Objectives to study the organization

My basic purpose to study the organization is to get practical knowledge

where my education and skills utilize in a most appropriate manner. The
objectives to study the organization are.

• The basic to study NBP is to understand banking system.

• To observe how to deal with the customers and how motivate them.
• To analyze how banks provide services to the public & private
sector.
• To study financial transactions performed in a banking sector.
• In order to know, how to handle banking documents.
• It is second source of getting confident about practical work.
• As a student, by doing lot of errors and mistake in practice at last
we able to get experience about a work.
• It increases level of communication among employees and
outsiders.

1
 • To get knowledge how to create relationship and friendly
environment among people of different cultures.
• To analyze Strength, Weaknesses, Opportunity, Threats (SWOT) of
the organization.
• Provide efficient and effective recommendations on solutions of the
problems that face by the organization.

Brief History and overview of the organization

National Bank of Pakistan (NBP) was established in 1949 under the

National Bank of Pakistan Ordinance 1949 and was 100% government
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. By 1952 it’s became strong enough to take over the
agency function from the “Impirical Bank” of India. The NBP also
forward its operation and in 1964 established a people’s credit department
to allow credit facilities to small borrowers. It expanded a nation-wide
presence of supported by a network of online ATMs and expanded its
network of 1,200 branches throughout Pakistan. The bank is listed on the
Karachi, Lahore, and Islamabad stock exchange. It has more than 20
branches in foreign countries and still continues to open. The bank
provides both commercial and public sector banking services.

NBP is a schedule commercial bank and is engaged in business of

banking as well as a government bank services. NBP Advance Salary is a

2
big example of Individual middle class services. It is working under
Banking Companies Ordinance, 1962.

While continuing its journey of success, NBP gets highest profit in 2007
in banking history. As December 31, 2007 the bank has total assets worth
of USD 12.293 billion.

NBP is a commercial organization. It provides both commercial and

public sector banking services. The main focus of NBP is to raise assets
by marketing individual, wholesalers, manufactures, and government
sector in cities as well in urban areas development. This segment
contributes significant revenues to the bank. The liability side remains
focused on the middle and upper class, retired and serving government
servants. It is also a big contributor of foreign trade and serving as a
treasury bank.

In 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. In June 30, 1974 the government of Pakistan nationalized
NBP when the part of bigger bank amalgamated and NBP acquired Bank
of Bahawalpur. In 1994 NBP remains continue to increase its strength and
merged Mehran Bank.

In 2001, with the cooperative agreement of Pakistani Central Bank SBP

and Bank of England allow only 2 Pakistani banks to operate in the UK.
NBP and United Bank agreed to merge their operations to form Pakistan
International Bank (PIB), of which NBP would own 45% and United
Bank 55%. In 2002, Pakistan International Bank renamed itself United

3
National Bank Limited (UNB). The ownership structure of the UNB
remained as before. The only change to the shareholding structure is that
UBL had recently been privatized in Pakistan and was now owned 49%
by the Government of Pakistan and 51% by a joint foreign consortium of
Abu Dhabi. In 2003, NBP received permission to open new branches in
Afghanistan and Bangladesh, the inaugurated ceremonies of these
branches held in 2007.

Head Office

Head office of NBP in NBP Building, I.I. Chundrigar Road, Karachi,

Pakistan which is “the city of lighting” in Urdu “Uroos-ul-Bilad” which
was also the first capital and ancient place of Pakistan. It carried out its
successful journey to make it an “Asian Tiger”.

Corporate Information

Board of Directors

Syed Ali Raza Chairman & President

Mian Kausar Hameed Director
Muhammad Ayub Khan Director
Mr.Tariq Kirmani Director
Sikandar Hayat Jamali Director
Azam Faruque Director
Muhammad Arshad Chaudhry Director

4
Auditors

The auditors, M/S Ford Rhodes Sidat Hyder & Co. and M. Yousaf Adil
Saleem & Co., Chattered Accountants have completed their assignment
for the year ended Dec.31, 2007. These are the independent external
auditors involved in providing financial services, with the approval of
State Bank of Pakistan.
Customer Services

NBP offers a number of valued products and services to the diverse

market segments. These include.

LIABILITY PRODUCTS ASSETS PRODUCTS

Saving/Time Deposits Personal Finance

NBP Debit Card Home Finance
Utility Bills Payment Business Finance
Travelers Cheques Mortgage/Agricultural
Running Finance
Demand Finance

Awards and Recognition

Over the years, NBP has received several awards for its better quality of
providing banking services to the individual and businesses.

Credit Rating

5
According to annual report the year ended December 31, 2007, the “JCR-
VIS Credit Rating Company Limited”. NBP enjoys the highest credit
rating amongst Pakistani banks. The rating company awarded highest
standalone credit rating of ‘AAA’. The JCR-VIS credit rating Co. signifies
that the organization has been able to strategically manage and build on its
competitive advantages, which has translated into the strong and well
managed in profitability.

Functions of the organization

The financial Intermediaries or banks mean a business that interacts two

types of individuals and institutions for economic development.
• Deficit-spending individuals and institutions
• Surplus- spending individuals and institutions
Deficit-spending individuals and institutions are those whose expenditures
exceed their income, they need extra money to further carry on their
movements required through capital i.e. through borrowing of money or
issuance of stock.
Surplus-spending individuals and institutions are those whose income
exceed their level of expenditures, they have extra money in his pocket;
they invest surplus money or deposit it for savings.

In small words, a bank is a financial intermediary accepting deposits from

general public and granting loans: offers the widest menu of services of
any financial institutions.

In ancient days, banks were providing separate services as compare to

financial institutions. They were providing specific functions. Now days

6
banks are configured and performing all those activities of products and
service due to the requirement of the customers. NBP is a commercial
bank. NBP is a most powerful organization in Pakistan due to deposits.
The success of NBP hinges on their ability to identify the financial
services the public demand producing those services efficiently and sells
them at a competitive price, the basic purpose to increase shareholder’s
wealth. The main functions and objective of NBP are.

• Mobilizing of money for economic development of Pakistan

• Acting as a government or local or any other person or persons,
and on behalf of agency of customers.
• General utility services
• Accepting deposits and providence of loans etc.

Business volume
Rs.in million

Particulars/years 2003 2004 2005 2006 2007

Total Assets 468,972 553,231 577,719 635,133 762,194
Deposits 395,492 465,572 463,427 501,872 591,907
Advances 161,266 220,794 268,839 316,110 340,677
Investments 166,196 149,350 156,985 139,947 210,788
Shareholder's
Equity 18,134 24,900 37,636 53,045 69,271
Pre-Tax Profit 9,009 11,978 19,056 26,311 28,061
After-Tax Profit 4,198 6,195 12,709 17,022 19,034
Earnings Per
Share (Rs) 8.53 10.48 17.92 20.88 23.34
No of Employees 13,272 13,745 13,824 14,019 14,079

7
Trend Analysis
Rs. in million

Discriptions 2007 (X) Y

Revenue 42,451 -3
Deposits 591,907 -1
Advances 340,677 1
Investments 210,788 3
1,185,82
Total 3 0

By Equation,

Y=a+bX

By simplifying,

∑Y=na+b∑X
∑XY=a∑X+b∑X2

Hence by putting values, we get

a=0.465
b=.00000157
So equation is
Y=0.465+.00000157X

8
 DIFFERENT DEPARTMENTS AND THEIR
WORKING

Different Departments

Branch Banking

General Banking Credits/Loans

Deposits • Credit Facilities

• Cash • Loans
• Account opening • Documentation
• TDRs/Non-
Checking Accounts

Remittances
• DD, TT, PO
• Online funds
Transfer/MT
• Traveler Cheques

Collection of
Cheques
• Clearing
• Bills
(OBC, IBC, LBC)

9
 Accounts
Department
• Daily Activities
• Record Keeping

WORKING OF DEPOSITS DEPARTMENT

Deposits are the lifeblood of commercial banks. The main function of a

commercial bank is to mobilize deposits of money from the savers and
lend into for most profitable purposes. The process of collection deposits
is “Deposits Mobilization”.

Deposits can be divided into two categories.

Deposits

Checking Non-Checking
Accounts Accounts

PLS Saving PLS TDR’s

Account

Current Deposit Special Notice

Accounts Deposit Accounts

10
 Foreign Currency NIDA
Accounts

Categories of Deposits

There are two broad categories of deposits. These are

• Time deposits
• Demand deposits

Time Deposits Demand Deposits

• These are payable on • These are not payable of

maturity maturity but on demand
• Receive profit with respect to • No profit is given on demand
time period deposits

• All TDRs, saving accounts • They include current

and other profit bearing accounts and call deposits

accounts are included. etc.

Current Account

Current accounts are opened on proper introduction and submission of

required documents.
No profit is paid on the current account holders.

