bank of pakistan j

Internship Report 2014

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CHAPTER # 1

INTRODUCTION OF STUDY

1.1 INTRODUCTION

As part of the academic requirement for completing BBA (Finance) Bachelors of

Business Administration. The students are required to undergo for two months (Eight

Weeks) of internship with an organization. The internship is to serve the purpose of

acquainting the students with the practice of knowledge of the discipline of business

administration.

This report is about National Bank of Pakistan Main Branch Mansehra. NBP was

established in 1949 under the National Bank of Pakistan Ordinance No.XIX and since

then, it has expended its network, becoming the largest commercial Bank of the country.

It offers different products of services to its customers.

As I have completed my Internship in National Bank of Pakistan Main Branch Mansehra.

So, its brief history is, in 1964, State Bank of Pakistan licensed National bank of Pakistan

Main Branch to work in the City area. This branch started its operation on May 5, 1964.

The site selected for this branch was on central point of Mansehra City. This branch after

some period shifted to another place on (Shinkiari Road). But now Main branch

Mansehra having its own building is situated at another place in Mansehra city, which is

known as Ziarat Kahou. Its current Manager is Aqdas Ali Khan, (Assistant Vice

President)

The main purpose of the study in hand is to gather relevant information to compile

internship report on National Bank of Pakistan Main Branch Mansehra and as a whole

Network of NBP.

Another purpose of this Internship program is to enable the students to use the

management techniques acquired during their courses, and find out the possible solution

of management problems faced by the organization.


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To observe, analyze and interpret the relevant data competently and in a useful manner it

requires:

To work practically in an organization.

To develop interpersonal communication.

1.2 SCOPE OF STUDY

As a trainee in National Bank of Pakistan Main Branch Mansehra, the main focus of my

study research was on general banking procedures/practices in that of the branch of NBP.

These operations include remittances, deposits, advances and foreign exchange, clearing

and Government department.

Similarly different aspects of overall of NBP are also covered in this report.

1.3 OBJECTIVES OF THE STUDY

Discuss thorough study of National Bank of Pakistan.

To understand the various operations and to equip with practical knowledge of the

National bank of Pakistan.

1.4 LIMITATION OF THE STUDY

Something is better than nothing. No matter how efficiently a study is conducted, it

cannot be perfect in all aspects. This study was conducted in accordance with the

objectives of the report completion. The study may not include broad explanations of

facts and figures due to the nature of the study/research. Secondly, the limitation, which

affects the study/research, is the restriction on mentioning every fact of the bank due to

the problem of secrecy of the bank.

In addition, the availability of required data was a problem as all the documents and files

are kept strictly under lock and key due to their strictly confidential nature. Thirdly, the

problem of short time period also makes the analysis restricted as one cannot properly


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understand and thus analyze all the operations of a bank just a very short time of eight

weeks.

1.5 BENEFIT OF THE STUDY

The study done will benefit the finance students in particular and business administration

and banking students in general because the financial analysis section of this report

comprehensively encompasses all aspects of financial analysis. Furthermore, NBP Main

Branch Mansehra may also benefit from the recommendations made at the end of the

report.

1.6 RESEARCH METHODOLOGY

The report is based on my two months internship program in National Bank of Pakistan.

The methodology reported for collection of data is primary as well as secondary data.

The biggest source of information is my personal observation while working with staff

and having discussion with them. Formally arranged interviews, discussions and most

importantly the annual report 2012 also helped me in this regards. In order to complete

my report I needed two types of data about the National Bank of Pakistan also about the

NBP Main Branch Mansehra. These are

Primary data:

For primary data collection, I have used interview and observation method. I have

interviewed different officers in the branch, which include the branch Operation officers,

operation manager and manager of the branch also other staff members of the branch

Secondary data:

For secondary data collection, I have consulted different published material. I studied

different circulars (instruction and information circulars) of National bank of Pakistan

Simply Secondary data consist of Manuals, Journals, magazines, news lines, Annual

Reports, Internet and Branch financial statements.


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CHAPTER # 2

HISTORICAL BACKGROUND OF NBP

2.1 HISTORY OF NBP

The history of National Bank of Pakistan is part of Pakistan’s struggle for economic

independence. National Bank of Pakistan was established on November 9, 1949

under the National Bank of Pakistan Ordinance, 1949 in order to cope with the crisis

conditions which were developed after trade deadlock with India and devaluation of

Indian Rupee in 1949. Initially the Bank was established with the objective to extend

credit to the agriculture sector. The normal procedure of establishing a banking

company under the Companies Law was set aside and the Bank was established

through the promulgation of an Ordinance, due to the crisis situation that had

developed with regard to financing of jute trade. The Bank commenced its

operations from November 20, 1949 at six important jute centers in the then, East

Pakistan and directed its resources in financing of jute crop. The Bank’s Karachi and

Lahore offices were subsequently opened in December 1949.

National Bank of Pakistan is the Pakistan's premier bank determined to set higher

standards of achievements. It is the major business partner for the Government of

Pakistan with special emphasis on fostering Pakistan's economic growth through

aggressive and balanced lending policies, technologically oriented products and

services offered through its large network of branches locally, internationally and

representative offices. In modern business services provided by organizations are

termed as Products

The National Bank of Pakistan came forward to establish its offices in the Cotton

growing areas and extended credit facilities liberally in order to restore stability to

the market. In 1951, the country was once again faced with a crisis in the cotton

trade when prices was crashed and touched the lowest level since independence

following the cessation of hostilities in Korea. The bank in collaboration with the

cotton board provided the necessary Credit facilities to the trade and the crisis was

tided over. The nature of responsibilities of the Bank is different and unique from


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other banks/financial institutions. The Bank acts as the agent to the State Bank of

Pakistan for handling Provincial/Federal Government Receipts and Payments on

their behalf.

2.2 DEFINITIONS OF BANK

"The financial institution which deals with money and credit. It accepts the deposits for

individuals, businesses and companies, a decline in interest rates and higher interest rates

for those in need."

J. W Gilbert the principles and practice defines the bank banker, these words;

"Banker is, in its quality of dealer, or better, a trader of money capital. It is intermediate

between the borrower and the lender party. It loans and borrow a second".

Sir John called banker in these conditions?

"It is not guaranteed that these person or organization, or not, can be a banker, which is

not

Please submit accounts

Take current accounts

Tests and questions

Collect checks exceeds and the turbocharger make their customers

UNITED STATES of banker concept of a very broad sense.

"Banking Secrecy believes that there must be an amount of credits, and treatment

of the "bank" we each person, firm or company with a company, or the resources are

open by collection deposits the money, the currency. The topics include paid or payable

or money and it is advanced or equipment to be loaned to, bonds, precious metals,

promissory notes on the invoice received discount and/or sales".


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2.3 BANKING GROWTH DURING (1948-1970)

In this tense situation, a committee was immediately setup to formulate a scheme of

central banking legislation for Pakistan. Many specialists were of the opinion that in view

of the acute shortage of trained staff, any idea of establishing a central bank was I

impractical and the best that could be attempted was the setting up of a currency board

until such times as sufficient staff could be organize to operate a central bank.

One of the first tasks of the state bank was to arrange for the replacement of the Reserve

bank of India notes, which had continued to circulate in Pakistan during the transitional

period, by Pakistan currency.

The first Pakistan notes were issued in October 1948 in the denominations of Rs. 5, 10 &

100.An equally urgent task, which the new central bank had to address itself, was the

creation of a national banking system. To this end, while extending every help and

encouragement to Habib Bank to expand its organization, the state bank recommended

the setting up of a new banking institution to serve both as an agent to the state bank

recommended the setting up of a new banking institution to serve both as an agent of the

State bank as well as the spearhead of its credit policies.

With a view to broadening the institutional framework of the financial system, the state

bank also sponsored the establishment of specialized credit institutions in the field of

agriculture and industry. Banking companies (control) act was passed in December 1948

specifically empowering the state bank to control the operations of banking companies in

Pakistan.

As the Commercial Banking facilities continued to expand, a new Pakistani bank, the

National Commercial Bank was established and registered as a scheduled bank. In the

field of industrial finance a new institution known as the industrial credit and investment

cooperation was set up.

The year 1958 marked the completion of the first decade of the working of the State Bank

of Pakistan. When it was established there were only 195 bank offices in existence. At

the end of June 1958 their number had increased to 307, of which Pakistani banks


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accounted for 232 against 25 in mid-1948. Moreover at the end of June 1958, Pakistani

banks held 60% of the total banks deposits, and were responsible for 65 of total bank

credit.

When the Ayub Khan Government took over in 1958, the banking and monetary scene

was significantly affected by developments such as the liberalization of imports, transfer

of business in food grains to the private sector, and the firming up of commodity markets.

