state bank of pakistan and national bank of pakistan

8/7/2019 State Bank of Pakistan and National Bank of Pakistan

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State Bank of PakistanThe State Bank of Pakistan (SBP) is the central bank of

Pakistan. While its constitution, as originally laid down in the State

Bank of Pakistan Order 1948, remained basically unchanged untilJanuary 1, 1974, when the bank was nationalized, the scope of itsfunctions was considerably enlarged. The State Bank of Pakistan Act1956, with subsequent amendments, forms the basis of its operationstoday. The headquarters are located in the financial capital of Pakistan,Karachi with its second headquarters in the capital, Islamabad.

State Bank of PakistanState Bank of Pakistan is the Central bank ofPakistan. Its Headquarters are in Karachi,

Pakistan. It was established in 1948. Its Currency is Pakistani rupee ISO 4217 Code PKR. Its

website iswww.sbp.org.pk.

History

Beforeindependence on 14 August 1947, during British colonial regime the Reserve Bankof India was the central bank for both India and Pakistan. On 30 December 1948 the BritishGovernment's commission distributed the Reserve Bank of India's reserves between Pakistan andIndia -30 percent (750 Mgold) for Pakistan and 70 percent for India.

The losses incurred in the transition to independence were taken from Pakistan's share (atotal of 230 million). In May, 1948 Muhammad Ali Jinnah (Founder of Pakistan) took steps to

establish the State Bank of Pakistan immediately. These were implemented in June 1948, and theState Bank of Pakistan commenced operation on July 1, 1948

Under the State Bank of Pakistan Order 1948, the state bank of Pakistan was charged withthe duty to "regulate the issue ofbank notes and keeping of reserves with a view to securingmonetary stability in Pakistan and generally to operate the currency and credit system of thecountry to its advantage".

A large section of the state bank's duties were widened when the State Bank of PakistanAct 1956was introduced. It required the state bank to "regulate the monetary and credit system ofPakistan and to foster its growth in the best national interest with a view to securing monetary

stability and fuller utilisation of the countrys productive resources". In February 1994, the StateBank was given full autonomy, during the financial sector reforms.

On January 21, 1997, this autonomy was further strengthened when the government issuedthree Amendment Ordinances (which were approved by the Parliament in May 1997). Thoseincluded were the State Bank of Pakistan Act, 1956, Banking Companies Ordinance, 1962 andBanks Nationalisation Act, 1974. These changes gave full and exclusive authority to the StateBank to regulate the banking sector, to conduct an independent monetary policy and to set limit
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on government borrowings from the State Bank of Pakistan. The amendments to the BanksNationalisation Act brought the end of the Pakistan Banking Council (an institution established tolook after the affairs of NCBs) and allowed the jobs of the council to be appointed to the ChiefExecutives, Boards of the Nationalised Commercial Banks (NCBs) and Development FinanceInstitutions (DFIs). The State Bank having a role in their appointment and removal. Theamendments also increased the autonomy and accountability of the chief executives, the Boardsof Directors of banks and DFIs.

The State Bank of Pakistan also performs both the traditional and developmentalfunctions toachievemacroeconomic goals. The traditional functions, may be classified into two groups:

1. The primary functions including issue of notes, regulation and supervision of the financialsystem, bankers bank, lender of the last resort, banker to Government, and conduct ofmonetary policy.

2. The secondary functions including the agency functions like management of public debt,management of foreign exchange, etc., and other functions like advising the governmenton policy matters and maintaining close relationships with international financialinstitutions.

The non-traditional or promotional functions, performed by the State Bank includedevelopment of financial framework, institutionalisation of savings and investment, provision oftraining facilities to bankers, and provision of credit to priority sectors. The State Bank also hasbeen playing an active part in the process of islamisation of the banking system.

Regulation of liquidity

The State Bank of Pakistan has also been entrusted with the responsibility to carry out

monetary and credit policy in accordance with Government targets for growth and inflation withthe recommendations of the Monetary and Fiscal Policies Co-ordination Board without trying toeffect the macroeconomic policy objectives.

The state bank also regulates the volume and the direction of flow of credit to differentuses and sectors, the state bank makes use of both direct and indirect instruments of monetarymanagement. During the 1980s, Pakistan embarked upon a program of financial sector reforms,which lead to a number of fundamental changes. Due to these changed the conduct of monetarymanagement which brought about changes to the administrative controls and quantitativerestrictions to market based monetary management. A reserve money management programmehas been developed, for intermediate target of M2, that would be achieved by observing the

desired path of reserve money - the operating target.

State Bank of Pakistan has changed the format and designs of many bank notes which arecurrently in circulation in Pakistan. These steps were taken to overcome the problems offraudulent activities.
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Banking

The State Bank of Pakistan looks into a lot of different ranges of banking to deal with thechanges in economic climate and different purchasing and buying powers. Here are some of thebanking areas that the state bank looks into;

State Banks Shariah Board Approves Essentials and Model Agreements for IslamicModes of Financing

Procedure For Submitting Claims With Sbp In Respect of Unclaimed DepositsSurrendered By Banks/Dfis.

Banking Sector Supervision in Pakistan Micro Finance Small Medium Enterprises (SMEs) Minimum Capital Requirements for Banks Remittance Facilities in Pakistan Opening of Foreign Currency Accounts with Banks in Pakistan under new scheme. Handbok of Corporate Governance Guidelines on Risk Management Guidelines on Commercial Paper Guidelines on Securitization SBP.Scheme for Agricultural Financing

Bank assets and liabilities

This is a chart of trend of major assets and liabilities reported by scheduled commercialbanks to the State Bank of Pakistan with figures in millions of Pakistani Rupees.

Year Deposits Advances Investments

2002 1,466,019 932,059 559,542

2006 2,806,645 2,189,368 799,285

Departments

Agriculture credit Audit Banking Inspection Banking Policy & Regulations Banking Supervision Corporate Services Economic Analysis Financial Monitoring Unit Monetary Policy Research Statistics and Data Warehouse


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Exchange Policy Human Resource Information Systems & Technology Islamic Banking Legal Services Library Payment System Real Time Gross Settlement System (RTGS System) Small and Medium Enterprises Training and Development Department (TDD) Treasury Operations Strategic & Corporate Planning Microfinance Pakistan Remittance Initiative

Governor

The principal officer of the SBP is the Governor. The current Governor of State Bank ofPakistan is Mr. Shahid Hafiz Kardar.