11
No limitation to the number of withdrawal.
Statement of Account is issued free of charge to the current account
holders on semi-annual basis.
No zakat is deducted on current account.
No withholding tax.
Basic Banking Accounts

BBA’s are opened on proper introduction and submission of required

documents.
BBA’s are opened for individuals single or joint only.
No profit is paid on Basic Banking Accounts.
In BBA’s maximum two deposits transactions and two chequing
withdrawals are allowed free of charge through cash/clearing in a month.
Charges only made on issuances of ATM, no charges are made on further
transactions from the banks own ATM.
PLS Saving Account

Saving deposits were introduced to encourage the habit of saving among

people. In order to encourage the Islamilisation of the banking system in
the country, the bank is authorized to accept deposits on profit & loss
sharing basis. The bank is authorized to deduct service charges on half
yearly basis. Profit on PLS Saving Account is calculated on minimum
monthly basis and is paid half yearly basis announced by the Head Office
after June 30 and December 31.Zakat at the rate 2.50% is deducted from
the PLS Saving Accounts. A withholding tax at the rate of 10% on profit
is recovered from the account holder.

National Income Daily Account (NIDA)

12
The scheme of NIDA was launched in December 1995 at attract at
corporate customers.
NIDA are opened for individuals single or joint, Charitable institutions,
Provident funds, autonomous bodies, companies, associations,
educational institutions, firms etc.
NIDA is accepted only on the condition that the depositor shall always
maintain a minimum balance in his account.
These are special accounts of savings. Profit is paid to the account holder
on daily basis.

Premium Amdani Account

Premium Amdani Account is opened by all who are allowed to open

current, PLS, NIDA accounts.
It is necessary to maintain minimum balance if not no profit for the month
will be paid to the account holder.
A higher rate of profit as per bank discretion paid to depositors
maintaining balance Rs.300, 000/=
Maximum two debit transactions in a month are allowed free of charge.
On 3rd transaction profit will forward.
Additional amount only accepted in lot Rs.25, 000/= if any customer
wants to deposit money.
Premium Amdani Certificates are issued for the period of five years.
PA deposits are drawn only at maturity if in the event any depositors
wishes to draw before maturity, he will liable to the right to contribute in
loss only.

PLS Term Deposits

13
The bank accepts these deposits with minimum sums as prescribed by the
bank for a fixed period of time.
Terms deposits are accepted for a period of one month to five years.
Minimum deposit is accepted is Rs.25, 000/= with no upper limit.
Available to all types of investors i.e. individuals, partnership firms,
public and private limited companies, corporation, trusts, and government
bodies. Profit is paid on maturity. Profit may be paid in cash, pay order,
demand draft or any other form.

Call Deposits
Call deposits are the sorts of deposits, which are deposited in the bank
against any tender. This is without interest deposit and may be with
interest provided. The depositor has agreed to keep this amount with the
bank for some fixed period.

Foreign Currency Accounts

These are the accounts in US $, Pound, Euro, yen etc. of different account
holders and either saving or current accounts.
Profit is fluctuating as determined by the State Bank of Pakistan on six
monthly basis whereas return on Term deposits/SNTD will paid on
maturity.
The transactions in these accounts are translated into Pak. Rupees at the
exchange rate prevailing on the date of transaction.

14
 WORKING OF DEPOSIT DEPARTMENT

Account opening

NBP has the following classification of accounts.

1. Accounts of general customers (Individual accounts)

• Minor account
• Illiterate person account
• Joint account

2. Accounts of special customers

• Proprietorship account
• Partnership account
• Limited company’s account
• Accounts of clubs, societies and associations
• Agent account
• Trust account
• Executor’s and administrator’s account

The procedure of opening a new account is as follows: The Account is

opened after obtaining proper information. All the necessary documents
required opening an account according to the account opening type
obtained from the customers.

A distinctive Account number is allotted to each account holder.

15
The signature of the new account holder is taken on the account opening
from and SS (Sample Signature) Card from individual and in case of the
company.
The signature of the introducer is also verified on the account opening
form with CNIC copy.
For illiterate person a picture of the newly account holder is taken and
attached with SS Card.
In case of signature other than English by the account holder vernacular
form is obtained.
First chequebook is issued after all formalities are completed.

Cheque Book Issuance

Before issuance of chequebook all the account opening formalities should

be completed.
First chequebook issued against account opening form with letter of
thanks by the account holder.
The signature of account holder is duly verified with SS Card.
All subsequent cheque books to be issued against the requisition slip
extracted from the previous cheque book.
Name and account number should be written on cheque book and
requisition slip.
Stamp or write down account number on each leaf of the cheque book.
Cheque books issued in the running serial order.
Enter particulars in the cheque book issue register.
Enter detail in the system. These records should be daily checked by the
Daily Cheque Book Report, which should be signed by the authorized

16
officer after checking cheque book series input number. At the end of the
day all the cheque books should be checked and balanced with the help of
requisition slips.

In case of cheque book is issued without the requisition slip of previous

cheque book care must be taken to establish the genuineness of the
customers and Form should be obtained.

In some cases when cheque book is issued by the person duly authorized
by the account holder for obtaining cheque book, a letter of issuance of
cheque book is sent to the account holder for his acknowledgement.

In rare cases when customer demand printed cheque book, requisition slip
with demand letter is sent to the NIFT (National Institutional of
Facilitation Technology) (PVT) Ltd.

WORKING OF REMITTANCE DEPARTMENT

Four main modes of remittance are:

• Demand Draft
• Pay Order
• Mail Transfer/Online Funds Transfer
• Telegraphic Transfer

Demand Draft

It is a legal banking document payable on demand for which value has

been received, issued by one branch of the bank drawn by the same

17
branch of the bank from one city to outside the city. In case of agreement
the other branches of other banks. e.g. can also draw it. DD issued by
NBP payable by HBL.

Issuance of Demand Draft

The customer on standard DD application form makes request.

All information such as name of beneficiary, place where the DD is
drawn, amount mode of payment, cash/cheque/debit authority, signature
with name and address is filled.
The issuer checks the information.
Commission as per schedule of charges is charged.
Withholding tax as per applicable rates is recovered.
After the customer has made payment by cash/cheque, get the voucher
from cash department.
The DD of required amount is prepared.
The DD in NBP is manually prepared.
Junior DD can also be used in place of Senior DD if not required by
writing down with SNR DD equal to Rupees --.
Entry is made in DD issued register as well as on the system on which
following entry is passed.
Dr: Cash/Customer’s A/C
Cr: DD issued
Cr: DD issuance charges
Cancellation of DD

If any customer wants to cancel DD, obtain application in writing along

with original DD.

18
Verify the signature of applicant. This signature should tally with the
signature of DD application form.
Check the DD account into system of payment made or not.
Mark cancellation in DD issued register.
Recover cancellation charges.
Payment is made from Suspense Account DD cancelled after recovery of
cancellation cheque is per schedule charges.
Inform the drawee branch regarding cancellation and ask for Inter-Branch
Credit Advice (IBCA).
On the receipt of IBCA adjustment is made.

Lost/Stop payment/Issuance of Duplicate DD

Application form received from purchaser and verifies the signature.

Inform the drawee branch of the loss of DD and advise them to mark
caution against payment if presented.
After necessary checking, the drawee branch will inform the branch about
the status of DD whether it has been paid or still outstanding.
Write on the face of duplicate DD in red ink”Duplicate in lien of original
DD No--- dated ---reported lost”.
The duplicate DD will have the same control number.
The DD serial control is mentioned on application form.
The signing officer must check all the particulars before signing.
Pay order

Pay order issued from one branch is only payable from the same branch.
It is normally issued for payment in the same city and is referred to as
Banker’s Cheque.

19
Issuance of pay order

Get application form from the customer.

Issue pay order after vouchering all necessary formalities.
Get recovering charges and withholding tax in case of cheque deposit for
PO.
Make entry in PO issue register.
All pay order must be crossed “payee’s account only”.
It must be noted that Inter-Branch Clearing Advice is not involved
because it is payable at the same branch and same city only.

Cancellation

Get application for cancellation with original pay order.

Recover cancellation charges.
Signature verified by the officer.

Duplicate PO

Check the record that payment has never been made.

Get application for issuing of duplicate PO.
Recover charges as per schedule.
Issues duplicate PO by writing “ink red” pen “Duplicate PO”.
Mail Transfer/ Online funds Transfer

It is the quickest and safest modes of transfer of funds.

Application form submission is same as DD.

20
In MT funds are transfer through system within seconds if 2nd branch is
online.
Funds transfer only same branch of the banks.
It is necessary that the customer must have the Branch Code of the host
branch, account number of a drawer, name of place, etc.
Necessary requirements of funds transfer.

• Account enquiry
• Cash transactions
• Transfer of funds
• Printing statement

Inter-Branch Clearing Advice is involved.

The access can only be made through key password.
If OK message is received by the issuer branch system from host branch
then the source branch to proceed further otherwise not.

Telegraphic Transfer
It is also a quick way of transfer funds from one branch to another of the
same bank through telephone, fax/telex.
Procedure of application and vouchering is same as a DD.
Apply test on the TT message and appropriate codes and instructions such
as advice & credit or advice & debit.
It is mostly cleared through main branch of the same area.
Recover commission, telephonic charges and withholding tax as per
applicable rate.

