final report of n.b.p
TRANSCRIPT
Executive Summary
We are living in a time of extraordinary change. The ecological and economic threat is
looming large on the entire sphere of Pakistanis economy. Pakistani firms must design
and make better products and services and should find better ways to market them. What
was once regarded enough is no longer competitive. What were once limitless resources
are now to be used more efficiently. Today an organization is on the leading edge, or it is
on the bleeding edge.
I have learned the lessons perhaps the hardest way, that is, though my mistakes. I
have tried my best to peep into the generic as well as real cumulative problems faced by
the pioneer of banking industry in Pakistan but that degree of objective analysis proved to
be of little use since this bank is firmly entrenched in the claws of red tapism and royal
bureaucracy.
Several chapters have been inducted in the report but they seem to be very
conventional in nature giving supplementary justification to the fact that NBP is the most
conventional of the conventional bank.
This report is an upshot of my six weeks internship in National Bank of Pakistan, Main
Branch, Gujranwala. National Bank of Pakistan posses an imperative and historical
importance in the banking sector of Pakistan. It always remains the center of hustles in
business activities. It always endows with great covenant of rally round in terms of funds
and services at all epochs of its dynamism.
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Section
1
INTRODUCTION TO
BANKING SYSTEM
In this section two topics are discussed. They are as
under:
What is Commercial Bank?
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WHAT IS AWHAT IS A
COMMERCIAL BANK?COMMERCIAL BANK?
A bank is a financial institution which deals with money and credit. It accepts
deposits from individuals, firms, and companies at a lower rate of interest and gives at a
higher rate of interest to those who apply for loan. The difference between the terms at
which it borrows and those at which it lends from the source of its profit. A bank, thus, is
a profit earning institute. Any bank that performs this functioning is called the
commercial bank.
According to Crowther:
“A bank is a firm which collects money from those who have it spare. It lends
money to those who require it.”
According to Banking Ordinance 1962:
According to Section 5(b) of Banking Ordinance 1962, meaning of banking is
as under:
“Banking company is a company which transacts the business of banking in
Pakistan, mainly of accepting, for the purpose of lending and and investments of
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deposits of money from the public, repayable on demand or otherwise and withdraw
able by cheque, draft, order, or otherwise”
Section 2
HISTORY OF
BANKING AND NBP
In this section three topics are discussed. The major topic of this
section is:
History of Banking in PakistanEfforts towards Islamic Banking in PakistanNational Bank of Pakistan
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HISTORY OF BANKINGHISTORY OF BANKING
IN PAKISTANIN PAKISTAN
The partition plan was announced on June 3, 1947 and August 15, 1949 was fixed
as the date on which independence was to take effect. It was decided that the Reserve
bank of India should continue to function in the dominion of Pakistan until September 30,
1948 due to administrative and technical difficulties involved in immediately establishing
and operating a Central Bank.
At the time of partition, total number of banks in Pakistan were 38 out of these the
commercial banks in Pakistan were 2, which were Habib Bank Limited and Australia
Bank of India. The total deposits in Pakistani banks stood at Rs.880 million whereas the
advances were Rs.198 million. The Governor General of Pakistan, Muhammad Ali
Jinnah issued the order for the establishment of State Bank of Pakistan on 1st of July
1948.
In 1949, National Bank of Pakistan was established. It started with six offices in
former East Pakistan. There were 14 Pakistani scheduled commercial banks operating in
the country on December 1973, the name of these were:
1. National Bank of Pakistan
2. Habib Bank Limited
3. Habib Bank (Overseas) Limited
4. United Bank Limited
5. Muslim Commercial Bank Limited
6. Commerce Bank Limited
7. Australia Bank Limited
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8. Standard Bank Limited
9. Bank of Bahawalpur Limited
10. Premier Bank Limited
11. Pak Bank Limited
12. Lahore Commercial Bank Limited
13. Sarhad Bank Limited
14. Punjab Provincial Co-operative Bank Limited
The Pakistan Banking Council prepared banks amalgamation schemes in 1974 for
amalgamation of smaller banks with the five bigger banks of the country. These five
banks are as under:
1. National Bank of Pakistan
2. Habib Bank Limited
3. United Bank Limited
4. Muslim Commercial Bank Limited
5. Allied Bank Limited
So, through the Nationalization of Bank Act 1974, the State Bank of Pakistan, all
the commercial banks incorporated in Pakistan and carrying on business in or outside the
country were brought under the government ownership with effect from Jan. 1, 1974. The
ownership, management, and control of all banks in Pakistan stood transferred to and
vested in the Federal Government. The Finance Minister announced plans to start Islamic
Banking system in Pakistan in the budget speech on June 26, 1980, but it could not be
possible till August, 2003.
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EFFORTS TOWARDS ISLAMIC BANKING IN PAKISTANEFFORTS TOWARDS ISLAMIC BANKING IN PAKISTAN
Pakistan was created in the name of Islam on august 14, 1947. But since then, the
interest is paying the cardinal role in resource allocation of the economy. The banking
system in Pakistan based on interest divergences with Islamic ideology and is forbidden
by Almighty Allah and His Prophet Muhammad (PBUH).
Any government till now in the country except President Zia-ul-Haq did not dare to
change the well-digged system based on interest in banking in Pakistan.
The only step taken under this direction is starting of PLS Deposits from January 1,
1982. Only PLS saving account and PLS term deposits shall be accepted on profit and
loss sharing basis. The banks were allowed to meet the working capital requirements of
their clients on the basis of Musharika, and Leasing, and Hire Purchase. Beside it,
different efforts are made time by time in this respect but could not be acted upon at all.
Recently in June 2002, the Shariah Applet Bench of Pakistan issued an order to all the
banks in Pakistan to change the interest-based banking system to Islamic Modes but the
lawyer from the government of Pakistan challenged it by saying that if any affair is in the
favor of the public of the country and is also admired by the public then it cannot be
abandoned by the government. So this issue is still not resolved.
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NATIONAL BANK OF NATIONAL BANK OF
PAKISTANPAKISTAN
National Bank of Pakistan,
…the Nation’s Bank
National Bank of Pakistan (NBP) was established under the National Bank of
Pakistan Ordinance 1949. The primary objective of NBP was to purchase jute from the
growers in the former East Pakistan and also to perform the commercial banking
functions in the country.
National Bank of Pakistan is now the biggest financial institution with assets
totaling over Rs.635 billion with 1250 local and 23 foreign branches. The bank is the
higher financer in agriculture and commodity operation sector.
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VISIONVISION
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 offering.
MISSION STATEMENT MISSION STATEMENT
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To be recognized in the market place by Institutionalizing a
Merit & performance culture, Creating a powerful &
Distinctive brand identity, achieving top-tier financial
Performance, and Adopting & living out our core values.
Present Situation
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Now the NBP has the second largest network of branches in the Pakistan and other countries. Currently
Total Branches 1250Foreign BranchesRegional Offices 29Foreign Branches 18
Foreign Representative Offices:
CanadaUSA (Chicago)ChinaUzbekistan
(In Rupees Millions)Total Deposits 501872Total Assets 635133 Pre Tax Profit 26311 After Tax Profit 17022
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Section
3
ORGANIZATIONAL
STRUCTURE
In this section five topics are discussed. The major topics
of this section are:
Management and Organization of a
Commercial Bank
Board of Directors
Senior Management
Regional Structure
Branch Structure
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MANAGEMENTMANAGEMENT
ANDAND
ORGANIZATIONORGANIZATION
OF A COMMERCIAL BANKOF A COMMERCIAL BANK
The ownership, management, and control of all the commercial banks were taken
over by the Government of Pakistan on January 1st, 1974.