Functions of State Bank of

Pakistan

Statutory Obligations (RMD)

STATUTORY CASH RESERVE

In terms of Section36(1) SBP Act, 1956, every scheduled bank is required to maintainwith State Bank a balance the amount of which shall not at the close of business or any day beless than such percentage of Time & Demand Liabilities in Pakistan as may be determined byState Bank. Presently the requirement is 5% on weekly average basis subject to daily minimum of4% of Time & Demand Liabilities (reference BPRD Circular No.27 dated 2nd July,1999).

STATUTORY LIQUIDITY REQUIREMENT

In terms of Section 29(1) of Banking Companies Ordinance, 1962 every banking companyshall maintain in Pakistan in cash, gold or un-encumbered approved securities valued at price notexceeding "the lower of cost or the current market price" an amount which shall not at the close ofbusiness in any day be less than such percentage of the total of its time & demand liabilities inPakistan, as may be notified by State Bank from time to time. Presently the requirement is 15%
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(excluding 5% statutory cash reserve) of the total of its time and demand liabilities in Pakistan(BPRD Circular No.26 dated 2nd July, 1999).

MAINTENANCE OF LIQUIDITY AGANINST CERTAINLIABILITIES

In terms of Rule 6 of NBFIs Rules of Business, all NBFIs are required to invest 14% oftheir liabilities defined in the Rule, in Government Securities, NIT Units, shares of listedcompanies or listed debt securities in the prescribed manner. For the purpose of this rule,liabilities shall not include NBFIs equity, borrowings from financial institutions includingaccruals thereon, lease key money, deferred taxation not payable within 12 months, dividendpayable within two months, advance lease rentals and deposits from financial institutions. Inaddition, they are also required to maintain cash balance with State Bank, which shall not be lessthan 1% of their liabilities as defined above.

SUBMISSION OF ANNUAL AUDITED ACCOUNTS BY NBFIs

Under Rule 17 of NBFIs Rule of Business, all NBFIs are required to invest to submit theirannual audited accounts within a period of 6 months after the close of their accounting year.

ANNUAL ACCOUNTS

At the expiration of each calendar year every banking company incorporated in Pakistan,in respect of all business transacted by it, and every banking company incorporated outside

Pakistan, in respect of all business transited through its branches in Pakistan, shall prepare withreference to that year a balance-sheet and profit and loss account as on the last woking day of theyear in the prescribed forms(Section 34 of Banking Companies Ordinance, 1962).

SUBMISSION OF RETURNS.

The accounts and balance-sheet referred to in section 34 together with the auditors reportas passed in the annual General Meeting shall be published in the prescribed manner, and threecopies thereof shall be furnished as returns to the State Bank within three months of the close ofthe period to which they relate (Section 36 of Banking Companies Ordinance, 1962).

MINIMUM CAPITAL REQUIREMENTS

In terms of Section 13 of Banking Companies Ordinance, 1962 no banking company shallcommence business unless it has a minimum paid up capital as may be determined by the StateBank or carry on business unless the aggregate of its capital and unencumbered general reservesis of such minimum value within such period as may be determined and notified by the StateBank from time to time for banking companies in general or for a banking company in particular.


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As present, all banks operating in Pakistan are required to maintain capital and unhecumberedgeneral reserve, the value of which is not less than 8% of their risk weighted assets. Additionallythey are also required to maintain a minimum paid up capital of Rs.500 million.

Core Functions of State Bank of

Pakistan

State Bank of Pakistan is the Central Bank of the country. While its constitution, asoriginally laid down in the State Bank of Pakistan Order 1948, remained basically unchangeduntil 1st January 1974 when the Bank was nationalised, the scope of its functions wasconsiderably enlarged. The State Bank of Pakistan Act 1956, with subsequent amendments, formsthe basis of its operations today.

Under the State Bank of Pakistan Order 1948, the Bank was charged with the duty to"regulate the issue of Bank notes and keeping of reserves with a view to securing monetarystability in Pakistan and generally to operate the currency and credit system of the country to itsadvantage". The scope of the Banks operations was considerably widened in the State Bank ofPakistan Act 1956, which required the Bank to "regulate the monetary and credit system ofPakistan and to foster its growth in the best national interest with a view to securing monetarystability and fuller utilisation of the countrys productive resources". Under financial sectorreforms, the State Bank of Pakistan was granted autonomy in February 1994. On 21st January,1997, this autonomy was further strengthened by issuing three Amendment Ordinances (whichwere approved by the Parliament in May, 1997) namely, State Bank of Pakistan Act, 1956,

Banking Companies Ordinance, 1962 and Banks Nationalisation Act, 1974. The changes in theState Bank Act gave full and exclusive authority to the State Bank to regulate the banking sector,to conduct an independent monetary policy and to set limit on government borrowings from theState Bank of Pakistan. The amendments in Banks Nationalisation Act abolished the PakistanBanking Council (an institution established to look after the affairs of NCBs) and institutionalisedthe process of appointment of the Chief Executives and Boards of the nationalised commercialbanks (NCBs) and development finance institutions (DFIs), with the Sate Bank having a role intheir appointment and removal. The amendments also increased the autonomy and accountabilityof the Chief Executives and the Boards of Directors of banks and DFIs.

Like a Central Bank in any developing country, State Bank of Pakistan performs both the

traditional and developmental functions to achieve macro-economic goals. The traditionalfunctions, which are generally performed by central banks almost all over the world, may beclassified into two groups: (a) the primary functions including issue of notes, regulation andsupervision of the financial system, bankers bank, lender of the last resort, banker toGovernment, and conduct of monetary policy, and (b) the secondary functions including theagency functions like management of public debt, management of foreign exchange, etc., andother functions like advising the government on policy matters and maintaining closerelationships with international financial institutions. The non-traditional or promotional


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functions, performed by the State Bank include development of financial framework,institutionalisation of savings and investment, provision of training facilities to bankers, andprovision of credit to priority sectors. The State Bank also has been playing an active part in theprocess of islamization of the banking system. The main functions and responsibilities of the StateBank can be broadly categorised as under.

REGULATION OF LIQUIDITY

Being the Central Bank of the country, State Bank of Pakistan has been entrusted with theresponsibility to formulate and conduct monetary and credit policy in a manner consistent withthe Governments targets for growth and inflation and the recommendations of the Monetary andFiscal Policies Co-ordination Board with respect to macro-economic policy objectives. The basicobjective underlying its functions is two-fold i.e. the maintenance of monetary stability, therebyleading towards the stability in the domestic prices, as well as the promotion of economic growth.

