nbp by a saboor

7/30/2019 NBP BY A SABOOR

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CHAPTER NO 1

1.0 INTRODUCTION

My report is on NBP. After doing two months (8 weeks)

internship in National Bank of Pakistan (main branch Mardan 0365). I

gave preference to NBP because it serves as leading bank in Pakistan.

1.1 Background of StudyThe economic and social growth of every developing country

based mainly on its financial institution like bank. In the development

of economy the bank sector plays an important role.

Banks are adopting major changes with the increase completion

and the development of modern technology. Besides the role of banks

in KPK is very important and contributing to the province as well as to

national economy. NBP was establishing in November 9 1949.

NBP is a major business colleague for Pakistan emphasizing on

increasing economic growth by fair lending policies and offering

modern products and services to the costumer. The characteristics of

NBP involves its serves as a commercial bank for our country also act

as an agent for central bank act as a trusty NIT (national investment

trust) and consider a premium bank of country.

1.2 Purpose of Study

According to HEC rule for the completion of BBA (HONS.)

finance degree two months internship in a financial institution is

requirement.


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In order to fulfill this requirement the students were as an internee in a

bank or other organization. So I preferred NBP because it is an

established bank in public sector.

The purpose of my study is to obtain relevant information tocomplete my internship report on NBP.

To acquire practical knowledge in a bank To suggest some solution to their problem through SWOT

analysis of NBP.

To obtain experience for my future job.1.3SCOPE OF STUDY:

My scope of study involves an enough detail about NBP. As a

student of finance specialization my main focus was to study the

Financial Position of NBP currently and with previous years.

Working as an internee in different departments I observe different

problems in option and suggested some solution.

1.4Limitations of the study: Two months (8 weeks) of duration was very short for a

complete stage so the study had to be restricted to certain

specific areas only. Hence we can term the time factor a big

limitation of the study.

Due to large volume of work handled by NBP the mainbranch, the workload on the employees was too much due

to which they could not properly share their views about the

organization.

Most of the data was confidential. Rigid work schedule of the Bank.

Above all limitations create different in collecting complete

information.


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1.5METHODOLOGY OF STUDY:The key job in my internship was to collect quality information

about NBP. For this I collected primary as well as secondary data.

Primary data include personal judgment, interviews, physical

observation and literature review.

Secondary data include internet reports relevant books and

newspaper.

CHAPTER 2

BANKING AND NATIONAL BANK OF PAKISTAN:

1) BANKING:

The origin of the word bank has not been decided so far. Some people

say that it is derived from word banquet or banks, which means a

bench.


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Some people say that that it is derived from German word back which

means joint stock fund.

BANK:

A financial institution which collects/accepts money from individuals,

firms, and companies at a lower rate of interest and give to those who

need it, at high rate of interest.

Bank is an financial intermediary that accepts money from those who

surplus and lend to needed ones.

Banks are playing an important role in countrys development. When

banking sector of a country is un organized, it creates problems in

countrys development.

2) EVALUATION OF BANKING IN PAKISTAN:

An efficient banking will be needed for a country like Pakistan.

The first phase of evaluation of banking in Pakistan was very hard, as

it was a new country without any proper resources.

When people came to realize the importance of money as a medium of

exchange, the people felt maturely a need of financial institution to

cope with various economic needs.

At partition time, only two banks were Pakistani, twenty nine banks

were Indian and seven were exchange banks.

The reserve bank of India was suggested to continue banking function

in Pakistan, which resulted in negative effect, I-e scheduled banks

decreased from 487 to 195 branches in 1948.


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NATIONAL BANK OF PAKISTAN:

3) HISTORY OF NATIONAL BANK OF PKISTAN:

The establishment of NBP was laid vide NBP ordnance XIX 1949.

It was suggested to establish NBP in 1950, but it was arranged earlier

in 9 November 1949 following the devaluation of Indian rupee.

NBP start operations in November 1949. The bank of Bahawalpur

was only one subsidiary of NBP in 1950.

In January 1974, NBP and 13 other banks of Pakistan were

nationalized by nationalization ordinance 1974.

4) NBPS MISSION STATEMENT:

The mission statement of NBP is,

To make the bank absolute and competitive with

performing, quality stuff and operations and products and services, to

develop Excellency almost in every activity of the bank.

5) GOALS AND OBJECTIVES OF NBP:

The goals and objective of any organization may be desirable results,

which they may want from their operation that may be short term or

long term.

The goals and objective of NBP are,

increase in deposits


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Increase in advancing of loans.

INCREASING DEPOSITS:The main objective of NBP is to increase their deposits. By increasing

its deposits, NBP can advances more loan which enhance high profit.

NBP is trying their best to improve its services and increase its

deposits, by the following two factors.

Courtesy of customers and Facilitating their services.

ADVANCING OF LOANS:The rate of profit for a bank defends on the rate of advancing loans to

the customers.

Greater the rate of loon advancing, greater will be the rate of profit or

vice versa.

Bank collects surplus money from the people and invests it in different

projects or extended to the people who are in need of it. NBP trying to

give loans to potential and stable customers.

Besides these objectives, NBP also trying to create better environment

for customer services and efficient and quick operations in theirrespective branches.

6) FUNCTIONS OF NBP:

NBP like other commercial bank is busy in receiving deposits,

advancing loans, financing international business and discounting bills.

The main functions of NBP are;


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a) ACCEPTING DEPOSITS:

All banks depends upon the money deposited by the customers in

bank. Deposits may be:

CURRENT DEPOSITS:There is no interest on these deposits. Current account can be opened

with an amount Rs. 500/. It is suitable fpr businessmen.

PLS TERM DEPOSITS:These are deposits for fixed time period. In such deposits profit varies

upon time period.

PLS SAVING DEPOSIT:It allows customers to deposit and withdraw money easily. Interest is

paid on these deposits, and can be opened with Rs. 500/.

b) DISCOUNTING BILLS:

NBP also involve in discounting bills of exchange (mature bills).

c) AGENCY SERVICES:

NBP also provides agency services to its customers, like..

DIVIDEND COLLECTION:NBP offers dividend or interest earned on different securities.

CHEQUES COLLECTION:NBP collects and pays cheques, promissory notes and bills.

GENERAL UTILITY SERVICES:


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NBP provides clearing services of electricity, gas and telephonebills for its customers.

Locker services are also available for customers. It provides different information to the forex department.

7) MANAGEMENT OF NBP:

The overall management of NBP involves, board of directors,

executive committee , chief executive and group chiefs.

a) BOARD OF DIRECTORS:

BOD serves as top controlling bodies in NBP.

BOD consist of a chairman (president), three seniors executives vice

president(SEVPs), a representative of council, representative of

government and a secretary finance. These BODs are nominated by

government.

b) EXECUTIVE COMMITTEE:

The BODs elect members for executive committee. It is consist of one

president, a secretary and eleven other members. This committee is

responsible for day-to-day affairs of the bank.

c) CHIEF EXECUTIVE:

The president serves as chief executive of the bank and controls all

affairs of the NBP.

d) GROUP CHIEFS:

The management of the bank has been split up in to divisions. Each

division is supervised by the regional chief (SEVP).


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It is a process through which people learn different skills and

knowledge. It bring changes in the current behavior of the

trainee.

d) TRANSFER POLICY:Transfers mean change in the position of an employee.

Transfers may be within the departments or outside the

organization.

Transfer of employees from one post to another post is called

inter transfer policy. Employees are usually transfers to

enhance their skills and performance.

Transfer of employees from department to another iscalled inter departmental transfer. it is useful for

employee to make the all rounder.

e) PROMOTION POLICY:Promotion means high responsibility higher pay and status.

Seniority is not the base offer promotion but performance of an

employee also causes promoting. The criteria for promotion in

NBP are,

Seniority list Annual appraisal.

f) SALARY ADMINISTRATION:Salary is the fee to employees given by organization in return

of their duty performance.

