Submitted to: Maam Ammara Mujtaba

Submitted by:
Ifrah Anum
Naila Arshad
Jasia Imtiaz
Course:
Fundamentals of finance
End of semester project on NATIONAL BANK OF PAKISTAN

Introduction:
National bank of Pakistan
(Incorporated under the National Bank of Pakistan Ordinance, 1949)
National Bank of Pakistan (the bank) was incorporated in Pakistan under the National
Bank of Pakistan Ordinance, 1949 and is listed on all the stock exchanges in Pakistan.
Its registered and head office is situated at I.I. Chundrigar Road, Karachi. The bank is
engaged in providing commercial banking and related services in Pakistan and
overseas. The bank also handles treasury transactions for the Government of Pakistan
(GoP) as an agent to the State Bank of Pakistan (SBP). The bank operates 1,243
(2007: 1,232) branches in Pakistan and 22 (2007: 18) overseas branches (including
the Export Processing Zone branch, Karachi). Under a Trust Deed, the bank also
provides services as trustee to National Investment Trust (NIT) including safe custody
of securities on behalf of NIT.
National Bank of Pakistan maintains its position as 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.
The Bank is providing all banking services of mercantile and commercial banking
permissible in the country, which includes:
Handling of treasury transactions for the Government of Pakistan as agent to the
State Bank of Pakistan.
Providing services under a Trust Deed as Trustee to the National Investment Trust
(NIT) including safe custody of securities on behalf of NIT.
Accepting of deposits of money on current, fixed, saving, term deposit and profit
and loss sharing accounts.
Borrowing money and arranging finance from other banks.

 Advancing and lending money to its clients.

Financing of projects, including technical assistance, project appraisal through longterm shortterm loans, term finance and musharika certificates, etc.
Buying, selling, dealing, including entering into forward contracts of foreign
exchange.
Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco, etc.
Receiving of bonds, scrips, valuables, etc. for safe custody.
Carrying on agency business of any description other than managing agent, on
behalf of clients including Government and local authorities.
Generating, undertaking, promoting, etc. of issue of shares and, bonds, etc.
Transacting guarantee and indemnity business.
Undertaking and executing trusts.
ss Joint venturing with foreign dealers, agents and companies for its representation
abroad.
Participating in "World Bank" and "Asian Development Bank's" lines of credit.
Providing personalized Hajj services to intending Hajjis.

Structure of Finance Department

Department Hierarchy

Finance director

Accounts officer

Assistant accounts officer

Board of Director:
Board of Director - NBP. Syed Ahmed Iqbal Ashraf has rich experience of over 34 years in
domestic and international banking. Mr. Ashraf is a Fellow of Association of Chartered Certified
Accountants (FACCA) from UK; from where he not only acquired his education but also started
his career

Numbers of Employee
Total No. of Employees are 02 in Finance Department
Finance and Accounting Operations
Finance and Accounting operations are operated with the help of subordinate staff. Bank is
financing in multiple sectors.
Functions of the Finance Department
Finance Department performs following functions.
Borrowing from State Bank of Pakistan.
Lending to Commercial Banks
Lending to Investors.
Lending to General Public for multi-business.
Accounting system of the organization Accounting system of the bank is very bad due to nonavailability of Information Technology trained staff which is most requirement of the bank. Bank
use manually accounting system during its operational activities.
Finance system of the organization
Financial system of the bank is mixed and complicated because being government bank, bank
deals with all kind of lending and investing activities and also hold down the cash position of
others financial institutions i.e. banks like MCB, UBL, ABL etc.
Tax:
A business must pay a variety of taxes based on the company's physical location, ownership
structure and nature of the business. Business taxes can have a huge impact on the profitability of
businesses and the amount of business investment. Taxation is a very important factor in the
financial investment decision-making process because a lower tax burden allows the company to
lower prices or generate higher revenue, which can then be paid out in wages, salaries and/or
dividends. Business may be required to remit the following types of taxes:
Types of taxex:

Federal Income Tax: A tax levied by a national government on annual income.

State and/or Local Income Tax: A tax levied by a state or local government on annual income.
Not all states have implemented state level income taxes.