A banking council was formed under the Nationalization Act 1974. The banking
council was set up for making policy recommendations to the Federal Government,
formulating policy guidelines for the banks and their reorganization.
The management and organizational structure of the nationalized banks have
uniformity. This management and organizational structure is briefly described as under:
1 ... ... Board of Directors
2 ... ... Executive Board
3 ... ... Chief Executive
4 ... ... Divisional Chiefs
5 ... ... Provisional Chiefs
6 ... ... Circle Executive
7 ... ... Zonal Heads
8 ... ... Branch Managers
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1. Board of Directors
In the management of the banks, the board of directors is at the top of the
controlling body. Since there are no private share holders now, so there is no general
meeting of the share holders and no elected directors. The BOD consists of a nominated
President, a Secretary, and 9 other members. The board has limited administrative
powers because after the Nationalization Act 1974, most of powers are transferred to the
Banking Council and Executive Board
2. Executive Board
The general direction and supervision of the affairs of commercial banks lies in
their respective Executive Boards. An EB also consists of a President, a Secretary, and
9 other members, appointed by the Federal Government.
3. Chief Executive
The President of the Executive Board is the Chief Executive. He is the
administrative head of a bank and presides over the meetings of Executive Board.
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4. Divisional Chiefs
In order to improve the management and operation of a bank, it has been split up
into a numbers of divisions. Each division of a bank is placed under the supervision and
control of Divisional Chief (also called the Senior Executive Vice President or Executive
Vice President)
5. Provisional Chiefs
In order to improve the performance of banking system, each bank has a
Provisional Chief. PC has the powers for sanctioning finance and other credit facilities.
Each headquarter is situated in each province e.g. in Lahore, Peshawar, Quetta, and
Karachi.
6. Circle Executive
Each commercial bank has a number of circles placed directly under the control
and supervision of Chief Executive.
7. Zonal Heads
Each circle is divided into a number of zones. These zones are administered by
Zonal Heads who hold the posts of Vice President or Assistant Vice President.
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8. Branch Managers
Each zone of commercial bank is divided into several branches. The control and
supervision of each branch is mostly entrusted to Assistant Vice President or OG-II.
BOARD OF DIRECTORS
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Syed Ali Raza (Chair &President)
Dr.Waqar Masood Khan Iftikhar Ail Malik Shafqat Ali Director Director Director
M.Zubair Motiwala Sikander Hayat Jamili Azam Faruque(Director) ( Director ) ( Director )
Ekhlaq Ahmed ( Secretary board of directors)
SENIOR MANAGEMENTSENIOR MANAGEMENT
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Amer Siddiqui SEVP & Group Chief, Retail Banking Group
Dr. Asif A. Brohi SEVP & Group Chief, Operations Group
Imam Bakhsh Baloch
SEVP & Group Chief, Audit & Inspection Group
Masood Karim Shaikh
SEVP & Group Chief, Corporate & Investment Banking Group
Dr. Mirza Abrar Baig
SEVP & Group Chief, Human Resources Management & Administration Group
Muhammad Nusrat Vohra
SEVP & Group Chief, Treasury Management Group
Shahid Anwar Khan
SEVP & Group Chief, Commercial Banking Group
Ziaullah Khan SEVP & Group Chief, Compliance Group
Iu uiu
Amim Akhtar EVP & PSO to the President
Ekhlaq Ahmed EVP & Secretary Board of Directors
Mrs. Khurshid Maqsood Ali
EVP & Divisional Head Employee Benefits, Disbursements & Trustee Division
Nadeem Anwar Ilyas
EVP/Divisional Head, Special Assets Management Division
Syed Farhan Ahmed
EVP / CFO, Financial Control Divisional
Tahira Raza EVP & Group Chief, (A) Risk Management Group
Tahir YaqoobEVP & Group Chief, Overseas Coordination & Management Group
I U
Atif Hassan Khan SVP & Group Chief (A), Information Technology Group
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HIERARCHY OF NATIONAL BANK OF PAKISTAN
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PRESIDENT
EXECUTIVE VICE PRESIDENT
SENIOR EXECUTIVE VICE PRESIDENT
SENIOR VICE PRESIDENT
OFFICERS GRADE I II III
VICE PRESIDENT
ASSISTANT VICE PRESIDENT
CASHIER
ASSISTANTS
PEONS
REGIONAL STRUCTURE
REGIONAL CHIEF EXECUTIVE
GENERAL GENERAL GENERAL MANAGER MANAGER MANAGER Advances, Legal Planning, Business Administrative and Recovery Wing Development Wing
Customer Services and Implementation of Audit
BRANCH STRUCTURE
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MANAGER OG-I ADVANCE
OG-II ADMIN
OG-II OG-II OG-II OG-III SERVICES CASHIER ACCOUNTS
ASSISTANT ASSISTANT ASSISTANT ASSISTANT
GODOWN GODOWN GODOWN GODOWN KEEPER KEEPER KEEPER KEEPER
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HEAD MESSANGER
MESSANGER
Section
4
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DEPARTMENTS OF
THE ORGANIZATION
In this section we discuss the major departments
of the NBP:
DEPARTMENTS IN THE ORGANIZATION
(1) Cash Department
(2) Deposit Department
(3) Clearing Department
(4) Advances and Credit Department
(5) Remittance Department
(6) Foreign Exchange Department
(1) Cash Department
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This is very important department because cash is the most liquid asset and mostly frauds
are made in this department, therefore, extra care is taken in this department and no body
is allowed to enter or leave the area freely. Mostly, cash area is grilled and its door is
under the supervision of head of that department. Officer checks the books maintained in
this department.
(2) Deposit Department
Bank deals in money and they are merely mobilizing funds within the economy. They
borrow from one person and lend to another, the difference between the rates borrowed
and lend from their spread or gross profit. Therefore, we can rightly state that deposits are
the blood of the banks which cause the body of an institution to get to work. These
deposits are liability of the bank so from the viewpoint of bank we can refer to them as
liabilities.
(3)Clearing Department
Every banker acts both as a paying as well as a collecting banker. It is however an
important function of crossed cheques. A large part of this work is carried out through the
bankers clearing house. A clearing house is a place where representatives of all the banks
of a city get together and settle the receipts and payments of cheques drawn on each other
bank. As the collecting banker runs the certain risks in receipt of their ownership, the law
has provided certain protections to the banks.
(4)Credit Department
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The function of Advances and Credit Department is to lend money in the form of clean
advances, against the promissory note, as well as secured advances against tangible and
marketable securities. The bankers prefer such securities, which do not run the risk of
general depreciation due to market fluctuations.
Section
5
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FIELDS OF
ACTIVITIES
The major topics of this section are:
All the function which NBP is performing
All the services and products of NBP
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FUNCTIONS OF NATIONAL BANK OF PAKISTANFUNCTIONS OF NATIONAL BANK OF PAKISTAN
National Bank of Pakistan is a commercial bank, in modern time it plays a very vital
role and its functions are manifold. The main functions are as under:
(1) Accepting various types of deposits.
(2) Granting loans and advances.
(3) Undertaking of agency services and also general utility functions, few of these
are as under:-
a ... ... Collecting cheques and bills of exchange for the customers.
b ... ... Collecting interest due, dividend, pensions, and other sum due to
customers.
c ... ... Providing safe custody and facilities to keep jewellery, documents,
and securities etc.
d ... ... Transfer of money from place to place.
e ... ... Acting an executor, trustee or attorney for the customers.
f ... ... Issuing of travelers’ cheques and letters of credit to give credit
facilities to travel.
g ... ... Accepting bills of exchange on behalf of customers.
h ... ... Purchasing shares for the customers.
i ... ... Undertaking foreign exchange business.
j ... ... Furnishing trade information and tendering advice to customers.