NBP have a good name in their responsibility interms ofemployees salary, benefits, pension etc. the salaries of

employee are sufficient to their responsibilities.

g) BENIFIT PACKAGES FOR THE EMPLOYEES:The benefit packages given by NBP to its employees are;

LEAVES;Different types of leaves are set for employees, like,


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Privilege leaves (30 days every year) Casual leaves (11 days in a year) Medical leaves (30 days in a year with full pay) Pilgrimage leaves (40 days once in entire

services with full pay).

COMPENSATIONS: Bonus:

These are paid regularly on the basis of profit earned by

NBP.

Provident fund:These are pensionable and required seven percent of

employees salaries.

ALLOWANCES:NBP provides different allowances to its employees.

Medical allowance:NBP pay back the medicines and other medical costs

incurred to its employees. The actual bills must be

provided to the bank.

.house rent allowances:

NBP also providing house facility to it employees.

STAFF LOAN:NBP also offer loan facility to its employees.

HOUSE BUILDING LOAN:It is loan provides for the construction of home.

Installment are deducted from their salary.

CONVEYANCE LAON :It is a loan granted for the purchase of vehicles. The

repayment of the loan is very easy and on convenient

terms and conditions.


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CHAPTER 3

ACTIVITIES OF INTERNEE

An internship in an organization is necessary part of BBA (Hons)

degree. In order to achieve this task I decided to undergo an internship.

Being the student of finance specialization, my major area for

consideration was banks.

I suggested National bank of Pakistan for my internship as it was a

public sector bank and becoming a leading one.

With the care of G.M(HR wing), NBP regional office Mardan,

MR.kifayt ullak khan, I was sent to the NBP main branch Mardan

(0365) for internship program.

MR fahad (officer HRM) at August 8,2012 send me written

endorsement to start my internship in NBP main branch mardan

(0365).

My branch was located in District Mardan at the busy site of Mardan

BANK ROAD. The staff details are,

MANAGER: Mr. SAID QAMASH KHAN

OPERATIONAL MANAGER: MR JAMAL NASIR

COMPLAINCE OFFICER: RAHEEM KH

ALONG WITH THIS THERE ARE 33 PERMENENT AND 10

CONTRACT EMPLYEES.

I started my work at August 8, 2012 from ACCOUNT OPENING

SECTION.


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Mr.zafar ullah khan was the in charge of this section, and was total two

members in this section.

In this section I learned about account opening, account closing and

issuance of check book.

I observed that bank was using KYC (known your customer) policy for

account opening. I spent one week in this section.

After this I was sent to REMITTANCES SECTION. Mr.Rasheed

was the in charge of this section. Total members in this section were

five(5).

In this section I studied about the transfer of money from one branch to

another branch.

I also studied about the demand draft (DD), cheque collection and WU

(Western Union).

Now I was shifted to ADVANCES/CREDIT SECTION. Mr.Amankhan was the section in charge . Here I was greatly helped by Sir

Dawood khan (assistant to incharge) and told me about this section .

here we are concerned with the advancing of loans.

From this section I was sent to the GOVERNMENT SECTION.

Mr.Malik jhanzeeb was the section incharge along with other seven

members. Here my performance was related to the tax collection ,

paying pension and renewal of weapons and passport fee collection. I

learned the scrolling method and the purpose of scrolling. Sir Ibadullah

jaan greatly healped me to know about the govrnement section

activities.

I also studied the CLEARIGN SECTION. Mr. Jameel Akhter was

the officer of this section.


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Here I studied the banks functions of paying and collecting cheques.

I also spent few days in ESTABLISHMENT SECTION. Here wewere concern with different establishment of the branch, which were

related with branch operations.

Briefly in my two months internship I stayed at the following

deparments of NBP main Branch Mardan.

Deposit Section.

Cash Section. Government section. Clearing Section. Advances Section. Forex Section. Remittances Section.

Note:

The in depth detail of these sections/departments will be discussed in

separate chapters.


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CHAPTER 4

DEPOSIT DEPARTNENT

The basic function of deposit department is to receive deposits.

Deposits are called as the life blood of any bank. These serves as raw

materials for banks, these are the debts of the bank.

The deposit department of NBP main branch mardan is concerned

with, account opening and closing, issuance of cheque books and

providing the locker facility to its customers.

1) TYPES OF ACCOUNTS OFFERED BY THE NBP:

Customer can open different accounts (local and foreign currency) at

NBP main branch Mardan.

CURRENT ACCOUNTS:Current account offers,

No profit (no interest) Demand payable

No zakat deduction and Minimum balance must be maintain in these accounts.

Current account holders can easily deposit and with draw cash. This

account holder must maintain Rs.5000 as a balance in their account.

These accounts can be opened by all types of people, and is very

suitable for the businessmen.


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PROFIT AND LOSS SHARING ACCOUNTS: Profit is paid. (in case of profit earned) Loss must be bear. (in case bank suffer losses) Rs. 100 must be maintaining in this account, even then

account holder will be eligible for profit and loss of the

bank.

Zakat will be deducted from these accounts. The account can be open with very small amount.

The profit and loss will be calculated after each six months.

TERM DEPOSIT:It is an account that offers,

Deposit facility for fixed duration. (Cant be withdrawbefore the expiry date).

Highest interest rate. Duration 3 months to 5 years. It is suitable for short term investment. The account can be open by minimum Rs. 10,000.

2) CLASSIFICATION OF ACCOUNTS:

Account may be classified into following categories.

INDIVIDUALL ACCOUNTS:That type of accounts that can be opened or operated by only

one/single person is known as individual or single accounts.

JOINT ACCOUNTS:These are the accounts opened/operated by jointly 2 or more

persons.


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PARTNERSHIP ACCOUNT:accounts that are opened by a partnership of two or more

persons are called partnership accounts.

It must be opened by in the name of business. Minimum 2 and maximum 20 persons are allowed. Partnership Deed is necessary for these accounts.

MINOR ACCOUNTS:An account opened by a customer under the 17 years of age is

called minor account.

Guardian to a minor can operated this account on behalf of him.

STAFF ACCOUNTS:It is operated only for employees.

3) ACCOUNTING OPENING PROCEDURE:

the bank open accounts on the request of customer. Every bank wants

to increase their deposit which determines its financial strength as well.

My branch was using KYC (known your customer) policy before

opening of accounts.

However, the procedure for opening the account in NBP main branch

Mardan was following;

Accounts may be opened on customers request only. The presence of

the customer itself is necessary for opening of an account. My branch

was using an account opening form for this purpose. The customer

has to fill the form containing all information about opening of an

account.

The customer must give information like his full name, fathers name,

information about the job, marriage, next of kin along with address.


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Then the responsible account opening officer has to take signatures

from the account opener. For this purpose branch was using specific

signature card. The customers must gave copy of the national ID card.

In last when all the formalities are completed, then the cheque book

was issued to the account holder after one week. The signature of

issuing officer was necessary. The branch was using cheque book

requisition memo for this purpose.

4) ACCOUNT CLOSING IN NBP:

in branch the accounts will be closed on the request of customers. Then

the cheques that were not used must be return to the bank and the

confirms by destroying un used cheques.

The bank may close an account itself without notifying to the

customers.

5) ISSUANCE OF CHEQUE BOOK:

Before going to discuss the issuance of cheque book, I will prefer to

define a cheque and further discuss its types.

CHEQUE:

It is an order of a customer on a bank to pay a sum of money to him or

third body on his demand. it can easily transferable. It is the safe mode

of money. There are two parties in a cheque. The drawer and the

payee.

There are 3 kinds of cheques;

BEARER CHEQUE:It is that kind of cheque, which can be cashed by any person

who presents it at the counter. It needs no endorsement i-e the

bearer of the cheque may not be known to the bank.


