independent, objective assurance and consulting activity designed to add

value and improve organizational operations. It helps the bank accomplish its objectives by

bringing a systematic, disciplined approach to

evaluate and improve the effectiveness of risk management, control and governance processes.

Credit and Risk Management

NBP is continuously upgrading its risk management process to identify, evaluate and manage risk.

Our focus includes analysis, evaluation and management of all risks which include credit, liquidity,

market, operational and reputation risks. The bank’s risk management policies and procedures are

subject to high degree of supervision and guidance to ensure that all risk categories are

systematically identified, measured, analyzed and proactively managed.

Compliance

74

Compliance is an independent function that identifies, assesses, advises, monitors and reports on

the Bank’s compliance risk, i.e. the risk of legal or regulatory sanctions, financial loss or loss to the

reputation which the bank may suffer as a result of its failure to comply with applicable laws,

regulations, and codes of conduct and standards of best practices. The bank has accelerated its

efforts proactively to strengthen compliance culture in the bank. During 2009 we have revised

Compliance Review Program (CRP) to incorporate relevant changes in rules, regulations and

changing dynamics to help senior management in identifying and assessing risk. In view of

development of Compliance Review Program, Exception Reporting Mechanism has improved and

now senior management receives report of violations promptly. Immediate corrective measures are

initiated to secure the bank’s interest.

Domestic Branches Network

We expanded our operations in 2009 and 11 more branches across Pakistan were opened in 2009

taking the domestic branch network to 1265. NBP has a well defined strategy for branch expansion

to enter the untapped markets and to strike a balance between its rural and urban coverage.

Credit Rating

NBP enjoys the highest rating of ‘AAA’ in the industry assigned by M/s JCR-VIS Credit Rating

Company. The ratings assigned to NBP are primarily driven by the bank’s role in the national

economy as an agent of the State Bank of Pakistan and as a bank to the Government of Pakistan.

Additionally, ratings also derive strength from the bank’s consistently high capitalization levels,

and nationwide access that has enabled it to secure a cost effective and diversified deposit base.

Social Responsibility

NBP has been at the forefront of socioeconomic development in the country. It has over the years

funded projects which best serve the economic objectives and social needs of the country. The bank

has made tremendous contribution to the development of small and medium sized entrepreneurs

and to self-employment schemes. The Bank fulfils its social responsibility through contribution

75

towards various causes. The Bank have always been generously donating in cases of national

disasters and times of difficulty being faced by the nation, whether it was the devastating

earthquake, flood relief efforts or the issue of Internally displaced persons (IDPs) the bank and its

employees have been at the forefront to help and support the nation.

Profit & Loss Appropriation

The Profit for the year 2009 after carry over of accumulated profit of 2008 is proposed to be

appropriated as follows: -

Rupees in Millions

Net Profit before taxation for year 2009 22,300

Taxation

Current year 9,221

Prior year(s) (4,133)

Deferred (1,000)

4,088

After Tax Profit 18,212

Profit Brought Forward 52,456

Transfer from surplus on revalution of fixed assets 124

Profit available for appropriation 70,792

Transfer to Statutory Reserve (10% of after tax profit) 1,821

Issue of bonus shares 1,794

Cash dividend 5,830

9,445

Profit carried forward 61,347

Future Outlook

76

NBP remains committed to the interest of all stake holders including its employees, owners,

regulators and the Pakistani nation. We have well defined strategy on where and how we want to

proceed in the years to come. With the implementation of new ‘Core Banking Package’, NBP will

completely automate its functions which in turn will appreciably enhance work efficiency. We will

continue to diversify our customer segments thereby increasing our product offering. Our

commitment towards the employees’ empowerment / development will continue as we believe that

a motivated and well trained work force is necessary to ensure sustenance and growth. On the

business side our main focus would be to reduce non-performing loans and increase deposits.

We remain committed to our Vision, Mission & core values and our strategy for the future includes

recovery efforts and revival of non performing loans, deposit mobilization, consolidation of loans,

expense management and tapping into untapped markets by increasing our network both

domestically and internationally. Customer service will remain our main focus of operations

management.

