Professional Documents
Culture Documents
SPECIALIZATION IN (BANKING&FINANCE)
SUBMITTED TO:
SUBMITTED BY:
Name Mujeeb Ur
Rehman
ACKNOWLEDGEMENT
I am highly grateful to almighty Allah who gave me the power to complete this report.
I am also highly thankful to my honorable teachers for theirs guidance. I am indebted
to all the employees of National Bank of Pakistan MAIN Branch Taunsa Sharif
Special thanks to “Mr. Saif Ullah Khan” OG#1 of National Bank of Pakistan main
Branch) And all other employees of the branch for their cooperation
TABLE OF CONTENTS
EXECUTIVE SUMMARY..................................................................................................................viii
CHAPTER NO 1......................................................................................................................................1
1 INTRODUCTION.................................................................................................................................1
1.1 Brief History of National Bank of Pakistan.................................................................................1
2
1.2 Business volume of National Bank of Pakistan...........................................................................3
1.3 Product Lines..................................................................................................................................8
1.3.1 Deposits.....................................................................................................................................8
1.3.2 Current Deposits.......................................................................................................................8
1.3.3 PLS Saving Deposits................................................................................................................9
1.3.4 Fixed Deposit Account (Time Deposits)................................................................................10
1.3.5 Foreign Currency Account....................................................................................................11
1.3.6 NBP Premium Aamdani........................................................................................................11
1.3.7 National Income Daily Account (NIDA)..............................................................................12
1.4 Advances................................................................................................................................13
1.5 NBP Advance Salary....................................................................................................................14
1.6 NBP Cash & Gold........................................................................................................................14
1.7 Students Loan Scheme.................................................................................................................15
1.8 NBP Karobar- President’s Rozgar Scheme...............................................................................15
1.9 Corporate Advances....................................................................................................................16
1.9.1 Cash Finance..........................................................................................................................16
1.9.2 Running Finance/ Overdraft...................................................................................................16
1.9.3 Demand Finance.....................................................................................................................16
1.10 Remittances.................................................................................................................................17
1.10.1 Demand Drafts.....................................................................................................................17
1.10.2 Travelers Cheques................................................................................................................17
1.11 Letter Of Credit.........................................................................................................................18
1.12 Foreign Remittances..................................................................................................................18
1.13 Swift System................................................................................................................................19
1.14 Mail Transfer..............................................................................................................................19
1.15 Telegraphic Transfer.................................................................................................................20
1.16 Pay Order....................................................................................................................................20
CHAPTER NO 2....................................................................................................................................21
2 Organizational Structures..................................................................................................................21
2.1 Organizational Structure of National Bank of Pakistan..........................................................21
2.2 Board of Directors........................................................................................................................21
2.3 Senior Management.....................................................................................................................24
2.4 Corporate & Investment Banking Group..................................................................................25
2.5 Compliance Group.......................................................................................................................27
2.6 Islamic Banking Group...............................................................................................................28
2.7 Treasury Management Group....................................................................................................29
2.8 credit management group...........................................................................................................30
3
2.9 Audit & Inspection Group..........................................................................................................30
2.9.1 Internal Audit..............................................................................................................................31
2.9.2 External Audit.............................................................................................................................32
2.9.3 Statutory Audit............................................................................................................................32
2.10 Human Resource Management & Administration Group.....................................................33
2.11 Overseas Coordination & Management Group......................................................................34
2.12 Commercial & Retail Banking Group.....................................................................................34
2.13 Special Assets Management Group..........................................................................................35
2.14 Employee Benefits, Disbursements & Trustee Division.........................................................36
2.15 Defined Benefit Plans.................................................................................................................36
2.15.1 Pension Scheme.........................................................................................................................36
2.15.2 Post retirement medical benefits...............................................................................................37
2.15.3 Benevolent scheme....................................................................................................................37
2.15.4 Gratuity scheme........................................................................................................................37
2.16 Provincial & Regional Management.......................................................................................37
2.17 Branch Management.................................................................................................................38
2.18 Hierarchy of National Bank of Pakistan.................................................................................38
2.19 Centralized Decision Making...................................................................................................39
2.19.1 Downward Communication......................................................................................................39
2.19.2 Chain of Command...................................................................................................................40
2.20 Departments of the Branch......................................................................................................40
2.20.1 Clearing House Department....................................................................................................41
2.20.1.2 Remittance Department..........................................................................................................43
2.20.2 Account Opening Department...............................................................................................44
2.20.3 Cash Department....................................................................................................................45
2.20.4 Deposits Department.................................................................................................................47
2.20.5 Accounts Department.............................................................................................................48
2.20.6 Bank Accounting Operations...................................................................................................49
2.20.7 Internal and External Reporting..............................................................................................52
Use of Electronic Data in Decision Making.........................................................................................52
CHAPTER NO 3....................................................................................................................................54
3 Information System Resources of NBP.............................................................................................54
3.1 People Resources..............................................................................................................................54
3.2 Hardware Resources........................................................................................................................54
3.3 Software Resources..........................................................................................................................54
3.4 Data Resources.................................................................................................................................55
3.5 Network Resources..........................................................................................................................55
4
3.6 Sources of Funds..............................................................................................................................55
3.7 Critical Analysis (Theory vs Practical)..........................................................................................62
3.8 Conclusion.........................................................................................................................................62
CHAPTER NO 4....................................................................................................................................63
4 FINANCIAL REPORTS....................................................................................................................63
4.1 Balance Sheet................................................................................................................................63
4.2 Income Statement.........................................................................................................................64
4.3 Financial Statements Analysis....................................................................................................65
4.3.1 Ratio Analysis............................................................................................................................66
4.3.1.1 Profitability Ratios.............................................................................................................67
4.3.1.2 Liquidity Ratios..................................................................................................................67
4.3.1.3 Debt Ratios.........................................................................................................................67
4.3.2 Horizontal Analysis...................................................................................................................71
4.3.3 Horizontal Analysis of Balance Sheet...................................................................................72
4.3.4 Horizontal Analysis of Income Statement.............................................................................73
4.3.5 Vertical Analysis.....................................................................................................................74
4.3.6 Vertical Analysis of Balance Sheet........................................................................................75
4.3.7 Vertical Analysis of Income Statement.................................................................................76
4.3.8 Bank Analysis with refernce to commercial Banks listed on stock exchange.............................77
CHAPTER NO 5....................................................................................................................................81
5.1 Future prospects of National Bank of Pakistan............................................................................81
5.2 Short falls/ Weaknesses of National Bank of Pakistan.................................................................82
5.3 Conclusions.......................................................................................................................................83
5.4 Recommendations............................................................................................................................84
References...............................................................................................................................................86
References
FIGURE TABLE
5
Table 1.1.....................................................................................................................................................3
Table 1.2.....................................................................................................................................................4
Table 1.3.....................................................................................................................................................4
Table 1.4.....................................................................................................................................................5
Table 1.5.....................................................................................................................................................6
Table 1.6.....................................................................................................................................................6
Table 1.7.....................................................................................................................................................7
Table 1.8...................................................................................................................................................13
Table 3.1..................................................................................................................................................56
Table 3.2..................................................................................................................................................56
Table 3.3..................................................................................................................................................57
Table 3.4..................................................................................................................................................58
Table 3.5..................................................................................................................................................59
Table 3.6..................................................................................................................................................59
Table 3.7..................................................................................................................................................60
Table 3.8..................................................................................................................................................61
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EXECUTIVE SUMMARY
In this internship report there are five major parts first part consist of introduction and
product lines of the organization and also discuss the business volume of the
organization. The second part of this report is organizational structures and discusses
the whole groups that are working in the organization and also describe decision
making power in this organization. Third part of the report is the resources of the
organization if the resources of the organization are fully utilized than no organization
go to failure and also describe the resources of funds. The fourth part of the report is
very important part that is analysis of financial reports and balance sheet and ratio
analysis of the organization. The last part consists of future prospect, strength,
weakness, conclusion and recommendation for the organization. In last all annexure
7
CHAPTER NO 1
1 INTRODUCTION
The history of National Bank of Pakistan is part of Pakistan’s struggle for economic
independence. National Bank of Pakistan was established on November 9, 1949 under
the National Bank of Pakistan Ordinance, 1949 in order to cope with the crisis
conditions which were developed after trade deadlock with India and devaluation of
Indian Rupee in 1949. Initially the Bank was established with the objective to extend
credit to the agriculture sector. The normal procedure of establishing a banking
company under the Companies Law was set aside and the Bank was established
through the promulgation of an Ordinance, due to the crisis situation that had
developed with regard to financing of jute trade. The Bank commenced its operations
from November 20, 1949 at six important jute centers in the then, East Pakistan and
directed its resources in financing of jute crop. The Bank’s Karachi and Lahore
offices were subsequently opened in December 1949. The National Bank of Pakistan
came forward to establish its offices in the Cotton growing areas and extended credit
facilities liberally in order to restore stability to the market. In 1951, the country was
once again faced with a crisis in the cotton trade when prices was crashed and touched
the lowest level since independence following the cessation of hostilities in Korea.
The bank in collaboration with the cotton board provided the necessary Credit
facilities to the trade and the crisis was tided over. The nature of responsibilities of
the Bank is different and unique from other banks/financial institutions. The Bank
acts as the agent to the State Bank of Pakistan for handling Provincial/Federal
Government Receipts and Payments on their behalf. The Bank has also played an
important role in financing the country’s growing trade, which has expanded through
the years as diversification took place.1
The National Bank of Pakistan has its headquarters in Karachi, Pakistan. The bank
operates 1249(2008) branches in Pakistan and 22(2008) overseas branches. Under a
trust Deed, the bank also provides services as trustee to National Investment Trust
(NIT) including safe custody of securities on behalf of NIT. The National Bank of
Pakistan has assets worth Rupees 737976.44 million on September 30, 2008.2
1
National Bank of Pakistan is today a progressive, efficient, and customer focused
institution. It has developed a wide range of consumer products, to enhance business
and cater to the different segments of society. Some schemes have been specifically
designed for the low to middle income segments of the population. These include
NBP Karobar, NBP Advance Salary, NBP Saibaan, NBP Kisan Dost, and NBP Cash
n Gold.
The National Bank of Pakistan has implemented special credit schemes like small
finance for agriculture, business and industries, administrator to Qarz-e-Hasna loans
to students, self employment scheme for unemployed persons, public transport
scheme. The Bank has expanded its range of products and services to include Shariah
Compliant Islamic Banking products. For the promotion of literature, NBP recently
initiated the Annual Awards for Excellence in Literature. NBP will confer annual
awards to the best books in Urdu and in all prominent regional languages published
during the defined period. Patronage from NBP would help creative work in the field
of literature. The Bank is also the largest sponsor of sports in Pakistan. It has provided
generously to philanthropic causes whenever the need arose.
It has taken various measures to facilitate overseas Pakistanis to send their remittances
in a convenient and efficient manner. In 2002 the Bank signed an agreement with
Western Union for expanding the base for documented remittances. More recently it
has started Electronic Home Remittances Project. This project introduces technology
based system to handle inward remittances efficiently, by ensuring that the Bank's
branches keep a track of the remittance received from abroad till its final receipt.