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ORDER CHEQUE:that type of cheque which is cashed only when the right person

is known to the bank. here the bearer of the bank is known to

the bank. It is the safe mode for payment.

CROSS CHEQUE:it is that kind of cheque, if it have two parallel lines on its face

and words and Co Is written between them. It cant be cashed

at the counter of the bank, while it may be deposited to the

payees account.

NOW, coming towards my main topic, i-e Issuance of cheque book by

NBP main branch Mardan.

The branch was receiving requisition slip from the customer for the

issuance of new cheque book. The requisition slip must contain

customers signature. The branch was then charging cost of new

cheque book, signature will be verified, and account number will be

written on it and was recorded.

6) LOCKER FACILITY BY NBP:

NBP main branch Mardan is providing locker facility to its customers.

This facility enables customers to keep their valuable things in a safe

custody.

My branch was offering three sizes of locker facility to its customers.

That are small size lockers, medium size locker and large size lockers.

The rents of these lockers are different according to their sizes. Current

rate for these lockers at NBP main branch Mardan are,

Locker

Rent


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Large size lockers

Rs. 4000

Medium

Rs. 3000

Small

Rs. 1000

In order to acquire a locker the following approaches are uses in NBP.

The copy of national ID card must be attached by the customerwith the form for locker rental.

The customers must have account in the branch. In case of losing the key, the customer will be responsible for

that.

A sole person can rent only one locker.7) TERMS AND CONDITIONS FOR LOCKER RENTAL:

The terms and conditions for the customers, who are renting a locker,

are following.

The customer can rent a locker for only one year on his firstrequest and will be in voluntarily renewed for next year.

The locker can be rented by two persons but they must givewritten evidence to the bank for their mode of operation.

Third body cannot be authorized to access a locker. The customer may not allow using a locker for any risky things. If a customer fails to pay rent, he may loss all the rights to use a

locker.

In case if the customer losses the key, he will pay for a newlock as well as pay any expenses of breaking the existing lock.


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8) TERMINATION OF RENTAL:

If a customer want to terminate a locker facility, he have to give anotice to the bank, one month before the expiry date of rental, and in

case bank wants to terminate the facility for a specific customer, bank

is responsible to notify customer before expiry date. The locker and

key must be return to the bank.

CHAPTER 5

CASH DEPARTMENT

The main aim of every organization, Eighter it is business organization

or any financial institution, is to earn profit.


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Cash department of NBP main branch Mardan branch is playing an

important role in this perspective.

The bank plays a role of intermediary, by collecting money from those

who have surplus with them and invest or give as a loan to those who

need it.

Main branch Mardan using different procedures and Instruments for

this purpose, that are following.

INSTRUMENTS AND PROCEDURES:

1) TOKENS:Banks issue Tokens to their customers and made

payment against Tokens only.

In NBP main branch Mardan when a customer brings a cheque,

the responsible person receives it and gives Token to the

customer. Cheque must contain a token number.

An officer, then check, post, and sign that cheque, which then

reach to the cashier. The cheque is now ready for its customer

to receive money on the counter.

2) STAMP:In main branch Mardan, an officer kept a CASH

RECEIVED STAMP with his custody and is not allowed forany other person even a cashier.

The officer was allowed to stamp only those vouchers and slips

that were properly signed by the cashier.

3) RECEIPTS AND PAYMENTS:


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When a customer wants to

deposit money in his account, he has to fill a deposit slip, which

includes account holders name, amount of money to be

deposited and his account number.

Then the cash along with deposit slip is submitted to the

cashier. the cashier collects, counts, verify and stamp it, and

then one part is given to the customer and other part is remain

by the bank.

Before the payment of a cheque, extreme care should be taken,

it must be check that the cheque has been posted, supervised

and cancelled by the officer.

The officer must check all the receipts and payments of the

cashiers book, in order to verify the totals of the receipts and

payments.

4) COLLECTION OF BILLS:NBP main branch Mardan was also

providing the services of collection of bills.

The cash department was responsible for that. they collect

different utility bills like gas, electricity, PTCL etc.

5) CASH SAVING:In afternoon, one of the officers of main

branch was responsible to check the cash and keep into safe

custody.

The loose, unstitched and stitched notes were also be checked.

6) CUT AND DEFECTIVE NOTES:


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My branch was really

concerned with, that cut and defective notes does not issue to

the customers.

For this purpose they maintain and collect fresh notes to satisfy

their customers.

7) CHEQUE PAYMENT POSTING AND CANCELLATION:

In NBP main branch Mardan, a member of cash section (not a cashier)

was responsible to post all cheques in a ledger book, and the cashier

was allowed to make payments to any person against cheque, which is

not posted in ledger book and is not cancelled by the officer.

8) GOVERNMENT COLLECTION SECTION:Mr. Malik

jhanzeeb was the in charge of this section.

The responsibility of the government collection section of NBP

main branch Mardan was to perform different services for

government like,

My branch was responsible for the collection of Taxes,

challans, renewal of weapons and paying pension.

As my branch was main branch, so we are mainly concern

paying pension to the retire employees.

For that purpose my branch was consisting properly a pension

department.

This section was responsible to pay pensions to the pensioners.

For this purpose the branch was issuing a pension book to the

pensioners that consisting amount due to him.


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The branch was using B143 register to maintain records of the

pensioners.

It was necessary for the pension payment that the pensioner has

to come personally.

Without getting pension book, pension may be refused by the

branch. The picture of the pensioner was necessary on the

pension book.

CHAPTER 6

REMITTANCES DEPARTMENT

Remittances department was the important section of NBP main

branch Mardan.


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This department is concerned with the transformation of funds from

one place to another or from one branch to another branch.

MEANS OF REMITTANCES:

The NBP main branch Mardan was using the following means for

remittances purpose.

1) DD (demand draft)2) Pay order3) MT (mail transfer)4) TT (telegraphic transfer)5) SC (short credit)

1) PAY ORDER:

Pay order is a mean for transformation of money, not only for local

transfer of money.

The branch was charging Rs. 20 on pay order.

2) DD (DEMAND DRAFT):

It is another way of transferring money from branch to branch.

Where Draft is an order by one branch to another of same bank to pay

a sum of money on demand to the person named there in.

A draft is to be filled with necessary requirements beneficiary (the

person who will receive money) name, account number and senders

(the person who is sending a draft) name.

The sender deposits the amount of DD in responding branch and the

branch make DD and give it to the sender.


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Then the concern branch sent an advice to the branch to which the DD

is sent. When the responsible branch receives DD, they credit it and

after clearing amount is debited.

There are two types of DD,

Open DD (Direct payment made) .Cross DD (Indirect payment is made

3) TT (TELEGRAPHIC TRANSFER):

It is the fastest mean of for remittances purpose.

Telegraphic transfer is performed for urgently remittance. The

customer may use TT on his written request. For this purpose they

must fill the form for TT and must deposit money.

The responsible officer for remittances send a telegraph in code words

and confidential number (Test number) to the responding branch and

the receiving branch make payment to the customers. They can use a

Telephone call for this purpose also.

The customers are responsible for telephone charges as well. The

customer has to deposit Rs. 90 as a fax charges and 0.4 percent as tax

charges.

4) MT (MAIL TRANSFER):

Mail transfer is that mean of remittances, which is concerned with the

transformation of money from one branch to another, or within the

country or outside the country.

If a customer wants to transfer money with the use of mail transfer, he

must fill an application form, stating that he wants to transfer the

money one bank to another bank through Mail.


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The customer must pay Rs. 20 as mail charges and 0.4 percent as tax

charges.

5) SHORT CREDIT (SC):

it is also a mean for remittances purpose. Short credit consists of

cheques. These cheques are outside the city cheques.