To regulate the volume and the direction of flow of credit to different uses and sectors, theBank makes use of both direct and indirect instruments of monetary management. Until recently,the monetary and credit scenario was characterised by acute segmentation of credit markets withall the attendant distortions. Pakistan embarked upon a program of financial sector reforms in thelate 1980s. A number of fundamental changes have since been made in the conduct of monetarymanagement which essentially marked a departure from administrative controls and quantitativerestrictions to market-based monetary management. A reserve money management programmehas been developed. In terms of the programme, the intermediate target of M2 would be achievedby observing the desired path of reserve money - the operating target. While use in now beingmade of such indirect instruments of control as cash reserve ratio and liquidity ratio, theprograms reliance is mainly on open market operations.

ENSURING THE SOUNDNESS OF FINANCIAL SYSTEM:REGULATION AND SUPERVISION

One of the fundamental responsibilities of the State Bank is regulation and supervision ofthe financial system to ensure its soundness and stability as well as to protect the interests ofdepositors. The rapid advancement in information technology, together with growingcomplexities of modern banking operations, has made the supervisory role more difficult andchallenging. The institutional complexity is increasing, technical sophistication is improving andtechnical base of banking activities is expanding. All this requires the State Bank for endeavoringhard to keep pace with the fast-changing financial landscape of the country. Accordingly, the outdated inspection techniques have been replaced with the new ones to have better inspection andsupervision of the financial institutions. The banking activities are now being monitored through asystem of off-site surveillance and on-site inspection and supervision. Off-site surveillance isconducted by the State Bank through regular checking of various returns regularly received fromthe different banks. On other hand, on-site inspection is undertaken by the State Bank in thepremises of the concerned banks when required.


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To deepen and broaden financial markets as also to diversify the sources of credit, anumber of non-bank financial institutions (NBFIs) were allowed to increase substantially. TheState Bank has also been charged with the responsibilities of regulating and supervising of suchinstitutions. To regulate and supervise the activities of these institutions, a new Departmentnamely, NBFIs Regulation and Supervision Department was set up. Moreover, in order tosafeguard the interest of ultimate users of the financial services, and to ensure the viability ofinstitutions providing these services, the State Bank has issued a comprehensive set of PrudentialRegulations (for commercial banks) and Rules of Business (for NBFIs).

The "Prudential Regulations" for banks, besides providing for credit and risk exposurelimits, prescribe guide lines relating to classification of short-term and long-term loan facilities,set criteria for management, prohibit criminal use of banking channels for the purpose of moneylaundering and other unlawful activities, lay down rules for the payment of dividends, directbanks to refrain from window dressing and prohibit them to extend fresh laon to defaulters of oldloans. The existing format of balance sheet and profit-and-loss account has been changed toconform to international standards, ensuring adequate transparency of operations. Revised capitalrequirements, envisaging minimum paid up capital of Rs.500 million have been enforced.Effective December,1997, every bank was required to maintain capital and unencumbered generalreserves equivalent to 8 per cent of its risk weighted assets.

The "Rules of Business" for NBFIs became effective since the day NBFIs came underState Banks jurisdiction. As from January, 1997, modarbas and leasing companies, which arealso specialized type of NBFIs, are being regulated/supervised by the Securities and ExchangeCommission (SECP), rather than the State Bank of Pakistan.

EXCHANGE RATE MANAGEMENT AND BALANCE OF

PAYMENTS

One of the major responsibilities of the State Bank is the maintenance of external value ofthe currency. In this regard, the Bank is required, among other measures taken by it, to regulateforeign exchange reserves of the country in line with the stipulations of the Foreign Exchange Act1947. As an agent to the Government, the Bank has been authorised to purchase and sale gold,silver or approved foreign exchange and transactions of Special Drawing Rights with theInternational Monetary Fund under sub-sections 13(a) and 13(f) of Section 17 of the State Bankof Pakistan Act, 1956.

The Bank is responsible to keep the exchange rate of the rupee at an appropriate level and

prevent it from wide fluctuations in order to maintain competitiveness of our exports and maintainstability in the foreign exchange market. To achieve the objective, various exchange policies have been adopted from time to time keeping in view the prevailing circumstances. Pak-rupeeremained linked to Pound Sterling till September, 1971 and subsequently to U.S. Dollar.However, it was decided to adopt the managed floating exchange rate system w.e.f. January 8,1982 under which the value of the rupee was determined on daily basis, with reference to a basketof currencies of Pakistans major trading partners and competitors. Adjustments were made in itsvalue as and when the circumstances so warranted. During the course of time, an important


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development took place when Pakistan accepted obligations of Article-VIII, Section 2, 3 and 4 ofthe IMF Articles of Agreement, thereby making the Pak-rupee convertible for currentinternational transactions with effect from July 1, 1994.

After nuclear detonation by Pakistan in 1998, a two-tier exchange rate system wasintroduced w.e.f. 22nd July 1998, with a view to reduce the pressure on official reserves andprevent the economy to some extent from adverse implications of sanctions imposed on Pakistan.However, effective 19th May 1999, the exchange rate has been unified, with the introduction ofmarket-based floating exchange rate system, under which the exchange rate is determined by thedemand and supply positions in the foreign exchange market. The surrender requirement offoreign exchange receipts on account of exports and services, previously required to be made toState Bank through authorized dealers, has now been done away with and the commercial banksand other authorised dealers have been made free to hold and undertake transaction in foreigncurrencies.

As the custodian of countrys external reserves, the State Bank is also responsible for themanagement of the foreign exchange reserves. The task is being performed by an InvestmentCommittee which, after taking into consideration the overall level of reserves, maturities andpayment obligations, takes decision to make investment of surplus funds in such a manner thatensures liquidity of funds as well as maximises the earnings. These reserves are also being usedfor intervention in the foreign exchange market. For this purpose, a Foreign Exchange DealingRoom has been set up at the Central Directorate of State Bank of Pakistan and services of aForex Expert have been acquired.

DEVELOPMENTAL ROLE OF STATE BANK

The responsibility of a Central Bank in a developing country goes well beyond the

regulatory duties of managing the monetary policy in order to achieve the macro-economic goals.This role covers not only the development of important components of monetary and capitalmarkets but also to assist the process of economic growth and promote the fuller utilisation of acountrys resources.

