Financial Analysis report on .

National Bank of Pakistan

. . Presented to: Mr. Sikander Tajj Presented by: M. Shiraz Khan Regd. ID: Course : MBA-53304 IBF

The banks services were very poorly exaggerated At the time of independence in 1947 and by June 30, 1948, the number of offices of scheduled banks came down to only 81 in the territories comprising Pakistan; but there were following 14 scheduled Pakistani commercial banks with 3323 offices all over the Pakistan and 74 offices in foreign countries by December 31, 1973.

National Bank of Pakistan United Bank Limited. Punjab Provincial Cooperative bank limited. Habib bank (Overseas) Limited Muslim Commercial Bank Limited. Bank of Bahawalpur Limited. Standard bank Limited. Australasia bank limited. Commerce bank limited. Premier bank limited Sarhad Bank limited Pak bank limited. Lahore Commercial bank limited.

Commercial banks have duly played a vital role as a fuel of people's saving to constitute the most important source of financing in country economy. The truth shows that commercial banking has completed marvelous progress and achieved a phenomenal growth since independence.. However it was felt that these bank failed to ensure that the resources so mobilized by them flow in those sectors of economy where they would produce the goods and services needed badly by a very large number of people in Pakistan.

Overview of organization
Brief history
One way to keep momentum going is to have constantly greater goals

At the freedom of Pakistan the banks services were badly affected by the political conditions of the country and banks were not working according to the mark, in order to cope with the crisis conditions which were developed after trade deadlock with India and devaluation of Indian rupee National Bank of Pakistan was established on November 9, 1949 as a semi public commercial bank under the National Bank of Pakistan. The main purpose of the National Bank of Pakistan at its initial stage is to extend credit to the agriculture sector. At that time the crises were on their peak so the main purpose of National Bank of Pakistan was to face the problems that had arisen with regard to financing of jute trade. National Bank started its functions on November 20, 1949 with its very important eight jute centers in the East Pakistan. Mr.Ghulam Farooq was announced the first chairman of Jute Board and Mumtaz Hassan was announced the first chairman of National Bank of Pakistan. National Bank of Pakistan was remained totally under the Jute Operations till 1950. The first M.D of the National Bank of Pakistan was Mr. M.A. Muhajir. In 1952 Governor of State Bank of Pakistan decided to replace Imperial Bank of India by National Bank of Pakistan. By becoming Mr. Mumtaz Hassan the MD of NBP, the number of branches, deposits and the number of employees had increased significantly as compare earlier, it was all happen by the great struggle of Mr. Mumtaz Hussan. In Dec. 1966 its 600th branch was opened raising the deposits to 2.31 billion, and staff to 14, 963. Up to 1965, the shareholders had received 225% of their original investment. Now it has more than 21549 employees 1537 branches and Rs.208283 million deposits. National Bank Pakistan has a matchless position in the financial sector of Pakistan. It is the agent of the Stats Bank of Pakistan where it has no its own Branch. The National Bank of Pakistan is the largest Commercial Bank of Pakistan and transacts all types of Banking Business. The Head Office of the Bank is at Karachi.

National Bank of Pakistan is the first bank in the country to introduce and implement supervised Ruler Credit Programmed help small farmer to obtain loans at his doorsteps on easy terms and conditions. It has also played a pioneering role in introduction of profit and loss sharing System (PLS) as a major towards Islamization of economy. While it continues to act as trustee of public funds and as the agent to the State Bank of Pakistan (in places where SBP does not have a presence) it has diversified its business portfolio and is today a major lead player in the debt equity market, corporate investment banking, retail and consumer banking, agricultural financing, treasury services and is showing growing interest in promoting and developing the country's small and medium enterprises and at the same time fulfilling its social responsibilities, as a corporate citizen. NBP is 100% owned by the Government of Pakistan (GOP).

Vision
To be recognized as a leader and a brand synonymous with trust, highest standards of service quality, international best practices and social responsibility.

