Académique Documents
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TABLE OF CONTENTS
Objectives of Studying the Organization ........................................................................................ 6 Brief History of National Bank of Pakistan .................................................................................... 7 Nature of National Bank of Pakistan ............................................................................................ 10 Business volume of National Bank of Pakistan ............................................................................ 12 Branch Network of National Bank of Pakistan............................................................................. 16 Number of Employees of National Bank of Pakistan ................................................................... 18 Product Lines ................................................................................................................................ 19 1. a) b) c) d) e) g) 2. a) b) c) d) e) 3. a) b) c) 4. a) b) c) Deposits.............................................................................................................................. 19 Current Deposits ............................................................................................................. 20 PLS Saving Deposits ...................................................................................................... 20 Fixed Deposit Account (Time Deposits) ........................................................................ 21 Foreign Currency Account ............................................................................................. 22 NBP Premium Aamdani ................................................................................................. 22 National Income Daily Account (NIDA) ....................................................................... 23 Advances ............................................................................................................................ 25 NBP Saibaan .................................................................................................................. 25 NBP Advance Salary...................................................................................................... 25 NBP Cash & Gold .......................................................................................................... 27 Students Loan Scheme ................................................................................................... 27 NBP Karobar- Presidents Rozgar Scheme .................................................................... 27 Corporate Advances ........................................................................................................... 30 Cash Finance .................................................................................................................. 30 Running Finance/ Overdraft ........................................................................................... 30 Demand Finance ............................................................................................................. 30 Remittances ........................................................................................................................ 31 Demand Drafts ............................................................................................................... 31 Travelers Cheques .......................................................................................................... 32 Letter Of Credit .............................................................................................................. 32
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d) e) f) g) h) 5. a) b) c)
Foreign Remittances ....................................................................................................... 33 Swift System .................................................................................................................. 33 Mail Transfer .................................................................................................................. 33 Telegraphic Transfer ...................................................................................................... 34 Pay Order........................................................................................................................ 34 Miscellaneous .................................................................................................................... 35 Lockers ........................................................................................................................... 35 NBP Cash Card .............................................................................................................. 35 International Banking ..................................................................................................... 36
Organizational Structure of National Bank of Pakistan ................................................................ 37 Board of Directors ..................................................................................................................... 37 Senior Management ................................................................................................................... 40 1. 2. 3. 4. 5. 6. 7. 8. 9. Corporate & Investment Banking Group ....................................................................... 41 Compliance Group ......................................................................................................... 43 Islamic Banking Group .................................................................................................. 44 Treasury Management Group......................................................................................... 45 Credit Management Group ............................................................................................. 47 Audit & Inspection Group .............................................................................................. 48 Human Resource Management & Administration Group .............................................. 50 Information technology group ........................................................................................ 51 Financial control Division .............................................................................................. 52
10. Overseas Coordination & Management Group .............................................................. 53 11. Commercial & Retail Banking Group ............................................................................ 54 12. Special Assets Management Group................................................................................ 55 13. Employee Benefits, Disbursements & Trustee Division ................................................ 55 14. Core Banking Application .............................................................................................. 58 15. Operations Group ........................................................................................................... 59 Provincial & Regional Management ......................................................................................... 60 Branch Management .................................................................................................................. 60
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Organizational (Management) levels at NBP ............................................................................... 61 Top Managers ............................................................................................................................ 62 Middle Managers ....................................................................................................................... 62 First Line Managers or Lower Level Management ................................................................... 62 Non Managerial Employees ...................................................................................................... 62 Hierarchy of National Bank of Pakistan ....................................................................................... 63 Organization Structure of the Branch ........................................................................................... 64 a) b) c) d) e) Centralized Decision Making ............................................................................................ 64 Downward Communication ............................................................................................... 65 Chain of Command ............................................................................................................ 65 Authority and Responsibility ............................................................................................. 66 Delegation .......................................................................................................................... 66
Departments of the Branch ........................................................................................................... 67 1. 2. 3. 4. 5. 6. 7. a) b) c) 8. 9. Clearing House Department ............................................................................................... 67 Remittance Department ..................................................................................................... 71 Account Opening Department ........................................................................................... 73 Cash Department ................................................................................................................ 74 Deposits Department .......................................................................................................... 76 Advances Department ........................................................................................................ 77 Computer Department ........................................................................................................ 78 Online branches .............................................................................................................. 78 Batch Branches ............................................................................................................... 79 Manual Branches ............................................................................................................ 79 Pension Disbursement Department .................................................................................... 80 Accounts Department......................................................................................................... 80
Structure of Branchs Accounts Department ................................................................................ 83 Bank Accounting Operations ........................................................................................................ 86 Role Of CFO (Chief Financial Officer) ........................................................................................ 88 Use of Electronic Data in Decision Making ................................................................................. 92
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Information System Resources of NBP ..................................................................................... 93 a) b) c) d) e) People Resources............................................................................................................ 93 Hardware Resources ....................................................................................................... 94 Software Resources ........................................................................................................ 94 Data Resources ............................................................................................................... 94 Network Resources ........................................................................................................ 94
Sources of Funds ........................................................................................................................... 95 Generation of funds....................................................................................................................... 98 Allocation of Funds..................................................................................................................... 100 Critical Analysis (Theory vs Practical) ....................................................................................... 106 Balance Sheet .............................................................................................................................. 108 Income Statement........................................................................................................................ 108 Financial Statements Analysis .................................................................................................... 110 Ratio Analysis.......................................................................................................................... 111 a) b) c) d) e) Profitability Ratios ....................................................................................................... 111 Liquidity Ratios ............................................................................................................ 117 Debt Ratios ................................................................................................................... 121 Capital Adequacy Ratios .............................................................................................. 124 Operating Performance Ratios ..................................................................................... 125
Horizontal Analysis ................................................................................................................. 128 Horizontal Analysis of Balance Sheet ..................................................................................... 129 Horizontal Analysis of Income Statement ............................................................................... 138 Vertical Analysis ..................................................................................................................... 147 Vertical Analysis of Balance Sheet ......................................................................................... 148 Vertical Analysis of Income Statement ................................................................................... 157 Bank Analysis with refernce to commercial Banks listed on stock exchange ............................ 165 Future prospects of National Bank of Pakistan........................................................................... 168 Short falls/ Weaknesses of National Bank of Pakistan ............................................................... 170 Conclusions ................................................................................................................................. 172
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responsibilities of the Bank is different and unique from other banks/financial institutions. The Bank acts as the agent to the State Bank of Pakistan for handling Provincial/Federal Government Receipts and Payments on their behalf. The Bank has also played an important role in financing the countrys growing trade, which has expanded through the years as diversification took place.1 The National Bank of Pakistan has its headquarters in Karachi, Pakistan. The bank operates 1249(2008) branches in Pakistan and 22(2008) overseas branches. Under a trust Deed, the bank also provides services as trustee to National Investment Trust (NIT) including safe custody of securities on behalf of NIT. The National Bank of Pakistan has assets worth Rupees 737976.44 million on September 30, 2008.2 National Bank of Pakistan is today a progressive, efficient, and customer focused institution. It has developed a wide range of consumer products, to enhance business and cater to the different segments of society. Some schemes have been specifically designed for the low to middle
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income segments of the population. These include NBP Karobar, NBP Advance Salary, NBP Saibaan, NBP Kisan Dost, and NBP Cash n Gold. The National Bank of Pakistan has implemented special credit schemes like small finance for agriculture, business and industries, administrator to Qarz-e-Hasna loans to students, self employment scheme for unemployed persons, public transport scheme. The Bank has expanded its range of products and services to include Shariah Compliant Islamic Banking products. For the promotion of literature, NBP recently initiated the Annual Awards for Excellence in Literature. NBP will confer annual awards to the best books in Urdu and in all prominent regional languages published during the defined period. Patronage from NBP would help creative work in the field of literature. The Bank is also the largest sponsor of sports in Pakistan. It has provided generously to philanthropic causes whenever the need arose. It has taken various measures to facilitate overseas Pakistanis to send their remittances in a convenient and efficient manner. In 2002 the Bank signed an agreement with Western Union for expanding the base for documented remittances. More recently it has started Electronic Home Remittances Project. This project introduces technology based system to handle inward remittances efficiently, by ensuring that the Bank's branches keep a track of the remittance received from abroad till its final receipt. A number of initiatives have been taken, in terms of institutional restructuring, changes in the field structure, in policies and procedures, in internal control systems with special emphasis on corporate governance, adoption of Capital Adequacy Standards under Basel II framework, in the up gradation of the IT infrastructure and developing the human resources. National Bank has earned recognition and numerous awards internationally. It has been the recipient of The Bank of the Year 2001, 2002, 2004 and 2005 Award by The Banker Magazine, the Best Foreign Exchange Bank Pakistan for 2004, 2005, 2006 and 2007, Global Finance, Best Emerging Market Bank from Pakistan for the year 2005, Global Finance, Kisan Time Awards 2005 for NBP's services in the agriculture field. It is listed amongst the Region's largest banks and also amongst the largest banks in South Asia 2005, The Asian Banker. It has also been presented a Recognition Award 2004 for having a Gender Sensitive Management by WEBCOP AASHA besides other awards.3
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The precise summary of National Bank of Pakistan regarding its countrywide and overseas operations is as fallows: 1949 National Bank of Pakistan (NBP) was established under the National Bank of Pakistan Ordinance 1949 and was 100% govt.-owned. NBP acted as an agent of the Central Bank wherever the State Bank did not have its own Branch. It also undertook Government Treasury operations. Its first branches were in jute growing areas in East Pakistan. Offices in Karachi and Lahore followed. 1950 NBP established a branch in Jeddah, Saudi Arabia. The Bank in 1950 had one subsidiary The Bank of Bahawalpur on December4, 1947 by the former Bahawalpur State 1955 By this time NBP had branches in London and Calcutta. 1957 NBP established a branch in Baghdad, Iraq. 1962 NBP established a branch in Dar-es-Salaam, Tanganyika. 1964 The Iraqi government nationalized NBP's Baghdad branch. 1965 The Indian government seized the Calcutta branch on the outbreak of hostilities between India and Pakistan. 1967 The Tanzanian government nationalized the Dar-Es-Salaam branch. 1971 NBP acquired Bank of China's two branches, one in Karachi and one at Chittagong. At separation of East Pakistan NBP lost its branches there. NBP merged with Eastern Mercantile Bank and with Eastern Bank Corporation. 1974 The government of Pakistan nationalized NBP. As part of the concomitant consolidation of the banking sector, NBP acquired Bank of Bahawalpur (est. 1947). 1977 NBP opened an offshore brain Cairo. 1994 NBP amalgamated Mehran Bank (est. 1991). 1997 NBP's branch in Ashgabat, Turkmenistan commenced operations. 2000 NBP opened a representative office in Almaty, Kazakhstan. 2001 State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani banks to operate in the UK. NBP and United Bank agreed to merge their operations to form Pakistan International Bank, of which NBP would own 45% and United Bank 55%. 2003 NBP received permission to open a branch in Afghanistan. 2005 NBP closed its offshore branch in Cairo.
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Joint venturing with foreign dealers, agents and companies for its representation abroad. Participating in World Bank and Asian Development Banks lines of credit. Providing personalized Hajj services to intending Hajjis.
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The business volume of National Bank of Pakistan is stated in terms of total assets, deposits, advances, reserves and investments. To analyze the trend in these items the Horizontal analysis of each item is calculated.
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A NALYSIS
The Total Assets of National Bank of Pakistan fluctuates during all years as they show an increasing trend. The total assets are increased 4 % in 2005 and 17 % in 2006. The year 2007 represents second highest percentage on account of total assets as it was increased to 38%. There was an increase of 48 % in 2008 as compare to base year and 10% as compare to 2007.
A NALYSIS The deposits and other accounts of National Bank of Pakistan show a mixed trend during all years. In the year 2005, the deposits were increased very marginally, with the year 2006 represents an increase of 8%. The deposits are increased 27% & 34% in the years 2007 and 2008 respectively.
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A NALYSIS The advances made by National Bank of Pakistan shows an increasing trend in all years as compare to base year. This implies that National Bank of Pakistan is keener to advance money to lenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to base year. The year 2007 represents an increase of 54 % and 2008 represents highest percentage among all years that is 87 % as compare to base year.
A NALYSIS The Banks reserves are banks' holdings of deposits in accounts with their central bank plus currency that is physically held in bank vaults (vault cash). The reserves of National Bank of Pakistan fluctuate during all years as they show an increasing trend. The reserves are increased 25 %, 28 % & 46 % in the years 2005, 2006 & 2007 respectively. The year 2008 represents highest increasing percentage of 84% as compare to base and previous years.
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A NALYSIS The investments made by National Bank of Pakistan fluctuate during all years. There was an increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in investments. The year 2007 represents an increase of 41 %, highest among all years. The investments are increased 14 % in 2008 as compare to base year; however investments are decreased 27 % as compare to the year 2007.
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of Pakistan has 156 online branches throughout the country. It has modernized its services by installing Automated Teller Machines (ATMs) called CASH LINK at selected branches. The Bank's organizational structure reflects the three levels at which it operates: international, national and local. The Head Office formulates and implements the strategic, management and operational policies. The Bank's geographical organization consists of branches located in the regional capitals and in some provincial capitals. The branches' activities relate to the State treasury service, payment system services, currency circulation, banking and financial supervision, and the analysis of economic and financial developments at the local level. The Bank has representative offices abroad, in London, New York and Tokyo; a number of officers are seconded as financial experts to Italian embassies and consulates. The Bank has representative offices in Beijing, Tashkent, Chicago and Toronto. It has agency arrangements with more than 3000 correspondent banks worldwide. Its subsidiaries are Taurus Securities Ltd, NBP Exchange Company Ltd, NBP Capital 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, an Asset Management Company (a joint venture with NIB Bank & Fullerton Fund Management of Singapore).5 The Branch network of National Bank of Pakistan is divided into following categories ATM network ( Total ATMs 101 & Total ATMs machines 104) Domestic network ( 1249 Branches) Islamic network ( 5 Branches) Online network ( 156 Branches) Overseas network ( 29 Branches) Swift network ( 12 Branches) Customer Facilitation Centers (6 Customer Facilitation Centers) Agriculture branches ( 825 Branches)
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An employee may be defined as: "A person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed." 6An employee contributes labor and expertise to an endeavor. Employees perform the discrete activity of economic production. Of the three factors of production, employees usually provide the labour. Specifically, an employee is any person hired by an employer to do a specific "job". In most modern economies, the term employee refers to a specific defined relationship between an individual and a corporation, which differs from those of customer, or client. The relationship between National Bank of Pakistan and its employees is usually handled through the Human Resource Management & Administration Group & Employees benefit disbursement & trustee division. These groups handle the incorporation of new hires, and the disbursement of any benefits which the employee may be entitled, or any grievances that employee may have. There are differing classifications of workers within National Bank of Pakistan, these are: Permanent
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Temporary / On Contractual Outsourced The Employees of National Bank of Pakistan are organizing into trade unions, which represent most of the available work force in National Bank of Pakistan. These trade Unions utilize their representative power to collectively bargain with the management of bank in order to advance concerns and demands of their membership.
PRODUCT LINES
The most precise definition of product is anything capable of satisfying needs, including tangible items, services and ideas. In marketing, a product is anything that can be offered to a market that might satisfy a want or need.7 Since 1575, the word "product" has referred to anything produced. Since 1695, the word has referred to "thing or things produced. The economic or commercial meaning of product was first used by political economist Adam Smith. In general usage, product may refer to a single item or unit, a group of equivalent products, a grouping of goods or services, or an industrial classification for the goods or services. The consumer banking products include personal accounts, credit cards, loans, investment products, treasury products and many more. The National Bank of Pakistan offering for sale several related products individually, which is commonly known as product lining. A product line is defined as A group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through same types of outlets, or fall within the given price ranges.8 The followings are the main consumer banking products of NBP.
1. DEPOSITS
The National Bank of Pakistan offers to their clients a variety of Deposit Schemes with personalized services at competitive rates of interest. Any Pakistani citizen can open his/her account for any deposit scheme at any of its Branches strategically located throughout Pakistan. The Bank with its huge network of 1243 branches garners savings from both the rich and the poor in urban as well as rural areas. Even a poor farmer in a remote village, with his meager
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annual income, feels secure to safe keep his minuscule savings in National Bank of Pakistan, Because National Bank of Pakistan has a long heritage of trust and professional commitment.
a) CURRENT DEPOSITS
These are payable to the customer when ever they are demanded. When a banker accepts a demand deposit, he incurs the obligation of paying all cheques etc, drawn against him to the extent of the balance in the account. Because of their nature, these deposits are treated as current liabilities by the banks. Bankers in Pakistan do not allow nay profit on these deposits, and customers are required to maintain a minimum balance, failing which incidental charges are deducted from such accounts. This is because Current Deposits may be withdrawn by the depositors at any time, and as such the bank is not entirely free to employ such deposits. 9 Current Accounts/ Basic Banking accounts are opened, on proper introduction and submission of required documents along with initial deposit prescribed from time to time. Basic banking accounts are opened for an individuals (single or joint) only whereas current accounts are opened for individuals (single or joint) Charitable institution, provident and other funds of benevolent nature of local bodies, autonomous corporations, companies, associations, educational institutions, firms etc. and in all other cases where the accounts are to opened under the order of a competent court of law. No profit is paid on the balances of current/basic banking accounts. The bank is authorized to deduct service charges (incidental charges) on current accounts levied through its half yearly schedule of charges, in case the average balance falls below the minimum balance as prescribed by the bank. No balance maintenance condition is applied on basic banking account.