National Bank has earned recognition and numerous awards internationally. It has
been the recipient of The Bank of the Year 2001, 2002, 2004 and 2005 Award by The
Banker Magazine, the Best Foreign Exchange Bank –– Pakistan for 2004, 2005, 2006
and 2007, Global Finance, Best Emerging Market Bank from Pakistan for the year
2005, Global Finance, Kisan Time Awards – 2005 for NBP's services in the
agriculture field. It is listed amongst the Region's largest banks and also amongst the
1
largest banks in South Asia 2005, The Asian Banker. It has also been presented a
Recognition Award –– 2004 for having a Gender Sensitive Management by
WEBCOP AASHA besides other awards.3
TABLE 1.1
Rupees in
Millions
Year 2005 2006 2007 2008 2009
645,132,71
Total Assets 553,231,467 577,719,114 1 762,193,593 862,556,378
465,571,71 501,872,24
Deposits 7 463,426,602 3 591,907,435 726,464,825
316,110,40
Advances 220,794,075 268,838,779 6 340,677,100 475,243,431
Reserves 10,813,914 13,536,041 13,879,260 19,941,047 22,681,707
139,946,99
Investments 149,350,096 156,985,686 5 210,787,868 217,642,822
Horizontal Analysis
(%)
Total Assets 100 104 117 138 155.912386
Deposits 100 100 108 127 156.037147
Advances 100 122 143 154 215.242837
Reserves 100 125 128 146 209.745583
Investments 100 105 94 141 145.726603
The business volume of National Bank of Pakistan is stated in terms of total assets,
deposits, advances, reserves and investments. To analyze the trend in these items the
Horizontal analysis of each item is calculated.
TABLE 1.2
2
(Total Assets)
Analysis
The Total Assets of National Bank of Pakistan fluctuates during all years as they
show an increasing trend. The total assets are increased 4 % in 2005 and 17 % in
2006. The year 2007 represents second highest percentage on account of total assets
as it was increased to 38%. There was an increase of 48 % in 2008 as compare to base
year and 10% as compare to 2007.
TABLE 1.3
(Deposits and other Accounts)
A NALYSIS
The deposits and other accounts of National Bank of Pakistan show a mixed trend
during all years. In the year 2005, the deposits were increased very marginally, with
the year 2006 represents an increase of 8%. The deposits are increased 27% & 34% in
the years 2007 and 2008 respectively.
TABLE 1.4
(Advances)
A NALYSIS
The advances made by National Bank of Pakistan shows an increasing trend in all
years as compare to base year. This implies that National Bank of Pakistan is keener
to advance money to lenders. The advances were increased 22 % in the year 2005 and
43 % in 2006 as compare to base year. The year 2007 represents an increase of 54 %
1
and 2008 represents highest percentage among all years that is 87 % as compare to
base year.
TABLE 1.5
(Reserves)
A NALYSIS
The Banks’ reserves are banks' holdings of deposits in accounts with their central
bank plus currency that is physically held in bank vaults (vault cash). The reserves of
National Bank of Pakistan fluctuate during all years as they show an increasing trend.
The reserves are increased 25 %, 28 % & 46 % in the years 2005, 2006 & 2007
respectively. The year 2008 represents highest increasing percentage of 84% as
compare to base and previous years.
TABLE 1.6
(Investments)
A NALYSIS
The investments made by National Bank of Pakistan fluctuate during all years. There
was an increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in
investments. The year 2007 represents an increase of 41 %, highest among all years.
The investments are increased 14 % in 2008 as compare to base year; however
investments are decreased 27 % as compare to the year 2007.
2
TABLE 1.7
Number of Employees of National Bank of Pakistan
Permanent 13237
Temporary/ On Contractual basis 842
Bank's own staff strength at the end of the year 14079
Outsourced 2350
Total Staff Strength 16429
http://www.nbp.com.pk/nbp/About_Us/About_US.jsp
An employee may be defined as: "A person in the service of another under any
contract of hire, express or implied, oral or written, where the employer has the power
or right to control and direct the employee in the material details of how the work is to
be performed." 4An employee contributes labor and expertise to an endeavor.
Employees perform the discrete activity of economic production. Of the three factors
of production, employees usually provide the labour. Specifically, an employee is any
person hired by an employer to do a specific "job". In most modern economies, the
term employee refers to a specific defined relationship between an individual and a
corporation, which differs from those of customer, or client. The relationship between
National Bank of Pakistan and its employees is usually handled through the Human
Resource Management & Administration Group & Employees benefit disbursement
& trustee division. These groups handle the incorporation of new hires, and the
disbursement of any benefits which the employee may be entitled, or any grievances
that employee may have.
There are differing classifications of workers within National Bank of Pakistan, these
are:
• Permanent
• Temporary / On Contractual
• Outsourced
The Employees of National Bank of Pakistan are organizing into trade unions, which
represent most of the available work force in National Bank of Pakistan. These trade
Unions utilize their representative power to collectively bargain with the management
of bank in order to advance concerns and demands of their membership.
1
The most precise definition of product is anything capable of satisfying needs,
including tangible items, services and ideas. In marketing, a product is anything that
can be offered to a market that might satisfy a want or need. 5 Since 1575, the word
"product" has referred to anything produced. Since 1695, the word has referred to
"thing or things produced”. The economic or commercial meaning of product was
first used by political economist Adam Smith. In general usage, product may refer to a
single item or unit, a group of equivalent products, a grouping of goods or services, or
an industrial classification for the goods or services. The consumer banking products
include personal accounts, credit cards, loans, investment products, treasury products
and many more. The National Bank of Pakistan offering for sale several related
products individually, which is commonly known as product lining. A product line is
defined as “A group of products that are closely related because they function in a
similar manner, are sold to the same customer groups, are marketed through same
types of outlets, or fall within the given price ranges”.6 The followings are the main
consumer banking products of NBP.
1.3.1 DEPOSITS
The National Bank of Pakistan offers to their clients a variety of Deposit Schemes
with personalized services at competitive rates of interest. Any Pakistani citizen can
open his/her account for any deposit scheme at any of its Branches strategically
located throughout Pakistan. The Bank with its huge network of 1243 branches
garners savings from both the rich and the poor in urban as well as rural areas. Even a
poor farmer in a remote village, with his meager annual income, feels secure to safe
keep his minuscule savings in National Bank of Pakistan, Because National Bank of
Pakistan has a long heritage of trust and professional commitment.
3
documents along with initial deposit prescribed from time to time. Basic banking
accounts are opened for an individuals (single or joint) only whereas current accounts
are opened for individuals (single or joint) Charitable institution, provident and other
funds of benevolent nature of local bodies, autonomous corporations, companies,
associations, educational institutions, firms etc. and in all other cases where the
accounts are to opened under the order of a competent court of law. No profit is paid
on the balances of current/basic banking accounts. The bank is authorized to deduct
service charges (incidental charges) on current accounts levied through its half yearly
schedule of charges, in case the average balance falls below the minimum balance as
prescribed by the bank. No balance maintenance condition is applied on basic banking
account.
The silent features of profit and loss sharing and saving accounts of NBP are as
fallows
• These accounts can be opened by individuals in their own single or joint name.
The PLS savings account can also be opened for provident fund or other
benevolent funds of companies, firms, organizations, NGO’s and educational
institutions.
• PLS saving account can be opened with a minimum amount of Rs.500/- only
• To share in the profit a minimum balance of Rs.500/- must be maintained in
the account. The minimum balance on sixth and last of month will qualify for
the profits. The profits will be calculated on the basis of monthly minimum
2
balance for the periods of six months i.e. from January to June and July to
December
• The head office of NBP determines the profit or loss on PLS saving deposits
and advice its branches the rate and time of distribution of these profits.
• There shall be no restrictions on maintaining the maximum balance in PLS
saving account.
• On the first day of Ramzan each year the Zakat at the rate of 2.5% will be
deducted from these deposits on the balance of that day. But if depositors affix
an affidavit of Zakat deduction along with account opening form or he is a
non-Muslim, no Zakat will be deducted from his account.
• The PLS term deposit are opened for individuals in their own single or
joint names, companies firms and other organizations.
• The PLS term deposit receipt are issued for any amount. There is
minimum or maximum limit or deposits in a single term deposit account.
• PLS term depositors may be allowed some facilities against the security of
these receipt credits, after making “Lien” on the relevant receipt and
subject to recovery of service charges.
• Under term deposit scheme the depositors not cease to earn the profit
immediately, after the respective maturity date.
2
1.3.5 FOREIGN CURRENCY ACCOUNT
Government of Pakistan has introduced many important reforms in Foreign Exchange
Control in the country since February, 1990, for the purpose of strengthening the
Foreign Exchange Reserves. One of these reforms relates to foreign currency
accounts, which can be opened in United States Dollars, Pound Sterling, Euro and
Japanese Yen in any of the authorized branches of commercial banks throughout the
country.10 Foreign currency accounts are opened, on proper introduction and
submission of required documents along with an initial deposit prescribed from time
to time. Rates of return on foreign currency deposits are subject to fluctuation as
determined in accordance with State Bank of Pakistan directives and will be paid on
six monthly basis whereas the return on term deposit/SNTD will be paid on maturity
or as prescribed by SBP. The bank shall have no responsibility for or liability to the
account holders for any diminution due to taxes imposed or depreciation in the value
of funds credited to the account whether due to devaluation or fluctuation in the
exchange rate or other wise.
Period Profit
Rates
1st year 7.50%
2nd years 8.50%
3rd years 9.50%
4th years 10.50%
5th years 11%
1.3.7 NATIONAL INCOME DAILY ACCOUNT (NIDA)
The scheme of National income daily account was launched in December 1995 to
attract corporate customers. It is a current account scheme and is part of the profit
and loss system of accounts in operation throughout the country. Deposits in the
NIDA accepted on the condition that the depositor shall always maintain a minimum
balance as prescribed by the bank in his account. In the event however, that any
depositor wishes to withdraw the amount and the balance in his account is less than
1
the required amount, the account will be converted to the ordinary PLS SB account
for the purpose of calculating profit. An example of how the NIDA accounts are
maintained is shown on the next page.
• From Rs50/- million but less than Rs 500/-million, the rate is 1.5%.
S ALIENT F EATURES
(NIDA 1)
1.4 ADVANCES
National Bank of Pakistan plays a pivotal role in translating the government's
development plans in terms of growth in industrial, commercial and agricultural
sectors in Pakistan. Accordingly the Bank has formulated its Credit Policy under the
guidelines of SBP-the Central Bank of Pakistan.