Mission:
NBP will aspire to the values that make NBP truly the Nations Bank by: Creating a distinctive brand identity by giving the highest principles of services Institutionalizing a merit and performance culture Adopting the best international management practices Discharging our responsibility as a good corporate citizen of Pakistan and in countries where we operate. Maximizing stake holders value

Nature of the organization

National Bank of Pakistan is a banking organization, a public limited company listed in Karachi Stock Exchange (KSE), Islamabad Stock Exchange (ISE), and Lahore Stock Exchange (LSE).

Business volume
Description Profit before tax Profit after tax Shareholders equity Advances net Total Assets Deposits Investments Earnings per share 2009 21,300 17,562 94,142 475,243 944,583 727,465 217,643 13.05 2010 24,415 17,563 103,762 477,507 1,035,025 832,152 301,324 13.05

NBP Product lines:

ATM / Debit Cards Protection Shield Insurance Remittance Facilities Advance Salary (Personal loan) Cash and Gold (loan Secured against Gold) SME / Commercial Financing Trade Finance Facilities Current, Savings, Term, Foreign Currency Accounts Cash Management / Financial Institutions Treasury Services to Government Islamic Banking Products Finance / Credit Facilities Loan Syndication Structured Finance Project Finance Financial Advisory Service

Kissan Dost Taquat (Agriculture) NBP Saibaan (Housing Finance) NBP Karobar (Micro Finance) Commodity Finance Investor Advantage (Margin Financing) NBP Premium Aamdani NBP Premium Saver NBP Karobar

Investments / Participations Proprietary Equity Trading NBP Cash n Gold NBP Kisan Taqat NBP Kisan Dost NBP Pak Remit NBP Protection Shield NBP Saiban NBP Advance Salary NBP Cash Card NBP Investor Advantage

Services Offered By NBP

Corporate Finance Working Capital and Short Term Loans Medium Term Loans and Project Financing Loan Structuring and Syndication Cash Management Service International Banking Disbursement of Pensions (EOBI) Musharika Ijara Mudarba PLS Term Deposits PLS Saving Accounts Current Accounts Demand Drafts Utility Bills Provincial Collections Sale and Purchase of Prize Bonds Foreign Remittances National Income Daily Account (NIDA) Commercial Finance Agriculture Financing (Medium to Long Term) Letters of Credit Travelers Cheque Pay Orders Mail Transfers Government Treasury Functions Government Receipt and Payments Farm Credit

Competitors:
The competitors of the National Bank of Pakistan are as follows: Askari Bank Habib Bank Limited United Bank Limited First Woman Bank Muslim Commercial Bank PICIC Commercial Bank Bank of Punjab Dubai Islamic Bank National Savings Allied Bank Limited Saudi Pak Commercial Bank Ltd Union Bank Limited Faysal Bank Standard Charter Prime Bank Bank Al-Falah My bank Silk Bank Sonehri Bank Metropolitan Bank Arif Habib Bank The Bank of Khaibar Bolan Bank Limited Platinum Commercial Bank Ltd Mashreq Bank

Organizational Structure
Board of Directors Chairman and President

Board-Sub Committees

President Secretariat

Management Committee

Audit Committee

HRM Sub Committee

Sports and Culture Committee

IT Sub Committee

Islamic Banking and Subsidiaries

Operations Committee

Assets and Liability Committee

Credit Committee

Secretary Board of Director Group

IT Group

Corporate and Investment Banking Group

Special Asset Management Group

Treasury Management Group

Audit and Inspection Group

Compliance Group

HRM and Admin Group

Operation Group

EBD and TD

Islamic Banking Division

Credit Management Group

Commercial and Retail Banking Group

Financial Control Division

Overseas Coordination and management group

29 Regional Offices

Overseas Offices

Regional HR Chief

Regional Operations Chief

Regional Credit Management Chief

Regional Business Chief

Regional Compliance Chief

Number of employees
In Overall Organization=15204 In Civil Lines Branch=50

Main offices
The Head Office of the National Bank of Pakistan is at Karachi. NBP carries on its business all the way through a wide set up of branches those are situated in the country and out of the country very professionally and in point of fact. All branches execute their functions under the rule of local Regional Offices and regional offices are proscribed by the Head Office situated a superb building in the heart of Karachis center. NBP has a wide domestic branch network consist of more than 1500 branches situated in all over the country. NBP has also more than 24 branches out of the country.