REVIEW OF BOARD OF DIRECTORS’ COMMITTEES AT NBP

At NBP, the Board of Director’s have an active role in providing their able guidance and support to

the Bank’s management. For this purpose a number of Board’s

committees have been constituted in the bank. These committees have well defined terms of

reference and they meet at regular intervals to review and make decisions on matters of importance

for their respective area of functioning. The following are the committees:

Name of the Committees

Number

of

Directors

Number of

Meetings held

in 2008

Chairman of the Committee

Audit Committee 3 28 Mr. Ibrar A. Mumtaz

HR Management Committee 4 23 Mian Kauser Hameed

I.T Committee 3 14 Mr. Tariq Kirmani

Board Risk Committee 3 13 Mr. M Ayub Khan Tarin

Agriculture Finance Committee 3 11 Mr. Ibrar A. Mumtaz

Islamic Banking & 3 13 Mr. Tariq Kirmani

77

Subsidiaries Committee

Sports & Culture Committee 3 11 Mr. Sikander Hayat Jamali

Audit Committee

This committee has the oversight monitoring / assurance responsibility mainly relating to the

effectiveness of the Bank’s internal audit function, integrity of the Bank’s financial statements,

system of internal control, safeguarding of Bank’s assets and associated risks, compliance with the

applicable legal and regulatory

requirements, corporate governance and Bank’s “Code of Conduct” and co-ordination with external

auditors, making recommendations with respect to other matters relating to their independence,

performance, appointment and remuneration and approval of provision of other than audit services.

The major achievement of the committee includes conducting a Quality Assurance Review of the

bank’s internal audit function through independent consultants to align the internal audit function

with international standards/best practices of corporate governance. The Committee ensured

independence of the Internal Audit function and further strengthened it in line with the

requirements of International Standards on Internal Auditing, Institute of Internal Auditors USA,

regulators and best practices of corporate governance.

HR Management Committee

The committee is an advisory and assurance committee which assists the board in fulfilling its

responsibilities relating to all HR policy matters. It reviews and formulates human resource policies

and best practices for attraction, retention, succession, motivation, training and development

policies to achieve corporate objectives. It also recommends to the board the compensation, annual

increase, performance bonuses, and perquisites of the CEO, Chief Internal Auditor, Secretary to the

Board, CFO and all positions reporting to the CEO. It suggests strategies for negotiations with

training and educational institutions both nationally & internationally for collaborating in training

activities. It is also responsible for improvements in training methodology and identifying areas

relevant to the needs of the organization. During 2009 several decisions were taken for

78

improvement in the areas of HR policies, planning, training & development, compensation &

pension, institutional discipline, and other HR related areas.

I.T Committee

The Committee is responsible for identifying areas of the prospective automation, reviews and

decides strategic technology implementation and provides guidance and approves selection of

appropriate technology solution; software, hardware, infrastructure and outsourcing.

For the first time in the history of National Bank a comprehensive IT strategy for the Bank was

designed which encompasses the phase-1 focusing on “Strategy for Systems Quality Assurance &

Testing Strategy (Policy, Procedures, Methodology and Framework).” The phase-2 of the strategy

will cover the entire bank wide transformation and full spectrum automation, systems and data

center integration, depth and width of IT Service Portfolio, IT Operations, plus incorporating the IT

Internal Control Framework supported by COBIT, ISO ISMS 27001 and ITIL.

Board’s Risk Committee (BRC)

BRC over sighted the risk related issues of the bank and took several decisions for implementation.

The functional scope of the Risk Management Committee is to develop the risk management role

by identifying the relevant/new risk management tools as per Basel guidelines and developing the

road map for implementing Basel II framework as per SBP guidelines. It also works for Risk &

Exposure Reporting by development of Basel II’s economic capital management frame work. This

committee also provides the reporting and research for Board of Directors. It also reviews the

liquidity position, forecasting and projections and portfolio of the Bank. In 2009 the committee

approved rating model for corporate & commercial borrowers.

Agriculture Finance Committee

Agriculture Finance Committee directed restructuring and reorganization of Agriculture Finance

Group and approved TOR, vision & mission statement of the group, Livestock/Dairy Farm

Financing policy and Agricultural Finance Policy Manual. Particular emphasis was given to

79

disbursement of finance to improve the yield/out put of this sector while maintaining the healthy

recovery ratio.