Payroll Tax: A tax an employer withholds and/or pays on behalf of their employees based on the
wage or salary of the employee. In most countries, including the United States, both state and
federal authorities collect some form of payroll tax. In the United States, Medicare and Social
Security, also called FICA, make up the payroll tax.
Unemployment Tax: A federal tax that is allocated to state unemployment agencies to fund
unemployment assistance for laid-off workers.
Sales Tax: A tax imposed by the government at the point of sale on retail goods and services. It
is collected by the retailer and passed on to the state. Sales tax is based on a percentage of the
selling prices of the goods and services and is set by the state. Technically, consumers pay sales
taxes, but effectively, business pay them since the tax increases consumers costs and causes them
to buy less.
Foreign Tax: Income taxes paid to a foreign government on income earned in that country.
Value-Added Tax: A national sales tax collected at each stage of production or consumption of a
good. Depending on the political climate, the taxing authority often exempts certain necessary
living items, such as food and medicine from the tax.
Personal tax rate : The percentage at which an individual or corporation is taxed. The tax rate
is the tax imposed by the federal government and some states based on an individual's taxable
income or a corporation's earnings.
Corporate: taxes against profits earned by businesses during a given taxable period; they are
generally applied to companies' operating earnings, after expenses such as COGS, SG&A and
depreciation have been deducted from revenues.
Benchmark of National Bank of Pakistan:
National bank of Pakistan compare themselves with KIB ( Karachi inter bank) where all banks
do their buying and sellings.
They also see according to the moodies rating , also with the JCRBIS.
Compeitors of the national bank of Pakistan:
Competitors are United Bank limited (UBL) , Habib bank limited (HBL), Allied bank limited
(ABL) and Muslim commercial bank (MCB)

Bankruptcy:
In case of any bankruptcy, 10% cash is reserved at the state bank then the cash can be
accommodated by that. Another way is the landing call back.

Analysis of financial statements:

Internal comparison:
It is the comparison within the same bank of different years,
Profitability ratios :
They indicate the effectiveness of the firms operation. It relates profitability to sales and
investment.
Profitability in relation to sales:
As there are no sales in the banks, so the profitability in relation to sales cant be calculated
Profitability in relation to investments:
Return on assets
It is calculated as
ROA = Net income /total assets x 100
2010

ROA

206538/12086215
x 100
= 1.7088%

2011

196891/1282418
2 x 100
= 1.535%

2012

173829/1354775
6 x 100
= 1.28%

2013

51848/13023718
x 100
= 0.398%

By investing the certain amounts in dollars on assets the bank has earned 1.7088% return in
2010, 1.535% return in 2011, 1.28% in 2012 and 0.398% in 2013 so the return is decreasing
every year

Return on equity:

It is calculated as
ROE = Net income/common equity x 100
2010

ROE

206538/156660
x 100
= 131.838%

2011

196891/186983
x 100
= 105.29%

2012

173829/190429
x 100
= 912.282%

2013

51848/201996
x 100
= 25.66%

The bank has earned a return of 131.83% in year 2010 , 105.29% in year 2011 , 912.28% in year
2012 and 25.66% in year 2013 this is the investment made by the stock holders high return on
equity reflects the firms acceptance of strong investment opportunities.

Liquidity ratio:
It is the ability to convert your assets into cash , it measures the short term debt paying ability of
a firm.
Current Ratio:
It is calculated as

Current ratio = Current Assets/ Current liabilities

2010

Current
ratio

2011

5478638/10011096 5823527/1070525
= 0.5472
3
= 0.5439

2012

2013

5567670/11359529 5933774/1081
= 0.490
= 0.5486

The current ratio determines the short term debt paying ability. If the current liabilities are rising
faster than the current assets then your current ratio will fall. The current ratio of the bank is
almost same i.e 0.54 except in year 2012 which is 0.49.

Financial leverage ratios:

It measures the extent to which the firm is using the borrowed money.

Debt to equity ratio:

It is calculated as
Debt to equity ratio = total debt/total equity x 100
2010

Debt to
equity
ratio

10557431/152878
4 x 100
= 690.577%

2011

2012

2013

11314445/1509737 11940154/1607602 11498306/1525412

x 100
x 100
x 100
= 749.43%
= 742.730%
= 753.78%

In year 2010 690.577% is equity, in 2011 equity is 749.43%, in 2012 742.730% and in 2013 it is
753.78% so it can be seen that the bank is financed by the debt more in year 2013 than the other
years.