21
Schedule of Remittance charges

DD/MT/TT issue
a) upto Rs.100,000/- 0.10% min Rs.50/-
b) upto Rs.1,000,000/- 0.05% min Rs.100/-
c) over Rs. 1,000,000/- 0.04% min Rs.400/-
Pay order
d) for A/C Holder Rs. 55/-
e) for Non-A/C Holder Rs. 110/-
f) Issuance of Duplicate DD for A/C Rs. 200/-
Holder
g) Issuance of Duplicate DD for Non- Rs. 250/-
A/C Holder
h) Issuance of Duplicate Pay order for Rs. 150/-
Non-A/C Holder
i) Postage charges on TT only Rs. 75/-
j) TT phone charges Rs. 100/-

WORKING OF PENSION/LOCKER
DEPARTMENT

Pension is defined as the payment of retired govt. servants, who die

during service but fulfill the age of pensioner, Employees Old Age
Benefits (EOBI), etc.

Types of pension

• Govt. servant retired benefits

22
 • Benevolent funds
• Employees Old Age Benefits

Required documents in case of a new pensioner holder check by the head

of department.
Entries of new pensioner holder are made into the “Pension Register”.
If the customers receive Benevolent Funds opportunity entries are also
made into “Benevolent Fund Register”.
Recommend monthly pension according to the permissible amount duly
approved by the competent authority.
In case of a customer wants to transfer pension indirectly in his account
deposit slip is attached with pension form.
The necessities before filling an application of pension form are P.P.No,
Army No, and Railway Station No. etc due to the post and department of
pension where employee.
Entries are made at last into the system.

Locker

It means a box operate by a customer of holder on permanent basis.

There are three types of locker operate in banks.

• Small
• Medium
• Large
An application form is necessary for customer with desire documents and
approval made by the head of department.

23
Locker operation account is allowed for a account holder, Non-account
holder not able to operate it.
Lien is placed on the account of a locker holder on drawing of amount.
Entries are made on “Locker Register” as well as on the system.
Locker No and Key No is allotted to the locker holder for further
operation.

Charges of Locker
Small Rs.8, 000/=
Medium Rs.12, 000/=
Large Rs.16, 000/=

WORKING OF CLEARING AND CHEQUES

COLLECTION DEPARTMENT

Clearing

Clearing is a system by which banks exchange cheques and other

negotiable instruments drawn on each other within a specified area and
thereby secure payment for their clients through the clearinghouse at a
specified time in an efficient way.

Clearing House
National Institutional Facilitation Technology (NIFT) Pvt. Limited is
performing the function of clearing and charges commission against it.

24
The commission of per collection charges is Rs.2/- per cheque. Before the
NIFT, the State Bank of Pakistan (SBP) with efficient controlling staff
performed the process of clearing.

The process of clearing is carried in two categories.

• Inward clearing
• Outward clearing

Inward Clearing
Cheque received of other parties after clearing are lodged in the system by
vouching date, signature, documents numbers is noted. The cheque
without sufficient balance, changing in amount, signature and verifying
other formalities returned to the customer by attaching return memo
explaining the cause of cheque return. Return cheques also enter into the
return register by writing dates, causes of return, and amount. After
posting summary of cheques is prepared and cheques return to third
parties through NIFT.

Outward Clearing

These are the cross cheques deposited by the customers for credit the
same amount to its account. Before posting following is being performed.
Crossing cheque stamp if not place it.
Title of account and account number from deposit slip is checked.
The deposits slip is handed over to the customers by branch stamping.
Entry is done in daily register.
Add list is being prepared.

25
Special crossing clearing stamp of next day is affixed.
The payee’s amount will credit stamp is affixed on back of the cheque.
In case of outside city clearing Inter-Branch Clearing Stamp is affixed.
Place all the cheque in a back with special closing and sent to NIFT.

WORKING OF ACCOUNTS DEPARTMENT

Daily Activities
The main function of this department is to check daily transactions
whether cash, transfer of payments, billing, and clearing of all the
departments.
Following procedure is followed in checking daily activities carried out in
different departments of the branch.

• All the vouchers, advices both manual as well as computerized

obtained for posting in the system of each department.
• All the vouchers and advices are further sorted in ascending and
descending order for the sake of convenience in checking and tally
information.
• It is checked whether or not the account number, instrument
number, document number and amount appearing in words and
figures are agreed with the information appearing in the
computerized record.
• In case of changing or discrepancy informed to the concerned
department.
• All the credit, debit and billing voucher bunched separately.

26
 • The name of the branch, date of vouchering, title and number of
vouchers is written on voucher must be cover authorized signature.
• All the above vouchers assist in case of any enquiry and audit.

Handling of Stationery

All the branches of the companies required having a complete record the
stationery to be used. Accounts department also maintain and handle the
record of stationery used during the month.
G-9 NBP branch request to main branch for stationery requirements and
record maintain for this purpose. On receipt of stationery following entry
is passed.
Dr. Stock of Stationery
Cr. Main Branch
Stationery issued into the branch for daily uses and entry is passed.
Dr. Expenditure A/C Stationery
Cr. Stock of Stationery A/C

27
 LEARNING AND PERSONAL INTERNSHIP
EXPERIENCE

In Allama Iqbal Open University, Islamabad, the students of Department

of Business Administration are required to undergo for eight weeks of
internship to complete the Master degree. For this reason, I carried out my
internship in National Bank of Pakistan, G-9 Markaz, Branch, and
Islamabad and try to prepare my report.

During the session of three month I work in different departments on

weekly basis. The employees of the bank help me and provide me all
required information. I studied major functions, objectives and future
planning. I worked in different departments during working as a internee
which is very beneficial and I am able to get basic concepts of banking
operations.

Deposits Department

The basic purpose of the deposits I stated earlier in previous discussion.

Ms. Seemi Qazi is the head of this department. The main function of this
department are maintaining records of saving, current, call deposit, and
NIDA account holders, their signatures, their balances, issuance of cheque
book, scrutiny of cheques issued.

I worked in Opening accounts, made entries on accounts opening register

and post them into the system. It was crucial to entry made on computer

28
but after three days it was permission to me to make entries on the system.
I prepared several cheque books and enter the detail into the system as
well as in the cheque books issuance register. I also learnt to cheque
posting on system. In the cheque book posting something which are
necessary, account number, cheque number and amount to be debit or
credit should be matched.

Cash session in the bank is one the sensitive place we as a internee also
work there in cash deposit, withdrawal, etc. There is a complete process in
case of cash withdrawal. A person who fills a cheque take the token,
posting is done into the system and then signature is verified. In case of
discrepancies in signatures, date, cutting, and the amounts written on the
cheque in words and figures, the cheque returned to the customers without
any excuse. SS cards verification is one of the most difficult works of this
department; I also go through only specific activities in which the heads
of verified informed me.

Pension/locker department

Mr. Atif Hussain is the head of pension/locker department. During my

internship, I learnt how to handle with new pensioner’s cases, entries
made into the “pension register”, recommend payments of pension on
monthly basis, transfer of payments into the accounts of the customers,
entries made into the system. The most obligatory thing for payment of
pension is to check pension slip in form of cash payment P.P.No., name of
the pensioner, signature, and payment period. In case of pension holder
does not come to receive, it is legally recommended that the pensioner

29
holder issue authority letter to the desire person otherwise pension will
never be paid in cash.
I carried out my further effort to learn in locker department. In locker
operation, I help in fulfillment locker application form, entries made on
the “locker register” then key no and locker no allotted to the locker
customer.

Remittance Department

It is a transfer of money payable at a certain place within or outside the

country. It was my third department. Ms.Seemi Qazi is the head of
department. In this department I learnt about issuance of PO, DD, MT,
and T.T. I made all the four categories of funds transfer. Head of
department help me a lot to achieve this target. I only make entries of PO,
and DD, on the system. MT is an online system it was not permissible to
internee to do it. The Manger only does TT; it is so secret way of transfer
funds.

Accounts Department

In accounts department, Mr. Ahmad Assistant is performed all activities. I

sorted vouchers, check daily activities, and check advices by tallying the
account number, instrument number, document, and amount appearing on
the instrument in words and figures with the information register and on
the system.

30
 Structure and Functions of the Accounts/Finance
Department

CFO

Asst Finance
Officer

Accounts
Finance Department
Department

Finance Manager
Operations & Accounts Payroll
Business Manager Manager

Senior Business
Analyst
Senior Senior
Accounts Accounts
Payable Receivable
Business Analysts

Accounts Asst Accounts Asst

Payable Receivable

The department of finance and accounting is a large department and the

head of this department is chief executive Finance and second major
controlling authority is the assistant executive finance and all the

31
reporting comes to the executive finance in the end. In this major
department there are two major operation authorities, one is the head of
finance department and the second is the head of accounts department and
both the heads have separate duties and responsibilities and they report to
the executive finance in the end.

Head of finance department works with the sub-ordinates like manager

business operations and finance manager business and senior business
analyst etc. and they perform their duties like budgeting controlling and
analyzing the different activities of finance department. And the other
officer is the accounts manager, who performs managing the accounts
operations and reports upon them to the executive finance.

32
Accounts Department

Accounts Department plays a vital role in the development of banking

functions. It’s considering a backbone of the bank. The accounts
department in NBP is functioning computerized as well as manual. It
handles each and every transaction is being made into the bank, and
control expenses and allocation of funds through appropriation of
accounts. The work in accounts department is depending on vouchers and
contra entries are passed through different heads.