These cheques are sent through short credit for clearance purpose.NBP

main branch Mardan was charging Rs. 20 as postage charges and 0.03

percent as commission charges.

The customer was responsible for all the charges spent for this

purpose.

The short credit is also consisting of local short credit which are

specified for the clearance of inside the city or district cheques.

Bank has separate records of these short credits. There are no charges

on local short credits.


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CHAPTER 7

CLEARING DEPARTMENT

Every bank, whether it is public owned or private banks, performs

the function of clearing.

Clearing is basically related with the payment and collection of money.

The banks perform the clearing function through Clearing House.

1) CLEARING HOUSE:

A clearing house is a place where representatives of all commercial

banks are get together for the purpose of settlement of payments and

receipts of cheques drawn on each other.

State bank of Pakistan (SBP) is responsible for the operating of

clearing system in Pakistan.

In case if there is no office or branch of state bank of Pakistan (SBP) in

specific area, the National Bank of Pakistan acts as a representative of

state bank of Pakistan and performs the function of clearing house.

Each bank has their own desk in the clearing house. The

representatives of all local commercial banks meet in the office of

clearing house at a fixed time on all working days of the week.

Where they receive their own cheques and deliver the cheques and

deliver the cheques payable at other banks.

Then a schedule is prepared that contains the name of the bank and the

number of cheques received and delivered by them.

2) TYPES OF CLEARING:


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The clearing function performed by NBP main branch Mardan is

divided into two types.

outward clearing inward clearing

OUTWARD CLEARING:Outward clearing deals with those cheques which bank sent for

payments to the other banks. These cheques are exchanged through

local main branches. Bank demands payment for its customers.

PROCEDURE:

The procedure followed by NBP main branch Mardan for outward

clearing is as under;

The cheque which is sent to the bank has written the payees account

number on its back side.

The cheques are separated in different forms like investment and

paying. Then these are separated as according to different branches and

banks. Proper time table is programmed.

If payment is made then the amount is written in the PAY column

and for delivery it is written in delivered column.

Then the necessary balancing is done and then is forwarded to the

clearing department and a transfer debt voucher is generated. Then the

main branch instructions are followed for further action.

INWARD CLEARING:


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Those cheques which other banks present to the bank for payment are

dealed under inward clearing.

PROCEDURE:

The inward clearing is done through the following procedure.

All the instruments are noticed and verified as mentioned in the time

table on receipt just on time.

Then the amount of these instruments is balanced and the totaling of

accounts is done. Then amount is matched to the amount of IBDA. The

IBDA sent by branch is credited in favor of the bank. Then finally the

amounts of these instruments are released to the related departments.


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CHAPTER 8

ADVANCES DEPARTMENT

This section is very essential for any bank because it generate profit for

the bank.

Advances are considered as assets of the bank. NBP main branch

Mardan offers loans for creative actions to businesses and individuals.

The NBP collects money from those who have surplus money with

him and advances to those who needed ones.

In order to take full advantage from advancing loans, these

considerations should be followed, like financial background of

creditor, his country economic conditions and collateral offered by

him.

Mr. Aman khan was the in charge officer of advance section of NBP

main branch Mardan.

The advances section of NBP Main branch Mardan offering two types

of loans.

short term loans long term loans

Short term loans are those, which duration is less than one year.

Long term loans are those, which duration is more than 2 years.

The advance section of my branch deals with all types of long term and

short term loans, dealing with borrowers and payment of loans.

CLASSIFICATION OF LOANS:

Loans are primarily classified into following two types;


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Unsecured loan Secured loan

UNSECURED LOAN:It is that type of loan which is not supported by any guarantee or

security.

The limit for unsecured loans is rupees one lack.

It should be clear that unsecured loans are advances to only thosecustomers who have perfect financial background. Their sources for

repayment should be known and should be identified the use of loan.

SECURED LOAN:

A type of loan that is backed/supported by any type security or

guarantee.

The advances section of NBP is responsible to advance loan according

to indicated limit, to check the security, to identify the sources of

repayment and to make sure that loan is properly utilizing for the

purpose for which it was advanced.

TYPES OF CREDIT FACILITY OFFERED BY NBP MAIN

BRANCH PESHAWAR CANTT:

NBP main branch mardan is offering two types of credit facility to its

potential customers.

A) FUND BASED CREDIT FACILITY

B) NON FUNED BASED CREDIT FACILITY.

A) FUNED BASED CREDIT FACILITTY:


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1) CASH FINANCE (CASH CREDIT):

The most common type of advancing is cash finance, that is concerned

with cash credit facility (loan in cash form) to its customers.

Cash credit enables customers to fulfill his short term needs.

Cash credit is considered the most popular source of short term

financing. The bank provides cash credit facility to its customers

against security i-e security of goods or raw materials etc.

The customers are allowed to withdraw cash from their cash credit

accounts only after, all the formalities are fulfilled by the bank.

The customer must remember following dates for the maintenance of

cash credit facility.

Initial payment date, December 31st (expiry date) The last date of adjustment.

This loan is interest payable.

2) RUNNIN FINANCE:

Running finance also known as Over Draft facility. NBP main branch

mardan was permitting their reliable customers for over draft facility.

According to this facility, the current account holders can draw extra or

additional money (in form of cash) from their actual amount they hold

in their account.

The customer must pay interest for borrowing extra money from bank.

Running finance generally needs no security or guarantee but bank

may ask about security in some cases.


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The limit for running finance is identified on the basis of customers

requirement.

3) DEMAND FINANCE:

Demand finance also known as demand loan and is extended on the

basis of customers demand.

Demand finance may be short term, medium term or long term.

Currently NBP main branch Mardan is offering the following types of

demand finance;

GOLD FINANCING:the type of loan extend to the customers against Gold as

security.

NBP is the only authorized bank for gold financing. The bank for this

purpose authorized some jewelers to evaluate the gold and the

customer gets loan after fulfilling all the paper works. The customer

must pay the loan in two years.

ADVANCE SALARIES:NBP offers this credit for government employees. Through this facility

an employee can gets his twenty months salaries in advance under

specific terms and conditions. These are interest payable up to 19

percent and can be repaid through installments.

HOUSING FINANCE:

NBP offers housing finance (loan) for building/construction of

houses. The loan is secured by the house as a mortgage.


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45 percent of interest is paid on this loan. The is loan extended for the

duration of up to 15 years.

STAFF LOAN:NBP main branch Mardan is providing loan for employees. The loan

is given for the purpose of building a house, purchasing a car or

motorcycle.

The interest rate is different for clerical staff and for officers, i-e in

case of loan for building a house, the clerical staff has to pay no

interest and officers must pay 4 percent as ai interest charges. In this

case the house will be mortgage to the bank. The loan will be paid in

twenty years.

Motor cycle loan is advance for both clerical staff and officers, that is

payable in 10 years.

While car loan is extended for officers only, with 4 percent of interest

rate.

B) NON FUND BASED CREDIT FACILITY:

1) LETTER OF CREDIT:

NBP main branch mardan assists its customers in import-export related

business as well.

NBP facilitate import-export trade through a Letter of Credit. The

letter of credit is made by the bank on its own behalf.

This facility is granted to only those customers whose reputation and

financial soundness in import-export trade is well known and is in no

doubt.


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Note: the enough detail should be provided about letter of credit in

next chapter.

CHAPTER 9

FOREIGN EXCHANGE

1) FOREIGN EXCHANGE

According to the foreign exchange regulation act;

Foreign exchange refers to the foreign currency and it consist all

balances, credits and deposits payable in that currency. The deposits

payable in foreign currency are also included in this.

Currency relates to all the exchange mediums like loins, bant notes,

postal notes, cheques, money orders, letter of credits, bill of exchange

transfers cheques and promisolly notes.

a) AUTHERIZED DEALEROnly the regulated bodies are authorized to deal in foreign exchange.

b) FORES TRANSALATION REGULATIONThe translation occur under foreign exchange should be dealed under

foreign exchange put 1947.