Islamic Banking & Subsidiaries Committee

This Committee provides strategic guidance and recommends initiatives for expansions, mergers &

acquisitions. The strategic endeavors resulted in expansion in NBP Islamic banking branch network

covering all major cities of the country. To evaluate the commercial viability, future profitability

and growth of Islamic banking, the committee guided Islamic Banking Group to prepare business

plan for the year-2010 and henceforth strategic plan 2011-2013.

Sports & Culture Committee

The functional scope of the Committee is to devise strategies to promote sports and cultural

activities in the bank as well as in the country.

During 2009 the Committee reviewed the progress of various activities undertaken by the Sports,

Culture & CSR Division and also approved various incentive and cash award policies for

sportspersons working for NBP. The Committee also finalized the fee structure and membership

rules & regulations of NBP Sports Club.

The number of board meeting held during the year was 8 and attended by the directors as

follows:

Syed Ali Raza President / Chairman 8

Mr. Muhammad Ayub Khan Tarin Director 8

Mr. Sikandar Hayat Jamali Director 4

Mr. Tariq Kirmani Director 8

Mian Kausar Hameed Director 8

Mr. Ibrar A. Mumtaz Director 8

Mrs. Haniya Shahid Naseem Director 6

80

The Board places on record its sincerest appreciation to the outgoing Directors, Dr. Waqar Masood

Khan, and Mr. Azam Faruque to whom we are indebted for their prudent, professional and diligent

guidance that helped in achieving such tremendous performance.

(j) Value of investments of Employees’ Pension Fund and Employees Provident Fund as at

December 31, 2009 (un-audited) was as follows:

Rs. in - `000

Employees Pension Fund 19,781,585

Employees Provident Fund 8,448,101

Pattern of Share holding

The pattern of share holding as at December 31, 2009 is given in Annual Report.

Earning per share

After tax earning per share for the year 2009 is Rs. 16.92.

Appointment of Auditors

The Board of Directors on the recommendation of the Audit Committee has recommended M/s

Anjum Asim Shahid Rahman & Co. Chartered Accountants & M/s M. Yousuf Adil Saleem & Co.

Chartered Accountants as statutory auditors for the year ending December 31, 2010. Both the firms

being eligible offer themselves for appointment.

Risk Management Framework

81

NBP Board of Directors and Senior Management are fully committed to strengthen the Risk

Management structure and practices. Several initiatives taken and planned by the Bank, in this

regard, reflect commitment of Senior Management & Board of Directors to upgrade the quality of

Risk Management process such as formation of Board Risk Committee, Executive Risk

Management Committee, Basel II Implementation Committee, strengthening of Risk Management

Division, conducting of exercises like Basel II Gap Analysis, Hiring of consultant for Basel II

advisory services, implementation of software / systems for Credit Risk, designing of Internal

Rating system, Scorecards for Consumer Credits , Revision and continuous improvement in

policies, procedures, reporting structure for effective Risk Management and shift from fixed

markup rate structure to floating rates for markup for managing Interest Rate Risk.

Statement of Internal Controls

The Board is pleased to endorse the statement made by management relating to internal control.

The Management’s Statement on Internal Control is included in the Annual Report.

We extend our appreciation to the bank’s staff for their commitment, dedication and hard work in

achieving these excellent results. We would like to express our sincere reverence to the Board

members whose valuable guidance has always enlightened us in our decision making. Finally we

would like to express our appreciation to our stakeholders, regulators and our valued customers for

their support and continued confidence in NBP.

On behalf of Board of Directors

S. Ali Raza

Chairman & President

82

Appendix-XVII

CITI PAKISTAN’S GRANTS

Some of the grants Citi Pakistan has closely been involved with include:

• Citi Microentrepreneurship Awards (CMA): US$55,000 for the CMA that have been conducted in

Pakistan since 2005, in collaboration with the Pakistan Poverty Alleviation Fund. The pivotal aim

of the CMA is to support existing small enterprises and incentivize the creation of new ones.