Ever since its establishment, the State Bank of Pakistan, besides discharging its traditionalfunctions of regulating money and credit, has played an active developmental role to promote therealisation of macro-economic goals. The explicit recognition of the promotional role of theCentral Bank evidently stems from a desire to re-orientate all policies towards the goal of rapideconomic growth. Accordingly, the orthodox central banking functions have been combined bythe State Bank with a well-recognised developmental role.

The scope of Banks operations has been widened considerably by including the economicgrowth objective in its statute under the State Bank of Pakistan Act 1956. The Banksparticipation in the development process has been in the form of rehabilitation of banking systemin Pakistan, development of new financial institutions and debt instruments in order to promotefinancial intermediation, establishment of Development Financial Institutions (DFIs), directingthe use of credit according to selected development priorities, providing subsidised credit, anddevelopment of the capital market.


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BANKS/ DEVELOPMENT FINANCEINSTITUTIONS

BEING REGULATED BY STATE BANK OF

PAKISTAN

PUBLIC SECTOR BANKS

National Bank of Pakistan

First Women Bank Limited

The Bank of Khyber

The Bank of Punjab

SPECIALIZED BANKS

Industrial Development Bank of Pakistan

SME Bank Limited

The Punjab Provincial Cooperative Bank Ltd

Zarai Taraqiati Bank Limited

PRIVATE BANKS

Allied Bank Limited Summit Bank Limited

Askari Bank Limited

Atlas Bank Limited

Bank Alfalah Limited

Bank Al Habib Limited

Faysal Bank Limited

Habib Bank Limited

Habib Metropolitan Bank Limited

JS Bank Limited

KASB Bank Limited

MCB Bank Limited

Mybank Limited

NIB Bank Limited

SAMBA Bank Limited

SILKBANK Limited

Soneri Bank Limited

Standard Chartered Bank (Pakistan) Limited

The Royal Bank of Scotland Limited


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United Bank Limited

ISLAMIC BANKS

BankIslami Pakistan Limited

Dawood Islamic Bank Limited

Dubai Islamic Bank Pakistan Limited

AlBaraka Bank (Pakistan) Limited

Meezan Bank Limited

FOREIGN BANKS

Barclays Bank PLC

Citibank N.A. - Pakistan Operations

Deutsche Bank AG - Pakistan Operations

HSBC Bank Middle East Limited - Pakistan Operations

Oman International Bank S.A.O.G -Pakistan Operations

The Bank of Tokyo-Mitsubishi UFJ Limited - Pakistan Operations

MICRO FINANCE BANKS / INSTITUTIONS

KASHF Microfinance Bank Limited

Khushhali Bank Limited

Network Microfinance Bank Limited

Pak Oman Microfinance Bank Limited

Rozgar Microfinance Bank Limited

The First Micro Finance Bank Limited

Tameer Micro Finance Bank Limited

DEVELOPMENT FINANCE INSTITUTIONS

House Building Finance Corporation Limited

Pak Brunei investment Company Limited

Pak-China Investment Company Limited

Pak Iran Joint Investment Company Limited

Pakistan Kuwait Investment Company Limited

Pak Libya Holding Company Limited Pak Oman Investment Company Limited

Saudi Pak Industrial & Agricultural Investment Company Limited

MONETARY POLICY DECISION29th November 2010


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The economys ability to achieve sustainable recovery remains constrained owing to slow progress in the prevailing security and economic conditions. The key economic variablesimpeding stabilization and thereby growth are high and persistent inflation, continuing fiscalslippages and unresolved power sector issues. Whereas adjustments in administered prices of fueland energy and the post-flood disruption in the supply chain of food items have contributed to therecent upsurge in inflation, the high level of government borrowing from the SBP is diluting theeffectiveness of monetary policy in containing excessive monetary expansion and thus inflation.The need for such borrowing is largely emanating from a seemingly difficult fiscal predicament.While rising security and flood-related expenditures and continued power sector subsidies are oneaspect of the problem, a narrow tax base and a declining tax to GDP ratio are bigger issuesmagnifying the fiscal challenges. The cost to the economy is being paid through erosion in thepurchasing power of the rupee, growing total debt, and discouragement of productive privatesector activity.

High inflation, at a fundamental level, persists because of money creation in excess ofproductive activity in the economy. Of the Rs308 billion expansion in reserve money up till 19thNovember 2010 during the current fiscal year, Rs266 billion is due to government borrowingfrom the SBP, which has been on an increasing trend since January 2010. Such borrowing hasstoked expectations of increasing inflation, resulting in high interest rates. The nature of this fiscalexpansion is the fundamental source of high inflation in Pakistan over the last year.

Increases in electricity and domestic petroleum prices and the impact of the catastrophicfloods on food prices did play their part in providing impetus to CPI inflation but do not fullyexplain the persistence in inflation. Further, apprehensions that these supply shocks woulddramatically worsen the inflation outlook have thus far not fully materialized. Temporary pricehikes in the food category, as seen in a monthly increase of over 5 percent during August andSeptember 2010, have somewhat subsided. As a result, in Oct 2010, CPI inflation posted amarginal decline of 0.4 percent on year-on-year basis, while a 0.6 percent growth on month-on-month basis was well below the last 12 months average.

On the other hand, the persistent component of inflation, provide by core trimmedinflation, remains sticky at over 12.5 percent on year-on-year basis since January 2010 and hasincreased to a 1 percent monthly change in October 2010, with expectations of further increases.An important source of this stickiness is the expectations of a persistent reliance of thegovernment on SBP to finance its deficit. Indeed, the co-movement between persistence ofinflation and that of governments financing gap is no coincidence. Therefore, it would bedifficult to bring inflation down unless government borrowing from SBP is curtailed substantiallyand kept under control on a sustained basis.

Government borrowing from SBP at an increasing rate reflects severe fiscalvulnerabilities. Given the delays in the introduction of tax reforms and weak industrialproduction, the task of achieving close to 27 percent enhancement in tax revenues during FY11 is beginning to look quite ambitious. To increase its capacity to raise revenues and contain

inflationary borrowings from SBP within an explicit and clearly defined limit, the government hasshown its intention to: i)- widen the tax net through introduction of the Reformed General SalesTax (RGST) along with other tax measures; ii)- effectively contain the power sector subsidies;and, iii)- amend the SBP Act, including explicit limits on government borrowings from SBP,which is now in the final stage of legislation. Together, these could potentially address the problem in the medium term of stubbornly high inflation expectations, reduce the cost ofborrowing, and hence pave the way for long term economic growth. However, it may take some


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time before the benefits of such important measures, after their implementation, begin to havetheir impact.