Table 1.9
1
1.6 NBP CASH & GOLD
With NBP’s Cash & Gold, the customers meet their need for ready cash against their
idle gold jewelry. The rate of mark up is 13% p.a. This product has following
features13
Pursuant to the announcement made by the Federal Finance Minister in his 2001-
2002 budget speech, a Student Loan Scheme (SLS) for Education was launched by
the Government of Pakistan in collaboration with major commercial banks of
Pakistan (NBP, HBL, UBL, MCB and ABL). Under the Scheme, financial assistance
is provided by way of Interest Free Loans to the meritorious students who have
financial constraints for pursuing their studies in Scientific, Technical and
Professional education within Pakistan. The Scheme is being administered by a high
powered committee comprising Deputy Governor, State Bank of Pakistan, Presidents
of the commercial banks and representative of Ministry of Finance, Government of
Pakistan. 14
1
15% down payment will include 1st year’s asset insurance premium. However, the
cost of life and disability insurance will be borne by GOP. The mark-up rate for the
1st year will be 12% and for the subsequent years it will be 1 year KIBOR + 2%. Fifty
percent (50%) of this rate will be paid by the customer i.e. 6% and the balance of 6%
will be borne by GOP. Additionally, first 10% of the losses under the scheme will be
taken-up by GOP. Initially, under the President’s Rozgar scheme, NBP will offer
following products:
• NBP Karobar Utility Store (under a Franchise with Utility Stores Corporation)
• NBP Karobar Mobile General Store (without USC Franchise)
• NBP Karobar Transport
• NBP Karobar PCO
2
against him. The main difference between a cash finance and overdraft lies in the fact
that cash finance is a bank finance used for long term by commercial and industrial
concern on regular basis, while an overdraft is a temporary accommodation
occasionally resorted
The amount of loan is placed at the borrower’s disposal in lump sum for the period
agreed upon, and the borrowing customer has to pay interest on the entire amount.
Thus the borrower gets a fixed amount of money for his use, while the banker feels
satisfied in lending money in fixed amounts for definite short periods against a
satisfactory security.
1.10 REMITTANCES
“ Where any draft, that is, an order to pay money, drawn by one office of bank upon
another office of the same bank for a sum of money payable to order on demand,
purports to be issued by or on behalf of the payee, the bank is discharged by payment
in due course”.
Banker’s drafts payable to order on demand are within the protection of Sections 10
and 131-A of the Negotiable Instruments Act. However, if a demand draft drawn on a
bank by its own branch bears a forged endorsement, the person in possession of it
cannot compel that bank to pay it. As far as possible the banker’s draft should be
crossed and it should never be drawn payable to bearer.
2
purchaser or by those persons who have been duly authorized to act on his behalf.
When a customer requests his banker to provide him with a banker’s draft, the amount
of which is to be debited to his account, he should enclose with his written request a
cheque covering the amount of the required draft and other charges etc. payable to
banker.15
The National Bank of Pakistan provides demand drafts at very reasonable rates with
safety, speedy and reliable way to transfer money. Any person whether an account
holder of the bank or not, can purchase a Demand Draft form a bank.
The National Bank of Pakistan provides their services for traveler’s cheque at very
reasonable and competitive rates. It has following features
2
of letter of credit such as Revolving credit, Back to Back credit, Claused credit etc.17
NBP is committed to offering its business customers the widest range of options in the
area of money transfer. If you are a commercial enterprise then our Letter of Credit
service is just what you are looking for. With competitive rates, security, and ease of
transaction, NBP Letters of Credit are the best way to do your business transactions.
2
1.14 MAIL TRANSFER
A Mail Transfer is a form of remittance in which the amount remitted by a customer
or a non-customer is directly credited to the account of the beneficiary with another
branch. Move your money safely and quickly using NBP Mail Transfer service. And
NBP also offer the most competitive rates in the market. They charges Rs 50/-
exchange rate and RS 75/- postage charges on issuing mail transfer. When the money
is not required immediately, the remittances can also be made by mail transfer (MT).
Here the selling office of the bank sends instructions in writing by mail to the paying
bank for the payment of a specified amount of money. Debiting to the buyer’s account
at the selling office and crediting to the recipient’s account at the paying bank make
the payment under this transfer. NBP taxes mail charges from the applicant where no
excise duty is charged. Postage charges on mail transfer are actual minimum Rs. 40/-
if sent by registered post locally Rs.40/- if sent by registered post inland on party’s
request.
1
CHAPTER NO 2
2 ORGANIZATIONAL STRUCTURES
The Organization Structure (Annexed I) shows the internal operations and reporting
lines of the National Bank of Pakistan. The bank has clearly defined organizational
structure, which supports clear lines of communications and reporting relationships.
There exists a properly defined financial and administrative power of various
committees and key management personnel, which supports delegations of authority
and accountability.
The internal operations of the Bank are organized into 15 main departments and
divisions headed by senior management of the bank and are report directly to the
Board of Directors. The organizational structure of National Bank of Pakistan is
centralized because all the decisions of the bank are taken by the top Management.
The National Bank of Pakistan’s Departmental key roles and functions are as follows:
3
1. The Board of Directors shall assume its role independent of the influence of
the Management and should know its responsibilities and powers in clear
terms. it should be ensured that the Board of Directors focus on policy making
and general direction, oversight and supervision of the affairs and business of
the Bank and does not play any role in the day-to-day operations, as that is the
role of the Management.
2. The Board shall approve and monitor the objectives, strategies and overall
business plans of the institution and shall oversee that the affairs of the
institution are carried out prudently within the framework of existing laws &
regulations and high business ethics.
3. All the members of the Board should undertake and fulfill their duties &
responsibilities keeping in view their legal obligations under all the applicable
laws and regulations.
4. The Board shall clearly define the authorities and key responsibilities of both
the Directors and the Senior Management without delegating its policy-
making powers to the Management and shall ensure that the Management is
in the hands of qualified personnel.
5. The Board shall approve and ensure implementation of policies, including but
not limited to, in areas of Risk Management, Credit, Treasury & Investment,
Internal Control System and Audit, IT Security, Human Resource,
Expenditure, Accounting & Disclosure, and any other operational area which
the Board may deem appropriate from time to time. The Board shall also be
responsible to review and update policies periodically and whenever
circumstances justify.
6. As regards Internal Audit or Internal Control, a separate department shall be
created which shall be manned preferably by professionals responsible to
conduct audit of the Bank, Various Divisions, Offices, and Units Branches
etc. The Head of this department will report directly to the BOD or Board
Committee on Internal Audit.
7. The business conditions and markets are ever changing and so are their
requirements. The Board, therefore, is required to ensure existence of an
effective ‘Management Information system’ to remain fully informed of the
activities, operating performance and financial condition of the institution, the
environment in which it operates, the various risks it is exposed to and to
evaluate performance of the Management at regular intervals.
1
8. The Board should meet frequently (preferably on monthly basis, but in any
event, not less than once every quarter) and the individual directors of an
institution should attend at least half of the meetings held in a financial year.
The Board should ensure that it receives sufficient information from
Management on the agenda items well in advance of each meeting to enable it
to effectively participate in and contribute to each meeting.
9. The Board should carry out its responsibilities in such a way that the external
auditors and supervisors can see and form judgment on the quality of Board’s
work and its contributions through proper and detailed minutes of the
deliberations held and decisions taken during the Board meetings.
10. To share the load of activities, the Board may form specialized committees
with well-defined objectives, authorities and tenure. These committees,
preferably comprising of ‘Non- Executive’ Board members, shall oversee
areas like audit, risk management, credit, recruitment, compensation etc. these
committees of the Board should neither indulge in day-to-day
affairs/operations of the bank and enjoy any credit approval authority for
transaction/limits. These committees should apprise the Board of their
activities and achievements on regular basis.
11. The Board should ensure that it receives management letter from the external
auditors without delay. It should also be ensured that appropriate action is
taken in consultation with the Audit Committee of the Board to deal with
control or other weaknesses identified in the management letter. A copy of
that letter should be submitted to the State Bank of Pakistan so that it can
monitor follow-up actions.
The Following table mentioned the names & designation of Board of
Directors of National Bank of Pakistan:
Name Designation
Syed Ali Raza Chairman & President
Mr. Sikandar Hayat Jamali Director
Mian Kausar Hameed Director
Mr. Ibrar A. Mumtaz Director
Mr. Tariq
Kirmani Director
Mr. Muhammad Arshad Chaudhry Director
Mr. Mohammad Ayub Khan Tarin Director
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Mr. Ekhlaq Secretary Board of
Ahmed Directors
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Name Group Name & Designation
SEVP & Group Chief, Corporate & Investment Banking
Masood Karim Shaikh Group
SEVP & Group Chief, Credit Management
Shahid Anwar Khan Group
Dr. Asif A. Brohi SEVP & Group Chief, Operations Group
SEVP & Group Chief, Audit & Inspection
Imam Bakhsh Baloch Group
Ziaullah Khan SEVP & Group Chief, Compliance Group
SEVP & Group Chief, Human Resources Management & Administration
Dr. Mirza Abrar Baig Group
SEVP & Group Chief, Commercial & Retail Banking
Amer Siddiqui Group
Muhammad Nusrat SEVP & Group Chief, Treasury Management
Vohra Group
Amim Akhtar EVP & PSO to the President
EVP & Secretary Board of
Ekhlaq Ahmed Directors
Tajammal Hussain Bokharee EVP/Divisional Head, Special Assets Management Group
EVP & Divisional Head Employee Benefits, Disbursements & Trustee
Mrs. Khurshid Maqsood Ali Division
Tahir Yaqoob EVP & Group Chief, Overseas Coordination & Management Group
Anwar Ahmed Meenai EVP & Divisional Head, Islamic Banking
Naeem
Syed EVP & Head, Core Banking Application, PMO
Aamir Financial Controller & Divisional Head, Financial Control
Sattar Division
Group Chief (A), Information Technology
Atif Hassan Khan Group
The corporate & investment banking group is headed by Mr. Masood Karim Shaikh.
This group performs its function through its following two units:
• Corporate Banking
• Investment Banking
The corporate and investment banking will continue to play a major role in loan
syndications, structured financing and debt / capital raising transactions with the
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objective of providing entire range of corporate and investment banking solutions to
its valued clients under one umbrella.
The Corporate Banking Group achieved excellent results in 2007 with a number of
landmark transactions in cement, energy, communication and fertilizer sectors. In
addition to the funded income, our corporate and investment banking has substantially
increased its fee base income this year by being the lead advisor in a number of
transactions in the corporate world of Pakistan
The challenges to corporate business in year 2007 were manifold including reduction
in Private Credit Investment as a result of slowing down of economy as well as rising
interest rates. The increasing pressure on the textile industry reduced the lending to
this sector. In addition the bank's corporate loans yields also faced pressure as
substitute form of funding sources are available in the market in form of Islamic
financing, mutual funds, issuance of debt instruments like TFCs and Bonds and the
Capital markets.
Despite these threats and challenges at NBP, our corporate team not only increased
the volume as well as the yield of the loans they also maintained a strong franchise
with the leading Pakistani corporate so as to ensure that NBP not only maintains its
market share but is in a position to meet any challenges in future. NBP during the year
also participated in a number of TFC issues and mutual funds subscriptions thereby
increasing the overall yield on investment portfolio.
NBP has the largest equity portfolio in the banking sector primarily due to 27%
holding in NIT units, the largest mutual fund in Pakistan. During the year 2008 the
bank redeemed 10% of its NIT holding covered under LoC, which resulted in capital
gain of Rs. 1.8 billion in 2008.