2) NBP FOREX DEPARTMENT

The forex department of NBP deals the following transaction:

Foreign accounts Services of collection Remittances


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Translation the support travelers Letters of credits Accounts of guarantees Accounts of indemnities

AUTHORIZED RATE OF FOREX

The rate for doing transaction under forex is assigned by the state bank

of Pakistan. A margin to select their and own rates is given to the

authorized dealers.

3) FOREX ACCOUNT

The NBP offers foreign currency account to the all residents of

Pakistan. Along with residents foreigners, firms and banks can also use

this facility. Account can be opened both single and joint. The account

holder will maintain the account in that currency in which account has

been opened.

4) COLLECTION SERVICES

The customers are facilitated through the collection services on the

foreign bills. If foreign currency cheques, travelers cheques, foreign

direct payment are entitled for the purpose of collection.

5) FOREIGN REMITTANCES

Remittances refer to the money transfer from one to another place.


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This transfer of money or funds may be from one to another country or

within the country. the foreign remittances are grouped in inward and

outward remittances,

INWARD FOREIGN REMITTANCESThe inward remittances refer to the purchase of foreign

currency in any form either in currency notes are in any other

form

The inward remittances can be only done byauthorized dealers

The inward remittances may be due to the result of theforeign currency payment from the overseas branches

against the bills.

OUTWARD FOREIGN REMITTANCESWhen the foreign currency is sold in any form it refers to the

outward remittances.

The outward foreign remittances can be done through using

different forms like,

I form use to cover remittances against imports. T-I form issued to show the sales of travel

exchange.

T-2 form for business travels. M form to show the other remittances

6) HOME REMITTANCES

When the abroad nationals send foreign exchanges to the country for

their domestic use it is called home remittances.

PURPOSES OF HOME REMITTANCESThe home remittances are used for different purposes like,

Maintenance of house


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Family support Transfer of insurance payments Pension funds transfer Saving purpose Investment purpose. (small enterprise investment )

7) TRAVEL TRANSACTION SERVICES

When people go abroad , that is they purchase local products can make

payment through using travel transaction services.

NBP provides this service by introducing the following instruments;

TRAVELERS CHEQUE.As NBP acting as agent of SBP so the travelers cheque

includes by NBP is acceptable almost all over the world.

Travelers cheque when presented will be payable by the

bank. People usually use travelers cheques for business and

travel purpose.

CREDIT CARDS:Credits cards the foreign currency accounts holder can enjoy

the NBP credit card offer. NBP is currently offering the credit

card of with $ 5000 to trust worthy accounts holders.

8) LETTER OF CRIDIT:

Letter of credit is very useful service of NBP which support the tradeof imports and exports.

The holder of this instrument is entitled to get money right on time or

according to the terms and conditions of the letter of the credit. The

bank facilitate the account holders by this instruments in these ways;

Payment of order of a party or accept ion of bills of exchange.


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Delegate authorities to another bank to effect such paymentsor to pay the bills.

The parties included in letter of credit usually carry out the

documentation of letter of credit.

ADVANTAGES OF LETTER OF CREDIT:both export and import business are benefited.

Reduces the risk of dealing with unknown dealers andbuyers. (for the exporter)

The receiver of the products is ensure about theimported products, because he is owing the

documented guarantee.

9) FORMS OF LETTER OF CREDIT:

letter of credits are in form of revocable and irrevocable credits.

REVOCABLE L/C:bank has the authority to cancel the revocable credit without

any proper notice to the beneficiary.

IRREVOCABLE L/C:The irrevocable credit can only be cancelled with the advice

of the parties of agreement.

The issuing bank of the irrevocable credit provide under

taking about the fulfilling of the terms and conditions of the

credit.

10) PARTIES INVOLVES IN A L/C:

The following 5 parties participate in the letter of credit.

The importer or buyer


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Issuing bank The advisors (bank) The bank on which L/C is drawn The beneficiary

11) FOREIGN CURRENCY ACCOUNTS:

The bank opens the foreign currency accounts to facilitate the

payments of international business. these accounts are Nostro accounts

and vostro accounts.

NOSTRO ACCOUNTS:NOSTRO is a Latin word meaning our.

The NBP has developed this account with their overseas

respective and all transactions are managed through this

account.

VOSTRO ACCOUNTS:VOSTRO is a Latin word means your.The bank usually keeps account of overseas bank to maintain

the convertible pak rupee account. This account is known as

VOSTRO account.

12) DOCUMENTS REQUIRED FOR L/C:

The trade through letter of credit is secured by some documentation

settlement. These documents are used by the bank upon which the L/C

is drawn.

The documents for a L/C are,

Commercial documents Financial documents Transformation documents


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Official documents Insurance documents

13) PROCEDURE FOR OPENING L/C in NBP:

When the customers, that NBP can trust, ask the bank to issue the

credit in favor of someone, the bank issue letter of credit followed by

a specific procedure is as following;

The first requirement is that the person must have a sanctionlimit.

The customer must have a tax registration NO. And should be amember of the trade body.

First the customer should fill an application form requesting toopen a letter of credit. The letters of credit is opened at the time

when the customer submits and fulfill the early necessary

requirements. The application form is a written contract

between the bank and the customers.

The application form contains all the relevant information about the

letter of credit and the necessary guidelines. The form identifies all the

terms and conditions for availing the services of letter of credit. the

customer also should fill the appendix B which shows that the

imported items are legally eligible to import.

CHAPTER 10

SWOT ANALYSIS AND FINANCIAL RATIO ANALYSIS FOR

NBP:


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SWOT ANALYSIS FOR NBP:

The word SWOT is a marketing term stands for strengths, weakness,

opportunities and threats.

SWOT analysis is an instrument on the basis of which the performance and

current position of an organization can be measured.

SWOT analysis of NBP will focus NBPs business to get better strengths and get

rid of weakness, to avail opportunities and reduce their threats.

EXPLANATION:

STRENGHTS:

NBP is the oldest banks of Pakistan, that is why people have confidence on the

bank.NBP act as a agent for SBP where there is no branch of SBP. It is the sole

provider of loan against Gold. They have more deposits because of their high

confidence level.NBP also collects gas, electricity, PTCL bills.

WEAKNESSES:

NBP is not dealing properly its customers complaints. There marketing efforts

are negligible. NBP is under the political pressure that affects their efficiency.

Due to not enough staff, there is a poor quality counter services. NBP have no

proper computer network. Counting machines are not available in NBP.

Imbalanced allocation of duties and no operation of IT tools are also its

weaknesses.

OPPERTUNITIES:

A scheme for overseas Pakistanis will be profitable segment for NBP.


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NBP must focus on micro financing as well as international trade. They should

finance new projects. NBP should introduce new technology and electronic

banking. ATM facility should be motivated. Proper training and seminar for their

employees will be profitable.

THREATS:

Arrival of new banks (Allied Bank, HBL, Meezan Bank) is becoming a threat

for NBP. NBP have non qualified staff. The political and economic condition of

the country are also becoming as a threat for NBP.


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INTERPRETATIONS OF RATIOS:

1. NET PROFIT MARGIN RATIO:The ratio has been decreased in 2010, that is from 39.28% to 34.55%,whichindicates that the performance of NBP is not good. It shows the low profits

revenue per rupee in case of NBP.Because of high advances, NBP given to his

customers and bad financial position of the country.

2. RETURN ON EQUITY:The ROE ratio has been in decreasing trend. It is because of low net profit

earned by NBP. It indicates that earning power on the shareholders investment is

decreased in 2010.it is because of high investment and ineffective managementtheir expenses.

