Department of Business Administration

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(Department of Business Administration)
1. INTRODUCTION
Internship at a Financial Institution is an essential requirement for
obtaining the MBA (Banking & Finance) Degree from AIOU, Islamabad. The
purpose of this assignment is to familiarize the students with Banking &
Financial Environment. I have completed my Internship at National Bank of
Pakistan, Main Branch, Mandi Bahauddin. After completing my internship I
analyzed the collected information which enabled me to complete this task
efficiently.
1.1 Objectives of studying the organization
The efforts to study the organization are to achieve the following objectives:
 The primary objective of my study is to meet the requirement of the course
MBA, internship. The secondary objective is to analyze the present system of
“National Bank of Pakistan” to find out the effectiveness of the current system.
To get awareness about the business development & financial techniques. To
analyze the financial review of the bank as well as critical analysis of financial
statements.
 To analyze the proper management system of the organization and all kind of
risk inherent in the banking business. To explore plans of the bank for
sustained growth and profitability. To indentify the problems of any kind.
Finding out the probable solutions to eradicate the problems. And most of all
to gain a life time experience by working as a trainee and achieving
knowledge. This study has been carried out to meet the requirements of the
Master in Business Administration (MBA) program of Allama Iqbal Open
University Islamabad (AIOU).
 The purpose of the study is to acquire the experience in the field by applying
the theoretical knowledge / lectures in the practical life. To understand the
various operations of the banking system. To make recommendations in light
of the analysis. To improve the long report writing skills.
It also give me chance to gain some professional experience and as well as
understanding of working environment of the organization.
 The administrative structure of the organization both as it is formally
organized and as it actually appears.
 The role of different types of organization personnel in performing
the functions of the organization.
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 The organization’s philosophy and goals in relation to the services it

provides to the community.
 The effects of limited resources and other constraints on the
organizational functionality
2. Overview of the organization
2.1 Brief history of the organization
The NBP was established vide NBP Ordinance No. XIX of November 9. 1949.
British Govt. devalued its currency in September 1949, India devalued its
rupees but Pakistan did not. It led to a crisis in trading between the two
countries and India refused to lift the Pakistan Jute. To solve this problem i.e.
to export jute, NBP was established through an Ordinance of GOP. 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.
It is the largest commercial bank operating in Pakistan and widely spread. It

has previously redefined its role. Today it is leading the market in various
departments of banking sector like corporate, retail etc. Now with the
constantly changing environment it has also redefine its policies and
introduced schemes for low and middle class families. It has also introduced
various ways to facilitate the overseas Pakistanis to send their remittances in
efficient manner.
NBP has also modified its infrastructure in which major modification took
place in IT sector. NBP has also built extensive branch network with 1250
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branches. It has agency arrangements with more than 3000 correspondent

banks worldwide. The Bank's financial performance has been remarkable. In
2006, total assets are estimated at Rs635 billion, while deposits have grown
to nearly Rs502 billion. Pre-tax profit rose to Rs26 billion. Earnings per share
have jumped to Rs24.01 in 2006. The increase in profit was achieved through
strong growth in core banking income. Interest income increased by Rs10
billion through growths in the loan portfolio as well as increase in spreads.
Advances increased by Rs48 billion to Rs316 billion. The Bank maintains a
sound loan portfolio diversified in nature to counter the risk of credit
concentration. It ranges from providing credit to the un-banked market
segment under NBP Karobar, to small and medium enterprises, to agricultural
loans, to large corporate customers.
2.2 Nature of the organization
National Bank of Pakistan is the only bank in Pakistan which also acts as a
govt. bank and performs all the agency functions of the State Bank of
Pakistan. It is a leading development financial institution which is providing
financial facilities to public as well as private sector. Most of its branches are
equipped with modern information technology having satellite access.
formation ving ETWEEN THEORY AND PRACTICEFollowing most common

services offered by the NBP:-
1 It provides deposit banking services.

2 It provides credit and financing facilities.
3 It acts on behalf of govt. in its receipts and payments.
4 It performs Govt. treasury function.
5 It helps govt. in sale/purchase of Securities Bonds and Certificates
etc.
6 It helps in Foreign Exchange transactions.
7 Locker service and safe custody of valuable belongings.
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8 It provides Hajj facilities to citizens.

9 Render investment advice & allied Svc
10 ATMG
11 Traveler cheques
12 Special deposit products.
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2.3 Business Volume (Rs. In

Millions)
Items 2004 2005 2006 2007 2008
Total Assets 432. 468.9 553. 577. 635.1
8 2 7
Deposits 362. 395.5 465. 463. 501.8
9 6 4
Advances 140. 161.3 221. 268. 316.1
5 4 8
Investments 143. 166.2 144. 156. 139.9
5 7 9
Shareholders equity 14.3 18.1 25.2 36.1 53.0
Pre-tax profit 6.04 9.01 12.0 19.0 26.3
2 0
After Tax profit 2.25 4.20 6.24 12.7 17.0
Earning per Share (Rs) 5.49 8.53 12.6 21.5 24.0
8 1
Return on Assets (pre-tax profit)% 1.4 2.0 2.4 3.4 4.3
Number of branches 1204 1199 1226 1226 1250
Number of Employees 13,7 13,82 14,0 14,0 15,20
45 4 19 79 4
Comments on Business Volume:

The total assets of the bank have shown a continuous increase in the
last five years. In 2004 the 432.8 millions but it begin to increase every year
and reached at 635.1 millions in 2008, which is very fast growth.
The total deposits of the bank also showed a continuous increased in
the value of total deposits. In 2004 the total deposits of the bank are 362.9
millions and then after five years the total deposits reached at 501.8 millions.
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The total advances of the bank have shown a continuous increase in the last
five years. In 2004 the 140.5 millions but it begin to increase every year and
reached at 316.1 millions in 2008, which is very fast growth.
The total investment of the bank also showed a continuous increased in
the value of total deposits. In 2004 the total deposits of the bank are 143.5
millions and then after four years the total deposits reached at 156.5 millions,
but in 2008 its value decreases to 139.9 millions.
2.4 Number of employees

No of
2004 2005 2006 2007 2008
employees
Total 13,745 13,824 14,019 14,079 15,204
Total numbers of employees as on 31-12-2008 were 15204.
There were following employees in different sections at NBP, Main

Branch, Mandi Bahauddin
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Sr. Name Designation / Grade

No.
1. Khalid Mehmood Branch Manager (OG-1)
Tarar
2. Mazhar Iqbal Tarar Operational Manager (OG-1)
3. Arshad Iqbal Gujjar Incharge Remittance Deptt. (OG-
1)
4. Muhammad Ameer Accountant (OG-1)
Gondal
5. Pervaiz Akhtar Incharge Agri Finance (OG-1)
6. Munawar Hussain Head Cashier (OG-1)
7. Shafqat Abbas Kazmi Incharge Foreign Currency Deptt.
(OG-2)
8. Faqeer Muhammad Deposit Deptt. (OG-2)
9. Mohsin Bashir Cashier (OG-2)
10. Khalid Mehmood Cashier (OG-2)
11. Muhammad Shuaib Cashier (OG-2)
12. TOTAL 12
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2.5-Product lines
2.5.1 Premium Amdani
• Investment period is 5 years
• Investments required from Rs. 50,000/- to Rs. 5,000,000
• Free Demand Draft, Pay Order and NBP Online Aasan Banking Free
Cheque Book / NBP Cash Card
• Profit is paid every month
2.5.2 Premium Saver

Minimum saving balance of Rs. 20,001 and a maximum balance of Rs.
300,000*
Free NBP Cash Card (ATM + Debit)
Two debit withdrawals allowed in a month and no limit on number of deposit
transactions
Profit calculated monthly and paid on half yearly basis.
Earning up to 7.25% p.a.
2.5.3 President Rozgar Scheme
President's Rozgar Scheme,

A person aged between 18 and 40 years, is eligible for easy
financing for self employment in the categories below:
NBP Karobar Utility Store:
The national bank of Pakistan offer loans for the development of the
utility stores in the different areas of the country.
NBP Karobar Mobile Utility Store:
National bank also introduces the NBP Karobar Mobile Utility in which
the bank gives loan for the settlement of Mobilink PCO for small business.
NBP Karobar Transport:
National bank of Pakistan also introduces the NBP Karobar Transport
facility for the loans to the lower class of business men for light Transport
vehicles such as Auto Rikshaws, pickup etc.
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Home Purchase / Home Construction:

National bank also gives the loans to its customer for purchasing or
construction of their homes at very easy terms and conditions which is easy
and affordable for all people.
Home Renovation:
National bank also gives the loans to its customer for the renovation of
their houses at small and medium level. The amount of the loan depends on
the credibility of the customer.
Purchase of Land and for Construction:
National bank also gives the loans to its customer for the purchase of
land and also for the construction of houses on that land at very easy terms
and conditions.
2.5.4 Unique Product

In January-2003, National Bank of Pakistan has launched a unique
product, ‘NBP-Advance Salary’.
The NBP has started a financing scheme for its clients (i.e. Accounts holders)
specially for low paid Governmental Employees.
Such employees, who maintain a PLS account with NBP and their
monthly salary is remitted to this account, can enjoy the facility.
2.5.5 Different Services Provided by NBP

Demand Draft:
Demand Draft is another reliable and speedy way of transferring
money. Any person whether he is holding accounts at NBP or not can avail the
facility at reasonable charges.
Mail Transfer:
NBP is also providing telegraphic transfer (T.T.)/mail transfer facility for
smooth and quick remittances.
Pay Order:
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Money can be transferred from one place to another by means of pay

order which is considered the safest and easiest way of remittance NBP
provides this service to its customers on very competitive price.
Traveler's Cheque:
Traveler’s cheques are very much popular among travelers and
businessmen who travel frequently. These are generally issued to the people
who travel abroad. Due to its safety add convenience, these are also issued in
Pakistani currency to be used within the country. Traveler’s cheques are for
fixed amount and are treated as Order Cheques payable only to the purchaser
whose specimen signature appears on traveler’s cheque itself.
COMMERCIAL FINANCE:
National Bank provides highly efficient trade finance services for

import/export business for our clients/customers through large number of
authorized branches where trained and motivated staff is available to handle
the business on behalf of customer.
FOREIGN REMITTANCES:
Likewise the products in local currency, the bank is also dealing in
foreign currency accounts and transactions. Most of the functions like account
dealing cash deposits and withdrawals, remittances etc. are the same as are
being dealt with in local currency. The bank facilitates the imports and
exports of goods and services also.
2.5.6 Agricultural Finance

NBP provides Agricultural Finance to solidify faith, commitment and
pride of farmers who produce some of the best agricultural products in the
World.
Agricultural Finance Services:

The aim of this new product is to help the farmers maximize the per
acre production with minimum of required input.
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• Letter of Credit: - A document issued by the importer’s bank in favor of

an exporter beneficiary party in a country. It is guarantee form the issuing
bank the exporter in another country will get the payment against the
provision of documents of international trade called for in letter of credit.
• Foreign Currency Account: - These accounts are maintained in foreign
currencies to facilitate resident and non-resident Pakistanis and foreign
nationals who wish to keep their deposits in foreign currency.
3. ORGANIZATIONAL STRUCTURE
PRESIDENT
BOARD OF DIRECTORS
GROUP OPERATION CREDIT COMMITTEE

CHIEF
REGIONAL
MANAGEMENT
REGIONAL
COMMITTIE CHIEF
OPERATIONS
OPERATION MANAGER REGIONAL BUSINESS

AT BRANCH CHIEF
& REGIONAL RISK
MANAGEMENT CHIEF
Comments on the organizational structure:

The organizational structure of the NBP, with its large branch network
and excessive layers of controlling offices requires a structural change in its
organizational set up for optimizing utilization of men and material resources
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to yield better operational and business control and efficiency with greater
focus on customer services. Based on this understanding the Head Office of
the Bank was reorganized in April, 2002.
ORGANIZATIONAL CHART OF NBP MAIN BRANCH, MANDI
BAHAUDDIN
Branch Manager
Operational Manager
,
Deposit Cash Deptt Compliance Govt. Receipt Foreign
Deptt Deptt Deptt Currency
Deptt.
Comments on Organizational Structure of NBP Main

Branch, Mandi Bahauddin:
The Branch Manager is responsible for overall performance of the
Branch. The Operational Manager is responsible for overall operational
activities and to controll all the Departments of the bank i.e Deposit Deptt. ,
Cash Deptt, Compliance Deptt., Govt. Deptt., Foreign Curreny Deptt., etc.
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NBP Main Branch is situated near Ghalla Mandi, Mandi Bahauddin.

Khalid Mehmood Tarar is Branch Manager and Mr. Mazhar Iqbal Tarar is
Operational Manager of the branch. Branch code is (0463), Phone no: 0546-
502730 & 0546-507558, Fax No. 0546-502558.
All the employees are cooperative and have wide experience.
3.2 Various Departments of the Organization (functions &

responsibilities):
3.2.1 Departments
Accounts Department:
The accounts department maintains the accounts of customers, it pays
cheques, accepts cash from account holders also accepts payments for
other purposes i.e. utility bills, fee, government payments etc. It also
manages government accounts.
Remittance Department:
The Remittance Department issues drafts, payment orders, traveler
cheques etc. Remittance means transfer of funds from one place to
another place. Drafts are issued for other cities while payment orders are
issued for within a city purpose.
Cash Department:
The Cash Department deals with cash inflow and outflow. It also handles
cash chest, which is the ownership of the State Bank of Pakistan. At the
end of the closing hours, it maintains cash and makes the statement of
cash chest daily.
HRM Department:
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The H.R.M. Department is responsible for new appointments, transfer

posting of the officers and officials, ACR’s. Granted annual increments and
promotions to the employees. The finance department of the bank cannot
release the payment of any employee without the approval of the HRM
department i.e. salaries, allowances and other benefits. The HRM
department deals pension, gratuity and disciplinary action cases of the
employees.
Lockers Department:
Lockers provide services of safe keeping the previous object of public.
Locker holders pay annual rent. One key of the locker is kept by the bank
other is given to the client.
Credit Department:
It provides loans to various clients and has a major contribution in the
bank's profit and assets. Different types of loans are provided to the clients
depending on their needs and demands. Loan against property (Saiban
Scheme) and Loan against assets (advance salary) etc is provided. Such
loan is given keeping in view the total income as well as salary being
drawn per month by the applicants.
Foreign Trade Department:

The business of imports & exports of goods & services are being dealt with
here. Foreign trade transactions are carried out through Letter of Credit
generally known as (L.C.) Thus by helping the imports & exports, the
branch is contributing a lot in boosting the economic activities of the
country.
Foreign Currency Department:

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It deals with the foreign currency accounts and transactions. Most of the
functions like account dealing, cash deposits/withdrawals, remittances etc,
are the same as local currency department. In addition this department
deals with:-
i) Traveller Cheques. ii) Old Scheme Foreign Currency

Deposits.
iii)New Foreign Accounts iv) Special Foreign Currency

Accounts
v) Special US Dollar
Bonds.
Audit Department:
Every organization has certain rules and regulation and its functions are
to keep in mind those rules. NBP follows the prudential regulations given
by the State Bank of Pakistan. Therefore, in order to check whether the
organization is going on right track, there is an Internal Audit and
Inspection Department.
Functions of Audit
The main function of audit is to monitor the implementation of
policies, rules, regulations, and prescribed procedures with a view to
ensure improved operations. It maintains check and balance on behalf of
management. This in turns calls for a high standard of professional skills
and judgments on part of Auditors.
Methods of Opening of an Account:

Procedure of Opening of PLS Account:
For the purpose of opening a new PLS account, a prescribed printed
form is available which every new customer has to fill in. The National
Identity Card is to be verified through the Verisys, a facility provided by the
NADRA for verification.
After opening the account, cheque book is issued for the purpose of
operating the concerned account. A small amount is charged for issuance
of cheque book which is either received in cash or the expenditure is
debited to the account. As an acknowledgement, receipt is obtained from
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the recipients. Specimen signatures of the account opener are obtained on

a card which is kept with Office Incharge to verify the signature of
customer at the time of payment. The entry of new account is made in the
reference book and computer software also and the account opening form
is kept in relevant file for record.
In last complimentary letter is issued to the new client.
Procedure of opening of Current Deposit Account:

Current Deposit Accounts can be opened as per following detail:-
i) Individuals proprietary firms, partnership firms, private
limited Company, Public limited Company, Clubs,
Association as well as govt. institutions can open the current
deposit account.
ii) Minors are not allowed to open current deposit amount except
prior approval from HQ. In such cases, guardians will operate
the account.
iii) Sole partnership certificate is necessary in case of proprietary
firms.
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4. Structure and Functions of the Accounts /

Finance / Audit Department
Account Department of any branch of bank is a major
department. It performs all the activities of accounting in bank. This
department is responsible to maintain the proper record of account
holders and other account of the branch.
Structure of the Finance Department:
4.1 Functions of Account Department

The main function of this department is to handle the cash, record the
cash transaction, summarizes all the bank transaction daily and sends the
report to head office.
This department is headed by a CD in charge (cash department in charge) the
department involves in the process of receipt / check of cash and payments.
This department comprises of two sections.
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(a) ACCOUNTS
(b) CASH.
Cash section involves only in the payment and receipt of cash from and
to the customers. While the activities of A/C section is to check the balance of
the client posting of the Cheque and deposit slip in ledger register or
computer and the verification of signature on the Cheque. The cheque is
then passed on to the cashier for payment. The cash section and the A/C
sections separately maintain their balances in system at the closing of day for
verification. The A/C department prepares the list of all bank transaction daily
enter the cash transactions and transfer transactions in cash and transfer
registers respectively and send the daily report to the head office.
The activities of A/C department can be summarized as follows:
• To check and maintain daily activities of branch.
• To maintain daily deposit in branch.
• To records transactions with SBP.
• To check debt & credit vouchers of branch and verify these transaction,
these are correctly records or not and if mistakes is found it would be
sent for correction in respective department.
• To calculate the depreciation of various assets.
• To check any variation in sundry credits and debtors.
• Financial and cost accounting of branch.
• Workout a planning and budget document.
• To prepay weekly, monthly internal and external reports.
• To maintain daily income and expenditures of the branch.

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• To prepare the balance sheet and profit and loss account and tax
report of branch.
• To prepare daily position of branch and statement should be provided to

the following
• Branch Manager
• Manager Credit
• Manager Operation
• Payments and receipt of the cash and checks
• Prepare the account holders statement periodically
• Verification of the cash balance
. 4.2 The Role of Financial Manager
The financial manager of NBP is a team player in the overall effort of the
bank to create value. The duties of financial managers vary with their
specific titles, which include controller, treasurer or finance officer, credit
manager, cash manager and manager of consumer banking etc.
The Financial Manager controllers direct the preparation of financial

reports, such as income statements, balance sheets, and analyses of
future earnings or expenses, that summarize and forecast the
organization’s financial position. Financial manager administer the
preparation of financial reports, direct investment activities, and
implement cash management strategies. Manager administer various
functions, such as lending, trusts, mortgages, and investments, or
programs, including sales, operations, or electronic financial services.
These managers can seek business, authorize loans, and direct the
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investment of funds, always hold on to Federal and State laws and

regulations
Financial manager primarily raised funds and manage the bank’s cash
position by inveseting in assests and by efficient allocation of resources.
He currents with the management of current assests with that of fixed
assets. A large share of the responsibility for the management of fixed
assets would reside with the operating managers who employ these
assets.
Financial manager supervise the bank’s issuance of credit, establishing

credit-rating criteria, determining credit ceilings, and monitoring the
collections of past-due accounts. Manager establishes the length of the
payment period and the size of any cash discounts for the customers who
pay rapidly. Manager establishes sensible credit limits to make more and
more customers for the bank.
USE OF ELECTRONIC DATA IN DECISION MAKING
NBP also use electronic data and different software in its branches. The
bank uses operating system IBM-OS/400 for various workings. Moreover, the
bank uses programs like ORACLE and FOX PRO. The bank uses the software
like ’10-ASF, EBS, DB-2 and BBO in daily routine working. The bank is
struggling for further up-gradation of the on line banking services for its
valued customers. The bank is also using special accounts software for
maintaining accounts, ledger and financial statements etc. NBP is engaged in
performing the routine duties of banking business. Its finance system is to
collect surplus money from people and make loans and advances.
4.3 Sources and Funds of NBP

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The major sources of funds for National Bank are public source (deposits),
money market, bond issued, corporate treasuries and government
institutions. Deposits are the major source of funds and life blood for
banking industry. 80% deposits are from the general public. Figurative
expression for the informal network of dealers and investors over which
short term debt securities are purchased and sold. Money Market securities
generally are highly liquid securities that mature in less than one year,
typically in less than ninety days. Corporate Treasuries and Government
Institutions, corporate sector is one of the major source of fund in all types
of banking. All major financial institutions, government, and private are the
major source of fund.
(Rs. In Millions)
200 200
Sources 2008 2007 2005
6 4
1031 1032 922 1005
Interest Income 9688
7 8 0 0
Non Interest 247
3756 2529 1958 1716
Income 1
401
Profitability 9797 8097 2034 1112
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Bank is generating its funds from providing different services to its

clients. Such as opening of their accounts, doing daily routine business. It
is also providing advisory services for its clients. The main sources of
funds are clients and other financial institutions, which are helpful for
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generation of funds. After generating of funds bank allocate its funds to

different assets.
4.4 Generation of Funds
The funds which the bank have before taxation e.g interest charged are
the generation of fund. The advances, expenditurs , interest paid on
deposits, mark up on advances , income from banking services, non
interest income, return on average assets are the generation of funds.
Refinance borrowing from SBP , sub- ordinated loans , cash , short term
funds and statuory deposits with SBP , return on average shareholders
fund etc are all the things which generate the funds of bank.
Bank is positively using its workforce to mobilize its funds. It has mission
“Bank for all” which means that bank is providing services to every
individual without discrimination. Marketing staff of bank is working in
different areas to bring deposits for the bank. It is due to efforts of the
bank that the deposits of the bank are increased over the last five years,
which could be seen from the following.
As on 31st December
Particular/Y 2004 2005 2006 2007 2008

ears
2
Share 6,900,00 6,900,00 6,900,000 6,900,00 6,900,00

Capital 0 0 0 0
Deposits 230,256, 386,332, 416,435,6 459,140, 531,298,
627 570 67 198 127
Advances 72,808,1 250,612, 316,881,6 349,432, 382,172,
06 460 35 685 724
Investment 69,244,3 130,327, 107,384,, 119,587, 177,942,
s 28 611 470 476 251
Advances Rupee in ‘000’

Chemical and pharmaceuticals 26,20,612
Agribusiness 9,479,183
Textile 42,711,358
Cement 4,613,292
Sugar 4,353,925
Shoes & leather garments 600,635
Automobile & transportation 1,486,553
equipment
Financial 9,704,197
Insurance 104,375
Transportation 4,943,711
Electronics & electrical appliances 1,715,678
Production and transmission of 6,161,514
energy
Food and Tobacco 2,233,479
Metal Products 4,196,740
Oil, Gas, petroleum and energy 26,317,160
Telecommunication 7,350,944
Public Sector commodity operations 9,965,157
Individuals 37,718,840
General Traders 4,290,128
Others 40,876,482
Total 221,773,963
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From the above-mentioned table one can easily understand that how
effectively bank is using its sources in order to strengthen its deposits.
Bank has special workforce who motivates people to do dealing with bank.
4.5 ALLOCATIONS OF FUNDS:

The funds generated through various deposit schemes are allocated to
cater the business needs of different sectors of society. It is ensured the
finances are not advances to a particular sector to avoid the collapse rather
the bank has a broad based borrowers structure covering agriculture,
industrial and financial sector.
NBP Provides finance to all types of industries i.e. textile, surgery

tanneries, sports, seasonal finance to growers, importers, exporters,
unemployed persons, gold loan for domestic needs etc. Detail of different
sectors to which National Bank of Pakistan has allocated its funds is as under:
Rs in “Billions”
2004 2005 2006 2007 2008
Admin 1,845 2,594 3,283 4,802 5,916
Expenses
Cash Dividend 502 723 1,203 1,503 1,735
Bonus Share 923 978 1,002 1,052 1014
Income Tax 920 837 1,097 (381) 75
Depreciation 1,633 1,552 2,139 2,447 2,707
Retained in 1,421 1,299 1,047 1,178 386
Business
5. FINANCIAL ANALYSIS
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Financial statement analysis means reporting the financial condition and the
result of operations of an organization, or in other words we can say that
financial analysis are carried out for the purpose of identifying the financial
strengths and weaknesses of an organization by properly establishing the
relationship between the balance sheet and income statement items. This
analysis helps many parties in making decision who are interested in business
activities. To improve the quality of decision making, proper analysis of these
statements helps a lot. The firm itself and outsider providers of capital,
creditors and investors all undertake financial statement analysis.
5.1 FIVE-YEAR PERFORMANCE OF NBP. Rs. In
Million
Description 2004 2005 2006 2007 2008

TOTAL
817,758
ASSETS 553,231 577,719 635,133 762,194
DEPOSITS 465,572 463,427 501,872 591,907 624,939
ADVANCES 220,794 268,839 316,110 340,677 412,987
INVESTMENTS 149,350 156,985 139,947 210,788 170,822
PRE-TAX 11,978 19,056 26,311 28,061
23,000
PROFIT
AFTER-TAX 6,195 12,709 17,022 19,034
15,459
PROFIT
5.2 Balance sheet of NBP

2004 2005 2006 2007 2008
Assets
Cash & Balances 94,446,5 71,196,9 78,625,2 94,873,2 106,503,
with treasury 52 56 27 49 756
banks
Balances with 49,784,8 31,019,3 40,641,6 37,472,8 38,344,6
other banks 84 30 79 32 08
Leadings to 10,511,3 16,282,9 23,012,7 21,464,6 17,128,0
financial 22 42 32 00 32
institutions
Investments 149,350, 156,985, 139,946, 210,787, 170,822,
2
096 378 995 868 491

Advances 220,794, 268,838, 316,110, 340,677, 412,986,
075 779 406 100 865
Operating fixed 19,141,5 9,454,36 9,681,97 25,922,9 24,217,6
assets 69 5 4 79 55
Deferred Tax 9,202,96 - - - 3,204,57
Assets 9 2
Other Assets - 23,941,0 27,113,6 30,994,9 44,550,3
56 98 65 47
577,718, 635,132, 762,193, 817,758,
806 711 593 326
Liabilities 2004 2005 2006 2007 2008

Bills Payable 7,214,67 1,741,15 10,605,6 7,601,90 10,219,0
1 6 63 2 61
Borrowings 11,084,7 8,756,84 11,704,0 10,886,0 40,458,9
90 7 79 63 26
Deposits & Other 465,571, 463,426, 501,872, 591,907, 624,939,
Accounts 717 602 243 435 016
Sub-ordinate - - - - -
Loans
Liabilities against 17,058 16,629 13,235 33,554 25,274
assets subject to
finance lease
Deferred Tax 23,068,3 4,462,71 2,387,07 5,097,83 -
Liabilities-net 14 8 3 1
Other Liabilities 29,185 23,496,9 26,596,3 30,869,1 39,656,8
10 00 54 31
503,378, 501,900, 553,178, 645,855, 715,299,
402 862 593 939 108
Net Assets 74,340,7 75,817,9 81,954,1 116,337, 102,459,
12 44 18 654 218
Represented by
Share capital 4,924,10 5,908,92 7,090,71 8,154,31 8,969,75
6 7 2 9 1
Reserves 10,813,9 12,654,2 13,879,2 15,772,1 19,941,0
14 56 60 24 47
Inappropriate 9,161,74 19,372,5 32,074,6 45,344,1 52,456,2
3
profit 7 23 77 88 04
24,899,7 37,635,7 53,044,6 69,270,6 81,367,0
67 06 49 31 02
Surplus on 21,345,9 38,182,2 28,909,4 47,067,0 21,092,2
revaluation of 65 38 69 23 16
assets-net
46,245,7 75,817,9 81,954,1 116,337, 102,459,
32 44 18 654 218
5.3 Profit and loss account

4
2004 2005 2006 2007 2008

Mark up/return/interest 20,947,3 33,692,6 44,100,9 50,569,4 60,942,7
earned 33 65 34 81 98
Mark up/return/interest 6,559,39 10,321,7 13,947,2 16,940,0 23,884,7
expensed 8 68 18 11 68
Net Mark up/Interest 14,387,9 23,370,8 30,153,7 33,629,4 37,058,0
Income 35 97 16 70 30
Provision against non 1,515,35 2,446,73 3,075,72 4,723,08 10,593,5
performing loans and 4 9 3 4 65
advances
Reversal of provision for 185,707 (245,881 (709,461 (40,248) 373,249
diminution in the value ) )
of investment
Bad debts written off 32,807 23,069 5,284 39,899 4,000
directly
1,748,16 2,223,92 2,371,54 4,722,73 10,970,8
5 7 6 5 14
Net Mark up/Interest 12,639, 21,146, 27,782, 28,906, 26,087,
income after provisions 770 970 170 735 216
Non Markup/Interest
Income
Fee, commission and 5,099,19 4,926,60 6,144,62 6,781,68 7,925,37
brokerage income 5 4 8 3 0
Dividend Income 1,273,86 1,718,47 2,891,75 3,263,24 2,878,93
3 8 5 6 2
Income from dealing in 1,008,98 1,205,63 1,333,84 1,042,82 3,969,05
foreign currencies 8 8 0 7 7
Gain on Sale and
redemption of securities
Unrealized loss on - 1,365,77 1,169,51 2,341,69 395,427
revaluation of 1 5 0
investments classified
as held-for-trading
5.4 Financial Ratio Analysis

5.4.1 SOLVENCY RATIOS
1
A ratio used to measure a company's ability to meet long-term

obligations. The solvency ratio measures the size of a company's after-tax
income, excluding non-cash depreciation expenses, as compared to the firm's
total debt obligations. It provides a measurement of how likely a company will
be to continue meeting its debt obligations.
The measure is usually calculated as follows:
Solvency Ratio = After Tax Net Profit + Depreciation

Long Term Liabilities + Short Term
Liabilities
Years After Tax Depreciat Long term + Solvency

Net Profit ion Short Term Liab. Ratio
2004 434,273,0
6,195,372 00 503,378,402 0.88
2005 567,438,0
12,709,444 00 501,900,862 1.16
2006 484,810,0
17,022,346 00 553,178,593 0.91
2007 553,114,0
19,033,773 00 645,855,939 0.89
2008 748,690,0
15,458,590 00 715,299,108 1.07
Comments:
Acceptable solvency ratios will vary from industry to industry, but
as a general rule of thumb, a solvency ratio of greater than 20% is
considered financially healthy. Generally speaking, the lower a
company's solvency ratio, the greater the probability that the company
will default on its debt obligations.
5.4.2 Current Ratio

1
Current ratios measure the number of times a company’s current assets

cover its current liabilities. The higher the ratio, the greater is the company’s
ability to meet its short term obligations as they come due. Current ratio is
calculated by dividing current assets by current liabilities.
Current Ratio= Current assets / current liabilities
Years Current Assets Ratio
/Current Liabilities
2004 524,886/483,871 1.08
2005 544,323/473,924 1.14
2006 598,338/510,960 1.15
2007 705,276/609,855 1.16
2008 745,786/675,642 1.10
Interpretation:
Current ratios measure the number of times a company’s current assets
cover its current liabilities. The higher the ratio, the greater is the company’s
ability to meet its short term obligations as they come due. Current ratio is
calculated by dividing current assets by current liabilities.
Current ratio shows a firm’s ability to cover its current liabilities with its
current assets. The ratio is starting to increase in year 2005 indicating
stability of the bank, which is a good sign. This ratio is not increasing due to
the fact that management is not improving its current assets. The ratio for
year 2006-07 is the lowest, which reflects that bank is not in a better position
to meet its liabilities. Higher the current ratio, greater will be the ability of the
firm to pay its bills. But the above position of 2006-07is not a good sign for
the bank.
5.4.3 Debt to Assets Ratio:

Debt ratio shows the fraction of the company’s assets that is financed
by debts. Creditor of company would generally like this ratio to be low. The
ratio is derived by dividing a firm’s total debt to its total assets.
Debt to assets Ratio= Total Debts / Total Assets

(Rs in Millions)
Years Total Debts / Total Debt Ratio
1
Assets
2004 466,426/506,985 0.92
2005 437,939/503,378 0.87
2006 481,264/553,178 0.87
2007 548,977/645,856 0.85
2008 586,545/715,299 0.82
Interpretation:
The debt to assets ratio serves the similar purpose to the debt to equity
ratio. It highlights the relative improvement of debt financing to the bank by
showing the percentage of the firm assets that are supported by debt
financing.
The debt to assets ratio of the NBP shows that most of its assets are
financed by the debt financing and from year 2004 it is gradually decreased
every year.
5.4.4 Debt to Equity Ratio:
This ratio indicates the extent to which debt financing is used relative to
equity financing.
Debt to Equity Ratio= Total Debts / Share holders Equity
Years Total Debts Shareholder Debt to Equity
s’ Equity Ratio
2004 506,985 46,245 10.96
2005 503,378 74,340 6.77
2006 553,178 81,952 6.75
2007 645,856 116,337 5.55
2008 715,299 102,459 6.98
Interpretation:
1
The debt to equity ratio shows the extent to which the bank is financed
by debt. This ratio is obtained by dividing the total debts of the bank with the
share holder’s equity.
The debt to equity ratio of NBP shows that the how much the bank is
financed by debt and figures shows that there is a gradual decrease in the
debt to equity ratio from 2004 and still going on decreases year by year.
5.4.5 Coverage Ratio

Coverage ratio shows the number of times a company can cover
or meet a particular financial charge or obligation. One of the most commonly
used coverage ratios is the interest coverage ratio.
It measures the number of times the income is available to pay interest
charges and covers the company’s interest and thus avoids bankruptcy. The
ratio is calculated by dividing the income before interest expense and tax of a
period by interest expense of the same period. The higher the ratio, the
greater is the likelihood that the company could cover the interest expenses.
Interest Coverage= Earnings before interest and taxes / Interest Expense
Interest Coverage (Rs in Millions)
Years EBIT Interest Interest
Expense Coverage
2004 12,025 8,919 1.35
2005 19,056 11,456 1.66
2006 26,310 13,634 1.93
2007 28, 061 14,391 1.95
2008 23,000 19,502 1.18
Interpretation:
This ratio serves as one measure of the firm’s ability to meet interest
payments and thus avoid bankruptcy. The higher the ratio, the greater is the
ability that the company can cover its interest payments without difficulty. It
also sheds some light on the firm’s capacity to take on new debt.
The interest coverage ratio of NBP has shown an improvement over the
period of three years. In the year 2006, the ratio is 1.92, which shows that the
income in 2005 covers 1.85 times the interest expense. As the core business
1
of a bank is borrowing and lending, interest expense constitute the main

expense of the business that’s why the interest expense is so higher and ratio
is so lower.
5.4.6 Activity Ratios
Total Asset Turnover (TAT) Ratio
This ratio measures relative efficiency of total assets to generate sales.
TAT= Net Sales / Total Assets

(Rs in Millions)
Years Net Sale Total Assets TAT
2004 20,947 553,231 0.04
2005 33,633 577,719 0.06
2006 44,100 635,132 0.07
2007 50,569 762,193 0.07
2008 60,943 817,758 0.08
Interpretation:
The activity ratio measures that how effectively the bank is utilizing its assets
with the respect of its sales.
The activity ratio of NBP shows that the bank is utilizing its assets quiet
effectively throughout the last five years. There is a steady increase in the
activity ratio of the bank from 2004 and it carries on increase every year.
5.4.7 Profitability Ratios

5.4.8.1 Net Profit Margin
It measures the profit that is available from each rupee of sales after all
expenses have been paid, including cost of sales, selling, general, and
administrative expenses, depreciation, interest, and taxes. The ratio is
calculated as follows:
Net profit margin= Net profit after taxes *100 / net sales
(Rs in Millions)
Years Net Profit After Net Sale Net Profit
Tax Margin
%age
1
2004 6,242 20,947 29.80%

2005 12,709 33,633 37.79%
2006 17,022 44,100 38.60%
2007 19,033 50,569 37.64%
2008 15,459 60,943 25.37%
Interpretation:
The Net profit margin ratio measures the profitability of the firm to
respect to sales generated by the firm; the net profit per 1Rs of sales.
The net profit margin of NBP shows a gradual increase in the net profit
of the firm. That shows that the bank has increased its expenses and
decreased the profit margin with the graduate increase.
5.4.8.2 Operating Profit Margin: = (Operating Profit*100/

Sales)
It measures the profit that is available from each rupee of sales before
all expenses have been paid, including cost of sales, selling, general, and
administrative expenses, depreciation, interest, and taxes. The ratio is
calculated as follows:
Operating profit margin= Operating profit *100/ net sales

(Rs in Millions)
Years Operating Profit Net Sale Net Profit
Margin
%age
2004 7,242 20,947 34.57%
2005 13,709 33,633 40.70%
2006 19,022 44,100 37.61%
2007 21,033 50,569 41.92%
2008 23,459 60,943 38.49%
5.4.8.3 Return on investment (ROI):

Return on investment (ROI) or return on assets, measures profitability
per rupee of investment in assets. The ratio is calculated as under:
1
ROI= Net profit after taxes * 100/ Total assets (Rs in Millions)
Years Net Profit After Total Net Profit
Tax Assets Margin
%age
2004 6,242 553,231 1.13%
2005 12,709 577,719 2.2%
2006 17,022 635,132 2.6%
2007 19,033 762,193 2.5%
2008 15,459 817,758 1.9%
Interpretation:
The ROI figures of NBP shows a consistent increase over the last three years.
The reason for this increase is due to increase in the net profit of the bank.
Although total assets are also increasing but the increase in the net profits
are more than the total assets. The positive change in ROI figures shows the
outstanding performance of the bank.
5.4.8.4 Gross Profit Margin

Gross profit is the difference between revenues and cost of goods or
services sold. Gross profit is critical because it represents the amount of
money remaining to pay operating expenses, financing costs, and taxes, and
to pay for profit. Gross profit margin is the amount of each sale rupee left
over after paying the cost of goods or services sold. It is calculated as follows:
Gross profit margin= Gross profit *100/ Net sales

(Rs in Millions)
Years Gross Profit Net Sale Gross Profit
Margin
2004 14,387 20,947 0.69%

2005 23,311 33,633 0.69%
2006 30,153 44,100 0.68%
2007 33,629 50,569 0.67%
1
2008 37,058 60,943 0.61%
Interpretation:
The Gross profit margin ratio measures the profitability of the firm to
respect to sales generated by the firm; gross profit per 1Rs of sales.
The gross profit margin of NBP shows a gradual decrease in the gross
profit of the firm. That shows that the bank has increased its sales and
decreased the profit margin with the gradual decrease.
5.4.9 Return on Equity (ROE):

It is another measure of overall performance of a company. The ratio is
calculated as under:
ROE= Net profit after taxes * 100/ Shareholders equity
Years Net Profit After Shareholde Return on

Tax rs’ equity equity
%age
2004 6,242 42,936 14.54%
2005 12,709 74,340 17.1%
2006 17,022 81,954 20.7%
2007 19,033 116,337 16.40%
2008 15,459 102,459 15.09%
Interpretation:
This ratio relates the net profits to the amount of capital funds that
have been employed in making that profit.
The above given ratios suggest that the profitability of the bank has
increased very in the year 2004 indicating more profitable operations of the
bank. While discussing the trend analysis, we mentioned that the mark up
charges have increased in some proportion but the mark up earned by the
bank resulting increase in the profit available on the capital funds employed.
This ratio showing a very good financial position of the bank.
5.4.10 Advances to Deposit Ratio:

1
This ratio is bank’s financial ratio which is used to test the company
financial position by keeping in view its advances and deposits. Strength of
bank is judged that how much bank is capable to grasp the saving of people
and how many people are interesting to take loan facility from bank as profit
of bank depends on higher advances and advances comes from deposits of
customers.
Advances/Deposits Advances to
Year
*100 Deposit
2004 298,757/465,572*100 64.17%
2005 276,017/463427*100 68.56%
2006 268,300/501872*100 53.46%
2007 370,711/591907*100 62.63%
2008 389,755/624939*100 62.67%
Interpretation:
This ratio is bank’s financial ratio which is used to test the company
financial position by keeping in view its advances and deposits. Strength of
bank is judged that how much bank is capable to grasp the saving of people
and how many people are interesting to take loan facility from bank as profit
of bank depends on higher advances and advances comes from deposits of
customers. This ratio tells that for every one rupee of deposits how much is
advanced to others. In 2008 the Bank faces a decline in advances as
proportion to its deposits of about 15%. But in last two years this ratio
showing a pleasing trend which indicates that bank is using deposits
efficiently.
5.4.11 Book value per Share = Total Shareholder’s Equity /

No. of Outstanding Shares:
Book value is of limited to the investment analyst since it is based on

historical costs. Book value per share is showing mix trend but for last two
year it’s almost constant.
B.V/Share= total shareholder’s equity / No of Outstanding shares
1
T.shareholder
Year equity/outstanding Book value Per Share
shares
2004 46,245/2464 18.77
2005 74,340/3961 17.48
2006 81,952/3649 22.46
2007 116,337/5501 21.15
2008 102,459/4837 21.18
Interpretation:
The firm’s Book value per share is generally of interest to present
shareholders. Book value per share represents the earning on behalf of each
outstanding share of common stock. The Book value per share increased in
2008 significantly as compared to last year.
5.4.12. EPS Ratio:
The firm’s EPS are generally of interest to present shareholders. EPS

represent the earning on behalf of each outstanding share of common stock.
EPS increased in 2008 significantly as compared to last year.
PS = N. Profit / No of outstanding shares
N. Profit/
Year EPS(Rs)
Outstanding shares
2004 11,977,601/1,410,789 8.49
2005 19,056,028/4,886,161 3.90
2006 26,310,577/6,711,881 3.92
2007 28,060,501/9,642,783 2.91
2008 23,000,998/4,771,991 4.82
Interpretation:
The firm’s EPS are generally of interest to present shareholders. EPS

represent the earning on behalf of each outstanding share of common stock.
EPS increased in 2008 significantly as compared to last year.
Dividend Payout Ratio:

1
The Dividend Payout ratio measures the portion of current earnings per
common share being paid out in dividends. The table below shows that the
bank’s dividend payout ratio has declined, the reason the retaining the profits
in the business for expanding the business.
Dividend Payout Ratio = Dividend / Net Profit
Years Dividend Net Profit After DividendPayout

Tax Ratio
2004 52,539 1,091,989 0.0481
2005 52,014 1,702,094 0.0305
2006 37,393 1,762,691 0.2121
2007 64,722 3,130,229 0.0206
2008 300,943 1,301,301 0.2312
Interpretation:
In the above table we can see that the dividend payout ratio
of the bank has shown a variable trend. In 2004 it start decreasing till 2005
but in 2006 it increased and also in year2008 it increased as compared to
2007. This is because of increasing the business activities of the bank.
5.5 Vertical/Common size analysis

An analysis of percentage financial statements where all balance sheet items
are divided by total assets and all income statement items are divided by net
sales or revenues is called common size analysis. Common size analysis can
give analyst valuable insight into changes that have occurred in a firm’s
financial condition and performance. As common size analysis gives us
relative percentage of an item with respect to total, so the growth or decline
in various items of balance sheet and income statement cannot be detected
from common size percentages.
5.6 Vertical Analysis of Balance Sheet:

2004 2005 2006 2007 200
8
Assets
Cash & balances with treasury 8.18% 8.11% 9% 7% 8%
banks
Balances with other banks 4.52% 3.83% 5% 2% 2%
Lending to financial institutes 2.17% 7.01% 5% 8% 2%
2
Investments 16.09% 17.72 17% 22% 18%

%
Advances 65.17% 59.25 60% 55% 62%
%
Operating fixed assets 2.42% 2.20% 2% 3% 4%
Deferred tax assets 0.00% - 2% 3% 4%
Other assets 1.46% 1.88% - - -
100% 100% 100 100% 100%
%
Liabilities
Bills Payable 1.15% 0.91% 1% 1% 1%
Borrowings 12.86% 7.28% 9% 10% 7%
Deposits and other accounts 77.75% 81.87 79% 78% 81%
%
Sub-ordinated loans 0.93% 2.07% 2% 2% 2%
Liabilities against assets subject to 0.01% - - - -
Fin-lease
Deferred tax liabilities 0.49% 0.39% 2% 2% 3%
Other Liabilities 1.20% 1.57% 7% 7% 6%
Represented by
Share Capital 1.17% 1.04% 1% 2% 2%
Reserves 4.03% 4.04% 4% 4% 4%
Unappropriated profit - - 7% 8% 6%
Surplus on revaluation of assets-net 0.41% 0.84% 1% - -

of tax
100% 100% 100 100% 100%
%
Interpretations of Analysis of Balance Sheet:
In vertical financial statement analysis, the various components of

balance sheet
express as the percentages of the total asset of the organization.
Vertical/Cross-sectional/common size statements came from the problem in
comparing the financial statements of the organization that differs in size. In
the balance sheet, for example the assets as well as the liabilities and equity
are each expressed as 100% and each item in these categories is expressed s
a percentage of the respective totals.
1
The expression of individual financial statement items as percentages of

totals helps the analyst to spot trends with respect to the relative importance
of these items over time. The strategies may include increase/decrease the
holding of certain assets. The analyst may observe the trend of the increase
in the assets and liabilities
5.7 Vertical Analysis of Profit & Loss Account:
2004 2005 200 2007 2008

6
Markup/return/interest expense 52% 54% 55% 57% 58%
Net Mark up/Interest Income 47% 46% 45% 43% 42%
Provision against non performing loans and 15% 11% 9% 26% 21%
advances
Bad debts written off directly - - - - 1%
Net Mark up/Interest income after 15% 11% 9% 26% 22%
provisions
Non Markup/Interest Income 100 100 100 100 100
% % % % %
Fee, commission and brokerage income 8.1% 8.2% 8.0 7.1% 6.9%
%
Dividend Income 0.7% 0.8% 0.9 0.9% 1%
%
Income from dealing in foreign currencies 4.2% 4.4% 4.6 4% 4.8%
%
Gain on Sale and redemption of securities 6% 2% 0.9 16% 0.2%
%
Unrealized loss on revaluation of - - - - 0.1%
investments classified as held-for-trading
Other Income 2.8% 2.6% 2.6 2% 2%
%
Total non Mark up/Interest Income 21% 18% 17% 30% 15%
56% 55% 53% 47% 35%
Non-Mark up/Interest Expenses
Administrative Expenses 22% 24% 26% 32% 32%
Other provisions/ write offs/Reversals - - - - -
Other Charges - - - - -
Total non Mark up/Interest Expenses 22% 24% 26% 32% 32%
Profit Before Taxation 29% 27% 27% 15% 3%
Taxation-Current 6% 9% 8% 1% 0.1%
2
Prior-years - - - -2% -0.3%

Deferred -1% 1% 1% -2% 0.6%
5% 6% 9% -3% 0.4%
Profit After Taxation 10% 16% 18% 18% 2.6%
Interpretation of Vertical Analysis of Profit & Loss

Account:
Vertical analysis shows much the same picture as in horizontal

analysis. Interest income and non-interest income of the bank has
increasing trend, which shows sound business of the bank. Income of bank
from dealing in foreign currencies is also having a sharp increase.
Administration expenses have increased in recent years, which are to
control bank, more efficiently than before. Taxation expense of the bank
has also increasing trend which is due to increase in profits which is a
positive sign. Net profit is consistently increasing, which is a positive sign
for the sound working of the bank.
5.8 Horizontal Analysis:

This type of analysis represents the percentage change in specific line item of
the income statement or balance sheet from the last year. This analysis used
to comment on the growth of specific line item of the organization.
5.8.1. Horizontal Analysis of Balance Sheet:

2
2004 2005 2006 2007 2008

Assets
Cash & balances with treasury 100% 134.27 19.81% 7.62% 15.24%
banks %
Balances with other banks 100% 114.48 17.49% 28.42% 7.10%
%
Lending to financial institutes 100% 437.50 42.19% 178.70 171.25
% % %
Investments 100% 149.12 14.10% 48.72% 12.82%
%
Advances 100% 123.10 9.61% 1.28% 17.95%
%
Operating fixed assets 100% 123.03 14.49% 26.70% 46.54%
%
Deferred tax assets 100% 40% 45% 62%
Other assets 100% 175.24 12.80% 9.14% 11.88%
%
Liabilities
Bills Payable 100% 107.22 31.74% 34.12% 1.58%
%
Borrowings 100% 76.64% 48.46% 19.61% 15.0%
Deposits and other accounts 100% 142.57 8.14% 5.92% 12.58%
%
Sub-ordinated loans 100% 299.97 - - -
%
Liabilities against assets subject 100% 10.31% 79.13% 94.96% 255.86
to Fin-lease %
Deferred tax liabilities 100% 107.65 41.34% 36.74% 73.49%
%
Other Liabilities 100% 177.04 10.66% 7.50% 10.50%
%
Represented by
Share Capital 100% 120% 30% 45.45% 31.81%
Reserves 100% 135.77 19.17% 12.14% 6.39%
%
Unappropriated profit 100% - 11% 19% 86%
Surplus on revaluation of assets- 100% 275.01 46.54% 227.56 199.89
net of tax100% % % %
100% 133.07 19.68 8.66% 4.72%
% %
1
Interpretation of Analysis of Balance Sheet:
We take year 2004 as base year. It is observed that cash balance,

lending to financial institutions & investment of the bank has increasing
trend this is due to increase in deposits of the bank, which is positive sign.
Bank’s advances also having increasing trend, which is again a positive
sign. Bank is paying its bills payable more easily than before because of
more equity and deposits which is a good sign. Borrowing has Shapely
decreased in year 2005-06 due to more deposits which is good sign. Share
capital and profits has sharp increase over years because of increase in
equity, which is a positive sign.
5.8.2. Horizontal Analysis of Profit & Loss Account:

2004 2005 2006 2007 2008
Mark up/return/interest 100% 160.84% 210.53% 241.41% 290.93%
earned
Mark up/return/interest 100% 164.43% 212.63% 258.52% 364.13%
expensed
Net Mark up/Interest 100% 167.12% 209.57% 233.73% 257.53%
Income
Provision against non 100% 206.97% 136.97% 311.68% 699.08%
performing loans and
advances
Reversal of provision for 100% 132.40% 382.03% 21.67% 200.98%
diminution in the value of
investment
Bad debts written off 100% 70.31% 16.10% 121.61% 12.19%
directly
Net Mark up/Interest 100% 127.21% 135.65% 270.15% 627.54%
income after provisions
Non Markup/Interest
Income
Fee, commission and 100% 159.79% 27.56% 16.54% 42.54%
brokerage income
Dividend Income 100% 135.81% 114.21% 27.51% 29.85%
Income from dealing in 100% 315.77% 71.54% 17.52% 36.54%
2
foreign currencies
Gain on Sale and 100% 18.48% 52.37% 208.14% 98.21%
redemption of securities
Unrealized loss on 100% - 69.52% 145.54% 154.45%
revaluation of
investments classified as
held-for-trading
Other Income 100% 74.26% 56.53% 25.54% 32.14%
Total non Mark 100% 162.78% 38.55% 113.41% 41.44%
up/Interest Income
100% 114% 22.55% 17.45% 21.22%
Non-Mark up/Interest
Expenses
Administrative Expenses 100% 180.46% 26.12% 46.41% 23.41%
Other Charges 100% 149.31% 201.21% 31.84% -
Total non Mark 100% 180.44% 25.63% 46.72% 23.68%
up/Interest Expenses
Profit Before Taxation 100% 150.34% 17.85% 31.34% 80.44%
Taxation-Current 100% 94.46% 19.52% 90.33% 83.44%
Prior-years 100% 262.42% 86.48% 107.52% 79.59%
Deferred 100% 188.46% 43.52% 318.21% 144.27%
100% 104.52% 31.84% 135.95% 120.21%
Profit After Taxation 100% 123.52% 21.15% 31.54% 86.48%
Interpretations of Analysis of Profit & Loss Account:
It is observed that interest income of the bank has increasing trend

due to more advances, which is a positive sign. Fee income and brokerage
of the bank has increasing trend, which shows sound business of the bank
it is positives sign. Share profit has sharp increase over the years which is
due to sale of bank share to general public it shows public confidence on
the bank which is also a positive sign.
Income of bank from dealing in foreign currencies is also having a

sharp increase. Administration expenses have increased in recent years,
which are to control bank, more efficiently than before. Taxation expense
2
of the bank has also increasing trend which is due to increase in profits
which is a positive sign.. Net profit of the bank has sharp-increasing trend,
which is due to increase in different kind of income of the bank. Overall
income statement of the bank depicts very sound position of the bank’s
profitability.
6. Organizational Analysis:
6.1 Overview on the Major Players of Bank Industry:
The brief overview on the banking industry and the major players are
involved in it. The combine value of all major players is collected from
their financial statements of 2007.
Assets”:
“Liabilities & Equity:”
• As graphical shows (NBP) is the key player and the leader in the
industry which total assets and liabilities of RS. 764,609. While
AKBL is RS 632,414.
• Major Player includes NBP, MCB, HBL, and SCB.
1
• Total assets of the major player in the industry are RS. 3,561195
(M).
• Like major player NBP has the largest profit before and after tax
i.e.28, 452 (M) and 19,405 (M) respectively.
• The total profit before and after tax of the major players are RS.
99,835 (M) and RS 70,045 (M) respectively.
“Income Comparison”
6.2 Comparison of the Bank Industry Major Vs Medium Vs
Small Business:
• Major Player in the medium category of the banking industry is

AB, NIB, Citi, and ABL.
• Total assets and liabilities of this level comprised on RS
1,091,083(M).
• Net income of this level is RS 9,567 (M).
• This level is giving a tough competition to the major players and
trying to clutch their share.
• Few mergers are taking place and in future it is expected to be
more because to maintain SB standard reserve ratio.
1
• Major players in small category in the banking industry are ATLAS,

KASB, and JS etc.
• Total assets and liabilities of this level comprised on RS. 411,044
(M).
• Net income of this level is RS (2,176) (M).
• These banks are going in loss overall in 2007. Since they are new
players in Pakistani market. It is expected that they will give
return in future
1
7. FUTURE PROSPECTS OF THE

ORGANIZATION
• The corporate and investment Banking Group is structured to provide a
focused and professional approach towards enhancing NBP’s share of
business within existing and more importantly new business from larger
corporate customers.
• The NBP is more emphasis is on relationship management and provision
of high quality and responsive customer service.
• Retail banking is aimed towards optimizing the use of existing delivery
channels and developing alternate delivery channels for further
business development.
• The bank established call center for effective client contact, tele
marketing for retail products and services.
• The NBP expand over ATM network.
• For the year under review, staff was imparted training by the Shore
Bank USA, a US based bank on cash flow lending model and the model
is being successfully implemented at selective branches.
• Expanding customer base through schemes structured to ensure
accessibility to un-banked customers.
2
8. SHORTFALLS / WEAKNESSES
Critical analysis of the management patterns of the organization with
reference to financial operations, weak areas that need to be improved.
During the period of internship at National Bank of Pakistan Main