SWOT analysis:
According to my observation, Following are some Strengths, weaknesses, Opportunities and Threats for NBP.

Strengths:

1. State bank Agent: Wherever state bank of Pakistan does not have its own branch, National Bank of Pakistan serves as agent of State Bank and perform its functions on behalf of state bank of Pakistan. 2. Maximizing Shares Holder's wealth: Shares holder's wealth is maximizing in NBP and in safe hands. 3. hire Qualified Workers NBP civil lines branch has now more qualified employees who can compete in with the requirements of today. 4. Government Based Bank National Bank of Pakistan is purely nationalized sector. It has full support of government. 5. Well defined Policies and Objectives Policies are well defined to all employees. Each and every employee knows the organizational strategy, goal and mission. 6. Dress code Dress code in NBP is strictly followed. Each employee is in his particular dress defined by organization like pent court for Officers and if some one wants to wear shalwar qameez, he has to wear waskoot also. 7. Pension Distribution: Only NBP civil lines branch distributes pension to pension holders 8. Western Union: Western Union branch is been opened in civil line branch, Faster and secured transfer of funds is possible now through western union. 9. Lockers Facility of lockers is available at this branch, people can keep their documents and jewelry safe and secured.

Weaknesses
1. Poor Discipline/Punctuality

It is the major factor of that can harm the organization in achieving goals is that the discipline level in branch is very poor. Employees are not punctual. Customers have to wait for their arrival so that particular procedure can be started. 2. Poor Dealing Employees rudely behave with customers and with each other as well. 3. Lesser number of employees Another factor which can become hurdle in the way of success is that number of employees in civil line branch is very low. Most of the work is done by internees in the branch. 4. Nepotism Too much preferential treatment is there in civil line branch. There is too much discrimination by manager and employees. 5. Compliant Box is not safe: If customer gives any suggestion or does complaint about any employee, top management can not know anything about it because complaint chits have been removed from complaint box by some of staff members. Here, management is unable to get feedback for further improvements. 6. Security Cameras are good for nothing No benefit is got from security cameras. Cameras are old version and have used more than enough 7. Critical Process There is a critical procedure for some tasks like for loan, and for account opening. This procedure is long as well. Sometimes customers are asked to give some personal information which they tell with some hesitation. 8. Information Desk Information Desk is missing in civil line branch. This results in wastage of time and frustration of customers. 9. Ambiguity in Assessment Procedure Assessment procedure is with fill of ambiguities. Some employees appraise own selves by their own choice of rank.

Opportunities
1. Improved Hiring Policy NBP can have improved policy of hiring employees. 2. Training and Development of employees Training and development is a good opportunity to get a competitive edge.

3. Foreign Exchange: A good opportunity in the form of foreign exchange for civil line branch of NBP in cities because industrial city and huge import and export is done in the different region by its people. This can be a good source to earn foreign exchange

4. Deposit Mobilizations: Whole world is in economic crisis. Major Banks are becoming insolvent. Here its a good opportunity for civil line branch of NBP to introduce such products which are deposit mobilization and do not lesser the current liquidity. 5. EEO Equal Employment Opportunity is a big opportunity available in market to gather competent employees whether men or women.