The demand of funds picked up and there was a substantial expansion of bank credit to

the private sector. The pace of expansion in the institutional frameworks of the country’s

banking system quickened and a new Pakistani, bank, namely the United Bank Limited

was established.

Owning the five years plan 1960-65, the credit structure in Pakistan made rapid progress.

The bank extended its network by opening six new offices located at Chitagong,

Peshawar, Quetta, Khulna, Layallpur and Rawalpindi. The number of scheduled bank

offices rose from 430 at the end of June 1960 to 1591 in June 1965. Several new banks

were added to the list of scheduled

Two principal additions were the commerce bank, and the standard bank. The number of

scheduled banks, which stood at 29 in June 1960 rose to 36 by June 1965.

Under the impact of economic growth and dear scope of private enterprises, bank credit

to the private sector rose from Rs. 1,458 million to Rs. 5759 million. Thus the total

expansion in bank credit to the private sector during this period amounted to Rs. 4300

million, which gave a annual expansion of Rs. 860 million compared to the annual

average increase of Rs. 144 million over the preceding five years. Banks deposits

increased from Rs. 2,493 million to Rs. 6883 million during the five years period ended

June 1965 compared to Rs. 231 million in the proceeding five years.

Time deposits during this period increased from Rs. 946 million to Rs. 3228 million,

where demand deposits rose from Rs. 1997 million to Rs 3655 million. The increase in

time deposits was particularly rapid. The ratio of time deposits to total deposits in June

1965 stood at 49.6 percentage as against 32.01 percentage five years earlier. Another

salient feature of banking development during this period was that since the rate of


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increase in bank deposits lagged behind the rate of expansion in bank credit, the banked

has to depend increasingly on central bank finance. They borrowing from the state bank

rose from Rs. 11 million in June 1960 to Rs. 1688 million in June 1965. Owing keen

demand for bank credit, bank’s investments could not increase as rapidly as their

advances. Their investments totaled to Rs. 1,874 million at the end of June 1965

compared to Rs. 1,231 million in June 1960. Investments, which were almost equal to

their advances in June 1960, were only about one third of the advances in June 1965.

The third plane period witnessed a further expansion of banking facilities in the country

the total number of scheduled banked offices increased from 1,591 at the end of June

1965 to 3133 at the close of June 1970. During the same bank credit to the private sector

rose from Rs. 5,789 million to Rs. 9492 million. There was also a substantial growth in

the bank deposits, which increased from Rs. 6883 million June 1965 to Rs. 13147 million

at the end of June 1970.

A remarkable change occurred during this period related to the composition of deposits.

Time deposit becomes greater than demand deposits forming about 54 percent age of the

total deposits. As oppose to what happened in the previous period, banks were able to

finance a much higher level of credit expansion without having to increase their

borrowings from the central bank.

2.4 BANKING REFORMS 1972

After the opening of the new government in 1971 May 1972 a number of reforms for the

banks are more sensitive to the needs of economic growth and social justice. Reforms,

which seeks to achieve on an equal footing is spent in a more targeted way and to the

granting of loans from the bank, to improve the consistency and efficiency of banks, and

the upper levels of the social responsibility of entire banking sector.

The role that banking system was really good cost savings to the community and to meet

the needs of populations. But at the same time that the banks were in general neglected

role with regard to the promotion of social justice and has not to play an effective role in

more effectively and to ensure a more equitable distribution of economic growth. It was


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also found that it was that no person can no longer be a major player in the past six years,

the Bank of continuous. Each bank is the paid-up capital is equal to or higher than 5 per

cent of its deposits gradually increased from 10 per cent above a certain time. The banks

are also required to transfer 10% of the profits each year after they reserves the right to

reserve was equal to the paid-in capital. That the decision of the banks so that the

diversity of ownership of banks was to lead to a new capital on the markets. Loans

drivers, his family and the businesses had been totally prohibited. The World Bank, with

the reform of the institutions may also create new objectives.

In addition, the national council of credit and by an advisory committee has been

established to provide for agricultural credit put in place for the different objectives, the

coordination and agricultural credit agencies of information to credit and debit for the

monitoring of the objectives. Standing Committee on exports in general and a new

exports, in particular, were

Two financial institutions have been established. Financing Company is intended to

finance people with small means that the national development finance cooperation

Corporation has been created to cultivate of finance public sector industry and the

business sector.

2.5 EVOLUTION OF BANKING IN PAKISTAN

At the time of independence, the areas now if Pakistan had only the food grain and raw

materials, in accordance with the by the regime in Pakistan peninsula. Practically no

industry and raw materials produced are exported to Pakistan. But the banks and their

commercial potential.

The first phase of development of the banking system in Pakistan the day the banking

sector. Begins to almost zero in 1947, now has a comprehensive range of banks and

financial institutions are faced with different requirements.

In relative terms, the area is now Pakistan was reasonably well equipped in banking

services, an undivided India 3496 has MARCH 1947 offices in India provided for banks,

or up to 487 are located in regions of Pakistan.


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India central bank of central banks authority in India. Split takes place, a decision was

taken in order to ensure a smooth transition should continue to work on a new Pakistan

September 30, 1948.

In 1947 as a result of this uncertainty and inappropriate banking sector also suffer

considerable losses.

This led to negative effects on greaseproof paper in Pakistan. The banks which is

registered office of Pakistan, India. An attempt to prevent this error new press a

deliberate policy results the bank India offices closed more quickly as possible.

The banks, and which remained in only, pending the completion of their business.

Recorded the largest decline of numbers of independence only 195 branches in 487

branch banks 30 June1948.

2.6 MISSION STATEMENT

“To make the Bank complete and competitive with all international Standard in

performing, quality of, operations, staff, financial strength. And products and services to

develop a culture of excellence in every spare of activity of the bank”.

2.7 GOALS AND OBJICTIVES

“An organizational objective is the intended goal that prescribes definite scope and

suggests direction to the panning efforts of an organization.”

2.8 VISION STATEMENT

“To be the pre-eminent financial institution in Pakistan and achieve market recognition

both in the quality and delivery of service as well as the range of product offerings.”


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2.9 BOARD OF DIRECTORS

Chairman

Mr. Muneer Kamal

Directors

Tariq Kirmani

Shahid Aziz Siddiqi

Zahid Hussain

Wasiq Mahmood

Farrakh Qayyum


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Rana Assad Amin

Dr. Shujat Ali

President

Syed Ahmed Iqbal Ashraf

Audit Committee

Chairman Farrakh Qayyum

Members Rana Assad Amin

Tariq Kirmani

Dr. Shujat Ali

Auditors

Ernst & Young Ford Rhodes Sidat Hyder & Co

Chartered Accountants

KPMG Taseer Hadi & Co

Chartered Accountants

Legal Advisor

Mandviwala & Zafar

Advocates & Legal Consultants

Registered & Head Office

NBP Building

I.I. Chundrigar Road,

Karachi, Pakistan

Registrar & Share Registration Office

Central Depository Co. of Pakistan (CDC),

CDC House, 99-B, Block-B,

S.M.C.H.S., Main Shara-e-Faisal

Karachi, Pakistan

111-111-500

Website

www.nbp.com.pk.

http://www.nbp.com.pk/


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2.10 MANAGEMENT

Management is a distinct process consisting of activities of planning, organizing,

actuating and controlling performed to determine and accomplish stated objectives with

the use of human being and other resources.

NBP have a centralized type of management because the top management takes all the

decisions.

2.11 SENIOR MANAGEMENT OF NBP

Senior Management of NBP comprises of the following member and their respective

designation.

NAME DESIGNATION

Asif Hassan Senior Executive Vice President

Ziaullah Khan SEVP & Group Chief Asset Recovery group

Nausherwan Adil SEVP & Group Chief Operations groups

Nadeem Anwar Ilyas

SEVP & Group Chief

Corporate & Investment Banking Group

Imam Bakhsh Baloch

SEVP & Group Chief

Audit & Inspection Group

Khalid Bin Shaheen

SEVP & Group Chief

Global Home Remittance Management Group

Tahira Raza SEVP & Chief Risk Officer


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Risk Management Group

Raza Mohsin Qizilbash EVP & Divisional Head Legal Division

Khawaja M Amin-ul-Azam

EVP & Head (A)

Islamic Banking Group

Nasir Hussain

EVP & Group Chief (A)

Overseas Banking Group

2. 12 NET WORK OF BRANCHES

NBP have wide range of branches inside the country and outside the country.

In Pakistan it has 29 regional offices, 1189 Branches and 4 Subsidiaries.

In overseas it has 16 overseas branches, 6 other branches.