This officer is working under the director finance, or in other words

director finance is the higher authority for this department and its
functions are as under.
The functions cover the working in accounts department is as follows.

• Budgeting
• Controlling
• Analyzing
• Directing
• Coordinating business activities
• Reporting to director finance

33
 • Admin activities

Finance Department

It is the person, which is also bond to the executive, finance and accounts
because executive finance is the higher authority to this person but the
functions of this department are not same in the nature to the above first
department.

The primary responsibility of finance department is making planning,

analyzing, and valuation of financial resources and to provide consistent,
reliable, and timely information to management, stakeholders, regulators,
and internal business groups to help management in appropriate decisions
making for improved performance of the bank.
The main functions of the finance department are as follows.
• Analysis of accounts
• To maintain inventory records
• Finance activities
• Audit preparation
• To keep record of loans, accounts, cash, and all banking
transactions according to accounting principles
• Funds management
• Preparation of cash flow, income statement, and balance sheet
• The use of effective budgetary techniques for budgets

34
 • Preparation of reports/ cash forecast

NBP is a most growing organization and performing a role as a treasury

on behalf of SBP, the whole functions of the bank is totally depend upon
the finance department. It has a core value in the promotion of banking
sector. Budgets and forecasting is further assist for future planning.
Different books of accounts are prepared into the bank through
computerized system and manual. The accountants prepare daily, weekly,
monthly, quarterly, and yearly reports.

Preparation of repots

The basic purpose of accounts and finance department is to prepare

financial reports for decision-making and future planning. Different
reports are prepared in NBP due to getting information and time period
requirements. Reports are prepared by using general ledger. The following
reports in accounts and finance department are prepared.
Daily reports: It summarizes the daily position of all the main heads of
the bank i.e. cash, loans, deposits, accounts and ATM’s. Other daily
reports are
• Balance Sheet
• Reconciliation reports
• Trial balance
• Financial statement
• Daily expense vouchers

35
Monthly Statement: These reports are monthly basis in order to know
the position of the bank and pay rewards on monthly basis, etc.
• Balance sheet
• Profit and loss statement
• Monthly analysis of expenses
• Actual budget analysis
• Cost of funds statement
• Variance analysis
• Trial balance
Quarterly Statement: It includes tax statement, reconciliation’s, others
reports and interest statements etc.

Role of Financial Managers

Cash management

Cash includes physical cash comprising of currency notes and coins held
in the office, at the factory, branch or company. There are three major
reasons for holding cash:
• Transactional motive
• Precautionary (Emergency) motives
• Speculative (Investment) motive
As a financial manager, it is the responsibility of a manager to hold cash
up to the point where current ratio should never be decrease in by one.
The focus of manager to holds the optimum, amount of cash in hand at the
right time. Cash management shows that how an organization needs, how

36
much it as, and where to be collected. The objectives of financial manager
to invest excessive amount for a return while retaining sufficient liquidity
to satisfy future needs and plan where money to be collected or borrowed.
The amount of cash to be held depends upon the following factors.
1. The Manager develops a complete cash management policy.
2. Idle cash should be minimized.
3. The bank should be able to payment obligations on due dates so as
not to lose any goodwill.
4. The bank completely maintains a current liquidity position.
5. Forecast short and long-term cash flow.
6. The maintenance of cash flow due to deterioration in economy.
7. The Manager follows a speed up cash receipts methods.
• Concentration Banking
• Offer cash Discount to the customers
• Selling of Account Receivables
• Prompt follow up debtors/Reminder
• 2nd Reminder
• Contact to court or recovery department

Credit Management

37
“It is management of account receivables or the people to whom a

company sells goods or services.” Advances and Deposits are the major
sources of the bank. The volume of banking sector is depending upon
these factors. Financial experts are desired to extend credit due to the
limitations of the customers and capability to pay back. In NBP, G-9,
branch advance salary and subordinated loans are basic and big credits
issued to customers. NBP extend credit in order to.
• To attract new customers
• By encouraging existing customers to get more deposits and
credit
• By producing loyalty among customers, leading to client
retention
1. The role of Manager to draw up a complete credit policy to ensure
2. The manager analyzes “Credit Information Bureau Report” (CIBR)
before issuance of credit to any customers. The basic needs to be
discussed and study by the Manager are to see.
• Overall parameters for credit volume
• Vetting process of new clients
• Classifying clients
• Procedure for processing orders from clients
• Credit records
• Follow up procedure
• Incentives for prompt settlement
• Recovery process
• Provision for Bad and Doubtful debts

38
 • Periodic review of credit situation

Use of Information Technology in Decision making

Today banking is becoming more and more complex with the introduction
of new products, services and enhancing regulatory compliance
requirements. It is the use of information technology that can improve the
customer’s services and reduce the cost at the same time. NBP adopted
“IBM Software” for service providing motives, the “IBM Software”
categories into two sections.

• BBO (Branch Banking Office)

• EBS (Electronic Banking System)

EBS is used for any kind of transaction within the bank .i.e. Receipts and
payments, Bills Collection, Tax receipts, etc. BBO is use for remittances.
The use of IBM Software is one of the main purposes of collection
electronic data for the bank that further helpful in future in decision
making. Now a day, the bank plans for transformation of the entire I.T.
architecture by implementing a core Banking Solutions.

The bank prepares financial statements, agricultural reports, customer’s

management, risk management and other reports for decision-making
purposes. The I.T. system of the bank not only increases distribution
capabilities but also simplify internal procedures thereby reducing the cost
and lead-time for services. NBP has started a number of projects in
relation to I.T. infrastructure up gradation. The bank is expanding its ATM

39
 (Automatic Teller Machine) network and connectivity to reach to the
customers in every corner. In future, NBP is looking I.T. products for
salary and pension disbursements and E-banking for better services.

Competitor’s analysis

The growth in the banking industry of Pakistan has led to an increase in

the number of banks both domestic and international to be established and
create a competitive industry. NBP competitors come in the form of both
domestic and international banks working in Pakistan because of its
products and services offered. NBP is in position to increase its market
share and shareholder’s wealth by enhancing products and services and
become a largest bank in the history of Pakistan in financial year 2007.

Descriptions/Bank
s NBP MCB UBL Bank Alfalah ACB
374,07
Total Assets 762,194 2 383,472 317,711 307,034
281,34
Deposits 591,907 9 335,077 279,917 251,711
243,39
Advances 340,677 2 254,272 197,277 114,971
Capital 69,271 43,259 16,807 14,499 13,053
Profit after Tax 19,034 12,444 12,056 10,555 9,097
Source: SBP

Total Assets

40
NBP is a most growing organization in banking sector. Total assets of
NBP are persistently going to increase and show an upward trend
throughout the financial year. Table show that total assets of the bank for
year 2007 are Rs.762, 194/= in million while increase by 16.6% then last
year. We can see that total assets of the bank are still at top position that
shows its growth due to its competitors. The latest figures show that MCB
at 50.9% less, Bank Alfalah at 58.32% less, UBL at 49.6% less and ACB
at 59.72% less, comparison in financial year 2007. So we can say that
NBP is in strong position in banking sector.

Deposits

Deposits are treated as backbone of the banking sector. Banks offered

different schemes to allocate deposits form general public and lend them
to public and corporate sectors. NBP is also one of them. Deposits of NBP
in Rs.591, 907/= in million. NBP now enhance its position by 15.21%
then last year 2006. It shows NBP’s economic stability.

Advances

Loans and advances are the major sources of revenue in banking business.
Advances of NBP in financial year 2007 is Rs.340, 677/=, MCB is at
Rs.243, 392/=, UBL at Rs.254, 272/=, Bank Alfalah at Rs.197, 277/=, and
ACB at Rs.114, 971/= in million mentioned above on the table. It express
that NBP got 7% increase in advances in year 2007.

Capital

41
The capital is the amount invested by the owners into business. All
shareholders are the owners of the organization. NBP’s balance of at
January 1, 2007 was Rs.7, 090,712/= and issued bonus shares at 15% by
Rs.1, 063,607/=. The table shows persistent growth as its competitors.

Profit after Tax

The profit of NBP is Rs.19, 034/= in million which is the highest rate of
profit in banking sector. So the highest profit shows that NBP received
best return on capital for 2006 amongst all banks in Asia.

Sources of funds

Sources of funds reveal the organizations needs for funds, the timing of
these funds when required, and for what purpose these funds are needed.
These are the main elements to carrying out the operations of business. It
involves the analysis of capital uses by the Bank i.e. Debt and Equity
financing.

Debt financing

NBP’s in financial year 2007 get debt in Rs.10, 886/=, and Rs.11, 704/= in
million in year 2006, which is 7.5% low. Bills payable of the bank are
also decreasing by 50% in 2007.

Equity financing

42
The basic purpose of financing is to get funds from different ways
depending upon capital structure mentioned by the top management
during a period of time. But to finance with lower interest rate and invest
higher return is the business of banks. NBP’s share capital with increase
in 13.05% year 2007 is
Rs.8, 154/=.