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For proper functioning of all these activities, the bank has divided its operations into
different departments that would be discussed next. These departments are as under:
Cash Department
Deposit Department
Clearing Department
Advances and Credit Department
Remittance Department
Foreign Exchange Department
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CASH DEPARTMENTCASH DEPARTMENT
The following books are maintained in the cash department:-
1 ... ... Receiving Cashier Books
2 ... ... Token Book
3 ... ... Paying Cashier Book
4 ... ... Scroll Books
5 ... ... Cash Balance Book
When cash is received in counter, it is entered in the Scroll Book and Receiving
Cashier Book. At the close of the day, these are balanced with each other. When the
cheque or any negotiable instrument is presented at counter for payment, it is entered in
the Token Book and Token is issued to the customer. The Token and the cashier make
entry in the Payment Book and the payment is made to payee. At the close of the day, the
Token Book and paying Cashier Book is balanced. The consolidated figure of receipt and
payment of cash is entered in the Balance Book and drawn closing balance of cash.
OPENING BALANCE + RECEIPT – PAYMENT =
CLOSING BALANCE
This is very important department because cash is the most liquid asset and
mostly frauds are made in this department, therefore, extra care is taken in this
department and no body is allowed to enter or leave the area freely. Mostly, cash area is
grilled and its door is under the supervision of head of that department. Officer checks the
books maintained in this department.
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DEPOSIT DEPARTMETDEPOSIT DEPARTMET
IMPORTANCE
Bank deals in money and they are merely mobilizing funds within the economy.
They borrow from one person and lend to another, the difference between the rates
borrowed and lend from their spread or gross profit. Therefore, we can rightly state that
deposits are the blood of the banks which cause the body of an institution to get to work.
These deposits are liability of the bank so from the viewpoint of bank we can refer to
them as liabilities.
TYPES OF DEPOSITSTYPES OF DEPOSITS
Deposits can be segregated on two bases, one is the duration in which these funds
are expected to be with the bank, and second is the cost of getting these funds. So we can
divide deposits into two classes according to duration:
1 ... ... Time Deposits
2 ... ... Demand Deposits
And on the basis of the cost of acquire these funds, a deposit can be classified as
any one of the following four:
a ... ... High Cost
b ... ... Medium Cost
c ... ... Low Cost
d ... ... No Cost
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Bank has different kind of deposit schemes in order to induce deposits. These
schemes are a mixture of the above mentioned two types of deposits with and addition of
different services and requirements, mode of transactions, basis for calculation of profit,
deduction, additional benefits, and eligibility for different groups. In the similar fashion,
national Bank of Pakistan has large variety of deposit schemes and some of these are as
follows:
(1) CURRENT ACCOUNT
In this type of accounts, the client is allowed to deposit or withdraw money as and
when he likes, but there is requirement of maintaining the minimum balance of Rs.5000/-
other wise Rs.50/- will be deducted every month. Usually the businessmen open this type
of account and the bank pays no profit on it. These types of deposits are also exempt from
compulsory deduction of Zakat.
(2) PLS SAVING BANK ACCOUNT
This type of account is for those persons who want to make small savings. This type
of account is opened with a minimum deposit if Rs.200/- If the balance in the account
falls below the minimum requirement then a flat charge of Rs.150/- is made in the
account once in a half year. Zakat and other withholding taxes are deducted as per rules
of the government.
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(3) FIXED DEPOSITS
In this type of account a certain amount is deposited for a certain period such as six
months, one year, two year or longer. A fixed deposit receipt is issued in the name of the
depositor. The receipt is signed by the officer in charge and the bank manager. A notice is
given to the depositor on a prescribed from two weeks before the Fixed Deposit Receipt
(FDR) falls due, requesting the depositor to withdraw his money or to renew his deposits.
The interest is allowed on fixed deposit varies with the period for which the deposit is
made.
(4) SHORT NOTICE TERM DEPOSIT
This kind of deposit is for a short period as the name indicates. The depositor may
withdraw his deposit at any time by giving seven days notice to the banker. This type of
deposit facilitates the trader to withdraw his amount with interest of the deposited period.
(5) CALL DEPOSIT
Call Deposits are the sorts of deposits, which are deposited with the banker against
any tender. This is with out interest deposit, this may be with interest provided with the
depositor has agreed to keep this amount with the banker for some fixed period.
(6) CUMULATIVE DEPOSIT CERTIFICATE
This is just like of fixed deposit. In this kind of deposit, the rate of interest is higher as
compared to other kind of deposits, which are mentioned previously. The rate of interest
rises gradually as the period extends. Its period ranges from three month to twenty years.
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(7) MONTHLY INCOME SCHEME
National Bank of Pakistan has also introduced Monthly Income Scheme for the
benefits of its customers. An individual or institution, company, corporation etc. can take
the advantage of this scheme.
LEDGERS OF DEPOSIT DEPARTMENT
The following types of ledgers are concerned with deposit department:
1 ... ... Saving Ledgers
2 ... ... Current Ledgers
3 ... ... Profit and Loss Sharing Ledgers
4 ... ... Fixed Deposit Register
5 ... ... Cumulative Deposit Certificate Register
6 ... ... Cash Book
7 ... ... Daily Profit and Loss Summary Book
8 ... ... Voucher Register
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CLEARING DEPARTMENTCLEARING DEPARTMENT
Every banker acts both as a paying as well as a collecting banker. It is however an
important function of crossed cheques. A large part of this work is carried out through the
bankers clearing house. A clearing house is a place where representatives of all the banks
of a city get together and settle the receipts and payments of cheques drawn on each other
bank. As the collecting banker runs the certain risks in receipt of their ownership, the law
has provided certain protections to the banks.
TYPES OF CHEQUES COLLECTEDTYPES OF CHEQUES COLLECTED
(1) TRANSFER CHEQUES
Transfer cheques are those cheques which are collected and paid by two different
branches of the same bank situated in the same city.
(2) CLEARING CHEQUES
Clearing Cheques are those cheques which are drawn on the branches of some
other bank of the same city or of the same area which covers a particular clearing house.
(3) COLLECTION CHEQUES
Collection Cheques are those cheques which are drawn on the branches of either
the same bank or of another bank, but branches are not in the same city or they are not the
members of clearing house.
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* ADVANCES AND * ADVANCES AND
CREDIT DEPARTMENTCREDIT DEPARTMENT
The function of Advances and Credit Department is to lend money in the form of
clean advances, against the promissory note, as well as secured advances against tangible
and marketable securities. The bankers prefer such securities, which do not run the risk of
general depreciation due to market fluctuations. Common securities for the banker’s
advances are as under:
SECURITIESSECURITIES
(1) BANKERS’ LIEN
(Moveable property possessed to the lender cannot be sold in case of default)
Lien is the bankers’ right to hold the property until the claim on the property
is paid. The bankers look at their lien as a protection against loss on loan or overdraft
or any other credit facility. In ordinary lien, the borrower remains the owner if the
property, but the actual or constructive possession remains with the creditors, though
he has no right to sell it.
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(2) GUARANTEES
When an application for an advance can offer any tangible security, the
banker may rely on personal guarantees to protect himself against loss on advances or
overdraft to the applicant.