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As such, the initial deposits required for opening these accounts are very nominal.10NBP charge Rs.500 for opening of PLS Savings deposits. The silent features of profit and loss sharing and saving accounts of NBP are as fallows 1. These accounts can be opened by individuals in their own single or joint name. The PLS savings account can also be opened for provident fund or other benevolent funds of companies, firms, organizations, NGOs and educational institutions. 2. PLS saving account can be opened with a minimum amount of Rs.500/- only 3. To share in the profit a minimum balance of Rs.500/- must be maintained in the account. The minimum balance on sixth and last of month will qualify for the profits. The profits will be calculated on the basis of monthly minimum balance for the periods of six months i.e. from January to June and July to December 4. The head office of NBP determines the profit or loss on PLS saving deposits and advice its branches the rate and time of distribution of these profits. 5. There shall be no restrictions on maintaining the maximum balance in PLS saving account. 6. On the first day of Ramzan each year the Zakat at the rate of 2.5% will be deducted from these deposits on the balance of that day. But if depositors affix an affidavit of Zakat deduction along with account opening form or he is a non-Muslim, no Zakat will be deducted from his account.
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deposit. The bank grants to the depositor a fix deposit (FDR) which is not transferable to any other person. The silent features of fixed deposit account of NBP are as fallows 1. The PLS term deposit are opened for individuals in their own single or joint names, companies firms and other organizations. 2. The PLS term deposit receipt are issued for any amount. There is minimum or maximum limit or deposits in a single term deposit account. 3. PLS term depositors may be allowed some facilities against the security of these receipt credits, after making Lien on the relevant receipt and subject to recovery of service charges. 4. Under term deposit scheme the depositors not cease to earn the profit immediately, after the respective maturity date.
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(ATM+Debit). The Financing facility is available up to 90% of the deposit value.13 Profit paid every period as follows: Period 1st year 2nd years 3rd years 4th years 5th years Profit Rates 7.50% 8.50% 9.50% 10.50% 11%
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S ALIENT F EATURES
Rs 2-million is required to open an account and there is no maximum limit. Profit is paid on half yearly basis on monthly balances. The rates of profit vary according to the slabs of deposit. On Deposits of Rs.2 million to 2,000 million, the rate fluctuates from 1.4 to 1.75 It is a checking account and there is no limit of withdrawals.
NIDA 1
Date Description of Transaction C Debit (-) Credit (+) Balance Days Products
01/05/2008 05/05/2008 08/05/2008 11/05/2008 15/05/2008 18/05/2008 20/05/2008 22/05/2008 23/05/2008 25/05/2008 27/05/2008 31/05/2008 01/06/2008 06/06/2008 10/06/2008
Balance Cash Cash Transfer Cash Cash Cash Cash Cash Cash Cash Transfer Cash Transfer Cash
9,870,000 2,100,000 300 700,000 1,000,000 3,000,000 500,000
10,000,000 10,000,000 9,500,000 100,000 9,600,000 4 3 3 4 3 2 2 1 2 2 4 1 5 4 38000000 28800000 253800000 326400000 480600000 318400000 328400000 163500000 327020000 327019400 656038800 161909700 989548500 752158800
75,000,000 84,600,000 81,600,000 78,600,000 160,200,000 159,200,000 5,000,000 164,200,000 163,500,000 10,000 163,510,000 163,509,700 500,000 164,009,700 161,909,700 36,000,000 197,909,700 188,039,700
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2. ADVANCES
National Bank of Pakistan plays a pivotal role in translating the government's development plans in terms of growth in industrial, commercial and agricultural sectors in Pakistan. Accordingly the Bank has formulated its Credit Policy under the guidelines of SBP-the Central Bank of Pakistan.
a) NBP SAIBAAN
The NBP Saibaan is retail product of the bank. It has different product items which are home purchase, home construction, home renovation and purchase of land plus construction. If anyone has a Home Finance Facility outstanding with another bank he can have it transferred to NBP through a hassle-free process. 15 A brief description of these products is as fallows
TYPE OF ADVANCE Home Purchase (House or Apartment) Home Construction Home Renovation Purchase of land Plus Construction Financing Amount Rs. 35 Million Rs. 35 Million Rs. 15 Million Rs.35 Million Financing Period 3 to 20 years 3 to 20 years 3 to 15 years 3 to 20 years Debt to equity Ratio 85:15 (maximum) 85:15 (maximum) 80:20 (maximum) 80:20 (maximum)
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Max. Repayment Period Advance in terms of # of net take home salaries Markup Rate Processing Fee Verification Charges Life Insurance Documentation Charges Contact Remaining Service Age Debt Burden Minimum net take home salary
15 % (Based on diminishing balance method) 1% of Loan Amount Rs 500/No Insurance of any kind. at actual Your Salary disbursing NBP Branch. At the time of approval and disbursement the applicants remaining service age should be 6 months after maturity of the loan 50% no minimum take home requirement
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Disability insurances will be mandatory under this scheme. The 15% down payment will include 1st years asset insurance premium. However, the cost of life and disability insurance will be borne by GOP. The mark-up rate for the 1st year will be 12% and for the subsequent years it will be 1 year KIBOR + 2%. Fifty percent (50%) of this rate will be paid by the customer i.e. 6% and the balance of 6% will be borne by GOP. Additionally, first 10% of the losses under the scheme will be taken-up by GOP. Initially, under the Presidents Rozgar scheme, NBP will offer following products: a) NBP Karobar Utility Store (under a Franchise with Utility Stores Corporation) b) NBP Karobar Mobile General Store (without USC Franchise) c) NBP Karobar Transport d) NBP Karobar PCO e) NBP Karobar Tele-center a) NBP K AROBAR U TILITY S TORE The product has been designed in collaboration with UTILITY STORES CORPORATION OF PAKISTAN (USC) to provide financing facility of an average amount of Rs.100, 000/- for a maximum period of five years with grace period of three months. This is available to all eligible citizens of Pakistan for setting-up small-scale Retail Outlet or Mobile Utility Store. The USC will give its franchise to qualifying Pakistani citizens. Following two financing options are available under this product:
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b) NBP K AROBAR M OBILE G ENERAL S TORE ( WITHOUT USC F RANCHISE ) This financing program has been designed on the similar pattern of Mobile Utility Store. The only difference is that the borrower will have the liberty of procuring stock/supplies/grocery items from open market. Under this product the average loan size of Rs.100, 000/- will be given for a maximum period of five years with a grace period of three months.
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3. CORPORATE ADVANCES
a) CASH FINANCE
This is a very common form of borrowing by commercial and industrial concerns and is made available either against pledge or hypothecation of goods, produce or merchandise. In cash finance, a borrower is allowed to borrow money from the banker up to a certain limit, either at once or as and when required. The borrower prefers this form of lending due to the facility of paying markup/services charges only on the amount he actually utilizes. If the borrower does not utilize the full limit, the banker has to lose return on the un-utilized amount. In order to offset this loss, the banker may provide for a suitable clause in the cash finance agreement, according to which the borrower has to pay markup/service charges on at least on self or one quarter of the amount of cash finance limit allowed to him even when he does not utilize that amount.
c) DEMAND FINANCE
When a customer borrows from a banker a fixed amount repayable either in periodic installments or in lump sum at a fixed future time, it is called a loan. When bankers allow loans to their
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customers against collateral securities they are called secured loans and when no collateral security is taken they are called clean loans. The amount of loan is placed at the borrowers disposal in lump sum for the period agreed upon, and the borrowing customer has to pay interest on the entire amount. Thus the borrower gets a fixed amount of money for his use, while the banker feels satisfied in lending money in fixed amounts for definite short periods against a satisfactory security.
4. REMITTANCES
a) DEMAND DRAFTS
Drafts drawn by one branch on another branch or on the Head Office of same bank or vice versa, are not cheques or bills, as these have no distinct drawer and drawee. Section 85-A reads: Where any draft, that is, an order to pay money, drawn by one office of bank upon another office of the same bank for a sum of money payable to order on demand, purports to be issued by or on behalf of the payee, the bank is discharged by payment in due course. Bankers drafts payable to order on demand are within the protection of Sections 10 and 131-A of the Negotiable Instruments Act. However, if a demand draft drawn on a bank by its own branch bears a forged endorsement, the person in possession of it cannot compel that bank to pay it. As far as possible the bankers draft should be crossed and it should never be drawn payable to bearer. When a person requires a draft he should be asked to complete the prescribed application form in which he should state the amount of the draft, the name of the payee, and the place of payment. This application form should be signed by the purchaser or by those persons who have been duly authorized to act on his behalf. When a customer requests his banker to provide him with a bankers draft, the amount of which is to be debited to his account, he should enclose with his written request a cheque covering the amount of the required draft and other charges etc. payable to banker.19
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The National Bank of Pakistan provides demand drafts at very reasonable rates with safety, speedy and reliable way to transfer money. Any person whether an account holder of the bank or not, can purchase a Demand Draft form a bank.
b) TRAVELERS CHEQUES
They are generally issued for the convenience of person travelling abroad, but some Pakistani banks issue them in Pakistan currency also for use within the country as well. Before issuing, the bankers receive an amount equal to the face value of the cheques, and also charge a small commission. The travelers cheques are for fixed amount and are treated as Order cheques payable only to the purchaser whose specimen signature appears on each travelers cheque itself. Foreign currency travelers cheques are issued and encashed in accordance with the provisions of the Exchange Control Regulation Act, 1947. While making payment, the paying banker must insist that the holder signs in his presence.20 The National Bank of Pakistan provides their services for travelers cheque at very reasonable and competitive rates. It has following features Negotiability Validity Availability Encashment Limitation Safety Pak Rupees Travelers Cheques are a negotiable instrument There is no restriction on the period of validity At 700 branches of NBP all over the country At all 400 branches of NBP No limit on purchase NBP Travelers Cheques are the safest way to carry our money
c) LETTER OF CREDIT
Letters of credit are very useful instruments in facilitating commercial relations between businessmen at various places. Letter of credit state the limit of the credit and the time during which it is held at the disposal of the grantee, but they are neither negotiable nor transferable. Letter of credit may be revocable. There are many kinds of letter of credit such as Revolving credit, Back to Back credit, Claused credit etc.21 NBP is committed to offering its business customers the widest range of options in the area of money transfer. If you are a commercial
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enterprise then our Letter of Credit service is just what you are looking for. With competitive rates, security, and ease of transaction, NBP Letters of Credit are the best way to do your business transactions.
d) FOREIGN REMITTANCES
To facilitate its customers in the area of Home Remittances, National Bank of Pakistan has taken a number of measures to: Increase home remittances through the banking system. Meet the SBP directives/instructions for timely and prompt delivery of remittances to the beneficiaries. The new features of NBP foreign remittances include: The existing system of home remittances has been revised/significantly improved and well-trained field functionaries are posted to provide efficient and reliable home remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides United National Bank (the joint venture between NBP and UBL in UK)., and Bank AlJazira, Saudi Arabia. Zero Tariffs: NBP is providing home remittance services without any charges. Strict monitoring of the system is done to ensure the highest possible security. Special courier services are hired for expeditious delivery of home remittances to the beneficiaries.
e) SWIFT SYSTEM
The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been introduced for speedy services in the area of home remittances. The system has built-in features of computerized test keys, which eliminates the manual application of tests that often cause delay in the payment of home remittances. The SWIFT Center is operational at National Bank of Pakistan with a universal access number NBP-PKKA. All NBP overseas branches and overseas
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correspondents (over 450) are drawing remittances through SWIFT. Using the NBP network of branches, we can safely and speedily transfer money for our business and personal needs.
f) MAIL TRANSFER
A Mail Transfer is a form of remittance in which the amount remitted by a customer or a noncustomer is directly credited to the account of the beneficiary with another branch. Move your money safely and quickly using NBP Mail Transfer service. And NBP also offer the most competitive rates in the market. They charges Rs 50/- exchange rate and RS 75/- postage charges on issuing mail transfer. When the money is not required immediately, the remittances can also be made by mail transfer (MT). Here the selling office of the bank sends instructions in writing by mail to the paying bank for the payment of a specified amount of money. Debiting to the buyers account at the selling office and crediting to the recipients account at the paying bank make the payment under this transfer. NBP taxes mail charges from the applicant where no excise duty is charged. Postage charges on mail transfer are actual minimum Rs. 40/- if sent by registered post locally Rs.40/- if sent by registered post inland on partys request.
g) TELEGRAPHIC TRANSFER
Telegraphic Transfer is a form of remittance, which is advised by telegram, telex or fax machines. The fundamental principles of such transfer are otherwise identical with the Mail Transfer. It is the message, which is sent from one branch to another on the order of payer to payee through wire. It is one of the quickest means to transfer fund through the use of
telex/fax/internet or cable. Payment to the beneficiary is affected directly by the drawee office upon identification or through credit into beneficiarys bank account. As such remitting office is not required to issue any instrument payment to the remitter for delivery to the beneficiary.
h) PAY ORDER
NBP provides another reason to transfer your money using our facilities. NBP pay orders are a secure and easy way to move your money from one place to another. And, as usual, NBP charges for this service are extremely competitive. The charges of NBP are very low all over the Pakistan. It charges Rs 50/- for NBP account holders on issuing one payment order, and charges Rs 100/- for NBP non-account holders on issuing one payment order. It charges Rs 25/- for
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students on payment of fees of educational institutions. If some one want a duplicate of payment order they charges Rs 100/- for NBP account holders and Rs 150/- for non account holders.
5. MISCELLANEOUS
a) LOCKERS
National of Pakistan also provides lockers facility in the country. The lockers issued only to the depositors. No lockers are issued to any unknown person. The dual control system is used for lockers. The officer has master key to apply on the locker but he cannot open the locker of any person. The locker holder provides the bank has specimen signature. Whenever the locker holders come to open the locker, his signatures are verified by the officer and then will be able to open his locker. If the key of the locker is lost company providing these lockers breaks the locker and new lock is fitted in its locker and lock is destroyed in the presence of the locker holder and bank charges RS 1200 for that. In case the locker holder dies, the court opens his locker in the presence of his heir as mentioned in his will or and his belongings are given to them and the locker is closed.
