Bank of Pakistan J

Internship Report 2014
CHAPTER # 1
INTRODUCTION OF STUDY
1.1 INTRODUCTION
As part of the academic requirement for completing BBA (Finance) Bachelors of
Business Administration. The students are required to undergo for two months (Eight
Weeks) of internship with an organization. The internship is to serve the purpose of
acquainting the students with the practice of knowledge of the discipline of business
administration.
This report is about National Bank of Pakistan Main Branch Mansehra. NBP was
established in 1949 under the National Bank of Pakistan Ordinance No.XIX and since
then, it has expended its network, becoming the largest commercial Bank of the country.
It offers different products of services to its customers.
As I have completed my Internship in National Bank of Pakistan Main Branch Mansehra.
So, its brief history is, in 1964, State Bank of Pakistan licensed National bank of Pakistan
Main Branch to work in the City area. This branch started its operation on May 5, 1964.
The site selected for this branch was on central point of Mansehra City. This branch after
some period shifted to another place on (Shinkiari Road). But now Main branch
Mansehra having its own building is situated at another place in Mansehra city, which is
known as Ziarat Kahou. Its current Manager is Aqdas Ali Khan, (Assistant Vice
President)
The main purpose of the study in hand is to gather relevant information to compile
internship report on National Bank of Pakistan Main Branch Mansehra and as a whole
Network of NBP.
Another purpose of this Internship program is to enable the students to use the
management techniques acquired during their courses, and find out the possible solution
of management problems faced by the organization.

To observe, analyze and interpret the relevant data competently and in a useful manner it
requires:
To work practically in an organization.
To develop interpersonal communication.
1.2 SCOPE OF STUDY

As a trainee in National Bank of Pakistan Main Branch Mansehra, the main focus of my
study research was on general banking procedures/practices in that of the branch of NBP.
These operations include remittances, deposits, advances and foreign exchange, clearing
and Government department.
Similarly different aspects of overall of NBP are also covered in this report.
1.3 OBJECTIVES OF THE STUDY
Discuss thorough study of National Bank of Pakistan.
To understand the various operations and to equip with practical knowledge of the
National bank of Pakistan.
1.4 LIMITATION OF THE STUDY

Something is better than nothing. No matter how efficiently a study is conducted, it
cannot be perfect in all aspects. This study was conducted in accordance with the
objectives of the report completion. The study may not include broad explanations of
facts and figures due to the nature of the study/research. Secondly, the limitation, which
affects the study/research, is the restriction on mentioning every fact of the bank due to
the problem of secrecy of the bank.
In addition, the availability of required data was a problem as all the documents and files
are kept strictly under lock and key due to their strictly confidential nature. Thirdly, the
problem of short time period also makes the analysis restricted as one cannot properly
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understand and thus analyze all the operations of a bank just a very short time of eight
weeks.
1.5 BENEFIT OF THE STUDY

The study done will benefit the finance students in particular and business administration
and banking students in general because the financial analysis section of this report
comprehensively encompasses all aspects of financial analysis. Furthermore, NBP Main
Branch Mansehra may also benefit from the recommendations made at the end of the
report.
1.6 RESEARCH METHODOLOGY

The report is based on my two months internship program in National Bank of Pakistan.
The methodology reported for collection of data is primary as well as secondary data.
The biggest source of information is my personal observation while working with staff
and having discussion with them. Formally arranged interviews, discussions and most
importantly the annual report 2012 also helped me in this regards. In order to complete
my report I needed two types of data about the National Bank of Pakistan also about the
NBP Main Branch Mansehra. These are
Primary data:
For primary data collection, I have used interview and observation method. I have
interviewed different officers in the branch, which include the branch Operation officers,
operation manager and manager of the branch also other staff members of the branch
Secondary data:
For secondary data collection, I have consulted different published material. I studied
different circulars (instruction and information circulars) of National bank of Pakistan
Simply Secondary data consist of Manuals, Journals, magazines, news lines, Annual
Reports, Internet and Branch financial statements.
CHAPTER # 2
HISTORICAL BACKGROUND OF NBP
2.1 HISTORY OF NBP
The history of National Bank of Pakistan is part of Pakistans struggle for economic
independence. National Bank of Pakistan was established on November 9, 1949
under the National Bank of Pakistan Ordinance, 1949 in order to cope with the crisis
conditions which were developed after trade deadlock with India and devaluation of
Indian Rupee in 1949. Initially the Bank was established with the objective to extend
credit to the agriculture sector. The normal procedure of establishing a banking
company under the Companies Law was set aside and the Bank was established
through the promulgation of an Ordinance, due to the crisis situation that had
developed with regard to financing of jute trade. The Bank commenced its
operations from November 20, 1949 at six important jute centers in the then, East
Pakistan and directed its resources in financing of jute crop. The Banks Karachi and
Lahore offices were subsequently opened in December 1949.
National Bank of Pakistan is the Pakistan's premier bank determined to set higher
standards of achievements. It is the major business partner for the Government of
Pakistan with special emphasis on fostering Pakistan's economic growth through
aggressive and balanced lending policies, technologically oriented products and
services offered through its large network of branches locally, internationally and
representative offices. In modern business services provided by organizations are
termed as Products
The National Bank of Pakistan came forward to establish its offices in the Cotton
growing areas and extended credit facilities liberally in order to restore stability to
the market. In 1951, the country was once again faced with a crisis in the cotton
trade when prices was crashed and touched the lowest level since independence
following the cessation of hostilities in Korea. The bank in collaboration with the
cotton board provided the necessary Credit facilities to the trade and the crisis was
tided over. The nature of responsibilities of the Bank is different and unique from
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other banks/financial institutions. The Bank acts as the agent to the State Bank of
Pakistan for handling Provincial/Federal Government Receipts and Payments on
their behalf.
2.2 DEFINITIONS OF BANK

"The financial institution which deals with money and credit. It accepts the deposits for
individuals, businesses and companies, a decline in interest rates and higher interest rates
for those in need."
J. W Gilbert the principles and practice defines the bank banker, these words;
"Banker is, in its quality of dealer, or better, a trader of money capital. It is intermediate
between the borrower and the lender party. It loans and borrow a second".
Sir John called banker in these conditions?
"It is not guaranteed that these person or organization, or not, can be a banker, which is
not
Please submit accounts
Take current accounts
Tests and questions
Collect checks exceeds and the turbocharger make their customers
UNITED STATES of banker concept of a very broad sense.

"Banking Secrecy believes that there must be an amount of credits, and treatment
of the "bank" we each person, firm or company with a company, or the resources are
open by collection deposits the money, the currency. The topics include paid or payable
or money and it is advanced or equipment to be loaned to, bonds, precious metals,
promissory notes on the invoice received discount and/or sales".
2.3 BANKING GROWTH DURING (1948-1970)