(3) MORTGAGE
(Immoveable property possessed to the lender can be sold in case of default)
A mortgage is the transfer of an interest in specific immoveable property for
the purpose of securing the payment of money advanced or to be advanced by way of
loan, and existing of future debt, or the performance of an engagement, which may
rise to a particular liability. The person in whose interest the property is transfer is
called mortgagee.
(4) HYPOTHICATION
(Immoveable property possessed to the borrower can be sold in case of
default)
When property in the shape of goods is charged as security for a loan from the
bank, the ownership and possession is with the borrower, the goods are said to be
hypothecated. The essence of hypothecation is that neither the property in goods nor
the possession of them passes to the lender, but the security is granted by means of
letter of hypothecation which usually provides for a banker’s charge on the
hypothecated goods.
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(5) PLEDGE
(Moveable property possessed to the lender can be sold in case of default)
In a pledge, the ownership remains with pledger (borrower), but the pledgee
has the possession of property until the advance is repaid in full. While in case of
defaulter, the pledge has the right of sale after giving due notice.
TYPES OF ADVANCESTYPES OF ADVANCES
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1 ... ... Demand Finance(Ordinary Loans)
2 ... ... Running Finance(Overdraft)
3 ... ... Cash Finance
4 ... ... Small Finance
5 ... ... Finance against Bills
6 ... ... Agriculture Loans
(1) DEMAND FINANCE (ORDINARY LOANS)
These are those advances which are allowed in lump sum for a fixed period and are
repayable in lump sum or gradually in installments.
(2) RUNNING FINANCE
Running finance are advances, which are gradually given to meet temporary
requirements of the customers. A good customer uses the banks running finance limit, as
a mean of protecting his credit in the market and as a line of second defense to meet his
commitments. There are two types of running finance:
a) UN-SECURED
Under this type of overdraft, the bank relies upon the personal security of the
customer or customer’s account.
b) SECURED
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Under this type of overdraft, the bank allows his customer to withdraw more than his
deposit after giving security against the amount overdrawn. The securities against which
they are given are as under:
a ... ... Share Certificates
b ... ... Savings Certificates
c ... ... Deposits
d ... ... Mortgage Property
e ... ... Guarantee of a person
(3) CASH FINANCE
These types of loans are given against the following:
1 ... ... Against locally manufactured goods
2 ... ... Cash finance against rice and paddy
3 ... ... Against pledge
4 ... ... Against commodities
5 ... ... Besides advances against the above commodities bank may be approached
by parties for advances against other commodities like tobacco, oil, etc.
6 ... ... Against Trust Receipts
(4) SMALL LOANS
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Loans are allowed to contractors’ clearing and forwarding agents. These loans are
repayable within a year.
(5) FINANCE AGAINST BILLS
The advances are allowed both on local and foreign bills such as:
a ... ... Bill of Exchange and Invoices
b ... ... Bill of Landing
(6) AGRICULTURE LOANS
Agriculture loans are given to the farmers with holding up to 25 acres for meeting
their short medium and long term production requirements such as:
a ... ... Agriculture inputs
b ... ... Tractors instruments
c ... ... Tube wells
d ... ... Live stock farming
e ... ... Land Improvements
(7)(7) OTHER SERVICESOTHER SERVICES
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* UTILITY BILLS COLLECTION
For the convenience of the customer, National Bank of Pakistan also collects
different kinds of utility bills such as:
Electricity Bills, Sui-Gas Bills, Telephone Bills etc.
* NBP PAK RUPEE TRAVELER CHEQUE
NBP Pak Rupee traveler Cheque is better than cash, because you get the power to
purchase as well as your money can be refunded in case you would loss your cheque.
It is a safe and convenient way of purchase.
* FOREIGN CURRENCY ACCOUNTS
Launched to attract deposits in foreign currencies like US Dollars, Pound Sterling,
Dutch Mark, and Japanese Yen. Whether you are a resident or a non-resident of
Pakistan, NBP invites all to operate in a foreign currency account.
DIFFERENT SCHEMES CONDUCTED BY NBPDIFFERENT SCHEMES CONDUCTED BY NBP
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National Bank of Pakistan always makes efforts to improve its goodwill in the
general public. It introduces different kind of schemes time to time.
The most popular schemes conducted by NBP are as under:
1 ... ... Hajj Mubarak Scheme
2 ... ... NBP Advance Salary Scheme
3 ... ... Fund Management Scheme
4 ... ... LG TV Scheme
5 ... ... NBP Karobar
6 ... ... NBP Cash n Gold
7 ... ... NBP Kisaan Taqat
8 ... ... NBP Kisaan Dost
(1) HAJJ MUBARAK SCHEME
For the convenience of a person with a limited income who desire to perform Hajj,
Hajj Mubarak Scheme is introduced. Moreover, National Bank of Pakistan process the
Hajj applications of thousands of people successfully more than any other bank in
Pakistan.
University Of The Punjab, Gujranwala Campus 43
(2) NBP ADVANCE
SALARY SCHEME
Do you need urgent funds? If yes then head to National Bank of Pakistan and avail
“NBP Advance Salary Scheme”, which allow you to draw three months salary in one go.
This facility is available to permanent employees of the:-
1 ... ... Federal and Provincial governments
2 ... ... Semi-governments, autonomous, semi-autonomous, local bodies,
and government corporations
3 ... ... Other corporations approved by NBP
No guarantee, collaterals, or insurance is required to avail this scheme. NBP gives the
facility to repay the excessive amount within 1 to 36 months. The procedure is very easy,
just fill the application form and choice between 1 to 36 months and take your NBP
Advance Salary within 3 days after submitting your form.
(3) FUND MANAGEMENT SCHEME
This scheme is offered to corporate under customer and is aimed at providing better
rate of return up to 15% per annum. One of the objectives of the scheme is to develop the
secondary market for government securities.
University Of The Punjab, Gujranwala Campus 44
(4) LG TV SCHEME
It is the most popular of NBP schemes for the year 2003. NBP incorporates with LG
Appliances Corporation. If you want a TV set but has not enough money to purchase it
then head to NBP, fill an application form of LG TV Scheme. NBP gives you the facility
to pay for the TV set in smaller installments during a time period of 2 years.
Any one can avail this scheme. Two government employees are required to present
the witness to repay the loan if the applicant is unable to repay the loan or the applicant
should have the Fixed Term Deposit in NBP more worthily than the amount advanced to
the applicant and it should have the duration of more than two years.
(5)NBP Karobar:
President's Rozgar Scheme
If you are aged between 18 and 40years, you could be eligible for easy
financing for self employment inthe categories below.
Ghar AsanScheme
Open the door to your dream homewith NBP SAIBAAN
University Of The Punjab, Gujranwala Campus 45
NBP Premium Amadani
Minimum saving balance of Rs. 20,001
and a maximum balance of Rs. 300,000*
Earn up to 7.25% p.a.††Profit rates are expected
NBP cash in Gold
With NBP's Cash n Gold, you can meet your need for ready
cash against your idle gold jewelry
NBP Kisan Taqat
Get amount with the help of the NBP
to increase the production of the milk
KisanDost
Get amount with the help of the NBP
to increase the production of the crops
NBP Online ASAAN Banking
You can avail the services from our Online Branches located in 30 cities.
University Of The Punjab, Gujranwala Campus 46
Section
6
WORK DONE BY ME
In this section two topics are discussed. They are as
under:
All the work which I have learned in during my
internship in different departments of NBP
University Of The Punjab, Gujranwala Campus 47
WORK DONE BY ME AT THE BRANCH
Major activities performed during my internship program are as follows:
First Week
ACCOUNT OPENNING DEPARTMENT:
In this department, I gain the practical knowledge about opening account. This
department deals with opening current and saving account for its customers and all
matters regarding thereof. The customers opening current and saving accounts can be
categorized as following.