Threats:
1. Rivalry among competing Banks: It lays stress on rivalry of competing banks. Here NBP has to see how to compete with other banks and to what entrance extent as well. 2. Threat of new: Entrance of any other bank in market can become a threat on transacting in the market. 3. Potential Development of substitute Products: Other banks are offering the same product as substitute of NBP products 4. Political Influence: Politics is too much involved in NBP. Influential political personalities force bank management to select employees of their choice and bank has to agree with them as such personalities have huge bank balance with bank 5. Political Instability: Political Instability of country is another major threat to NBP. 6. Lower interest rates offered by other banks: This is a threat when other banks offer lower interest rates than the interest rates offered by NBP like interest on loan, extra higher service charges.

Business volume
In Millions

Description Profit before tax

2009 21,300

2010 24,415

Profit after tax Shareholders equity Advances net

17,562

17,563

94,142

103,762

475,243

477,507

Total Assets

944,583

1,035,025

Deposits Investments

727,465 217,643

832,152 301,324

Earnings per share

13.05

13.05

Ratio Analysis

Liquidity Ratios Current Ratio Quick ratio

Asset Management Ratios Total Assets Turnover Fixed Assets turnover

Debt Management Ratios Debt Ratio Time Interest earned ratio

Profitability Ratios Net Profit Margin Return on Assets Return on Equity

Market Value Ratios Price Earning Ratio

Current Ratio Ratio Analysis National bank of Pakistan Current Ratio= Current Assets / Current liabilities Year 2008 Current Ratio 584,977,140 / 682,905,461 =0.86 Times Year 2009 645,064,165 / 725,293,720 = 0.89 Times Year 2010 693,463,983 / 867,626,367 = 0.80 Times

Quick ratio

Ratio Analysis

National bank of Pakistan Quick Ratio = Current Assets Inventory / Current Liabilities Year 2008 Year 2009 630,040,628 / 725,293,720 = 0.87 times Year 2010 691,160,473 / 867,626,367 = 0.80 times

Acid Test Ratio

582,255,871 / 682,905,461 =0.85 times

Working Capital Ratio

Ratio Analysis

National bank of Pakistan Net Working Capital = Current Assets - Current Liabilities

Year 2008 Net Working Capital Ratio 584,977,140 -682,905,461 = -97,928,321

Year 2009 645,064,165 -725,293,720 = -80,229,555

Year 2010 693,463,983 -867,626,367 = -174,162,384

Total Assets Turnover Ratio Analysis National bank of Pakistan Total Assets Turnover = Net sales / Total Assets Year 2008 Total Assets Turnover 60,942,798 / 817,758,326 = 0.0745 No. of times Year 2009 77,947,697 / 944,582,762 = 0.0825 No. of times Year 2010 88,472,134 / 1,035,024,680 = 0.0855 No. of times

Fixed Assets turnover

Ratio Analysis

National bank of Pakistan Fixed Assets turnover = Year 2008 Year 2009 77,947,697 / 25,147,192 = 3.10 No. of times Net sales / Fixed assets Year 2010 88,472,134 / 341,560,700 = 3.29 No. of times

Fixed Assets turnover

60,942,798 / 24,217,655 = 2.52 No. of times

Debt Ratio

Ratio Analysis

National bank of Pakistan Debt Ratio = Total liabilities / Total Assets Year 2008 Year 2009 825,676,384 / 944,582,762 = 0.874 times Year 2010 906,528,852 / 1035,024,680 = 0.876 times

Debt Ratio

715,299,108 / 817,758,326 = 0.875 times

Times Interest Earned Ratio Analysis National bank of Pakistan Time Interest earned ratio = Earning before interest & tax (EBIT) Interest expenses Year 2008 Time Interest earned ratio 46,885,766 / 23,884,768 = 1.96 times Year 2009 61,789,822 / 40,489,649 = 1.53 times Year 2010 69,665,595 / 45,250,476 = 1.54 times

Net Profit Margin Ratio Analysis National bank of Pakistan Net Profit Margin = (Net Income / Sales) *100 Year 2008 Net Profit Margin 15,458,590 / 60,942,798 = 25.4% Year 2009 17,561,846 / 77,947,697 = 22.5% Year 2010 17,563,214 / 88,472,134 = 19.9%