In this tense situation, a committee was immediately setup to formulate a scheme of
central banking legislation for Pakistan. Many specialists were of the opinion that in view
of the acute shortage of trained staff, any idea of establishing a central bank was I
impractical and the best that could be attempted was the setting up of a currency board
until such times as sufficient staff could be organize to operate a central bank.
One of the first tasks of the state bank was to arrange for the replacement of the Reserve
bank of India notes, which had continued to circulate in Pakistan during the transitional
period, by Pakistan currency.
The first Pakistan notes were issued in October 1948 in the denominations of Rs. 5, 10 &
100.An equally urgent task, which the new central bank had to address itself, was the
creation of a national banking system. To this end, while extending every help and
encouragement to Habib Bank to expand its organization, the state bank recommended
the setting up of a new banking institution to serve both as an agent to the state bank
recommended the setting up of a new banking institution to serve both as an agent of the
State bank as well as the spearhead of its credit policies.
With a view to broadening the institutional framework of the financial system, the state
bank also sponsored the establishment of specialized credit institutions in the field of
agriculture and industry. Banking companies (control) act was passed in December 1948
specifically empowering the state bank to control the operations of banking companies in
Pakistan.
As the Commercial Banking facilities continued to expand, a new Pakistani bank, the
National Commercial Bank was established and registered as a scheduled bank. In the
field of industrial finance a new institution known as the industrial credit and investment
cooperation was set up.
The year 1958 marked the completion of the first decade of the working of the State Bank
of Pakistan. When it was established there were only 195 bank offices in existence. At
the end of June 1958 their number had increased to 307, of which Pakistani banks
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accounted for 232 against 25 in mid-1948. Moreover at the end of June 1958, Pakistani
banks held 60% of the total banks deposits, and were responsible for 65 of total bank
credit.
When the Ayub Khan Government took over in 1958, the banking and monetary scene
was significantly affected by developments such as the liberalization of imports, transfer
of business in food grains to the private sector, and the firming up of commodity markets.
The demand of funds picked up and there was a substantial expansion of bank credit to
the private sector. The pace of expansion in the institutional frameworks of the countrys
banking system quickened and a new Pakistani, bank, namely the United Bank Limited
was established.
Owning the five years plan 1960-65, the credit structure in Pakistan made rapid progress.
The bank extended its network by opening six new offices located at Chitagong,
Peshawar, Quetta, Khulna, Layallpur and Rawalpindi. The number of scheduled bank
offices rose from 430 at the end of June 1960 to 1591 in June 1965. Several new banks
were added to the list of scheduled
Two principal additions were the commerce bank, and the standard bank. The number of
scheduled banks, which stood at 29 in June 1960 rose to 36 by June 1965.
Under the impact of economic growth and dear scope of private enterprises, bank credit
to the private sector rose from Rs. 1,458 million to Rs. 5759 million. Thus the total
expansion in bank credit to the private sector during this period amounted to Rs. 4300
million, which gave a annual expansion of Rs. 860 million compared to the annual
average increase of Rs. 144 million over the preceding five years. Banks deposits
increased from Rs. 2,493 million to Rs. 6883 million during the five years period ended
June 1965 compared to Rs. 231 million in the proceeding five years.
Time deposits during this period increased from Rs. 946 million to Rs. 3228 million,
where demand deposits rose from Rs. 1997 million to Rs 3655 million. The increase in
time deposits was particularly rapid. The ratio of time deposits to total deposits in June
1965 stood at 49.6 percentage as against 32.01 percentage five years earlier. Another
salient feature of banking development during this period was that since the rate of
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increase in bank deposits lagged behind the rate of expansion in bank credit, the banked
has to depend increasingly on central bank finance. They borrowing from the state bank
rose from Rs. 11 million in June 1960 to Rs. 1688 million in June 1965. Owing keen
demand for bank credit, banks investments could not increase as rapidly as their
advances. Their investments totaled to Rs. 1,874 million at the end of June 1965
compared to Rs. 1,231 million in June 1960. Investments, which were almost equal to
their advances in June 1960, were only about one third of the advances in June 1965.
The third plane period witnessed a further expansion of banking facilities in the country
the total number of scheduled banked offices increased from 1,591 at the end of June
1965 to 3133 at the close of June 1970. During the same bank credit to the private sector
rose from Rs. 5,789 million to Rs. 9492 million. There was also a substantial growth in
the bank deposits, which increased from Rs. 6883 million June 1965 to Rs. 13147 million
at the end of June 1970.
A remarkable change occurred during this period related to the composition of deposits.
Time deposit becomes greater than demand deposits forming about 54 percent age of the
total deposits. As oppose to what happened in the previous period, banks were able to
finance a much higher level of credit expansion without having to increase their
borrowings from the central bank.
2.4 BANKING REFORMS 1972

After the opening of the new government in 1971 May 1972 a number of reforms for the
banks are more sensitive to the needs of economic growth and social justice. Reforms,
which seeks to achieve on an equal footing is spent in a more targeted way and to the
granting of loans from the bank, to improve the consistency and efficiency of banks, and
the upper levels of the social responsibility of entire banking sector.
The role that banking system was really good cost savings to the community and to meet
the needs of populations. But at the same time that the banks were in general neglected
role with regard to the promotion of social justice and has not to play an effective role in
more effectively and to ensure a more equitable distribution of economic growth. It was
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also found that it was that no person can no longer be a major player in the past six years,
the Bank of continuous. Each bank is the paid-up capital is equal to or higher than 5 per
cent of its deposits gradually increased from 10 per cent above a certain time. The banks
are also required to transfer 10% of the profits each year after they reserves the right to
reserve was equal to the paid-in capital. That the decision of the banks so that the
diversity of ownership of banks was to lead to a new capital on the markets. Loans
drivers, his family and the businesses had been totally prohibited. The World Bank, with
the reform of the institutions may also create new objectives.
In addition, the national council of credit and by an advisory committee has been
established to provide for agricultural credit put in place for the different objectives, the
coordination and agricultural credit agencies of information to credit and debit for the
monitoring of the objectives. Standing Committee on exports in general and a new
exports, in particular, were
Two financial institutions have been established. Financing Company is intended to
finance people with small means that the national development finance cooperation
Corporation has been created to cultivate of finance public sector industry and the
business sector.
2.5 EVOLUTION OF BANKING IN PAKISTAN

At the time of independence, the areas now if Pakistan had only the food grain and raw
materials, in accordance with the by the regime in Pakistan peninsula. Practically no
industry and raw materials produced are exported to Pakistan. But the banks and their
commercial potential.
The first phase of development of the banking system in Pakistan the day the banking
sector. Begins to almost zero in 1947, now has a comprehensive range of banks and
financial institutions are faced with different requirements.
In relative terms, the area is now Pakistan was reasonably well equipped in banking
services, an undivided India 3496 has MARCH 1947 offices in India provided for banks,
or up to 487 are located in regions of Pakistan.
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India central bank of central banks authority in India. Split takes place, a decision was
taken in order to ensure a smooth transition should continue to work on a new Pakistan
September 30, 1948.
In 1947 as a result of this uncertainty and inappropriate banking sector also suffer
considerable losses.
This led to negative effects on greaseproof paper in Pakistan. The banks which is
registered office of Pakistan, India. An attempt to prevent this error new press a
deliberate policy results the bank India offices closed more quickly as possible.
The banks, and which remained in only, pending the completion of their business.
Recorded the largest decline of numbers of independence only 195 branches in 487
branch banks 30 June1948.
2.6 MISSION STATEMENT

To make the Bank complete and competitive with all international Standard in
performing, quality of, operations, staff, financial strength. And products and services to
develop a culture of excellence in every spare of activity of the bank.
2.7 GOALS AND OBJICTIVES

An organizational objective is the intended goal that prescribes definite scope and
suggests direction to the panning efforts of an organization.
2.8 VISION STATEMENT

To be the pre-eminent financial institution in Pakistan and achieve market recognition
both in the quality and delivery of service as well as the range of product offerings.
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2.9 BOARD OF DIRECTORS
Chairman
Mr. Muneer Kamal
Directors
Tariq Kirmani
Shahid Aziz Siddiqi
Zahid Hussain
Wasiq Mahmood
Farrakh Qayyum
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Rana Assad Amin
Dr. Shujat Ali
President
Syed Ahmed Iqbal Ashraf
Audit Committee
Chairman Farrakh Qayyum
Members Rana Assad Amin
Tariq Kirmani
Dr. Shujat Ali
Auditors
Ernst & Young Ford Rhodes Sidat Hyder & Co
Chartered Accountants
KPMG Taseer Hadi & Co
Chartered Accountants
Legal Advisor
Mandviwala & Zafar
Advocates & Legal Consultants
Registered & Head Office
NBP Building
I.I. Chundrigar Road,
Karachi, Pakistan
Registrar & Share Registration Office
Central Depository Co. of Pakistan (CDC),
CDC House, 99-B, Block-B,
S.M.C.H.S., Main Shara-e-Faisal
Karachi, Pakistan
111-111-500
Website
www.nbp.com.pk.
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2.10 MANAGEMENT
Management is a distinct process consisting of activities of planning, organizing,
actuating and controlling performed to determine and accomplish stated objectives with
the use of human being and other resources.
NBP have a centralized type of management because the top management takes all the
decisions.
2.11 SENIOR MANAGEMENT OF NBP

Senior Management of NBP comprises of the following member and their respective
designation.
NAME
DESIGNATION
Asif Hassan
Senior Executive Vice President
Ziaullah Khan
SEVP & Group Chief Asset Recovery group
Nausherwan Adil
SEVP & Group Chief Operations groups
Nadeem Anwar Ilyas
SEVP & Group Chief

Corporate & Investment Banking Group
Imam Bakhsh Baloch
SEVP & Group Chief

Audit & Inspection Group
Khalid Bin Shaheen
SEVP & Group Chief

Global Home Remittance Management Group
Tahira Raza
SEVP & Chief Risk Officer
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Risk Management Group

Raza Mohsin Qizilbash
EVP & Divisional Head Legal Division
Khawaja M Amin-ul-Azam
EVP & Head (A)

Islamic Banking Group
Nasir Hussain
EVP & Group Chief (A)