• Citi Microfinance Network Strengthening Program: Additionally, Pakistan is one of nine

countries included in the Citi Microfinance Network Strengthening Program (NSP), which is

supported by a 3-year Citi Foundation grant (started in 2007). The Citi Foundation‘s global NSP

initiative is intended to help expand microfinance outreach through resource development,

advocacy and knowledge creation. In Pakistan, the NSP provides financial and volunteer skill-

based support to the Pakistan Microfinance Network, which consists of organizations that are

engaged in microfinance and dedicated to improving the outreach and sustainability of

microfinance services in the country.

• Citi-LUMS Management Development Training for micro-finance institutions (MFIs): Grant

worth US$65,000 to fund training modules for middle and upper MFI management in Pakistan

• Microfinance Research: A Citi Foundation grant to Acumen Fund supports research on the design

of financial products for low income communities. Acumen Fund is a non-profit, global venture

capital fund that addresses poverty by working to fill the niche left between traditional capital

markets and grant-based philanthropy

• Development in Literacy (DIL): US$20,000 for a teacher training given to DIL for its supporting

its schools in the Orangi town area in Karachi

• Thardeep Rural Development Program: US$22,000 for a micro-credit training program that will

reach 2,000 women in Tharparkar, one of Pakistan’s most disadvantageous districts, in the province

of Sindh

83

• Health: A Citi Foundation multi-year grant of US $280,000 was given to the Aga Khan

Foundation to support its Urban Credit and Health Program, which endeavors to achieve

sustainable improvements in health status among women of childbearing age and children in

Karachi‘s underprivileged areas

Previously, grants have also been provided to the Lahore University of Management Sciences,

Kashf Foundation, The Citizen’s Foundation, Institute of Business Administration, Institute of

Business Management, Akhuwat Foundation, Tarraqi Foundation, Thardeep Rural Development

Program and Development in Literacy over recent years.

84

Appendix-XVIII

BUSINESS PROFILE - Citibank

Citi has been present in Pakistan since 1961 and will be completing its 50th anniversary in 2011.

Citi has US$105MM invested in the country and employs approximately 847 permanent employees

across Pakistan. Citi Pakistan has 18 fully operational retail branch outlets, with a focus on the main

commercial centres of Karachi, Lahore, Islamabad, Faisalabad and Rawalpindi. Citi Pakistan’s

business provides a variety of best-in-class products and services to more than 200,000 consumer

and institutional clients. Citi is the leading bank in Pakistan for delivering export agency and

multilateral financing and has been instrumental in the development of Pakistan‘s market for

derivatives and other treasury products.

Citi Pakistan has also been at the forefront of the financial sector reform process in Pakistan and has

been the lead bank in bringing the Pakistani Government to international capital markets. Over

these years it has come to be reputed as an industry leader, recognized as the pioneer for a spectrum

of banking products and services in Pakistan.

Some Citi ‘Firsts’ in Pakistan include:

• Pioneered Consumer Banking – first to launch Credit Cards, Auto Loans, Mortgages

• Derivatives (Interest Rate Swaps, Currency Swaps, Options)

• First 30-year US Dollar sovereign bond

• Issuance of the first foreign currency Islamic bonds or sukuks

• OPIC risk participation programs & structured ECA financings (volumes hit $1 billion or 20% of

Citi global ECA business in ‘05)

• Bill processing for Public Sector utilities

• Customized remittance product for expatriates

• Back office processing (Private Label) for banks

• Providing the first equity offering in over a decade

85

Appendix-XIX

CITI IN PAKISTAN: BUILDING COMMUNITIES

Community Development:

Further, Citi Pakistan has played its part in supporting the Internally Displaced Person’s (IDP’s) by

raising over $50,000 for this cause. Citi Pakistan’s employees’ donated one day’s salary on a

voluntary basis for the IDP’s which was matched by Citi’s funds. Similarly during the 2005

Earthquake in the Northern Areas, Citi supported the construction of a girls school by The Citizen’s

Foundation (TCF) in Mansehra. This year, the left over Earthquake Relief Funds have been donated

to TCF for maintaining the operating costs of the Mansehra school campus for the next ten years.