Debt to asset ratio:

It is calculated as
Debt to asset ratio = total debt/total assets x 100
2010

Deb
t to
asse
t
ratio

2011

10557431/1208621
5 x 100
= 87.35%

2012

11314445/1282418
2 x 100
= 88.22%

2013

11940154/1354775
6 x 100
= 88.13%

11498306/1302371
8 x 100
= 88.2%

Almost 88% of the assets are financed with debt and remaining 12% of the financing comes from
shareholders equity. 88% of the assets are purchased by using borrowed money in the four years.

Gearing ratio:
It measures the relative significance of long term debt
It is calculated as:
Gearing ratio = long term debt/ total capitalization x 100

2010

Gearing ratio

546335/702995
x 100
= 77.715%

2011

609192/796175
x 100
= 76.5%

2012

580625/771054
x 100
= 75.30%

2013

686452/888448
x 100
= 77.26%

In year 2010, in total capitalization 77.7% is debt. In year 2011 debt is 76.5%, in 2012 it is
75.3% and in 2013 the debt is 77.26%

Interest coverage ratio:

It measures the firms ability to payoff the interest expense and avoid bankruptcy.
It is calculated as
Interest coverage ratio = EBIT/ Interest expense

2010

Interest coverage
ratio

286691/314734
= 0.9108

2011

290357/34964
= 0.83031

2012

2013

247698/383896
= 0.64

68196/366993
= 0.185

The higher the ratio the better it is. In 2010 the ratio is better than the other years it is decresing
every year so the bank was able to cover its interest expense easily in 2010 than in the other
years.

Horizontal Analysis:
It is calculated as :
Current amount-base amount/base amount x 100

Variables
Cash and balances

2010
1346658

2013
1502308

%change
11.558%

Balances with other

banks

357962

174591

-51.226%

Interpret
Since the base
period the change
in cash is 11.58%
Since the base
period the change
in balances is
-51.226%

Lending to financial
institutions

268397

493160

83.742%

Investments

3505621

3763715

7.362%

Advances

5575939

5888621

5.607%

Operating fixed assets

321603

328213

2.055%

Deffered tax assets

80972

104143

28.61%

Other assets

629063

768967

22.24%

Bills payable

93226

131922

41.50%

Borrowings

228880

218508

-4.53%

Deposits and other

accounts

9688990

10461424

7.97%

Finance lease

1437

545

-62.07%

Other liabilities

544898

685907

25.87%

Since the base

period the change
in lendings is
83.74%
Since the base
period the change
in investments is
7.3%
Since the base
period the change
in advances is
5.607%
Since the base
period the change
in fixed assets is
2.055%
Since the base
period the change
in deffered tax is
28.61%
Since the base
period the change
in other assets is
22.24%
Since the base
period the change
in bills payable is
41.50%
Since the base
period the change
in borrowings is
-4.53%
Since the base
period the change
in deposits is
7.97%
Since the base
period the change
in finance lease is
-62.07%
Since the base
period the change
in other liabilities is
25.87%

Share capital

156660

201996

28.93%

Reserves

292596

318413

8.82%

Unappropriated profit

781324

472198

-39.56%

Non controlling
interest

5799

7791

34.35%

Since the base

period the change
in share capital is
28.93%
Since the base
period the change
in reserves is
8.82%
Since the base
period the change
in unappropriated
profit is -39.56%
Since the base
period the change
in non controlling
interest is 34.35

Income statement.
Variables
Interest earned

2010
1032566

2013
951272

Change in %
-7.87

Interest
expensed

525936

578159

9.92%

Interest income

506630

373113

-26.35

Provision
against non
performing
advances
Net mark up

81598

165767

103.15%

390084

187328

-51.97%

Interpret
Since the base
period the
change in
interest earned is
-7.87%
Since the base
period the
change in
interest
expensed is
9.92%
Since the base
period the
change in the
interest income
is -26.35%
Since the base
period the
change is
103.15%
Since the base
period the

Dividend
income

12427

25265

103.3%

Administrative
expenses

311256

357731

14.93%

Other provisions

2094

9040

331.7%

Interest expenses 314734

366993

16.60%

Profit before
taxation

286691

68196

-76.2%

Taxation

114941

59153

-48.53%

Profit after
taxation

206538

51848

-74.89%

change in net
mark up is
-51.97%
Since the base
period the
dividend income
is 103.3%
Since the base
period the
change in
Administrative
expenses is
14.93%
Since the base
period the
change is
331.7%
Since the base
period the
change is
16.60%
Since the base
period the
change is
-76.2%
Since the base
period the
change in
taxation is
-48.53%
Since the base
period the
change is
-74.89%