Return on Assets Ratio Analysis National bank of Pakistan Return on Assets = (EBIT / Total Assets)*100 Year 2008 Return on Assets 46,885,766 / 817,758,326 = 5.73% Year 2009 61,789,822 / 944,582,762 = 6.54% Year 2010 69,665,595 / 1,035,024,680 = 6.73%

Return on Equity

Ratio Analysis

National bank of Pakistan Return on Equity = (Net income / Shareholders equity)*100 Year 2008 Year 2009 17,561,846 / 94,265,853 = 18.63% Year 2010 17,563,214 / 103,880,048 = 16.91%

Return on Equity

15,458,590 / 81,497,458 = 18.97%

Earning Per Share Ratio Analysis National bank of Pakistan Earning per Share = Profit Available to shareholders or Net income after tax/ No of shares outstanding Year 2008 Earning per Share 15458590 / 896975 = 17.23 Rs. Year 2009 17561846 / 1076370 = 16.32 Rs. Year 2010 17563214 / 1345463 = 13.05 Rs.

Gross Profit Margin Ratio

Ratio Analysis

National bank of Pakistan Gross Profit Margin Ratio = (Gross Profit / Net Sales)*100 Year 2008 Year 2009 37,458,048 / 77,947,697 = 48.06% Year 2010 43,221,658 / 88,472,134 = 48.85%

Gross Profit Margin Ratio

37,058, 030 / 60,942,798 = 60.81%

Conclusion:
NBP is a part of State Bank of Pakistan and it is its major strength. Providing different products and services to its customers. Islamic banking, student loan scheme, international finance. Most rising bank with highest return on capital. Largest market share amongst all Banks in Pakistan. Highest cost to Income ratio as compare to all other commercial banks. Net assets of the NBP are increasing day by day. The net profit is also increasing which may attract the investors.

Recommendations: 1. Regulatory authority is highly needed concerning the disciplinary matters. 2. A committee of senior qualified expert staff should be physically present at bank to receive complains by customers and catch the guilty person red handed. 3. Complain box should be such that no one can bring the compliant papers out of box. 4. As only head office deals the pension, so this branch should provide facilities to specially old aged pension holders to increase its good will. 5. Security cameras should be technically alright and latest. 6. Branch must review its strategy whenever any new entrance in market is visible and whenever any product comes in market as substitute product of the products of NBP. 7. NBP should introduce deposit mobilization products. 8. A check and balance should be imposed on all employees 9. A handsome amount of fine should be charge to the guilty employees. 10. training session should be held at different intervals in a financial year to make employees more competent and get a competitive edge overall

11. Rules and regulations should be applied to all employees even to the top management in any way. 12. Account opening, loan issuing and some other procedures should be more convenient and flexible. 13. Make sure that all employees follow rules and regulations. 14. Any strategy implied for the over all benefit of organization should be accepted by every one, no one should have any objection on it. 15. Appraisal should be fair, transparent, and secured. 16. Separate information desk must be established in bank to facilitate the customers. 17. Prompt reply to the queries of the customers. 18. Favoritism and nepotism should be strictly dealt. Any employee whether of lower rank or upper rank found involved in favoritism and nepotism should be removed on the spot. 19. A separate investigation team should be formed to investigate the market situations and keep the working be up to date. 20. New qualified and competent employee must be hired to fill the gap. 21. All branches of NBP should be online for customer convenience and for best link among all its branches. 22. Bank mangers should not encourage the influence of customers with huge bank balance 23. Higher authority should be free from any influence and pressure by politicians 24. All branches should deal foreign exchange. 25. Internal audit should be held and executed fairly.

26. External audit is of tremendous importance. It should also be held fairly. 27. Differential products should be introduced by NBP. 28. Marketing Strategy should be improved. 29. facilitation should be provided to civil line branch.