Overseas Banking Group
2. 12 NET WORK OF BRANCHES

NBP have wide range of branches inside the country and outside the country.
In Pakistan it has 29 regional offices, 1189 Branches and 4 Subsidiaries.
In overseas it has 16 overseas branches, 6 other branches.
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CHAPTER # 3
INFORMATION AND DEPARTMENTALIZATION OF NBP
3.1 INTRODUCTION
This chapter presents the services and departmentalization of NBP. Services are outputs
of the firm/organization, which are in intangible form & which are the backbones of any
organization to earn profit? NBP offers the following services to the people.
3.2
Demand drafts
Telegraphic transfer
Swift system
Letters of credit
Traveler's cheques
Pay order
Mail transfers
Foreign remittances
NEW FEATURES
The existing system of home remittances has been revised/significantly improved and
well-trained field functionaries are posted to provide efficient and reliable home
remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides
Pakistan International Bank (UK) Ltd., and Bank Al-Jazira, Saudi Arabia.
Zero tariffs: NBP is providing home remittance services without any charges.
Strict monitoring of the system is done to ensure the highest possible security.
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Special courier services are hired for expeditious delivery of home remittances
to the beneficiaries.
3.2.1
SHORT TERM INVESTMENTS
NBP now offers excellent rates of profit on all its short-term investment accounts.
Whether you are looking to invest for 3 months or 1 year, NBPs rates of profit are
extremely attractive, along with the security and service only NBP can provide.
3.2.2
NATIONAL INCOME DAILY ACCOUNT. (NIDA)
The scheme was launched in December 1995 to attract corporate customers. It is a

current account scheme and is part of the profit and loss system of accounts in operation
throughout the country.
3.2.3
EQUITY INVESTMENTS
NBP has accelerated its activities in the stock market to improve its economic base and
restore investor confidence. The bank is now regarded as the most active and dominant
player in the development of the stock market.
3.2.4
NBP is involved in the following
Investment into the capital market
Introduction of capital market accounts (under process)
NBPs involvement in capital markets is expected to increase its earnings, which would
result in better returns offered to account holders
3.2.5
COMMERCIAL FINANCE
NBP dedicated team of professionals truly understands the needs of professionals,

agriculturists, large and small business and other segments of the economy. They are the
customers best resource in making NBPs products and services work for them.
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3.3
TRADE FINANCE OTHER BUSINESS LOANS
There are two types of trade finance.

3.3.1
Agriculture Finance
NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers
who produce some of the best agricultural products in the World.
3.3.1.1
Agricultural Finance Services
I Feed the World program, a new product, is introduced by NBP with the aim to help
farmers maximize the per acre production with minimum of required input. Select farms
will be made role models for other farms and farmers to follow, thus helping farmers
across Pakistan to increase production.
Agricultural Credit
The agricultural financing strategy of NBP is aimed at three main objectives:
Providing reliable infrastructure for agricultural customers
Help farmers utilize funds efficiently to further develop and achieve better
production
Provide farmers an integrated package of credit with supplies of essential inputs,

technical knowledge, and supervision of farming.
3.3.1.3
Agricultural Credit (Medium Term)
Production and development
Watercourse improvement
Wells
Farm power
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Development loans for tea plantation
Fencing
Solar energy
3.3.1.4
Farm Credit
NBP also provides the following subsidized with ranges of 3 months to 1 year on a
renewal basis.
Operating loans
Land improvement loans
Equipment loans for purchase of tractors, farm implements or any other

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

3.3.1.5
Production Loans
Production loans are meant for basic inputs of the farm and are short term in nature.
Seeds, fertilizers, sprayers, etc are all covered under this scheme.
3.3.2 CORPORATE FINANCE
3.3.2.1 Working Capital and Short Term Loans
NBP specializes in providing Project Finance Export Refinance to exporters Preshipment and Post-shipment financing to exporters Running finance Cash Finance
Small Finance Discounting & Bills Purchased Export Bills Purchased / Pre-shipment
/ Post Shipment Agricultural Production Loans.
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3.3.2.2
Medium term loans and Capital Expenditure Financing
NBP provides financing for its clients capital expenditure and other long-term
investment needs. By sharing the risk associated with such long-term investments, NBP
expedites clients attempt to upgrade and expand their operation thereby making possible
the fulfillment of our clients vision. This type of long term financing proves the banks
belief in its client's capabilities, and its commitment to the country.
3.3.2.3
Loan Structuring and Syndication
National Banks leadership in loan syndicating stems from ability to forge strong
relationships not only with borrowers but also with bank investors. Because we
understand our syndicate partners asset criteria, we help borrowers meet substantial
financing needs by enabling them to reach the banks most interested in lending to their
particular industry, geographic location and structure through syndicated debt offerings.
Our syndication capabilities are complemented by our own capital strength and by
industry teams, who bring specialized knowledge to the structure of a transaction.
3.3.2.4
Cash Management Services
With National Banks Cash Management Services (in process of being set up), the
customers sales collection will be channeled through vast network of NBP branched
spread across the country. This will enable the customer to manage their companys total
financial position right from your desktop computer. They will also be able to take
advantage of our outstanding range of payment, ejection, liquidity and investment
services. In fact, with NBP, youll be provided everything, which takes to manage your
cash flow more accurately
3.4 INTERNATIONAL BANKING

National Bank of Pakistan is at the forefront of international banking in Pakistan, which
is proven by the fact that NBP has its branches in all of the major financial capitals of the
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world. Additionally, NBP have recently set up the Financial Institution Wing, which is
placed under the Risk Management Group. The role of the Financial Institution Wing is:
To effectively manage NBPs
exposure to
foreign and
domestic
correspondence
Manage the monetary aspect of NBPs relationship with the correspondents to

support trade, treasury and other key business areas, thereby contributing to
the banks profitability
3.4.1
3.5
Generation of incremental trade-finance business and revenues
NBP offers
The lowest rates on exports and other international banking products
Access to different local commercial banks in international banking
CASH AND GOLD FINANCE
Cash and Gold finance means that loan is given against the gold. The gold is
mortgaged with the bank and loan is taken. It is the area of consumer finance. And
borrower can take loan for common use.
3.6
ADVANCE SALARY LOAN
This loan is given to those people who are govt. servants. They can get a loan up to the
salary of twenty months.
3.7
DEPARTMENTALIZATION
Dividing an organization into different parts according to the functions is called depart
mentation. So NBP can be divided into the following main departments.
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A) DEPARTMENTALIZATION OF NBP
3.7.1 CASH DEPARTMENT
Cash department performs the following functions
3.7.1.2 Receipt
The money, which either comes or goes out from the bank, its record should be kept.
Cash department performs this function. The deposits of all customers of the bank are
controlled by means of ledger accounts. Every customer has its own ledger account and
has separate ledger cards.
3.7.1.3
Payments
It is a bankers primary contract to repay money received for this customers account
usually by honoring his cheques.
3.7.1.4 Cheques and their Payment
The Negotiable Instruments. Act, 1881
Cheque is a bill of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand.
Since a Cheque has been declared to be a bill of exchange, it must have all its
characteristics as mentioned in Section 5 of the Negotiable Instruments Act, 1881.
Therefore, one can say that a Cheque can be defined as an:
3.7.1.5 The Requisites of Cheque
There is no prescribed form of words or design of a Cheque, but in order to fulfill the
requirements mentioned in Section 6 above the Cheque must have the following.
It should be in writing
The unconditional order

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Drawn on specific banker only
Payment on Demand
Sum Certain in money
Payable to a specific person
Signed by the drawer
3.7.1.6 Parties to Cheque

The normal Cheque is one in which there is a drawer, a drawee banker and a payee, or no
payee but bearer.
The Drawer
The Drawee
The Payee
3.7.1.7 Types of Cheques

Bankers in Pakistan deal with three types of cheques
a) Bearer Cheques
Bearer cheques are cashable at the counter of the bank. These can also be collected
through clearing.
b) Order cheque
These types of cheques are also cashable on the counter but its holder must satisfy the
banker that he is the proper man to collect the payment of the cheque and he has to show
his identification. It can also be collected through clearing.
c) Crossed Cheque
These cheques are not payable in cash at the counters of a banker. It can only be credited
to the payees account. If there are two persons having accounts at the same bank, one of
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the account holder issues a cross-cheque in favor of the other account holder. Then the
cheque will be credited to the account of the person to whom the cheque was issued and
debited from the account of the person who has actually issued the cheque.
3.7.1.8
Payment of Cheques
It is a bankers primary contract to repay money received for his customers account
usually by honoring his cheques. Payment of money deposited by the customer is one of
the root functions of banking. The acid test of banking is the receipt of money etc. from
the depositors, and repayment to them. The payment in due course means payment in
accordance with the apparent tenor of the instrument, in good faith and without
negligence to any person in possession thereof under circumstances, which do not afford
a reasonable ground of believing that he is not entitled to receive payment of the amount
therein mentioned. It is a contractual obligation of a banker to honor his customers
cheques if the following essentials are fulfilled.
3.7.2
Cheques should be in a proper form.
Cheque should not be crossed.
Cheque should be drawn on the particular bank.
Cheque should not mutilated.
Funds must be sufficient and available.
The Cheque should not be postdated or stale.
Cheque should be presented during banking hours.
CLEARING DEPARTMENT
A clearinghouse is an association of commercial banks set up in given locality for the