Generation of funds

NBP offers different products and services to generate funds. Deposits are
the main heads of generation of funds. The banks receive from public and
invest it for the sake of return. Banks receive fees, commission on
services offering; get interest of investments, and dividend etc.

Descriptions/Years 2003 2004 2005 2006 2007

Interest income 12,716 14,387 23,312 30,153 33,629
Total income 17,345 20,944 30,512 39,945 42,451
Net profit 4,198 6,242 12,709 17,023 19,033
Source: annual report

Allocation of funds

The most important functions of banks are to allocate funds and make a
portfolio of funds to profitability. NBP allocate resources from different
ways i.e. reserves, and fixed asset sales.

43
Reserves

It is the amount set aside to meet statutory requirements of SBP and

maintain liquidity position. The reserves of NBP are Rs.8, 133/- in million
in financial year 2003 and then constant increase with 26.8% in 2004,
17.86% in 2005, 2.54% in 2006 and 12.01% in year 2007. It also
determines the position of the bank during a period of time.

Fixed assets

Fixed assets are immoveable assets of the organization. Financial year

ended December 31, 2007 shows property and equipment of NBP are
Rs.29, 792/= in million before depreciation and after depreciation amount
is Rs.25, 454/= in million, it is also a comparative figure to show a bright
future of the bank.

Financial analysis

Financial analysis refers to an assessment of the viability, stability, and

profitability of a business, or projects. It is performed by professionals
who prepare reports using ratios and other analysis that make use of
information taken from financial statement and other reports. These
reports are usually presented to top management as one of their bass in
making business decisions. Or it is a process, which involves
reclassification and summarization of information through the
establishment of ratios and rends.

44
 Balance Sheet as at December 31, 2003-07

Descriptions 2003 2004 2005 2006 2007

Assets
Cash and balance banks 59,420,502 94,446,552 71,196,956 78,625,227 94,873,249
Balance other banks 24,154,070 49,784,884 31,019,330 40,641,679 37,472,832
Lending fin. inst. 30,213,352 10,511,322 16,282,942 23,012,732 21,464,600
Investments 166,195,619 144,735,672 156,985,686 139,946,995 210,787,868
Advances 160,990,265 221,443,963 268,838,779 316,110,406 340,677,100
Other assets 21,946,846 18,339,514 23,941,056 9,681,974 30,994,965
Operating fixed assets 8,939,483 9,202,969 9,454,365 ----- 25,922,979
Deferred tax assets --- 1,275,949 ------ 27,113,698 ------
Total Assets 471,860,137 549,740,825 577,719,114 635,132,711 762,193,593
Liabilities & Capital

Bills payable 5,496,738 7,214,671 1,741,156 10,605,663 7,061,902

Bor. from financial inst. 16,493,514 11,084,790 8,756,847 11,704,079 10,886,063
Deposits & accounts 395,568,490 465,571,717 463,426,602 501,872,243 591,907,435
Sub-ordinated loans --- ---- ---- ---- ----
Lia. financial lease 41,117 17,058 16,629 13,235 33,554
Other liabilities 26,080,400 22,916,147 24,974,450 26,596,300 30,869,154
Deferred tax liabilities 595,864 ------ 4,462,718 2,387,073 5,097,831
Total Liabilities 444,276,123 506,804,383 503,378,402 553,178,593 645,855,939
Capital
Share capital 4,103,422 4,924,106 5,908,927 7,090,712 8,154,319
Reserves 8,133,312 11,119,613 13,536,041 13,879,260 15,772,124
Unappropriated profit 5,897,163 9,213,565 16,713,506 32,074,677 45,344,188
Surplus on re. of assets 9,450,117 17,679,158 38,182,238 28,909,469 47,067,023
Total Capital 27,584,014 42,936,442 74,340,712 81,954,118 116,337,654
T.Liabilities & Capital 471,860,137 549,740,825 577,719,114 635,132,711 762,193,593

45
 Income Statement at Year 2003-07

Descriptions 2003 2004 2005 2006 2007

Mark-up/Return/Interest earn 19,452,317 20,947,333 33,633,735 43,788,628 50,569,481
Mark-up/Return/Interest expense 6,735,579 6,559,398 10,321,768 13,634,912 16,940,011
Net Mark-up/Interest Income 12,716,738 14,387,936 23,311,967 30,153,716 33,629,470
Provision non-performing advance 1,684,777 1,515,354 2,446,739 3,075,723 4,723,084
Provision diminution investments 459,523 185,707 -245,881 -709,461 -40,248
provision off balance sheet obligations 474,743 14,297 ----- --- ------
Bad debts off directly ------ 32,807 23,069 5,284 39,899
Net Mark-up/Int.Inc. After provision 10,097,695 12,639,770 21,088,040 27,782,170 28,906,735
NON-MARK-UP/INTEREST INCOME
Fee, Commssion and Brokerage Income 3,260,863 5,099,195 4,926,604 6,144,628 6,781,683
Dividend Income 1,126,742 1,273,863 1,718,478 2,891,755 3,263,246
Gain on sale of securities ----- ----- ----- ----- 2,341,690
Income dealing in f.c.’s 710,726 1,008,988 1,205,638 1,333,840 1,042,827
Share of profit of joint venture 108 47,557 ------- -31,964
Other income 2,149,800 875,113 1,573,905 627,618 147,363
Total non mark-up/int.incom 17,345,934 20,944,486 30,512,665 12,162,892 13,544,845
NON-MARK-UP/INTEREST EXPNESES
Administrative expenses
Salaries and allowances 4,761,408 8,878,801 11,195,133 13,443,441 14,457,580
Charge to defined benefit plans 280,632 ----- ----- ----- -----
Provision handshake scheme 293,612 ------ ----- ----- -----
Other administrative expenses 2,471,083 ------ ----- ----- -----
Other provision/write offs 33,454 32,243 198,298 -17,283 168,027
Other charges 22,894 8,284 63,206 208,327 17,141
Total non mark-up/interest expenses 7,863,083 8,919,328 11,456,637 13,634,485 14,391,079
Staff Welfare Fund 474,143 ------- ------ ------ -----
profit before tax 9,008,708 12,025,158 19,056,028 26,310,577 28,060,501
Taxation -Current 4,650,000 4,950,000 7,154,002 8,695,598 8,311,500
Prior years(s) 1,439,444 847,958 -1,098,709 530,652 391,497
Deferred 1,278,839 -15,729 291,291 61,981 323,731
Profit after tax 4,198,103 6,242,929 12,709,444 17,022,346 19,033,773

46
 How to drive ratios
1)
Working Capital= Current Assets-Current Liabilities
2)
Current Ratio= Current Assets/Current Liabilities
3)
Acid-test Ratio= (C. Assets-C. Liabilities)/C. Liabilities
4)
Debt Ratio= Total Debt/Total Assets
5)
Long-term Debt Ratio= Long-term debt/Total Assets
6)
ROA= N.I (Before-tax)/Total Assets
7)
ROE= N.I (Before-tax)/Total Equity
8)
NP Margin= N.I/Revenue or Sales * 100
9)
Total Assets Turnover = Sales/Revenue /Total Assets
10)
Time Interest earned = EBIT/Interest Expense

11) EPS = N.I./No of share outstanding

12)
Book value PS = (T. Assets-T. Liab.)/No of share out.
13)
Cost to Income Ratio = Cost/Income

47
14) Fixed Assets Turnover = Sales/Fixed Assets

15)
OP. Expense Ratio = EBIT/ Op. Expense

Ratio Analysis

48
Ratios 2003 2004 2005 2006 2007
Working Capital in
9,099,364 38,900,632 58,410,275 60,459,328 79,743,881
(000)
Current Ratio 1.03 1.08 1.13 1.12 1.13
Acid test Ration 1.03 1.08 1.13 1.12 1.13
Debt Ratio 94.15% 92.19% 87.13% 87.09% 84.74%
Long term Debt
3.50% 2.02% 1.52% 1.85% 1.43%
Ratio
Return on
2.0% 2.4% 3.4% 4.3% 4.10%
Assets(ROA)
Return on
38.66% 36.01% 29.64% 49.6% 45.90%
Equity(ROE)
NP Margin Ratio 24.20% 29.81% 41.65% 42.62% 44.84%
Equity Ratio 5.85% 7.81% 12.87% 12.91% 16.36%
Total Assets
0.037 0.038 0.053 0.063 0.056
Turnover
Operating Expense
45.33% 42.58% 37.55% 34.14% 33.01%
Ratio
Time Interest earned 1.34 1.84 1.85 1.93 1.95
Earnings per share 8.53 10.48 17.92 20.88 23.34
Book value per share 56.05 72.08 104.82 100.53 142.66
Cost to Income
0.17 0.23 0.24 0.28 0.3
Ratio
Fixed Assets
0.44 1.06 1.185 1.22 0.89
Turnover
Current ratio