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Account Information on tips (like: Mini Statement, Balance Inquiry, Utility Bill Payment etc.) Enable To Withdraw Cash From 1-Link ATMs / MNET ATMs. Enable to Make Purchases from Around 4000 POS (Merchants) Countrywide including 2500+ POS in Karachi. No Card Issuance Fee for first 12 Months
c) INTERNATIONAL BANKING
National Bank of Pakistan is at the forefront of international banking in Pakistan which is proven by the fact that NBP has its branches in all of the major financial capitals of the world. Additionally, the Bank has recently set up the Financial Institution Wing, which is placed under the Risk Management Group. The role of the Financial Institution Wing is:To effectively manage NBP's exposure to foreign and domestic correspondence Manage the monetary aspect of NBP's relationship with the correspondents to support trade, treasury and other key business areas, thereby contributing to the bank's profitability Generation of incremental trade-finance business and revenues
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BOARD OF DIRECTORS
Pursuant to Section 11 of The Banks (Nationalization) Act, 1974, the number of Directors of the Bank shall not be less than 5 and not more than 7, excluding the President. The Federal
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Government may, if deems necessary, appoint a Chairman of the Board in respect of the Bank. At present National Bank of Pakistans Board of Directors consist of 6 Directors and a President who is the Chief Executive of the Bank and presides over the meetings of the Board. The responsibilities of Directors include the followings:22 1. The Board of Directors shall assume its role independent of the influence of the Management and should know its responsibilities and powers in clear terms. it should be ensured that the Board of Directors focus on policy making and general direction, oversight and supervision of the affairs and business of the Bank and does not play any role in the day-to-day operations, as that is the role of the Management. 2. The Board shall approve and monitor the objectives, strategies and overall business plans of the institution and shall oversee that the affairs of the institution are carried out prudently within the framework of existing laws & regulations and high business ethics. 3. All the members of the Board should undertake and fulfill their duties & responsibilities keeping in view their legal obligations under all the applicable laws and regulations. 4. The Board shall clearly define the authorities and key responsibilities of both the Directors and the Senior Management without delegating its policy-making powers to the Management and shall ensure that the Management is in the hands of qualified personnel. 5. The Board shall approve and ensure implementation of policies, including but not limited to, in areas of Risk Management, Credit, Treasury & Investment, Internal Control System and Audit, IT Security, Human Resource, Expenditure, Accounting & Disclosure, and any other operational area which the Board may deem appropriate from time to time. The Board shall also be responsible to review and update policies periodically and whenever circumstances justify. 6. As regards Internal Audit or Internal Control, a separate department shall be created which shall be manned preferably by professionals responsible to conduct audit of the Bank, Various Divisions, Offices, and Units Branches etc. The Head of this department will report directly to the BOD or Board Committee on Internal Audit. 7. The business conditions and markets are ever changing and so are their requirements. The Board, therefore, is required to ensure existence of an effective Management Information system to remain fully informed of the activities, operating performance
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and financial condition of the institution, the environment in which it operates, the various risks it is exposed to and to evaluate performance of the Management at regular intervals. 8. The Board should meet frequently (preferably on monthly basis, but in any event, not less than once every quarter) and the individual directors of an institution should attend at least half of the meetings held in a financial year. The Board should ensure that it receives sufficient information from Management on the agenda items well in advance of each meeting to enable it to effectively participate in and contribute to each meeting. 9. The Board should carry out its responsibilities in such a way that the external auditors and supervisors can see and form judgment on the quality of Boards work and its contributions through proper and detailed minutes of the deliberations held and decisions taken during the Board meetings. 10. To share the load of activities, the Board may form specialized committees with welldefined objectives, authorities and tenure. These committees, preferably comprising of Non- Executive Board members, shall oversee areas like audit, risk management, credit, recruitment, compensation etc. these committees of the Board should neither indulge in day-to-day affairs/operations of the bank and enjoy any credit approval authority for transaction/limits. These committees should apprise the Board of their activities and achievements on regular basis. 11. The Board should ensure that it receives management letter from the external auditors without delay. It should also be ensured that appropriate action is taken in consultation with the Audit Committee of the Board to deal with control or other weaknesses identified in the management letter. A copy of that letter should be submitted to the State Bank of Pakistan so that it can monitor follow-up actions. The Following table mentioned the names & designation of Board of Directors of National Bank of Pakistan:
Name Syed Ali Raza Mr. Sikandar Hayat Jamali Mian Kausar Hameed
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Mr. Ibrar A. Mumtaz Mr. Tariq Kirmani Mr. Muhammad Arshad Chaudhry Mr. Mohammad Ayub Khan Tarin Mr. Ekhlaq Ahmed
SENIOR MANAGEMENT
The senior management of National Bank of Pakistan is consists of Group chiefs, who report directly to the Directors of Bank. The whole functions of National Bank of Pakistan are performed under these Groups. The National Bank of Pakistan has following groups and divisions: Corporate and investment Banking Group Operations Group Credit Management Group Audit & Inspection Group Compliance Group HRM & Administration Group Commercial & Retail Banking Group Treasury Management Group Special Assets Management Group Employees benefit & Disbursements Group Overseas & Coordination Group Islamic Banking Core Banking Application, PMO Financial Control Division Information Technology Group Name Group Name & Designation
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Masood Karim Shaikh Shahid Anwar Khan Dr. Asif A. Brohi Imam Bakhsh Baloch Ziaullah Khan Dr. Mirza Abrar Baig Amer Siddiqui Muhammad Nusrat Vohra Amim Akhtar Ekhlaq Ahmed Tajammal Hussain Bokharee Mrs. Khurshid Maqsood Ali Tahir Yaqoob Anwar Ahmed Meenai Naeem Syed Aamir Sattar Atif Hassan Khan
SEVP & Group Chief, Corporate & Investment Banking Group SEVP & Group Chief, Credit Management Group SEVP & Group Chief, Operations Group SEVP & Group Chief, Audit & Inspection Group SEVP & Group Chief, Compliance Group SEVP & Group Chief, Human Resources Management & Administration Group SEVP & Group Chief, Commercial & Retail Banking Group SEVP & Group Chief, Treasury Management Group EVP & PSO to the President EVP & Secretary Board of Directors EVP/Divisional Head, Special Assets Management Group EVP & Divisional Head Employee Benefits, Disbursements & Trustee Division EVP & Group Chief, Overseas Coordination & Management Group EVP & Divisional Head, Islamic Banking EVP & Head, Core Banking Application, PMO Financial Controller & Divisional Head, Financial Control Division Group Chief (A), Information Technology Group
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bank's corporate loans yields also faced pressure as substitute form of funding sources are available in the market in form of Islamic financing, mutual funds, issuance of debt instruments like TFCs and Bonds and the Capital markets. Despite these threats and challenges at NBP, our corporate team not only increased the volume as well as the yield of the loans they also maintained a strong franchise with the leading Pakistani corporate so as to ensure that NBP not only maintains its market share but is in a position to meet any challenges in future. NBP during the year also participated in a number of TFC issues and mutual funds subscriptions thereby increasing the overall yield on investment portfolio. NBP has the largest equity portfolio in the banking sector primarily due to 27% holding in NIT units, the largest mutual fund in Pakistan. During the year 2008 the bank redeemed 10% of its NIT holding covered under LoC, which resulted in capital gain of Rs. 1.8 billion in 2008. The National Bank of Pakistan has initiated a structured approach to corporate banking by introducing a single point of contact through Relationship Managers. For this purpose, new Relationship Managers as well as team leaders has been inducted to expedite this process. The Area Managers of National Bank of Pakistan are appointed to manage relationships and to better service the needs of multinationals and large local corporate. An investment banking team has also been formed by National Bank of Pakistan to offer specialized services to major relationships including advisory and debt syndications. The National Bank o Pakistan have special focus on Corporate Banking with a presence in all major locations through out the country, offering full range of Banking products / services and one window interface through designated Relationship Managers. Corporate Banking offers tailor made products / solutions as required by corporate customers which includes: The key features of corporate Banking includes: Funded facilities, ranging from short to medium and long term lending Trade related financing. Foreign currency financing.
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All sorts of non-funded facilities / services which include Cash receipts / payments, Remittances, Collections, guarantees, letter of credit etc. Customized products / solutions
2. COMPLIANCE GROUP
The Compliance Group of National Bank of Pakistan is headed by Mr. Ziaullah Khan and is report directly to the President/ Chief executive of NBP. In order to keep the working of Audit Department aligned with the best international practices 'Compliance Group has been created. This group is responsible for monitoring compliance of various administrative / operative instructions, rules, and regulations by constantly reviewing and reporting status of compliance and non-compliance. The Compliance Group of NBP is set to ensure that all relevant laws are complied with, in letter and spirit, and, thus, minimize legal and regulatory risks. The Compliance officers will primarily be responsible for Banks effective compliance relating to: Relevant provisions of existing laws and regulations. Guidelines for KYC. Anti money laundering laws and regulations. Timely submission of accurate data / returns to regulator and other agencies. Monitor and report suspicious transactions to President / Chief Executive Officer of the bank and other related agencies. The Compliance Officers will serve as a contact point between President /Chief executive officers and senior management, with regard to functioning of compliance program provide assistance in this area to branches and other departments of the bank, and act as liaison with State Bank of Pakistan concerning the issues related to compliance. The functions of compliance group of National Bank of Pakistan are as fallows: Study and emphasize compliance of best international practices in audit of various functions of NBP. Monitor compliance of Administrative/Operational Instructions, Rules, Regulations issued from time to time by the Management. Review over the compliance carried out by the audit departments. Prepare and put up a consolidated Report to the Directors of National Bank of Pakistan regarding the status of compliance and non-compliance of the recommendations agreed by the Departmental Management.
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b) Profit & Loss Sharing (PLS) Deposit Scheme Commercial and Corporate customers requiring financing will have the following financing facilities available to them to meet their requirements: a) Murabaha b) Murabaha Facility c) Ijarah (Leasing) In addition to Shariah acceptable standard general banking services, following services are also being offered at the Islamic Banking Branches: Letter of Credit Facility Handling of Remittances Issuance of Bank Drafts and Pay Orders. Collection of Export Bills. Collection of Local Bills. Government Collections Utility Bills Collection
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NBP is the leading Primary Dealer for PIBs primarily because of its inventory size and the appetite for such a long-term instrument given its deposit base. While most foreign / private banks would have to go to the secondary market in order to satisfy a large order from an institutional investor, NBP can execute such large orders through its own book. This means that it can offer tight prices for large amounts even under volatile market conditions.
c) D ERIVATIVES P RODUCTS
NBP treasury Management group has been at the forefront in developing the derivatives market in Pakistan and has contributed both individually and from the FMA (Financial Market Association) front as well. The first ever Derivative transaction of the Pakistani banking sector was done by NBP. Some of the more common derivative structures being offered include: 1) C URRENCY O PTIONS An option gives the buyer the right but not the obligation to buy or sell an asset at a pre-specified date and price. So the upside profit potential is unlimited whereas the downside loss is protected at a pre determined level. Various structures of currency options are available including Knock-ins / Knock outs Participating Forwards 2) INTEREST R ATE S WAPS AND FRA S A client can convert a fix rate loan into floating rate one or vice versa by using these derivative instruments. This allows the clients to develop and implement their views about the evolving interest rate scenario. For example, if the borrower feels that the interest rate might go up in the future, than he may choose to enter into a Pay Fixed Received Floating swap with its bank to effectively hedge its floating rate loans. 3) C ROSS C URRENCY S WAPS This product allows a client to convert its rupee based loans into a dollar based loan. The clients exposure is shifted from PKR KIBOR to USD LIBOR. The functions of Treasury management group include:
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The Management of National Bank of Pakistans holdings in and trading in government and corporate bonds, currencies, financial futures, options and derivatives, payment systems and the associated financial risk management. The management of cash flows, banking, money-market and capital-market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks. Presentations of information on which treasury-management decisions are to be taken reflect the principles of trustworthiness, honesty, truthfulness and objectivity. Employing National Bank of Pakistans treasury-management policies and practices accurately reflect the legal and regulatory regimes under which the Bank operates. Review of National Bank of Pakistans treasury-management policies and practices on a regular basis with a view to identifying ways of minimizing the risks of losses through improved checks and safeguards and through clarity and segregation of responsibilities and dealing procedure.
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Establishing development rules on credit; dealing with the acceptance draft; estimating the loaning accounts Responsible for reporting the credit statistic statement Responsible for training client managers Responsible for dealing with other work according to the directors of the bank Responsible for the credit-registered consulting system; regulating the five-graded loans
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a) I NTERNAL A UDIT
The Bank has an independent Internal Audit Group that conducts audit of all Branches, Regions and Groups at Head Office on an on-going basis to evaluate the efficiency and effectiveness of Internal Control System. In addition to that, Compliance Group is also in place with independent Compliance Officer in 119 Branches and 29 Regional Compliance Chiefs with supporting staff to take care of compliance related issues to strengthen the control environment.26 For the purpose of inspection the National Bank of Pakistan inspects its branches through inspectors. Inspections are conducted on regular basis in the branches. The current chairmen of audit committee of NBP are Azam Faruque, Ibrar. A. Mumtaz & Mian Kausar Hameed. The State Bank of Pakistan conducts the regular full scope examination of banks pursuant to an inspection schedule; however, flexibility exists in policy for frequency of inspections depending upon the need to maintain safety & soundness. The CAMELS (Capital, Asset Quality, Management, Earnings, Liquidity, Sensitivity and System & Controls) rating is a criteria to determine the frequency of inspection of banks as weak institutions are given greater attention. Special investigations (targeted inspections) are also conducted as and when circumstances so warrant on the basis of complaints or market reports about specific institution.
b) E XTERNAL A UDIT
The Board of Directors on the recommendations of Audit Committee has also recommended name of Messers Ford Rhodes Sidat Hyder, Chartered Accountants and Yousaf Adil Saleem & Co. as auditors of National Bank of Pakistan.
c) S TATUTORY A UDIT
The statutory audit of National Bank of Pakistan is conducted to meet the particular requirements of State Bank of Pakistan. The scope and audit programs are set by the State Bank of Pakistan. The National Bank of Pakistan has to pay a penalty of Rs.20000 for each mistake in the Books and procedures as prescribed by the law plus surcharge of per day from the date of mistake to the date of statutory audit. The functions of Audit & inspection group of National Bank of Pakistan are as fallows:
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Examine and evaluate adequacy and effectiveness of the internal control systems in the Bank. Review the applications and effectiveness of risk management procedures and risk assessment methodologies in financial, operational and Corporate Governance aspects of the Banks activities. Review financial, automation technology and MIS. Review and ensure accuracy and reliability of accounting records and financial reports. Perform testing of both transactions and functioning of specific internal control procedures. Evaluate and ensure that approved policies and procedures meet legal and regulatory requirements. Examine and evaluate effectiveness of existing policies, procedures and give recommendations for improvements. Identify opportunities for cost savings in Bank operations and make recommendations. Examining those resources are acquired economically, used efficiently and safeguarded adequately. Review various reports of Banks subsidiaries, recommend improvements and provide policy guideline
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Systematically observes & measures employees/candidates performance for the purpose of recruitment, selection and promotions. Facilitates in establishing successful productive working relationships through effectively orienting new employees to their respective departments/divisions and to their positions. Encourages employees to seek promotion/transfers to fill internal openings and meet employees personal objectives. Foster a culture of acknowledgement and appreciation amongst employees for introducing innovative business practices, showing extra ordinary efforts for achievement of goals and enhancing Banks corporate image uses various methods of recognition ranging from simple Thank you letters to elaborate celebrations and monetary rewards. Conducting motivation surveys and developing market based employee satisfaction & retention strategies. Conduction of evaluation of positions and grades to ascertain employees position in the grade structure. This Group supervises all the staff colleges, at Karachi, Islamabad, Lahore and Peshawar.
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Web development Central Server System Admin UNIX System Admin Windows Customer Support Database Management Network Management Production Support Administration Director Section
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Assets capitalization, assets transfers and overall responsibility to manage and maintain assets physical inventory, keeping track of physical location of assets. To ensure the smooth and unhampered running of the Fixed Assets Management function. To record all the expenses regarding repair/ maintenance and rent taxes for NBP buildings and equipments. To deal with various administrative matters arising in the Finance Department. To respond to various queries rose from various internal and external sources.
10.
The group chief of NBPs overseas coordination & management group is Mr. Tahir Yaqoob. This department is in charge of the management and operation of foreign exchange business including marketing and operating of the financial products and trade financing of foreign exchange in the light of National foreign exchange management policy, and is the governing department of foreign exchange. The functions of this group are as follows: Establishing marketing strategy, policy and management system of foreign exchange. Making annual operating and working plan. Selecting and opening overseas account under supervision, and establishing and harmonizing the business among agent banks. Corresponding and dealing with foreign exchange business among branches. Showing business requirement of costumers and development of new products; publicizing foreign exchange business; training managers of customer-service for foreign exchange business. Managing and operating foreign fund of the whole bank. Making deposit and loan rate of each wholesale foreign exchange according to management and market situation of deposit and loan rate of foreign exchange Focusing on direct marketing of VIP customers and overall plans to put all resources together so as to provide one-stop service. Examining and approving international business financing(import & export bill purchase, foreign exchange bill discount, acceptance, documentary credit, stand-by L/C,
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Management and operation of researching credit, and consult and testimony business. Managing turnover position of exchange settlement and sales. Declaring international balance, register foreign loans and manage foreign exchange account. Supervising wholesale foreign exchange deposit and payment to defend money laundering and bank swindle. Managing and operating SWIFT system and foreign exchange system. Organizing international business research and statistic; establishing and improving foreign exchange files; making accounting report forms and business report forms. Regularly examining the executive results of all system of foreign exchange and renovate all the problems. Contacting and corresponding with National foreign trade department, customs, industry governing department and foreign exchange department. Examining and approving the branches launching foreign exchange business, applying for new foreign business category to the Peoples Bank of China according to current foreign exchange policy. The National Bank of Pakistan is shifting focusing on expanding its market share in trade finance, home remittance and foreign investments. The Bank is setting high-speed satellite link along with the extension of S.W.IF.T service to large domestic and international branches.
11.
The group chief of National Bank of Pakistans commercial & retail Banking group is Mr. Amer Siddiqui. Retail banking includes retail lending and deposits, banking services, trust and estates, private lending and deposits, banking service, trust and estates investment advice, merchant / commercial / corporate cards and private labels and retail.27 Commercial banking includes project finance, real estate, export finance, trade finance, factoring, lending, guarantees, bills of exchange and deposits. This group is responsible for serving the needs of the retail and commercial market, focusing on individual consumers and small and medium size enterprises. This group is responsible for developing and managing brands which serve the investment needs of the consumer market, and focuses on deposit mobilization, provision of value added services based on modern technology and undertaking the centralized marketing and advertising for the Bank. This group is engaged in
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the development and management of retail credit schemes. The consumer market in Pakistan has not only grows exponentially over the last decade or so, but the needs of this segment have become extremely diverse. In order to sustain competition, it is but imperative to continue offering innovative consumer credit schemes. The National Bank of Pakistan plan to establish commercial centers across the country looking at the business potential in the area, size of the branch and its capabilities to deliver the desired service in order to attract quality customers. The objective is to target the untapped sectors and provide them professional quality service, through one window operations and Relationship Managers stationed at those centers. We expect and hope to reduce the turn around time and become more competitive and market oriented. Further this customer friendly and dedicated set up at convenient locations would help in improving the image of the Bank as well. These Centers would work in conjunction with the existing setup of Commercial Lending done throughout the NBP branch network. The main purpose of these centers is to generate ancillary business in addition to funded and non-funded facilities, with quick turn around time in decisions for customer satisfaction.
12.
The group chief of Special assets management group is Mr. Tajammal Hussain Bokharee. The Special Asset Management Group (SAMG) is a group of people with specialized skills in managing the "stressed" assets of National Bank of Pakistan. The group was created with a view to enable restructuring and recoveries through various initiatives like innovative work-outs, merger & acquisition strategies, asset stripping, security enhancements and structured selldowns. The group has also been working with / advising various governmental and regulatory bodies in evolving a framework for implementing international best practices like asset reconstruction companies in the country. With provision coverage of 84% we believe that going forward our Special Assets Management Group will make major contribution towards the Bank's profitability through recoveries and reversal of provision charge as a result of declassification / rescheduling. We have revamped our special assets management business and have coordinated our efforts to expedite recoveries and settlements.
13.