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Banking with a presence in all major locations through out the country, offering full
range of Banking products / services and one window interface through designated
Relationship Managers. Corporate Banking offers tailor made products / solutions as
required by corporate customers which includes:
• Funded facilities, ranging from short to medium and long term lending
• Trade related financing.
• Foreign currency financing.
• All sorts of non-funded facilities / services which include Cash receipts /
payments, Remittances, Collections, guarantees, letter of credit etc.
• Customized products / solutions
The Compliance Group of National Bank of Pakistan is headed by Mr. Ziaullah Khan
and is report directly to the President/ Chief executive of NBP. In order to keep the
working of Audit Department aligned with the best international practices
'Compliance Group’ has been created. This group is responsible for monitoring
compliance of various administrative / operative instructions, rules, and regulations by
constantly reviewing and reporting status of compliance and non-compliance. The
Compliance Group of NBP is set to ensure that all relevant laws are complied with, in
letter and spirit, and, thus, minimize legal and regulatory risks. The Compliance
officers will primarily be responsible for Bank’s effective compliance relating to:
• Relevant provisions of existing laws and regulations.
• Guidelines for KYC.
• Anti money laundering laws and regulations.
• Timely submission of accurate data / returns to regulator and other agencies.
• Monitor and report suspicious transactions to President / Chief Executive
Officer of the bank and other related agencies.
• The Compliance Officers will serve as a contact point between President
/Chief executive officers and senior management, with regard to functioning
of compliance program provide assistance in this area to branches and other
departments of the bank, and act as liaison with State Bank of Pakistan
concerning the issues related to compliance.
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The functions of compliance group of National Bank of Pakistan are as fallows:
• Study and emphasize compliance of best international practices in audit of
various functions of NBP.
• Monitor compliance of Administrative/Operational Instructions, Rules,
Regulations issued from time to time by the Management.
• Review over the compliance carried out by the audit departments.
• Prepare and put up a consolidated Report to the Directors of National Bank of
Pakistan regarding the status of compliance and non-compliance of the
recommendations agreed by the Departmental Management.
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• Letter of Credit Facility
• Handling of Remittances
• Issuance of Bank Drafts and Pay Orders.
• Collection of Export Bills.
• Collection of Local Bills.
• Government Collections
• Utility Bills Collection
The group chief of Credit Management Group is Mr. Shahid Anwar Khan. This group
usually deals with Bank’s allocations of payments or cash application, internal fund
movements, reconciliations and also maintaining positive working relationships with
customer during the debt collection or credit review and approval process, screening
of customers and only those who is credit worthy are allowed to do business. The
divisions of this group are distributed according to different areas which are:
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1) NWFP Azad Kashmir Sind & Baluchistan area wing
2) Karachi area wing
3) Special Credit Cell & Punjab area Wing
The functions of this department include:
• Enforcing the State Policies, financial regulations, and credit rules of the bank
• Framing credit policies and regulations; supervising the staff to execute orders
• Putting forward the proposal of credit management and development; guiding
and supervising the branch-banks to deal with credit business
• Managing the authorized business; dealing with the legal affairs consulted and
coordinated
• Establishing development rules on credit; dealing with the acceptance draft;
estimating the loaning accounts
• Responsible for reporting the credit statistic statement
• Responsible for training client managers
• Responsible for dealing with other work according to the directors of the bank
• Responsible for the credit-registered consulting system; regulating the five-
graded loans
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efficient and effective Internal Control System is in place by identifying control
objectives, reviewing existing procedures and policies and ensuing that control
procedure and policies are amended for time to time wherever required. However,
Internal Control System is designed to manage rather than eliminate the risk of failure
to achieve objectives and provide reasonable but not absolute assurance against
material misstatement or loss.20 The audit system of National Bank of Pakistan
consists of following:
a) Internal Audit
b) External Audit
c) Statutory Audit
The Bank has an independent Internal Audit Group that conducts audit of all
Branches, Regions and Groups at Head Office on an on-going basis to evaluate the
efficiency and effectiveness of Internal Control System. In addition to that,
Compliance Group is also in place with independent Compliance Officer in 119
Branches and 29 Regional Compliance Chiefs with supporting staff to take care of
compliance related issues to strengthen the control environment.21
For the purpose of inspection the National Bank of Pakistan inspects its branches
through inspectors. Inspections are conducted on regular basis in the branches. The
current chairmen of audit committee of NBP are Azam Faruque, Ibrar. A. Mumtaz &
Mian Kausar Hameed. The State Bank of Pakistan conducts the regular full scope
examination of banks pursuant to an inspection schedule; however, flexibility exists in
policy for frequency of inspections depending upon the need to maintain safety &
soundness. The CAMELS (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity and System & Controls) rating is a criteria to determine the frequency of
inspection of banks as weak institutions are given greater attention. Special
investigations (targeted inspections) are also conducted as and when circumstances so
warrant on the basis of complaints or market reports about specific institution.
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2.9.3 STATUTORY AUDIT
The statutory audit of National Bank of Pakistan is conducted to meet the particular
requirements of State Bank of Pakistan. The scope and audit programs are set by the
State Bank of Pakistan. The National Bank of Pakistan has to pay a penalty of
Rs.20000 for each mistake in the Books and procedures as prescribed by the law plus
surcharge of per day from the date of mistake to the date of statutory audit.
The functions of Audit & inspection group of National Bank of Pakistan are as
fallows:
The group chief of Human resource management & administration group is Mr. Dr.
Mirza Abrar Baig. This Division is responsible for fresh induction of employees and
other professionals through a rigorous induction process in order to ensure presence of
quality professionals. Following units and areas of work are the part of this division.
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This group is responsible to develop annual manpower plan for National Bank of
Pakistan, conduct job analysis, prepare job descriptions, and conduct job evaluation
process. The other functions of this group include attracting, selecting and recruiting
the right people from the market. The group firmly works on adopting latest
organizational theories & change management processes to bring in efficiency. This
group also performs following functions:
• Deals from placing job advertisements to timely recruitment of competent
personnel by using modern selection techniques.
• Systematically observes & measures employee’s/candidate’s performance for
the purpose of recruitment, selection and promotions.
• Facilitates in establishing successful productive working relationships through
effectively orienting new employees to their respective departments/divisions
and to their positions.
• Encourages employees to seek promotion/transfers to fill internal openings
and meet employees’ personal objectives.
• Foster a culture of acknowledgement and appreciation amongst employees for
introducing innovative business practices, showing extra ordinary efforts for
achievement of goals and enhancing Bank’s corporate image uses various
methods of recognition ranging from simple “Thank you” letters to elaborate
celebrations and monetary rewards.
• Conducting motivation surveys and developing market based employee
satisfaction & retention strategies.
• Conduction of evaluation of positions and grades to ascertain employees’
position in the grade structure.
• This Group supervises all the staff colleges, at Karachi, Islamabad, Lahore and
Peshawar.
The group chief of NBP’s overseas coordination & management group is Mr. Tahir
Yaqoob. This department is in charge of the management and operation of foreign
exchange business including marketing and operating of the financial products and
trade financing of foreign exchange in the light of National foreign exchange
management policy, and is the governing department of foreign exchange. The
functions of this group are as follows:
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• Establishing marketing strategy, policy and management system of foreign
exchange.
• Making annual operating and working plan.
• Selecting and opening overseas account under supervision, and establishing
and harmonizing the business among agent banks.
• Corresponding and dealing with foreign exchange business among branches.
• Showing business requirement of costumers and development of new
products; publicizing foreign exchange business; training managers of
customer-service for foreign exchange business.
The National Bank of Pakistan plan to establish commercial centers across the
country looking at the business potential in the area, size of the branch and its
capabilities to deliver the desired service in order to attract quality customers. The
objective is to target the untapped sectors and provide them professional quality
service, through one window operations and Relationship Managers stationed at those
centers. We expect and hope to reduce the turn around time and become more
competitive and market oriented. Further this customer friendly and dedicated set up
at convenient locations would help in improving the image of the Bank as well. These
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Centers would work in conjunction with the existing set–up of Commercial Lending
done throughout the NBP branch network. The main purpose of these centers is to
generate ancillary business in addition to funded and non-funded facilities, with quick
turn around time in decisions for customer satisfaction.
The group chief of Special assets management group is Mr. Tajammal Hussain
Bokharee. The Special Asset Management Group (SAMG) is a group of people with
specialized skills in managing the "stressed" assets of National Bank of Pakistan. The
group was created with a view to enable restructuring and recoveries through various
initiatives like innovative work-outs, merger & acquisition strategies, asset stripping,
security enhancements and structured sell-downs. The group has also been working
with / advising various governmental and regulatory bodies in evolving a framework
for implementing international best practices like asset reconstruction companies in
the country.
With provision coverage of 84% we believe that going forward our Special Assets
Management Group will make major contribution towards the Bank's profitability
through recoveries and reversal of provision charge as a result of declassification /
rescheduling. We have revamped our special assets management business and have
coordinated our efforts to expedite recoveries and settlements.
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Along with estate settlement, this department also provides a number of other agency
services, such as functioning as the trustee of record for corporate bonds or
administering a pension or profit sharing plan. As a means of ensuring that the
resources of the bank safely protect the investments involved, the department makes it
relatively easy for the client to deal with other matters. Thus, the investor can focus
more on family or other business matters, and be less involved in the task of
protecting assets that are already established and set on a path of consistent growth.
The bank operates defined benefit approved funded pension scheme for its eligible
employees. The bank’s costs are determined based on actuarial valuation carried out
using Projected Unit Credit Method. Net cumulative un-recognized actuarial
gains/losses relating to previous reporting period in excess of the highest of 10% of
present value of defined benefit obligation or 10% of the fair value of plan assets are
recognized as income or expense over the estimated working lives of the employees.
Where the fair value of plan assets exceeds the present value of defined benefit
obligation together with unrecognized actuarial gains or losses and unrecognized past
service cost, the bank reduces the resulting asset to an amount equal to the total of
present value of any economic benefit in the form of reduction in future contributions
to the plan and unrecognized actuarial losses and past service costs.
The bank operates an un-funded defined post retirement medical benefits scheme for
all of its employees. Provision is made in the financial statements for the benefit
based on actuarial valuation carried out using the Projected Unit Credit Method.
Actuarial gains/losses are accounted for in a manner similar to the pension scheme.
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The bank also operates an un-funded defined benefit gratuity scheme for its eligible
contractual employees. Provision is made in the financial statements based on the
actuarial valuation using the Projected Unit Credit Method. Actuarial gains/losses are
accounted for in a manner similar to pension scheme.
There are four executives of National Bank of Pakistan to supervise the Bank’s maters
of every province, as they are called Provincial Chiefs. These provincial chiefs are
responsible for the entire banking operations in their respective provinces. The
provincial management includes:
• The Provincial Chief Punjab
• The Provincial Chief Sind
• The Provincial Chief Baluchistan
• The Provincial Chief N.W.FP & Kashmir
These provinces are sub-divided into regions, the regions are controlled and manage
by Regional heads, which are responsible for the supervision in their circles and deal
with the problems of their respective Regions. The regional management of National
Bank of Pakistan is divided into two areas which are:
• Overseas
• Countrywide
The overseas regions include Middle East, Far East, Europe & USA, and Central
Asia. The country has been divided into 29 regions by National Bank of Pakistan to
facilitate its functions. The detail about National Bank of Pakistan’s regions is shown
as Annexed-II at the end of the report. These regions are sub divided into Zones, the
in charge of a Zone is called Zonal Chief.