49
Current ratio explains the ability of a firm to pay short-term obligations. It
is usually said in business that its current ratio must never decrease by 1:1
because it determine the liquidity position. The table exposes an upward
trend in first three years and in 2007 but year 2006 ratio deduce by 0.88%.
We can analyze that NBP is in a strong position and need to improve
further in next economic years.
Return on Assets
The ratio expresses how effectively the management is using the assets of
the business. There is deterioration in return on assets in year 2007.
Financial year 2007 shows a 4.88% decrease in return on assets then last
year. Whole analysis explains that ROA is growing with from year ended
2003-06 but then decreases. It is need to use assets of the bank to bring
bright future.
Return on Equity
There is variation in ROE throughout five years. Financial year 2007
explains “Golden year in respect of return on capital in 2006” because it
was 49.6% prominent return in the history of banking business in Asia in
2006. NBP does not stable its capacity in current financial year 2007 and
looses at point 7.5% then last year. Now, It is need of time to repeat year
2006 to show its temperament.
Debt ratio
The analysis shows persistently going downward debt ratio, we can say
that bank able to protect itself. Capital structure of NBP expressing
decreases in borrowings and enhance capital by issuing of shares during
five years. Debt in 2003 was at point 94.15% and reduces in financial year
2003 at point 84.74%, shows its strength.
NP margin ratio

50
It shows profitability of the organization against it sales. The table
explains a regular increase in net profit ratio. At the year ended 2003, net
profit against sales was 24.20% and reaches at 44.84% that is double
figure. It says in short that NBP earn Rs.44.84 by investing Rs.100 in year
2007. It is up to the mark but need to improve sale and control cost to earn
better margin.
Total assets turnover
The ratio explains how much in a prominent way the bank using total
assets to increase sales. The first four years shows a regular increase in
turnover but year ended 2007 explains decreases by 11.12% then last year.
So we can say that position to use assets in not satisfactory level. NBP
management can increase its output by using total assets to increase sale
and revenue.
Cost to income ratio
The above table exposes an upward trend in cost against income. But we
know as income increase and inflation come into the economy its effect
on cost. Financial year 2007 defines that NBP’s income in Rs.10 against
investing Rs.3. We can see all four years trend with minimum changing in
figures.

Time interest earned ratio

It is use to find out the ability of a business to cover interest charges. The
ratio occurs that NBP has ability to pay its charges. The bank tries to
increases its EBIT to enhance its position.
Fixed assets turnover
Analysis on table shows upward trend during three consecutive years
from 2004-06. Especially financial year ended 2006 was a golden year in

51
this turnover. The bank does not maintain its position in further and lose
its position in next year with point 27.05% that is very hard figure to
recover but possible in next coming years.
EPS (Earning per share)
Earnings per share show a regular increase in earnings throughout last
five years from 2003-07. It show an upward trend, I observed that NBP is
improve its market condition in a constant year with confident on its
vision-You can trust.

Horizontal Analysis:

It is a procedure to compares a company’s financial statements over a

certain period of time. The analysis stated information about changing
items of financial statements in percentage. Mathematically, we can
calculate it as
H.A. = (current year-old year)/old year * 100

52
 Balance Sheet as at December 31, 2003-07
In percentage

Descriptions 2003-04 2004-05 2005-06 2006-07

Assets
Cash and balance wit tr. banks 58.94 -24.62 10.43 20.66
Balance with other banks 106.12 -38 31.02 -7.8
Lending to financial inst. -65.21 54.9 41.33 -6.7
Investments -12.92 8.46 -10.85 50.62
Advances 37.55 21.4 17.58 7.78
Other assets -16.44 31 -59.56 14.32
Operating fixed assets 2.95 3 -100 167.74
Deferred tax assets ---- -100 --- ---
Total Assets 16.5 5.00 9.94 20.00
Liabilities & Capital
Bills payable 31.25 -75.86 509.12 -33.42
Borrowings from financial inst. -32.79 -21 33.66 -6.989
Deposits and other accounts 17.69 -0.46 8.29 17.94
Sub-ordinated loans ---- --- --- -----
Liabilities against. lease -58.5 -2.52 -20.41 153.53
Other liabilities -12.13 8.98 6.49 16.06
Deferred tax liabilities -100 ---- -46.51 113.56
Total Liabilities 14.07 -0.675 9.89 16.75
Capital
Share capital 19.99 19.99 19.99 15.00
Reserves 36.72 21.73 2.54 13.63
Unappropriated profit 56.24 81.4 91.9 41.37
Surplus on revaluation of assets 87.08 115.97 -24.28 62.8
Total Capital 55.66 73.14 10.24 41.95
53
Now here number of factors can affect this percentage. Here in the table
we can see that the figure of balances with other banks is 1.6 in years
03/04 and it decreases to –38 percent in the next coming years. So here
we can see that why the total result of the total assets varies of much
difference from each other. Similarly the figure of investment also varies
greatly when we move from the year 2003 to the year 2007.

In case of total liabilities it is 14 percent in the year 2003/04 and goes to –

0.675 in the year 2004/05. It has decreasing trend up to the year 2006 and
then it again increases in the year 2006/07. The major factor, which I
think giving the great difference is due to the variation in amounts of, bills
payable. Here we can see that it is about 31 percent in the year 2003/04
and then it decreases to about –75 percent. Here it increases in the next
two years analysis and then it decreases.

When we look at the total capital there is the same pattern. Total capital in
the year 2003/04 is about 55 percent, which increases, in the next year’s
analysis and then it decreases and increases in the year 2006/07. The
amounts of reserves and the surplus on revaluation of assets are putting
affect on the total value.

Index Analysis

54
 Balance Sheet as at December 31, 2003-07
In percentage

Descriptions 2003 2004 2005 2006 2007

Assets
Cash and balance wit tr.
banks 100 158.94 119.82 132.32 159.66
Balance with other banks 100 206.12 128.2 168.26 155.14
Lending to financial inst. 100 34.79 53.89 76.17 71.04
Investments 100 87.08 94.45 84.21 126.83
Advances 100 137.55 166.99 196.35 211.62
Other assets 100 83.56 109.08 123.54 141.23
Operating fixed assets 100 102.95 105.75 108.31 289.98
Deferred tax assets ------ 100 ---- -------- ------
Total Assets 100 116.51 122.43 134.61 161.53
Liabilities & Capital
Liabilities
Bills payable 100 131.25 31.67 192.94 128.47
Borrowings from financial
inst. 100 67.21 53.09 70.96 66.00
Deposits and other accounts 100 117.69 117.15 126.87 149.64
Liabilities against ass. lease 100 41.48 40.44 32.18 81.61
Other liabilities 100 87.86 95.76 101.98 118.36
Deferred tax liabilities 100 ---- 74.89 400.6 137.63
Total Liabilities 100 114.07 113.31 124.52 140.37
Capital
Share capital 100 119.99 143.99 172.79 198.72
Reserves 100 136.72 166.43 170.65 193.92
Unappropriated profit 100 156.24 283.42 391.28 768.92
Surplus on re. assets 100 187.08 404.04 305.92 498.06
Total Capital 100 155.65 269.51 297.11 421.76
Index analysis of Balance Sheet

Index analysis show percentages which compare changes in the current

period with that of base period, measures overall changes phenomenon. It
can be mathematically expressed as

I.A. =Current year/Base year *100

Total assets

55
Financial year 2003 is a base year. It is equal to 100% value. Total assets
due to analysis show an upward trend by 116.51%, 122.43%, 134.61, and
161.21% respectively as compare to base year 2003. The increase in total
assets in 2004 only 4.8%, which is very low figure then form years 2003-
07. The whole analysis suggests that lending to financial institutions,
investments, and other assets are decreased in 2004 and vary during a
period of time. The deterioration in figures especially investments and
lending can effect economic stability at the long run, so need to work on
these figures.

Total liabilities and capital

Liability side, financial year 2005 shows downward trend in bills payable,
deposits, and borrowing form financial institutions but increase in share
capital and reserves. NBP focus to increase capital through equity in the
long run as we see from year 2003-07. Annual year 2007 analyze the
upward trend in lending to financial institutions but advances are not up to
mark, which are going to decrease yearly. So NBP need to focus
especially on advances and loan to carry its financial strength.

Vertical Analysis

Balance Sheet at 2003-07

In percentage

Descriptions 2003 2004 2005 2006 2007

Assets
Cash and b.wit tr. banks 12.59 17.2 12.33 12.38 12.45
Balance with other banks 0.118 9.06 5.37 6.39 4.92
Lending to financial inst. 6.41 1.91 2.82 3.63 2.82

56
Investments 35.22 26.3 27.17 22.04 27.65
Advances 34.12 40.3 46.54 49.77 44.69
Other assets 4.65 3.34 4.14 1.53 4.066
Operating fixed assets 1.89 1.67 1.64------- 3.4
Deferred tax assets ------ 0.23---- 4.268----
Total Assets 100 100 100 100 100
Liabilities & Capital
Bills payable 1.164 1.31 0.302 1.669 0.926
Borr. from fin. inst. 3.49 2.02 1.52 1.84 1.428
Deposits and other accts. 83.83 84.7 80.22 79.02 77.66
Sub-ordinated loans ------- ------ ---- ------- -----
Liab. against assets 0.009 0 0.003 0.0021 0.004
Other liabilities 5.52 4.17 4.322 4.137 4.05
Deferred tax liabilities 0.126 ------ 0.772 0.375 0.669
Total Liabilities 94.14 92.2 87.14 87.09 84.74
Capital
Share capital 0.869 0.9 1.023 1.1164 1.069
Reserves 1.723 2.02 2.34 2.185 2.069
Unappropriated profit 1.249 1.67 2.89 5.05 5.949
Surplus on re. assets 2.002 3.22 6.609 4.551 6.175
Total Capital 5.843 7.81 12.86 12.902 15.26
Total Liab.& Capital 100 100 100 100 100

Vertical analysis
Vertical analysis refers to the view of the financial information for only
one accounting period. Mathematically, it can be expressed by dividing
current amount to the total amount.