Vertical Analysis

variables
Cash

2010
1346658/120862

2011
1465810/1282418

2012
1634144/1354775

2013
1502308/1302371

Balances

Lendings

Investmen
ts
Advances

Op fixed
assets
Deffered
tax assets

Other
assets
Bills
payable
Borrowing
s
Deposits
and other
accounts
Finance
lease

15 x 100
= 11.14%
357962/1208621
5 x 100
= 2.96%
268397/1208621
5 x 100
= 2.22%
3505621/120862
15 x 100
= 29%
5575939/120862
15 x 100
= 46.13%
321603/1208621
5 x 100
= 2.66%
80972/12086215
x 100
= 0.669%

2 x 100
= 11.43%
312076/12824182
x 100
= 2.43%
493195/12824182
x 100
= 3.84%
3552446/1282418
2 x 100
= 27.70%
5860305/1282418
2 x 100
= 45.69%
312708/12824182
x 100
= 2.43%
88643/12824182
x 100
= 0.691%

6 x 100
= 12.06%
318016/13547756
x 100
= 2.34%
85240/13547756
x 100
= 0.629%
3530270/1354775
6 x 100
= 26.057%
6807482/1354775
6 x 100
= 50.24%
305860/13547756
x 100
= 22.52%
35682/13547756
x 100
= 0.26%

8 x 100
= 11.53%
174591/13023718
x 100
= 1.340%
493160/13023718
x 100
= 3.78%
3763715/1302371
8 x 100
= 28.8%
5888621/1302371
8 x 100
= 45.21%
328213/13023718
x 100
= 2.52%
104143/13023718
x 100
= 0.799%

629063/1208621
5 x 100
= 5.20%
93226/10557431
x 100
= 0.88%
228880/1055743
1 x 100
= 2.167%
9688990/105574
31
x 100
= 91.77%
1437/10557431
x 100
= 0.0136

738999/12824182
x 100
= 5.76%
101225/11314445
x 100
= 0.89%
293195/11314445
x 100
= 2.59%
10310833/113144
45 x 100
= 91.12%

831062/13547756
x 100
= 6.13%
147892/11940154
x 100
= 1.23%
526118/11940154
x 100
= 4.40%
10685519/119401
54 x 100
= 89.49%

768967/13023718
x 100
= 5.90%
131922/11498306
x 100
= 1.147%
218508/11498306
x 100
= 1.90%
10461424/114983
06 x 100
= 90.98%

1031/11314445
x 100
= 0.0091%

395/11940154
x 100
= 0.0033%

545/11498306
x 100
= 0.0047%

The certain change in % is given above.

External comparison:
External comparison is done by looking at the income statements and balance sheet of the other
banks and comparing all the ratios with them.

Conclusion:
This report is all about National Bank of Pakistan, one of the leading banks of Pakistan banking
industry with 1254 nationwide and almost 25 branches operating in other countries including
USA, China, France, Hong Kong, Azerbaijan, Bangladesh, and Hong Kong. It has maximum
coverage with facilities of ATM and online banking throughout Pakistan
It is a part of State Bank of Pakistan and it is its major strength. It is providing different facilities
to its customers. Inside the bank, in branch banking it has Clearing and Collection Department,
Government Receipts Processing Department, Account Opening Department, Remittance
Department, Customer Services Department Cash Department, Deposit Department, Advances
and Credit Department. These are the most common departments exist in almost each branch. It
is offering different deposit choices, advances, credits and securities etc for its customers.
Its Human Resource is its major strength that is leading this bank in this way but there is much
gap to cover yet. The other strengths this bank has are that it is acting as Agent of State Bank of
Pakistan, providing Agency Arrangements for different government organizations include
WAPDA and PIA, Profitability and a vide coverage throughout Pakistan through its Corporate
Branches. And also it has comprehensive range of products it is offering in market.
The challenge it is facing are currently the lack of implementation of rules and regulations that
may lead to weak organizational culture, old organizational culture, no regular promotions
practices and not much use of IT technology in bank as other are using. There are many workers
and employees unions exist in National Bank of Pakistan that use to play organizational politics
instead of doing productive work that leads to wastage of time.
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.