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The divisional head of this division is Mr. Mrs. Khurshid Maqsood Ali. The function of the National Bank of Pakistans Employee benefits, disbursement & trustee division is to handle the administration of trust funds, provide estate planning support, and in some cases see to the disposition of the estate of a deceased customer. One of the factors that make the use of this department so attractive is that it tends to be somewhat conservative with their management approach. This means that this department is likely to take time to evaluate all options when involved in settling estates, establishing guardianships, or administering trusts that have been set up for the survivors of a major depositor. This methodical approach is often in line with the motivation for establishing the asset in the first place, which was to provide a source of financial support for loved ones, even after a parent or significant other has died. Along with estate settlement, this department also provides a number of other agency services, such as functioning as the trustee of record for corporate bonds or administering a pension or profit sharing plan. As a means of ensuring that the resources of the bank safely protect the investments involved, the department makes it relatively easy for the client to deal with other matters. Thus, the investor can focus more on family or other business matters, and be less involved in the task of protecting assets that are already established and set on a path of consistent growth.
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value of any economic benefit in the form of reduction in future contributions to the plan and unrecognized actuarial losses and past service costs. 2. P OST RETIREMENT MEDICAL BENEFITS The bank operates an un-funded defined post retirement medical benefits scheme for all of its employees. Provision is made in the financial statements for the benefit based on actuarial valuation carried out using the Projected Unit Credit Method. Actuarial gains/losses are accounted for in a manner similar to the pension scheme. 3. B ENEVOLENT SCHEME The bank also operates an un-funded defined benefit benevolent scheme for its eligible employees. Provision is made in the financial statements based on the actuarial valuation using the Projected Unit Credit Method. Actuarial gains/losses are recognized in the period in which they arise. 4. G RATUITY SCHEME The bank also operates an un-funded defined benefit gratuity scheme for its eligible contractual employees. Provision is made in the financial statements based on the actuarial valuation using the Projected Unit Credit Method. Actuarial gains/losses are accounted for in a manner similar to pension scheme.
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b) LONG - TERM C REDIT F UND (LTCF) Consequent upon the NDFC amalgamation, the bank manages on behalf of the Government of Pakistan, LTCF established from the proceeds of loans disbursed by various international funding agencies for financing private sector energy development projects. The National Bank of Pakistan is in process of negotiating the charge of fee in consideration of administrative services to the LTCF.
c) Q ARZ - E -H ASNA F UND The work relating to Qarz-e-Hasna Scheme was attended by Pakistan Banking Council (PBC) since inception. PBC was dissolved in January 1997. In order to fill the void created by the dissolution of PBC and in order to continue the scheme, SBP decided to entrust all funds and transfer all record relating to Qarz-e-Hasna scheme for education to the bank with the instructions to perform all work relating to the Fund.
14.
The head of core banking application is Mr. Naeem Syed. The core banking application is an integrated application that supports real time, multi banking and multi channel strategies. The single biggest achievement of implementing the Core Banking Solution is that each customer is truly the customer of the Bank and not just the customer of the Branch, where his/her account is maintained. The customer can go to a branch anywhere in the country and perform a transaction. This is possible as the entire Customer Database is centrally located at the central Data Centre and can be accessed throughout the network of branches. Business processes in all the branches of National Bank of Pakistan update a common database in a central server located at data centre, which gives a consolidated view of banks operations.
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Customers can avail of banking services across the branch and Channel network irrespective of location where their account is maintained. Integration with strategic sectors Core Banking integrates all strategic sectors of Banking such as Trade Finance, Treasury, AssetLiability Management and Corporate Balance Sheet. As a result, the information related to these areas is centrally available for use or reference. Strengthening MIS, DSS and EIS Core banking application is more than just a transaction processing system. It provides updated data for generating various reports for Management information system (MIS), and will facilitate Decision Support System (DSS) and Executive Information System (EIS). As data is located on CDC, branches and administrative offices can concurrently avail updated data when required. Business Process Re-engineering Core Banking would enable implementation of BPR initiatives of a Bank and facilitate centralized handling of various processes. Branches would do less and less back office work and would be able to focus on marketing, customer relationship management and cross selling.
15.
OPERATIONS GROUP
The group chief of National Bank of Pakistans Operation group is Mr. Dr. Asif A. Brohi. This group is being created to efficiently collect and utilize the feedback from the branches to support product development and enhance the quality of service. The National Bank of Pakistan is currently improving the service orientation at its branches, as these constitute the front line of the Bank in terms of contact with its customers. The operations group is in the process of introducing E-Commerce initiatives based on customer friendly technologies. The group creates products to utilize the benefits of E-Commerce for its customers. We are committed and focused towards good quality customer service and in 2007 with the motto of Putting a smile on our Customer's face. We made concerted efforts and took a number of initiatives. Workshops and seminars were conducted to disseminate the very important message of Excellent Customer Service. We are transforming our branches to give a modern look and convenience. A number of branches have been shifted to prominent and spacious locations. We also have established specialized customer facilitation centers to exclusively cater to pension payments, utility and government collections. These are expected to reduce counter traffic at our branches and will increase our distribution channels for better and
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convenient services. Business hours have been extended with establishment of customer facilitation offices at the regional levels to help on the spot resolution of customer complaints.
BRANCH MANAGEMENT
The National Bank of Pakistan, in order to facilitate its functions on branch level appoints Branch Managers & other staff according to branchs activities and volume of business. The
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branch managers are responsible for all functions and staff within the branch office. The job of branch managers is to take charge of the entire operation of his branch, making sure that everything runs smoothly. The other functions involves scheduling of employee work hours, overseeing training, hiring and firing, assuring that proper procedures are followed, and reporting to upper management any problems or providing reports and updates as required by banks protocol.
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TOP MANAGERS
Top managers are responsible for making organization-wide decisions and establishing the plans and goals that affect the entire organization. These individuals typically have titles such as executive vice president, president, managing director, chief operating officer, chief executive officer or chairman of the board. The NBP have its top management in their head office at Karachi. They are responsible for making the plans and establishing goals the run their business smoothly all over Pakistan & around the globe. Among seven member of group Chief Executive is called the president. The bank has directors for superintendence and direction of its business. The Government appoints six directors as members and one president. These members are also responsible for making the policy of the bank.
MIDDLE MANAGERS
Middle managers include all levels of management between the first line level and the top level of the organization. These managers manage the work of first line managers and may have titles such as department head, project leader, plant manager or division manager.29 NBP divided his management into various regions such as Rawalpindi region, Gujranwala region etc. In NBP, regional management falls under this category. They are responsible for the planning,
organizing, leading and controlling of the resources and staff of the whole region.
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Department and Operation Manager II controls Deposits, Advance & Branch accounts department. Both of them are report directly to the Manager regarding affairs of their departments. The Chief Accountant controls Accounts department & is report directly to branch Manager. The branch also has two cashiers responsible for cash & Pension disbursement department reports directly to branch Manger. The BBO (Branch Back Office System) Operator controls computer department of the branch and is report directly to Operation Manager I and Branch Manager.
b) DOWNWARD COMMUNICATION
Communication is the process by which information is exchanged and understood by two or more people, usually with the interest to motivate or influence the behavior of others in the organization. Downward communication is the message and information sent from top management to subordinates in a downward direction. The same pattern is followed at National Bank of Pakistan Rawat branch, the Manager of the branch sent orders, information & messages to following subordinates Operation Manager I Operation Manager II BBO ( Branch Back Office System) Operator Chief Accountant Cashier I Cashier II Clerk I Clerk II Non Clerical Staff
c) CHAIN OF COMMAND
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The chain of command is an unbroken line of authority that links all persons in an organization and shows who reports to whom. By analyzing the organizational structure of the National Bank of Pakistan Rawat branch it can be found that there is a scalar principle followed with in the branch because each and every employee of the branch knows to whom they can report. The authority and responsibility for different tasks and duties are different, as well as every one knows the successive levels of management all the way to the top.
e) DELEGATION
Delegation is the process, which managers use to transfer the authority and responsibility to position below in the hierarchy. Most organizations today encourage managers to delegate authority to the lowest possible level to provide maximum flexibility to meet customer needs and adapts to the environment. At National Bank of Pakistan Rawat branch Operation Managers have some authority & responsibility relating to affairs of the Branch.
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banks drawn on the customers of the drawee banks. Therefore, the banks act as Collecting Banks when they send cheques/instruments for collection and as paying Banks, when they receive cheques/instruments for collection from other banks. Since each bank receive and sends cheques/instruments for collection to and from an number of banks, the process of settlement would clearly be very cumbersome and time consuming if every cheques/instrument had to be sent by the collection bank to each of the drawee banks or branch upon which different collection items are drawn and to individually pay the proceeds to each of the bank sending cheques/instrument in for collection. Therefore, the banks have evolved what is called the Bankers Clearing arrangement. The Clearing System enables cheques to be paid or cleared centrally and settlement made for receivables and payables between the banks. The SBP co-ordinates clearing activity through its offices, called the Clearing Houses, set up in big cities and towns. Where SBP does not maintain its own office, some other bank, usually National Bank of Pakistan (NBP) performs this function. But the clearing house facility is available only for cheques/instruments drawn on banks situated within the same city/clearing house area.
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The cheques/instruments received, also called Inward Clearing, and are taking back by each bank to its bank/branch. The amounts of each cheques/instrument is debited or recovered from each drawee customers account and credited to the Clearing House account. Similarly, against the amount credited by the Clearing House as Outward Clearing, the appropriate customers accounts are credited and clearing House account is debited. Any cheques/instruments received by a bank that cannot be paid, due to insufficient balance in its customers account or for any other reason, are returned back to the Clearing House and a credit is claimed and obtained there against.
Each bank will send competent representative to exchange the cheques. Each bank is required to insure that all cheques and other negotiable instruments are properly stamped and suitably discharged An objection memo must accompany each and every cheque when return unpaid duly initialed. Each bank is required to maintain sufficient funds in the principal account with SBP to meet the payment obligations. The State Bank of Pakistan debit the account of each member of the clearinghouse with the proportionate working expenses incurred on the operation of clearing house. These expenses are very nominal.
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The name of the branch appears on its face where it is drawn o. It should not stale or post dated or without date. Amount in words and figures does not differ. Signature of the drawer appears on the face of the instrument. Instrument is not mutilated. There should be no material alteration, if so, it should be properly authenticated. If order instrument suitably indorsed and the last endorsees account being credited. Endorsement is in accordance with the crossing if any. The amount of the instrument is same as mentioned on the paying-in-slip and counterfoil. The title of the account on the paying-in-slip is that of payee or endorsee (with the exception of bearer cheque). If an instrument received other than National Bank of Pakistan then special crossing stamp is affixed across the face of the instrument. Clearing stamp is affixed on the face of the instruments, paying-in-slip and counterfoil (The stamp is affixed in such a manner that half appears on counterfoil and paying-in-slip). The instrument is suitably discharged, where a bearer cheque does not require any discharge and also an instrument in favor a bank not need be discharged. The instrument along with pay-in-slip is retained while the counterfoil is given to the customer duly signed. Then the following steps are to be taken: 1. The particulars of the instrument and the pay-in-slip or credit voucher are entered in the outward clearing register. 2. Serial no is given to each voucher. 3. The register is balanced; the credit vouchers are balanced from the instruments and are released to the respective departments against acknowledgement in the register. 4. The instruments are arranged bank wise. 5. The schedules are prepared in triplicate, two copies which are attached with the relevant instrument and the third is kept as office copy.
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6. The house page is prepared from schedules in triplicate. 7. The schedules and house pages are signed by the house in charge with branch stamp. 8. The grand total of the house page is taken and agreed with that of the outward clearing register. 9. The instrument along with duplicate schedule and house page are sent to the main office. 10. The entry of the instrument returned unpaid is made in Cheques returned Register. If the instrument is not to be presented again in clearing then a covering memo is prepared. The covering memo along with returned instrument and objection memo is sent to the customer who sent the same to his account.
S PECIAL C LEARING
In addition to the normal clearing function at Clearing house it is mutually agreed to hold an extra clearing at the clearing house on the particular day and time which is known as special clearing it is arranged due to the rush of work arising out of say, more Holidays declared by the Central Govt. at a time, but normally special clearing is held on last working day of half yearly and yearly closing i.e. 30th June and 31st Dec. every year.
2. REMITTANCE DEPARTMENT
The Remittance department deals with the transfer of money from one place to another. Funds transfer facility or remittance of funds is on of the key functions of the banks all over the world. Remittances through banking channels save time, costs less and eliminate the risks involved in
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physical transportation of money from one place to another. National Bank of Pakistan transfers money in the following ways. Pay Order Demand Draft Mail Transfer Telegraphic Transfer Pay Slip Call Deposit Receipt Letter of Credit Travelers Cheque The Job responsibilities & requirements of remittance department include: Responsible for money transfers, issuance of pay-orders & drafts, collection items, maintenance of cheque books & ATM cards and all other counter specific products and services Ensure highest level of customer service in a professional and competent manner Must ensure that the activities are carried out strictly in accordance with the laid down procedures/processes, and SBP/Compliance guidelines Responsible for Cash, Clearing, Inland remittances including Demand Drafts and Pay Orders Ensure high standards of customer services within the assigned turn around time Ensure compliance with SBP's regulations and internal controls handling cash, clearing, local remittances, and other related activities at branch level
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R EMITTER
One who initiates, or requests for a remittance. The remitter comes to the issuing or originating branch, asks for a remittance to be made, and deposits the money to be remitted. The bank charges him a commission for this service. He may or may not be the branchs customer.
R EMITTEE
A Remittee is also called the beneficiary, or the payee. The person in whose name the remittance is made. A Remittee is also the one who receive the payment.
I SSUING B ANK
The bank that sends or affects the remittance through demand drafts, telegraphic transfers, Mail Transfers, Pay order etc
P AYING B ANK
Paying Bank also knows as the drawee branch, the branch on which the instrument is drawn. It has to make the payment (usually located in a different city or country).
K INDS OF R EMITTANCES
Transfer within the branch Transfer from one branch to another Transfer from one bank to another bank in the same city Transfers from one bank to another bank in two cities.
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the perspective customer. Any individual, who has attained the age of majority and is of sound mind can open and maintain his/her account. Two or more individuals may open an account jointly. Similarly, business organizations such as sole proprietary concerns, partnership firms, and limited liability companies as well as non-profit organizations like clubs, trusts, societies, associations and NGOs etc, may open their accounts. The documents required for National Bank of Pakistans Account opening are showed as Annexed VII at the end of this report. The following requirements are necessary for opening an account. Identification of the new customer. Ascertaining the genuineness of the stated occupation business of the customer. Determining the correct residential and permanent address. Completion of all relevant columns of the Account opening form. Proper completion of documentation.
4. CASH DEPARTMENT
All physical movement of cash in the bank is made through the cash department. As bank is borrowing and lending institution, therefore cash is the top most priority of Bank. Another aspect
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is that cash department is for the security purpose, security in a sense that there should be no embezzlement of funds or in money leaded to bank by any party or person. The efficiency of bank is also related to this department the more efficient the bank is the stronger and busy is the cash department. Cash department perform following functions Cash department owes its important to the fact that it is a major point of contract between the bank and the customer, the banks most valued relationships. This department is the showcase of the bank and conveys the first impressions about the banks commitment to professionalism in its systems and procedures and to courteous and efficient customer service. Normally cash department performs following functions Collection of funds Acceptance of deposits Collection of utility bills Payment of checks Remittances Act according to any standing instructions Transfer of funds from one account to another Verification of signatures Posting Handling of Prize bond The two main activities of cash department are as fallows:
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V ERIFICATION OF S IGNATURE After receiving the cheques the cheques the operation manager verify the signature of the account holder and the signature on the cheques. If the signature is not same it is returned back otherwise forward to BBO Operator for posting. C OMPUTER T ERMINAL P ROCESS The cheque is received in computer terminal, where BBO operator checks the balance of the account holder. The BBO operator also sees the stop payment instructions, whether received from account holder or not. After considering these points BBO Operator post the cheque in BBO (Branch back office system) and forward to operation manager. P AYMENT O F C ASH After posting the cheque the operation manager cancelled the cheque and returned back to cashier. The cashier enters the cheque in cash paid registered and pays against the second signature of receiver on the back of the cheque.
5. DEPOSITS DEPARTMENT
The primary function of National Bank of Pakistan is to accept and receive surplus money from the people, which they willingly deposit with the Bank. Like all other Banks, National Bank of Pakistan also take incitation to attract as much depositors as it can. The deposit department accepts/collects deposit from accountholders.
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The National Bank of Pakistan offer different deposit schemes to its customers, which includes the following: Current Deposits PLS Saving Deposits Fixed Deposit Account ( Time Deposits) Foreign Currency Account NBP Premium Aamdani Foreign Currency Account National Income Daily Account (NIDA)
6. ADVANCES DEPARTMENT
The bank is profit seeking institution. It attracts surplus balance from the customer at low rate of interest and makes advances at a higher rate of interest to the individuals and business firms. Credit extensions are the most important activity of all the financial institutions, because it is the main source of earnings. Advances department is one of the most sensitive and important department of the bank. The major portion of the profit is usually earned through this department. The job of this department is to make proposals about the loans; the credit management division of head office directly controls all the advances. The advances Department receive application from intending borrowers. After receiving application the advance department processes it further. After analyzing and detailed investigation, they decide whether to approve the loan or not. Some loan approvals are made by the Manager of the branch within his powers as prescribed by the banks higher authorities, while some loan applications are submit to higher authorities for their approval. Some advances are of the following nature Loan against Gold Agriculture advance to farmers Medium term advance for working capital Long term advance for setting industry Short term advance to businessman
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The National Bank of Pakistan offer following products (Advances) to its customers NBP Saibaan NBP Advance Salary NBP Cash & Gold Students Loan Scheme NBP Karobar
The Advances department deals in following transactions: 1. Preparation and submission of proposals of Running finance, Cash finance, Demand finance, Export finance, Staff finance, Finance against imported merchandise etc for sanction of finance limit from the hire authority. 2. Preparation and posting of vouchering of all type of finance. 3. Accruals & recovering of Markup on finances on periodical basis. 4. Approval of transfer of funds through DD-TT, PO, MT, IBCO etc to various branches by debiting the limits. 5. Preparation of weekly, monthly, quarterly, and annually statement to the hire authority. 6. Transfer of funds from one account to another account of the party taking the authority letter. 7. Preparation of advances record. 8. Timely submission of returns/reports, daily, weekly, monthly & quarterly. 9. Checking of computer outputs of the department on daily basis. 10. Balancing of all financing heads.