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CHAPTER # 3

INFORMATION AND DEPARTMENTALIZATION OF NBP

3.1 INTRODUCTION

This chapter presents the services and departmentalization of NBP. Services are outputs

of the firm/organization, which are in intangible form & which are the backbones of any

organization to earn profit? NBP offers the following services to the people.

Demand drafts

Telegraphic transfer

Swift system

Letters of credit

Traveler's cheques

Pay order

Mail transfers

Foreign remittances

3.2 NEW FEATURES

The existing system of home remittances has been revised/significantly improved and

well-trained field functionaries are posted to provide efficient and reliable home

remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides

Pakistan International Bank (UK) Ltd., and Bank Al-Jazira, Saudi Arabia.

Zero tariffs: NBP is providing home remittance services without any charges.

Strict monitoring of the system is done to ensure the highest possible security.


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Special courier services are hired for expeditious delivery of home remittances

to the beneficiaries.

3.2.1 SHORT TERM INVESTMENTS

NBP now offers excellent rates of profit on all its short-term investment accounts.

Whether you are looking to invest for 3 months or 1 year, NBP’s rates of profit are

extremely attractive, along with the security and service only NBP can provide.

3.2.2 NATIONAL INCOME DAILY ACCOUNT. (NIDA)

The scheme was launched in December 1995 to attract corporate customers. It is a

current account scheme and is part of the profit and loss system of accounts in operation

throughout the country.

3.2.3 EQUITY INVESTMENTS

NBP has accelerated its activities in the stock market to improve its economic base and

restore investor confidence. The bank is now regarded as the most active and dominant

player in the development of the stock market.

3.2.4 NBP is involved in the following

Investment into the capital market

Introduction of capital market accounts (under process)

NBP’s involvement in capital markets is expected to increase its earnings, which would

result in better returns offered to account holders

3.2.5 COMMERCIAL FINANCE

NBP dedicated team of professionals truly understands the needs of professionals,

agriculturists, large and small business and other segments of the economy. They are the

customer’s best resource in making NBP’s products and services work for them.


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3.3 TRADE FINANCE OTHER BUSINESS LOANS

There are two types of trade finance.

3.3.1 Agriculture Finance

NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers

who produce some of the best agricultural products in the World.

3.3.1.1 Agricultural Finance Services

“I Feed the World” program, a new product, is introduced by NBP with the aim to help

farmers maximize the per acre production with minimum of required input. Select farms

will be made role models for other farms and farmers to follow, thus helping farmers

across Pakistan to increase production.

Agricultural Credit

The agricultural financing strategy of NBP is aimed at three main objectives:

Providing reliable infrastructure for agricultural customers

Help farmers utilize funds efficiently to further develop and achieve better

production

Provide farmers an integrated package of credit with supplies of essential inputs,

technical knowledge, and supervision of farming.

3.3.1.3 Agricultural Credit (Medium Term)

Production and development

Watercourse improvement

Wells

Farm power


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Development loans for tea plantation

Fencing

Solar energy

3.3.1.4 Farm Credit

NBP also provides the following subsidized with ranges of 3 months to 1 year on a

renewal basis.

Operating loans

Land improvement loans

Equipment loans for purchase of tractors, farm implements or any other

equipment

Livestock loans for the purchase, care, and feeding of livestock.

3.3.1.5 Production Loans

Production loans are meant for basic inputs of the farm and are short term in nature.

Seeds, fertilizers, sprayers, etc are all covered under this scheme.

3.3.2 CORPORATE FINANCE

3.3.2.1 Working Capital and Short Term Loans

NBP specializes in providing Project Finance – Export Refinance to exporters – Pre-

shipment and Post-shipment financing to exporters – Running finance – Cash Finance –

Small Finance – Discounting & Bills Purchased – Export Bills Purchased / Pre-shipment

/ Post Shipment Agricultural Production Loans.


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3.3.2.2 Medium term loans and Capital Expenditure Financing

NBP provides financing for its clients’ capital expenditure and other long-term

investment needs. By sharing the risk associated with such long-term investments, NBP

expedites clients’ attempt to upgrade and expand their operation thereby making possible

the fulfillment of our clients’ vision. This type of long term financing proves the bank’s

belief in its client's capabilities, and its commitment to the country.

3.3.2.3 Loan Structuring and Syndication

National Bank’s leadership in loan syndicating stems from ability to forge strong

relationships not only with borrowers but also with bank investors. Because we

understand our syndicate partners’ asset criteria, we help borrowers meet substantial

financing needs by enabling them to reach the banks most interested in lending to their

particular industry, geographic location and structure through syndicated debt offerings.

Our syndication capabilities are complemented by our own capital strength and by

industry teams, who bring specialized knowledge to the structure of a transaction.

3.3.2.4 Cash Management Services

With National Bank’s Cash Management Services (in process of being set up), the

customer’s sales collection will be channeled through vast network of NBP branched

spread across the country. This will enable the customer to manage their company’s total

financial position right from your desktop computer. They will also be able to take

advantage of our outstanding range of payment, ejection, liquidity and investment

services. In fact, with NBP, you’ll be provided everything, which takes to manage your

cash flow more accurately

3.4 INTERNATIONAL BANKING

National Bank of Pakistan is at the forefront of international banking in Pakistan, which

is proven by the fact that NBP has its branches in all of the major financial capitals of the


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world. Additionally, NBP have recently set up the Financial Institution Wing, which is

placed under the Risk Management Group. The role of the Financial Institution Wing is:

To effectively manage NBP’s exposure to foreign and domestic

correspondence

Manage the monetary aspect of NBP’s relationship with the correspondents to

support trade, treasury and other key business areas, thereby contributing to

the bank’s profitability

Generation of incremental trade-finance business and revenues

3.4.1 NBP offers

The lowest rates on exports and other international banking products

Access to different local commercial banks in international banking

3.5 CASH AND GOLD FINANCE

Cash and Gold finance means that loan is given against the gold. The gold is

mortgaged with the bank and loan is taken. It is the area of consumer finance. And

borrower can take loan for common use.

3.6 ADVANCE SALARY LOAN

This loan is given to those people who are govt. servants. They can get a loan up to the

salary of twenty months.

3.7 DEPARTMENTALIZATION

Dividing an organization into different parts according to the functions is called depart

mentation. So NBP can be divided into the following main departments.


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A) DEPARTMENTALIZATION OF NBP

3.7.1 CASH DEPARTMENT

Cash department performs the following functions

3.7.1.2 Receipt

The money, which either comes or goes out from the bank, its record should be kept.

Cash department performs this function. The deposits of all customers of the bank are

controlled by means of ledger accounts. Every customer has its own ledger account and

has separate ledger cards.

3.7.1.3 Payments

It is a banker’s primary contract to repay money received for this customer’s account

usually by honoring his cheques.

3.7.1.4 Cheques and their Payment

The Negotiable Instruments. Act, 1881

“Cheque is a bill of exchange drawn on a specified banker and not expressed to be

payable otherwise than on demand”.

Since a Cheque has been declared to be a bill of exchange, it must have all its

characteristics as mentioned in Section 5 of the Negotiable Instruments Act, 1881.

Therefore, one can say that a Cheque can be defined as an:

3.7.1.5 The Requisites of Cheque

There is no prescribed form of words or design of a Cheque, but in order to fulfill the

requirements mentioned in Section 6 above the Cheque must have the following.

It should be in writing

The unconditional order


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Drawn on specific banker only

Payment on Demand

Sum Certain in money

Payable to a specific person

Signed by the drawer

3.7.1.6 Parties to Cheque

The normal Cheque is one in which there is a drawer, a drawee banker and a payee, or no

payee but bearer.

The Drawer

The Drawee

The Payee

3.7.1.7 Types of Cheques

Bankers in Pakistan deal with three types of cheques

a) Bearer Cheques

Bearer cheques are cashable at the counter of the bank. These can also be collected

through clearing.

b) Order cheque

These types of cheques are also cashable on the counter but its holder must satisfy the

banker that he is the proper man to collect the payment of the cheque and he has to show

his identification. It can also be collected through clearing.

c) Crossed Cheque

These cheques are not payable in cash at the counters of a banker. It can only be credited

to the payee’s account. If there are two persons having accounts at the same bank, one of


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the account holder issues a cross-cheque in favor of the other account holder. Then the

cheque will be credited to the account of the person to whom the cheque was issued and

debited from the account of the person who has actually issued the cheque.

3.7.1.8 Payment of Cheques

It is a banker’s primary contract to repay money received for his customer’s account

usually by honoring his cheques. Payment of money deposited by the customer is one of

the root functions of banking. The acid test of banking is the receipt of money etc. from

the depositors, and repayment to them. The payment in due course means payment in

accordance with the apparent tenor of the instrument, in good faith and without

negligence to any person in possession thereof under circumstances, which do not afford

a reasonable ground of believing that he is not entitled to receive payment of the amount

therein mentioned. It is a contractual obligation of a banker to honor his customer’s

cheques if the following essentials are fulfilled.