3. RETURN ON ASSETS RATIO:ROA ratio for NBP is in decreasing trend, which show that NBP is not efficiently

using their assets, that is why NBP are earning very low prophets.

4. INVESTMENT DEPOSIT RATIO:The investment deposit ratio for NBP has been in increasing trend. Which

indicates that people have a great surety about NBP,That is why they are

depositing their investment in NBP.

5. DEBT TO EQUITY RATIO:As the ratio in increasing trend its a good for NBP and show its satisfactory

efficiency. Here the creditors are interested in high ratio.

6. DEBT TO ASSETS RATIO:


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The ratio is decreasing which show high risk, because of more deposits in the

bank which are liability of customers on bank.

7.

ADVANCES DEPOSIT RATIO:The ratio has been decreased in 2010,which is not a good sign for NBP.Because

their advances are low as compare to their deposits.

8. ASSET TURNOVER RATIO:The ratio has been slightly in decreasing trend, which indicates that NBP is

slightly inefficient in utilizing its assets to generate revenue, which is not a good

sign for NBP. Still the difference is very low, so showing satisfactory efficiency

will be beneficial in future.

CHAPTER 11

FINDINGS AND RECOMMENDATIONS:

The main purpose of my study was to analyze my branch and find solutions for

their problems.

during my internship of two months in NBP main branch Peshawar cantt, I

noticed many things and recommended some recommendations for my branch.

1) ACCESSABILITY TO REQUIRED STAFF:

In order to improve the work standards, the branch must access to required staff.

I observed that branch there were employees deficiency in main branch,

particularly a telephone operator and a customer service officer.


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I suggested the branch to establish a customer information centre. Still it will

cost the branch at was the time, but will be beneficial in future.

2) JOB REPLACEMENT:

The branch must concentrate on job replacement, i-e to change the current duty of

an employee.

Through this employees can know about all the sections.

In my branch I noticed that some seats were over loaded and some were out of

work. So the branch must focus on job replacement to ensure that no body is over

burdened.

3) FRIENDLY ENVIROMENT FOR EMPLOYEES:

employees or human resources are considered the most important source of any

organization.

The internal environment of NBP main branch mardan was really disturbed; the

employees were not satisfied from their duties. I suggested my branch to keep

friendly environments for their employees in order to achieve their mission.

4) PROFFESIONAL APPROACH TOWARDS EXPENCES:

The branch must be concerned with professional approach towards all the

expenses of the branch, in respect of fuel, electricity, telephone expenses.

The operation manager of the branch will be concerned with all these activities

and must keep check up of their all expenses to avoid un necessary utilization of

electricity, fuel etc.

All approaches must be base on the cost and befit analysis.


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5) PERSONAL MARKETING:

Personal marketing is very important for attracting customers. Through which

different type of information can be collected, like financial and businessinformation etc.

I recommended my branchs staff to attract customers on his personal contact.

6) EQUAL DISTRIBUTION OF DUTIES:

The human resource (employees) must be treated equally. They should give equal

workload.

I observed that some workload was not properly adjust, which creates tussles

among employees.

So, I recommended that the operation manager must equally distribute the work

load to over come this situation.

7) INTRODUCTION OF ATM FACILITY:

The competitors of NBP like Allied Bank, Habib Bank, United Bank limited have

already adopted ATM facility al most in every area that becoming a threat for

NBP.

So, I recommended the branch to introduce ATM facility at least in main branch

Peshawar cantt, to improve its services.

8) DECENTRALIZATION (WIDE SPAN OF COMMANDS):

In NBP all major decisions are centralized, i-e are taken by only top level

management. The branch manager has very limited delegation of authorities and

must take permission for almost every action.

So, I recommended the top level management of NBP to wider the span of

authorities for branch managers.


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9) APPEARANCE:

my recommendation for the branch is to improve its internal and external outlook.

Specially the staff of the branch must be dressed properly and behave nicely. This

will help to attract the customers.

10) CUSTOMER SATISFACTION:

customers are considers a key concept in the market and his satisfaction is a

competitive advantage.

I recommended the branch to improve their customer related activities.

CHAPTER 12

IMPLEMENTATION PLAN

After finishing internship in NBP main branch Mardan I recommended an

implementation plan for my branch. My implementation plan includes two steps.

These are:

1) Computerization of the branch


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2) Setting up Customer information section

12.1 COMPUTERIZATION OF THE BRANCH

Now a days about all banks have a well organized computerization in their

branches, that is why I also suggested a plan for the computerization in NBP main

branch Mardan, that will involve the following steps:

12.1.1 TENDER NOTICE

In order to purchase tools for the computerization of the branch, a Tender notice

must be given in a news paper. The successful party will perform further

responsibility of computer networking in the branch.

12.1.2 SELECTION OF THE BEST PARTY

The best party will further precede the project. The best party will be that having

good reputation and have minimum estimations for the completion of plan. It will

also be necessary to complete the projects within given duration.

12.1.3 ESTIMATED COST OF COMPUTERIZATION AT MARDAN MAIN

BRANCH:

S.NO EQUIPMENT TO BE PURCHASED ESTIMATED COST

1. Server with


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. Dual processor with main board support

. Processor (Intel)

. CD Rom 52 x

. Fdd 1.45, M+keyboard

. Monitor 21

. LAN card

. External Robotics RS. 80000

2. Dell computers

Total 15 systems with p4, 17

Monitor, 21 GB HDD,

250 Mb Ram, 1 GHZ Processor

(20 thousand * 15) Rs. 300000

3. Intel switch for 100 Mobs hub cable STP

Connectors

HP Inkjet printer Rs .40000

4. Network cost RS. 8000

5. AD expenses RS. 2000

6. Salary of Additional Officer (12 * 15 thousand)

(Per year) RS. 180000

7. Fitting Cost Rs. 30000


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Total Estimated Cost. Rs. 640000

12.1.4 TRAINING OF THE STAFF:

The staff of the branch will be given training about computers at least 1 month

that will enable him to use computers for branch operations.

12.2 SETTING UP CUSTOMER INFORMATION SECTION

Another plan for my branch is the introduction of customer information section.

The main functions of this section will be to create coordination among

employees, to attend all the inquiries of customers and also act as a telephone

operator.

The section will be operated by one person and will be selected through following

procedure.

12.2.1 NEWSPAPER AD

The ad for the post will be given in a newspaper and Job specification, job

description will be mentioned. The interested candidates must submit their

applications and relevant documents before a particular date. The job will be on

contract basis. The selected candidate will be given fixed salary of Rs. 10,000/-.

12.2.2 JOB DESCRIPTION AND SPECIFICATION

1. JOB DESCRIPTION


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The job description is as follows:

i) Graduate with minimum First division.ii)

2 year working experience in relevant field.

iii) Computer expert.iv) Good communication skills.

2. JOB SPECIFICATIONThe job specifications are:

i) Telephone operator.ii) To answer all queries of the customers.

iii) To coordinate among the staff.

12.2.3 SELECTION OF SUITABLE CANDIDATES

The suitable candidate will be selected after considering his qualification,

experience and communication skills. The selection of the person will be strictly

on merit. The manager of the branch will conduct interviews. The selectedcandidate will be asked to sign the secrecy bond.

12.2.4 TRAINING OF THE SELECTED PERSON

The selected person will be given four weeks training in computer and other

banking services. The training will be set in the Regional office Peshawar. After

the successful completion of the training he will join the branch.