purpose of interchange and settlement of credit claims. The function of clearinghouse is
performed by the central bank of a country by tradition or by law. In Pakistan, the
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clearing system is operated by the SBP. If SBP has no office at a place, then NBP, as a
representative of SBP act as a clearinghouse.
In practice, the person receiving a Cheque as rarely a depositor of the cheque at the same
bank as the drawer. He deposits the cheque with his bank other than of payer for the
collection of the amount. Now the bank in which the cheque has been deposited becomes
a creditor of the drawers bank. The depositor bank will pay his amount of the cheque by
transferring it from cash reserves if there are no offsetting transactions.
The banks on which the cheques are drawn become in debt to the bank in which the
cheques are deposited. At the same time, the creditors banks receive large amounts of
cheques drawn on other banks giving claims of payment by them.
The easy, safe and most efficient way is to offset the reciprocal claims against the other
and receive only the net amount owned by them. This facility of net interbank payment is
provided by the clearinghouse.
The representatives of the local commercial banks meet at a fixed time on all the business
days of the week. The meeting is held in the office of the bank that officially performs the
duties of clearinghouse. The representatives of the commercial banks deliver the cheques
payable at other local banks and receive the cheques drawn on their bank. The cheques
are then sorted according to the bank on which they are drawn. A summary sheet is
prepared which shows the names of the banks, the total number of cheques delivered and
received by them. Totals are also made of all
The cheques presented by or to each bank. The difference between the total represents the
amount to be paid by a particular bank and the amount to be received by it. Each bank
then receives the net amount due to it or pays the net amount owed by it.
3.7.2.1 In-Ward Clearing Books
The bank uses this book for the purpose of recording all the cheques that are being
received by the bank in the first clearing. All details of the cheques are recorded in this
book.
24

3.7.2.2 Out-Ward Clearing Book
The bank uses outward clearing register for the purpose of recording all the details of the
cheques that the bank has delivered to other banks.
3.8
ADVANCES DEPARTMENT
Advances department is one of the most sensitive and important departments of the bank.
The major portion of the profit is earned through this department. The job of this
department is to make proposals about the loans. The Credit Management Division of
Head Office directly controls all the advances. As we known bank is a profit seeking
institution. It attracts surplus balances from the customers at low rate of interest and
makes advances at a higher rate of interest to the individuals and business firms. Credit
extensions are the most important activity of all financial institutions, because it is the
main source of earning.
However, at the same time, it is a very risky task and the risk cannot be completely
eliminated but could be minimized largely with certain techniques.
Any individual or company, who wants loan from NBP, first of all has to undergo the
filling of a prescribed form, which provides the following information to the banker.
3.8.1 Name and address of the borrower.
Existing financial position of a borrower at a particular branch.
Accounts details of other banks (if any).
Security against loan.
Exiting financial position of the company. (Balance Sheet & Income Statement).
Signing a promissory note is also a requirement of lending, through this note

borrower promise that he will be responsible to pay the certain amount of money with
interest.
25

3.8.2 Forms of Loans
In addition to purchase and discounting of bills, bankers in Pakistan generally lend in the
form of cash finance, overdrafts and loans. NBP provides advances to different people in
different ways as the case demand.
a) Cash Finance
This is a very common form of borrowing by commercial and industrial concerns and is
made available either against pledge or hypothecation of goods, produce or merchandise.
In cash finance a borrower is allowed to borrow money from the banker up to a certain
limit, either at once or as and when required. The borrower prefers this form of lending
due to the facility of paying markup/services charges only on the amount he actually
utilizes.
If the borrower does not utilize the full limit, the banker has to lose return on the unutilized amount. In order to offset this loss, the banker may provide for a suitable clause
in the cash finance agreement, according to which the borrower has to pay
markup/service charges on at least on self or one quarter of the amount of cash finance
limit allowed to him even when he does not utilize that amount.
b) Overdraft/Running Finance
This is the most common form of bank lending. When a borrower requires temporary
accommodation his banker allows withdrawals on his account in excess of the balance,
which the borrowing customer has in credit, and an overdraft thus occurs. This
accommodation is generally allowed against collateral securities. When it is against
collateral securities it is called Secured Overdraft and when the borrowing customer
cannot offer any collateral security except his personal security, the accommodation is
called a Clean Overdraft. The borrowing customer is in an advantageous position in an
overdraft, because he has to pay service charges only on the balance outstanding against
him. The main difference between a cash finance and overdraft lies in the fact that cash
finance is a bank finance used for long term by commercial and industrial concern on
regular basis, while an overdraft is a temporary accommodation occasionally resorted.
26

c) Demand Financing/Loans
When a customer borrows from a banker a fixed amount repayable either in periodic
installments or in lump sum at a fixed future time, it is called a loan. When bankers
allow loans to their customers against collateral securities they are called secured loans
and when no collateral security is taken they are called clean loans.
The amount of loan is placed at the 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
3.9 REMITTANCE DEPARTMENT

Remittance means a sum of money sent in payment for something. This department deals
with either the transfer of money from one bank to other bank or from one branch to
another branch for their customers. NBP offers the following forms of remittances.
Demand Draft
Telegraphic Transfer
Pay Order
Mail Transfer
3.9.1 Demand Draft

Demand draft is a popular mode of transfer. The customer fills the application form.
Application form includes the beneficiary name, account number and a senders name.
The customer deposits the amount of DD in the branch. After the payment the DD is
prepared and given to the customer. NBP officials note the transaction in issuance
register on the page of that branch of NBP on which DD is drawn and will prepare the
advice to send to that branch. The account of the customer is credited when the DD
advice from originating branch comes to the responding branch and the account is
debited when DD comes for clearance.
27

3.9.2 Pay Order
Pay order is made for local transfer of money. Pay order is the most convenient, simple
and secure way of transfer of money. NBP takes fixed commission of Rs. 25 per pay
order from the account holder and Rs. 100 from a non-account holder.
3.9.3 Telegraphic Transfer
Telegraphic transfer or cable transfer is the quickest method of making remittances.
Telegraphic transfer is an order by telegram to a bank to pay a specified sum of money to
the specified person. The customer for requesting TT fills an application form. Vouchers
are prepared and sent by ordinary mail to keep the record. TT charges are taken from the
customer. No excise duty is charged on TT. The TT charges are:
Telegram/ Fax Charges on TT = Actual-minimum Rs.125.
Cable telegram transfer costs more as compared to other title of money. In cable transfer
the bank uses a secret system of private code, which is known to the person concerned
with this department and branch manager.
3.9.4 Mail Transfer
When the money is not required immediately, the remittances can also be made by mail
transfer
(MT). Here the selling office of the bank sends instructions in writing by mail to the
paying bank for the payment of a specified amount of money. Debiting to the 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.
3.10 HUMAN RESOURCE MANAGEMENT

Human Resource plays a vital role in the success of every service organization. They
interact between man and machine. Their attitude can win or lose the customer. The
28

positive attitude could only be created in a conducive environment, which can make the
staff dedicated towards the organization and its objectives. In reality the man is more
important than machine as it is the human which could get maximum out of machine to
keep a happy customer. However, most organizations give little importance to this very
important asset.
Various aspects related to human resource of National Bank of Pakistan are critically
examined in the following text.
3.10.1 Selection & Recruitment
Although the Bank believes in merit but in practice the selection of employees is not
done on merit. Most of the employees are low educated. This shows that candidates with
some strong family background or political pressure are given preference in recruitment
and qualified candidates are sometimes left behind.
3.10.2 Job for Life
Like the employee of public sector organizations in Pakistan, the employees of NBP also
enjoy their job for life. Since there is no risk of early retirement or redundancy in rank,
they do not perform with their full potentials. This is one redundancy in rank, they do not
perform with their full potentials, and this is one of the reasons responsible for the low
productivity of the employees of the Bank.
3.10.3 Performance Appraisal
The performance of employees of the Bank are appraised though their annual
confidential reports at the end of each year. This has become an outdated method of
performance appraisal and no longer used due to the following reasons:
The performance of employees is evaluated after quite a long time.
Element of subjectivity is involved in this method.
Employees participation is not ensured in the process of evaluation.