7. COMPUTER DEPARTMENT
This department is playing a very important role in making the banking procedures faster and helping the bank for providing better services to its customers. The National Bank of Pakistan has three types of branches in all over Pakistan, these included
a) ONLINE BRANCHES
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The branches, which are directly, link with central computer AS-400, through wide area networking through fiber optics. These branches have dumb terminal directly linked with central computer.
b) BATCH BRANCHES
The branches where all transactions are carried out with the computer base system but these branches are not connected to the central computer with wide area net working. Batch branches are using three type of system, Branch Back Office (BBO) based on FoxPro, Branch Automated System based (BAS) on UNIX, Branch Integrated System (BIS) based on FoxPro in Karachi mostly branches are facing this problem. BAS was establish in the beginning while BBO is currently implemented now efforts are under way to convert all branches into Electronic Banking System (EBS) which is used by online branches as this system does not require a person to remain sitting till the branch closed its daily operation but the system automatically close it self when the branch timing is over. The database in head office is also based on this system.
c) MANUAL BRANCHES
The branches where all transactions are carried out manually and records are maintained on registers usually stored in big wardrobes. Manual branches reports Regional head office regarding their daily transactions. In Regional head office through On Line, terminal data goes to head office central computer; Except for branches those are On Line as they transfer there daily data directly through there own terminal. As day-to-day, activities of all branches are recorded in a central computer.
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The next task after receiving the data is to enter that data in to a computer. The floppy disk is directly inserted in the computer. The program in used is based on COBOL language. This program is designed in away that it demand Hash Value value before opening the floppy for further action this value serve the purpose of password or pin code send by the branch on entering that value the data enter in to the computer. This computer is attached with the terminal of central computer. The operator of that terminal takes the data from the computer and converted it in to a text file through that terminal the data finally goes to the central computer.
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9. ACCOUNTS DEPARTMENT
Accounts Department of the bank can be considered the most important department. This department is basically concerned with processes and activities of recovering, sorting, summarizing and reporting data resulting from the whole day transactions of all the departments. Actually the process of this activity starts from the preparation of all the required vouchers by different related departments. When these vouchers are prepared, these are posted into respective computer terminals by the relevant departments. Before merging, a batch list is printed out by Computer Department and duly checked by the respective departments. After this, merging stage comes, after which a proof list is printed out. This is the stage, where Accounts Department starts performing its function. Proof list is checked by the Accounts Department. The account department prepare following vouchers and reports Monthly Profit & Loss account- F48 General Ledger General Ledger- Abstract Check Book Issue Register Western Union payments Register Demand Notices Miscellaneous Book Bank Transfer scroll Posting NBP Advance Salary Daily Statement- F21 General Ledger- Head wise Hash Value Register End of Day register Posting National Income Daily Account (NIDA) Monthly return register Charges A/c register P-L-S Profit list
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Weekly Telegram Mail Transfer Register Government Scroll Provident file Government Scroll Debit & Credit Transfer Responding Advice Dispatched Register-F15 Cash Remittance IN Cash Remittance OUT NBP General Account Utilities register Statement of affairs Closing entries Daily activity checking Minor expense recording
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Directs and reviews the study of new and revised laws, rules, and programs affecting the central accounting system and records and installs or recommends changes as appropriate. Designing and operating a system to capture, record, process, and store all relevant documents and information about the financial activities of the branch. Ensuring the integrity and reliability of the information system, and preventing fraud from inside and outside the branch. Preparing financial statements that are reported to Regional Management of National Bank of Pakistan. Preparing financial statements and accounting reports for distribution to the branch Manager for their planning, control, and decision-making needs. The Chief Accountant with the help of branchs clerical staff is preparing following reports: o Monthly Profit & Loss account- F48 o Daily Statement- F21 o General Ledger o General Ledger Abstract o General Ledger head wise o Bank transfer Scroll o Posting NBP Advance Salary o Misc Book o Posting National Income Daily Account (NIDA) o Monthly return file o Charger List o PLS Profit list o Weekly Telegram o Government Scroll o Government Scroll Dr & Cr o Transfer Responding Advice Dispatched Register- F15 o Cash Remittance In o Cash Remittance Out
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o NBP General Account o Clearing register o Debit & Credit supplementary Debit supplementary is used for debit voucher and credit supplementary is used for credit voucher books and register maintained by bank are as fallows General ledger included: Statement of daily affairs Cash book or cash cum day book Transfer book Income & expenditure ledger Income & expenditure includes: 1. Discount 2. Service charges 3. Commission from utility services 4. Salaries allowances & provident fund 5. Rent taxes insurance lighting 6. Profit paid on deposits and borrowings 7. Auditors fee & legal charges
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bookkeeping, is that for every debit there must be a credit, and vice-versa. In accordance with this fundamental theory the books are maintained. With respect to the statement, every Rupee of liabilities is accounted for by another Rupee of resources. Similarly each accounts at the end of the day for each item of cash is balanced. Each bank employee has had the experience of remaining at his desk until a late hour at night checking up his day's work searching for a difference of a few cents. Often they become embittered at what seems to them a tyranny when the small sum of money involved is considered. The reason they must settle, however, is not on account of the possible loss of ten cents, but because the most important principle in bank accounting is involved. "Accuracy first" is a motto that should be framed, figuratively at least, upon the wall of every banking room. The books used by National Bank of Pakistan are of various kinds and their purpose is indicated by name. A ledger is a book used to keep a record of balances. To "post" means to enter in the proper columns either the debits or credits on the ledger, and the difference between them represents the balance either due by or to the bank. Another important book which is used by the National Bank of Pakistan is journal, a book in which daily transactions are listed in regular order as to accounts, and the total debit or credit is then posted on the ledgers. All other books, cards and sheets used by bank of whatever nature is a part or subdivisions of these books. Often they become known among the clerks by some other name descriptive of their general appearance. For instance, the general ledger scratcher in one bank is known as the "red book," while the collection scratcher is the "black book." The records made by one clerk upon one set of books go to check the records of another clerk upon a different set of books. For instance, the paying teller and the receiving teller will each keep a record of checks cashed or deposited payable within the bank. The debit postings of the individual bookkeeper would agree with the teller's figures. Skillful accounting lies in making the fullest possible use of original entries, at the same time having a check on all figures to guard against either error or fraud. Every transaction ultimately affects the bank's statement of condition by debit or credit. For example, a deposit of Rs.1000 is made, consisting of Rs.200 cash and checks as follows: Rs.200 on the bank itself and Rs. 600 payable in another city. At the end of the day (assuming this to be the only deposit), on the liabilities side there is an increase of Rs 800 all of which appears in the
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item "deposits" being the total Rs.1000, less the check for Rs 200 which is charged to the account of the drawer. On the resource side, then, a corresponding increase of Rs.800 and this is made up by an increase in the cash of Rs 200 and an increase of Rs.600 in the item "due from banks." Or a transaction may appear on one side of the statement only. The bank has sold Rs.5, 000.00 of the bonds it owns.
Q UALIFICATION R EQUIREMENT
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The qualification requirement is defined under the code of corporate governance that is the person appointed as the Chief Financial Officer must be Member of recognized body of professional accountants or A graduate from a recognized university or equivalent, having at least 5 years experience in handling financial and corporate affairs of a listed company.
R ESPONSIBILITIES OF CFO
The new responsibilities apply to all Chief Financial Officers of Listed Companies, Insurance Companies, Banks and DFIs. Mostly the CFO presents the financial position relating to the period which has been over, and the period which has to come that is the financial position attained and the financial projection i.e. where the organization will be.
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Default in payment of principal and/or interest, including penalties on late payments and other dues, to a creditor, bank or financial institution, or default in payment of public deposit. Failure to recover material amounts of loans, advances, and deposits made by the company, including trade debts and inter-corporate finances. Significant public or product liability claims likely to be made against the company, including any adverse judgment or order made on the conduct of the company.
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requirement is fulfilled by Chief Financial Officer, the accounts and financial statements are signed by the Chief Financial Officer before they are sent to concerned authorities.CCG requires that the listed companies submit their quarterly accounts to the shareholders within one month of the close of the first and third quarter of year of account. The CCG does not prescribe the time for submitting half yearly accounts to the shareholders. Here we can refer to section 245 of companies ordinance 1984 for this purpose, which requires half yearly accounts to be submitted within two months of the close of first half. The CCG requires a limited review of half yearly accounts by external auditor. Annual audited accounts are now required to be submitted within four months of the close of financial year. The Securities and Exchange Commission of Pakistan is exercising strict vigilance to ensure compliance of 4th and 5th schedule of the Companies Ordinance, 1984 and timely submission of accounts by companies. It has recently imposed penalties on Directors of nine listed companies who failed to prepare and circulate the quarterly accounts. Furthermore, fines have been imposed on chief executives.
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3. Identify the principles to judge the alternatives. What standards and judgment criteria should the solution meet? 4. Brainstorm and list different possible choices. Generate ideas for possible solutions. See more on extending your options for your decisions on my brainstorming tips page. 5. Evaluate each choice in terms of its consequences. Use your standards and judgment criteria to determine the cons and pros of each alternative. 6. Determine the best alternative. This is much easier after you go through the above preparation steps. 7. Put the decision into action. Transform your decision into specific plan of action steps. Execute your plan. 8. Evaluate the outcome of your decision and action steps. What lessons can be learnt? This is an important step for further development of your decision making skills and judgment. The decision making of Management of National Bank of Pakistan rely on information system resources which includes people and a variety of hardware, software, data, and communications network technologies as resources to collect, transform, and disseminate information in Bank.
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b) HARDWARE RESOURCES
The Hardware resources of National Bank of Pakistan include all physical devices and materials used in information processing. Specifically, it includes not only machines, such as computers and other equipments, but also all data media, that is, tangible objects on which data are recorded, from sheets of paper to magnetic or optical disks.
c) SOFTWARE RESOURCES
The software resources of National Bank of Pakistan include all sets of information processing instructions. It also includes sets of operating instructions called programs, which direct and control computer hardware. The followings are the examples of National Bank of Pakistans software resources: System Software: The National Bank of Pakistan uses Windows Operating Systems for controls and supports the operations of a computer system. Application Software: These are the programs that direct processing for a particular use of computers by employees of the Bank. Bank uses BBO system, Microsoft Office suit as application software.
d) DATA RESOURCES
The data resources of National Bank of Pakistan are typically organized, stored, and accessed by a variety of data resource management technologies. The data about Branch transactions is accumulated, processed, and stored in a BBO system that can be accessed by Manager for an analysis and decision making.
e) NETWORK RESOURCES
The network resources of National Bank of Pakistan include: Communication Media: The Banks communication media include cellular and landline. Network Support: The Bank uses hardware, software, and data technologies which are needed to support the operation and use of a communication network. The Bank uses
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communication processers such as Modems and internetwork processors, and communication control software such as network operating systems and Internet Browser packages (Opera).
SOURCES OF FUNDS
Rupees in Millions Year Share Capital Reserves Borrowings Deposits Other Liabilities Share Capital Reserves Borrowings Deposits Other Liabilities
2004 2005 2006 2007 2008
4,924,106 5,908,927 7,090,712 8,154,319 8,969,751 10,813,914 13,536,041 13,879,260 15,772,124 19,941,047 11,084,790 8,756,847 11,704,079 10,886,063 40,458,926 465,571,717 463,426,602 501,872,243 591,907,435 624,939,016 23,068,314 24,974,450 26,596,300 30,869,154 39,656,831
The National Bank of Pakistans sources of funds includes share capital, reserves, borrowings, deposits and other liabilities etc. To analyze trend, Horizontal analysis of each item is calculated.
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A NALYSIS The Share capital refers to the portion of a Bank's equity that has been obtained by trading stock to a shareholder for cash or an equivalent item of capital value. The share capital of National Bank of Pakistan shows an increasing trend in all years as compare to base year. The increase in share capital during all years indicates share holders concern toward National Bank of Pakistan and efficient banks Management policies.
A NALYSIS The Banks reserves are banks' holdings of deposits in accounts with their central bank plus currency that is physically held in bank vaults (vault cash). The reserves of National Bank of Pakistan fluctuate during all years as they show an increasing trend. The reserves are increased 25 %, 28 % & 46 % in the years 2005, 2006 & 2007 respectively. The year 2008 represents highest increasing percentage of 84% as compare to base and previous years.
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A NALYSIS The National Bank of Pakistans borrowings fluctuates during all years and shows a mixed trend. The borrowings were decreased 21 % in 2005; however same are increased 6 % in 2006 as compare to base year. There was a marginal decrease of 2% in banks borrowings in the year 2007. The year 2008 represents highest percentage of borrowings as these were increased to 265 % comparing with base year and are increased 267 % as compare to 2007.
A NALYSIS The deposits and other accounts of National Bank of Pakistan show a mixed trend during all years. In the year 2005 the deposits were increased very marginally, with the year 2006 represents an increase of 8% as compare to base year. The year 2007 represents second highest percentage as deposits are increased to 27%. The year 2008 indicates an increase of 34%, highest among all years.
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A NALYSIS The other liabilities of National Bank of Pakistan are fluctuating during all years and show an increasing trend. The year 2005 indicates an increase of 8 % and 2006 indicates an increase of 15%. The other liabilities in the year 2007 represent an increase of 34%. The other liabilities were on their peak percentage in 2008 as the shows an increase of 72%.
GENERATION OF FUNDS
Rupees in Millions Year
Markup/return/interest earned Net markup/interest income Net markup/interest income after provisions Total non-markup/ Interest income Total income ( Interest + non-Interest) PROFIT BEFORE TAXATION Markup/return/interest earned Net markup/interest income Net markup/interest income after provisions Total non-markup/ Interest income Total income ( Interest + non-Interest) PROFIT BEFORE TAXATION 2004 20,947,333 14,387,935 12,639,770 8,304,716 20,944,486 11,977,601 100 100 100 100 100 100 2005 33,692,665 23,370,897 21,146,970 9,392,351 30,539,321 19,056,028 161 162 167 113 146 159 2006 44,100,934 30,153,716 27,782,170 12,162,892 39,945,062 26,310,577 211 210 220 146 191 220 2007 50,569,481 33,629,470 28,906,735 13,544,845 42,451,580 28,060,501 241 234 229 163 203 234 2008 60,942,798 37,058,030 26,087,216 16,415,862 42,503,078 23,000,998 291 258 206 198 203 192
The National Bank of Pakistans generation of funds include Interest earned Net interest income Net interest income after provisions Total non markup interest income Total income ( Interest plus non- Interest) Profit before Taxation
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A NALYSIS The interest earned by National Bank of Pakistan fluctuates during all years, as it was increased during all years as compare to base year. The interest earned is increased 61% in 2005 and 111% in 2006. The year 2007 represents second highest percentage on account of interest earned as it was increase 141 %. The year 2008 represents peak percentage of 191 % as compare to all years.
A NALYSIS The net markup/ Interest income of National Bank of Pakistan fluctuates during all years as it shows an increasing trend. It was increased 62 % in 2005 and 110% in 2006 as compare to base year. The year 2007 represents second highest percentage on account of Net markup/ Interest income as it was increased to 134%, comparing with base year. The percentage is increased 158 % in 2008, highest among all years.
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A NALYSIS The net markup/ interest income after provisions fluctuates and shows a mixed trend during all years. It was increased 67% (2005), 120% (2006) and 129% in 2007. The income is increased 106 % as compare to base year but the same was decreased by 23% as compare to 2007.
A NALYSIS The Total non- markup/ Interest income of National Bank of Pakistan shows an increasing trend during all years. It was increased 13% in 2005 and 46% in 2006. The income is increased 63 % in 2007, second highest among all years. There was an increase of 98% in 2008, highest among all years.
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A NALYSIS The total income of National Bank of Pakistan shows an increasing trend. It was increased 46% in 2005 and 91% in 2006. The total income is increased 103% in 2007 and also increase very marginally in 2008.
A NALYSIS The profit before taxation of National Bank of Pakistan fluctuates and shows a mixed trend during all years. It was increased 59% in 2005 and 120% in 2006. The year 2007 represents highest percentage on account of profit before taxation as it was increased to 134%. The year
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2008 indicates an increase of 92% as compare with base year but it was decreased in 2008 by 42% as compare to 2007.
ALLOCATION OF FUNDS
Rupees in Millions Year Lendings to Financial Institutions Investments Advances Operating Fixed Assets Other Assets Lendings to Financial Institutions Investments Advances Operating Fixed Assets Other Assets
2004 2005 2006 2007 2008
10,511,322 16,282,942 23,012,732 21,464,600 17,128,032 149,350,096 156,985,686 139,946,995 210,787,868 170,822,491 220,794,075 268,838,779 316,110,406 340,677,100 412,986,865 9,202,969 9,454,365 9,681,974 25,922,979 24,217,655 19,141,569 23,941,056 37,113,698 30,994,965 44,550,347
After the acquisition of the funds their allocation becomes necessary. The Bank seeks the best way for making investment to get more profit with the maximum security. The Bank has an investment portfolio in which it allocate its funds for crediting to borrowers, investment in the stock market etc. The National Bank of Pakistan allocate its funds in Lendings to financial
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institutions, investments, advances, operating fixed assets and other assets etc. To analyze trend in these items, Horizontal analysis of each item is calculated.
A NALYSIS The lendings to financial institutions by National Bank of Pakistan fluctuates during all years. The lendings increased by 55 % in 2005. The year 2006 represents highest percentage of 119 % among all years on account of lendings to financial institutions. The year 2007 also shows an increase of 104 % as compare to base year. The year 2008 indicates an increase of 63% as compare to base year but lendings decreased by 41% in 2008 as compare to the year 2007.
A NALYSIS
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The investments made by National Bank of Pakistan fluctuate during all years. There was an increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in investments. The year 2007 represents an increase of 41 %, highest among all years. The investments are increased 14 % in 2008 as compare to base year; however investments are decreased 27 % as compare to the year 2007.
A NALYSIS The advances made by National Bank of Pakistan shows an increasing trend in all years as compare to base year. This implies that National Bank of Pakistan is keener to advance money to lenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to base year. The year 2007 represents an increase of 54 % and 2008 represents highest percentage among all years that is 87 % as compare to base year.
A NALYSIS
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The operating fixed assets of National Bank of Pakistan shows a mixed trend during all years. There was an increase of 3 % in 2005 & 5 % in 2006. There was a very sharp increase in operating fixed assets in the year 2007 of 182 % as compare to base year. There was an increase of 163% in 2008 as compare to base year but the same was decreased by 19% as compare to 2007.
A NALYSIS The other assets of National Bank of Pakistan are fluctuating during all years. The other assets are increased 25 % in 2005 and 94 % in 2006. The year 2007 indicates an increase of 62% as compare to base year. The other assets of National Bank of Pakistan are on their peak percentage of 133 % in 2008 as compare with base year.
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foreign exchange deposits, letters of credit are in accordance with theory almost. A bank's balance sheet is different from that of a typical company. You won't find inventory, accounts receivable, or accounts payable. Instead, under assets, you'll see mostly loans and investments, and on the liabilities side, you'll see deposits and borrowings. C ONCLUSION To me, Theory gives the direction to understand the processes and the terminologies going across the World using best business practices in a broader view covering each and every aspect of possible business scenarios. On the contrary practical life is specific, enclosed in a jar.
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BALANCE SHEET
Rupees in Millions ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Other assets Operating fixed assets Deferred tax assets
2004 2005 2006 2007 2008
94,446,552 71,196,956 78,625,227 94,873,249 106,503,756 49,784,884 31,019,330 40,641,679 37,472,832 38,344,608 10,511,322 16,282,942 23,012,732 21,464,600 17,128,032 149,350,096 156,985,686 139,946,995 210,787,868 170,822,491 220,794,075 268,838,779 316,110,406 340,677,100 412,986,865 19,141,569 23,941,056 27,113,698 30,994,965 44,550,347 9,202,969 9,454,365 9,681,974 25,922,979 24,217,655 _ _ _ _ 3,204,572 553,231,467 577,719,114 635,132,711 762,193,593 817,758,326
LIABILITIES Bills payable 7,214,671 1,741,156 10,605,663 7,061,902 10,219,061 Borrowings from financial institutions 11,084,790 8,756,847 11,704,079 10,886,063 40,458,926 Deposits and other accounts 465,571,717 463,426,602 501,872,243 591,907,435 624,939,016 _ Sub-ordinated loans _ _ _ _ Liabilities against assets subject to finance lease 17,058 16,629 13,235 33,554 25,274 Other liabilities 23,068,314 24,974,450 26,596,300 30,869,154 39,656,831 Deferred tax liabilities net 29,185 4,462,718 2,387,073 5,097,831 _ 506,985,735 503,378,402 553,178,593 645,855,939 715,299,108 NET ASSETS 46,245,732 74,340,712 81,954,118 116,337,654 102,459,218
Surplus
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46,245,732
74,340,712
81,954,118
116,337,654 102,459,218
INCOME STATEMENT
Rupees in Millions
2004 2005 2006 2007 2008 20,947,333 33,692,665 44,100,934 50,569,481 60,942,798 6,559,398 10,321,768 13,947,218 16,940,011 23,884,768 14,387,935 23,370,897 30,153,716 33,629,470 37,058,030 1,515,354 2,446,739 3,075,723 4,723,084 10,593,565 185,707 -245,881 -709,461 -40,248 373,249 14,297 Nil Nil Nil 4,000 32,807 23,069 5,284 39,899 Nil 1,748,165 2,223,927 2,371,546 4,722,735 10,970,814 12,639,770 21,146,970 27,782,170 28,906,735 26,087,216 5,099,195 1,273,863 1,008,988 47,557 Nil 875,113 8,304,716 4,926,604 6,144,628 6,781,683 7,925,370 1,718,478 2,891,755 3,263,246 2,878,932 1,205,638 1,333,840 1,042,827 3,969,057 1,365,771 1,169,515 2,341,690 395,427 -1,979 -4,464 -31,964 1,707 177,839 627,618 147,363 1,245,369 9,392,351 12,162,892 13,544,845 16,415,862
Markup/return/interest earned Markup/return/interest expensed Net markup/interest income Provisions against non-performing advances provision for/(reversal of) diminution in the value of investments provision against off balance sheet obligations bad debts written off directly Net markup/interest income after provisions NON MARKUP/ INTEREST INCOME Fee, Commission & brokerage income Dividend income Income form dealing in foreign currencies Gain on sale & redemption of securities-net Investments classified as held for trading Other income Total non-markup/ Interest income Total income ( Interest + non-Interest) NON MARKUP/ INTERSET EXPENSES Administration expenses Other provisions written off Other charges Total non markup/ Interest expenses PROFIT BEFORE TAXATION Taxation Current Prior years Deferred PROFIT AFTER TAXATION Unappropriated Profit brought forward Transfer from surplus on revaluation of fixed assets on account of incremental depreciation Profit available for appropriation
20,944,486 30,539,321 39,945,062 42,451,580 42,503,078 8,878,801 11,221,789 13,443,441 14,205,911 18,171,198 32,243 198,298 -17,283 168,027 747,521 8,284 63,206 208,327 17,141 583,361 8,919,328 11,483,293 13,634,485 14,391,079 19,502,080 11,977,601 19,056,028 26,310,577 28,060,501 23,000,998 4,950,000 7,154,002 8,695,598 8,311,500 11,762,650 847,958 -1,098,709 530,652 391,497 Nil -15,729 291,291 61,981 323,731 -4,220,242 5,782,229 6,346,584 9,288,231 9,026,728 7,542,408 6,195,372 12,709,444 17,022,346 19,033,773 15,458,590 5,892,902 9,161,747 19,372,523 32,074,677 45,344,188 45,496 43,221 41,060 39,007 130,456 12,133,770 21,914,412 36,435,929 51,147,457 60,933,234
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RATIO ANALYSIS
Ratio analysis enables the analyst to compare items on a single financial statement or to examine the relationships between items on two financial statements. After calculating ratios for each year's financial data, the analyst can then examine trends for the company across years. Since ratios adjust for size, using this analytical tool facilitates intercompany as well as intercompany comparisons. Ratios are often classified using the following terms: profitability ratios (also known as operating ratios), liquidity ratios, and solvency ratios. Profitability ratios are gauges of the company's operating success for a given period of time. Liquidity ratios are measures of the short-term ability of the company to pay its debts when they come due and to meet unexpected needs for cash. Solvency ratios indicate the ability of the company to meet its long-term obligations on a continuing basis and thus to survive over a long period of time. Financial ratios allow for comparison: Between companies Between industries Between different time periods for one company Between a single company and its industry average
a) PROFITABILITY RATIOS
The continued viability of any bank depends on its ability to earn an appropriate return on its assets and capital. Good earning performance enables a bank to fund its operations, remain competitive in the market and increase or decrease in market funds. Profitability ratios relate profit to sales and investments. These ratios indicate the firms overall effectiveness of operations and give us idea how well firm utilized its resources in generating profit and shareholder value.
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A NALYSIS The Year 2006 has been an outstanding year with the bank recording the highest profit in its history i.e.., 59.65 %.The National Bank of Pakistans wide range of product offering, large branch network and committed workforce are some of fundamental strengths that enabled NBP to achieve exceptional in a very competitive market. The gross profit is 37.74% in 2008. The lowest percentage among all years.
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A NALYSIS Net profit margin shows positive trend till 2006 and was the highest in the same year as it was 38.59%, the percentage is decreased in 2007 as it was 37.63%. The net profit margin is on its lowest level at the end of 2008 as it indicates a percentage of 25.63%. The primary reason of this decline is current global economic conditions and current political crisis in Pakistan.
A SSETS T URNOVER
This ratio is useful to determine the amount of revenue that is generated from each Rupee of assets. The Banks with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover. Formula = Revenue/ Total Assets Year 2004 2005 2006 2007 2008 Ratio 0.03 0.05 0.06 0.05 0.05
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A NALYSIS The year 2004 represents a ratio of 0.03, lowest among all years. The years 2005, 2007 and 2008 indicates almost same percentage of 0.05% on account of banks assets turnover. The National Bank of Pakistans assets turnover in 2006 is 0.06, peak ratio among all years.
A NALYSIS The above given ratios suggest that the profitability of the bank has a mixed trend during five years. The first three years 2004 (2.92), 2005 (3.95), 2006 (4.95) shows an increasing trend, indicating more profitable operations of the bank. It was decreased in the year 2007 (4.12) and has increased in 2008 as the ratio was 4.13.
R ETURN ON I NVESTMENT
This ratio indicates the profit earned by the bank on the resources employed. Formula = Net income after taxes / Total Assets
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Year 2004 2005 2006 2007 Ratio 0.011 0.021 0.026 0.024
2008 0.018
A NALYSIS There was an increase in the utilization of the resources till 2006 i.e.., 0.011(2004), 0.021 (2005) and 0.026 (2007). The ratio was decreased to 0.024 (2007) and 0.018 (2008).
R ETURN ON D EPOSITS
This ratio indicates to what extent deposits which represent funds mobilization on the part of the bank contribute towards income generation. Formula = Net income before taxes / Total Deposits Year 2004 2005 2006 2007 Ratio 0.025 0.041 0.052 0.047
2008 0.036
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A NALYSIS During all five years the return on deposits ratio of National Bank of Pakistan shows a mix trend. The year 2006 (0.052) was the best year for bank in terms of its funds mobilization. Although the ratio was decreasing in 2008 (0.036), indicating Bank is more keen to kept deposits and a change in policy of the Bank regarding its funds mobilization.
E FFECTIVE T AX R ATE
This ratio is a measurement of a company's tax rate, which is calculated by comparing its income tax expense to its pretax income. This amount will often differ from the company's stated jurisdictional rate due to many accounting factors, including foreign exchange provisions. This effective tax rate gives a good understanding of the tax rate the company faces. Formula = Income Tax expense/ Pretax Income
2004 2005 2006 2007 2008 Year Ratio % 0.48 0.33 0.35 0.32 0.32
A NALYSIS The effective tax rate of National Bank of Pakistan was highest in the year 2004 (0.48%). However bank is able to reduce its tax burden because the Bank is able to adopt Tax management techniques to lessen the tax burden. A relatively stable effective tax rate percentage, and resulting net profit margin, would seem to indicate that the Bank's operational managers are more responsible for a company's profitability than the company's tax accountants.
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b) LIQUIDITY RATIOS
The liquidity position of a bank is like a reservoir. It may be adequate, although nearly depleted, just before the start of the rainy season. Or it may be inadequate, although three quarters full just before the summer drought. Liquidity can be defined as: The banks ability not only to meet possible deposit withdrawals but also to provide for the legitimate needs of the economy as well
C URRENT R ATIO
Current ratio is a measure of the current adequacy of company's current assets to meet its current obligations. It must be greater than 1. If it is less than 1, liabilities exceed current assets. For every Rs.1 of liabilities, the company has a ratio amount of current assets available. The concept behind this ratio is to ascertain whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes). In theory, the higher the current ratio, the better. Formula = Current Assets / Current Liabilities
Year Ratio 2004 2005 2006 2007 0.83 0.96 1.02 1.00 2008 1.12
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A NALYSIS The year 2004 (0.83) and 2005 (0.96) were not satisfied for bank as current assets are less than current liabilities. However, in 2006 (1.02) the management of National Bank of Pakistan is able to overcome this problem. The year 2007 (1.00) is also good for bank as per standards of this ratio. Again in the year 2008 (1.12) the management of bank is able to increase its current ratio.
C ASH R ATIO
This ratio shows that the cash is enough for payment of current liabilities or not. This ratio is obtained by dividing cash by current liabilities. For a bank this is the cash held by the bank as a proportion of deposits in the bank. Formula = Cash / Current Liabilities Year Ratio
2004 2005 2006 2007 2008 4.09 2.85 2.96 3.07 2.69
A NALYSIS The cash ratio of National Bank of Pakistan shows a mixed trend during five years of operations. During all years, the ratio is satisfactory as per standards of this ratio. The year 2004 (4.09), representing highest and 2005 (2.85) & 2008 (2.69), representing lowest ratio in all five years.
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Year Ratio%
2008 66.08
A NALYSIS This ratio, a comparison of funds generation and its funds mobilization, indicates the total loans sanctioned by the bank in relation to total amount of money deposited with the bank, stands highest in 2008 ( 66.08%) as compared with the previous year figures. This shows that the bank has greater potential to advance additional loans. During all other years the ratio is quiet satisfactory representing National Bank of Pakistans credit management decisions.
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A NALYSIS The National Bank of Pakistans due from banks to total assets ratio is fluctuating and indicates a mixed trend during all years. The ratio is 0.019 in 2004 and 0.028 in the year 2005. The year 2006 represents highest ratio of 0.036 among all years. There was a decrease in ratio at the end of financial year 2007 that is 0.028. The year 2008 represents a decrease in ratio (0.021) on account of due from banks to total assets.
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A NALYSIS The ratio indicates an increasing trend till 2007 that is 94.83 (2004), 185.95 (2005), 196.62 (2006) and 197.18 in 2007. The year 2008 represents the lowest percentage of 42.33 on account of due from banks to due to banks.
A NALYSIS The due to banks to total deposits ratio of National Bank of Pakistan is fluctuating and indicates a mixed trend during all years. The ratio is 0.024 in 2004 and decreased to 0.019 in 2005. The ratio is increased in 2006 as the ratio is 0.023. The year 2007 represents the lowest percentage of 0.018 and the year 2008 represents the peak percentage of 0.065.
c) DEBT RATIOS
These ratios give users a general idea of the company's overall debt load as well as its mix of equity and debt. Debt ratios can be used to determine the overall level of financial risk a
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company and its shareholders face. In general, the greater the amount of debt held by a company the greater the financial risk of bankruptcy.
A NALYSIS The debt to equity ratio of National Bank of Pakistan shows a ratio of 112.35 % in 2004. The ratio is decreased to 97.77% in the year 2005. The ratio is further decreased in 2006 as it shows a percentage of 89.57%. There was an increase in the ratio as it shows a percentage of 93.47%. The year 2008 represents the ratio of 91.17% .
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A NALYSIS The amount of interest a Bank pays in relation to its revenue and earnings is tremendously important. The National Bank of Pakistans interest coverage ratio is 1.83 times in the year 2005. The ratio was increased in the years 2005 and 2006 as it was 1.85 times & 1.89 times respectively. There sudden decrease of 1.66 times is observed in 2007. The ratio is further decrease to 0.97 times in 2008, representing the lowest ratio among all years.
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Year 2004 2005 2006 2007 2008 Ratio 0.13 0.13 0.12 0.17 0.47
A NALYSIS The loan loss coverage ratio of National Bank of Pakistan is almost same in the years 2004 and 2005 as it was 0.13 in both years. There was a slight decrease in this ratio as it was 0.12 in 2006. The year 2006 shows an increase in loan loss coverage ratio as it was 0.17. The year 2008 represents highest ratio of 0.47 on account of loan loss coverage, as compare to all years.
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A NALYSIS The National Bank of Pakistans Capital funds to Total Assets ratio is increased during all years. The ratio is 0.89 in 2004, representing lowest ratio in all years. The ratio is increased in 2005, 2006 and 2007 as the graph shows ratios of 1.02, 1.10 & 1.07 respectively. The ratio is keeping its trend and also increases in the year 2008 as it was 1.09.
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A NALYSIS The fixed assets turnover ratio of National Bank of Pakistan has an increasing trend till 2006. The ratio increases 2.28 (2004) to 3.23 (2005). The year 2006 represents highest fixed assets turnover ratio for National Bank of Pakistan i.e.., 4.13. The banks efficiency to utilize these assets has been decreased to 1.64 in the year 2007 however it was increased in 2008 as the ratio is 1.76.
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A NALYSIS The ratio has been showing an increasing trend till 2007 i.e.., 1274.85 (2004), 1858.87 (2005), 2431.38 (2006) and 2583.94 (2007). There was a marginal increase in the year in the year 2008 i.e.., 2587.08, representing the peak percentage in all years.
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HORIZONTAL ANALYSIS
This technique is also known as comparative analysis. It is conducted by setting consecutive balance sheet, income statement or statement of cash flow side-by-side and reviewing changes in individual categories on a year-to-year or multiyear basis. The most important item revealed by comparative financial statement analysis is trend. A comparison of statements over several years reveals direction, speed and extent of a trend(s). The horizontal financial statements analysis is done by restating amount of each item or group of items as a percentage. Such percentages are calculated by selecting a base year and assign a weight of 100 to the amount of each item in the base year statement. Thereafter, the amounts of similar items or groups of items in prior or subsequent financial statements are expressed as a percentage of the base year amount. The resulting figures are called index numbers or trend ratios. Formula = Current Year amount / Base Year amount * 100 Horizontal analysis, whilst simple to execute and useful to a certain extent, has its limitations. These limitations include: Being highly dependent on the selection of base year and the period under examination in the financial model. Horizontal analysis provides little insight into why the trend occurred in a financial model. Horizontal analysis does not provide insight into whether the trend in the financial model results was superior/inferior to some benchmark. Horizontal analysis does not address the challenge of negative numbers.
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2005
75 62 155 105 122 103 125 104
2006
83 82 219 94 143 105 194 117
2007
100 75 204 141 154 282 162 138
2008
113 77 163 114 187 263 233 148
2004
100 100 100 100 100 100 100 100 100 100 100
2005
120 125 182 179 24 79 100 97 15291 108 104
2006
144 128 350 135 147 106 108 78 8179 115 117
2007
166 146 495 221 98 98 127 197 17467 134 138
2008
182 184 573 99 142 365 134 148 Nil 172 133
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A NALYSIS The National Bank of Pakistans Cash & balance with treasury banks shows a mixed trend during all years. It was decreased by 25% in 2005 and 17% in 2006. There was a marginal increase in the year 2007. In 2008 the percentage is increased by 13% as compare to base year.
A NALYSIS The Balances of National Bank of Pakistan with other banks shows a decreasing trend as compare to base year. The year 2005 represents lower percentage (38%), while the year 2006 represents highest percentage of 18%.
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A NALYSIS The lendings to financial institutions by National Bank of Pakistan fluctuates during all years. The lendings increased 55 % in 2005. The year 2006 represents highest percentage of 119 % among all years on account of lendings to financial institutions. The year 2007 also shows an increase of 104 % as compare to base year. The year 2008 indicates an increase of 63% as compare to base year but lendings decreased by 41 % in 2008 as compare to the year 2007.
A NALYSIS The investments made by National Bank of Pakistan fluctuate during all years. There was an increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in investments. The year 2007 represents an increase of 41 %, highest among all years. The investments are increased 14 % in 2008 as compare to base year; however investments are decreased 27 % as compare to the year 2007.
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A NALYSIS The advances made by National Bank of Pakistan shows an increasing trend in all years as compare to base year. This implies that National Bank of Pakistan is keener to advance money to lenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to base year. The year 2007 represents an increase of 54 % and 2008 represents highest percentage among all years that is 87 % as compare to base year.
A NALYSIS The operating fixed assets of National Bank of Pakistan shows a mixed trend during all years. There was an increase of 3 % in 2005 & 5 % in 2006. There was a very sharp increase in operating fixed assets in the year 2007 of 182 % as compare to base year. There was an increase of 163% in 2008 as compare to base year but the same was decreased by 19% as compare to 2007.
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A NALYSIS The other assets of National Bank of Pakistan are fluctuating during all years. The other assets are increased 25 % in 2005 and 94 % in 2006. The year 2007 indicates an increase of 62% as compare to base year. The other assets of National Bank of Pakistan are on their peak percentage of 133 % in 2008 as compare with base year.
A NALYSIS The Share capital refers to the portion of a Bank's equity that has been obtained by trading stock to a shareholder for cash or an equivalent item of capital value. The share capital of National Bank of Pakistan shows an increasing trend in all years as compare to base year. The increase in share capital during all years indicates share holders concern toward National Bank of Pakistan and efficient banks Management policies.
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A NALYSIS The Banks reserves are banks' holdings of deposits in accounts with their central bank plus currency that is physically held in bank vaults (vault cash). The reserves of National Bank of Pakistan fluctuate during all years as they show an increasing trend. The reserves are increased 25 %, 28 % & 46 % in the years 2005, 2006 & 2007 respectively. The year 2008 represents highest increasing percentage of 84% as compare to base and previous years.
A NALYSIS The Unappropriated profit are Earnings of National Bank of Pakistan not paid out as dividends but instead reinvested in the core business or used to pay off debt. Unappropriated profit is part of shareholder equity. The banks Unappropriated profit is increasing very sharply during all years as compare to base year, indicated banks strict dividend payout policy and concern towards reinvestment options.
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A NALYSIS The National Bank of Pakistans surplus on revaluation of assets fluctuates and shows a mixed trend during all years. It was increased 79% in 2005 and 35% in 2006. The year 2007 represents highest percentage of 121%. The percentage is decreased by 1% in 2008 as compare to base year and 122% as compare to 2007.
A NALYSIS The National Bank of Pakistans bills payable is showing a mix trend during all years. The year 2005 is best for bank in terms of reduction in bills payable. The year 2006 represents a higher percentage of banks liability as it increase 47% as compare to base year. The year 2008 also shows an increase in banks bills payable as it increases to 42% as compare to base year.
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A NALYSIS The National Bank of Pakistans borrowings fluctuates during all years and shows a mixed trend. The borrowings were decreased 21 % in 2005; however same are increased 6 % in 2006 as compare to base year. There was a marginal decrease of 2% in banks borrowings in the year 2007. The year 2008 represents highest percentage of borrowings as these were increased to 265 % comparing with base year and are increased 267 % as compare to 2007.
A NALYSIS The deposits and other accounts of National Bank of Pakistan show a mixed trend during all years. In the year 2005, the deposits were increased very marginally, with the year 2006 represents an increase of 8%. The deposits are increased 27% & 34% in the years 2007 and 2008 respectively
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A NALYSIS The National Bank of Pakistans Liabilities against assets subject to finance lease were fluctuate during all years, with the year 2005 (3% decrease) and 2006 (22% decrease) shows a decreasing trend and the year 2007 (97% increase) & 2008 (48 % increase) shows an increasing trend as compare to base year.
A NALYSIS The other liabilities of National Bank of Pakistan are fluctuating during all years and show an increasing trend. The year 2005 indicates an increase of 8 % and 2006 indicates an increase of 15%. The other liabilities in the year 2007 represent an increase of 34%. There was a sharp increase in 2008 as it indicates a percentage of 72%, highest among all years.
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Markup/return/interest earned Markup/return/interest expensed Net markup/interest income Provisions against non-performing advances provision for/(reversal of) diminution in the value of investments provision against off balance sheet obligations bad debts written off directly Net markup/interest income after provisions NON MARKUP/ INTEREST INCOME Fee, Commission & brokerage income Dividend income Income form dealing in foreign currencies Gain on sale & redemption of securities-net Investments classified as held for trading Other income Total non-markup/ Interest income Total income ( Interest + non-Interest) NON MARKUP/ INTERSET EXPENSES Administration expenses Other provisions written off Other charges Total non markup/ Interest expenses PROFIT BEFORE TAXATION Taxation Current Prior years Deferred PROFIT AFTER TAXATION Unappropriated Profit brought forward Transfer from surplus on revaluation of fixed assets on account of incremental depreciation Profit available for appropriation
100 -132 -382 -22 201 100 Nil Nil Nil 28 100 70 16 122 Nil 100 127 136 270 628 100 167 220 229 206 97 121 133 155 135 227 256 226 119 132 103 393 2,872 2,459 4,924 831 Nil Nil Nil Nil Nil 100 20 72 17 142 100 113 146 163 198 100 100 100 100 100 100 100 100 100 100 100 100 100 100 146 126 615 763 129 159 145 -130 -1,852 110 205 155 95 181 191 151 -54 2,515 153 220 176 63 -394 161 275 329 90 300 203 160 521 207 161 203 205 2,318 7,042 219 100 100 100 100
234 192 168 238 46 Nil -2,058 26,831 156 130 307 544 86 422 250 769 287 502
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A NALYSIS The interest earned by National Bank of Pakistan fluctuates during all years, as it was increased during all years as compare to base year. The interest earned is increased 61% in 2005 and 111% in 2006. The year 2007 represents second highest percentage on account of interest earned as it was increase 141 %. The year 2008 represents peak percentage of 191 % as compare to all years.
A NALYSIS The interest expense of National Bank of Pakistan shows an increasing trend in all years, as it was increased 57 % (2005) and 113 % (2006). The year 2007 represents second highest percentage on account of interest expensed as it was increases to 158% as compare to base year. The year 2008 shows an increase of 264 %, highest among all years.
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A NALYSIS The net markup/ Interest income of National Bank of Pakistan fluctuates during all years as it shows an increasing trend. It was increased 62 % in 2005 and 110% in 2006 as compare to base year. The year 2007 represents second highest percentage on account of Net markup/ Interest income as it was increased to 134%, comparing with base year. The percentage is increased 158 % in 2008, highest among all years.
A NALYSIS The net markup/ interest income after provisions fluctuates and shows a mixed trend during all years. It was increased 67% (2005), 120% (2006) and 129% in 2007. The income is increased 106 % as compare to base year but the same was decreased by 23% as compare to 2007.
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A NALYSIS The Fee, Commission and brokerage income of National Bank of Pakistan fluctuates during all years. It was decreased 3% in the year 2005 and increases 21 % in the year 2006. The year 2007 represents an increase of 33%. The year 2008 represents peak percentage of 55%.
A NALYSIS The dividend income of National Bank of Pakistan fluctuates during all years, as it shows a mixed trend during all years. The dividend income is increasing 35 % in the year 2005 and 127 % in 2006. It was increased 156% in 2007, represents higher percentage among all years. The year 2008 represents an increase of 126 % as compare to base year and a decrease of 30% as compare to 2007.
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A NALYSIS The National Bank of Pakistans income from dealing in foreign securities fluctuates during all years as it shows an increasing trend. It was increased 19 % in 2005 and 32 % in 2006. The income has its lowest percentage in 2007 as it was increased 3 %. The year 2008 represents highest percentage on account of banks income from dealing in foreign securities as it was increased 293 % as compare to base year and 290% as compare to the year 2007.
A NALYSIS The other income of National Bank of Pakistan fluctuates during all years as it shows a mixed trend. It was decreased 80 % in 2005 and 28% in 2006 as compare to base year. The year 2007 represents the lowest decreasing trend of 83%. There was a sharp increase in National Bank of Pakistans other income as it was increased to 42% as compare to base year and increased 125% as compare to 2007. to 63%, comparing with base year. The percentage is increased 52 % in 2008 as compare to base year, but it was decreased 11% as compare to 2007.
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A NALYSIS The Total non- markup/ Interest income of National Bank of Pakistan shows an increasing trend during all years. It was increased 13% in 2005 and 46% in 2006. The income is increased 63 % in 2007, second highest among all years. There was an increase of 98% in 2008, highest among all years.
A NALYSIS The total income of National Bank of Pakistan shows an increasing trend. It was increased 46% in 2005 and 91% in 2006. The total income is increased 103% in 2007 and also increase very marginally in 2008.
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A NALYSIS The administration expense of National Bank of Pakistan is increased 26 % in 2005 and 51 % in 2006 as compare to base year. The year 2007 represents an increase of 60%. The percentage is increased 105 % in 2008, highest among all years.
A NALYSIS The Total non markup/ Interest expenses of National Bank of Pakistan fluctuates and shows an increasing trend as compare to base year. It was increased 29%, 53% and 61% in the years 2005, 2006 and 2007 respectively. The year 2008 represents peak percentage of 119% in 2008.
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A NALYSIS The profit before taxation of National Bank of Pakistan fluctuates and shows a mixed trend during all years. It was increased 59% in 2005 and 120% in 2006. The year 2007 represents highest percentage on account of profit before taxation as it was increased to 134%. The year 2008 indicates an increase of 92% as compare with base year but it was decreased in 2008 by 42% as compare to 2007.
A NALYSIS The current taxation of National Bank of Pakistan fluctuates during all years as it was increased during all years as compare to base year. It was increased 45 % in 2005 and 76 % in 2006. The year 2007 and 2008 indicates an increase of 68 % & 138 % respectively.
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A NALYSIS The National Bank of Pakistans Profit after taxation fluctuates during all years as it was increased during all years as compare to base year. The profit after taxation is increased 105% in 2005 and 175 % in 2006 as compare to base year. The Year 2007 has been an outstanding year with the National Bank of Pakistan recording the highest profit after taxation in its history as the percentage increases to 207 % comparing with base year. The year 2008 indicates an increase of 150 % as compare to base year and a decrease of 57 % as compare to 2007.
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VERTICAL ANALYSIS
When using vertical analysis, the analyst calculates each item on a single financial statement as a percentage of a total. The term vertical analysis applies because each year's figures are listed vertically on a financial statement. The total used by the analyst on the income statement is net sales revenue, while on the balance sheet it is total assets. This approach to financial statement analysis, also known as component percentages, produces common-size financial statements. Common-size balance sheets and income statements can be more easily compared, whether across the years for a single company or across different companies. Vertical analysis is a technique for identifying relationship between items in the same financial statement by expressing all amounts as the percentage of the total amount taken as 100. In a balance sheet, for example, cash and other assets are shown as a percentage of the total assets and, in an income statement, each expense is shown as a percentage of the sales revenue. In Vertical analysis, various components of the financial statements are standardized by expressing them as a percentage of some bases. Examples of common-sized statements include: Components of the balance sheet expressed as a percentage of total assets Components of the income statement expressed as a percentage of sales or revenue
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ASSETS Cash Balances with other banks Lendings to fin. institutions Investments Advances Operating fixed assets Other assets Total LIABILITIES Share Capital Reserves Unappropriated profit Surplus On Reval. of assets Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to finance lease Deferred tax liabilities net Other liabilities Total
2004
17.07 9.00 1.90 27.00 39.91 1.66 3.46 100
2008
13.02 4.69 2.09 20.88 50.50 2.96 5.45 100
2004
0.89 1.95 1.66 3.86 1.30 2.00 84.15 0.0031 0.01 4.17 100
2005
1.02 2.34 2.89 6.61 0.30 1.52 80.22 0.0029 0.77 4.32 100
2006
1.10 2.15 4.97 4.48 1.64 1.81 77.79 0.0021 0.37 4.12 100
2007
1.07 2.07 5.95 6.18 0.93 1.43 77.66 0.0044 0.67 4.05 100
2008
1.09 2.43 6.41 2.57 1.25 4.94 76.42 0.0030 Nil 4.85 100
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A NALYSIS The cash balance of National Bank of Pakistan fluctuates during all years. The year 2004 representing highest percentage of cash balance among all years that is 17.07%. The cash balance percentage is decreasing in 2005 (12.32 %) and 2006 (12.19%). There was a slight increase in the year 2007 as compare to the years 2005 & 2006, of 12.45%. The year 2008 indicates second highest level of National bank of Pakistans cash balance as it was 13.02%.
A NALYSIS The National Bank of Pakistans balances with other banks has its peak percentage of 9% in the year 2004. The percentage is decreased to 5.37% in 2005 and has increased slightly in 2006, indicates 6.3%. The percentage is again decreased in 2007 with a percentage of 4.92 % and a percentage of 4.69% in 2008.
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A NALYSIS The lendings to financial institutions by National Bank of Pakistan shows a mixed trend. In the year 2004 percentage is 1.90%. The year 2005 along with the year 2007 indicates the same percentage of 2.82%. The year 2006 represents peak percentage of 3.57% for National Bank of Pakistan regarding its lendings to financial institutions. The percentage is decreased in 2008 indicating a percentage of 2.09%, second lowest among all years.
A NALYSIS The investments made by National Bank of Pakistan are fluctuating and showing a mixed trend. The year 2004 shows a percentage of 27% and the year 2005 show 27.17%. The percentage is decreased to 21.69% in 2006; however it was increased in 2007 to 27.66 %, representing peak percentage among all years. The percentage is again decreased to 20.88% in the year 2008.
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A NALYSIS The advances made by National Bank of Pakistan are fluctuating and indicates mixed trend in all years. The first three years of analysis shows an increasing trend that is 39.91% (2004), 46.53% (2005) and 49% in the year 2006. There was a decrease in banks advances to 44.7% in 2007; however in 2008 the percentage is increased to 50.5%, representing peak rate among all previous years.
A NALYSIS The operating fixed assets of National Bank of Pakistan shows a percentage of 1.66% in the year 2004. There was a slight decrease of 1.64% in 2005 and 1.50% in 2006. The operating fixed assets are increased to 3.40% in 2007. The year 2008 indicates a decrease in banks operating fixed assets as it reduces to 2.96%.
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A NALYSIS The other assets of National Bank of Pakistan fluctuate during all years. The year 2004 has a percentage of 3.46%, which is increased till 2006 that is 4.14% (2005) and 5.75% (2006). The percentage of other assets is decreased to 4.07% in the year 2007; however it was increased to 5.45% in the year 2008.
A NALYSIS The share capital of National Bank of Pakistan shows a mixed trend in all years. It was 0.89% in 2005 and shows an increasing trend of 1.02% in 2005. The percentage of share capital is further increased in 2006 and shows 1.10%. There was a slight decrease in 2007 as percentage was 1.07%. The year 2008 represents highest percentage of 1.09% among all years.
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A NALYSIS The reserves of National Bank of Pakistan fluctuate and indicate a mixed trend. The above graph shows a percentage of 1.95% in 2004 with an increasing trend of 2.34% in the year 2005. The reserves of the bank are decreasing in 2006 & 2007, shows a percentage of 2.15% and 2.07% respectively. Despite the decreasing trend in previous two years, the National Bank of Pakistan is being able opt achieve highest percentage of reserves in 2008 as the percentage increased to 2.43%.
A NALYSIS The Unappropriated profit of National Bank of Pakistan is increased during all years. It shows a percentage of 1.66% in 2004, 2.89% in 2005, 4.97% in 2006, 5.95% in 2007 and a peak percentage of 6.41% in 2008.
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A NALYSIS The surplus on revaluation of assets is fluctuating and shows a mix trend. It shows a percentage of 3.86% in 2004. The year 2005 represents highest percentage of 6.61%, but it was decreased in 2006 as percentage is decline to 4.48%. There was a sharp increase in 2007 of 6.18%, however surplus is again decline in 2008 and shows a percentage of 2.57%, lowest among all years.
A NALYSIS The bills payable by National Bank of Pakistan indicates a percentage of 1.3% in 2004. The percentage is decline in 2005 as it shows a decrease of 0.3%, lowest percentage in all years. There was a sharp increase in 2006 of 1.64% with a decline of 0.93% in 2007. The percentage is again increased in 2008 as it shows a percentage of 1.25%.
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A NALYSIS The Borrowings of National Bank of Pakistan shows a mixed trend in all years. The percentage is 2% in 2004 with a decline in 2005 shows a percentage of 1.52%. The borrowings are increased in 2006 shows a percentage of 1.81%. The year 2007 represents lowest percentage of 1.43% of banks borrowing among all years. There was a sharp increase in banks borrowing in the year 2008 as it shows a percentage of 4.94%.
A NALYSIS The deposits and other accounts of National Bank of Pakistan decreased during all years. The year 2004 represents peak percentage of 84.15%. The deposits are decline to 80.22% in 2005, 77.79% in 2006, 77.66% in 2007 and 76.42 % in 2008.
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A NALYSIS The other liabilities of National Bank of Pakistan fluctuate and show a mix trend in all years. The percentage of other liabilities in 2004 is 4.17%. The year 2005 represents percentage (4.32%) of banks other liabilities. The other liabilities were decline in 2006 and 2007 shows a percentage of 4.12% and 4.05% respectively. The National Bank of Pakistan is not being able to reduce its other liabilities in 2008 as the graph shows a percentage of 4.85%, highest percentage among all years.
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Markup/return/interest earned Markup/return/interest expensed Net markup/interest income Provisions against non-performing advances provision for/(reversal of) diminution in the value of investments provision against off balance sheet obligations bad debts written off directly Net markup/interest income after provisions NON MARKUP/ INTEREST INCOME Fee, Commission & brokerage income Dividend income Income form dealing in foreign currencies Gain on sale & redemption of securities-net Investments classified as held for trading Other income Total non-markup/ Interest income Total income ( Interest + non-Interest) NON MARKUP/ INTERSET EXPENSES Administration expenses Other provisions written off Other charges Total non markup/ Interest expenses PROFIT BEFORE TAXATION Taxation Current Prior years Deferred PROFIT AFTER TAXATION Unappropriated Profit brought forward Transfer from surplus on revaluation of fixed assets on account of incremental depreciation Profit available for appropriation
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A NALYSIS
The interest earned by National Bank of Pakistan fluctuates and shows an increasing trend during all years. The year 2008 is unique in terms of banks interest earned. The bank earned 143% interest in this year. All other years shows an increasing trend that is 100% in 2004, 110% in 2005, 110% in 2006 and 119% in 2007.
A NALYSIS
The interest expense of National Bank of Pakistan shows an increasing trend during all years. In the year 2004, the interest expensed is 31%. The interest expense is increase in 2005 as it shows a percentage of 34%. There was a marginal increase in 2006, as interest expanse shows a percentage of 35%. The year 2007 also shows an increase of 40%. The year 2008 represents a percentage of 56%, highest among all years.
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A NALYSIS The net markup/ interest income of National Bank of Pakistan fluctuates and shows a mixed trend during all years. The percentage is 69% in 2004 and shows an increasing trend in 2005 as percentage is 77%. There was a slight decrease in net markup/ Interest income as the percentage is 75%. There was an increase in income in 2007, as the graph indicating a percentage of 79%. The year 2008 represents peak percentage of 87% of net markup/ Interest income.
A NALYSIS The net markup/ Interest income after provisions fluctuates and shows a mixed trend. The percentage is 60% in 2004, lowest among all years. The year 2005 represents an increasing trend as percentage is 69%. There was a marginal increase in 2006 as the percentage is 70%. The banks income is decreasing in 2007 & 2008 as the percentage is 68% and 61% respectively.
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A NALYSIS The Fee, Commission & brokerage income of National Bank of Pakistan fluctuate and show a mixed trend during all years. The year 2004 represents highest percentage of 24% on account of fee, commission & brokerage income. The percentage is decreased in 2005 & 2006 as percentage is 16% & 15% respectively. There was a slight increase in 2007 & 2008 as percentage is 16% & 19% respectively.
A NALYSIS The dividend income of National Bank of Pakistan is showing a mixed trend during all years. The year 2004 and 2006 indicates almost same percentage of 6%. The year 2006 & 2008 shows a percentage of 7% each. The year 2007 represents a peak percentage of 8% on account of dividend income.
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A NALYSIS The National Bank of Pakistans income from dealing in foreign securities shows a percentage of 5% in 2004. The percentage is decreased in 2005, 2006 and 2007 as the percentage in these years is 4%, 3% and 2% respectively. The year 2008 represents highest percentage of 9% on account of income from dealing in foreign securities.
A NALYSIS The Total non markup/ Interest income of National Bank of Pakistan fluctuates and indicates a mixed trend during all years. The year 2004 represents highest percentage of 40% among all years. The percentage is decreased in 2005 as it was 31%. There was a slight decrease in 2006 as percentage is 30%. The years 2007 and 2008 indicates an increasing trend as percentage is 32% & 39% respectively.
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A NALYSIS The administrative and operating expenses of National Bank of Pakistan are 42% in 2004, representing second highest percentage among all years. The expenses are decreased in 2005 as percentage is 37%. The year 2006 and 2007 also shows a decreasing trend as percentage is 34% & 33% respectively. The administrative and operating expenses of bank are increased in the year 2008 as the percentage is 43%, highest among all years.
A NALYSIS The total non markup/ Interest expenses of National Bank of Pakistan are 43% in 2004, representing second highest percentage among all years. The expense is decreased in 2005 as percentage is 38%. The year 2006 and 2007 also shows a decreasing trend as percentage is 34% in each year. The total interest expense of bank is increased in the year 2008 as the percentage is 46%, highest among all years.
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A NALYSIS The National Bank of Pakistans current taxation fluctuates and shows a mixed trend in all years. The percentage is 23% in the year 2004. The years 2005, 2006 and 2007 shows a slight decrease in banks current taxation as percentage in these years is 23%, 22% and 20% respectively. The year 2008 represents peak percentage of 28% on account of current taxation.
A NALYSIS The National Bank of Pakistans Profit before taxation is 57% in the year 2004.The percentage is increased in 2005 as it shows a percentage of 62%. The year 2006 and 2007 shows almost same increasing trend as percentage is 66%. There was a decrease in banks Profit before taxation as percentage is reduces to 54%, lowest among all years.
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A NALYSIS The National Bank of Pakistans Profit after taxation is 30% in the year 2004, representing the lowest percentage among all years. The percentage is increased in 2005 as it shows a percentage of 42%. The year 2006 and 2007 shows a slight increasing trend as percentage is 43% & 45% respectively. There was a decrease in banks Profit before taxation as percentage is reduces to 36%.
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As of June 2008 Deposits Advances Profit After (Rs. Bn) (Rs. Bn) Tax (Rs. Bn)
584.85 621.53 293.97 350.72 465.54 6.4 180.82 64.73 153.32 136.75 24.4 287.77 42.35 99.61 44.33 57.84 112.12 31.96 22.18 173.81 14.08 128.97 411.36 173.42 168.45 228.98 328.55 3.09 142.85 45.83 114.04 93.25 11.14 180.02 27.62 87.61 32.65 38.3 85.43 23.03 17.5 126.27 9.57 101.22 7.5 8.1 2.51 7.68 5.59 0.05 -2.63 0.47 0.05 1.25 0.11 1.69 -0.81 0.75 0.08 0.44 -0.73 0.43 -0.2 1.31 0.16 1.57
Habib Bank NBP Allied Bank MCB United Bank First Women Bank of Punjab Soneri Bank Askari Bank Bank Al- Habib Bank of Khyber Bank Al- Falah Saudi Pak Faysal Bank KASB Bank Meezan Bank NIB Bank Mybank Atlas Bank Standard Chartered JS Bank Habib Metropolitan
AA69 A
31
AAA+ AAA+
176 11 100
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A stock exchange is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. In Pakistan securities are traded on three stock exchanges which are Karachi stock exchange, Lahore stock exchange and Islamabad stock exchange. The financial position of commercial banks registered on stock exchanges in Pakistan, are shown in preceding page in terms of their: Paid-up Capital Reserves Assets Deposits Advances Profit after tax Earnings per share Credit rating The best way to analyze these commercial banks is to analyze their credit ratings. The National Bank of Pakistan enjoys the highest credit rating amongst Pakistani banks; JCR- VIS Credit rating Co. Limited awarded highest standalone credit rating of AAA to NBP. The JCRVIS Credit rating Co. comments about NBP say a lot about the bank:31
The organization has been able to strategically manage and build on its competitive advantages
which has translated into the strong and well managed improvement in profitability trend observed over the last few years, a substantial balance sheet of sound asset quality, and strong liquidity and capitalization levels NBPs key strength remains its extensive outreach and a low cost, stable deposit base. Deposits are also guaranteed by the Government of Pakistan under the Banking Nationalization Act, 1974. There have also been significant improvements in the management practices of the bank and a focus on enhancement of systems and controls. In this regard the management has entered into
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an agreement for the acquisition of a core banking software which is likely to be implemented over the next few years. JCR-VIS believes that the current economic situation puts certain leading industrial sectors and the general consumer under financial stress. Therefore, the second half of 2008 and 2009 are likely to be challenging for the banking sector as a whole, in terms of maintaining growth, asset quality and profitability.32 The JCR-VIS Rating Process include following steps:33 1. Signs agreement for an initial rating 2. Submits preliminary information materials 3. Conducts a preliminary study 4. Submits a detailed questionnaire to the issuer/client 5. Provides detailed information in response to detailed questionnaire 6. Conducts pre due diligence meeting analysis 7. Conducts due diligence meetings 8. Conducts post due diligence analysis 9. Brief for internal rating committee meetings is prepared 10. Sub Committee recommends preliminary/initial rating 11. Rating Committee decides the preliminary/initial rating 12. Discusses the rating rationales and rating issues with client 13. Notifies issuer of the preliminary/initial rating, deliberates on appeals by client, if any 14. Consents to release of preliminary/initial rating to the public in case of non-mandatory ratings 15. Releases the preliminary/initial rating to the press
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An innovative, creative and dynamic institution responding to the changing needs of the internal and external environment NBPs current management has boarder vision. They have taken steps to improve customer services, streamline internal procedure and creating a delectating climate for technology initiative. Reorganizing efforts going on in the NBP has open many opportunities for NBP to grow. For instance to achieve objectives NBP have taken following measures. Setting of target for of making at least 300 branches country wide on line. Closing of all those branches, which are burden on NBP. Management to offer specialized services to major corporate including advisory and debt syndication introduces the concept of relationship manager. Comprehensive training programs has been develop to up grade the core banking skills of the existing staff as well as integrate high quality hiring. To improve the motivation of staff a merit-based culture is being promoted. Through overhauling the manpower recruitment preservation and performance appraisal system. The actions taken by current management provide a great opportunity for NBP for making it future prosper and can make NBP not less than any modern commercialize bank in Pakistan. The Management of NBP assess that the Internal Control environment is showing signs of improvement as compared to previous years in all areas of the bank. The bank is endeavoring to further refine its internal control design and assessment process as per guidelines issued by the State Bank of Pakistan Accordingly, Bank is making all possible effort to improve the professional skills and competency level of the staff through need based training programs and our valued customers for their support and continued confidence in NBP.
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The National Bank of Pakistans outsourced employees (2350) was obtained from a single source. Most of these are performing the core function of the bank outside their assigned duties without any training and supervision. The National Bank of Pakistan is incurred large expenses in running those branches, which are not producing any income. The up gradation of human resource is very slow in NBP. The branches of NBP have less number of employees as their requirements. The concept of One Man Show is adopted in many branches to save salary expenditure; even most of the branches use their security guards for various tasks. The one reason for this is that the senior management is able to decrease salary expenditure of the bank, which result an increase in the net profit. For their performance they received handsome amounts of bonus. But in long run it has a negative effect on banks productivity. The pensions distribution service or payments to EOBI beneficiaries, utility payments; workers remittances are occupied lowest priority level. In NBP Karobar scheme the product selected by the NBP is of inferior quality and develops faults in the first few months of delivery.
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CONCLUSIONS
The National Bank of Pakistan plays a key role in the strategic national development. The bank has historically been the financial arm of the government and has enjoyed the blessings of state support in the form of huge public sector funds and deposits. In contract to other banks populating the FSI sector, NBP is mandated to uphold public interest. It is critical too as all other banks and NBFIs in public sector have been closed down or merged with NBP. In contract to other banks populating the FSI sector, NBP is mandated to uphold public interest. It is critical too as all other banks and NBFIs in public sector have been closed down or merged with NBP. The current management of National Bank of Pakistan was hired purely for their international experience, business orientation to turn around a purely public institution into a sustainable and commercially viable bank serving public interest along the lines of a large modern commercial bank. The National Bank of Pakistan has effective budgeting system in place. Annual budget of the bank is approved by the Board and monthly comparisons of actual results with the budget are prepared and reviewed by the senior management. The National Bank of Pakistan has a comprehensive framework of written policies and procedures on all major areas of operations such as Credit, Treasury Operations, Finance, Internal audit and Compliance approved by the Board. The National Bank of Pakistan provides sustainable financing for growth of industries of critical national importance such as energy, education, healthcare, transport, shipping, Research & development.
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RECOMMENDATIONS
The National bank of Pakistan should be fully prepared in its management of financial crises and its business continuity planning, within the standing committee framework, and should work with others to strengthen national crises management preparations. The bank should improve the quality of training of its employees and the integrity, controls and efficiency of its systems, processes and financial reporting. The bank should improve its recruitment, retention and development and to reform the Banks pension scheme. The bank should renegotiate the Banks long term financial framework and to overhaul the Banks financial system. The Bank should improve IT capability in the analytical areas and to develop a medium term strategy for banking and market operations. The National bank of Pakistan should monitor the impact of its operations on the environment, which is mainly through the use of power and the generation of waste. NBP, being the only lending arm to the government for public sector development should design, develop and deliver product and services for economic growth. The bank should provide support to the Micro, Small and Medium enterprises thereby reducing unemployment and helping to create a more equitable distribution of wealth. The NBP should adopt modern banking tools and techniques. Quality leadership, clear vision, investment in IT infrastructure and human resource development. The bank should develop software for pension disbursement. As for as Islamic Banking environment is concerned the management and employees of NBP should work together for basic research for discovering their own laws, developing theories or concepts for the better direction of their own business environment according to Quran & Sunnah. The branches should reduce its large expenses in order to increase the value of the bank. The NBP should strengthen incentives and accelerate a results-oriented training and communications programs for management and staff.
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The National Bank of Pakistan should implement a financial inclusion program to meet the needs of underserved economic subsectors, including outreach programs to meet the requirements of the agriculture, housing, SME and microfinance sectors. The National Bank of Pakistan should introduce a framework for consolidated supervision and reorganize the regulatory architecture to allow better regulation and supervision of financial control division of bank.
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REFERENCES
1 2 3 4 5 6 7 8 9
http://www.nbp.com.pk/EcomomicBulletin/FS-Complete-31-12-2007.pdf NBP Quarterly Report September 2008 http://www.nbp.com.pk/nbp/About_Us/About_US.jsp NBP Quarterly Report September 2008 http://www.nbp.com.pk/nbp/About_Us/About_US.jsp Black's Law Dictionary page 471 (5th ed) Kotler, P., Armstrong, G., Brown, L., and Adam, S. (2006) Marketing, 7th Ed. Principles of marketing 8 ED by Kotler & Armstrong G7 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 87 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 91 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 88 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed http://www.nbp.com.pk/Aamdani/index.htm http://www.nbp.com.pk/Premium/index.htm http://www.nbp.com.pk/Saibaan/index.htm http://www.nbp.com.pk/advancesalary/index.htm http://www.nbp.com.pk/CashnGold/index.htm http://www.nbp.com.pk/StudentLoan/index.htm Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 221 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 228 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 228 SBP Prudential Regulations http://www.nbp.com.pk/nbp/NBP_Treasury.jsp http://www.nbp.com.pk/nbp/Treasury_Products.jsp http://www.nbp.com.pk/nbp/About_Us/DReport3.jsp http://www.nbp.com.pk/nbp/About_Us/DReport3.jsp NBP Annual Report 2007 Terry and Franklin Principles of Management Management 7 Ed Robbins & coulter
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
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30 31 32 33
Human error by James Reason NBP Annual Report 2007 http://www.jcrvis.com.pk http://www.jcrvis.com.pk/ratingscale/rating_process.htm
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