12.2.5 ESTIMATED COST FOR SETTING UP A CUSTOMER

INFORMATION SECTION IN CANTT BRANCH:


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The cost to be incurred is as follows:

S. No Type of Cost Estimated Cost

1. Cost of AD Rs. 2000

2. Salary (cost) Rs. 69000

TOTAL COST RS.71000


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CHAPTER#13

13.0 FINANCIAL ANALYSIS:

Years 2011 2010 2009 2008 2007 2006 2005 2004 2003

Items

Total assets 1149578 1037750 944563 817758 762194 635133 577719

533231 468972

Deposits 927421 832152 727465 624939 591907 501872 463427 465572 395492

Advances 525046 477507 475243 412987 340319 316110 268839 220794 161266

Investment 319531 301324 217643 170822 211246 139947 156985 149350 166196

S,s holder equity 110520 103762 94142 81367 69271 5345 37636 24900

18134

pre tax profit 26011 24415 21300 23001 28061 26311 19056 11978 9009

After tax profit 17605 17563 17562 15459 19034 17012 12709 6195 4198

Earning per share 10.47 10.44 10.44 9.19 11.32 10.12 7.56 3.68

2.50

Return on assets 2% 1.40% 0.80% 0.30% 0.20% 0.10% ---------- ------

-----

No of Branches 1300 1289 1287 1276 1261 1250 1242 1226 1199

No of Employees 16924 16457 16248 15441 14079 14019 13824 13745

13272

13.1 INTRODUCTION

Financial analysis, though varying according to the particular interests of the

analyst, always involves the use of various financial statements primarily the

balance sheet and income statement. The balance sheet summarizes the assets,


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liabilities, and owners equity of a business at a point in time, and This ratio

shows that the cash is enough for payment of current liabilities or not.

It is calculated as cash Ratio=Cash/current liabilities

This ration is obtained by dividing cash by current liabilities / liabilities.

Ratio is the comparison between two figures of balance sheet and income

statement.

An organization would be interested in every aspect of the financial analysis. It is

their overall responsibility to see that the resources of the firm are used most

effectively and efficiently and that the firm's financial condition is sound.

So thus management employee financial analysis for the purpose of internal

control and to better provide what capital supplier seeks in financial condition and

performance from the business and from an internal control standpoint,

management needs to take financial analysis in order to plan and control

effectively.

Investors who have invested their money in the firms share are most concerned

about the firm steady growth in earning. As such, they concentrate on the analysis

of the firm's present and future profitability. They are also interested in the firms

financial structure of the extent it influence the firms earning ability and risk.

Suppliers of long-term debt on the other hand are concerned with firm's long-term

solvency and survival. They analysis the firms profitability over time, its ability to

generate cash to be able to pay interest and repay interest and repay principal and

the relationship between various source of funds. (Capital structure relationship).

Long-term creditors do analyses the historical financial statements but they place

more emphasis on the firm's projected financial statement to make analysis about

its future solvency and profitability.


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Trade creditors are interested in firm's ability to meet their claims over a very

short period of time. Their analysis will, there fore confine to the evaluation of the

firm's liquidity positions.

Financial analysis is the process of identifying the financial strengths and

weakness of the firm by properly establishing relation ship between the items of

balance sheet and profit and loss account, in order to make rational decision in

keeping with the objective of the organization, for that purpose the management

use analytical tools. To evaluate the financial condition and performance of the

business entity, the financial analyst needs to perform "checkups" on various

aspects of the business financial health.A tools frequently used during these

checkups is a financial ratio analysis, which relates two piece of financial data by

dividing one quantity by the other we calculate ratios because in this way we get a

comparison that may prove more useful than the raw number by themselves. The

business itself and outside providers of capital (creditors and investors) all

undertake financial statement analysis. The type of analysis varies according to

the specific interest party involved. The nature of analysis is depending at the

purpose of analyst.

NBP is one of the leading banks in Pakistan. The fact that it is the best bank of

Pakistan is obvious from the performance shows in the table below.

(Source Annual reports 2011)

From the above table it is very much clear that the NBP performance is going

higher and higher total assets are at the peak in 2003. If we draw a graph this will

shows that the graph is upward trend. Profit is increasing from year to year. NBP

decrease the number of its branches and employees because of automation and

large networks of other banks. But this bank can compete and now NBP is the

best bank of year.


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statement summarizes revenues and expenses of the over a particular period of

time. A conceptual framework for financial analysis provides the analyst with an

interlocking means for structuring the financing.

thee incomestatement summarizes revenues and expenses of the over a particular

period of time. A conceptual framework for financial analysis provides the analyst

with an interlocking means for structuring the financing.

13.2 National Bank of Pakistan Ten Years Performance at one

glance

NBP is one of the leading banks in Pakistan. The fact that it is the best bank of

Pakistan is obvious from the performance shows in the table below.

(Source Annual reports 2011)

From the above table it is very much clear that the NBP performance is going

higher and higher total assets are at the peak in 2003. If we draw a graph this will

shows that the graph is upward trend. Profit is increasing from year to year. NBP

decrease the number of its branches and employees because of automation and

large networks of other banks. But this bank can compete and now NBP is the

best bank of year.

13.3 RATIOS ANALYSIS

Financial analysis is the process of identifying the financial strengths and

weakness of the firm by properly establishing relation ship between the items of

balance sheet and profit and loss account, in order to make rational decision in

keeping with the objective of the organization, for that purpose the management

use analytical tools. To evaluate the financial condition and performance of the

business entity, the financial analyst needs to perform "checkups" on various

aspects of the business financial health.A tools frequently used during these

checkups is a financial ratio analysis, which relates two piece of financial data by

dividing one quantity by the other we calculate ratios because in this way we get a

comparison that may prove more useful than the raw number by themselves. The

business itself and outside providers of capital (creditors and investors) all

undertake financial statement analysis. The type of analysis varies according to

the specific interest party involved. The nature of analysis is depending at the

purpose of analyst.

13.3.1 Parties interested in ratio analysis


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13.3.1.1 Trade creditors

Trade creditors are interested in firm's ability to meet their claims over a very

short period of time. Their analysis will, there fore confine to the evaluation of the

firm's liquidity positions.

13.3.1.2 Suppliers of long-term debt

Suppliers of long-term debt on the other hand are concerned with firm's long-term

solvency and survival. They analysis the firms profitability over time, its ability to

generate cash to be able to pay interest and repay interest and repay principal and

the relationship between various source of funds. (Capital structure relationship).

Long-term creditors do analyses the historical financial statements but they place

more emphasis on the firm's projected financial statement to make analysis aboutits future solvency and profitability.

13.3.1.3 Investors

Investors who have invested their money in the firms share are most concerned

about the firm steady growth in earning. As such, they concentrate on the analysis

of the firm's present and future profitability. They are also interested in the firms

financial structure of the extent it influence the firms earning ability and risk.

13.3.1.4 Management.

An organization would be interested in every aspect of the financial analysis. It is

their overall responsibility to see that the resources of the firm are used most

effectively and efficiently and that the firm's financial condition is sound.

So thus management employee financial analysis for the purpose of internal

control and to better provide what capital supplier seeks in financial condition and

performance from the business and from an internal control standpoint,

management needs to take financial analysis in order to plan and control

effectively.

13.4 Ratios analysis

Ratio is the comparison between two figures of balance sheet and income

statement.

13.4.1 Cash Ratio:


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This ration is obtained by dividing cash by current liabilities / liabilities.

This ratio shows that the cash is enough for payment of current liabilities or not.

It is calculated as cash Ratio=Cash/current liabilities

Table 3

Year 2003 2004 2005 2006 2007 2008 2009

Cash Ratio 0.118 0.169 0.19 0.21 0.22 0.15 0.134

It means that how much cash is available for payment its current liabilities. This

ratio of NBP shows a downward trend. Because of high advances cash is less to

cover its current liabilities.

13.4.2 Gross Profit Margin Ratio:

This ratio shows the profit margin in sales/ revenue.

This is calculated as.