Additionally, the Citi Foundation provided a grant of US $1.9 million to the American Red Cross

(ARC) National Headquarters for its Pakistan Earthquake Reconstruction Project, following the

earthquake of 2005.

The Citi Foundation Marks a Decade of Support in Pakistan by Exceeding the US$1.5

Million Mark

As Citi Pakistan approaches its 50th anniversary in January 2011, the Citi Foundation, Citigroup’s

social investment arm, marks a decade of support towards various socio-economic projects in the

country, exceeding the total mark of US$1.5million in social sector support to Pakistan. Just this

year, the Citi Foundation has provided US$400,000 through five new grants to Pakistan, for a

spectrum of development related initiatives.

Citi’s main community objectives revolve around microfinance, financial education and

environmental projects. Our efforts in the areas where we operate have benefits that extend beyond

these cities as well. We are proud to have received the CSR National Excellence Award in 2007

and 2009 for outstanding corporate social responsibility. We were also one of the top ten companies

to have received special recognition for our CSR efforts at the CSR Asia Forum in Manila in

November 2009.

86

Appendix-XX

MEEZAN BANK LIMITED, PAKISTAN

Vision, Mission, & Service Mission

Our Vision

Establish Islamic banking as banking of first choice to facilitate the

implementation of an equitable economic system, providing a strong

foundation for establishing a fair and just society for mankind.

Our Mission

To be a premier Islamic bank, offering a one-stop shop for innovative

value added products and services to our customers within the bounds of

Shariah, while optimizing the stakeholders value through an

organizational culture based on learning, fairness, respect for individual

enterprise and performance.

Our Service Mission

To develop a committed service culture which ensures the consistent

delivery of our products and services within the highest quality service

parameters, promoting Islamic values and ensuring recognition and a

quality banking experience to our customers.

87

Appendix-XXI

MEEZAN'S BRANCH NETWORK

The Bank is currently segmented into three Regions of Pakistan. The cities in which the Bank presently operates are as follows:

Southern Region Central Region Northern Region

Hub (Lasbela) Arifwala Abbottabad

Hyderabad Bahawalpur Attock

Karachi Burewala Dera Ismail Khan

Mirpurkhas Chiniot Dina

Nawabshah Daska Gujar Khan

Quetta Dera Ghazi Khan Haripur

Sakrand Faisalabad Havelian

Sukkur Gojra Islamabad

Tando Adam Gujranwala Jhelum

Tando-Allah-Yar Gujrat Kohat

Hafizabad Mansehra

Jhang Mardan

Kasur Muzaffarabad

Khanpur Nowshera

Khushab Peshawar

Lahore Rawalpindi

Lalamusa Swat

Mandi Bahauddin

Mian Channu

Multan

Okara

Rahim Yar Khan

Sadiqabad

Sahiwal

Sargodha

Sheikhupura

Sialkot

88

Appendix-XXII

Habib Bank Limited (HBL), Pakistan Board of Directors

Sultan Ali Allana Chairman

Sajid Zahid Director

Mushtaq Malik Director

R. Zakir Mahmood President & CEO

Ahmed Jawad Director

Sikandar Mustafa Khan Director

Moez Jamal Director

HBL Worldwide

89

Appendix-XXIII

HABIB BANK LIMITED (HBL), PAKISTAN Services to Individual & Business Customers

INDIVIDUAL CUSTOMERS BUSINESS CUSTOMERS

• CarToCar o Car Calculator o Car Showroom o FAQs

• Car Loan o Car Calculator o Car Showroom o FAQs

• Credit Cards o Benefits o Features o Promotions o Dining Discounts o Drop Box Finder o Handset Plans o FAQs o Apply Online

• Deposit Accounts o Term Accounts o Current Accounts

� Freedom Account o Savings Accounts o Foregin Currency Accounts

• Bancassurance o Amaan o Tabeer o Branch Network

• Debit Card • PhoneBanking • Mutual Funds

• Corporate Banking o Cash Management o Islamic Banking

• Commercial Banking • Investment Banking • Islamic Banking • Cash Management • Zarai Banking • Global Treasury • Asset Management

30-10-2008

Governor Management Committee

Deputy Governor(Banking)