In the mean time, pressing flood-related expenditures and shortfalls in external financingof the budget have increased reliance of the government on domestic sources. The seasonalincrease in the working capital credit requirements of the private sector during the second quarteris also higher on the margin due to higher input prices. Consequently, pressure on the bankingsystem and interest rates has increased. With low growth in the banking system Net ForeignAssets (NFA) and deposits, liquidity management has also become challenging. Therefore, tofurther encourage the private sector, fiscal authorities need to demonstrate greater resolve inimplementing their strategy to contain the fiscal deficit through fundamental structural reformsand their commitment to restrict inflationary central bank borrowings. However, the recentrejection of the two PIB auctions in Q1-FY11 and acceptance of Rs50 billion instead of the Rs90billion offered by the banks in the 16th November 2010 T-bill auction is apparently inconsistentwith the stated intentions.

Assuming a real GDP growth of 2.5 percent and that the expected decline in private andpublic sector investment expenditures would be largely compensated by increases in public sectorconsumption expenditures, the external current account deficit is likely to be narrower in FY11than earlier projections of 3.5 percent. Helped by higher cotton prices, the export earnings of $7.1billion during first four months of the current fiscal year seem fairly encouraging. Similarly, therecent trends in remittances coupled with expectations of realization of Coalition Support Fund(CSF) receipts could prove to be quite helpful in meeting import and other payments. The realtest, however, would continue to be in the financing of the external current account deficit.Assuming that the projected external official inflows for FY11 do materialize, a substantialgrowth in private foreign inflows would be required to maintain and build foreign exchangereserves.

Monetary policy is essentially a short term instrument with which emerging risks anduncertainties are managed. The impact of monetary policy on economic activity and inflation isindirect and operates with a lag, and unlike the case of fiscal policy that tends to be reactive, it hasto be proactive. Under the present circumstances, if the expansionary fiscal position is notexpected to translate into a high external current account deficit during the current fiscal year thenit could be the case that the private sector demand is muted. Therefore, the monetary policy stancecould probably remain unchanged. However, inflation is rising and showing persistence becauseof relentless government borrowing from the SBP. The rising NDA to NFA ratio of SBP balancesheet and its strong association with CPI inflation also suggest that inflation is likely to persist atdouble digit levels during much of FY11 and possibly in FY12. SBPs efforts to counterbalancethe rapid expansion in reserve money and arrest the rising inflation expectations would require anincrease in the policy rate. After careful consideration of this trade-off, SBP has decided toincrease the policy rate by 50 basis points to 14 percent with effect from 30th November, 2010.

A principled decision has also been taken to strictly implement the revised limits on

borrowings of the provinces from SBP, even if it involves stopping payments to the provincialgovernments. SBP believes that the entire responsibility of tackling macroeconomic problems hasbeen unfairly placed on monetary policy only. SBP also understands that the burden of thismonetary tightening is being borne largely by the private sector, as it gets crowded out by theexcesses of government borrowing for budgetary purposes and commodity operations, with all itsadverse implications for sustainable economic growth.


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Guidelines for Islamic Modes of Finance

The Shariah Board of the State Bank of Pakistan has approved and incorporated some ofthe suggestions given by different stakeholders in the Essentials of Islamic Modes of Financing toensure compliance with minimum Shariah standards by banks conducting Islamic banking inPakistan. These essentials have been placed on SBP website (http://www.sbp.org.pk/) as GeneralGuidelines to be followed by banking institutions conducting Islamic banking in the country.

Essentials of Islamic Modes of Financing

These Essentials are proposed to be enforced as Prudential Regulations for Islamic banksin due course. Similarly, in order to facilitate the existing Islamic banks and the potential marketplayers to develop Islamic banking products in particular and to create awareness about Islamicbanking products in general, Model Agreements for the following modes have also been updated

in the light of stakeholders comments by the SBP Shariah Board. The following links may beclicked to access the same from our website (http://www.sbp.org.pk/)

1.Murabaha Facility Agreement2.Musawamah Facility Agreement3.Lease Agreement4.Salam Agreement5.Musharaka Investment Agreement6. Istisna Agreement

7.Agreement for Interest free Loan8. Mudaraba Financing Agreement

9.Syndication Mudaraba Agreement

It may be pointed out that these are model agreements, which can be modified, accordingto the products designed by the banks conducting Islamic banking business, with the approval ofbanks Shariah Adviser to ensure that such changes are consistent with the principles of Shariah.

Banking Sector Supervision inPakistan

State Bank of Pakistan (SBP) which is the Central Bank of the country has been interaliaentrusted with the responsibility for an ongoing effective supervision of the banking sector. Therelevant provisions of law which vest powers in State Bank of Pakistan (SBP) to carry out
http://sbp.org.pk/press/Essentials/Essentials%20of%20Islamic.htmhttp://sbp.org.pk/press/Essentials/Murabaha%20Facility%20Agreement-1.htmhttp://sbp.org.pk/press/Essentials/Musawamah%20Facility%20Agreement.htmhttp://sbp.org.pk/press/Essentials/Lease%20Agreement.htmhttp://sbp.org.pk/press/Essentials/Salam%20Agreement.htmhttp://sbp.org.pk/press/Essentials/Musharaka%20Investment.htmhttp://sbp.org.pk/press/Essentials/Istisna%20Agreement.htmhttp://sbp.org.pk/press/Essentials/Agreement%20for%20Interest%20free%20Loan.htmhttp://sbp.org.pk/press/Essentials/Mudaraba%20Financing.htmhttp://sbp.org.pk/press/Essentials/Syndication%20Mudaraba.htmhttp://sbp.org.pk/press/Essentials/Essentials%20of%20Islamic.htmhttp://sbp.org.pk/press/Essentials/Murabaha%20Facility%20Agreement-1.htmhttp://sbp.org.pk/press/Essentials/Musawamah%20Facility%20Agreement.htmhttp://sbp.org.pk/press/Essentials/Lease%20Agreement.htmhttp://sbp.org.pk/press/Essentials/Salam%20Agreement.htmhttp://sbp.org.pk/press/Essentials/Musharaka%20Investment.htmhttp://sbp.org.pk/press/Essentials/Istisna%20Agreement.htmhttp://sbp.org.pk/press/Essentials/Agreement%20for%20Interest%20free%20Loan.htmhttp://sbp.org.pk/press/Essentials/Mudaraba%20Financing.htmhttp://sbp.org.pk/press/Essentials/Syndication%20Mudaraba.htm


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inspection of banks are contained in the Banking Companies Ordinance, 1962. Besides, StateBank of Pakistan Act, 1956 and the Banks Nationalization Act, 1974, The Financial Institutions(Recovery of finances) Ordinance, 2001, Companies Ordinance, 1984 and Statutory RegulatoryOrders (SROs) are the relevant legislations, which cover the activities concerning the bankingsector.