Gross profit/ interest earned

Table 4

Year 2003 2004 2005 2006 2007 2008 2009

Gross profit margin% 24.8 27.7 28.9 29.59 39.67 46.6 51.9

G. Profit margin relates profit of the organization to its sales (interest earned in

case of Bank). From calculation it is very much clear that the gross profit margin

ration have upward trend which shows that how much they using their deposits to


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earn interest. This shows the profit of the Firm relative to its revenue. It is a

measure of the efficiency of the firms operations too. As it is clear that the ratio

gong high this is the indication of good performance.

13.4.3 Net Profit Margin:

This ratio measures the firms profitability of sales/ interest earned after taking

account of all expenses and income taxes. This ratio can be calculated as:

Net profit margin ration = Net Profit after taxes / interest earned

Table5

Year 2003 2004 2005 2006 2007 2008 2009

Net profit Margin % 0.2 1.6 1.7 1.55 3.67 3.18 21.6

Explanation: from the calculation and graph it is very much clear that the

performance of NBP is very good. And the trend is upward. It tells us a firms net

income per rupee of revenue. As the Trend is upward it shows the high profits in

revenue per rupee in case of NBP. It is because of high advances the NBP has

given to the people.

13.4.4 Return on Equity:

Dividing profit after taxation by shareholders equity. ROE compares net profit

after taxes to the Shareholders Equity.

This ratio is calculated as:

ROE=Profit after taxes/Share holders Equity

Table6

Year 2003 2004 2005 2006 2007 2008 2009

Return on Equity 0.67 5.3 0.2 2.7 6.55 9.4 23.1


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Explanation: from the calculation it is clear that the ROE Ratio have an upward

trend of NBP. It is because of high net profit they have earned. It tells us the

earning power on the shareholders investments. It is because of high investments

by NBP and effective expense management.

13.4.5 Return On Assets:

This ratio shows the efficiency of organization that how efficiently utilizes their

assets. This ratio relates profits to assets.

It is calculated as:

Profit after Tax/Total Assets

Table7

Year 2003 2004 2005 2006 2007 2008 2009

Return on assets 0.01 0.16 0.008 0.124 0.225 0.52 0.9

From calculation it is clear that this ration of NBP is going high and high. It

shows that NBP using its assets very efficiently. That is why they are earning

very highprofits. This shows that how efficiently they investing the assets thats

why they are earning high profits.

13.4.6 Investment deposit Ratio:

This ratio shows the comparison of investments and deposits. This is calculated

as.

Investment deposit Ratio=Investment/deposits

Table8

Year 2003 2004 2005 2006 2007 2008 2009

Investment Deposit ratio 42.9 37.7 31.03 22.94 20.54 39.66 42.01


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Explanation: From above table and graph it is very much clear that NBP are using

their deposit very efficiently. And earning high profits. The ratio has an upwardtrend, which shows the performance of NBP is very good. Now it is the retraction

from top management to invest 30% of its deposits. This may reduce its profits.

But can be fruitful in long term.

13.4.7 Debit to Equity Ratio:

This ration shows the amount contributed by creditors and shareholders. It shows

to what extent the firm is using borrowed money. It is computed simply dividing

the total debt of the fire by its shareholders equity. This calculated as.

Total debt/shareholders equity

Table9

Year 2003 2004 2005 2006 2007 2008 2009

Debt to equity ratio 32.42 31.4 30.4 20.9 22.7 28.6 24.5

From the table and graph it is clear that this ratio is decreasing which show the

high efficiency of NBP. In 2008 it was high but in 2009 it decreases to 24.5 from

28.6 which is a good sign. Here the creditors are interested in low ratio. The lower

the ratio the high the level of the fires financing that is being provided by the

shareholders.

5.4.8 Debt to assets ratio:

This ratio shows that to which extent the organization assets are financed by debit.

It is calculated as.

Total debt/total asset


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Table1

Year 2003 2004 2005 2006 2007 2008 2009

Debt to asset ratio 0.94 0.944 0.957 0.954 0.92 0.954 0.961

This ration is directly related to risk high ratio means high risk and low ratio

means low risk. From calculation it is clear that the ratio is decreasing which

show low risk. This ratio serves the similar purpose to the debt to equity ratio.

This ratio is high because of more deposits in the bank, and deposits are the

liability of customer on bank

13.4.9 Advances deposit Ratio:

This ratio show that how much efficiently the bank advances the deposits of their

customer to borrower.


Advances deposit ratio = Advances/ deposit

Table11

Year 2003 2004 2005 2006 2007 2008 2009

Advances deposits ratio 0.414 0.399 0.416 0.443 0.487 0.387 0.406

From above table and graph it is clear that the ratio is going high. Which means

the efficiency on NBP is good and they use their deposits efficiently in advancing

to borrowers. Here high ratio is required. The next side of the picture is that the

people will think that is risky to deposit the money in the bank.

13.4.10 Assets Turnover Ratio:


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The relationship of net sales /revenue to total assets is known as the total asset

turnover ratio. It is calculated as.

Total revenue / total assets

Table12

Year 2003 2004 2005 2006 2007 2008 2009

Assets turnover ratio 0.099 0.097 0.093 0.079 0.075 0.079 1.07

Explanation: This ratio shows us the relative efficiency with which a firm utilizes

its total assets to generate revenue. We can see that the ratio is going high and

which is a good sign and shows that NBP is utilizing its assets efficiently.

13.4.11 Price to earning Ratio:

This ratio show the relation ship b/w face price per share and earning per share.

This ratio is calculated as:

Price to earning ratio= face price of share/earning per share

Table13

Year 2003 2004 2005 2006 2007 2008 2009

Price to earning Ratio 2.4 2.7 47.62 3.17 3.25 1.6 0.97

As from the above calculations it is clear that the ratio decreased tremendously in

2009, it is because of the reason that earning per share increased resulting in

decreasing price to earning ratio. From calculation it is clear that it have a

downward slope. It is b/c of increase in earning per share.

13.4.12 Dividend yield:


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Anticipated annual dividend divided by the market price of the stock.


Dividend yield =Total dividend/ market price

Table14

Year 2003 2004 2005 2006 2007 2008 2009

Dividend Yield 0.2 0.1 2.3 3.32 1.63 2.45 0.23

Year 2006 was best as far as dividend yield is concerned; it was

mainly due to the decreased amount of number of shares outstanding. In year

2007 increase in outstanding shares decreased dividend yield, but due to increase

in total dividend in 2008 it has recovered to 2.45.

From the above table it is clear that the dividend is increasing but in 2009 it is

low. It is because of high market price and low dividend.

13.5 Predicting failure:

Where one wants to lend money to a company that is about to fail. The ability to

predict corporate failure before the event has been the holy grail of financial

analysis for move than 50 years. The collapse comes much unsaddled. One a

company will be successful and next year it will be fail. For this a tool is used

which is

Z=0.012A+ 0.014B + 0.033C + 0.006D = 0.010E

Where

D = capi


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Now Z score blow 1.8 was an indicator of probable failure, and a score of over 3

was seen as a clean bill of health the advantage of this approach is that using a

combination of several financial ratios makes it less likely that the result will be

affected by manipulation of financial statements.

If the portion of current asset is greater compared with total assets the healthier is

short-term position.

If the retained earnings is greater the greater is the extent of the companys self-

financing. The profit before tax and interest in the third ratio indicates the

contribution of a companys profitability toward the end index score. In fourth

ratio the investors view of the further potential of the company is set against total

debt. The last ratio shows the ability of the company to use its assets to generate

revere. Predicting failure of NBP - 2004.

Z = 0.012(.86) + 0.014(0.026) + 0.033(0.014) + 0.006(0.13) +0.010 (0.11)

= 0.010 + 0.0004 + 0.0005 + 0.0008 + 0.001 = 0.0129

This shows that the calculation is below 1.8 and it is an indicator of failure

13.6 Summation

We discussed in brief the financial analysis of NBP. Calculating various ratios,

interpretation of these ratios, and different tools and techniques is used in order to

arrive the conclusion.


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nbp by a saboor

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