29
Objectives of employees are not quantified.
3.10.4 Inter Personal Relationship

Modern management acknowledges human resources as one of the most important
assets of an organization. But by their very nature, human beings are also the most
unpredictable. Where a number of persons work together, interactions among them, of
necessity, will lead to conflicts and NBP is no exception. Most interpersonal conflicts in
NBP can be traced back to the following major heads.
3.10.5 Diversity in Values
Diversity in values, perceptions, cultural background and life-style is another reason
responsible for inter personal conflicts in NBP. Different values and perceptions about
the same issue, event or personality hinder understanding. When things come to such a
pavement, therefore, interpersonal conflicts are generated.
The dominant trend in all modern industrial societies of the world is merit and expertise,
which helps promote cohesion and reduce conflicts. But the feudalistic mindset is still
very strong in our set up and there is no tradition of tolerance for differing viewpoints.
Hence, interpersonal conflicts are generated.
3.11
FOREIGN EXCHANGE DEPARTMENT
This department mainly deals with the foreign business. The main functions of this
department are:
L/C dealing.
Foreign currency accounts dealing.
Foreign Remittance dealing.
30

3.11.1 L/C dealing
NBP is committed to offering its business customers the widest range of options in the
area of money transfer. If you are a commercial enterprise then our Letter of Credit
service is just what you are looking for. With competitive rates, security, and ease of
transaction, NBP Letters of Credit are the best way to do your business transactions.
3.11.2 Foreign currency account dealing
This department deals with the foreign currency accounts which mainly include dollar
account, euro account etc.
3.11.3 Foreign Remittance dealing.
This is very important function of this Department.
B) DEPARTMENTATION OF NBP MAIN BRANCH MANSEHRA.
Dividing an organization into different parts according to the functions is called
depart mentation. So NBP Main Branch Mansehra is divided into three main parts.
1.
Cash Department
2.
General Banking Department.
3.
Government Department
3.12 CASH DEPARTMENT

Cash department mainly deals in cash. The Head of department is Syed Haider
Shah and three cashiers Syed Sajid Shah, Safeer Ahmed and Waseem the objective of
cash department.
To facilitate people in the payments of their bills and taxes and repayments of cash
There are two main functions of cash department.
31

i.
Payment
ii.
Receipts
Payments are the function that they pay their cheques and pay cash.
Receipts mean collection of utilities bills, taxes etc.
3.13 GENERAL BANKING

In this section of the bank the general banking function is performed. It is divided
into five departments.
Foreign Exchange Department.
General Banking.
Advances Department.
Clearing Department.
Establishment Department.
3.13.1 Foreign Exchange Department

The incharge of this department is Abdul Haseeb Khan a very competent person. The
objective of this department is:
To transfer the money of people from one place to another place in safe and comparable
way The main functions of this department are:
Opening and Maintaining of Foreign currency Account
Transfer of funds to foreign countries both in currency notes and from

Accounts.
Foreign currency clearing both local and international.
32
Payments of Home Remittances.
3.13.2 Advances department

Every bank has a department, which advances money to borrowers. In NBP Main
Branch Mansehra the advances department is head by the Nadeem Ahmad. He is very
competent person. The objective of Advances Department is
To facilitate people by giving short term and long term loans on easy terms and
conditions. The main function of this Department is to take surplus money from the
people at low rates and lend this money to borrowers at high rates to earn profit.
33
CHAPTER # 4
FINANCIAL ANALYSIS
4.1 FINANCIAL STATEMENT ANALYSIS
Financial statement analysis is the process of identifying of financial strengths and
weaknesses of the firm by properly establishing relationship between the items of the
balance sheet and the profit &loss account,"
It is a valuable tool used by investors and creditors, financial analysts, and others in their
decision-making processes related to stocks, bonds, and other financial instruments. The
goal in analyzing financial statements is to assess past performance and current financial
position and to make predictions about the future performance of a company. Investors
who buy stock are primarily interested in a company's profitability and their prospects for
earning a return on their investment by receiving dividends and/or increasing the market
value of their stock holdings. Creditors and investors who buy debt securities, such as
bonds, are more interested in liquidity and solvency, the company's short-and long-run
ability to pay its debts. Financial analysts, who frequently specialize in following certain
industries, routinely assess the profitability, liquidity, and solvency of companies in order
to make recommendations about the purchase or sale of securities, such as stocks and
bonds. The analysis of financial statement refers to the examination of the statements for
the purpose of acquiring additional information regarding the activities of the business.
The users of the financial information often find analysis desirable for the interpretation
of the firms activities.
34

3 Years Statement of Financial Position of NBP
National Bank of Pakistan
Statement of Financial Position
Rupees in 000
35

3 Years Profit & Loss A/C:
For the year ended December, 31
PARTICULARS
2009
2010
2011
Mark-up/Return/Interest earned
78,124,796
88,681,381 95,689,741
Mark-up/Return/Interest earned
40,448,291
45,169,744 48,516,517
Net Mark-up/ Interest income
37,676,505
43,511,637 47,173,224
Provision against on performing advances-
11,148,773
7,007,975
6,219,671
651,282
2,904,949
3,138,494
net
Provision against diminution in the value of
investments-net advances-net
Impairment of good will
92,593
Provision against off balance sheet
20,237
3,965
11,820,292
10,009,482 9,358,165
25,856,213
33,502,155 37,815,059
Nonmarkup / interest income
2009
2010
2011
Fee, commission and brokerage income
8,996,973
9,871,667
9,948,547
Dividend income
1,896,817
1,067,273
1,595,192
Income from dealing in foreign currencies
3,103,673
2,278,898
3,196,630
Gain on sale of securities net
4,593,041
2,512,363
2,390,211
Gain on revaluation of investments
2,355
6,730
(35039)
obligations
Net Mark-up/ Interest income after

provisions
36
Share of loss from joint ventures
(41,715)
(16,976)
32,181
Share of profits from associates
5,238
66,906
83,559
Gain on revaluation of previously held equity
180,131
Other income
552,950
2,183,891
2,543,139
Total nonmarkup / interest income
19,109,332
18,150,883
19754420
44,965,545
51,653,038
57569479
Nonmarkup / interest expenses
2009
2010
2011
Administrative expenses
22,816,665
26,732,045
30760815
Other provision net
628,391
179,819
554,810
Other charges
321,647
118,887
137852
Total nonmarkup / interest expenses
23,766,703
27,030,751
31453477
Profit before taxation
21,198,842
24,662,287
26116002
Taxation Current year
8,890,206
9,871,640
9229882
Prior years
(4,137,307)
(938,158)
2,60,000
Deferred
(1,003,099)
(2,049,600)
(1083045)
3,749,800
6,883,882
8406837
17,449,042
17,738,405
17709165
Profit after taxation
37
Techniques of Analysis
Three techniques may be used in evaluating financial statement data:
Ratio Analysis
Horizontal Analysis,
Vertical Analysis
4.2. RATIO ANALYSIS

Ratio analyses are the most popular form of analyses all over the world and the trusted
one also. In ratio analyses as the name suggests ratios are used in analyzing the financial
standings of the organization.
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as:
The quotient of two mathematical expressions
OR
The relationship between two or more elements
In financial ratio analysis a ratio is used as benchmark for evaluating the financial
Position and performance of a firm.
Ratio analysis enables the analyst to compare items on a single financial statement or to
examine the relationships between items on two financial statements. After calculating
ratios for each year's financial data, the analyst can then examine trends for the company
across years. Since ratios adjust for size, using this analytical tool facilitates
intercompany as well as intercompany comparisons.
CALCULATION OF DIFFERENT RATIOS
Here we are going to calculate different ratios, which include both the balance sheet and
income statement ratios. These ratios are quite important for analyzing the financial
position of a firm.
These ratios are calculated for the years 2009, 2010 and 2011 from the balance sheet and
profit and loss statement of NBP.
38
4.2.1. LIQUIDITY RATIOS

A class of financial metrics that is used to determine a company's ability to pay off its
short terms debts obligations. Generally, the higher the value of the ratio the larger
the margin of safety that the company possesses to cover short-term debts.
4.2.1.1Current Ratio
The current ratio is the ratio of current assets to current liabilities.
Formula
Current Ratio = Current Assets / Current Liabilities
Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders
may prefer a lower current ratio so that more of the firm's assets are working to grow the
business.
Particulars
Formula
Years 2009
Years 2010
640476876/
646363744
781962320
Ratio
Year 2011
728683464/
962897823
/860262110
0.82
0.75
0.76
Interpretation
The current ratio of NBP decreasing in 2010 and in 2011because of increase in current
liabilities. The ratio is 0.82in 2009 and 0.75 in 2010 and in 2011 it is 0.76.This means
that for every 1 rupee liability of the bank it has 0.76 rupees IN 2011.It shows the poor
short term financial position of NBP.
39

4.2.1.2 Cash ratio
The cash ratio is an indication of the firm's ability to pay off its current liabilities if for
some reason immediate payment were demanded. NBP cash ratios are
Formula
Cash Ratio = Cash / Current liabilities
Particulars
Years 2009
Years 2010
Year 2011
Formula
145454911/
146400393/
159913188/
781962320
860262110
962897823
0 .18
0.17
0.16
Ratio
Interpretation
The cash ratio of the bank is 0.18, 0.17 and 0.16 in 2009, 2010 and 2011 respectively.
This shows a decrease in 2010 and 2011. This means that NBP have some cash than their
liability, and NBP not easily cover their liabilities with cash in hard times.
4.2.1.3 Advances to deposits ratio
The loan to deposit ratio is used to calculate a lending institution's ability to cover
withdrawals made by its customers
Formula
Advances to deposits ratio= Advances / Total Deposits
Particulars
Years 2009
Years 2010
Year 2011
Formula
475338439 /
727513013
478886775 /
527109209 /
8321344054
927415132
0.57
0.56
Ratio
0.65
40