Analysis of balance sheet 2003 shows 100% on both sides and further as
well. The cash and balances with treasury banks is 12.59% and cash with
other banks is 5.12%, which are impressive figures to meet the liquidity
position. Lending to financial institutions is 6.41%. Investments and
advances are major components in balance sheet 35.22% and 34.12%

57
respectively. These two elements are lifeblood of any banking business.
Operating fixed assets and other assets are not up to the mark showing
4.65% and 1.89% only. A deferred tax asset is zero. Deposits are the one
of the main sources of the bank and shows 83.83%, which fulfill the
vision of “NBP-you can trust”, are impressive figure. Total equity is
5.843% in which the higher figure is surplus on revaluation of assets. It
gives view that the bank is strong and need to further expansion because
bills payable and borrowings are 1.64% and 3.49% respectively.

Analysis of year 2004, it exposes regular increase in cash and balance

with treasury banks, balance with other banks, advances, and deferred tax
assets but investments decrease 25.2% and lending to financial
institutions decreases at 70.1%. Deposits and other accounts of the bank
jumps at 84.68% that grows 1.02% then last year 2003, decreasing in total
liability by 1.67% in 2004 (94.138% to 92.18). T. Equity grows at 1.96%
in 2004.

With the analysis of 2005, it arises that only 4.9% growths occur, that is
extremely down as compare to financial year 2003-04. In this year, NBP
follows a downward trend in its position but it got overall profitability.
Here only advances jump at a reasonable high other elements of balance
sheet deteriorate. Deposits are the main sources of banks but it got deficit
by 5.2%, which shows that customers are unsatisfactory.

With the analysis of 2006, there is overall increase in total assets of NBP
by 9.02%. Advances in year 2006 are 49.77% that grows 6.5% then last
year. Deferred tax assets go upward at 4.3% in 2006; deposits are still at

58
 downward at 79.02%. Share capital of the bank reaches 1.12% instead of
1.02% in previous year. The overall figure exposes that NBP is growing in
double figure then last year.

Analysis of December 31, 2007, appears both increase and decrease in

balance sheet throughout the year. Cash and balance with treasury banks,
other assets, and operating fixed assets show upward trend, on the other
side deposits are regularly decrease and reaches at point 77.66%. Total
assets of the bank grow by 16.67% then last year that shows quite a
growing volume in competitive market.

Index Analysis

Income Statement at Year 2003-07

In percentage
Discriptions 2003 2004 2005 2006 2007
Mark-up/Return/Interest earn 100 107.68 172.9 225.11 259.96
Mark-up/Return/Interest expense 100 97.38 153.24 202.43 251.5
Net Mark-up/Interest Income 100 113.14 183.32 237.12 264.45
Provision agaisnt non-performing advance 100 89.94 145.23 182.56 280.34
Provision dim.value of inv. 100 40.42 -53.5 -154.4 -8.758
provision against off balance sheet obligations 100 3.012----- 100 8.0841
Bad debts off directly -------- 100 100----- 180.32
100 66.75 84.92 90.55----
Net Mark-up/Interest Income after provision 100 125.17 208.84 275.14 286.67
NON-MARK-UP/INTEREST INCOME
Fee, Commssion and Brokerage Income 100 156.37 151.08 188.44 207.97
Dividend Income 100 113.05 152.49 256.65 289.62
Income from dealing in foregin currencies 100 141.96 169.64 187.67 146.73
Share of profit of joint venture 100 44034------ ---- -----
Other income 100 40.7 73.21 29.19 6.854
Total non mark-up/interest income 100 114.57 130.02 167.81 186.87
100 120.75 175.91 230.28 244.7

59
NON-MARK-UP/INTEREST EXPNESES
Administrative expenses
Total Administration expenses 100 113.73 143.4 172.21 181.97
Other provision/write offs 100 96.38 592.75 -51.66 502.27
Other charges 100 36.18 276.08 909.96 74.87
Total non mark-up/interest expenses 100 113.43 145.71 173.39 183.02
profit before tax 100 133.48 211.53 292.06 311.48
Taxation -Current 100 106.45 153.85 190.69 178.74
Prior years(s) 100 58.9 -76.33 36.86 27.19
Deferred 100 -1.229 22.77 4.45 125.32
Profit after tax 100 148.7 302.7 405.48 453.39

Index analysis

Profit and loss statement or income and expenditure determine the

summary of an organizations revenues and expenses over a specified
period ending with net income or loss.

Mark-up/interest Income

Taking financial year 2003 is a base year. Analysis expresses that mark-
up/return/interest earned shows upward trend in throughout year 2003-07.
These are income generating resources, the net mark-up is 89.9% in year
ended 2004 that decreases by 10.06% then last year 2003. NBP got
extraordinary mark-up in the financial year ended 2007 and grows more
than 30%. Table shows that provisions against NPL’s are gradually
increases. The bank’s overall coverage ratio in year ended 2007 is at
improving at the rate of 84%.

Non Mark-up/Interest Income

It is the income of the bank generated by providing products and services

to the customers. The bank receives fee/commission and brokerage
income156.37%, 151.08%, 188.4%, 207.97% respectively yearly.
Dividend income shows an upward trend during five year 2003-07. NBP
is also dealing in foreign currencies, the income receives from resources

60
are not up to the mark and decreases in point 27.9% then at last year.
Other income of the bank also exposes a down ward in the year 2007. If
we analyze whole, we can say that total income of the bank before
expenses is up scale from years 2003-07. It is already known when profit
increases; expenses of the organization also rise. We can see table that
total expenses of the bank are also increases.

Profit-before Tax

The pre-tax profit increases in Rs.28.06 billions an increase of 6.6% in

2007 over last year. The pre-tax profit in year 2006 was 292.06% which
was extremely high than year 2005. The bank got overall profit but this
pre-tax profit is not sufficient if we compare it to the year 2005-06. The
bank management further need to work for maintains its capability and
customers trust.

61
 Horizontal Analysis
Income Statement at Year 2003-07
In percentage

Discriptions 2003-04 2004-05 2005-06 2006-07

Mark-up/Return/Interest earn 7.68 60.56 30.19 17.56
Mark-up/Return/Interest expense -2.616 57.36 32.09 23.12
Net Mark-up/Interest Income 13.14 62.03 29.35 11.53
Provision against non-performing advance -10.056 61.46 25.71 12.65
Provision dim. of inv. -59.58 -32.4 -188.54 -221.5
provision against off balance sheet obligations-96.98 -100 ----- -----
Bad debts off directly ------- -29.68 -77.09 -----
-33.25 27.22 6.64 2.07
Net Mark-up/Interest Income after provision 25.17 66.84 31.74 29.12
NON-MARK-UP/INTEREST INCOME
Fee, Commssion and Brokerage Income 56.37 -3.38 24.73 19.56
Dividend Income 13.06 34.9 68.27 57.22
Income from dealing in foregin currencies 41.96 19.49 10.64 9.37
Share of profit of joint venture 439.34 -100 ----- 42.79
Other income -59.29 79.85 -60.13 6.65
Total non mark-up/interest income 14.57 13.48 29.05 21.59
20.74 45.68 30.92 24.72
NON-MARK-UP/INTEREST EXPNESES
Administrative expenses
Total Administration expenses 13.73 26.08 20.08 29.12
Other provision/write offs -3.619 515.01 -108.72 35.8
Other charges -63.82 662.98 229.6 333.5
Total non mark-up/interest expenses 13.43 28.45 19 27.89
26.81 58.47 38.07 34.17
profit before tax 33.48 58.47 38.07 6.65
Taxation -Current 6.45 44.52 21.55 22.46
Prior years(s) -41.09 -29.57 148.29 42.3
Deferred -98.77 1951.9 -78.7 66.3

62
Profit after tax 48.708 103.58 33.94 31.97

Horizontal analysis

Horizontal analysis explains the changes in profit and expenses of two

consecutive years. It also suggests that overall variation in the statement
as compare to its current with old year.

The above table shows that interest earned vary during the five years in
analysis, the interest expenses also vary with the same point. Both figures
effects on net-mark-up, so we can see that net-mark-up in 2003-04 were
13.14%, 62.03% in 2004-05, 29.35% in 2005-06, and 11.53 in 2006-07.
NBP’s performance during in 2004-05 was up to the mark but not to
maintain this figure and deduce regularly.

Total mark-up interest income shows little changes in two consecutive

years but got a great position in 2005-06, in 2006-07 it’s again come at
equal to last year progress.