The financial sector in Pakistan comprises of Commercial Banks, Development FinanceInstitutions (DFIs), Microfinance Banks (MFBs), Non-banking Finance Companies (NBFCs)(leasing companies, Investment Banks, Discount Houses, Housing Finance Companies, VentureCapital Companies, Mutual Funds), Modarabas, Stock Exchange and Insurance Companies.Under the prevalent legislative structure the supervisory responsibilities in case of Banks,Development Finance Institutions (DFIs), and Microfinance Banks (MFBs) falls within legalambit of State Bank of Pakistan while the rest of the financial institutions are monitored by otherauthorities such as Securities and Exchange Commission and Controller of Insurance.

Under the WTO commitments the operational status of branch network of foreign banksoperating in Pakistan as on 31-12-1997 has been protected and frozen. However, existing foreignbanks having less than 3 branches can have branches to the extent of maximum number of 3 only.New foreign banks desirous of entering banking business in Pakistan will now be required toincorporate as domestic bank under the local laws. The branches of foreign banks operating inPakistan can also be converted into a local commercial bank by incorporating under the local lawsand subject to a minimum paid up capital of Rs.1 billion provided foreign share holding isrestricted to a maximum of 49%.

At present there are 41 scheduled banks, 6 DFIs, and 2 MFBs operating in Pakistan whoseactivities are regulated and supervised by State Bank of Pakistan. The commercial banks compriseof 3 nationalized banks, 3 privatized banks, 15 private sector banks, 14 foreign banks, 2provincial scheduled banks, and 4 specialized banks.

Under the Banking Companies Ordinance, 1962 the State Bank of Pakistan is fullyauthorized to regulate and supervise banks and development finance institutions. During the year1997 some major amendments were made in the banking laws, which gave autonomy to the StateBank in the area of banking supervision. Under Section 40(A) of the said Ordinance it is theresponsibility of State Bank to systematically monitor the performance of every banking companyto ensure its compliance with the statutory criteria, and banking rules & regulations. In every casein which the management of a bank is failing to discharge its responsibility in accordance with theapplicable statutory criteria or banking rules & regulations or is failing to protect the interests ofthe depositors or for advancing loans and finance without due regard for the best interests of thebank or for reasons other than merit, the State Bank is empowered to take necessary remedialsteps. The State Bank of Pakistan can, interalia, exercise the following powers vested upon itunder the Banking Companies Ordinance:-

Prohibiting the bank from giving loans, advances & credits. Prohibiting the bank fromaccepting deposits. Cancel license of a bank. Give directions to the bank as it deem fit. Remove


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chairman, directors, chief executive or other managerial persons from the office and appoint aperson as chairman, director or chief executive.

Supersede the Board of Directors. Direct prosecution of directors, chief executive or otherofficer. Caution or prohibit bank against entering into any particular transaction(s). Require bankto make changes in management. Appoint its officers to observe the manner in which affairs ofbank/its branches/office are conducted. Winding up the bank through high court. Apply to FederalGovernment for an order of moratorium in respect of a bank and to prepare scheme ofreconstruction or amalgamation. Impose penalties including civil money penalties.

The State Bank has framed Prudential Regulations for banks and Rules of Business forDFIs that present a prudent operating framework within which banks and DFIs are expected toconduct their business in a safe and sound manner taking into account the risks associated withtheir activities. These regulations incorporate the spirit and essence of BIS regulations and areconstantly watched for possible improvement so that their enforcement yields the best results topromote the objectives of supervision.

The State Bank is empowered to determine Statutory Liquidity and Cash ReserveRequirements for banks/DFIs. Presently the Cash Reserve Requirement is 5% on weekly averagebasis subject to daily minimum of 4% of Time & Demand Liabilities. In addition to that banks arerequired to maintain Statutory Liquidity Requirement (SLR) @ 15% of their Time & DemandLiabilities. Similarly, DFIs are required to maintain SLR of 14% and Cash Reserve of 1% of theirspecified liabilities. Additionally, The Banking Companies Ordinance had been amended in 1997which empowers the State Bank to prescribe capital requirements for banks. In exercise of thesepowers the State Bank has laid down Minimum Capital Requirements for banks based on Baslecapital structure. The banks have to maintain a Capital Adequacy Ratio in a way that their capitaland unencumbered general reserves are, at the minimum, 8% of their risk weighted assets, andeffective from 1st January, 2003 banks are required to maintain a minimum paid up capital levelof Rs.1 Billion.

While the off-site monitoring aspect is looked after by the State Bank of PakistansBanking Supervision Department the responsibility for the on-site examination of the bankingsystem in Pakistan lies on the shoulders of the Banking Inspection Department. This has beendesigned to ensure that institutions operate in a safe and sound manner. The focus of thesupervisory efforts by the State Bank of Pakistan is on the health and stability of the bankingsystem in Pakistan.

National Bank of Pakistan


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National Bank of Pakistan is the largestcommercial bank operating in Pakistan. Ithas redefined its role and has moved from a public sector organisation into a moderncommercial bank. While it continues to actas trustee of public funds and as the agent tothe State Bank of Pakistan (in places whereSBP does not have a presence) it hasdiversified its business portfolio and is today a major lead player in the debt equity market,corporate investment banking, retail and consumer banking, agricultural financing, treasuryservices and is showing growing interest in promoting and developing the country's small andmedium enterprises and at the same time fulfilling its social responsibilities, NBP headquarters inKarachi, Pakistan with over 1,200 branches country wide. The bank provides both commercialand public sector banking services. It has assets worth USD 12.293 billion in 2007. Itssubsidiaries include NBP Capital, NBP Modaraba Management Company, NBP ExchangeCompany, Taurus Securities,NBP Almatyet al.'

EstablishmentNational Bank of Pakistan (NBP) was established in 1949, under the National Bank of PakistanOrdinance 1949 and was government-owned. NBP acted as an agent of the central bankwhereverthe State Bank did not have its own branch. It also undertook government treasury operations. Itsfirst branches were in jute growing areas in East Pakistan. Offices in Karachi and Lahore.

MissionNBP will aspire to the values that make NBP trulythe Nations Bank, by: Institutionalizing a merit and performance culture

Creating a distinctive brand identity by providing thehighest standards of services Adopting the best international management practices Maximizing stakeholders value Discharging our responsibility as a good corporatecitizen of Pakistan and in countries where we operate

VisionTo be recognized as a leader and a brand synonymous with trust, highest standards of servicequality, international best practices and social responsibility.

Core Values Highest standards of Integrity Institutionalizing team work and performance culture Excellence in service Advancement of skills for tomorrows challenges Awareness of social and community responsibility Value creation for all stakeholders
http://en.wikipedia.org/wiki/Commercial_bankhttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Pakistanhttp://en.wikipedia.org/wiki/USDhttp://en.wikipedia.org/wiki/1949http://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Jutehttp://en.wikipedia.org/wiki/East_Pakistanhttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Lahorehttp://en.wikipedia.org/wiki/Commercial_bankhttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Pakistanhttp://en.wikipedia.org/wiki/USDhttp://en.wikipedia.org/wiki/1949http://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Jutehttp://en.wikipedia.org/wiki/East_Pakistanhttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Lahore


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Share In Stock Market

In today's competitive business environment, NBP needed to redefine its role and shed the publicsector bank image, for a modern commercial bank. It has offloaded 23.2 percent share in the stock

market, and while it has not been completely privatized like the other three public sector banks,partial privatization has taken place. It is now listed on the Karachi Stock Exchange .

Corporate Banking

NBP further consolidated its position as one of the top players in corporate and investmentbanking of the country in 2007 and has built a strong customer relationship with the premiercorporate clients.

Islamic Banking NBP's First Islamic Banking Branch started operations in Karachi on December 15, 2006. Two more Branches started Operations by the end of 2007 Peshawar and Lahore. At present 8 Islamic Banking branches are functional all over Pakistan having Group

office at Karachi, Pakistan. Mr. Shafiq Khan is newly appointed Group Chief of Islamic Banking Group. Mufti Abdul Sattar Laghari is a Shariah Advisor.

Financing FacilitiesCommercial and Corporate customers requiring financing will have the following financingfacilities available to them to meet their requirements:

Murabaha

Murabaha may be defined as a contract between a Buyer and Seller under which the Sellerdiscloses to the Buyer the cost of goods being sold and adds an agreed profit. Price is payable onspot or at a certain future date, in lump sum or in installments (deferred payments).

Under the MURABAHA FACILITY, the Bank will first purchase the required goodsdirectly or through an Agent. All costs incurred on such purchases will be borne by theBank.


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Subsequently the Bank will sell the goods to the customer on deferred payment basis (30days to one year) at an agreed price comprising cost of goods purchased and Bank's profit.

On due date the customer will pay to the Bank the agreed price, in lump sum or as per theagreed installment schedule.

Ijarah(Leasing)Ijarah means to give something on rent.The term IJARAH is analogous to the English termleasing.

Firstly the Bank will purchase the Assets as required by the Customer and subsequently the assetswill be leased to the Customer on the terms and conditions as agreed with him.

Ijarah Facility will be offered for the following assets:

Vehicles (both Commercial and Private) Office Equipment Plant and Machinery

Operations of National Bank of Pakistan

National Bank of Pakistan is the largest commercial bank operating in Pakistan . Its balancesheet size surpasses that of any of the other banks functioning locally. It has redefined its role andhas moved from a public sector organisation into a modern commercial bank. The Bank's servicesare available to individuals, corporate entities and government. While it continues to act as trustee

of public funds and as the agent to the State Bank of Pakistan (in places where SBP does not havea presence) it has diversified its business portfolio and is today a major lead player in the debtequity market, corporate investment banking, retail and consumer banking, agricultural financing,treasury services and is showing growing interest in promoting and developing the country's smalland medium enterprises and at the same time fulfilling its social responsibilities, as a corporatecitizen.

National Bank of Pakistan is today a progressive, efficient, and customer focused institution. Ithas developed a wide range of consumer products, to enhance business and cater to the differentsegments of society. Some schemes have been specifically designed for the low to middle incomesegments of the population. These include NBP Karobar, NBP Advance Salary, NBP Saiban,

NBP Kisan Dost, NBP Cash n Gold

It has implemented special credit schemes like small finance for agriculture, business andindustries, administrator to Qarz-e-Hasna loans to students, self employment scheme forunemployed persons, public transport scheme. The Bank has expanded its range of products andservices to include Shariah Compliant Islamic Banking products. For the promotion of literature,NBP recently initiated theAnnual Awards for Excellence in Literature . NBP will confer annual


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awards to the best books in Urdu and in all prominent regional languages published during thedefined period. Patronage from NBP would help creative work in the field of literature. The Bankis also the largest sponsor of sports in Pakistan . It has provided generously to philanthropiccauses whenever the need arose.

It has taken various measures to facilitate overseas Pakistanis to send their remittances in aconvenient and efficient manner. In 2002 the Bank signed an agreement with Western Union forexpanding the base for documented remittances. More recently it has started Electronic HomeRemittances Project. This project introduces technology based system to handle inwardremittances efficiently, by ensuring that the Bank's branches keep a track of the remittancereceived from abroad till its final receipt.

A number of initiatives have been taken, in terms of institutional restructuring, changes in thefield structure, in policies and procedures, in internal control systems with special emphasis oncorporate governance, adoption of Capital Adequacy Standards under Basel II framework, in theupgradation of the IT infrastructure and developing the human resources.

National Bank of Pakistan has built an extensive branch network with 1250 branches in Pakistanand operates in major business centre abroad. The Bank has representative offices in Beijing ,Tashkent , Chicago and Toronto . It has agency arrangements with more than 3000 correspondentbanks worldwide. Its subsidiaries are Taurus Securities Ltd, NBP Exchange Company Ltd, NBPCapital Ltd, NBP Modaraba Management Company Ltd, and CJSC Bank, Almaty , Kazakhstan .The Bank's joint ventures are, United National Bank (UK), First Investment Bank and NAFA, anAsset Management Company (a joint venture with NIB Bank & Fullerton Fund Management ofSingapore).

The Bank's financial performance has been remarkable. In 2006, total assets are estimated atRs635 billion, while deposits have grown to nearly Rs502 billion. Pre-tax profit rose to Rs26billion. Earnings per share have jumped to Rs24.01 in 2006. The increase in profit was achievedthrough strong growth in core banking income. Interest income increased by Rs10 billion throughgrowth in the loan portfolio as well as increase in spreads. Advances increased by Rs48 billion toRs316 billion. The Bank maintains a sound loan portfolio diversified in nature to counter the riskof credit concentration. It ranges from providing credit to the un-banked market segment under NBP Karobar, to small and medium enterprises, to agricultural loans, to large corporatecustomers.

Trade ServicesNBP Financial Institutions & Cash Management Division (FI & CMD) division provides globaltrade services & solutions in the major financial hubs; we offer complete solution for importers aswell as exporters. The services offered covers:

Letter of Credit

Advising


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Confirmation Negotiation/Discounting Reimbursement

Trade Collection Services

Export Bill Collection Services Documentary/Clean Collection

Payment Services

Electronic Payment / MT103 Fund Transfer / MT 202

Trade Financing

Account Receivable Discounting Usance Payable at Sight Structure LC Discounting Trade Payment Guarantees LC Refinancin

Structured Trade Finance

Risk Participation FI Syndication FI Lending Bridge/Project Financing

Services Offered for Exporters

NBP finances & manages export receivables and monitor your business worldwide plus ensureprompt payments and prompt delivery of information.

Document presentation and payment services: Our team of experts can expedite thepreparation, presentation of documentation & collection of receivables.

Pre and postshipment financing: Sell on both letter of credit and open accountpayments; reduce payment cycles; enhance access to liquidity and eliminate routineinquiries.

Banktobank reimbursements: We serve as your reimbursing bank under letter ofcredits by using your NBP USD, Euro & other major currency nostro accounts to


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consolidate your letter of credit payments as well as for your export proceeds. We alsooffer competitive rebate structure to our correspondents. You will enjoy consolidated predebit advices, realtime balance, transaction reporting and overnight investment servicesfor excess balance on your nostro account.

Export bills collection service: Combine courier delivery of open receivables letters,payment tracing, tracking, reporting and received funds. Concentrated approach to quicklydeposit the funds due from export receivables into your account while keeping youinformed of paid and open items. Along with fine rebate offers; Export Bills Collectionfinancing is also available for valued clients.

Services Offered for Importers

Companies importing goods need to mitigate crossborder trading risks, increase cash flows andoperating efficiencies. Our experienced & efficient team helps you to compete more effectivelyon a worldwide basis with trade finance solutions tailored to your specific needs as an importer.

Import services include:

Documentary Credits Import Finance Shipping Guarantees

We also offer traditional trade finance solutions that suits your requirement including private labelletters of credit, import documentary collections, banker's acceptances and standby letter ofcredits.

National Bank sets new standards

The National Bank of Pakistan maintains its position as Pakistans premier bank and isdetermined to set higher standards of achievements. It is the major business partner for thePakistan government with special emphasis on fostering its economic growth, said bank chairman

and president Ali Raza.This is through aggressive and balanced lending policies, technologically- oriented products andservices offered by its large network of branches locally, internationally and throughrepresentative offices. It also gives me great pleasure to announce that National Bank of Pakistanis gearing up to the challenges faced by the domestic banking industry due to innovations andadvances in the international banking world, which is the consequence of globalisation. The bank wishes to effectively utilise the financial assistance being extended by Pakistans


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government for banking sector reforms aimed at reducing operating costs and improvingprofitability.

National Bank of Pakistan is distinct from other banks in that it has a non-profit and service-oriented motive, which has manifested itself in the area of salary deposits of governmentemployees and payment of utility bills. The bank renders both of these services across thecountry reaching as far as the remotest regions, from our northern borders to the Arabian Sea.These services do not contribute towards the earnings of the bank, rather they put pressure onour resources. Nevertheless, we are committed to serving small savers and the general public ofthe country.By extending and targeting our research to improve bank earnings, through customer focus ofour commercial and corporate branches and by enhanced efforts towards the development ofhuman capital we shall very soon transform the bank to a fast-paced, modern, and competitivebank, said Mr Raza. I firmly believe that we have the vision, which will enable us to achieveeven better results, safeguard the interest of our customers and to assist us in our march towardsprogress and prosperity in future.

Market Position of National Bank of

Pakistan in KSE

Investment synopsisNational Bank of Pakistan (NBP) is one of our picks in our banking sector universe, delineating

48% upside to our Justified Price to book target of Rs 133.3/share. NBP is expected to announceits CY08 results within a fortnight. We expect CY08 earning deceleration by 17%.The bank is expected to report after tax earning of Rs 15,817 mn (EPS: Rs 17.63) as against Rs

19,033 mn (adjusted EPS: Rs 21.22). We expect bank to announce cash dividend of Rs 3.0/share(CY07: Rs 4.5) and also bonus issue of 15%. Some of the main highlights in our earningestimations include 1) our forecasted spreads of 6% which is lower than MCB and UBL,nevertheless, looks better if we consider magnitude of the balance sheet 2) our assumed 65% -70% proportion of low cost deposit base 3) only 4% y-o-y growth in net interest income of Rs35,018 mn given peculiar increase in cost of funds 4) only 6% y-o-y increase in non-core incomedespite some good impact of dividend income of Rs 2.35 bn from NIT unit holding and nearlytripling of income from FCY dealing to Rs 3.3 bn 5) our assumed provisioning against legacy

loans to the extent of Rs 8.5 bn 6) regressive growth in deposits during 9M-CY08 to Rs 561 bn asagainst Rs 592 bn reported in CY07.We expect bank to book lesser revaluation surplus of Rs 7 bn from NIT holdings as against nearlyRs 17 bn reported last year. Moreover, there might be a lesser gains from old stakes in SaudiArabia based Bank Al-Jazira (BJAZ) which is 5.8% due to steep decline in share prices of BJAZat Tadawul Exchange (TASI). We see banks book value to remain fluctuating given ups anddown coming in investments in equities (our estimated CY08 BVS: Rs 107.47/share).


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Stock data- NBPLast Closing PKR/Share 67.90Paid up Capital in mn shares 896.98Free Float in mn shares 179.40

Free float Market CAP in mn US$ 153.22Stdev 1 Week 3.55%Stdev 30 day 4.48%Stdev 60 day 4.17%52-Week High/Low 272.90 / 46.56

state bank of pakistan and national bank of pakistan

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