Interpretation:
It means the efficiency on NBP is good and they use their deposits efficiently in
advancing to borrowers. Here high ratio is required. The next side of the picture is that
the people will think that is risky to deposit the money in the bank
4. 2. 2
SOLVENCY RATIO ANALYSIS
Solvency analysis of a firm indicates the amount of the other peoples money being used
to generate profit. In general, these analyses are more concerned with long term debts,
because these commit the firm to a stream of payments over the long run. Solvency
analysis includes
4. 2. 2.1
Proprietary Ratio
Proprietary ratio refers to a ratio which helps the creditors of the company in seeing that
their capital or loans which the creditors have given to the company are safe. Proprietary
ratio can be calculated as follows
Formula
Proprietary Ratio = Total Asset / Total Equity
Particulars
Years 2009
Years 2010
Year 2011
Formula
120681622 /
130800756/
135298921
946253269
103828467
0.12
0.12
Ratio
/1153480100
0.10
Interpretation
This ratio shows the solvency position of the bank. In 2009, 2010 there is an increases
trend as .i2 but in 2011 it decline .10. It shows that very small amounts of shareholders in
asset contribution.
41

4. 2. 2.2 Debt-to-owner's equity
The ratio of debt-to-owner's equity or net worth indicates the degree of financial leverage
you're using to enhance your return. A rising debt-to-equity ratio may signal that further
increases in debt caused by purchases of inventory or fixed assets should be restrained
Formula
Debt-to-owner's equity= Total Debt / Equity
Particulars
Years 2009
Years 2010
Year 2011
Formula
825460717/
906719635/
1017685691/
120681622
130800756
135298921
6.83
6.93
7.52
Ratio
Interpretation
It shows increases trend in 2009 to 2011 which means NBP financing more through debt
and NBP business depend on debt .it also increases the right of outsiders against assets .it
is high and not better for owners.
4. 2. 2.3 Earning assets to total assets ratio
Earning assets to total assets ratio tells us about the bank management efficiency to
utilize the earning assets.
Formula
Earning assets to total assets ratio=Earning assets/ Total assets
Particulars
Years 2009
Years 2010
Year 2011
Formula
827286516/
918673469 /
1022840481/
946253269
1038018467
1153480100
0.87
0.88
0.89
Ratio
42

Interpretation
The earning assets to total assets ratio increases which means efficiency of bank
improves. It means earning capacity of earning assets 0.89 against 1 rupee.
4. 2. 2.4 Return on total assets
The return on assets ratio provides a standard for evaluating how efficiently financial
management employs the average dollar invested in the firm's assets, whether the dollar
came from investors or creditors.
Formula
Return on total assets ratio= Net Profit after Tax/ Total Assets*100
Particulars
Years 2009
Years 2010
Year 2011
Formula
17449042/
17738405/
17709165/
946253269
103818467
1153480100
1.80%
1.70%
1.53%
Ratio
Interpretation
It shows the decrease trend of profitability. It means the assets of business are fully
utilized in 2009 and ratio is 1.80 but the assets of the business are fully not utilized in
more and efficient way in 2011 and ratio is 1.53 and also shows the unfavorable trend of
the business.
4. 2. 2.5 Return on investment
A performance measure used to evaluate the efficiency of an investment or to compare
the efficiency of a number of different investments
Formula
Return on investment= Net Profit after Tax/ Investment *100
43
Particulars
Years 2009
Years 2010
Year 2011
Formula
17449042 /
17738405/
17709165/
217596037
301078498
319527254
8.01%
5.89%
5.50%
Ratio
Interpretation
It means the investment of the business are fully utilized in more and efficient way it also
shows that NBP have large amount of investment but it needs some improvement and
also shows the unfavorable trend of the business
4. 2. 2.6 Return on equity
Return on equity measures a corporation's profitability by revealing how much profit a
company generates with the money shareholders have invested.
Formula
Net Profit after Tax/ Total Equity*100
Particulars
Years 2009
Years 2010
Year 2011
Formula
17449042 /
17738405/
17709165/
120681622
130800756
135298921
14.45%
13.56%
13.08%
Ratio
Interpretation
This ratio is more meaningful for shareholders who are interested to know the profit
earned by the company because the dividend paid from available profit higher ratio
means factor of production fully utilized and good position but here there is decline in
ratio.
4. 2. 2.7 Net profit margin
Net profit margin is the percentage profit your business makes for every dollar of revenue
whether youre making a profit after covering all of your costs.
44

Formula = net profit/ Interest Earned
Particulars
Years 2009
Years 2010
Year 2011
Formula
17449042
/78,124,796
17738405/
17709165/
88,681,381
95,689,741
20%
19%
Ratio
22%
Although bank is earning huge income but its expenses increased quite a bit
simultaneously. Ultimately result is decrease in the net profit of the bank. It is decreased
20%to 19% in 2011
4.3. HORIZONTAL ANALYSIS

This technique is also known as comparative analysis. It is conducted by setting
consecutive balance sheet, income statement or statement of cash flow side-by-side and
reviewing changes in individual categories on a year-to-year or multiyear basis. The most
important item revealed by comparative financial statement analysis is trend. A
comparison of statements over several years reveals direction, speed and extent of a
trend(s). The horizontal financial statements analysis is done by restating amount of each
item or group of items as a percentage. Such percentages are calculated by selecting a
base year and assign a weight of 100 to the amount of each item in the base year
statement. Thereafter, the amounts of similar items or groups of items in prior or
subsequent financial statements are expressed as a percentage of the base year amount.
The resulting figures are called index numbers or trend ratios.
Formula = Current Year amount / Base Year amount * 100.
45
Horizontal analysis of Statement of Financial Position
Interpretation
Assets sides-The horizontal analysis of the balance sheet of the bank over all give the
positive trend .The result of the balance sheet depict that there is a constant increasing
46

trend in cash about 14% in 2011as compare to last year. Lendings to financial and
advance increases very huge amounts such as 125% (lending to financial) and 10 %(
advances) total assets .investments increases in 2011 by 46 %. Fixed assets & others
assets also increases as 10% and 11%.
Liabilities & equity-Bills payable decreased in 2010 by 25% and in 2011 by 15%.
Borrowing decreases in 2010 as 56 % and 42 % in 2011.Deposits increases in 2010 as 14
% and 27 % in 2011.Others liabilities increases 10 %in 2010 and 28 % in 2011. Shares
capital of NBP increases in 2010 as 25 % and 56% in 2011.Reserves increases in 7 %in
2010, 12%in 2011. Inappropriate profit increases 7% in 2010, 12%in 2011.
HORIZONTAL ANALYSIS PROFIT & LOSS A/C
Particulars
2009 %
2010 %
2011 %
Markup / return / interest earned
100%
113%
122%
Markup / return / interest expensed
100%
111%
119%
Net markup / interest income
100%
15%
8%
Provision against non performing advances-net
100%
62%
55%
100%
446%
481%
100%
19%
100%
85%
79%
100%
129%
146%
Impairment of goodwill
Provision for diminution in the value of investments
net
sheet obligations
Net markup / interest income after provisions
47
48

Interpretation
The interest earned by National Bank of Pakistan fluctuates and shows an increasing
trend during all years. It shows an increasing trend that is 13% in 2010, 22%in 2011. The
interest expense of National Bank of Pakistan shows an increasing trend during all years.
It increases in 2010 as 11%, 19 % in 2011. The net markup/ interest income of National
Bank of Pakistan fluctuates and shows a mixed trend during all years. Provision against
none performing advances decreases in 2010 by 32 % & in 2011 as 45%. Net markup
increases as 26% in 2010 and 46 % in 2011.
The Fee, Commission & brokerage income of National Bank of Pakistan fluctuate and
show increases as 9% in 2010 and 10% in 2011. The dividend income of National Bank
of Pakistan is showing a mixed trend during all years .it decreases in 2010 by 44% and
16%in 2011. The administrative and operating expenses of National Bank of Pakistan
increase 22% in 2011 and 17 % in 2010 and profit before tax 1ncreases as compared to
last years. Profit after tax stable in 2011
4.4. VERTICAL ANALYSIS

Vertical analysis is a technique for identifying relationship between items in the same
financial statement by expressing all amounts as the percentage of the total amount taken
as 100. In a balance sheet, for example, cash and other assets are shown as a percentage
of the total assets and, in an income statement, each expense is shown as a percentage of
the sales revenue. In Vertical analysis, various components of the financial statements are
standardized by expressing them as a percentage of some bases.
Examples of common-sized statements include:
Components of the balance sheet expressed as a percentage of total assets
Components of the income statement expressed as a percentage of sales or Interest

earned
Formula
The formula for Vertical Analysis is:
Individual item of financial statement/total of items head *100
49
Vertical analysis of Statement of Financial Position

Rupees in 000
ASSETS
2009 %age
2010 %age
2011%age
Cash and balances with treasury banks
13%
11%
12%
Balances with other banks
2%
3%
2%
Lendings to financial institutions
2%
2%
2.7%
Investments net
22%
28%
26.5%
Advances net
50%
46%
44.3%
Operating fixed assets
2%
3%
2%
Deferred tax assets net
3%
5%
6%
Other assets net
6%
4%
5%
100%
100%
100%
Bills payable
1%
.008%
.008%
Borrowings
5%
1%
2%
Deposits and other accounts
79%
81%
83%
.0042 %
.0012%
.0011%
3%
3%
4%
TOTAL
LIABILITIES
Subordinate loan
Liabilities against assets
Deferred tax liabilities
Other liabilities
50
TOTAL LIABILITIES
88%
86%
89%
NET ASSETS
12%
14%
11%
Share capital
1.5%
2%
1%
Reserves
2.5%
2.4%
2.6%
Inappropriate profit
5.9%
6%
5.2%
2%
2.2%
2%
.1%
.4%
.2%
12%
14%
11%
PRSEENTED BY
Surplus on revaluation of assets
Interpretation
Assets analysis
In balance sheet of bank the most important item is earning assets. There are four earning
assets. Bank has strong earning assets like advances investments and lending to financial
institutions has major percentage in of assets of bank.
There was a slight increase in the year 2011 as compare to the years 2009& 2010, of
12%. %. In cash and Lendings increasing trend and investment increases in 2010 28 %
and decline in 2011 2% as compared to last years. Advances decreases in
2010 and 2011 in liability deposits of the bank increases as compared to last years 2%.
The operating fixed assets of National Bank of Pakistan shows a percentage of 2% in the
year 2011. There was a slight decrease of 1% in 2011, the other assets of National Bank
of Pakistan fluctuate during all years. The percentage of other assets is decreased to 6%
in the year 2011.
51

Liabilities & Equity analysis
The bills payable by National Bank of Pakistan indicates a stable percentage. The
borrowings are increased in 2011 shows a percentage of 3%. The deposits and other
liabilities of National Bank of Pakistan increased during all years. The share capital of
National Bank of Pakistan shows a mixed trend in all years. It was 10% in 2010 and
shows an increasing trend of 13% in 2011. The unappropriated profit & Reserves of
National Bank of Pakistan is increased during all years
Vertical analysis of Profit & loss account

Rupees in 000
Particulars
2009 %
2010 %
2011 %
Markup / return / interest earned
100%
100 %
100%
Markup / return / interest expensed
49%
52%
51%
Net markup / interest income
47%
49%
49%
14%
8%
6%
.9%
3%
4%
.1%
-.oo2%
15%
11%
10%
33%
40%
39%
Provision against non-performing

advances-net
Provision for diminution in the value of
investments net
Provision against off balance sheet
obligations
Net markup / interest income after

provisions
52
Non -markup / interest income
2009 %
2010 %
2011 %
Fee, commission and brokerage income
11%
13%
11%
Dividend income
3%
1%
2%
Income from dealing in foreign currencies
4%
2%
3%
Gain on sale of securities net
6%
3%
2%
Unrealized gain on revaluation of investments
.01%
0.1%
Share of loss from joint ventures
(.1)%
.009
0.1%
Share of profits from associates
.02%
0.1 %
.1%
.2%
Gain on revaluation of previously equity interest

Other income
.7%
2%
3%
24.5%
20%
21%
Administrative expenses
29%
31%
32%
Other provision net
.8%
.2%
0.6%
Other charges
.7%
.1%
0.2%
Total nonmarkup / interest expenses
31%
30%
33%
Extra ordinary / unusual item
27%
28%
28%
Profit before taxation
11%
11%
10%
Taxation Current year
(5)%
(1)%
.3%
Prior years
(1)%
(3)%
(9)%
Deferred
4%
7%
9%
Profit after taxation
23%
20%
19%
Total nonmarkup / interest income
53

Interpretation.
The interest earned by National Bank of Pakistan fluctuates and shows an increasing
trend during all years. The interest expense of National Bank of Pakistan shows a
decreasing trend during all years. In the year 2011, the interest expensed is 51%. The Fee,
Commission & brokerage income of National Bank of Pakistan fluctuate and show a
decreasing flow. The administrative and operating expenses of National Bank of Pakistan
are 32% in 2011, representing second highest percentage among all years The total nonmarkup/ Interest expenses of National Bank of Pakistan are 30% in 2010 and increases
33% in 2011.current tax and profit decreases in 2011 as compared to 2010
10 Years financial Highlights of NBP
Total Assets
Deposits
54

Advances
Investments
Capital reserves
55

Pre-tax Profit
After-Tax profit
4.5 SWOT ANALYSIS

SWOT analysis is an acronym that stands for strengths, weakness, opportunities, and
threats SWOT analysis is careful evaluation of an organizations internal strengths and
weakness as well as its environment opportunities and threats.
SWOT analysis is a situational which includes strengths, weaknesses, opportunities and
threats that affect organizational performance.
56

SWOT analysis is one of the most important steps in formulating strategy using the
organization mission as a context; managers assess internal strengths distinctive
competencies and weakness and external opportunities and threats.
The goal is to then develop good strategies and exploit opportunities and strengths
neutralize threats and avoid weaknesses with an overall organizational goal is to increase
the wealth and value of the organization.
STRENGTHS
NBP is one of the oldest bank of Pakistan and first nationalized bank Hence its
customer base is strength from this plus point as customers have more confidence in
the bank. The additional value services as the privilege for the bank.
The NBP performs additional services for its customers as well as the other bank
customer in the absence of SBP.
NBP has the relative competence in having more deposits than the other bank. This is
because of the confidence the customer have in the bank. The bank being the
privileged and oldest bank in banking sector of Pakistan enjoys this edge over all
others, lacking it.
The employers at NBP are offered reasonable monetary benefit. Normally two
bonuses are given Eid-Ul-Fitar & Eid-Ul-Azha. This serves as an additional benefit
and competency for the bank and a source of motivation for the employees.
The bank has another competency i.e. it has broad-basses network of branches
throughout the country also more than one branch in high productive cities. The
customers are provided services at their nearest possible place to confirm customer
satisfied.
The employees at NBP are strict followers of rule & regulation imposed by bank. The
disciplined environment at NBP bolsters its image and also enhances the overall
output of the organization.
57
The employees at NBP here have a good hold on their descriptions, as they are highly
skilled Professionals with background in business administration, banking, economics
etc. These professional competencies enable the employees to understand and
perform the function and operation in better way.
The working condition in the NBP branch here is very conductive and favorable for
better output. The informal environment affects the performance of the employees in
a positive way.
The bank enjoys a good plus point when it comes to the employee manager
relationship the hearing as removing of discrepancies if any, between the employees,
and between the manager and employees.
Best and optional policies and attractive compensation packages for employees,
which has really improved their commitment dedication and hard work towards the
accomplishment of banks objectives.
WEAKNESSES
The bank does not promote its corporate image, services, etc on a competitive way.
Hence lacks far behind in marketing effort .A need for aggressive marketing in there
in the era marketing in now becoming a part of every organization.
The strong political hold of some parties and government and their dominance is
affecting the bank in a negative way. They sometime have to provide loan under the
pressure, which leads to uneven and adjusted feeling in the bank employees.
The promotions and bonuses etc in the bank are often powered by seniors favoritism
or depends upon their wills and decision. This adds to the negative factors, which
denominate the employees thus resulting in affecting their performance negatively.
The bank falls far behind when the innovative and new schemes are considered. It has
not been involved in the tug of war between the competitors to the accounts and
strengthens the existing customer base. This stands out to be the major incompetence
and weakness of the banks.
58
During the rush hours, the bank is founded out to be a total flop to handle the mob of
people peaking from windows and doors. The bank has deficiency to operate in the
stages of rush hours where the people find them services entangled in a situation of
nowhere because they are not well served.
The bank lack the strength of being powered by the network of computers, which
have saved time, energy and would have lessened the mental stress, the employees
have currently. This would add to the strength if it were powered by network of
computers.
The bank lacks the modern Equipment that is note counting machine computers. Even
if there is any equipment they lack to fall in the criteria of being rearmed as update
and upgraded
The workload in NBP is not evenly distributed and the workload tends to be more on
some employees while others abscond away from their responsibilities, which serves
as a demotivation factor for employees performing above average work.
OPPORTUNITIES
The world today has become a global village because of advancement in the
technologies, especially in communication sector. More emphasis is now given to
avail the modern technologies to better the performances. NBP can utilize the
electronic banking opportunity to ensure on line banking 24 hours a day. This would
give a competitive edge over others.
Because of the need for micro financing in the market, there are lot of opportunities in
this regard. Other banks have already initiated, now the time has arrived when the
NBP must realize it and take on step to cater an ongoing demand.
Growing policies of government on business and commerce sector provides MCB