Deputy Governor(Corporate Services)

DirectorMuseum & Art Gallery

DirectorBusiness Support

Services

Chief Information Officer

Information Systems & Technology

Comptroller Finance(Financial Resources

Management)

DirectorPayment System

DirectorInternational Markets &

Investments

DirectorStatistics & Data

Warehouse

Director Finance

DirectorMonetary Policy

DirectorDomestic Markets &

Monetary Management

Executive Director(Financial Markets /

Reserve Management)

Corporate SecretaryCorporate

Secretary’s Office

State Bank of Pakistan - Revised Organization Structure

Executive Director(Development Finance)

DirectorAgriculture Credit

DirectorMicrofinance

Executive Director(Banking Supervision)

DirectorBanking

Surveillance

DirectorBanking

Inspection (On-site)

DirectorBanking Policy &

Regulation

Project ManagerRTGS Project

Director / Chief SpokesmanExternal Relations

Executive DirectorInternal Audit &

Compliance

Director/Head Treasury Operations

(Back Office)

Banking Cluster Financial Markets & Reserve Management Cluster (FMRM Cluster) Corporate Services Cluster (CS Cluster)Monetary Policy & Research Cluster (MPR Cluster)

Governor’s Office

Note: RTGS will be part of Payment Systems Department as a Division on completion of the RTGS Project.

Chief Economist *(Monetary Policy / Research)

DirectorHuman Resources

DirectorTraining &

Development

DirectorInfrastructure &

Housing Finance

Economic Advisor (Policy / Research)

DirectorEconomic Analysis

Executive Director(Banking Policy &

Regulation)

Special CounselGeneral Counsel’s

Office

DirectorOff-site

Supervision & Enforcement

DirectorResearch

DirectorFinancial Markets

Strategy & Conduct

Anti Money Laundering Unit

Chief Risk OfficerRisk Management

& Compliance

Governor’s Secretariat

DirectorExchange Policy

DirectorSmall Medium

Enterprise Finance

DirectorConsumer Protection

DirectorFinancial Stability

DirectorIslamic Banking

Group Head(Human Resources) IT & Museum Group

Chief LibrarianLibrary

231

Appendix-IV

Indicators CAPITAL ADEQUACY

2004 2005 2006 2007 2008 Mar-09 Jun-09 Sep-09 Dec-09

Risk Weighted CAR** Public Sector Commercial Banks Local Private Banks Foreign Banks

Commercial Banks Specialized Banks

All Banks Tier 1 Capital to RWA** Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks Capital to Total Assets Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks ASSET QUALITY

13.4 10.1 17.4 11.4 (9.0) 10.5

14.5 10.6 16.4 11.9 (7.7) 11.3

15.2 12.7 15.0 13.3 (8.3) 12.7

16.1 11.8 14.6 12.8 (6.2) 12.3

13.2 12.1 21.8 12.7 (4.9) 12.3

13.9 12.7 22.4 13.3 (2.1) 12.9

14.5 13.3 23.7 14.0 (3.4) 13.5

15.6 14.2 23.8 14.9 (5.0) 14.3

14.8 14.1 23.6 14.6 (2.1) 14.1

8.6 7.5

17.1 8.6

(15.0) 7.6

8.8 8.3

16.1 9.1

(13.6) 8.3

11.1 10.4 14.3 10.8

(13.3) 10.0

12.2 9.9

14.0 10.5

(12.5) 10.0

11.0 10.2 21.3 10.8

(10.1) 10.2

11.6 10.7 21.9 11.3 (7.4) 10.8

12.0 11.2 23.1 11.8 (7.4) 11.3

12.8 11.8 23.3 12.4 (8.2) 11.9

12.4 11.5 23.1 12.1 (6.3) 11.6

8.7 6.5 8.9 7.2

(9.4) 6.7

12.6 7.0 9.5 8.4

(8.1) 7.9

12.2 9.2

10.1 9.9

(8.0) 9.4

13.7 10.2 11.2 10.9 (5.4) 10.5

10.7 10.0 14.5 10.3 (3.2) 10.0

11.1 10.3 14.4 10.6 (2.7) 10.3

10.9 10.2 14.8 10.5 (2.5) 10.2

11.9 10.3 14.8 10.8 (3.4) 10.5

11.1 10.0 14.9 10.4 (1.8) 10.1

NPLs to Total Loans Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks Provision to NPLs Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks Net NPLs to Net Loans Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks Net NPLs to Capital Public Sector Commercial Banks Local Private Banks Foreign Banks Commercial Banks Specialized Banks All Banks