As all elements exposing decreases, expenses of the bank also decreasing

in the table above with different but regular points, pre-tax arises strong in
first four years but at a point 6.65% only in financial year 2006-07.

The whole analysis explains that if we compare current and old year, the
overall position of the bank decreases in financial year 2007, it is not
stable. Every element in income statement showing a downward trend,
now, it is the requirement to develop new policies to stabilize its position
and compete into the market.

63
 Future prospects of the organization

NBP’s is planning to expand its network of branches especially in Islamic

Banking. The bank’s international operation is focused towards increasing
trade business and expands where the bank has competitive advantage.
The bank is continued to develop liability side products by enhancing
leadership position. The bank is continued to recognize as a largest
treasury in terms of its size. Its target on untapped sectors and provide
them professional quality services, through on window operation and
relationship managers stationed.

It’s planning to transformation of the entire I.T. architecture of the bank

by implementing a core banking solution. The bank in future follows up
trust with a message “Excellence Customer Service” by invention of I.T.
products and services. The bank will focus to promote healthy sports
activities in the country.

Performance Analysis
Strength

64
• Over the year, NBP has proved its strength as a leading banking
sector entity and treasury agent on behalf of a SBP by achieving the
following first in Pakistani banking sector.

I. NBP in year 2007 received the award for the best

return on capital for 2006 amongst all banks in
Asia.
II. First bank enjoys the highest credit rating
amongst Pakistani banks.
III. First bank with nation-wide branches of over
1200 and over 20 outside Pakistan.
IV. It’s working as a government agent since birth.
V. ROE of the bank stood at 45.9%, which is the
highest in the Asian Banking history.
VI. The first bank in Pakistan with large coverage of
Central Asia, Far East and South Asia.
• NB has a wide range of products and services and improves quality
of life of diverse market segments.
• The bank continues to monitor the credit and risk exposure by
establishing an Operational Risk Management Unit.
• The management of the bank encourages attaining professionals
(MTO’s) and establishing efficient working environment within the
bank.
• The bank offer financing facility i.e. agricultural financing, home
financing international trade business loans, govt. loans syndicated

65
 loans, and karobar schemes for the individual serves, student loans
and portfolio investments for the individual savers.
• NBP is committed to develop and enhance each employee’s skills
and capabilities through training and job rotations.
• It provides timely information to all stakeholders about the
performance of NBP amongst competitors.
• The bank uses automated transaction – process system, for back up
support. Well-designed software “IBM Software” which transform
a register (paper) into electronic system.
• NBP purpose to become a “Bank of Choice” for the customers, the
effort is continuing to attain this target.
• As an autonomous body, the strong employee bank relationship and
job security.
• To promote healthy sports activates in the country NBP has built a
state-of-the art sports complex at Karachi to full fill social
responsibility.

Weaknesses

• The bank I.T system sometime hang or link down can causes a
delay in provision of timely and efficient services to the customers
• There is no proper information desk, which guide the customers on
different banking activities.

66
 • Return on equity decrease in 2007 at an unacceptable rate that
impact on overall condition of the bank.
• Horizontal analysis shows the downward trend in the income
statement can create problem in future.
• Deposits of NBP are regularly decreasing in every financial year,
which can lose the trust of employees.
• The use of token system by the bank for cash payments produces
and awkwardness among customers.
• Turnover fixed assets and total assets both decreasing in financial
year 2007, which can weaken the overall position of the bank.
• Mostly, ATM network shows “sorry for inconvenience” picture
especially in first salary days that is hard for customers trust.
• The lead-time for cheque clearing is three to four days for “Inter
City Clearing” and more days for other cheques.
• The bank management feels job security so they misbehave with
customers.
• NBP does not have a comprehensive marketing strategy; it
permanently uses print media and billboards for marketing of its
products and services. So there is lack of broad casting media
services.
• Sometime, sufficient number of employees are needed is a certain
department but there is mismanagement deployment of employees
that can cause burdened in some departments.

Opportunities

67
 • NBP is not only expanding “Kisan Dost” its banking services to
remote and ruler areas but also start “Karobar Schemes”.
• As the bank continues its expansion on international coverage the
bank also take opportunity to start Islamic banking is 2007.
• NBP plans to set up research centers, which help the bank to
enhance quality of services.
• NBP is looking E-banking for better services.
• With a provision coverage 84% in fiscal year 2007 and continues is
following years will lead towards banks profitability through
recoveries and reversals.
• Amongst highest bank is Asia, NBP further expand its services
proudest and earn more profit.
• The bank is reshaping its portfolios by investing into higher area of
growth developing core competing as a result to get maximum
return.
• I.T and HR are important factors for development in any
organization, NBP continue struggle to achieve this target.

Threats
• With the globalization of the world many international banks are
opening this branch into other countries posing a threat for banks,
as the competition would become more acute.
• The expansion of banking sector is forcing to offer improved and
innovative products and services in order to stay into competition.

68
 • The operating environment for banks in becoming more
challenging in the wake of intense competition is the pricing of
assets and liabilities products and services.
• With expansion of branches, help banks to give less attention to
down ward slump, increasing competition between banks and non-
banks can create problems.
• The bank face higher operating cost, the advancement in I.T turned
to grip on cost, the use of I.T by foreign banks on providing
extensive product and service can become a problem is future.

Conclusion

The bank has been able to strategically manage and build on its
competitive advantage, by knowing customer’s requirements,
understanding employee’s need, modern technology, to making social
responsibility and looking towards stakeholder’s values. The bank is able
to bear new challenges more efficiently. The bank continued its journey to
success on strategy of serving clients- by getting advantage of its unique
domestic and international footprints.
Leadership of Board of Directors makes the bank’s ability to continue as a
going concern. A large number of products, branch network, I.T and

69
committed workforce are fundamental strength of the bank that enables to
achieve exceptional results in a very competitive market.

Recommendation

As analysis shows that NBP is a most growing organization with highest

return on capital, largest market share amongst all Pakistani banks and
cost to income ratio is the highest in banking sector. But there is further
need for improvement. To overcome weaknesses and to maintain its
position as an “Asian Tiger” in banking field, following recommendations
are made:

70
• The bank should focus on enhancing and improving the quality and
effectiveness of banking software, to provide timely technology
based value added services.
• There should be a proper desk for customer’s information in every
branch.
• The bank should use broad casting media for promotion of its
products and services and to further expand its area through more
aggressive marketing.
• Financial analysis shows that NBP gradually loses its deposits and
other accounts that can create problem for the bank to maintain its
stability. The bank should focus to revaluate existing customers and
attract new to enhance it position.
• Financial year 2006 exposes that ROE/Capital is in point 49.6% but
in 2007 it loses at point 45.1%, it guides that there is deterioration
in uses total equity, the bank must try to repeat “2006 as a Golden
Year”.
• Advances and loans of the NBP in year 2007 are brutally down by
10.21% then last year, these are basic tools to earn interest as well
as non-interest income, the bank provides quick and better services
to its customer to continue upward trend.
• By analysis we see that assets turnover of the bank decrease in
2007 than last year, so the management try to grip on sales as well
as use assets to create maximum margin.
• Horizontal analysis of income statement showing downward trend
in every elements in whole year 2006-07, the management must
control to get overall market share.

71
 References
Books:
James C.Van Horne “Financial Management”
Afza Beig B.Sc Part 1 “Introduction to Statistics”
NBP Annual Reports

Internet:
www.nbp.com.pk
www.sbp.com.pk
www.google.com.pk

72
 Organization Structure

Executive
Committee

President &
Chief

Corp. Retail Credit

Regions
Bankng Cards
Op. and Banking
credit
Planning
& Corp.
Credit
Intern Rwp/Isb Assets
ationa Product

MIS HR
North
Treasur
y Inv.
System
products
& OP. Financ
e

Lahor
East
Corp.
&

West 73
 Data
Repor

South-I
Legal
Affair
South-

Organization Chart
President

SEVP

EVP SVP

VP

AVP

Managers

Asst.
Assistants
OG-III
OG-II
OG-I
Mngrs
74
75
76
 Chief Executive
Audit

Executive Assistant

Group Head Auditor

Branch Manager Audit

Area Manager
Audit
Assistant Manager
Branch Auditor
Assistant Manager
Area Auditor

Audit Internees

77
 Competitors Analysis

Total Assets

900,000
800,000
700,000
600,000
500,000 Total Assets
400,000
300,000
200,000
100,000
0
BP

BL

B
h
C

la

AC
U
N

fa
Al
kn
Ba

78
 700000
600000
500000
400000 Series1
300000 Series2
200000
100000
0
L

h
P

B
CB
ks

la
UB

AC
NB
an

fa
M

Al
/B
ns

nk
tio

Ba
rip
sc
De

79
400000
350000
300000
Descriptions/Bank
250000
s
200000
Advances
150000
100000
50000
0
1 2 3 4 5 6

80
 Capital

80,000
60,000
40,000 Capital
20,000
0

L
P

B
CB

lah
UB

AC
NB

fa
Al
nk
Ba

Profit after Tax

20,000
15,000
10,000 Profit after Tax
5,000
0
L

h
P

B
CB

la
UB

AC
NB

fa
M

Al
nk
Ba

81