-Individual
-Firm
-Company
-Trust
-Staff
-Others
OPENING AN ACCOUNT
In order to open an account, first of all the customers have to fill a form prescribed by the
bank. The person is required to bring some reference or introduction for opening the
account. Introducer may be the person who has any account with NBP.
University Of The Punjab, Gujranwala Campus 48
Some important information regarding introducer e.g. the name and account number of
the introducer is written on the space provided on the specimen signature card. Then in
order to find out whether he is a true introducer or not, a letter is sent to him thanking him
for this introduction so that anything wrong may come into notice. There are different
requirements for different types of accounts and accountholders.
ISSUANCE OF CHEQUE BOOK:
The accountholders request for the new cheque book by presenting the requisition slips
along with the authority letter to the concerned office. His signatures are verified before
giving him a new chequebook. The presence of the accountholders is compulsory to get
a new chequebook. But if he sends a third person to get his chequebook then the
procedure is as follows;
An authority letter is given to the third party by the accountholders.
The accountholders verify the signature of the third person on that authority letter.
The bank officer gets the signature of that third person to confirm whether he is the
same to whom the accountholder has sent.
The bank issues the new cheques book and authority letter is kept buy the bank.
University Of The Punjab, Gujranwala Campus 49
Second week:
Now I joined Credit Department. First of all here I came to know about different types
of credits and advances that NBP is offering. I provide the basic guide line to the
different customers who come for loan .then leaned to check the ID cards of customer
through NADRA verification.
Then I worked on scheme of Advance Salary Scheme, starting from filling up the forms
of different customers then check that all requirements are fulfilled .then the head of
department Mr. Amjad Baig verify it and then it forwarded to the manager operations for
approval. In this scheme NBP provide 20 salaries in advance and the maximum amount
limit is Rs 250,000
Arranged the day books of different scheme of credit department and posting in ledgers
for all transactions after checking the documentary evidence.
University Of The Punjab, Gujranwala Campus 50
Third Week
Then I was told about the types of finance which are
1. Cash Finance
2. Agri Finance
3. Running Finance
4. Demand Finance
5. Packing Finance
Cash Finance
It is a short term loan that is provided for 1 year.
Agri Finance
It is the loan provided for agriculture purposes like installation of tube
wells, purchase of tractor etc
Demand Finance
It is long term loan that is provided for a period of more than 1 year.
Types of finance on the basis of amount
1. Corporate Finance (Above Rs 100 Millions)
2. Commercial Finance (Above Rs 50 Millions)
3. SME Finance (Below Rs 50 Millions)
For all kind of loans for manufacturing concerns Bank check the evaluation statement of
Shore bank, ICIL report and the CIB.these evaluation reports shows the worth and
credibility of the customer through with the help of cash flows statement ,balance sheet .
University Of The Punjab, Gujranwala Campus 51
Lien Mark
When some documents are missing and the concerned person is out contact,
then his/her A/c is lien marked which means that no transaction can be done through this
account.
Fourth Week
I joined the foreign exchange department. On first day I learn what home remittances
(HR) are and foreign remittances (FC). How to make them and the recording of entries in
particular registers, transactions made may be in home currency as well in foreign
currency.
Sir Ahmad butter told us about different currencies which are usually transacted in
foreign exchange department i.e. Euro, Pound, Dollar and Yen. Different types of codes
are assigned to these currencies i.e. usd=1, UK=2, euro=4, yen=5etc.The rates are
determined by combine efforts of the bank like there are 8 major European countries that
fix the rate of currencies.
All these currencies are transacted by the agent named as intender.
Types of L.C was discussed there are two types of L.C,
Sight L.C
Usance L.C
Computer techniques used for L.C
Swift
Telex
Requirement to open foreign account:
Account holder CNIC card
Introduction(CNIC of introducer)
Next of kin
University Of The Punjab, Gujranwala Campus 52
If the account holder has no link with bank for 3 years then this person will
provide information about account holder may be brother or sister cusin or friends
etc.
There are 7b list checking of account opening form
To identify old id holder and new id holder and also those who have no card
Counting of resident and non resident
Here we worked with Mr.Afzal who was also the head of foreign exchange department.
University Of The Punjab, Gujranwala Campus 53
Fifth week
Inward remittances and outward remittances were discussed.
Inward remittances:
Money from foreign currency to home currency
Outward remittances:
Money from home currency to foreign currency.
Forms of inward remittance:
United States and London bank deal with NBP Pakistan when UBL want to send money
form London to MCB in Pakistan, in this case one branch of NBP receive a swift
message from UBL due to agency arrangements now for dealing of NBP and MCB. We
require f-15(for same bank and different branches)
But for different banks like NBP and MCB pay order is used for it, a certain limit is
fix for pay order.
Fixed with in city
Clearing have no charges
University Of The Punjab, Gujranwala Campus 54
It’s a collection procedure and now a days NIFT clearing account is used with in clearing
limit drafts is used and for foreign remittances it have no charges otherwise graft have
charges. Now a day’s all clearings are made under NIFT.
Credit procedures:
Red voucher = with us
F15=NBP=same bank different branches
P.O=NBP other than NBP with in credit limit)
Draft =beyond clearing limit with other banks.
University Of The Punjab, Gujranwala Campus 55
Sixth Week
Import and Export:
Chamber of commerce register registration is compulsory for export but optional for
imports. If we export rice then export association certificate is also required.
Letter of credit for import:
When required documents are joined with letter of credit then it becomes fund based
facility. Letter of credit is contract between import order and export order i.e.
between importer bank and exporter bank.
Bank takes some security as property or other material as a guarantee at the time of
opening of letter of credit. It is necessary to avoid any fraudulent from the part of
importer (Mortgage to avoid risk).
Payment 100%margin before receiving goods we take from importer.
Performa invoice:
When LC is opened
Import form:
Signed by importer
IB 8:
Stamp Paper agreement for irrevocable L.C when shipped.
IB 9:
University Of The Punjab, Gujranwala Campus 56
Stamp Paper =when LC through mail or by air
IB 6
Stamped paper agreement between Bank and borrower
IB 23
Agreement of mortgage
IB 29
Document contains Guarantee (from borrower)
Request letter:
On letter pad to open L.C after filling these documents we can open L.C
Insurance cover note:
L.C value +10%of L.C amount.
Two types of registers are maintained by L.C dept:
l).LC registers:
All charges of LC opening are maintained here.
Pak Rs=L.C amount * selling price
=100000$ *61
=610000
2) Liability Register:
It is concerned with the commission charges, telex
charges, federal excise duty, service charges etc
Document necessary for Importer/Exporter
NIC Card
University Of The Punjab, Gujranwala Campus 57
Current A/c of the firm (Necessary for importer)
NTN Number
Registration certificate of sales tax
Chamber of Commerce Certificate
Section
7
FINANCIAL ANALYSIS
In this section two topics are discussed. Two major topics of this section are:
Profit and Loss Account
Balance Sheet
Ratio Analysis
University Of The Punjab, Gujranwala Campus 58
FINANCIAL ANALYSIS
Vertical and Horizontal Analysis of Balance
Sheet and Profit and
Loss Account
University Of The Punjab, Gujranwala Campus 59
NBP (Vertical Analysis)
Balance Sheet As On 31-Dec-2006
ASSETS
31-Dec-06 31-Dec-05
Rupees in '000
% %
Cash and balances with treasury banks 78625227 12.38 71196956 12.32
Balances with other banks 40641679 6.39 31019330 5.39
Lending to financial institutions 23012732 3.62 16282942 2.82
Investments 139946995 22.03 156985378 27.17
Advances 316110406 49.77 268838779 46.53
Other assets 27113698 4.29 23941056 4.14
Operating fixed assets 9681974 1.52 9454365 1.64
Deferred tax assets-net _ _ _ _
635132711 100.00 577718806 100.00
LIABILITIES
Bills payable 10605663 1.92 1741156 0.35
Borrowing form financial institutions 11704079 2.12 8756847 1.75
Deposits and other accounts 501872243 90.72 463426602 92.33
Sub-ordinate loans _ _ _ _
Liabilities against assets subject to finance lease 13235 0.002 16629 3.31
Other liabilities 26596300 4.81 23496910 4.68
Deferred tax liabilities 2387073 0.43 4462718 0.89
553178593 100.00 501900862 100.00
NET ASSTS 81954118 75817944
University Of The Punjab, Gujranwala Campus 60
REPRESENTED BY
Share capital 7090712 13.16 5908927 15.70
Share premium _ _ _ _
Reserves 13879260 26.16 12354256 32.83
Inappropriate profit/(Accumulated losses) 32074677 60.46 19372523 51.47
53044649 100.00 37635706 100.00
Surplus on revaluation of assets-net of tax 28909469 _ 38182238 _
81954118 75817944
NBP (Vertical Analysis)
Profit and Loss Account 31-Dec-06 31-Dec-05
For the year ended December 31,2006. Rupees in '000
Mark-up/Return/Interest earned 43788628 50.00 33692665 50.00
Mark-up/Return/Interest expensed 13634912 19.72 10321762 10.23
Net Mark-up/Interest income 30153716 30.27 23370897 39.766
34431014 100.00 19784102 100.00
Provision/against non-performing loans and
advances-net 3075723 82.753 2446739 68.888
Provision/(reversal of provision) for diminution in
the value of investments-net (709461) _2.0745 (245881) 3.5186
Bad debts written off directly 5284 19.32 23069 27.592
2371546 100.00 2223927 100.00
Net mark-up/interest income after provisions 27782170 21146970
NON MARK-UP/INTEREST INCOME
Fee, Commission and Brokerage income 6144628 55.28 4926604 62.9
Dividend income 2891755 7.890 1718478 2.379
Income from dealing in foreign currencies 1333840 11.526 1205638 12.900
Gain on sale of securities 1169515 15.385 1365771 6.4128
Unrealized gain on revaluation of investments
classified as held for trading (4464)
-
_1.2320 (1979) 1.325
University Of The Punjab, Gujranwala Campus 61
Other income 627618 110148 177839 14.0629
Total non-Markup/Interest income 12162892 100.00 9392351 100.00
39945062 30539321
NON MARK-UP/INTEREST EXPENSES
Administrative expenses 13443441 96.09 11221789 96.989
Provision/(reversal of provision) against off balance
sheet obligation- net (17283) 0.046 198298 1.8006
Other charges 208327 0.12 63206 4.325
Total non-markup/interest expenses 13634485 100.00 11483293 100.00
Extra ordinary items /unusual items _ _
PROFIT BEFORE TAXATION 26310577 19056028
Taxation-current 8695598 97.846 7154002 76.34
Taxation-prior years 530652 _ (1098709) 1.26
Taxation-deferred 61981 2.1535 291291 22.395
9288231 100.00 6346584 100.00
PROFIT AFTER TAXATION 17022346 12709444
(Accumulated losses) brought forward 19372523 99.29 10885184 _99.9
Profit available for appropriation 36394869 .706 23594628 .311
Basic earning per share(rupees) 24.01 100.00 17.92 100.00
Diluted earning per share(rupees) 24.01 17.92
University Of The Punjab, Gujranwala Campus 62
NBP (Horizontal Analysis)
BALANCE SHEET AS ON 31-Dec-2006
ASSETS
31-Dec-06 31-Dec-05 Change %
Rupees in '000
Cash and balances with treasury banks 78625227 71196956 7428271 10.43
Balances with other banks 40641679 31019330 9622349 31.02
Lending to financial institutions 23012732 16282942 6729790 41.3
Investments 139946995 156985378 (17038383) -10.85
Advances 316110406 268838779 47271327 17.58
Other assets 27113698 23941056 3172642 13.25
Operating fixed assets 9681974 9454365 227609 2.41
Deferred tax assets-net
635132711 577718806 57413605 9.93
LIABILITIES
Bills payable 10605663 1741156 8864507 509.12
Borrowing form financial institutions 11704079 8756847 2947232 33.66
Deposits and other accounts 501872243 463426602 38445641 8.30
Subordinated loans _ _ _
Liabilities against assets subject to finance
lease 13235 16629 (3394) -20.41
Other liabilities 26596300 23496910 3099390 13.19
Deferred tax liabilities 2387073 4462718 (2075645) -46.51
553178593 501900862 51277731 10.22
NET ASSTS 81954118 75817944 6136174 8.09
University Of The Punjab, Gujranwala Campus 63
REPRESENTED BY
Share capital 7090712 5908927 1181785 20
Share premium _ _ _ _
Reserves 13879260 12354256 1525004 12.34
Inappropriate profit/(Accumulated losses) 32074677 19372523 12702154 65.57
53044649 37635706 15408943 40.94
Surplus on revaluation of assets-net of tax 28909469 38182238 (9272769) -24.29
81954118 75817944 6136174 8.09
NBP (Horizontal Analysis)
Profit and Loss Account 31-Dec-06 31-Dec-05 Change %
For the year ended December 31, 2006. Rupees in '000
Mark-up/Return/Interest earned 43788628 33692665 10095963 29.96
Mark-up/Return/Interest expensed 13634912 10321762 3313150 32.09
Net Mark-up/Interest income 30153716 23370897 6782819 29.02
Provision/against non-performing loans and
advances-net 34431014 19784102 14646912 74.03
Provision/(reversal of provision) for diminution in
the value of investments-net 3075723 2446739 628984 25.71
Bad debts written off directly (709461) (245881) 463580 188.54
5284 23069 (17785) -77.09
Net mark-up/interest income after provisions 2371546 2223927 147619 6.64
NON MARK-UP/INTEREST INCOME 27782170 21146970 6635200 31.38
Fee, Commission and Brokerage income 6144628 4926604 1218024 24.72
Dividend income 2891755 1718478 1173277 68.27
Income from dealing in foreign currencies 1333840 1205638 128202 10.63
Gain on sale of securities 1169515 1365771 (196256) -14.36
Unrealized loss on revaluation of investments
classified as held for trading (4464) (1979) (2485) -125.57
Other income 627618 177839 449779 52.91
Total non-Markup/Interest income 12162892 9392351 2770541 29.5
University Of The Punjab, Gujranwala Campus 64
39945062 30539321 9405741 30.80
NON MARK-UP/INTEREST EXPENSES
Administrative expenses 13443441 11221789 2221652 19.8
Provision/(reversal of provision) against off
balance sheet obligation- net (17283) 198298 (2615) -1.32
Other charges 208327 63206 145121 229.60
Total non-markup/interest expenses 13634485 11483293 2151192 18.73
Extra ordinary items /unusual items _ _
PROFIT BEFORE TAXATION 26310577 19056028 7254549 38.07
Taxation-current 8695598 7154002 1541596 21.55
Taxation-prior years 530652 (1098709) (568057) -51.70
Taxation-deferred 61981 291291 (229310) 78.72
9288231 6346584 29416 46.35
PROFIT AFTER TAXATION 17022346 12709444 4312902 339.3
(Accumulated losses) brought forward 19372523 10885184 8487339 77.97
Profit available for appropriation 36394869 23594628 12800241 54.25
Basic earning per share(rupees) 24.01 17.92 6.09 33.98
Diluted earning per share(rupees) 24.01 17.92 6.09 33.98
University Of The Punjab, Gujranwala Campus 65
Ratio Analysis
Ratio means “one number expressed in term of another a ratio is statistical yardstick by
mean of which relationship between two or various figures can be compared or measured.
Here we are going to explain the ratio analysis of MCB (bank) which is little bit different
from other organizations.
Profitability analysis of a firm indicates the overall efficiently of the management.
Without profit a company can not attract the outside capital. Profitability analysis
includes:
Return on total assets
Return on-equity
Return on investment
University Of The Punjab, Gujranwala Campus 66
1. Return on Assets
2.20% 2.68%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2005 2006
Return On Assets
2. Return on Equity
University Of The Punjab, Gujranwala Campus 67
16.76% 20.77%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2005 2006
Return On Equity
3. Return on Investment
2.51%3.10%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2005 2006
Return On investment
4. Return on Fixed Assets
University Of The Punjab, Gujranwala Campus 68
134.00%175.80%
0.00%
50.00%
100.00%
150.00%
200.00%
2005 2006
Return On fixed Assets
…: Interpretation:
Profitability analysis shows the entire performance of a business and if we study the
profitability trend of bank then it will clear to us that it showing a positive trend. Net
profit after tax is increased as compare to previous year, due to it return on assets, equity
and investment is increasing.
Not only overall profit is increasing but also average profit of all the branches is
increasing. Bank interest income is also increasing due to more advances in this year.
This year bank total deposits are also increased and that’s why interest expenses are
showing up ward trend. While all the profitability ratios of NBP in 2006 shows a better
performance then 2005.
University Of The Punjab, Gujranwala Campus 69
Investor analysis or market analysis are related to firm market valve, as measure by its
current share price to certain accounting values. Investor analysis includes:
Earning per share
P/E ratio
University Of The Punjab, Gujranwala Campus 70
Dividend per share
Dividend yield ratio
Dividend payout ratio
Break up value/Book value per share
M/B ratio
1. Earning per Share
21.5
24.01
20
21
22
23
24
25
2005 2006
Eaerning per share
2. P/E Ratio
University Of The Punjab, Gujranwala Campus 71
13.25
9.78
0
2
4
6
8
10
12
14
2005 2006
Price Earning Ratio
3. Dividend Yield Ratio
0.00526
0.0106
0
0.002
0.004
0.006
0.008
0.01
0.012
2005 2006
Dividend Yield Ratio
4. Dividend Payout Ratio
University Of The Punjab, Gujranwala Campus 72
0.07 0.104
0
0.02
0.04
0.06
0.08
0.1
0.12
2005 2006
Dividend Pay out Ratio
5. Book Value per Share
128.31
115.58
105
110
115
120
125
130
2005 2006
Book Value per Share
6. M/B Ratio
University Of The Punjab, Gujranwala Campus 73
2.221
2.03
1.9
1.95
2
2.05
2.1
2.15
2.2
2.25
2005 2006
M/B Ratio
…: Interpretation:
NBP has also has good investment opportunities for the investors. This bank has more
attraction for investors as compare to previous year. Earning per share is increased due to
increase in profit. Book value and market valve of one share in also increased as compare
to 2005.
Only dividend payout ratio is decreased fewer dividends but it is also in favor of
investors because it will increase wealth of shareholders and ultimate benefit to investors.
But improvement in these ratios is still not sufficient.
University Of The Punjab, Gujranwala Campus 74
Bank ratio analysis is little bit different from other organizations and if we want to see the
real picture of a bank we have to focus on given special ratios.
Earning assets to total assets
Return on earning assets
University Of The Punjab, Gujranwala Campus 75
Net margin to earning assets
Loan loss coverage ratio
Equity to total assets
Deposit time equity
Loan to deposit ratio
1. Earning Asset to Total Assets
86.40%
86.10%
85.90%
86.00%
86.10%
86.20%
86.30%
86.40%
2005 2006
Earning Assets To Total Assets
…: Interpretation:
University Of The Punjab, Gujranwala Campus 76
The efficiency of the banking firm is measured by its ability to utilize its assets in a
manner that they could be profitable for the firm. Bank earning assets are increasing as
compare to last year but it is just a little bit increase. Advances of bank are increasing and
investment as compare to 2005 is also increased.
Lending to financial institutions is also very well. Balance with other banks is not
desirable this year but overall earning assets showing satisfactory position in 2006.
2. Return on earning Assets
3.83%
4.80%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
2005 2006
Return on Earning Assets
…: Interpretation:
University Of The Punjab, Gujranwala Campus 77
Return on earning assets is increased as compare to previous year because there is
increased in net profit in 2005 as compare to 2004. The increasing trend in this ratio is
beneficial for business and investors because this ratio shows real profitability position of
business.
3. Net Margin to Earning Assets
4.70%
5.51%
4.20%
4.40%
4.60%
4.80%
5.00%
5.20%
5.40%
5.60%
2005 2006
Net Margin To Earning Assets
University Of The Punjab, Gujranwala Campus 78
…: Interpretation:Spread is difference between interest income and interest expense. This ratio shows the
spread position of a bank. In this year bank net margin is increased due to increase in
advances and interest income as compare to 2004. Interest expenses are also increased
but their increasing trend is lesser as compare to interest income so that’s why spread
position of bank is increased in this year.
4. Loan Loss Coverage Ratio
1939.13
5561.37
0
1000
2000
3000
4000
5000
6000
2005 2006
Loan Loss Coverage Ratio
University Of The Punjab, Gujranwala Campus 79
…: Interpretation:
This ratio shows how much money is there against Rs. 1 loss. This ratio provides a
protection to customers who are going to deposit their money in bank. Higher the ratio is
beneficial for the bank and customers. In this year loan loss coverage ratio is increased
due to decrease in bad debts but in 2004 the ratio of bad debts is more as compare to this
year. This shows the efficiency of bank in this year instead of 2004.
5. Equity to Total Assets
0.131
0.129
0.128
0.1285
0.129
0.1295
0.13
0.1305
0.131
2005 2006
Equity To Total Assets
…: Interpretation:
University Of The Punjab, Gujranwala Campus 80
This ratio shows the position of equity in total assets of business. In both years this ratio
is better. The bank should increase its equity by increasing the wealth of shareholders. It
means that this year bank has more deposits.
6. Deposit Time Equity
6.11
6.12
6.105
6.11
6.115
6.12
2005 2006
Deposit Time Equity
…: Interpretation:
University Of The Punjab, Gujranwala Campus 81
This ratio is also known as debt to equity ratio. This shows how much outsiders share in
business total equity. Lesser ratio is better for a business; there is a little fluctuation in
this ratio.
7. Loan to Deposit
62.00%
68.00%
58.00%
60.00%
62.00%
64.00%
66.00%
68.00%
2005 2006
Loan To Deposit
…: Interpretation:
University Of The Punjab, Gujranwala Campus 82
Loans or advances are the major assets of a bank while deposits are major liabilities of a
bank. Higher ratio shows the better solvency of bank. This ratio is increased instead of
previous years because advances of the bank are increased as previous years although
deposits are also increased this year.