EARNINGS

13.3 9.0 1.6 9.0

54.1 11.6

10.0 6.4 1.2 6.7

46.0 8.3

9.0 5.2 1.0 5.7

39.1 6.9

8.4 6.5 1.6 6.7

34.3 7.6

16.3 8.6 2.9 9.9

28.8 10.5

17.5 9.7 3.6

11.0 29.0 11.5

16.8 9.8 4.5

11.1 25.8 11.5

17.4 10.5 5.3

11.7 31.4 12.4

16.4 10.7 6.5

11.7 25.4 12.2

77.0 69.9

101.9 72.4 64.9 70.4

86.8 76.4

145.9 80.4 64.8 76.7

84.5 78.7

191.7 81.5 64.1 77.8

89.0 88.5

157.0 89.1 68.6 86.1

66.9 70.2 81.9 69.3 72.4 69.6

65.3 71.2 81.3 69.5 66.4 69.2

65.9 71.6 83.4 70.0 72.8 70.2

67.2 72.1 81.3 70.8 57.1 69.7

69.0 72.3 72.4 71.4 66.3 71.0

3.4 2.9

(0.0) 2.7

29.3 3.8

1.5 1.6

(0.6) 1.4

23.1 2.1

1.5 1.1

(1.0) 1.1

18.7 1.6

1.0 0.8

(0.9) 0.8

14.0 1.1

6.1 2.7 0.5 3.3

10.0 3.4

6.9 3.0 0.7 3.6

12.1 3.9

6.4 3.0 0.8 3.6 8.6 3.7

6.5 3.2 1.0 3.7

16.4 4.1

5.7 3.2 1.9 3.7

10.3 3.9

16.2 24.3 (0.2) 19.0 -

29.2

5.5 13.0 (3.0) 9.0 -

14.3

6.4 7.1

(5.1) 6.2 - 9.7

3.4 4.1

(4.1) 3.7 - 5.6

30.3 15.9 1.6

17.9 -

19.4

31.6 15.4 2.0

17.9 - 19.6

30.0 15.6 1.9

17.8 - 19.0

27.6 15.8 2.4

17.6 - 19.9

26.2 15.9 4.8

17.4 - 18.9

Return on Assets (Before Tax) Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks

2.4 1.7 2.5 2.0

(0.4) 1.9

3.3 2.7 3.6 2.9

(1.0) 2.8

4.0 3.1 3.2 3.2

(1.3) 3.1

3.5 2.0 1.5 2.3 1.4 2.2

0.6 1.3 0.0 1.1 3.2 1.2

1.7 1.9 1.0 1.8 3.8 1.8

1.1 1.8 0.4 1.6 3.3 1.7

1.5 1.7 0.1 1.6 1.3 1.6

1.5 1.6

(0.3) 1.5 2.5 1.5

Financial Soundness Indicators*


232

Appendix-IV


Financial Soundness Indicators*

Indicators EARNINGS

2004 2005 2006 2007 2008 Mar-09 Jun-09 Sep-09 Dec-09

Return on Assets (After Tax) Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks ROE (Avg. Equity& Surplus) (Before Tax) Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks ROE (Avg. Equity &Surplus) (After Tax) Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks NII/Gross Income Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks Cost / Income Ratio Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks LIQUIDITY