The National Bank of Pakistan, in order to facilitate its functions on branch level
appoints Branch Managers & other staff according to branch’s activities and volume
of business. The branch managers are responsible for all functions and staff within the
branch office. The job of branch managers is to take charge of the entire operation of
his branch, making sure that everything runs smoothly. The other functions involves
scheduling of employee work hours, overseeing training, hiring and firing, assuring
that proper procedures are followed, and reporting to upper management any
problems or providing reports and updates as required by bank’s protocol.
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2.18 HIERARCHY OF NATIONAL BANK OF PAKISTAN
The Hierarchy (An arrangement of objects, people, elements, values, grades, orders,
classes etc., any system of persons or things ranked one above another) of National
Bank of Pakistan is shown as Annexed III at the end of this report. The hierarchy may
include:
The Branch Manager of National Bank of Pakistan is responsible for all the affairs of
the Bank. All the decisions relating to Branch are made by him and the subordinates
have to obey these decisions. All the employees of the Bank are report directly to the
Branch Manager. The branch has two operation Managers. Operation Manager I
controls Clearing house & Remittance Department and Operation Manager II controls
Deposits, Advance & Branch accounts department. Both of them are report directly to
the Manager regarding affairs of their departments. The Chief Accountant controls
Accounts department & is report directly to branch Manager. The branch also has two
cashiers responsible for cash & Pension disbursement department reports directly to
branch Manger. The BBO (Branch Back Office System) Operator controls computer
department of the branch and is report directly to Operation Manager I and Branch
Manager.
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2.19.1 DOWNWARD COMMUNICATION
• Operation Manager I
• Operation Manager II
• BBO ( Branch Back Office System) Operator
• Chief Accountant
• Cashier I
• Cashier II
• Clerk I
• Clerk II
• Non Clerical Staff
The chain of command is an unbroken line of authority that links all persons in an
organization and shows who reports to whom. By analyzing the organizational
structure of the National Bank of Pakistan Rawat branch it can be found that there is a
scalar principle followed with in the branch because each and every employee of the
branch knows to whom they can report. The authority and responsibility for different
tasks and duties are different, as well as every one knows the successive levels of
management all the way to the top
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2. Remittance Department
3. Computer Department
4. Deposits Department
5. Advances Department
6. Account Opening Department
7. Accounts Department
8. Cash Department
9. Pension Disbursement Department
As part of their daily business activity, banks receive cheques and other financial
instruments from their customers drawn on other banks, to be collected and credited
to their accounts. Similarly, banks receive cheques/instruments from other banks,
deposited by customers of the banks drawn on the customers of the drawee banks.
Therefore, the banks act as Collecting Banks when they send cheques/instruments for
collection and as paying Banks, when they receive cheques/instruments for collection
from other banks. Since each bank receive and sends cheques/instruments for
collection to and from an number of banks, the process of settlement would clearly be
very cumbersome and time consuming if every cheques/instrument had to be sent by
the collection bank to each of the drawee banks or branch upon which different
collection items are drawn and to individually pay the proceeds to each of the bank
sending cheques/instrument in for collection. Therefore, the banks have evolved what
is called the Bankers Clearing arrangement.
The Clearing System enables cheques to be paid or cleared centrally and settlement
made for receivables and payables between the banks. The SBP co-ordinates clearing
activity through its offices, called the Clearing Houses, set up in big cities and towns.
Where SBP does not maintain its own office, some other bank, usually National Bank
of Pakistan (NBP) performs this function. But the clearing house facility is available
only for cheques/instruments drawn on banks situated within the same city/clearing
house area.
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2.20.1.1 W ORKING OF THE C LEARING P ROCESS
Under the clearing arrangements, the State Bank of Pakistan (SBP) offers a Clearing
House or a centralized exchange facility, which works on the following general lines:
• All the banks operating in a city who are members of the Clearing House
maintain an account with the SBP’s Clearing House.
• Every day representatives of all the banks in every city meet the Clearing
House, first meeting in the morning, at an appointed time, for the purpose of
depositing their own customers , cheques/instruments to be collected from
other banks and receiving cheques/instrument drawn on their account holders
from the others banks.
• At the Clearing House accounts of all the banks are debited by the total
amount of cheques/instruments drawn on their customer’s accounts and
credited with the amount of their customer’s cheques/instruments drawn on
other banks, as per the list of cheques submitted by each bank.
• The cheques/instruments received, also called Inward Clearing, and are taking
back by each bank to its bank/branch. The amounts of each
cheques/instrument is debited or recovered from each drawee customers’
account and credited to the Clearing House account. Similarly, against the
amount credited by the Clearing House as Outward Clearing, the appropriate
customers’ accounts are credited and clearing House account is debited.
• Any cheques/instruments received by a bank that cannot be paid, due to
insufficient balance in its customer’s account or for any other reason, are
returned back to the Clearing House and a credit is claimed and obtained there
against.
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• Each bank is required to maintain sufficient funds in the principal account
with SBP to meet the payment obligations.
• The State Bank of Pakistan debit the account of each member of the
clearinghouse with the proportionate working expenses incurred on the
operation of clearing house. These expenses are very nominal.
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The Remittance department deals with the transfer of money from one place to
another. Funds transfer facility or remittance of funds is on of the key functions of the
banks all over the world. Remittances through banking channels save time, costs less
and eliminate the risks involved in physical transportation of money from one place to
another. National Bank of Pakistan transfers money in the following ways.
• Pay Order
• Demand Draft
• Mail Transfer
• Telegraphic Transfer
• Pay Slip
• Call Deposit Receipt
• Letter of Credit
• Traveler’s Cheque
The Job responsibilities & requirements of remittance department include:
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Pakistan. The bank officer tactfully obtains information about character, integrity,
responsibility, occupation and the nature of business of the perspective customer. Any
individual, who has attained the age of majority and is of sound mind can open and
maintain his/her account. Two or more individuals may open an account jointly.
Similarly, business organizations such as sole proprietary concerns, partnership firms,
and limited liability companies as well as non-profit organizations like clubs, trusts,
societies, associations and NGO’s etc, may open their accounts. The documents
required for National Bank of Pakistan’s Account opening are showed as Annexed
VII at the end of this report.
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All physical movement of cash in the bank is made through the cash department. As
bank is borrowing and lending institution, therefore cash is the top most priority of
Bank. Another aspect is that cash department is for the security purpose, security in a
sense that there should be no embezzlement of funds or in money leaded to bank by
any party or person. The efficiency of bank is also related to this department the more
efficient the bank is the stronger and busy is the cash department. Cash department
perform following functions
Cash department owes its important to the fact that it is a major point of contract
between the bank and the customer, the bank’s most valued relationships. This
department is the showcase of the bank and conveys the first impressions about the
bank’s commitment to professionalism in its systems and procedures and to courteous
and efficient customer service.
• Collection of funds
• Acceptance of deposits
• Collection of utility bills
• Payment of checks
• Remittances
• Act according to any standing instructions
• Transfer of funds from one account to another
• Verification of signatures
• Posting
• Handling of Prize bond
The two main activities of cash department are as fallows:
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When the customer draws a cheque on the bank to pay a certain amount then BBO
Operator will debit the customer’s account that shows reduction in his account
balance.
R ECEIVING O F C HEQUES
The cash is paid against the cheques of the client. The following points are important.
• Cheque is drawn on same branch
• Cheque is not post dated.
• Amount in words and figure are same.
• It should be bearer cheques so the word bearer should not cross.
V ERIFICATION OF S IGNATURE
After receiving the cheques the cheques the operation manager verify the signature of
the account holder and the signature on the cheques. If the signature is not same it is
returned back otherwise forward to BBO Operator for posting.
P AYMENT O F C ASH
After posting the cheque the operation manager cancelled the cheque and returned
back to cashier. The cashier enters the cheque in cash paid registered and pays against
the second signature of receiver on the back of the cheque.
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The National Bank of Pakistan offer different deposit schemes to its customers,
which includes the following:
• Current Deposits
• PLS Saving Deposits
• Fixed Deposit Account ( Time Deposits)
• Foreign Currency Account
• NBP Premium Aamdani
• Foreign Currency Account
• National Income Daily Account (NIDA)
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• End of Day register
• Posting National Income Daily Account (NIDA)
• Monthly return register
• Charges A/c register
• P-L-S Profit list
• Weekly Telegram
• Mail Transfer Register
• Government Scroll
• Provident file
• Government Scroll Debit & Credit
• Transfer Responding Advice Dispatched Register-F15
• Cash Remittance IN
• Cash Remittance OUT
• NBP General Account
• Utilities register
• Statement of affairs
• Closing entries
• Daily activity checking
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The most important record keeping and report generated by Bank’s Accounts
Department is Statement of the Bank. The statement of the bank shows the general, or
control, accounts of the bank, and the various books of the bank show the detail of
these items. It would not be impossible, but it would be entirely impractical, to enter
every figure directly on the statement of condition. Instead of total deposits, the
balance of each depositor would appear opposite his name. On the other side, instead
of loans and discounts, there would be an itemized list of the loans with the names of
the borrowers. The first principle in bank accounting, as in all other bookkeeping, is
that for every debit there must be a credit, and vice-versa. In accordance with this
fundamental theory the books are maintained. With respect to the statement, every
Rupee of liabilities is accounted for by another Rupee of resources. Similarly each
accounts at the end of the day for each item of cash is balanced. Each bank employee
has had the experience of remaining at his desk until a late hour at night checking up
his day's work searching for a difference of a few cents. Often they become
embittered at what seems to them a tyranny when the small sum of money involved is
considered. The reason they must settle, however, is not on account of the possible
loss of ten cents, but because the most important principle in bank accounting is
involved. "Accuracy first" is a motto that should be framed, figuratively at least, upon
the wall of every banking room.
The books used by National Bank of Pakistan are of various kinds and their purpose is
indicated by name. A ledger is a book used to keep a record of balances. To "post"
means to enter in the proper columns either the debits or credits on the ledger, and the
difference between them represents the balance either due by or to the bank. Another
important book which is used by the National Bank of Pakistan is journal, a book in
which daily transactions are listed in regular order as to accounts, and the total debit
or credit is then posted on the ledgers. All other books, cards and sheets used by bank
of whatever nature is a part or subdivisions of these books. Often they become known
among the clerks by some other name descriptive of their general appearance. For
instance, the general ledger scratcher in one bank is known as the "red book," while
the collection scratcher is the "black book."
The records made by one clerk upon one set of books go to check the records of
another clerk upon a different set of books. For instance, the paying teller and the
receiving teller will each keep a record of checks cashed or deposited payable within
the bank. The debit postings of the individual bookkeeper would agree with the
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teller's figures. Skillful accounting lies in making the fullest possible use of original
entries, at the same time having a check on all figures to guard against either error or
fraud.