and opportunity to efficiently meet with the business peoples
59
NBP also has an opportunity to expand its new technological advancement like Tele
bank and Internet banking facilities in order to serve the customers more efficiently.
Due to efficient and highly qualifies management trainees groups, NBP can also
improve well and expand its foreign operations successfully.
NBP must continue the process of hiring the management trainees and should hire
well-qualified and competent people having specialization in the field of banking and
finance. As in most of the Business Institutions doing masters in this field have been
introduced.
THREATS
The bank is facing threats with the emergence of new competitors especially in terms
of foreign banks. These foreign banks are equipped with heavy financial power with
excellent and
innovative ways of promoting and performing their services.
The ongoing shift in power in political arena in the country effects the performance of
the bank has to forward loans to politically powerful persons which create a sense of
insecurity and demoralization in the customer as well as employees. The bank is
currently acting upon the policy of downsizing which threaten the environment of the
bank Employees feel insecurity in doing their jobs and work, hence affecting the
overall performance of employees negatively.
There exists no regular and specific system of the removal of customer complaints.
Now a day a need for total customer satisfaction is emerging and in their demanding
consequences customer's complaints are ignored.
Growing global technological advancement in the world and new online equipments
will be a major threats face by the National Bank.
Having nationalized bank inconsistency in governments policies regarding to

business and economic sector.
60
There is a growing concept of Islamic banking in Pakistan and many foreign banks
entered in the market with the said concept, so it is a big opportunity for NBP to adapt
this concept to grape more market share and also to overcome competition
61
CHAPTER # 5
CONCLUSION FINDINGS &
RECOMMENDATIONS
5.1 CONCLUSION
The economic growth, investment and the proper implementation of a positive
policy, the banks present economy has become a major area of concern. The banking
sector is also the opportunity to be used fruit economic recovery rapid growth over the
past few years. There are several economic mergers foreign investment in the banking
sector. PROB is intended is a leading bank in Pakistan, which offers an excellent service
to its customers. The Bank has delivered a phenomenal growth in the past few years in
many places in this country that the deposits, funds, assets and adjustment to the opening
balance of retained earnings bank. Benefits have a high market share is not only their
characteristics, but also the profit and the markup language. Also the products with NBP
offers to the catering sector.
National Bank of Pakistan within the framework of an important role for strategic
development. The Bank has always been the government's economic and have benefited
from the aid of state guarantees a large amount of public money and deposits.
National Bank of Pakistan is the second most important in the World Bank in
Pakistan, to the extent possible; National Bank of Pakistan and representatives of the
State of widely used the Pakistan and the Bank is also involved in commercial banks.
National Bank of Pakistan is crucial for Pakistans history of the bank, but also the
economy of Pakistan, so that it is very important. With the improvement of the National
Bank of Pakistan and their internal and external conditions, but maximum operations in
Pakistan (because that is the only bank which must be, the less developed regions where
there are no other banks will) continue to be many problems are new marketing
strategies, organizational and administrative problems with branches less developed areas
and the reasons for it.
62

I have a lot of experience of the bank in the course of my working experience.
You training courses in these areas that I learned that various functions organizations
whose rules and procedures of the central bank. National Bank of Pakistan Pakistan is
one of the most eminent banking system almost 1283 more national institutions and 23
abroad. Bank is always growing and always more far toward social assistance. The
management is very aware of the experienced and fields. I have had very good
opportunities not of internal card as a summary of the practices of life and work the
industry before they in practice. Practical issues and knowledge are very different from
the theory and intellectual attraction only increased knowledge. I had a good opportunity
from the practical experience and i mental attraction, and well developed theoretical
knowledge in some cases.
In addition, if the bank is on the increase, the employees of NBP add, indicates
that the problem is regarded as an employer is its employees difficult environment where
they can exploit the full potential and give a degree of confidence as the employer of the
staff bank.
Finally, a leading bank in Pakistan, PB is the standard leader of services to the
industry or its main competitors on average the industry and deliver a constant
improvement of existing products and services, but there are also new to the industry.
5.2 FINDINGS AND RECOMMENDATIONS

PB is a powerful, a non-profit organization, and the implementation of measures, a
particular system. Central bank regulatory authority in Pakistan, where both the market
works properly technical basis. Head Office set operation procedure and not to work.
Such a procedure update in time approach and this process can be effectively change
capacity building on an equal footing with international practice.
In this regard, I would like to give a number of recommendations which, I believe that the
efficiency and the performance which PB as an organization in general and the PB
Mansehra trunk cable. Recommendations are as follows:
Training of its employees
The Bank is intended to contribute to the improvement of the quality of the training and
of the integrity and effectiveness and of systems, processes and financial reports.
63

Job Rotation
Work the workers, in order that they should know about all departments. This is going to
be opportunities for workers, following changes in monotony is slipping. This will update
and motivate employees.
Equal Distribution of Workload
Also of the staff employed by the directorate general should be to equal the load. There
should not be unnecessary at the relaxation. Personal Contacts of employees must not
destroy the ministry of the environment.
IT capability
The banks should allow to improve its own analytical regions and a medium-term
strategy banking and securities regulation.
Micro Finance
The Bank should be to support the micro-enterprises and small and medium sized
enterprises, such as the unemployment and job creation requires a more equitable
distribution of wealth.
Modern Banking
NBP modern banking the necessary instruments and techniques. Quality Leadership, a
clear vision infrastructure and the development of human resources.
Improve product
PB, arm loans only government public sector development planning, and those of
development and economic growth to provide the products and services.
Proper Planning
EIB plan of reorganization must be in time of war and a change in the organization of the
work function of retrieving a global database tables with which you want to work. In
addition, the World Bank to strengthen the monitoring of expenditures
Monitoring
National Bank of Pakistan must deployment framework of supervision on a consolidated
basis and the reorganization of work regulatory framework for a better regulation and
control of financial supervision of the operation.
64

Introduction of advertising
During the past year, the Bank to begin advertising ways to promote savings the
population. The bank will open new branches regions country deposits and stationary
sources.
Rank Influence Should Be Avoided
Sometimes, a high-ranking officers and be a priority. In this case, the Bank will closely
monitor rule "first come, first served". This confidence to other customers, that they are
not ignored, because they are that you can then rank.
Customer Satisfaction
National Bank of Pakistan is to improve services and older persons to introduce scientific
methods to pay the bills. If consumers are satisfied with service they will grow with the
bank.
65
REFRENCES
Http// www.nbp.com.pk.
Service Personnel. 20. July 2010. PNI trunk Mansehra.
The Chairman, on 21. June 2006 round 13.203. Its head office in Karachi,
Pakistan, the National Bank of Pakistan.
Standard Manual national central bank in Pakistan.
In 2012 General Instructions
Israr Siddiqi has been H. (1998The banking and financial services. Karachi excellent print quality businesses. On page 35.36 and 40.
Sir called John. Right banking system. Right banking system. McGraw Hill
published: page 51-58
Dr. Aftab Ahmad Khan (macroeconomic and financial sector in Pakistan.)
Www.nbp.com.pk
The Bank operates in 1974.
2013 Annual Report and the financial statements of the central bank of
Pakistan until 2013.
66

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Internship Report 2014

Internship Report 2014

To work practically in an organization.

To develop interpersonal communication.

1.2 SCOPE OF STUDY

1.3 OBJECTIVES OF THE STUDY

Discuss thorough study of National Bank of Pakistan.

1.4 LIMITATION OF THE STUDY

Internship Report 2014

1.5 BENEFIT OF THE STUDY

1.6 RESEARCH METHODOLOGY

Internship Report 2014

Internship Report 2014

2.2 DEFINITIONS OF BANK

Please submit accounts

Take current accounts

Tests and questions

Collect checks exceeds and the turbocharger make their customers

UNITED STATES of banker concept of a very broad sense.

Internship Report 2014

2.3 BANKING GROWTH DURING (1948-1970)

Internship Report 2014

Internship Report 2014

2.4 BANKING REFORMS 1972

Internship Report 2014

2.5 EVOLUTION OF BANKING IN PAKISTAN

Internship Report 2014

2.6 MISSION STATEMENT

2.7 GOALS AND OBJICTIVES

2.8 VISION STATEMENT

Internship Report 2014

2.9 BOARD OF DIRECTORS

Internship Report 2014

Internship Report 2014

2.11 SENIOR MANAGEMENT OF NBP

Senior Executive Vice President

SEVP & Group Chief Asset Recovery group

SEVP & Group Chief Operations groups

Nadeem Anwar Ilyas

SEVP & Group Chief

Imam Bakhsh Baloch

SEVP & Group Chief

Khalid Bin Shaheen

SEVP & Group Chief

SEVP & Chief Risk Officer

Internship Report 2014

Risk Management Group

EVP & Divisional Head Legal Division

EVP & Head (A)

EVP & Group Chief (A)

2. 12 NET WORK OF BRANCHES

Internship Report 2014

Internship Report 2014

SHORT TERM INVESTMENTS

NATIONAL INCOME DAILY ACCOUNT. (NIDA)

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

NBP is involved in the following

Investment into the capital market

Introduction of capital market accounts (under process)

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

Internship Report 2014

TRADE FINANCE OTHER BUSINESS LOANS

There are two types of trade finance.