1.3 1.2 2.0 1.3

(0.8) 1.2

2.2 1.8 2.5 2.0

(1.2) 1.9

2.7 2.1 2.1 2.2

(1.8) 2.1

2.5 1.4 0.7 1.6 0.7 1.5

0.5 0.9 0.3 0.8 1.8 0.8

0.9 1.2 0.4 1.1 2.4 1.1

0.6 1.1 0.1 1.0 1.9 1.0

1.0 1.0

(0.1) 1.0

(0.6) 0.9

0.9 1.0

(0.3) 0.9 0.6 0.9

30.8 28.8 26.7 29.0 -

30.5

30.7 40.1 38.9 37.2 -

38.2

32.4 36.2 30.0 34.7 -

35.2

27.2 20.4 13.1 21.8 -

22.6

5.2 12.9 0.0

10.6 -

11.4

14.7 18.1 6.7

16.8 - 17.7

9.5 17.8 2.8

15.2 - 16.0

12.8 16.4 0.4

14.7 - 15.1

13.2 15.2 (2.1) 13.9 - 14.5

17.2 20.2 21.5 19.6 -

20.3

20.9 27.2 27.1 25.4 -

25.8

21.7 25.0 20.4 23.7 -

23.8

19.5 13.8 6.0

15.0 -

15.4

4.4 8.5 2.2 7.3 - 7.8

7.8 11.3 2.8

10.1 - 10.7

5.3 11.0 0.5 9.2

- 9.7

8.4 10.0 (0.9) 9.1

- 9.0

8.0 9.4

(2.0) 8.5

- 8.6

63.7 62.0 57.7 61.9 81.9 62.8

71.3 73.0 61.5 71.3 87.7 72.0

69.5 73.5 65.8 72.1 40.1 70.9

65.9 70.7 59.1 69.2 42.8 68.2

65.4 73.3 61.3 71.3 46.6 70.4

68.6 78.9 54.8 76.1 65.9 75.8

70.0 75.9 57.2 74.1 41.3 73.0

68.2 75.7 60.6 73.8 48.2 73.1

62.6 75.8 64.4 73.1 47.9 72.3

39.5 56.2 49.0 51.7 57.8 52.0

34.3 43.1 42.2 41.2 47.8 41.5

31.8 40.7 49.8 39.4 62.6 40.3

30.2 45.4 57.0 42.8 53.2 43.2

39.1 51.8 69.6 50.2 52.1 50.3

48.1 49.2 58.6 49.5 60.4 49.9

48.4 48.6 63.6 49.3 70.6 50.1

45.7 49.3 69.9 49.7 63.7 50.1

49.3 50.5 77.5 51.5 55.4 51.6

Liquid Assets/Total Assets Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks Liquid Assets/Total Deposits Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks Advances/Deposits Public Sector Commercial Banks Local Private Banks Foreign Banks


All Banks

43.9 34.3 39.8 37.0 25.3 36.6

35.6 32.4 41.8 33.9 25.8 33.7

33.9 31.1 41.0 32.2 23.0 31.9

37.0 32.5 41.6 33.8 27.9 33.6

30.5 27.4 45.3 28.7 24.5 28.6

31.4 29.5 49.6 30.7 21.6 30.5

30.2 30.5 54.7 31.5 22.2 31.2

29.3 30.9 57.2 31.6 19.0 31.4

29.8 32.2 54.7 32.6 19.0 32.3

52.6 42.3 53.4 45.7

154.1 46.5

44.7 40.3 57.9 42.7

183.2 43.5

42.6 40.6 61.1 42.0

205.4 42.7

47.1 42.9 61.1 44.3

247.7 45.1

38.8 35.7 71.9 37.6

229.4 38.2

40.3 39.3 79.6 41.0

243.7 41.5

38.6 39.9 84.2 41.2

206.9 41.7

38.7 41.2 83.3 42.3

193.5 42.7

38.4 43.4 82.2 43.7

155.3 44.1

49.7 67.3 70.1 63.6

370.5 65.8

59.8 70.8 68.7 68.4

400.7 70.2

64.6 74.5 80.1 72.7

528.4 74.6

60.0 70.1 75.2 73.8

507.3 69.7

68.4 75.4 69.1 73.8

577.0 75.5

65.2 71.4 65.1 69.9

721.3 71.7

65.0 69.2 57.5 67.9

597.2 69.6

67.0 68.8 50.2 67.8

683.3 69.6

65.1 66.9 56.3 66.2

544.9 67.9

*Source: (State Bank of Pakistan, 2009)

customer relationship management in the banking sector of

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