• Annual business planes, cash flow projection, forecasts and long term
planes.
• Budgets include capital, manpower and overhead budgets along with
variance analyses.
• Quarterly operating results of the company as a whole and in terms of
its operating divisions or business segments.
• Details of joint ventures or collaboration agreements or agreements with
distributors, agents, etc.
• Default in payment of principal and/or interest, including penalties on
late payments and other dues, to a creditor, bank or financial institution,
or default in payment of public deposit.
2
• Failure to recover material amounts of loans, advances, and deposits
made by the company, including trade debts and inter-corporate
finances.
• Significant public or product liability claims likely to be made against
the company, including any adverse judgment or order made on the
conduct of the company.
Chief Financial Officer now has extensive responsibilities for internal and external
reporting. All the information required for decision-making by the Board of Directors
and Chief Executive is processed and furnished by the Chief Financial Officer. Apart
from this, external reporting requirement is fulfilled by Chief Financial Officer, the
accounts and financial statements are signed by the Chief Financial Officer before
they are sent to concerned authorities.CCG requires that the listed companies submit
their quarterly accounts to the shareholders within one month of the close of the first
and third quarter of year of account. The CCG does not prescribe the time for
submitting half yearly accounts to the shareholders. Here we can refer to section 245
of companies’ ordinance 1984 for this purpose, which requires half yearly accounts to
be submitted within two months of the close of first half. The CCG requires a limited
review of half yearly accounts by external auditor. Annual audited accounts are now
required to be submitted within four months of the close of financial year.
1
environment. Thus, the field of information systems has become a major functional
area of business administration. The management of a business can use information
systems in their decision making process. Before proceeds it’s important to discuss
precisely about decision making.
CHAPTER NO 3
2
People are required for the operation of all information systems. These people
resources include end users and Information system Specialists. The Management and
employees of National Bank of Pakistan are end users and Knowledge workers of
information system. These are the employees of the Bank who spend most of their
time communicating and collaborating in teams and workgroups and creating, using
and distributing information.
The Information systems Specialist are people who develop and operate information
systems. They include System analysts, software developers, system operators, and
other managerial, technical, and clerical IS personnel of National Bank of Pakistan.
The system analysts of National Bank of Pakistan design information systems of the
Bank based on the information requirements of the end users. The software
developers create computer programs based on the specification of system analysts of
National Bank of Pakistan.
1
The data about Branch transactions is accumulated, processed, and stored in a
BBO system that can be accessed by Manager for an analysis and decision
making.
TABLE 3.1
Rupees in Millions
Year 2005 2006 2007 2008 2009
Share Capital 4,924,106 5,908,927 7,090,712 8,154,319 9,969,751
Reserves 10,813,914 13,536,041 13,879,260 15,772,124 20,941,047
Borrowings 11,084,790 8,756,847 11,704,079 10,886,063 40,458,926
Deposits 465,571,717 463,426,602 501,872,243 591,907,435 624,939,016
2
Other Liabilities 23,068,314 24,974,450 26,596,300 30,869,154 39,656,831
Horizontal Analysis (%)
Share Capital 100 120 144 166 182
Reserves 100 125 128 146 184
Borrowings 100 79 106 98 365
Deposits 100 100 108 127 134
Other Liabilities 100 108 115 134 172
www.nbp.com.pk/quarterly report/index “NBP Quarterly Report June 2010"
The National Bank of Pakistan’s sources of funds includes share capital, reserves,
borrowings, deposits and other liabilities etc. To analyze trend, Horizontal analysis of
each item is calculated.
TABLE 3.2
(Share Capital)
A NALYSIS
The Share capital refers to the portion of a Bank's equity that has been obtained by
trading stock to a shareholder for cash or an equivalent item of capital value. The
share capital of National Bank of Pakistan shows an increasing trend in all years as
compare to base year. The increase in share capital during all years indicates share
holder’s concern toward National Bank of Pakistan and efficient bank’s Management
policies.
TABLE 3.3
(Reserves)
A NALYSIS
The Banks’ reserves are banks' holdings of deposits in accounts with their central
bank plus currency that is physically held in bank vaults (vault cash). The reserves of
National Bank of Pakistan fluctuate during all years as they show an increasing trend.
The reserves are increased 25 %, 28 % & 46 % in the years 2005, 2006 & 2007
2
respectively. The year 2008 represents highest increasing percentage of 84% as
compare to base and previous years.
TABLE 3.4
(Borrowings)
A NALYSIS
The National Bank of Pakistan’s borrowings fluctuates during all years and shows a
mixed trend. The borrowings were decreased 21 % in 2005; however same are
increased 6 % in 2006 as compare to base year. There was a marginal decrease of 2%
in bank’s borrowings in the year 2007. The year 2008 represents highest percentage of
borrowings as these were increased to 265 % comparing with base year and are
increased 267 % as compare to 2007.
TABLE 3.5
(Deposits & other Accounts)
A NALYSIS
The deposits and other accounts of National Bank of Pakistan show a mixed trend
during all years. In the year 2005 the deposits were increased very marginally, with
the year 2006 represents an increase of 8% as compare to base year. The year 2007
represents second highest percentage as deposits are increased to 27%. The year 2008
indicates an increase of 34%, highest among all years.
TABLE 3.6
(Other Liabilities)
2
A NALYSIS
The other liabilities of National Bank of Pakistan are fluctuating during all years and
show an increasing trend. The year 2005 indicates an increase of 8 % and 2006
indicates an increase of 15%. The other liabilities in the year 2007 represent an
increase of 34%. The other liabilities were on their peak percentage in 2008 as the
shows an increase of 72%.
TABLE 3.7
(Generation of funds)
Rupees in
Millions
Year 2005 2006 2007 2008 2009
Markup/return/interest 20,947,33 33,692,66 44,100,93 50,569,48 60,942,79
earned 3 5 4 1 8
14,387,93 23,370,89 30,153,71 33,629,47 37,058,03
Net markup/interest income 5 7 6 0 0
Net markup/interest income after 12,639,77 21,146,97 27,782,17 28,906,73 26,087,21
provisions 0 0 0 5 6
12,162,89 13,544,84 16,415,86
Total non-markup/ Interest income 8,304,716 9,392,351 2 5 2
20,944,48 30,539,32 39,945,06 42,451,58 42,503,07
Total income ( Interest + non-Interest) 6 1 2 0 8
PROFIT BEFORE 11,977,60 19,056,02 26,310,57 28,060,50 23,000,99
TAXATION 1 8 7 1 8
Horizontal Analysis (%)
Markup/return/interest 100 161 211 241 291
1
earned
Net markup/interest income 100 162 210 234 258
Net markup/interest income after
provisions 100 167 220 229 206
Total non-markup/ Interest income 100 113 146 163 198
Total income ( Interest + non-Interest) 100 146 191 203 203
PROFIT BEFORE
TAXATION 100 159 220 234 192
“NBP Annual Report 2009” www.nbp.com.pk/invester relation/index 2009
• Interest earned
• Net interest income
• Net interest income after provisions
• Total non markup interest income
• Total income ( Interest plus non- Interest)
• Profit before Taxation
TABLE 3.8
(ALLOCATION OF FUNDS)
Rupees in
Millions
Year 2005 2006 2007 2008 2009
Lending’s to Financial Institutions 10,511,322 16,282,942 23,012,732 21,464,600 17,128,032
Investments 149,350,096 156,985,686 139,946,995 210,787,868 170,822,491
Advances 220,794,075 268,838,779 316,110,406 340,677,100 412,986,865
Operating Fixed Assets 9,202,969 9,454,365 9,681,974 25,922,979 24,217,655
Other Assets 19,141,569 23,941,056 37,113,698 30,994,965 44,550,347
Horizontal Analysis (%)
Lending’s to Financial Institutions 100 155 219 204 163
Investments 100 105 94 141 114
Advances 100 122 143 154 187
Operating Fixed Assets 100 103 105 282 263
Other Assets 100 125 194 162 233
“NBP Annual Report 2009” www.nbp.com.pk/invester relation/index 2009
2
After the acquisition of the funds their allocation becomes necessary. The Bank seeks
the best way for making investment to get more profit with the maximum security.
The Bank has an investment portfolio in which it allocate its funds for crediting to
borrowers, investment in the stock market etc. The National Bank of Pakistan allocate
its funds in Lending’s to financial institutions, investments, advances, operating fixed
assets and other assets etc.
In accounting, banks don’t prepare worksheet, but part of worksheet is prepared like
trial balance. The securities for the loans are handled in the same way as theory says
like mortgage, pledge, hypothecation, advances against insurance policies or
liquidation procedure is the same. There is some difference lies in types of loans in
bank that is theory talks about four or five types of loans that is cash finance,
overdraft, loans etc., but in practice there are some more types used by bank like
running finance, demand finance etc. All other concepts of remittances, bills, foreign
exchange deposits, letters of credit are in accordance with theory almost. A bank's
balance sheet is different from that of a typical company. You won't find inventory,
accounts receivable, or accounts payable. Instead, under assets, you'll see mostly
loans and investments, and on the liabilities side, you'll see deposits and borrowings.
3.8 CONCLUSION
To me, Theory gives the direction to understand the processes and the terminologies
going across the World using best business practices in a broader view covering each
and every aspect of possible business scenarios. On the contrary practical life is
specific, enclosed in a jar.
1
CHAPTER NO 4
4 FINANCIAL REPORTS
Rupees in Millions
3
ASSETS 2006 2007 2008 2009 2010
Cash and balances with treasury 106,503,75
banks 78,625,227 94,873,249 6 115,827,868 7 2,390,482
LIABILITIES
REPRESENTED BY
Share capital 7,090,712 8,154,319 8,969,751 10,763,702 13,454,628
Reserves 13,879,260 15,772,124 19,941,047 22,681,707 2 3,995,080
Unappropriated Profit 32,074,677 45,344,188 52,456,204 60,696,510 6 0,248,197
53,044,649 69,270,631 81,367,002 94,141,919 9 7,697,905
Surplus 28,909,469 47,067,023 21,092,216 24,764,459 2 0,962,345
116,337,65 102,459,21
81,954,118 4 8 118,906,378 1 18,660,250
3
Rupees in Millions
1
Deferre
d -15,729 291,291 61,981 323,731 -4,220,242
5,782,229 6,346,584 9,288,231 9,026,728 7,542,408
PROFIT AFTER 19,033,77
TAXATION 6,195,372 12,709,444 17,022,346 3 15,458,590
32,074,67
Unappropriated Profit brought forward 5,892,902 9,161,747 19,372,523 7 45,344,188
Transfer from surplus on revaluation of fixed
assets on account of incremental depreciation 45,496 43,221 41,060 39,007 130,456
12,133,77 51,147,45
Profit available for appropriation 0 21,914,412 36,435,929 7 60,933,234
www.nbp.com.pk/quarterly report/index “NBP Quarterly Report June 2010"
The analysis of financial statement refers to the examination of the statements for the
purpose of acquiring additional information regarding the activities of the business.
The users of the financial information often find analysis desirable for the
interpretation of the firm’s activities.