Section
8
SWOT ANALYSIS
In this section four topics are discussed. They are as
under:
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Strengths
Weaknesses
Opportunities
Threats
SWOT ANALYSIS
STRENGTHS
National Bank the Nation’s Bank
State Bank of Pakistan is government owned bank that is why Pakistani nation
has a trust on the bank that their deposits are secured. Due to this reason the deposits of
the banks are increasing with the passage of time.
Agent of State Bank of Pakistan
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National Bank of Pakistan also works as an agent of State bank of Pakistan in
those cities where SBP branches are not working.
Agency Arrangements
National Bank of Pakistan is enjoying with deposit of different Govt. organization
like Pakistan Railways, PIA, WAPDA, Sui-gas due to agency arrangements.
Deposits
National bank of Pakistan is the largest commercial bank of the country and has
Total Deposits of Rs. 501.87 billion and becomes the first bank to cross the deposit of
Rs. 350 billion.
Profitability
The pre-tax profits of NBP have gone up to Rs. 26.3 billion.
Corporate Branches
National Bank of Pakistan is now the biggest financial institution with assets
totaling over Rs.314 billion with 1250 local and 23 foreign branches. The bank is the
higher financer in agriculture and commodity operation sector.
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Collection of Cash from Shrines
Cash collected from different shrines is also deposited in National Bank of
Pakistan.
Comprehensive Range of Financial Products
In order to facilitate the customers, NBP is offering the comprehensive range of
financial products which are as follows:
Credit Cards
Foreign Exchange Bearer Certificates
National Bank Daily Accounts
Travelers Cheques etc.
Investing in Capital Market
NBP has decided to diversify the fund base by investing in capital markets not only in
Pakistan but also in the foreign countries.
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WEAKNESSES
Lack of Implementation of Rules and Regulations
Because NBP is a govt. owned organization so there is a lack of implementation
of rules and regulations.
Poor Working Conditions
Despite, cultural change program the working condition of the NBP is not up to
standard.
Recruitment Policy
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In NBP, employees are recruited on the basis of favoritism or through other tools of
corruption.
Incompetent Staff
Due to wrong recruitment policy staff of NBP is not proficient in their work.
Irregularities in Promotion
In NBP there is no smooth and continuous promotion system. Unfair means are
used in order to get the promotion especially the promotion of the managers.
Individual Difference
In NBP the individual difference have strong impact on the organization’s
performance due to the wrong criteria of selection of the employee. So with the passage
of time individual differences are increasing which are undermining the good will of the
organization.
No Major Use of Computer
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In NBP there is no major use of computer for maintaining the records of branches
as compared to other banks of the country.
Strong Union
Union has strong impact on performance of NBP. So the top management is
unable to punish the violators and shrieks.
Organizational Structure
In this organizational the organizational structure is bureaucratic which a barrier
in rapid and effective decision making is.
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OPPERTUNITIES
Consumer Banking
The basis need of the consumer such as housing, transportation and other durable goods
are not adequately financed by the banks. So by initiating these services, the bank can
enjoy with more funds.
Investing in the Foreign Capital Market
NBP can enjoy handsome return its funding base by investing in capital markets
in the foreign countries.
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Investment Banking
Until recently the bank perceived as purely commercial banking entity so in order
to expand its business the bank may start investment banking by investing in the portfolio
of handsome return.
New Branches
NBP by establishing new branches in foreign countries can expand its business
and can enjoy with the profit.
Issuance of Bonds
To enjoy with large amount, NBP can introduce a comprehensive range of bonds.
Night Banking
Despite of poor customer service of NBP, people still come to NBP because of its
Govt. ownership as they feel it secure therefore bank improve its deposit by giving
facility of night banking and also can compete its competitors with positive steps.
Advisory Services
It can establish advisory services in order to facilitate the customers in investing in the
securities.
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THREATS
Competition
The no. of banks in Pakistan is increasing with the passage of time. So due to poor
working condition and poor customer service it may be possible NBP will lose its market
share in future.
Inflation
In our country, the rate of inflation is increasing along with the unemployment. So
due to the increase in price of the products, the savings of the nation is decreasing with
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the passage of time. So it is the threat for the banking sector. In the future, the deposits of
the bank will decrease.
Government Policy
On NBP Govt. policies have strong impact. A slight change in Govt. policies may
affect the performance of the bank. The bank has to work with in the regulation frame
work.
Conclusion
As I have studied and analyzed NBP I found out that this a good bank as its working,
management is concerned.
First of all the reason of this is that there is no directive style in the management of
National Bank Of Pakistan and which shows that there is decentralization in the Bank and
every branch manager can take decision according to the situation.
NBP is providing their customers with wide range of services including online banking,
phone banking and some of their new products in the pipeline, include ATM network
Royal ………….etc shows that NBP is taking good care of their customers.
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NBP made heavy investments, towards enhancing its capabilities in the area of
automation and technology. NBP is well positioned to meet client needs, with improved
competitive advantage.
And from the financial and when I conduct comparative analysis with other banks I found
that it is somewhat better than others, and from the analysis of previous year I concluded
that it is improving and in 2005 profits are more than the previous year. So I can say that
NBP is performing very well.
It was concluded that there is no proper planning in the NBP for performing any task.
Employees does not perform their work on time, there is always a lot work that is
pending from employee side especially in credit department. There is lot of misuse of
resources at every level in branch, either in form of talking with others on telephone or by
using computer for their personal use.
RECOMMENDATIONSRECOMMENDATIONS
PROPER PLANNING
Bank should make a plan to gear up its recovery efforts on war footing and
reorganize the recovery function of global bases. In addition, bank should tighten up
control on expenditure
USE OF COMPUTERS
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To save the time of the customers and other clients, bank should adopt
computerized system for book keeping and other filling systems. It will increase the
efficiency of the bank. I know that there are some branches which are computerized but
most of the branches in various cities of the country are not computerized. So the bank
should mechanize all its branches in the country.
ADOPTION OF ADVERTISING
Bank should launch advertising campaigns through out the year to promote the
habits of savings in the people. Bank should open more branches in the remote areas of
the country to get deposits and idle resources. Bank should provide similar facilities to all
its branches in big cities. The standard of service and other facilities are far better as
compared to smaller cities.
PROPER GUIDANCE
Bank should adopt such an induction plan that when a customer opens his account
with the bank, he should be supplied with a booklet which enables him to know the
procedure of filling the cheques and pay-in-slip etc. It will save a lot of time of the bank
staff afterward during of the conduct of the account of that customer.
DIVISION OF WORK
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The billing system of national bank of Pakistan must be improved to facilitate the
customers and workers. The work should be divided among the staff e.g. collection of
bills, countering of cash and then entry of these.
CHECK ON EXPENDITURES
Expenditures must be controlled which are very high and unnecessary.
BORROWING AT LOW COST
Deposits must be taken at a lower cost and given at higher interest
rate.
BIBLIOGRAPHY
Books Reference:
Stephen P.Robbins, “Management”, San Diego State: San Diego Press, 2005
G.W White, “Financial Statement Analysis”, New York: Oxford University Press,
2005
Websites Reference:
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Date Visited Time Visited
http://www.google.com 06-11-2007 9pm to 2am
15-11-2007 10pm to 1am
18-11-2007 10pm to 3am
http://www.npb.com.pk. 06-11-2007 9pm to 2am
15-11-2007 10pm to 1am
18-11-2007 10pm to 3am
Organization Reference:
Mian Arshad Mehmood, Manager,NBP Amjad Baig, Head Credit Department, NBP Abid Tufail, CAD Officer NBP Afzal Khan, Head Foreign Exchange Department, NBP Ahmad Bhutter ,Foreign Trade Incharge ,NBP
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