Cheques should be in a proper form.

Cheque should not be crossed.

Cheque should be drawn on the particular bank.

Cheque should not mutilated.

Funds must be sufficient and available.

The Cheque should not be postdated or stale.

Cheque should be presented during banking hours.

3.7.2 CLEARING DEPARTMENT

A clearinghouse is an association of commercial banks set up in given locality for the

purpose of interchange and settlement of credit claims. The function of clearinghouse is

performed by the central bank of a country by tradition or by law. In Pakistan, the


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clearing system is operated by the SBP. If SBP has no office at a place, then NBP, as a

representative of SBP act as a clearinghouse.

In practice, the person receiving a Cheque as rarely a depositor of the cheque at the same

bank as the drawer. He deposits the cheque with his bank other than of payer for the

collection of the amount. Now the bank in which the cheque has been deposited becomes

a creditor of the drawer’s bank. The depositor bank will pay his amount of the cheque by

transferring it from cash reserves if there are no offsetting transactions.

The banks on which the cheques are drawn become in debt to the bank in which the

cheques are deposited. At the same time, the creditors’ banks receive large amounts of

cheques drawn on other banks giving claims of payment by them.

The easy, safe and most efficient way is to offset the reciprocal claims against the other

and receive only the net amount owned by them. This facility of net interbank payment is

provided by the clearinghouse.

The representatives of the local commercial banks meet at a fixed time on all the business

days of the week. The meeting is held in the office of the bank that officially performs the

duties of clearinghouse. The representatives of the commercial banks deliver the cheques

payable at other local banks and receive the cheques drawn on their bank. The cheques

are then sorted according to the bank on which they are drawn. A summary sheet is

prepared which shows the names of the banks, the total number of cheques delivered and

received by them. Totals are also made of all

The cheques presented by or to each bank. The difference between the total represents the

amount to be paid by a particular bank and the amount to be received by it. Each bank

then receives the net amount due to it or pays the net amount owed by it.

3.7.2.1 In-Ward Clearing Books

The bank uses this book for the purpose of recording all the cheques that are being

received by the bank in the first clearing. All details of the cheques are recorded in this

book.


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3.7.2.2 Out-Ward Clearing Book

The bank uses outward clearing register for the purpose of recording all the details of the

cheques that the bank has delivered to other banks.

3.8 ADVANCES DEPARTMENT

Advances department is one of the most sensitive and important departments of the bank.

The major portion of the profit is earned through this department. The job of this

department is to make proposals about the loans. The Credit Management Division of

Head Office directly controls all the advances. As we known bank is a profit seeking

institution. It attracts surplus balances from the customers at low rate of interest and

makes advances at a higher rate of interest to the individuals and business firms. Credit

extensions are the most important activity of all financial institutions, because it is the

main source of earning.

However, at the same time, it is a very risky task and the risk cannot be completely

eliminated but could be minimized largely with certain techniques.

Any individual or company, who wants loan from NBP, first of all has to undergo the

filling of a prescribed form, which provides the following information to the banker.

3.8.1 Name and address of the borrower.

Existing financial position of a borrower at a particular branch.

Accounts details of other banks (if any).

Security against loan.

Exiting financial position of the company. (Balance Sheet & Income Statement).

Signing a promissory note is also a requirement of lending, through this note

borrower promise that he will be responsible to pay the certain amount of money with

interest.


26

3.8.2 Forms of Loans

In addition to purchase and discounting of bills, bankers in Pakistan generally lend in the

form of cash finance, overdrafts and loans. NBP provides advances to different people in

different ways as the case demand.

a) Cash Finance

This is a very common form of borrowing by commercial and industrial concerns and is

made available either against pledge or hypothecation of goods, produce or merchandise.

In cash finance a borrower is allowed to borrow money from the banker up to a certain

limit, either at once or as and when required. The borrower prefers this form of lending

due to the facility of paying markup/services charges only on the amount he actually

utilizes.

If the borrower does not utilize the full limit, the banker has to lose return on the un-

utilized amount. In order to offset this loss, the banker may provide for a suitable clause

in the cash finance agreement, according to which the borrower has to pay

markup/service charges on at least on self or one quarter of the amount of cash finance

limit allowed to him even when he does not utilize that amount.

b) Overdraft/Running Finance

This is the most common form of bank lending. When a borrower requires temporary

accommodation his banker allows withdrawals on his account in excess of the balance,

which the borrowing customer has in credit, and an overdraft thus occurs. This

accommodation is generally allowed against collateral securities. When it is against

collateral securities it is called “Secured Overdraft” and when the borrowing customer

cannot offer any collateral security except his personal security, the accommodation is

called a “Clean Overdraft”. The borrowing customer is in an advantageous position in an

overdraft, because he has to pay service charges only on the balance outstanding against

him. The main difference between a cash finance and overdraft lies in the fact that cash

finance is a bank finance used for long term by commercial and industrial concern on

regular basis, while an overdraft is a temporary accommodation occasionally resorted.


27

c) Demand Financing/Loans

When a customer borrows from a banker a fixed amount repayable either in periodic

installments or in lump sum at a fixed future time, it is called a “loan”. When bankers

allow loans to their customers against collateral securities they are called “secured loans”

and when no collateral security is taken they are called “clean loans”.

The amount of loan is placed at the borrower’s disposal in lump sum for the period

agreed upon, and the borrowing customer has to pay interest on the entire amount. Thus

the borrower gets a fixed amount of money for his use, while the banker feels satisfied in

lending money in fixed amounts for definite short periods against a satisfactory security

3.9 REMITTANCE DEPARTMENT

Remittance means a sum of money sent in payment for something. This department deals

with either the transfer of money from one bank to other bank or from one branch to

another branch for their customers. NBP offers the following forms of remittances.

Demand Draft

Telegraphic Transfer

Pay Order

Mail Transfer

3.9.1 Demand Draft

Demand draft is a popular mode of transfer. The customer fills the application form.

Application form includes the beneficiary name, account number and a sender’s name.

The customer deposits the amount of DD in the branch. After the payment the DD is

prepared and given to the customer. NBP officials note the transaction in issuance

register on the page of that branch of NBP on which DD is drawn and will prepare the

advice to send to that branch. The account of the customer is credited when the DD

advice from originating branch comes to the responding branch and the account is

debited when DD comes for clearance.


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3.9.2 Pay Order

Pay order is made for local transfer of money. Pay order is the most convenient, simple

and secure way of transfer of money. NBP takes fixed commission of Rs. 25 per pay

order from the account holder and Rs. 100 from a non-account holder.

3.9.3 Telegraphic Transfer

Telegraphic transfer or cable transfer is the quickest method of making remittances.

Telegraphic transfer is an order by telegram to a bank to pay a specified sum of money to

the specified person. The customer for requesting TT fills an application form. Vouchers

are prepared and sent by ordinary mail to keep the record. TT charges are taken from the

customer. No excise duty is charged on TT. The TT charges are:

Telegram/ Fax Charges on TT = Actual-minimum Rs.125.

Cable telegram transfer costs more as compared to other title of money. In cable transfer

the bank uses a secret system of private code, which is known to the person concerned

with this department and branch manager.

3.9.4 Mail Transfer

When the money is not required immediately, the remittances can also be made by mail

transfer

(MT). Here the selling office of the bank sends instructions in writing by mail to the

paying bank for the payment of a specified amount of money. Debiting to the buyer’s

account at the selling office and crediting to the recipient’s account at the paying bank

make the payment under this transfer. NBP taxes mail charges from the applicant where

no excise duty is charged.

3.10 HUMAN RESOURCE MANAGEMENT

Human Resource plays a vital role in the success of every service organization. They

interact between man and machine. Their attitude can win or lose the customer. The


29

positive attitude could only be created in a conducive environment, which can make the

staff dedicated towards the organization and its objectives. In reality the man is more

important than machine as it is the human which could get maximum out of machine to

keep a happy customer. However, most organizations give little importance to this very

important asset.

Various aspects related to human resource of National Bank of Pakistan are critically

examined in the following text.

3.10.1 Selection & Recruitment

Although the Bank believes in merit but in practice the selection of employees is not

done on merit. Most of the employees are low educated. This shows that candidates with

some strong family background or political pressure are given preference in recruitment

and qualified candidates are sometimes left behind.

3.10.2 Job for Life

Like the employee of public sector organizations in Pakistan, the employees of NBP also

enjoy their job for life. Since there is no risk of early retirement or redundancy in rank,

they do not perform with their full potentials. This is one redundancy in rank, they do not

perform with their full potentials, and this is one of the reasons responsible for the low

productivity of the employees of the Bank.

3.10.3 Performance Appraisal

The performance of employees of the Bank are appraised though their annual

confidential reports at the end of each year. This has become an outdated method of

performance appraisal and no longer used due to the following reasons:

The performance of employees is evaluated after quite a long time.

Element of subjectivity is involved in this method.

Employee’s participation is not ensured in the process of evaluation.


30

Objectives of employee’s are not quantified.

3.10.4 Inter Personal Relationship

Modern management acknowledges human resources as one ‘of the most important

assets of an organization. But by their very nature, human beings are also the most

unpredictable. Where a number of persons work together, interactions among them, of

necessity, will lead to conflicts and NBP is no exception. Most interpersonal conflicts in

NBP can be traced back to the following major heads.

3.10.5 Diversity in Values

Diversity in values, perceptions, cultural background and life-style is another reason

responsible for inter personal conflicts in NBP. Different values and perceptions about

the same issue, event or personality hinder understanding. When things come to such a

pavement, therefore, interpersonal conflicts are generated.

The dominant trend in all modern industrial societies of the world is merit and expertise,

which helps promote cohesion and reduce conflicts. But the feudalistic mindset is still

very strong in our set up and there is no tradition of tolerance for differing viewpoints.

Hence, interpersonal conflicts are generated.

3.11 FOREIGN EXCHANGE DEPARTMENT

This department mainly deals with the foreign business. The main functions of this

department are:

L/C dealing.

Foreign currency accounts dealing.

Foreign Remittance dealing.


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3.11.1 L/C dealing

NBP is committed to offering its business customers the widest range of options in the

area of money transfer. If you are a commercial enterprise then our Letter of Credit

service is just what you are looking for. With competitive rates, security, and ease of

transaction, NBP Letters of Credit are the best way to do your business transactions.

3.11.2 Foreign currency account dealing

This department deals with the foreign currency accounts which mainly include dollar

account, euro account etc.

3.11.3 Foreign Remittance dealing.

This is very important function of this Department.

B) DEPARTMENTATION OF NBP MAIN BRANCH MANSEHRA.

Dividing an organization into different parts according to the functions is called

depart mentation. So NBP Main Branch Mansehra is divided into three main parts.

1. Cash Department

2. General Banking Department.

3. Government Department

3.12 CASH DEPARTMENT

Cash department mainly deals in cash. The Head of department is Syed Haider

Shah and three cashiers Syed Sajid Shah, Safeer Ahmed and Waseem the objective of

cash department.

“To facilitate people in the payments of their bills and taxes and repayments of cash”

There are two main functions of cash department.


32

i. Payment

ii. Receipts

Payments are the function that they pay their cheques and pay cash.

Receipts mean collection of utilities bills, taxes etc.

3.13 GENERAL BANKING

In this section of the bank the general banking function is performed. It is divided

into five departments.

Foreign Exchange Department.

General Banking.

Advances Department.

Clearing Department.

Establishment Department.

3.13.1 Foreign Exchange Department

The incharge of this department is Abdul Haseeb Khan a very competent person. The

objective of this department is:

“To transfer the money of people from one place to another place in safe and comparable

way” The main functions of this department are:

Opening and Maintaining of Foreign currency Account

Transfer of funds to foreign countries both in currency notes and from

Accounts.

Foreign currency clearing both local and international.


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Payments of Home Remittances.

3.13.2 Advances department

Every bank has a department, which advances money to borrowers. In NBP Main

Branch Mansehra the advances department is head by the Nadeem Ahmad. He is very

competent person. The objective of Advances Department is

“To facilitate people by giving short term and long term loans on easy terms and

conditions”. The main function of this Department is to take surplus money from the

people at low rates and lend this money to borrowers at high rates to earn profit.


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CHAPTER # 4

FINANCIAL ANALYSIS

4.1 FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is the process of identifying of financial strengths and

weaknesses of the firm by properly establishing relationship between the items of the

balance sheet and the profit &loss account,"

It is a valuable tool used by investors and creditors, financial analysts, and others in their

decision-making processes related to stocks, bonds, and other financial instruments. The

goal in analyzing financial statements is to assess past performance and current financial

position and to make predictions about the future performance of a company. Investors

who buy stock are primarily interested in a company's profitability and their prospects for

earning a return on their investment by receiving dividends and/or increasing the market

value of their stock holdings. Creditors and investors who buy debt securities, such as

bonds, are more interested in liquidity and solvency, the company's short-and long-run

ability to pay its debts. Financial analysts, who frequently specialize in following certain

industries, routinely assess the profitability, liquidity, and solvency of companies in order

to make recommendations about the purchase or sale of securities, such as stocks and

bonds. The analysis of financial statement refers to the examination of the statements for

the purpose of acquiring additional information regarding the activities of the business.

The users of the financial information often find analysis desirable for the interpretation

of the firm’s activities.


35

3 Years Statement of Financial Position of NBP

National Bank of Pakistan

Statement of Financial Position

Rupees in „000‟


36

3 Years Profit & Loss A/C:

For the year ended December, 31

PARTICULARS 2009 2010 2011

Mark-up/Return/Interest earned 78,124,796 88,681,381 95,689,741

Mark-up/Return/Interest earned 40,448,291 45,169,744 48,516,517

Net Mark-up/ Interest income 37,676,505 43,511,637 47,173,224

Provision against on performing advances-

net

11,148,773 7,007,975 6,219,671

Provision against diminution in the value of

investments-net advances-net

651,282 2,904,949 3,138,494

Impairment of good will 92,593

Provision against off balance sheet

obligations

20,237 3,965

11,820,292 10,009,482 9,358,165

Net Mark-up/ Interest income after

provisions

25,856,213 33,502,155 37,815,059

Non–mark–up / interest income 2009 2010 2011

Fee, commission and brokerage income 8,996,973 9,871,667 9,948,547

Dividend income 1,896,817 1,067,273 1,595,192

Income from dealing in foreign currencies 3,103,673 2,278,898 3,196,630

Gain on sale of securities – net 4,593,041 2,512,363 2,390,211

Gain on revaluation of investments 2,355 6,730 (35039)


37

Share of loss from joint ventures (41,715) (16,976) 32,181

Share of profits from associates 5,238 66,906 83,559

Gain on revaluation of previously held equity _ 180,131 _

Other income 552,950 2,183,891 2,543,139

Total non–mark–up / interest income 19,109,332 18,150,883 19754420

44,965,545 51,653,038 57569479

Non–mark–up / interest expenses 2009 2010 2011

Administrative expenses 22,816,665 26,732,045 30760815

Other provision – net 628,391 179,819 554,810

Other charges 321,647 118,887 137852

Total non–mark–up / interest expenses 23,766,703 27,030,751 31453477

Profit before taxation 21,198,842 24,662,287 26116002

Taxation – Current year 8,890,206 9,871,640 9229882

– Prior years (4,137,307) (938,158) 2,60,000

– Deferred (1,003,099) (2,049,600) (1083045)

3,749,800 6,883,882 8406837

Profit after taxation 17,449,042 17,738,405 17709165


38

Techniques of Analysis

Three techniques may be used in evaluating financial statement data:

• Ratio Analysis

• Horizontal Analysis,

• Vertical Analysis

4.2. RATIO ANALYSIS

Ratio analyses are the most popular form of analyses all over the world and the trusted

one also. In ratio analyses as the name suggests ratios are used in analyzing the financial

standings of the organization.

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as:

“The quotient of two mathematical expressions”

OR

“The relationship between two or more elements”

In financial ratio analysis a ratio is used as benchmark for evaluating the financial

Position and performance of a firm.

Ratio analysis enables the analyst to compare items on a single financial statement or to

examine the relationships between items on two financial statements. After calculating

ratios for each year's financial data, the analyst can then examine trends for the company

across years. Since ratios adjust for size, using this analytical tool facilitates

intercompany as well as intercompany comparisons.

CALCULATION OF DIFFERENT RATIOS

Here we are going to calculate different ratios, which include both the balance sheet and

income statement ratios. These ratios are quite important for analyzing the financial

position of a firm.

These ratios are calculated for the years 2009, 2010 and 2011 from the balance sheet and

profit and loss statement of NBP.


39

4.2.1. LIQUIDITY RATIOS

A class of financial metrics that is used to determine a company's ability to pay off its

short terms debts obligations. Generally, the higher the value of the ratio the larger

the margin of safety that the company possesses to cover short-term debts.

4.2.1.1Current Ratio

The current ratio is the ratio of current assets to current liabilities.

Formula

Current Ratio = Current Assets / Current Liabilities

Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders

may prefer a lower current ratio so that more of the firm's assets are working to grow the

business.

Particulars Years 2009 Years 2010 Year 2011

Formula 640476876/

781962320

646363744

/860262110

728683464/

962897823

Ratio 0.82 0.75 0.76

Interpretation

The current ratio of NBP decreasing in 2010 and in 2011because of increase in current

liabilities. The ratio is 0.82in 2009 and 0.75 in 2010 and in 2011 it is 0.76.This means

that for every 1 rupee liability of the bank it has 0.76 rupees IN 2011.It shows the poor

short term financial position of NBP.


40

4.2.1.2 Cash ratio

The cash ratio is an indication of the firm's ability to pay off its current liabilities if for

some reason immediate payment were demanded. NBP cash ratios are

Formula

Cash Ratio = Cash / Current liabilities


Formula 145454911/

781962320

146400393/

860262110

159913188/

962897823

Ratio 0 .18 0.17 0.16

Interpretation

The cash ratio of the bank is 0.18, 0.17 and 0.16 in 2009, 2010 and 2011 respectively.

This shows a decrease in 2010 and 2011. This means that NBP have some cash than their

liability, and NBP not easily cover their liabilities with cash in hard times.

4.2.1.3 Advances to deposits ratio

The loan to deposit ratio is used to calculate a lending institution's ability to cover

withdrawals made by its customers

Formula

Advances to deposits ratio= Advances / Total Deposits


Formula 475338439 /

727513013

478886775 /

8321344054

527109209 /

927415132

Ratio 0.65 0.57 0.56


41

Interpretation:

It means the efficiency on NBP is good and they use their deposits efficiently in

advancing to borrowers. Here high ratio is required. The next side of the picture is that

the people will think that is risky to deposit the money in the bank

4. 2. 2 SOLVENCY RATIO ANALYSIS

Solvency analysis of a firm indicates the amount of the other people’s money being used

to generate profit. In general, these analyses are more concerned with long term debts,

because these commit the firm to a stream of payments over the long run. Solvency

analysis includes

4. 2. 2.1 Proprietary Ratio

Proprietary ratio refers to a ratio which helps the creditors of the company in seeing that

their capital or loans which the creditors have given to the company are safe. Proprietary

ratio can be calculated as follows

Formula

Proprietary Ratio = Total Asset / Total Equity


Formula 120681622 /

946253269

130800756/

103828467

135298921

/1153480100

Ratio 0.12 0.12 0.10

Interpretation

This ratio shows the solvency position of the bank. In 2009, 2010 there is an increases

trend as .i2 but in 2011 it decline .10. It shows that very small amounts of shareholders in

asset contribution.


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4. 2. 2.2 Debt-to-owner's equity

The ratio of debt-to-owner's equity or net worth indicates the degree of financial leverage

you're using to enhance your return. A rising debt-to-equity ratio may signal that further

increases in debt caused by purchases of inventory or fixed assets should be restrained

Formula

Debt-to-owner's equity= Total Debt / Equity


Formula 825460717/

120681622

906719635/

130800756

1017685691/

135298921

Ratio 6.83 6.93 7.52

Interpretation

It shows increases trend in 2009 to 2011 which means NBP financing more through debt

and NBP business depend on debt .it also increases the right of outsiders against assets .it

is high and not better for owners.

4. 2. 2.3 Earning assets to total assets ratio

Earning assets to total assets ratio tells us about the bank management efficiency to

utilize the earning assets.

Formula

Earning assets to total assets ratio=Earning assets/ Total assets


Formula 827286516/

946253269

918673469 /

1038018467

1022840481/

1153480100

Ratio 0.87 0.88 0.89


43

Interpretation

The earning assets to total assets ratio increases which means efficiency of bank

improves. It means earning capacity of earning assets 0.89 against 1 rupee.

4. 2. 2.4 Return on total assets

The return on assets ratio provides a standard for evaluating how efficiently financial

management employs the average dollar invested in the firm's assets, whether the dollar

came from investors or creditors.

Formula

Return on total assets ratio= Net Profit after Tax/ Total Assets*100


Formula 17449042/

946253269

17738405/

103818467

17709165/

1153480100

Ratio 1.80% 1.70% 1.53%

Interpretation

It shows the decrease trend of profitability. It means the assets of business are fully

utilized in 2009 and ratio is 1.80 but the assets of the business are fully not utilized in

more and efficient way in 2011 and ratio is 1.53 and also shows the unfavorable trend of

the business.

4. 2. 2.5 Return on investment

A performance measure used to evaluate the efficiency of an investment or to compare

the efficiency of a number of different investments

Formula

Return on investment= Net Profit after Tax/ Investment *100


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Formula 17449042 /

217596037

17738405/

301078498

17709165/

319527254

Ratio 8.01% 5.89% 5.50%

Interpretation

It means the investment of the business are fully utilized in more and efficient way it also

shows that NBP have large amount of investment but it needs some improvement and

also shows the unfavorable trend of the business

4. 2. 2.6 Return on equity

Return on equity measures a corporation's profitability by revealing how much profit a

company generates with the money shareholders have invested.

Formula Net Profit after Tax/ Total Equity*100


Formula 17449042 /

120681622

17738405/

130800756

17709165/

135298921

Ratio 14.45% 13.56% 13.08%

Interpretation

This ratio is more meaningful for shareholders who are interested to know the profit

earned by the company because the dividend paid from available profit higher ratio

means factor of production fully utilized and good position but here there is decline in

ratio.

4. 2. 2.7 Net profit margin

Net profit margin is the percentage profit your business makes for every dollar of revenue

whether you’re making a profit after covering all of your costs.


45

Formula = net profit/ Interest Earned


Formula 17449042

/78,124,796

17738405/

88,681,381

17709165/

95,689,741

Ratio 22% 20% 19%

Although bank is earning huge income but its expenses increased quite a bit

simultaneously. Ultimately result is decrease in the net profit of the bank. It is decreased

20%to 19% in 2011

4.3. HORIZONTAL ANALYSIS

This technique is also known as comparative analysis. It is conducted by setting

consecutive balance sheet, income statement or statement of cash flow side-by-side and

reviewing changes in individual categories on a year-to-year or multiyear basis. The most

important item revealed by comparative financial statement analysis is trend. A

comparison of statements over several years reveals direction, speed and extent of a

trend(s). The horizontal financial statements analysis is done by restating amount of each

item or group of items as a percentage. Such percentages are calculated by selecting a

base year and assign a weight of 100 to the amount of each item in the base year

statement. Thereafter, the amounts of similar items or groups of items in prior or

subsequent financial statements are expressed as a percentage of the base year amount.

The resulting figures are called index numbers or trend ratios.

Formula = Current Year amount / Base Year amount * 100.


46

Horizontal analysis of Statement of Financial Position

Interpretation

Assets sides-The horizontal analysis of the balance sheet of the bank over all give the

positive trend .The result of the balance sheet depict that there is a constant increasing


47

trend in cash about 14% in 2011as compare to last year. Lending’s to financial and

advance increases very huge amounts such as 125% (lending to financial) and 10 %(

advances) total assets .investments increases in 2011 by 46 %. Fixed assets & others

assets also increases as 10% and 11%.

Liabilities & equity-Bills payable decreased in 2010 by 25% and in 2011 by 15%.

Borrowing decreases in 2010 as 56 % and 42 % in 2011.Deposits increases in 2010 as 14

% and 27 % in 2011.Others liabilities increases 10 %in 2010 and 28 % in 2011. Shares

capital of NBP increases in 2010 as 25 % and 56% in 2011.Reserves increases in 7 %in

2010, 12%in 2011. Inappropriate profit increases 7% in 2010, 12%in 2011.

HORIZONTAL ANALYSIS PROFIT & LOSS A/C

Particulars 2009 % 2010 % 2011 %

Mark–up / return / interest earned 100% 113% 122%

Mark–up / return / interest expensed 100% 111% 119%

Net mark–up / interest income 100% 15% 8%

Provision against non performing advances-net 100% 62% 55%

Impairment of goodwill

Provision for diminution in the value of investments –

net

100% 446% 481%

sheet obligations 100% 19%

100% 85% 79%

Net mark–up / interest income after provisions 100% 129% 146%


48


49

Interpretation

The interest earned by National Bank of Pakistan fluctuates and shows an increasing

trend during all years. It shows an increasing trend that is 13% in 2010, 22%in 2011. The

interest expense of National Bank of Pakistan shows an increasing trend during all years.

It increases in 2010 as 11%, 19 % in 2011. The net markup/ interest income of National

Bank of Pakistan fluctuates and shows a mixed trend during all years. Provision against

none performing advances decreases in 2010 by 32 % & in 2011 as 45%. Net markup

increases as 26% in 2010 and 46 % in 2011.

The Fee, Commission & brokerage income of National Bank of Pakistan fluctuate and

show increases as 9% in 2010 and 10% in 2011. The dividend income of National Bank

of Pakistan is showing a mixed trend during all year’s .it decreases in 2010 by 44% and

16%in 2011. The administrative and operating expenses of National Bank of Pakistan

increase 22% in 2011 and 17 % in 2010 and profit before tax 1ncreases as compared to

last years. Profit after tax stable in 2011

4.4. VERTICAL ANALYSIS

Vertical analysis is a technique for identifying relationship between items in the same

financial statement by expressing all amounts as the percentage of the total amount taken

as 100. In a balance sheet, for example, cash and other assets are shown as a percentage

of the total assets and, in an income statement, each expense is shown as a percentage of

the sales revenue. In Vertical analysis, various components of the financial statements are

standardized by expressing them as a percentage of some bases.

Examples of common-sized statements include:

Components of the balance sheet expressed as a percentage of total assets

Components of the income statement expressed as a percentage of sales or Interest

earned

Formula

The formula for Vertical Analysis is:

Individual item of financial statement/total of items head *100


50

Vertical analysis of Statement of Financial Position

Rupees in „000‟

ASSETS 2009 %age 2010 %age 2011%age

Cash and balances with treasury banks 13% 11% 12%

Balances with other banks 2% 3% 2%

Lending’s to financial institutions 2% 2% 2.7%

Investments – net 22% 28% 26.5%

Advances – net 50% 46% 44.3%

Operating fixed assets 2% 3% 2%

Deferred tax assets – net 3% 5% 6%

Other assets – net 6% 4% 5%

TOTAL 100% 100% 100%

LIABILITIES

Bills payable 1% .008% .008%

Borrowings 5% 1% 2%

Deposits and other accounts 79% 81% 83%

Sub–ordinate loan

Liabilities against assets .0042 % .0012% .0011%

Deferred tax liabilities _ _ _

Other liabilities 3% 3% 4%


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TOTAL LIABILITIES 88% 86% 89%

NET ASSETS 12% 14% 11%

PRSEENTED BY

Share capital 1.5% 2% 1%

Reserves 2.5% 2.4% 2.6%

Inappropriate profit 5.9% 6% 5.2%

Surplus on revaluation of assets 2% 2.2% 2%

.1% .4% .2%

12% 14% 11%

Interpretation

Assets analysis

In balance sheet of bank the most important item is earning assets. There are four earning

assets. Bank has strong earning assets like advances investments and lending to financial

institutions has major percentage in of assets of bank.

There was a slight increase in the year 2011 as compare to the years 2009& 2010, of

12%. %. In cash and Lending’s increasing trend and investment increases in 2010 28 %

and decline in 2011 2% as compared to last years. Advances decreases in

2010 and 2011 in liability deposits of the bank increases as compared to last year‟s 2%.

The operating fixed assets of National Bank of Pakistan shows a percentage of 2% in the

year 2011. There was a slight decrease of 1% in 2011, the other assets of National Bank

of Pakistan fluctuate during all years. The percentage of other assets is decreased to 6%

in the year 2011.


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Liabilities & Equity analysis

The bills payable by National Bank of Pakistan indicates a stable percentage. The

borrowings are increased in 2011 shows a percentage of 3%. The deposits and other

liabilities of National Bank of Pakistan increased during all years. The share capital of

National Bank of Pakistan shows a mixed trend in all years. It was 10% in 2010 and

shows an increasing trend of 13% in 2011. The unappropriated profit & Reserves of

National Bank of Pakistan is increased during all years

Vertical analysis of Profit & loss account

Rupees in „000‟

Particulars 2009 % 2010 % 2011 %

Mark–up / return / interest earned 100% 100 % 100%

Mark–up / return / interest expensed 49% 52% 51%

Net mark–up / interest income 47% 49% 49%

Provision against non-performing

advances-net 14% 8% 6%

Provision for diminution in the value of

investments – net .9% 3% 4%

Provision against off balance sheet

obligations .1% -.oo2%

15% 11% 10%

Net mark–up / interest income after

provisions 33% 40% 39%


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Non -mark–up / interest income 2009 % 2010 % 2011 %

Fee, commission and brokerage income 11% 13% 11%

Dividend income 3% 1% 2%

Income from dealing in foreign currencies 4% 2% 3%

Gain on sale of securities – net 6% 3% 2%

Unrealized gain on revaluation of investments .01% % 0.1%

Share of loss from joint ventures (.1)% .009 0.1%

Share of profits from associates .02% 0.1 % .1%

Gain on revaluation of previously equity interest .2%

Other income .7% 2% 3%

Total non–mark–up / interest income 24.5% 20% 21%

Administrative expenses 29% 31% 32%

Other provision – net .8% .2% 0.6%

Other charges .7% .1% 0.2%

Total non–mark–up / interest expenses 31% 30% 33%

Extra ordinary / unusual item 27% 28% 28%

Profit before taxation 11% 11% 10%

Taxation – Current year (5)% (1)% .3%

– Prior years (1)% (3)% (9)%

– Deferred 4% 7% 9%

Profit after taxation 23% 20% 19%


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Interpretation.

The interest earned by National Bank of Pakistan fluctuates and shows an increasing

trend during all years. The interest expense of National Bank of Pakistan shows a

decreasing trend during all years. In the year 2011, the interest expensed is 51%. The Fee,

Commission & brokerage income of National Bank of Pakistan fluctuate and show a

decreasing flow. The administrative and operating expenses of National Bank of Pakistan

are 32% in 2011, representing second highest percentage among all years The total non-

markup/ Interest expenses of National Bank of Pakistan are 30% in 2010 and increases

33% in 2011.current tax and profit decreases in 2011 as compared to 2010

10 Years financial Highlights of NBP

Total Assets

Deposits


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Advances

Investments

Capital reserves


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Pre-tax Profit

After-Tax profit

4.5 SWOT ANALYSIS

SWOT analysis is an acronym that stands for strengths, weakness, opportunities, and

threats SWOT analysis is careful evaluation of an organization’s internal strengths and

weakness as well as its environment opportunities and threats.

“SWOT analysis is a situational which includes strengths, weaknesses, opportunities and

threats that affect organizational performance.”


57

SWOT analysis is one of the most important steps in formulating strategy using the

organization mission as a context; managers assess internal strengths distinctive

competencies and weakness and external opportunities and threats.

The goal is to then develop good strategies and exploit opportunities and strengths

neutralize threats and avoid weaknesses with an overall organizational goal is to increase

the wealth and value of the organization.

STRENGTHS

NBP is one of the oldest bank of Pakistan and first nationalized bank Hence its

customer base is strength from this plus point as customers have more confidence in

the bank. The additional value services as the privilege for the bank.

The NBP performs additional services for its customers as well as the other bank

customer in the absence of SBP.

NBP has the relative competence in having more deposits than the other bank. This is

because of the confidence the customer have in the bank. The bank being the

privileged and oldest bank in banking sector of Pakistan enjoys this edge over all

others, lacking it.

The employers at NBP are offered reasonable monetary benefit. Normally two

bonuses are given Eid-Ul-Fitar & Eid-Ul-Azha. This serves as an additional benefit

and competency for the bank and a source of motivation for the employees.

The bank has another competency i.e. it has broad-basses network of branches

throughout the country also more than one branch in high productive cities. The

customers are provided services at their nearest possible place to confirm customer

satisfied.

The employees at NBP are strict followers of rule & regulation imposed by bank. The

disciplined environment at NBP bolsters its image and also enhances the overall

output of the organization.


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The employees at NBP here have a good hold on their descriptions, as they are highly

skilled Professionals with background in business administration, banking, economics

etc. These professional competencies enable the employees to understand and

perform the function and operation in better way.

The working condition in the NBP branch here is very conductive and favorable for

better output. The informal environment affects the performance of the employees in

a positive way.

The bank enjoys a good plus point when it comes to the employee manager

relationship the hearing as removing of discrepancies if any, between the employees,

and between the manager and employees.

Best and optional policies and attractive compensation packages for employees,

which has really improved their commitment dedication and hard work towards the

accomplishment of bank’s objectives.

WEAKNESSES

The bank does not promote its corporate image, services, etc on a competitive way.

Hence lacks far behind in marketing effort .A need for aggressive marketing in there

in the era marketing in now becoming a part of every organization.

The strong political hold of some parties and government and their dominance is

affecting the bank in a negative way. They sometime have to provide loan under the

pressure, which leads to uneven and adjusted feeling in the bank employees.

The promotions and bonuses etc in the bank are often powered by senior’s favoritism

or depends upon their wills and decision. This adds to the negative factors, which

denominate the employees thus resulting in affecting their performance negatively.

The bank falls far behind when the innovative and new schemes are considered. It has

not been involved in the tug of war between the competitors to the accounts and

strengthens the existing customer base. This stands out to be the major incompetence

and weakness of the banks.


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During the rush hours, the bank is founded out to be a total flop to handle the mob of

people peaking from windows and doors. The bank has deficiency to operate in the

stages of rush hours where the people find them services entangled in a situation of

nowhere because they are not well served.

The bank lack the strength of being powered by the network of computers, which

have saved time, energy and would have lessened the mental stress, the employees

have currently. This would add to the strength if it were powered by network of

computers.

The bank lacks the modern Equipment that is note counting machine computers. Even

if there is any equipment they lack to fall in the criteria of being rearmed as update

and upgraded

The workload in NBP is not evenly distributed and the workload tends to be more on

some employees while others abscond away from their responsibilities, which serves

as a demotivation factor for employees performing above average work.

OPPORTUNITIES

The world today has become a global village because of advancement in the

technologies, especially in communication sector. More emphasis is now given to

avail the modern technologies to better the performances. NBP can utilize the

electronic banking opportunity to ensure on line banking 24 hours a day. This would

give a competitive edge over others.

Because of the need for micro financing in the market, there are lot of opportunities in

this regard. Other banks have already initiated, now the time has arrived when the

NBP must realize it and take on step to cater an ongoing demand.

Growing policies of government on business and commerce sector provides MCB

and opportunity to efficiently meet with the business peoples


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NBP also has an opportunity to expand its new technological advancement like Tele

bank and Internet banking facilities in order to serve the customers more efficiently.

Due to efficient and highly qualifies management trainees groups, NBP can also

improve well and expand its foreign operations successfully.

NBP must continue the process of hiring the management trainees and should hire

well-qualified and competent people having specialization in the field of banking and

finance. As in most of the Business Institutions doing masters in this field have been

introduced.

THREATS

The bank is facing threats with the emergence of new competitors especially in terms

of foreign banks. These foreign banks are equipped with heavy financial power with

excellent and innovative ways of promoting and performing their services.

The ongoing shift in power in political arena in the country effects the performance of

the bank has to forward loans to politically powerful persons which create a sense of

insecurity and demoralization in the customer as well as employees. The bank is

currently acting upon the policy of downsizing which threaten the environment of the

bank Employees feel insecurity in doing their jobs and work, hence affecting the

overall performance of employees negatively.

There exists no regular and specific system of the removal of customer complaints.

Now a day a need for total customer satisfaction is emerging and in their demanding

consequences customer's complaints are ignored.

Growing global technological advancement in the world and new online equipments

will be a major threats face by the National Bank.

Having nationalized bank inconsistency in government’s policies regarding to

business and economic sector.


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There is a growing concept of Islamic banking in Pakistan and many foreign banks

entered in the market with the said concept, so it is a big opportunity for NBP to adapt

this concept to grape more market share and also to overcome competition


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CHAPTER # 5

CONCLUSION FINDINGS &

RECOMMENDATIONS

5.1 CONCLUSION

The economic growth, investment and the proper implementation of a positive

policy, the banks present economy has become a major area of concern. The banking

sector is also the opportunity to be used fruit economic recovery rapid growth over the

past few years. There are several economic mergers foreign investment in the banking

sector. PROB is intended is a leading bank in Pakistan, which offers an excellent service

to its customers. The Bank has delivered a phenomenal growth in the past few years in

many places in this country that the deposits, funds, assets and adjustment to the opening

balance of retained earnings bank. Benefits have a high market share is not only their

characteristics, but also the profit and the markup language. Also the products with NBP

offers to the catering sector.

National Bank of Pakistan within the framework of an important role for strategic

development. The Bank has always been the government's economic and have benefited

from the aid of state guarantees a large amount of public money and deposits.

National Bank of Pakistan is the second most important in the World Bank in

Pakistan, to the extent possible; National Bank of Pakistan and representatives of the

State of widely used the Pakistan and the Bank is also involved in commercial banks.

National Bank of Pakistan is crucial for Pakistan’s history of the bank, but also the

economy of Pakistan, so that it is very important. With the improvement of the National

Bank of Pakistan and their internal and external conditions, but maximum operations in

Pakistan (because that is the only bank which must be, the less developed regions where

there are no other banks will) continue to be many problems are new marketing

strategies, organizational and administrative problems with branches less developed areas

and the reasons for it.


63

I have a lot of experience of the bank in the course of my working experience.

You training courses in these areas that I learned that various functions organizations

whose rules and procedures of the central bank. National Bank of Pakistan Pakistan is

one of the most eminent banking system almost 1283 more national institutions and 23

abroad. Bank is always growing and always more far toward social assistance. The

management is very aware of the experienced and fields. I have had very good

opportunities not of internal card as a summary of the practices of life and work the

industry before they in practice. Practical issues and knowledge are very different from

the theory and intellectual attraction only increased knowledge. I had a good opportunity

from the practical experience and i mental attraction, and well developed theoretical

knowledge in some cases.

In addition, if the bank is on the increase, the employees of NBP add, indicates

that the problem is regarded as an employer is its employee’s difficult environment where

they can exploit the full potential and give a degree of confidence as the employer of the

staff bank.

Finally, a leading bank in Pakistan, PB is the standard leader of services to the

industry or its main competitors on average the industry and deliver a constant

improvement of existing products and services, but there are also new to the industry.

5.2 FINDINGS AND RECOMMENDATIONS

PB is a powerful, a non-profit organization, and the implementation of measures, a

particular system. Central bank regulatory authority in Pakistan, where both the market

works properly technical basis. Head Office set operation procedure and not to work.

Such a procedure update in time approach and this process can be effectively change

capacity building on an equal footing with international practice.

In this regard, I would like to give a number of recommendations which, I believe that the

efficiency and the performance which PB as an organization in general and the PB

Mansehra trunk cable. Recommendations are as follows:

Training of its employees

The Bank is intended to contribute to the improvement of the quality of the training and

of the integrity and effectiveness and of systems, processes and financial reports.


64

Job Rotation

Work the workers, in order that they should know about all departments. This is going to

be opportunities for workers, following changes in monotony is slipping. This will update

and motivate employees.

Equal Distribution of Workload

Also of the staff employed by the directorate general should be to equal the load. There

should not be unnecessary at the relaxation. Personal Contacts of employees must not

destroy the ministry of the environment.

IT capability

The banks should allow to improve its own analytical regions and a medium-term

strategy banking and securities regulation.

Micro Finance

The Bank should be to support the micro-enterprises and small and medium sized

enterprises, such as the unemployment and job creation requires a more equitable

distribution of wealth.

Modern Banking

NBP modern banking the necessary instruments and techniques. Quality Leadership, a

clear vision infrastructure and the development of human resources.

Improve product

PB, arm loans only government public sector development planning, and those of

development and economic growth to provide the products and services.

Proper Planning

EIB plan of reorganization must be in time of war and a change in the organization of the

work function of retrieving a global database tables with which you want to work. In

addition, the World Bank to strengthen the monitoring of expenditures

Monitoring

National Bank of Pakistan must deployment framework of supervision on a consolidated

basis and the reorganization of work regulatory framework for a better regulation and

control of financial supervision of the operation.


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Introduction of advertising

During the past year, the Bank to begin advertising ways to promote savings the

population. The bank will open new branches regions country deposits and stationary

sources.

Rank Influence Should Be Avoided

Sometimes, a high-ranking officers and be a priority. In this case, the Bank will closely

monitor rule "first come, first served". This confidence to other customers, that they are

not ignored, because they are that you can then rank.

Customer Satisfaction

National Bank of Pakistan is to improve services and older persons to introduce scientific

methods to pay the bills. If consumers are satisfied with service they will grow with the

bank.


66

REFRENCES

Http// www.nbp.com.pk.

Service Personnel. 20. July 2010. PNI trunk Mansehra.

The Chairman, on 21. June 2006 round 13.203. Its head office in Karachi,

Pakistan, the National Bank of Pakistan.

Standard Manual national central bank in Pakistan.

In 2012 General Instructions

Israr Siddiqi has been H. (1998The banking and financial services. Karachi -

excellent print quality businesses. On page 35.36 and 40.

Sir called John. Right banking system. Right banking system. McGraw Hill

published: page 51-58

Dr. Aftab Ahmad Khan (macroeconomic and financial sector in Pakistan.)

Www.nbp.com.pk

The Bank operates in 1974.

2013 Annual Report and the financial statements of the central bank of

Pakistan until 2013.

bank of pakistan j

Documents

state bank of pakistan

branch of nbp

internship report

introduction of study

main purpose

study research

scope of study

largest commercial bank