2
The overall objective of financial statement analysis is the examination of a firm’s
financial position and returns in relation to risk. This must be done with a view to
forecasting the firm’s future prospective.
• Between companies
• Between industries
• Between different time periods for one company
• Between a single company and its industry average
4.3.1.1 PROFITABILITY RATIOS
The continued viability of any bank depends on its ability to earn an appropriate
return on its assets and capital. Good earning performance enables a bank to fund its
operations, remain competitive in the market and increase or decrease in market
funds. Profitability ratios relate profit to sales and investments. These ratios indicate
the firm’s overall effectiveness of operations and give us idea how well firm utilized
its resources in generating profit and shareholder value.
1
The liquidity position of a bank is like a reservoir. It may be adequate, although
nearly depleted, just before the start of the rainy season. Or it may be inadequate,
although three quarters full just before the summer drought.
“The bank’s ability not only to meet possible deposit withdrawals but also to provide
for the legitimate needs of the economy as well”
Debt Ratio % % % % %
Debt/Equity Ratio 112.35 97.77 89.57 93.47 92.17
Interest Coverage (times) 1.83 1.85 1.89 1.66 0.97
Loan Loss Coverage 0.13 0.13 0.15 0.18 0.5
Capital Adequacy % % % % %
Capital Fund to Total
Assets 0.89 1.02 1.1 1.07 1.09
of debt held by a company the greater the financial risk of bankruptcy
3
Retrieved from www.nbp.com.pk/quarterly report/index “NBP Quarterly Report
June 2010"
Comments
The Year 2006 has been an outstanding year with the bank recording the highest
profit in its history i.e.., 59.65 %.The National Bank of Pakistan’s wide range of
product offering, large branch network and committed workforce are some of
fundamental strengths that enabled NBP to achieve exceptional in a very competitive
market. The gross profit is 37.74% in 2009. The lowest percentage among all years.
Net profit margin shows positive trend till 2006 and was the highest in the same year
as it was 38.59%, the percentage is decreased in 2007 as it was 37.63%. The net profit
margin is on its lowest level at the end of 2009 as it indicates a percentage of 25.63%.
The primary reason of this decline is current global economic conditions and current
political crisis in Pakistan
The above given ratios suggest that the profitability of the bank has a mixed trend
during five years. The first three years 2005 (2.92), 2005 (3.95), 2006 (4.95) shows an
increasing trend, indicating more profitable operations of the bank. It was decreased
in the year 2007 (4.12) and has increased in 2009 as the ratio was 4.13.
There was an increase in the utilization of the resources till 2006 i.e.., 0.011(2005),
0.021 (2005) and 0.026 (2007). The ratio was decreased to 0.024 (2007) and 0.018
(2009).
During all five years the return on deposits ratio of National Bank of Pakistan shows a
mix trend. The year 2006 (0.052) was the best year for bank in terms of its funds
mobilization. Although the ratio was decreasing in 2009 (0.036), indicating Bank is
more keen to kept deposits and a change in policy of the Bank regarding its funds
mobilization.
The year 2005 (0.83) and 2005 (0.96) were not satisfied for bank as current assets are
less than current liabilities. However, in 2006 (1.02) the management of National
Bank of Pakistan is able to overcome this problem. The year 2007 (1.00) is also good
for bank as per standards of this ratio. Again in the year 2009 (1.12) the management
of bank is able to increase its current ratio.
The cash ratio of National Bank of Pakistan shows a mixed trend during five years of
operations. During all years, the ratio is satisfactory as per standards of this ratio. The
3
year 2005 (4.09), representing highest and 2005 (2.85) & 2009 (2.69), representing
lowest ratio in all five years.
This ratio, a comparison of funds generation and its funds mobilization, indicates the
total loans sanctioned by the bank in relation to total amount of money deposited with
the bank, stands highest in 2009 ( 66.08%) as compared with the previous year
figures. This shows that the bank has greater potential to advance additional loans.
During all other years the ratio is quiet satisfactory representing National Bank of
Pakistan’s credit management decisions.
The ratio indicates an increasing trend till 2007 that is 94.83 (2005), 185.95 (2005),
196.62 (2006) and 197.18 in 2007. The year 2009 represents the lowest percentage of
42.33 on account of due from banks to due to banks.
The debt to equity ratio of National Bank of Pakistan shows a ratio of 112.35 % in
2005. The ratio is decreased to 97.77% in the year 2005. The ratio is further decreased
in 2006 as it shows a percentage of 89.57%. There was an increase in the ratio as it
shows a percentage of 93.47%. The year 2009 represents the ratio of 91.17% .
The amount of interest a Bank pays in relation to its revenue and earnings is
tremendously important. The National Bank of Pakistan’s interest coverage ratio is
1.83 times in the year 2005. The ratio was increased in the years 2005 and 2006 as it
was 1.85 times & 1.89 times respectively. There sudden decrease of 1.66 times is
observed in 2007. The ratio is further decrease to 0.97 times in 2009, representing the
lowest ratio among all years.
The loan loss coverage ratio of National Bank of Pakistan is almost same in the years
2005 and 2005 as it was 0.13 in both years. There was a slight decrease in this ratio as
it was 0.12 in 2006. The year 2006 shows an increase in loan loss coverage ratio as it
was 0.17. The year 2009 represents highest ratio of 0.47 on account of loan loss
coverage, as compare to all years.
The fixed assets turnover ratio of National Bank of Pakistan has an increasing trend
till 2006. The ratio increases 2.28 (2005) to 3.23 (2005). The year 2006 represents
highest fixed assets turnover ratio for National Bank of Pakistan i.e.., 4.13. The
bank’s efficiency to utilize these assets has been decreased to 1.64 in the year 2007
however it was increased in 2009 as the ratio is 1.76.
2
The National Bank of Pakistan’s Capital funds to Total Assets ratio is increased
during all years. The ratio is 0.89 in 2005, representing lowest ratio in all years. The
ratio is increased in 2005, 2006 and 2007 as the graph shows ratios of 1.02, 1.10 &
1.07 respectively. The ratio is keeping its trend and also increases in the year 2009 as
it was 1.09.
Horizontal analysis, whilst simple to execute and useful to a certain extent, has its
limitations. These limitations include:
• Being highly dependent on the selection of base year and the period under
examination in the financial model.
• Horizontal analysis provides little insight into why the trend occurred in a
financial model.
• Horizontal analysis does not provide insight into whether the trend in the
financial model results was superior/inferior to some benchmark.
1
4.3.3 HORIZONTAL ANALYSIS OF BALANCE SHEET
1
income
Provisions against non-performing advances 100 161 203 312 699
provision for/(reversal of) diminution in the
value
of investments 100 -132 -382 -22 201
provision against off balance sheet obligations 100 Nil Nil Nil 28
bad debts written off directly 100 70 16 122 Nil
100 127 136 270 628
Net markup/interest income after provisions 100 167 220 229 206
NON MARKUP/ INTEREST
INCOME
Fee, Commission & brokerage income 100 97 121 133 155
Dividend income 100 135 227 256 226
Income form dealing in foreign currencies 100 119 132 103 393
Gain on sale & redemption of securities-net 100 2,872 2,459 4,924 831
Investments classified as held for trading Nil Nil Nil Nil Nil
Other income 100 20 72 17 142
Total non-markup/ Interest income 100 113 146 163 198
Total income ( Interest + non-
Interest) 100 146 191 203 203
NON MARKUP/ INTERSET
EXPENSES
Administration expenses 100 126 151 160 205
Other provisions written off 100 615 -54 521 2,318
Other charges 100 763 2,515 207 7,042
Total non markup/ Interest expenses 100 129 153 161 219
PROFIT BEFORE
TAXATION 100 159 220 234 192
Taxatio
n Current 100 145 176 168 238
Prior years 100 -130 63 46 Nil
Deferre
d 100 -1,852 -394 -2,058 26,831
100 110 161 156 130
PROFIT AFTER
TAXATION 100 205 275 307 250
Unappropriated Profit brought forward 100 155 329 544 769
Transfer from surplus on revaluation of fixed
assets on account of incremental depreciation 100 95 90 86 287
Profit available for appropriation 100 181 300 422 502
“Retrieved from http://www.nbp.com.pk/Publications/AnReport2009.aspx”
2
4.3.5 VERTICAL ANALYSIS
When using vertical analysis, the analyst calculates each item on a single financial
statement as a percentage of a total. The term vertical analysis applies because each
year's figures are listed vertically on a financial statement. The total used by the
analyst on the income statement is net sales revenue, while on the balance sheet it is
total assets. This approach to financial statement analysis, also known as component
percentages, produces common-size financial statements. Common-size balance
sheets and income statements can be more easily compared, whether across the years
for a single company or across different companies.
Vertical analysis is a technique for identifying relationship between items in the same
financial statement by expressing all amounts as the percentage of the total amount
taken as 100. In a balance sheet, for example, cash and other assets are shown as a
percentage of the total assets and, in an income statement, each expense is shown as a
percentage of the sales revenue.
1
Reserves 1.95 2.34 2.15 2.07 2.43
Unappropriated profit 1.66 2.89 4.97 5.95 6.41
Surplus On Reval. of assets 3.86 6.61 4.48 6.18 2.57
Bills payable 1.30 0.30 1.64 0.93 1.25
Borrowings 2.00 1.52 1.81 1.43 4.94
Deposits and other accounts 84.15 80.22 77.79 77.66 76.42
Liabilities against assets 0.0031 0.0029 0.0021 0.0044 0.0030
subject to finance lease
Deferred tax liabilities net 0.01 0.77 0.37 0.67 Nil
Other liabilities 4.17 4.32 4.12 4.05 4.85
Total 100 100 100 100 100
“Retrieved from http://www.nbp.com.pk/Publications/AnReport2009.aspx”
2
2005 2006 2007 2008 2009
Markup/return/interest earned 100 110 110 119 143
Markup/return/interest expensed 31 34 35 40 56
Net markup/interest
income 69 77 75 79 87
Provisions against non-performing advances 7 8 8 11 25
provision for/(reversal of) diminution in the
value
of investments 1 -1 -2 0 1
provision against off balance sheet obligations 0 Nil Nil Nil 0
bad debts written off directly 0 0 0 0 Nil
8 7 6 11 26
Net markup/interest income after provisions 60 69 70 68 61
NON MARKUP/ INTEREST
INCOME
Fee, Commission & brokerage income 24 16 15 16 19
Dividend income 6 6 7 8 7
Income form dealing in foreign currencies 5 4 3 2 9
Gain on sale & redemption of securities-net 0 4 3 6 1
Investments classified as held for trading Nil 0 0 0 0
Other income 4 1 2 0 3
Total non-markup/ Interest income 40 31 30 32 39
Total income ( Interest + non-
Interest) 100 100 100 100 100
NON MARKUP/ INTERSET
EXPENSES
Administration expenses 42 37 34 33 43
Other provisions written off 0 2 0 1 5
Other charges 0 0 1 0 1
Total non markup/ Interest expenses 43 38 34 34 46
PROFIT BEFORE
TAXATION 57 62 66 66 54
Taxatio
n Current 24 23 22 20 28
Prior years 4 -4 1 1 Nil
Deferre
d 0 1 0 1 -10
28 21 23 21 18
PROFIT AFTER
TAXATION 30 42 43 45 36
Unappropriated Profit brought forward 28 30 48 76 107
Transfer from surplus on revaluation of fixed
assets on account of incremental depreciation 0 0 0 0 0
Profit available for appropriation 58 72 91 120 143
2
“Retrieved from http://www.nbp.com.pk/Publications/AnReport2009.aspx”
4.3.8 BANK ANALYSIS WITH REFERNCE TO COMMERCIAL BANKS LISTED ON STOCK EXCHANGE
1
177.9
NIB Bank 28.44 8.46 8 112.12 85.43 -0.73 0.23 240 AA-
Myban
k 4.24 0.41 45.47 31.96 23.03 0.43 1.02 69 A
Atlas Bank 5.01 0.52 30.7 22.18 17.5 -0.2 -0.39 31 A-
Standard 276.3
Chartered 38.72 1.95 8 173.81 126.27 1.31 0.34 176 AA+
JS
Bank 5.11 0.01 24.16 14.08 9.57 0.16 -0.31 11 A-
Habib 192.4
Metropolitan 6.02 6.7 5 128.97 101.22 1.57 2.6 100 AA+
Retrieved from “http://www.lahorestock.com/ListedCompanies”
• Paid-up Capital
• Reserves
• Assets
• Deposits
• Advances
• Profit after tax
• Earnings per share
• Credit rating
The best way to analyze these commercial banks is to analyze their credit ratings. The
National Bank of Pakistan enjoys the highest credit rating amongst Pakistani banks;
JCR- VIS Credit rating Co. Limited awarded highest standalone credit rating of AAA
2
to NBP. The JCRVIS Credit rating Co. comments about NBP say a lot about the
bank:24
“The organization has been able to strategically manage and build on its competitive
advantages which has translated into the strong and well managed improvement in
profitability trend observed over the last few years, a substantial balance sheet of
sound asset quality, and strong liquidity and capitalization levels”
NBP’s key strength remains its extensive outreach and a low cost, stable deposit base.
Deposits are also guaranteed by the Government of Pakistan under the Banking
Nationalization Act, 1974. There have also been significant improvements in the
management practices of the bank and a focus on enhancement of systems and
controls. In this regard the management has entered into an agreement for the
acquisition of a core banking software which is likely to be implemented over the next
few years.
JCR-VIS believes that the current economic situation puts certain leading industrial
sectors and the general consumer under financial stress. Therefore, the second half of
2008 and 2009 are likely to be challenging for the banking sector as a whole, in terms
of maintaining growth, asset quality and profitability.25
The JCR-VIS Rating Process include following steps:26
2
15. Releases the preliminary/initial rating to the press
CHAPTER NO 5
1
serve corporate customers. To extending and targeting research to improve bank
earnings, through customer focus of bank’s commercial and corporate branches, and
by enhanced efforts towards the development of human capital, the bank shall very
soon transform from a bureaucratic organization to a fast paced, modern, and
competitive bank. In conclusion, the National Bank of Pakistan have the vision, which
will enable it to achieve even better results, safeguard the interest of their customers
and to assist them in their march towards progress and prosperity in future.
• Setting of target for of making at least 300 branches country wide on line.
• Closing of all those branches, which are burden on NBP.
• Management to offer specialized services to major corporate including advisory
and debt syndication introduces the concept of relationship manager.
• Comprehensive training programs has been develop to up grade the core banking
skills of the existing staff as well as integrate high quality hiring.
• To improve the motivation of staff a merit-based culture is being promoted.
Through overhauling the manpower recruitment preservation and performance
appraisal system.
2
running on well-articulated systems and are backed by proper policies and
guidelines. The NBP product, despite boasting a sizeable portfolio built
around some reckless selling, is mostly infected.
• The NBP Karobar scheme is designed around President’s Rozgar scheme. The
scheme which had all the potential to become a landmark was so badly
mishandled by National Bank of Pakistan.
• The Quality of infrastructure added by National Bank of Pakistan during the
last few years is quite substandard as compared to that of peer banks.
• In NBP’s five year strategic plan 2007-2011 approved by board of directors
does not address any serious thinking on
• As for as public interest is concerned there were no service standards
benchmarks and guidelines available in NBP. There were only old documents
that were crafted at least a decade or more back.
• Due to poor planning the bank had book losses of over 1.2 billion rupees in the
Karobar Scheme.
• The National Bank of Pakistan’s outsourced employees (2350) was obtained
from a single source. Most of these are performing the core function of the
bank outside their assigned duties without any training and supervision.
• The National Bank of Pakistan is incurred large expenses in running those
branches, which are not producing any income.
• The up gradation of human resource is very slow in NBP. The branches of
NBP have less number of employees as their requirements. The concept of
“One Man Show” is adopted in many branches to save salary expenditure;
even most of the branches use their security guards for various tasks. The one
reason for this is that the senior management is able to decrease salary
expenditure of the bank, which result an increase in the net profit. For their
performance they received handsome amounts of bonus. But in long run it has
a negative effect on bank’s productivity.
• The pension’s distribution service or payments to EOBI beneficiaries, utility
payments; workers remittances are occupied lowest priority level.
• In NBP Karobar scheme the product selected by the NBP is of inferior quality
and develops faults in the first few months of delivery.
5.3 CONCLUSIONS
2
• The National Bank of Pakistan plays a key role in the strategic national
development. The bank has historically been the financial arm of the
government and has enjoyed the blessings of state support in the form of huge
public sector funds and deposits.
• In contract to other banks populating the FSI sector, NBP is mandated to
uphold public interest. It is critical too as all other banks and NBFIs in public
sector have been closed down or merged with NBP.
• In contract to other banks populating the FSI sector, NBP is mandated to
uphold public interest. It is critical too as all other banks and NBFIs in public
sector have been closed down or merged with NBP.
• The current management of National Bank of Pakistan was hired purely for
their international experience, business orientation to turn around a purely
public institution into a sustainable and commercially viable bank serving
public interest along the lines of a large modern commercial bank.
• The National Bank of Pakistan has effective budgeting system in place.
Annual budget of the bank is approved by the Board and monthly comparisons
of actual results with the budget are prepared and reviewed by the senior
management.
• The National Bank of Pakistan has a comprehensive framework of written
policies and procedures on all major areas of operations such as Credit,
Treasury Operations, Finance, Internal audit and Compliance approved by the
Board.
• The National Bank of Pakistan provides sustainable financing for growth of
industries of critical national importance such as energy, education, healthcare,
transport, shipping, Research & development.
5.4 RECOMMENDATIONS
• The National bank of Pakistan should be fully prepared in its management
of financial crises and its business continuity planning, within the standing
committee framework, and should work with others to strengthen national
crises management preparations.
• The bank should improve the quality of training of its employees and the
integrity, controls and efficiency of its systems, processes and financial
reporting.
1
• The bank should improve its recruitment, retention and development and
to reform the Bank’s pension scheme.
• The bank should renegotiate the Bank’s long term financial framework and
to overhaul the Bank’s financial system.
• The Bank should improve IT capability in the analytical areas and to
develop a medium term strategy for banking and market operations.
• The National bank of Pakistan should monitor the impact of its operations
on the environment, which is mainly through the use of power and the
generation of waste.
• NBP, being the only lending arm to the government for public sector
development should design, develop and deliver product and services for
economic growth.
• The bank should provide support to the Micro, Small and Medium
enterprises thereby reducing unemployment and helping to create a more
equitable distribution of wealth.
• The NBP should adopt modern banking tools and techniques. Quality
leadership, clear vision, investment in IT infrastructure and human
resource development.
• The bank should develop software for pension disbursement.
• As for as Islamic Banking environment is concerned the management and
employees of NBP should work together for basic research for discovering
their own laws, developing theories or concepts for the better direction of
their own business environment according to Quran & Sunnah.
• The branches should reduce its large expenses in order to increase the
value of the bank.
• The NBP should strengthen incentives and accelerate a results-oriented
training and communications programs for management and staff.
• The National Bank of Pakistan should implement a financial inclusion
program to meet the needs of underserved economic subsectors, including
outreach programs to meet the requirements of the agriculture, housing,
SME and microfinance sectors.
• The National Bank of Pakistan should introduce a framework for
consolidated supervision and reorganize the regulatory architecture to
allow better regulation and supervision of financial control division of
bank.
1
REFERENCES
3
1 http://www.nbp.com.pk/EcomomicBulletin/FS-Complete-31-12-2007.pdf
2 NBP Quarterly Report September 2008
http://www.lahorestock.com/ListedCompanies/
3 http://www.nbp.com.pk/nbp/About_Us/About_US.jsp
4 Black's Law Dictionary page 471 (5th ed)
5 Kotler, P., Armstrong, G., Brown, L., and Adam, S. (2006) Marketing, 7th Ed.
6 Principles of marketing 8 ED by Kotler & Armstrong G7
7 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 87
8 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 91
9 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 88
10 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed
11 http://www.nbp.com.pk/Aamdani/index.htm
12 http://www.nbp.com.pk/advancesalary/index.htm
13 http://www.nbp.com.pk/CashnGold/index.htm
14 http://www.nbp.com.pk/StudentLoan/index.htm
15 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 221
16 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 228
17 Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 228
18 SBP Prudential Regulations
19 http://www.nbp.com.pk/nbp/NBP_Treasury.jsp
20 http://www.nbp.com.pk/nbp/About_Us/DReport3.jsp
21 http://www.nbp.com.pk/nbp/About_Us/DReport3.jsp
22 NBP Annual Report 2007
23 Human error by James Reason
24 NBP Annual Report 2007
25 http://www.jcrvis.com.pk
26 http://www.jcrvis.com.pk/ratingscale/rating_process.htm
ANNEXTURES
Eligibility
Permanent Employees of Govt., Semi-Govt., Autonomous, Semi Autonomous, Local & other
bodies who are maintaining their Salary A/Cs at NBP.
Repayment
Direct deduction from Salary A/C
Maximum Loan Amount
Rs. 490,000/-
Security
Employer will provide undertaking that borrower’s Salary and end of service benefits will route
through his/her Salary A/C maintained at NBP during the tenure of the loan and his/her end
of service benefits are at least equal to the amount of Advance Salary required.
Hypothecation of Consumer durables owned by the borrower.
Three (3) Undated Cheques
Max. Repayment Period
5 years (60 months)
Advance in terms of # of net take home salaries
Up to 20 net take home salaries
Markup Rate
15 %
(Based on diminishing balance method)
Processing Fee
1% of Loan Amount
Verification Charges
Rs 500/-
Life Insurance
No Insurance of any kind.
Documentation Charges
at actual
Contact
Your Salary disbursing NBP Branch.
Remaining Service Age
At the time of approval and disbursement the applicant’s remaining service age should be 6
months after maturity of the loan
Debt Burden
50%
Minimum net take home salary
no minimum take home requirement
BOARD MEMBERS
Name
Designation
Director
Director
Director
Mr. Tariq Kirmani
Director