Branch, Mandi Bahauddin, I have observed different short falls /weaknesses
which warrant NBP management to take corrective measures to streamlines
the internal control for smooth operations. The following are the
weaknesses /deficiencies:
1. Huge amounts of debts are a practice of directly written off which is

very shocking.
2. Recovery of loans and bad debts is the weak area of the bank.
3. The accounts of loans are running irregular as the borrowers submit
their installments irregularly.
4. The National Bank of Pakistan has not yet made more policies for
generating more finance.
5. Files and other important papers are piled up like rubbish dump.
Mismanagement of record and files are another shortfall.
6. More expenditure is weak area of the bank. This is because of high
telephone bills of officers, misuse of office equipment and stationary.
7. MIS of the Bank is not up to the mark and significance of MIS
information emanating from different sources differ with each others
resultantly at times it becomes difficult to sort out the correct standing
with the help of figure available that casts doubts about the very
integrity of data.
8. Periodical review facilities of various uses of funds /allocations of
budgetary limits are not as per standard procedure as result many
portfolios where investment can be instrumental in generation of
enormous profits are ignored.
9. Female staffs are not employed to deal with female customers.
1
10. The facility of ATM is not available in every branch of the bank.
9. Conclusion
The importance of banks in the economy of any country is very vital, so

the state government decided to start the banking system in their country,
and by their own interference they control them, secure them according to
the situation, and main purpose behind that is to facilitate their nation. It is a
main (parent) bank in Pakistan known as SBP which is largest bank of
Pakistan. This bank works as the governmental department and its main
function is to monitor all type of banks working inside specially as well as
outside the country.
National Bank of Pakistan is the second largest bank of Pakistan by all

means; National Bank of Pakistan is widely used as an agent for State Bank of
Pakistan and is also involved in commercial banking. National bank of
Pakistan has a vital role in Pakistan’s banking history as well as in the
economy of Pakistan, so it has a great significance.
At present the national bank of Pakistan has improving its internal and
external conditions, but due to the largest operations in Pakistan (because
this is only bank which must cover the backward regions of the country where
no any other commercial bank wants to go). It still faces many problems...
Another main problem is faced by the NBP is labor unions because labor is
most powerful because of CBA union which protect the labor's all actions. All
above factors are causing problems of banking functional and growth of
banking is being resisted. Mostly recruitment and promotions are under
influence of political system of Pakistan. So it should be eliminated or should
be reduced as much as possible and make it on merit and transparent.
2
10. Recommendations
These are some recommendations, which I consider that will be helpful

in increasing the picture and performance of NBP.
➢ As NBP has a very poor recovery system so they should consider

overcoming this problem so that the bank’s performance can be
improved.
➢ As NBP has not been modernize its banking operations so they should
consider this and they should adopt the modern banking techniques.
➢ The NBP is not focusing on the rural development and has not
introduced any scheme for them so NBP should focus on rural
development policies.
➢ By increasing the number of branches of Bank would be able to increase
its number of customers.
➢ As NPB has its separate department of R&D but it is based at the head
office, so it is immense important to enhance and run it at the grass
root level which may help the branches which are located in the
backward areas of the country.
➢ There must be personnel department so these employees can get
accurate information about their rights, duties and responsibilities.
➢ There should be job rotation so that staff can get more knowledge and
experience about the working of bank. Job rotation may enhance the
judgment power.
➢ For home financing, the documentation must be easy and time duration
of loan sanction must be less in order to facilitate the clients.
1
➢ It is recommended that a quick and immediate response must be given

to the account holders probably not more than five days for the
issuance of ATM card.
➢ It is strongly recommended that two persons must be deployed on the
two different jobs, in order to reduce the inconvenience being faced by
the honorable drawers.
➢ There should be training centers for new & existing employees and
there must be career planning facility in bank against strong
competition.
2
11. REFERENCES:
1. James C.V Horne’s (edition 11th), Fundamentals of Financial Management
2. Hoans vane James: Financial Management in the edition 2005.
3. Internet
3.1.www.nbp.com.pk
3.2.www.sbp.gov.com
3.3.www.ksecstocks.com, www.sbp.gov.pk
3.4.www.secp.gov.pk
3.5. Site designed and developed by Information Technology Group,
National Bank of Pakistan (2009). Mission. Retrieved from Mar
05, 2009, http://www.nbp.com.pk/AboutUs/Mission.aspx.
National Bank of Pakistan (2009). Vision. Retrieved from Mar
12,2009, http://www.nbp.com.pk/AboutUs/Vision.aspx
National Bank of Pakistan (2009). About Us. Retrieved from,
http://www.nbp.com.pk/AboutUs/index.aspx on Mar 17, 2009.
3.8.http://www.scribd.com/doc/13450792/National-Bank-Internship-
Report-for-VU-wwwnoumanalicom
National Bank of Pakistan (2009). About Us. Retrieved from
http://www.nbp.com.pk/AboutUs/index.aspx on Apr 01,2009,
3.10.Site designed and developed by Information Technology
Group, National Bank of Pakistan (2009). Retrieved from
http://www.nbp.com.pk/Publications/AnReport2007/07-Balance
%20Sheet%20P&L%20Cashflow%20SofCiE.pdf on Apr 12, 2009.
3.11.Site designed and developed by Information Technology
Group, National Bank of Pakistan (2009). Retrieved from
http://www.nbp.com.pk/Publications/AnReport2008/08-Balance
%20Sheet%20P&L%20Cashflow%20SofCiE.pdf on Apr 13, 2009.
1
12. Annexes:
➢ Organizational Chart of NBP Main Branch, Mandi Bahauddin

➢ Organizational structure of NBP
1
ORGANIZATIONAL STRUCTURE OF NBP
PRESIDENT
BOARD OF DIRECTORS
GROUP OPERATION CREDIT COMMITTEE

CHIEF
REGIONAL
MANAGEMENT
REGIONAL
COMMITTIECHIEF
OPERATIONS
OPERATION MANAGER REGIONAL BUSINESS

AT BRANCH CHIEF
& REGIONAL RISK
MANAGEMENT CHIEF
2
ORGANIZATIONAL CHART OF NBP MAIN BRANCH,

MANDI BAHAUDDIN
Branch Manager
Operational Manager
,
Deposit Cash Deptt Compliance Govt. Receipt Foreign
Deptt Deptt Deptt Currency
Deptt.

Department of Business Administration

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(Department of Business Administration)

(Department of Business Administration)

 The organization’s philosophy and goals in relation to the services it

2. Overview of the organization

2.1 Brief history of the organization

It is the largest commercial bank operating in Pakistan and widely spread. It

(Department of Business Administration)

branches. It has agency arrangements with more than 3000 correspondent

2.2 Nature of the organization

formation ving ETWEEN THEORY AND PRACTICEFollowing most common

1 It provides deposit banking services.

(Department of Business Administration)

8 It provides Hajj facilities to citizens.

(Department of Business Administration)

2.3 Business Volume (Rs. In

Comments on Business Volume:

and reached at 635.1 millions in 2008, which is very fast growth.

The total deposits of the bank also showed a continuous increased in

(Department of Business Administration)

reached at 316.1 millions in 2008, which is very fast growth.

The total investment of the bank also showed a continuous increased in

but in 2008 its value decreases to 139.9 millions.

2.4 Number of employees

Total numbers of employees as on 31-12-2008 were 15204.

There were following employees in different sections at NBP, Main

(Department of Business Administration)

Sr. Name Designation / Grade

(Department of Business Administration)

2.5.2 Premium Saver

2.5.3 President Rozgar Scheme

President's Rozgar Scheme,

(Department of Business Administration)

Home Purchase / Home Construction:

2.5.4 Unique Product

2.5.5 Different Services Provided by NBP

(Department of Business Administration)

Money can be transferred from one place to another by means of pay

National Bank provides highly efficient trade finance services for

2.5.6 Agricultural Finance

Agricultural Finance Services:

(Department of Business Administration)

• Letter of Credit: - A document issued by the importer’s bank in favor of

GROUP OPERATION CREDIT COMMITTEE

OPERATION MANAGER REGIONAL BUSINESS

Comments on the organizational structure:

(Department of Business Administration)

Comments on Organizational Structure of NBP Main

(Department of Business Administration)

NBP Main Branch is situated near Ghalla Mandi, Mandi Bahauddin.

3.2 Various Departments of the Organization (functions &

(Department of Business Administration)

The H.R.M. Department is responsible for new appointments, transfer

Foreign Trade Department:

Foreign Currency Department:

(Department of Business Administration)

i) Traveller Cheques. ii) Old Scheme Foreign Currency

iii)New Foreign Accounts iv) Special Foreign Currency

Methods of Opening of an Account:

(Department of Business Administration)

the recipients. Specimen signatures of the account opener are obtained on

Procedure of opening of Current Deposit Account: