INTERNSHIP REPORT ON

NATIONAL BANK OF PAKISTAN

CITY BRANCH MANSEHRA

Submitted by: Wajahat Ali

Reg # 13-J/COM-HU-20

Supervised by: Muhammad Tariq

Government College of Management Sciences Mansehra

SESSION

2015-2016
 INTERNSHIP REPORT ON

NATIONAL BANK OF PAKISTAN

CITY BRANCH MANSEHRA

Submitted by: Wajahat Ali

Reg # 13-J/COM-HU-20

Supervised by: Muhammad Tariq

This internship report is submitted in partial fulfillment of the

requirements for the degree of Masters of Commerce awarded by
the Hazara University,
Mansehra

Government College of Management Sciences Mansehra

SESSION
2015-2016
Govt commerce of management sciences

Approval Sheet

Approval Committee

1. External Examiner
Mr/Ms ____________________________ Signature________________

2. Supervisor
Mr. Muhammad Tariq Signature________________

Head of Department

Mr/Ms ____________________________ Signature________________

 Dedication

I dedicate this report to my ever-loving parents and my respected teachers

i
 Abstract
Banks play very important and vital role for the economic growth and sustainability of
economy. The bank deals in money, such institution are also required to fulfill other financial
needs such as provision of place to deposit money, serving for the utilities and advancing
money in order to facilitate the needs of householders and the businesses. In this report the
financial position of NBP has been studied and analyzed.

The methodology for data collection that was available resources by the organization, like
website, annual reports, books, articles publicly available data, etc. also, interviews with
some employees and observation methods were used. In the first chapter introduction to the
report, background of study, scope of the study, merits, limitation, and scheme of the study
are given. The report covers the history of NBP bank, introduction of NBP, its background,
role and functions, its core values, and miscellaneous topics related to Finance department of
NBP Bank

Ultimately whole argument comes down to this: the bank is functioning in a proper &
systematic manner, but need more competitive strategies, long term debts, & outside
creditors, creditors should provide the funds to meet the SBP policies to have the maximum
branches.

In this report, I also included the financial analysis that helps to know that where the NBP is
strong and where it needs improvements. NBP offers new products and services day by day
for improving its performance, but there are many hurdles in the way of success of NBP, all
the recommendations are given in the report and there solutions as well as that can be helpful
in the success of NBP in future.

ii
 Table of Contents

Dedication.............................................................................................................................i
Abstract ..............................................................................................................................ii
Acknowledgements..........................................................................................................viii
List of abbreviations...........................................................................................................ix
Executive summary.............................................................................................................x
_______________________________________________________________________________

Chapter 1
Introduction of Study........................................................................................................1
1.1 Background of Study.....................................................................................................1
1.2 Objectives of study........................................................................................................1
1.3 Scope of Study...............................................................................................................2
1.4 Limitations of the work.................................................................................................2
1.5 Benefits of the Study.....................................................................................................2
1.6 Research methodology...................................................................................................2
1.6.1 The major sources for Primary data includes......................................................3
1.6.2 The major sources for Secondary data includes..................................................3
1.7 Scheme of the report......................................................................................................3

Chapter 2
Introduction to organization (NBP).................................................................................5
2.1 They aim to be an organization that is founded.............................................................5
2.1.1 They aim to be People who….............................................................................5
2.1.2 They have confidence that tomorrow they will be…..........................................5
2.1.3 Evaluation of Banking / Industry in Pakistan......................................................6
2.2 Historical Introduction to the organization (National Bank of Pakistan)....................7
2.2.2 Credit Rating.......................................................................................................8
2.2.3 Present status.......................................................................................................9
2.3 Organizational structure of NBP..................................................................................10
2.3.1 Board of Directors.............................................................................................11
2.4 Senior Management.....................................................................................................12
iii
 2.4.1 Senior Management for Overseas Operation....................................................14
2.5 Vision and Mission Statements....................................................................................14
2.5.1 Mission..................................................................................................................14
2.6 Objectives of National Bank of Pakistan.....................................................................15
2.7 Core Values..................................................................................................................15
2.8 Internal Structure of Bank Branch...............................................................................16

Chapter 3
Product and services........................................................................................................18
3.1 Deposit Department.....................................................................................................18
3.1.1 Account opening................................................................................................18
3.1.2 Procedure of Account Opening.........................................................................18
3.1.3 Documents Required.........................................................................................19
3.1.4 Issuance of Cheque Book..................................................................................19
3.1.5 Cheque Cancellation.........................................................................................19
3.2 TYPES of Accounts.....................................................................................................19
3.2.1 Current Account................................................................................................19
3.2.2 Profit & Loss Sharing Saving Account.............................................................20
3.3 Problems in personal account....................................................................................24
3.4 Advances department...................................................................................................24
3.5 Types of financing.......................................................................................................24
3.6 Western union..............................................................................................................27
3.7 Clearing department.....................................................................................................27
3.8 Short credit (sc)............................................................................................................28
3.9 Foreign exchange department......................................................................................28
3.10 Types of Cheque........................................................................................................31
3.10.1 Bearer Cheque.................................................................................................31
3.10.2 Order cheque...................................................................................................31
3.10.3 Crossed Cheque...............................................................................................31
3.10.4 Payment of Cheque.........................................................................................32
3.11Remittance department...............................................................................................32
3.12 Demand draft (Dd)...................................................................................................32
3.13 Telegraphic transfer (TT).........................................................................................33
3.15 computer department.................................................................................................35
iv
3.16 Establishment department..........................................................................................35

Chapter 4
FINANCIAL ANALYSIS................................................................................................36
4.1 Financial Analysis........................................................................................................36
4.1.1 Common size analysis.......................................................................................36
4.1.1.1 Vertical Analysis of NBP................................................................................36
4.1.1.2 Vertical Analysis of NBP`s Income Statement...............................................38
4.1.1.3 Horizontal Analysis of NBP`s Balance interpretation....................................39
4.1.1.4 Horizontal Analysis of NBP`s income statement an......................................41
4.2 Ratio Analysis..............................................................................................................42
4.2.1 Liquidity Ratios.................................................................................................43

Chapter 5
Conclusion and recommendations.................................................................................47
5.1 Conclusion...................................................................................................................47
5.2 Recommendations........................................................................................................47

References.........................................................................................................................54

v
 List Of Tables

Table 2.1 Board of Directors 11

Table 2.2 Senior Management 12

Table 3.1 Rates on term Deposit 20

Table 4.1 Vertical Analysis of NBP`s Balance sheet 36

Table 4.2 Vertical Analysis of NBP Income Statement 38

Table 4.3 Horizontal Analysis of NBP`s Balance interpretation 39

Table 4.4 Horizontal analysis of NBP`s Income Statement 41

Table 4.5 Ratio Analysis 43

vi
 List of Figures

Fig: 2.1 Organization structure of NBP 10

Fig 2.2 Internal Structure Of Branch 16

vii
 Acknowledgements

Allah Almighty is worthy of all acknowledgments, whose grace has no limits and who gave
me the strength and will to complete this report.

I have no words to express my heartiest sense of gratitude to my supervisor, Muhammad

Tariq for his supervision, contribution, intellectual guidance, constructive suggestion,
valuable time, patience, and wise comments to make this report possible.

I highly appreciate the help and cooperation of the Branch manager of NBP City branch
Mansehra for his support and collaboration.

The finally yet importantly, I would feel incomplete without thanking to my parents who
always pray for my brilliant success and bright future.

Wajahat Ali

viii
 List of abbreviations

NBP National Bank of Pakistan

BOD Board of Directors

D.D Demand Draft

EBIT Earning Before Income Tax

EPS Earning per share

EVP Executive vice president

I.T Information technology

L/C letter of credit

M/T Mail Transfer

MIS Management Information system

PLS Profit and loss saving

SBP State bank of Pakistan

SEVP Senior executive vice president

SVP Senior vice president

SWOT Strength Weaknesses Opportunities Threat

SS Specimen signature

VP Vice president

ix
 Executive summary

This internship report is related to national bank of Pakistan, being a government bank it is
operating in almost every part of the country that is why it is the largest bank of Pakistan.
Furthermore, NBP has its network outside national boundaries of Pakistan. To know about
the functions and procedure of any organization it is very important to work there for
minimum six months than you may able to understand this thing. The intense competition,
among banks, the privatization of the financial institution and financial liberalization in
general are gradually and continuously making the banking sector effective and efficient.

The basic purpose of this report is to describe and define different functions and products of
the bank, to identify weak areas of the bank, to analyze the performance of the management
and to make a financial analysis of it and suggest recommendations. It is also our degree
requirement to do an internship in any company so the basic purpose of this report is to fulfill
the Master degree requirement

The report actually gives the following information, which I have divided in different
chapters. First chapter is about introduction to the report, background of study, scope of the
study, merits, limitations, and scheme of the study. The second chapter is related to history of
banking, banking in Pakistan, introduction to the organization, its historical background, role,
and functions of organization, its core values, and collection of topics related to banking.

Third chapter covers the organizational structure of NBP, different departments working at
NBP and different financial products of NBP. The fourth chapter of this report is related to
the analysis and the findings, which have been observed. It includes the financial analysis;
Analysis no doubt acts as a mirror for the management. In addition, management should
develop plans to avail any opportunities which is been created by the environment because it
is very important in this competitive world. At the end of this report there is
recommendations based on the analysis.

x
 Chapter 1
Introduction of Study

Starting with the name of Allah, I am going to write my internship report as part of the
academic requirement for the completion of Two year’s study in Master of
Commerce. Therefore, we the students of Management Sciences are required to
undergo an internship program for the period of 8 weeks as an internee in an
organization. This internship helps me to gain the practical knowledge of working
environment of the banking sector of Pakistan.

1.1 Background of Study

NBP established in 1949, National bank of Pakistan has grown to become the largest
commercial bank in the country, maintaining its position as Pakistan’s premier bank
determined to set higher standards of achievements. The bank came in to existence by
the order promulgated by governor general and started functioning from Nov 20,
1949. NBP is the major business partner for the government of Pakistan with special
emphasis on developing Pakistan’s economic growth through aggressive and balanced
lending policies, technologically oriented products and services offered through its
large network of more than 1352 branches locally, 23 branches internationally and 11
regional offices (Annual report NBP, 2015).

1.2 Objectives of study

As part of the academic requirement for completing M.Com students are required to
under go eight Weeks of internship with an organization. The internship is to serve the
purpose of acquainting the students with the practice of knowledge of the discipline of
banking administration.

 To understand the various operations of the bank and work in different

departments.
 To analyses the financial and operational performance of NBP.
 To study the organizational management structure.
 To make possible recommendation in the light of analyses.
 To study the working environment of the organization.

1
1.3 Scope of Study

The time duration of two months is insufficient for conducting complete study and
observation of a large bank. Being a student specializing in finance, the focus of this
study is on its financial aspects including the financial health of the bank and its
comparison with previous year’s performance. Some of the problems faced by the
bank have been identified and some recommendations have been suggested to
overcome these problems and to improve the prevailing financial condition of the
bank.

1.4 Limitations of the work

There are some limitations which internee had to face during the internship program,
which are described as under:

 The period of two months was too short to properly understand and analyze all the
operations of bank.

 Staff members avoided to give all information due to the matter of secrecy. So it
was very difficult to collect the relevant information and to learn accordingly.

 Manager and other staff members have busy schedule due to this reason it was a
great problem for them to spend time with internee, so it is not easy to learn or to
gain knowledge from them.

 Some of the data was confidential and that was not made available to me.

1.5 Benefits of the Study

An internship grooms a person personally, academically and professionally. At the

end of internship, one gets a certificate, which acknowledges his work for that
specific company. This adds to his experience, an internship is a great opportunity to
improve interpersonal skills. Practical also provides the opportunity to gain self-
confidence. Moreover, it Figure out what one’s strengths are and also a good time to
identify one’s weakness so that he can improve them.

1.6 Research methodology

2
National bank of Pakistan is one of the leading and establishes banks of the country. It
has a large setup of departments and a big organizational structure. While working in
a Main branch Mansehra of the bank, it is not possible to thoroughly cover all the
areas of the bank, as it requires more time and two months are in no way sufficient to
do so. Different tools and techniques were used to gather relevant information for
writing the report. Secondly, journals from regional head quarter and staff college was
also reviewed which gave very useful information about the functioning of the bank. I
also visited the national bank of Pakistan’s official web site, which gave very useful
information about the services provided by the bank.

1.6.1 The major sources for Primary data includes

 Personal observation

Personal observations during the internship period

 Interviews of management

Short interviews of the bank’s management

 Discussion with staff members

1.6.2 The major sources for Secondary data includes

 Annual reports of Bank

Annual reports of the last three years

 Books

Relevant course books

 Internet

Official web site of NBP and some other relevant sites mentioned in the references

1.7 Scheme of the report

This internship report is divided into five chapters, which are:

Chapter 1 includes background, purpose of study, Scope of study, some limitations,

merits, and scheme of this Report.

3
Chapter 2 includes background and history of banking in Pakistan as well as
Introduction to NBP, City branch Mansehra .

Chapter 3 includes the financial statement, Products, and services offered by NBP to
its valued customers.

Chapter 4 includes the SWOT and ratio analysis and their interpretation.

Chapter 5 includes some of the conclusion and some of the recommendations.

4
 Chapter 2
Introduction to organization (NBP)

NBP contains its position as Pakistan's premier bank determined to set higher
standards of achievements. It is the major business partner for the Government of
Pakistan with special emphasis on fostering Pakistan's economic growth through
aggressive and balanced lending policies, technologically oriented products and
services offered through its large network of branches locally, internationally and
representative offices.

2.1 They aim to be an organization that is founded

 Growth through creation of sustainable relationships with our customers.

 Prudence to guide our business conduct.
 A national presence with a history of contribution to our communities.

They shall work to…

 Meet expectations through Market-based solutions and products.

 Reward entrepreneurial efforts.
 Create value for all stakeholders.

2.1.1 They aim to be People who…

 Care about relationships.

 Lead through the strength of our commitment and willingness to excel.
 Practice integrity, honesty and hard work. We believe that these are measures
of true success.
2.1.2 They have confidence that tomorrow they will be…

 Leaders in industry.
 An organization will take the trust of S&h.

5
2.1.3 Evaluation of Banking / Industry in Pakistan

At the time of independence in 1947, Pakistan’s commercial banking facilities were

almost jammed according to a plan in the whole sub continent especially in the
Muslim majority areas. Pakistan’s banking and Industrial sectors were in very poor
conditions. Banks largely depend for their growth and development on industrial
sector but at the time of independence, Pakistan had patriotically on industry except a
few textile mills and only product food grains and agricultural raw materials, most of
the industries were situate in Hindu majority area now called India.

A number of banks closed their branches with the result that only 81 branches
remain ed open on 30th June 1948 out of 487. The head offices were in India and most
of their employees were Hindu, and they fled to India. Imperial Bank of India, Which
was conducting government receipts and payments, closed down most of its branches
thus blocking the funds needed by the government?

The country was in trouble and needed most of the general commercial
banking and credit facilities. This need was a little bit satisfied with the transferring of
the head offer of the HBL. To Karachi on 7 th, August 1947. This bank playing a great
role in the next year in the economic development of Pakistan as the Habib Bank was
also new in the new country it was asked to open more branches at new place this was
a difficult time foe H.B.L to open their branches in different places.

In view of the above mentioned circumstances and in order to rehabilitee the

banking in Pakistan without further delay, on the recommendations of an committee
it was decided to establish as early as possible a central bank to control the banning
and currency in Pakistan. Accordingly state bank of Pakistan was Pakistan was
inaugurated by Quaid-e-Azam Muhammad Ali Jinnah on 1st July 1948. This bank lost
on time in meeting the national requirements of banking, currency and took following
remedial measures. Requested Government of state a new bank of nation wide
services accordingly National Bank of Pakistan was formed in 1949 which opened
many branches and in 1952 took over the emperor Bank of India. It will draw Indian
Currency notes of Rs: 125 crore from General Circulation and send these for recovery
to reserve Bank of India.

6
2.2 Historical Introduction to the organization (National Bank of
Pakistan)

National Bank of Pakistan maintains its position as Pakistan's premier bank,

determined to set higher standards of achievements. It is the major business partner
for the Government of Pakistan with special emphasis on fostering Pakistan's
economic growth through aggressive and balanced lending policies, technologically
oriented products and services offered through its nation wide branches.

2.2.1 History of NBP

National bank was establish in November 09, 1949 under NBP ,ordinance 1949, in
order to handle the crises condition which was develop after Deadlock with India and
the devaluation of Indian Rupee in 1949. The bank proved all type of banking
services to the government in general public. It works as agent of sent real bank
because the SBP dose not has its own branches.

The bank schedule commercial bank and its principally engaged in the business of
banking as defined in the banking company's ordinance 1962. National Bank of
Pakistan was basically established for reducing the difficulties of east Pakistan
farmers engaged in jute and patens” after mass migration of community from east
and west Pakistan in India. The bank commenced its operation in November 20.1949
at six centers of jute in the then East Pakistan. Lahore and Karachi officers were
opened subsequently in December 1949. Before restructuring in 2002, national Bank
of Pakistan with its head office at Karachi operates through 9 regional headquarters at
Lahore, Karachi Hyderabad, Quetta, Peshawar, Multan, Muzaferabad, Fasilabad and
Islamabad.

The bank was incorporated with authorized capital of 60 millions .in 960 this amount
was redacted to the 30 millions banks issued 15 millions of which 25% was
subscribed by the government and the balance was offered to the general public
.shears to the public where issued in 1950 and where quickly taken up. In 190 banks
ordinance was amended so that it take ordinarily commercial banking business. On
janvery-01-1974 national bank along with thirteen others commotional banks where
nationalized under the promulgation of “nationalization” act 1974 and the shears not
held by the government where required after compensation them.

7
The period 1990’s witnessed financial referees and the national bank also in
cooperated the change in its working and offered new services and products to its
clients .at present the bank is playing very important role in financing the trade
.commerce ,agricultural and important concerns and contributing the best to word
making the country prosperous. The improve its costumer focus redacted decision
making layers restructured its entire command and control system in business and
operational spheres zones and audit offices in the year 2002 and eliminated the total
numbers of regions in hands from 9 to 29 across the country .anew matrix structure
has been introduced with the objective to separate the office and the bank offices .to
improve the good governance and enhance the internal control.

 Operation group
 corporate and investment banking group
 special assets management group
 commercial and retail banking group
 audit and inspection group
 overseas Coordination and Management Group
 Risk Management Group
National Bank of Pakistan is known as the premier commercial institution of Pakistan
provide the large diversified customer base of 9.009 millions, which is the biggest
figure, in the country and conduct the business function of state bank of Pakistan in
addition to provision of other financial and allied services such as deposit banking
financing and credit remittance facilities collection government receipts and
payments. sale and purchase of government securities, Bands and other certificates,
Foreign exchange business, Safe custody, Safe deposited services and safe deposit,
Lockers, Hajji facilities Utility bills, Investment advice and other services, Special
deposits products / Schemes, pak rupee travelers choose, New product.

2.2.2 Credit Rating

NBP enjoys the highest rating of ‘AAA’ in the industry assigned by M/s JCR-VIS
Credit Rating Company. The ratings assigned to NBP are primarily driven by the
bank’s role in the national economy as an agent of the State Bank of Pakistan and as a
bank to the Government of Pakistan. Additionally, ratings also derive strength from

8
the bank’s consistently high capitalization levels, and nationwide access that has
enabled it to secure a cost effective and diversified deposit base.

2.2.3 Present status

National Bank of Pakistan has a network of 1,352 domestic branch and 19,204
employees for subsidiaries, 23. Oversea branches, 4 reparative offices, 1 joint venture
and subsidiary (overseas) all the world the local branches are controlled through 29
regional offices and overseas are managed through 4 overseas regional offices. It is
the largest contributory agent of government requirement. NBP provide wide range of
services and including collection of taxes and deliveries of salaries, person to public
sector employees. It has lowest rate on exports and other borrowings.

National bank of Pakistan, overseas operation comprises 18 overseas

branches, 5 representative offices, one international subsidiary bank of NBP in
Amatory and one joint venture with the United Kingdom. NBP with its commitment
to invest in development of the bank’s I.T infrastructure have now developed on line
branches with modern by highly professional bankers. NBP has launched an
ambitious business reprocessing programmed to make the bank more attractive with
the eventual aim of privatization. The largest bank in the country with a customer base
9.00 billion in poised for take off.

9
2.3 Organizational structure of NBP

Fig: 2.1 Organization structure of NBP

President and chairman

President Secretariat

Board of Director

Corporate and investment banking Group

Commercial and retail Banking Group

Operations Group

Audit & inspection group

Compliance group

Financial control division

Employees benefit, Disbursements and trustee

Special assist Management group

Organization development and training group

Overseas coordination and management group

Information technology group

10
2.3.1 Board of Directors

Table 2.1 Board of Directors

Mr. Muneer Kamal

Chairman

Mr. Syed Ahmed Iqbal Ashraf

President

Mr. Farrakh Qayyum

Director

Mr. Tariq Kirmani

Director

Mr. Iftikhar A. Allawala

Director

Mr. Muhammad Naeem

Director

Mr. Mir Balakh Sher Marri

Director

Mr. A. Akbar Sharifzada

Director

Mr. Syed Muhammad Ali Zamin

EVP, Secretary Board of Directors & Secretary Credit Committees

11
2.4 Senior Management

Table 2.2 Senior Management

Syed Ahmed Iqbal Ashraf

President, NBP

Nausherwan Adil
SEVP & Group Chief Operations Group/Corporate Communication Division

Mudassir H. Khan
SEVP & Group Chief, Commercial & Retail Banking Group

Nusrat Vohra
SEVP & Group Chief, Treasury Management Group

Tariq Jamali
SEVP & Group Chief, Logistics Support, Security & Engineering Group

Kausar Iqbal Malik

SEVP & Group Chief, Compliance Group

Masood Karim Shaikh

SEVP & Group Chief, Overseas Banking Group/Global Home Remittance
Management Group

Asif Hassan
SEVP & Group Chief, Audit & Inspection Group

Wajahat A. Baqai
SEVP & Group Chief, Credit Management Group

Aamir Sattar 
SEVP & CFO, Financial Control Division

12
Sultana Naheed
SEVP & Group Chief, Risk Management Group

Zahid Mahmood Chaudhry

SEVP & Group Chief, Human Resources Management & Administration
Group

Akbar Hasan Khan

EVP & Head, Corporate & Investment Banking Group

Sahibzada Rafat Raoof Ali Khan

EVP & Head, Assets Recovery Group

Khawaja Muhammad Aminul Azam

EVP & Head, Islamic Banking Group

Ovais Asad Khan

EVP - Divisional Head, Strategic Marketing Division

Mahmood Siddique 
EVP, Divisional Head & CIO, IT Division

Shaharyar Qaiserani 
EVP & Divisional Head, Agriculture & Business Development Division

S.M. Ali Zamin

EVP, Secretary Board of Directors & Secretary Credit Committees

Mufti Ehsan Waquar Ahmad

Shariah Advisor

13
 Mirza Babur Baig
EVP & Principal Staff Officer(PSO) to the President

Riffat Sultana Mughal

SVP - Head, Legal Division

2.4.1 Senior Management for Overseas Operation

Zubair Ahmed 

SEVP & Regional Chief Executive, Middle East, Africa & South Asia
Region

M. Rafiq Bengali 

SEVP & Regional Chief Executive, Americas Region

Khawar Saeed 

EVP & Regional Chief Executive, Cationentral Asian Republics Region

Muhammad Hanif Khan 

SVP & Coordinator, Afghan Operations

2.5 Vision and Mission Statements

To be recognized as a leader and a brand synonymous with trust, highest standards of

service quality, international best practices and social responsibility.
2.5.1 Mission

NBP will aspire to the values that make NBP truly the Nation's Bank by:
 Institutionalizing a merit and performance culture.
 Creating a distinctive brand identity by providing the highest standards of
services.
 Adopting the best international management practices.
 Maximizing stake holder’s value.

14
2.6 Objectives of National Bank of Pakistan

 Prime objectives of National Bank of Pakistan are tainting distinguishing

brand identity, attaining quality financial performance, achieving
acknowledgment in the market in terms of quality and performance.
 National Bank of Pakistan also aims at providing assistance to farmers, so that
they can utilize their funds effectively to get the best result.
 By charging interest on loans provided to the private sector and business
community.

2.7 Core Values

We aim to be an organization that is founded on

 Growth through creation of sustainable relationships with our customers.

 Prudence to guide our business conduct.
 A national presence with a history of contribution to our communities.
2.7.1 Shall work to

 Meet expectations through Market-based solutions and products.

 Reward entrepreneurial efforts.
2.7.2 We aim to be people who…

 Care about relationships.

 Lead through the strength of our commitment and willingness to excel.
2.7.3 We have confidence that tomorrow we will be…

 Leaders in our industry.

 An organization taining the trust of stakeholders.
 An innovative, creative and dynamic institution responding to the changing
needs of the internal and external environment

2.8 Internal Structure of Bank Branch

Fig 2.2 Internal Structure Of Branch

15
 RRMC RBC ROC RCC

Cad. Manager Operating Complain

Officer Manager Officer

Deposit Sector Remittance

Govt. Section Accountant

Foreign Exchange Credit Deptt:

Source: www.nbp.go.pk/about Chief Cashier

16
2.8.1 LOCATION

The Location of the Bank Branch is Mansehra City.

2.8.2 OVERVIEW

The building of NBP City branch Mansehra consist of single floors .The building of
NBP City branch Mansehra gives a pleasant look as it is a well furnished and
decorated by fresh flowers both inside and outside the bank. There is separate parking
place for staff members and also for general public which is helpful in reducing traffic
on road unlike other banks. Inside the bank there is a hall and on one side is the
manager’s office. In the hall there is separate seating facility for males and females
customers. In the hall all the officers of different departments has their tables. The
seating arrangement of all officers is same despite their designation. Only cash
department and government section is separated. The facility of generator is also
provided to the branch.

2.8.3 Number of Employees

In NBP City branch Mansehra the employees are very experienced. They are very
loyal and committed to their jobs. They are also very much cooperative with their
colleges if anyone of them face any problem in his work they never hesitate to help
him. Number of Employees currently working there is 11.

17
 Chapter 3
Product and services

Dividing an organization into different parts according to the functions is called

departmentalization. NBP can be divided into the following main departments.

3.1 Deposit Department

It controls the following activities:

 A/C opening.
 Issuance of cheque book.
 Current a/c
 Saving a/c
 Cheque cancellation
3.1.1 Account opening

An account is relationship between account holder and Banker. OR Account is an

agreement between customer and banker. Preliminary investigation is necessary
because of the following reasons.

 Avoid frauds.
 Negligence.
 Inquiries about clients.
3.1.2 Procedure of Account Opening

Accounts are opened after approval of manager. Customer has to fill in prescribed
application form properly particularly complete details of next of kin. Customer has to
sign terms and conditions of account opening. Accounts are opened with cash. In case
of issuance of check book at the time of opening of an account Manager has to give
justification that customer is personally known to him. Details of account are entered
into computer system. Included non-deduction of zakat and services charges who’s
applicable.

18
3.1.3 Documents Required

 Copy of CNIC.
 Copy of driving license in case CNIC is without photograph.
 Applicant photograph and CNIC copy attested by gazetted officer in case of
CNIC without photograph.
 Copy of service card/evidence of employment in case of salaried person.
 Photograph in case of illiterate person.
 Zakat exemption declaration/certificate.
3.1.4 Issuance of Cheque Book

Requisition slips to verify that cheque books have been issued to the account holder.
Cheque book are issued after receipt of acknowledgement of letter of thanks or with
the remarks of managers or operation managers giving justification for issuance of
cheque book before receiving of acknowledgment of letter of thanks. Cheque book
series are recorded in register. Charges for issuance of cheque books are recorded.

3.1.5 Cheque Cancellation

 This department can cancel a cheque on the basis of;

 Post dated cheque
 Stale cheque
 Warn out cheque
 Wrong sign etc

3.2 TYPES of Accounts

3.2.1 Current Account

It is also known as running account because it is always in operations.Current

accounts are opened on proper introduction and submission of required documents
along with an initial deposit prescribed from time to time. The money can be
deposited and withdrawal at any time during the banking hours by the customers.
Therefore the banks do not pay interests on current deposits. The bank is authorized to
deduct services charges on current account levied through its half yearly schedule of

19
charges, in case the average balance falls below the minimum balance as prescribed
by the bank. Minimum balance required to open this account is Rs 5000/-

3.2.2 Profit & Loss Sharing Saving Account

PLS saving accounts are opened on proper introduction and submission of required
documents along with an initial deposit prescribed from time to time. PLS saving
accounts are opened for individual (single/joint) charitable institution, autonomous
corporation, companies, associations, educational institutions, firms etc. Interest is
paid on six-monthly basis. The amount withdrawn before 6months is deleted from
assessment of profit.

3.2.3 Profit & Loss Sharing Term Account

Fixed accounts or term deposits are those deposits which are repayable after certain
period of time which may vary from 3months to 5years. In this account no cheque
book is issued to the customers. At the time of opening account TDR is issued
showing the amount of money deposited, period and rate of interest payable. The rate
of interest on fixed deposits is greater than saving accounts which also varies with the
length of period and amount deposited. The longer the period of deposit, higher will
be the rate of interest.

Table 3.1 Rates on term Deposit

3months 5.30%

6months 5.60%

1year 5.80%

2year 6.10%

3year 6.40%

4year 6.70%

5year 7.10%

Above 5 7.80%

20
3.2.4Foreign currency account

Foreign Currency Accounts are opened on proper introduction and submission

of required documents along with an initial deposit prescribed from time to
time. It can be operated singly or jointly by individuals, partnerships,
corporation, companies etc.Pakistani, foreigners, Muslims, non Muslims can
open this account in foreign currency Dollars, Pounds sterling and Euro. In
Pakistan only foreign currency saving account is running. Minimum balance
required for foreign currency saving account is 500 Dollars.If balance is less
than required then Bank makes deductions.

3.2.5 National income daily accounts (NIDA)

NIDA are opened on proper introduction and submission of required documents along
with an initial deposit prescribed from time to time. NIDA are opened for individual
(single/joint) charitable institution, autonomous corporation, companies, associations,
educational institutions, firms etc. Deposits in the NIDA accepted on the conditions
that the depositor shall always maintain minimum balance as prescribed by bank in
his account.

3.2.6 Rates or profit on NIDA

2million to 25million=1.50%

25m to 50m =2%

50m to 100m =2.30%

100m to 2.50m =2.60%

2.50m to 500m =2.80%

500m to 1000m =3.10%

1000m to 2000m =3.30%

2000m to 5000m =3.50%

5000m & above =3.75%

21
3.2.8 Premium saver account

Premium saver accounts are opened on proper introduction and submission of

required documents along with an initial deposit prescribed from time to time.
Premium saver accounts are opened for individuals (single or joint) only. In case
where prescribed minimum balance in Premium saver account is not maintained no
profit for the month will be paid to the account holder. In case of Premium saver
account a higher rate of profit as per bank discretion will be paid to depositor
maintaining deposit below the mark of Rs 300,000/- as compared to depositor
maintaining higher deposits in their Premium saver account.

3.2.9 Premium Amdani account

Premium Amdani products account can be opened by all who are allowed to open
current, PLS saving account. The bank reserves the right of refusing to accept deposit
from any person in premium Amdani account without assigning any reason. Premium
Amdani deposits are accepted by the bank with minimum sums prescribed by the
bank from time to time. In case of premium Amdani additional amount in the lots of
25000/- will be accepted. Premium Amdani Certificates will only be issued for period
of 5 year. Loan will be given 85% of face value of certificate. Loan will be sanctioned
for one year and lump sum payment will be made.

3.2.10 Rates

1 year 7.50%

2year 8.50%

3year 9.50%

4year 10.50%

5year 11%

3.2.11 Account of blind person

Blind person (both literate & illiterate) can open an account to be operated jointly
with a visually literate person on completion of all documents and formalities as
prescribed by the bank. Operations in the joint account will not be subject to ‘’either
or Survival’’. In the event of death of blind account holder the entire credit balance

22
will be paid to the legal heirs of the deceased blind account. In the event of death of
joint visually account holder the entire credit balance will be payable to the surviving
blind account holder.

3.2.12 Dormant & inoperative account

All current accounts, which have not been operated upon for six months or all saving
accounts which have not been operated upon for one year shall classify as ‘’Dormant
account’’. All current account s, which have not been operated upon for two years or
all saving accounts, which have not been operated upon for three year shall classify as
‘’Inoperative account’’.

3.2.13 Minor’s accounts

That person who has not up till attained the age of 18years is considered as minor.
Under section 11 of contract act, 1872 minor is incompetent to enter into contract.
Therefore in bank, contract with minor is avoided. There are two types of minor’s
account.

3.2.13.1 According to will of guardian

Bankers in Pakistan allow minor to open to an account but on the request of his
guardian. Title of account remain s on the name of both guardian & minor Until age
of 18 year minor cant made transaction, after 18 year both can do transactions.

3.2.13.2 after death of guardian

In case of death of account holder the credit balance in his account will be payable to
his legal heirs. They have to prove themselves through court. Bank will present the
details of his account in court. If any one of them is minor then he will not be given
balance. His account will be opened in the Bank according to orders of court and
Senior Civil Judge will be guardian of account until he attained the age of majority.
After that he can withdraw money from the account.

23
3.3 Problems in personal account

3.3.1 Lunacy of customers

A customer who is incapable of understanding, is of unsound mind cannot

enter into contract with the banker as a customer.

3.3.2 Death of customer

In the event of death of an account holder, the credit balance, in any account, in the
name of an individual will be payable to the legal heirs of the deceased individual
account holder If the account is in the name of two or more persons operated jointly
the credit balance will be payable to the legal heirs of the deceased account holders
along with the remaining account holders.

3.4 Advances department

The objective of Advances Department is”. To facilitate people by giving short term
and long term loans on easy terms and conditions”. The main function of this
Department is to take surplus money from the people at low rates and lend this money
to borrowers at high rates to earn profit. This section is back born of bank. 50% of
earning of bank comes from advance department. Profitability depends on advances

3.5 Types of financing

There are two types of financing .

3.5.1 Long term finance;

 Which are for 5years or more than 5 Years.

 House building finance
 NBP advance salary
 Motor car loan
 Agriculture development loan
 Project financing
 Staff loan

24
3.5.2 Short term finance

 Which are for one year.

 Gold finance
 Cash finance
 Running finance
3.5.2.1 Gold finance

 Facility of Rs 1000 against 1 gm of gold.

 No maximum limit of cash.
 Mark-up 15.5% per annum.
 Repayable after one year. (Lump sum).
 Loan is given on net weight.
 Minimum on 12 g loan is sanctioned.
 If after one year no capacity to repay then loan can be rescheduled by paying
mark-up for one more year.
 One person cannot take additional loan on other grams of gold with same
name.
 If after one year payment is not made to bank. Bank send 3 notice to borrower
 Again if he doesn’t reply to notice. Case will be sent to the court. Court will
give gold to bank and will order the borrower to pay mark-up.
Documents

 I.D. Card :
 Goldsmiths documents.
 Gold loan insurance form
 Promissory note, IB-12 (Here amount + mark-up).
 Undertaking
 IB/6A- Agreement for financing for Short/med/long term on mark-up basis
 IB-2 Letter of pledge (Here also A + mark-up).
ii) Cash finance

It is a very common form of borrowing by business concern, commercial concern, and

industrial concern. A borrower is granted an advance up to a certain limit against

25
securities such as pledge of goods and mortgage securities. Borrower pay markup
only on the amount which is actually utilized. It is granted on long term basis. Cash
Finance is not available in Mansehra , only in big cities Bank has its own lock on
warehouses. Industries can’t reduce stock without the permission of bank. If he wants
to use the stock, the bank person will visit along with him. When stock reduces he
will pay the loan. Loan is sanction for one year. After one year it can be renewed.
Markup is paid in quarterly.

3.5.2.2 Running finance

 In running finance property is kept as mortgage or any security. (certificate)

 The 85% loan is given because more liquid as property in the name of bank.
 Running finance is given for one year.
 In running finance multi transaction are allowed.
 He is given a check book.
 In one year he can with draw & deposit amount several time but cant exceed
the loan limit.
3.5.2.3 Long term finance

3.5.2.4 Advance salary

 20 months salaries in advance.

 Minimum documentation.
 Repayable in 5 Year (60 months).
 Mark up 20% markup is paid monthly.
 Before 18%, The new ratio is applied on loan taken after 01/07/2010
 Loan sanction authority to different grade officers is
 Grade 1 : 2 lacks
 Grade 2 : 1 lack 50 thousand

Documents

 Application form
 I.D Card of borrower and two guarantors.

26
  Three blank but signed cheques
 Agreement for financing on mark-up basis, variable rate
 Undertaking
 Annexure “A” .It is issued by department of borrower which shows how much
service is left and account no etc. His salary will be transferred to this
account.
 Annexure “C” Agreement for financing on mark-up basis.
 Annexure “D” Letter of hypothecation for stocks, machinery
 And receivables.
 Guarantee IB 29

3.6 Western union

It is private not govt. (a kind of Hundi).On the spot cash payment is made.No
compulsion of account.10 Digits MTCN (Money transfer control number) is allotted.
On which payment is done.It can be taken any where in Pakistan by showing the
number. Receiver has to show any one of following in order to receive
money.Original I.D. card. Original Driving license. Original Passport. Duplicate or
photo state is not accepted.

3.7 Clearing department

3.7.1 Clearing house

From many years there was clearing house in national bank of Pakistan City
branch Mansehra . The agents of banks who were members of clearing house daily
gather 2 times in a day and exchange the checks for clearance with each other.

3.7.2 NIFT (National institutional facilitation technology)

Now NIFT private ltd company is performing clearing functions for

banks.There office is at Abbott Abad. In this case the banks are in loss. Before banks
cut charges from parties account. But now they can’t do so. NIFT charges 8 Rs per
instrument from bank, which bank can not deduct from party’s account. Now it is
advantage for party.

27
Procedure

The agent of NIFT visits 3times a day.In morning he brings cheque which is
drawn on NBP City branch Mansehra .After 2- hours he visits again to take back if
any cheque, draft or Government receipt is to be returned with objection.In eve he
visits to take cheque for next day clearance from other banks. Which he will present
to them in next morning.All cheque of other banks are kept in a bag which is sealed
with a specific seal no.

3.7.2.1 In-Word Clearing Books

The bank uses this book for the purpose of recording all the cheque that are
being received by the bank in the first clearing. All details of the cheque are recorded
in this book.

3.7.2.2 Out-Word Clearing Book

The bank uses outward clearing register for the purpose of recording all the
details of the cheque that the bank has delivered to other banks.

3.8 Short credit (sc)

The banks which are not included in NIFT and out of city SC is sent to them.
If cheque is of which ever bank out of city NBP City BranchMansehra will send it to
the NBP City Branchof that city. That City branch will present the cheque in clearing
to other banks. On SC Rs 50 commission up to 50,000 Rs 75 postage and 10% of
commission FED (Federal exchange duty) are deducted from party account.

3.9 Foreign exchange department

In foreign exchange customer can open account in 3 currencies.US Dollar

code 40.Uk Pound code 30.Euro code 51.Three Banks which deal NBP
transactions of F.C are.NBP New York deals the transactions of dollar..United
National Bank London (UNB) deal Pound.Same procedure of opening account like in
Pakistan Rs.Here minimum balance required is 1000$.If less then monthly $3 as
services charges will be deducted.If account is opened in any other foreign currency
then amount will be converted in $ to deduct charges.

28
Outward TT in foreign currency
 Every foreign bank has opened a Nastro account in head office Karachi.
 In order to send TT to other country bank will debit account of person who is
sending TT and credit Head office. F-15 will be prepared to credit HO.
 Head office will credit the account of that bank which is dealing the
transactions of that F.C.
Remittance abroad through F.C account

Commission @ US $1.00 per US $1,000

Or minimum US $5.00

Maximum US $25.00

Plus telex/ SWIFT charges Rs.2.50 per telex/ SWIFT case of TT.

Inward TT in FC
If any one sends TT from foreign bank to National Bank in Pakistan then
NBP will be debited and credit account of that person.And will take credit from H.O
by F-16 & will also prepare FET along with that. Head office will debit that bank and
credit NBP.

When any one send TT to Dr foreign currency amount in F.C. account then bank will
Dr, Cr foreign currency amount at updating rates but when anyone ask to deposit in
Pak

Short Credit in F.C

If checks are of any bank out of country then bank will send these cheque to
standard chartered Bank Karachi for clearance.The account of Standard Chartered is
in H.O Standard Chartered Bank will credit the required amount of cheques in their
account in H.O But until 21 days bank will not ask for money by FET. Standard
chartered will physically present those cheques in relevant banks out of country.

Revaluation of accounts

At the end of each month revolution of accounts is done by updating rates. By

revaluation of account there arise differences in account. If rate increases bank take

29
additional amount from head office through F-16. If rate decreases then extra money
will be debited to HO by F-15.

Revaluation of in-hand-cash account

Revaluation is also done here at the end of month but here Head Office is not
involved. It is loss or profit of bank itself. Bank has cash with it which it has
purchased and is its asset. It does not belong to customers. Here bank Dr and Cr
interest account.

Cash department

Cash department performs the following functions

Cash Receipts

The money, which either comes or goes out from the bank, its record should
be kept. Cash department performs this function. The deposits of all customers of the
bank are controlled by means of ledger accounts. Every customer has its own ledger
account and has separate ledger cards When the bank receives the cash from the
customer, the bank credits the customer’s account which is then used for paying their
bills or remitting it to their creditors or suppliers as the case may be.

Cash Payments

It is a banker’s primary contract to repay money received for this customer’s account
usually by honoring his cheque.

Cheque and their Payment

The Negotiable Instruments Act, 1881“Cheque is a bill of exchange drawn on

a specified banker and not expressed to be payable otherwise than on demand”. Since
a Cheque has been declared to be a bill of exchange, it must have all its characteristics
as mentioned in Section 5 of the Negotiable Instruments Act, 1881. Therefore, one
can say that a Cheque can be defined as an

The Requisites of Cheque

There is no prescribed form of words or design of a Cheque, but in order to fulfill the
requirements mentioned in Section 6 above the Cheque must have the following.

30
  It should be in writing
 The unconditional order
 Drawn on specific banker only
 Payment on Demand
 Sum Certain in money
 Payable to a specific person
 Signed by the drawer
Parties to Cheque

The normal Cheque is one in which there is a drawer, a drawer banker and a payee, or
no payee but bearer.

 The Drawer
 The Drawer
 The Payee

3.10 Types of Cheque

Bankers in Pakistan deal with three types of cheque

3.10.1 Bearer Cheque

Bearer cheque is cashable at the counter of the bank. These can also be
collected through clearing.

3.10.2 Order cheque

These types of cheques are also cashable on the counter but its holder must
satisfy the banker that he is the proper man to collect the payment of the cheque and
he has to show his identification. It can also be collected through clearing.

3.10.3 Crossed Cheque

These cheque are not payable in cash at the counters of a banker. It can only
be credited to the payee’s account. If there are two persons having accounts at the
same bank, one of the account holder issues a cross-cheque in favor of the other
account holder. Then the cheque will be credited to the account of the person to whom

31
the cheque was issued and debited from the account of the person who has actually
issued the cheque.

3.10.4 Payment of Cheque

It is a banker’s primary contract to repay money received for his customer’s

account usually by honoring his cheques. It is a contractual obligation of a banker to
honor his customer’s cheques if the following essentials are fulfilled.

 Cheques should be in a proper form:

 Cheque should not be crossed:
 Cheque should be drawn on the particular bank:
 Cheque should not mutilated:
 Funds must be sufficient and available:

3.11Remittance department

Remittance means a sum of money sent in payment for something. This

department deals with either the transfer of money from one bank to other bank or
from one branch to another branch for their customers. NBP offers the following
forms of remittances.

 Demand Draft
 Telegraphic Transfer
 Pay Order
 Mail Transfer

3.12 Demand draft (Dd)

It is the safe mode to transfer money. Customer has to fill in DD slip in which
following items are written in favors of which one wants to make the draft,
Amount, exchange and total amount. Then he has to write his address and put
signature on it. Customer will deposit amount then draft will be prepared and
given to him.

32
3.12.1 Charges for Issuance of DD

Up to Rs.100, 000/- 0.10% Minimum Rs.50/-

Up to Rs.1, 000,000/- 0.05% Minimum Rs.100/-

Over Rs.1, 000,000/- 0.04% Minimum Rs.400/-

paying bank for the payment of a specified amount of money. Account holder and non
account holder both can send MT. MT can only be issued to NBP branches.

3.13 Telegraphic transfer (TT)

Telegraphic transfer is the quickest method of making remittances. Telegraphic

transfer is an order by telegram to a bank to pay a specified sum of money to the
specified person. TT can be sent only to NBP branches. The receiver must have an
account in the bank where TT is sent. If account is not in branch where TT has sent
then the responding branch will prepare TT payment order and will send to the
address of the receiver but it will take time and benefits of TT will not be availed

3.13.1 Charges for Issuance of TTS

Up to Rs.100, 000/- 0.10% Minimum Rs.50/-

Up to Rs.1, 000,000/- 0.05% Minimum Rs.100/-

Over Rs.1, 000,000/- 0.04% Minimum Rs.400/-

3.13.2 Telegram Charges on TTS

Whether through Telex/ SWIFT/ Fax Actual, Minimum Rs.75/-

3.13.3 Trunk Call Charges on issuance of TTS

Rs.100/-(Flat)

3.13.4 Charges for TT Cancellation

For account holder Rs.50/-

For non account holder Rs.100/-

33
3.13.5 PAY ORDER (PO)

Pay order is made for local transfer of money.Pay order is the most
convenient, simple and secures way of transfer of money It is the property of bank. It
is payable only at the branch from where it is issued.

3.13.6 Charges for Issuance of Pay Order

For account holder Rs.50/-

For non account holder Rs.100/-

3.13.7 Charges for Issuance of duplicate Pay Order

For account holder Rs.100/-

For non account holder Rs.150/-

3.13.8 Charges for PO Cancellation

For account holder Rs.50/-

For non account holder Rs.100/-

3.13.9 Demand draft purchase (DDP)

NBP has an agency agreement with some Banks which includes Citibank, Standard
Chartered, Grand lay and Oman exchange etc. These Banks have their accounts in
Head Office Karachi. When instruments of these banks are presented in NBP City
Branch the Bank make the payment in advance. NBP purchases the instrument from
customer and make payment of benevolent fund, pension funds etc on behalf of these
banks.

3.14.10 Compliance department

In this department the review of all the works in the bank is done. The responsibility
of compliance officer is to check whether works are done according to procedure
recommended or not. His duty is just to point out the mistakes, if any, and he will not
be liable if relevant department has do not correct the mistakes even after his
notification. He reviews different works at different time periods.

34
3.15 computer department

The objective of this Department is to facilitate customers in payment of their

cheques”. The main functions performed by this department are:

 Checking balance.
 Deduction from balance on clearing cheque.
 Issuing bank statements.
 Dealing Western Union.

3.16 Establishment department

This department mainly deals with the branch employees. The main objective of this
department is to” To regulate bank business”. Main functions of this department are:

 Keeps the record of attendance of employees.

 Employee’s salaries distribution.
 Employee’s bonuses etc.

35
 Chapter 4
Financial Analysis

4.1 Financial Analysis

Financial analysis (also referred to as financial statement analysis or accounting

analysis or Analysis  of  finance) refers to an assessment of the viability, stability and
profitability of a business, sub-business or project.

Typically, financial analysis is used to analyze whether an entity is stable, solvent,

liquid, or profitable enough to be invested in. When looking at a specific company, the
financial analyst will often focus on the income statement, balance sheet, and cash
flow statement.

4.1.1 Common size analysis

Common size analysis expresses comparisons in percentages. It includes vertical

analysis and horizontal analysis .Vertical analysis compares each amount with a base
amount elected from the same year. Horizontal analysis compares each amount with a
base amount for a selected base year.

4.1.1.1 Vertical Analysis of NBP

Table 4.1 Vertical Analysis of NBP`s Balance sheet

Year 2015 2015% 2014 2014%

Rs in “000” Rs in “000”

ASSETS

Cash and balance with 982,46,783 6% 15,823,0033 11%

treasury bank

Balance with other banks 12543964 1% 18388738 1%

Lending to financial inst 111794127 7% 51941866 4%

Investments 561767518 36% 396411825 29%

Advances 630229649 41% 620163029 45%

Operating fixed assets 33353526 2% 34568864 2%

36
Defferred Tax Assets 9884256 1% 10968824 1%

Other assets 91839258 6% 81576084 6%

1,549,659,081 100% 1,372,249,263 100%

LIABILITIES

Bills payables 11011827 1% 13894667 1%

Borrowings 38208413 2% 23258971 2%

Deposits and other accounts 1234405050 80% 1101845283 81%

Finance lease 1691 0% 3636 0%

Deferred tax liabilities - 0% - 0%

Other Liabilities 83439108 5% 72583176 5%

Total liabilities 1,367066089 88% 121,1585,733 89%

Net Assets 182592992 12% 160663530 11%

Share capital 21275131 1% 21275131 2%

Reserves 32996496 2% 33536713 2%

inappropriate profit 59751578 4% 49734161 4%

equity 114023205 7% 104546005 7%

Surplus on revaluation of 67852770 4% 55296862 4%

Assets

182,592,992 12% 160,663,530 11%

Sources: Annual reports 2014-2015

Interpretation

The major components in the balance sheet of banks are deposits, advances and
investments. Advances decreased from 2014 and o 2015, increased from 41 % to
45%. Investment increased from 2014 to2015. Although it is not comparable to
previous years, still it is showing improvement from 2014. This is due to low interest
rates in 2014 and higher interest rate in2015 and . Bankers are left with only option of
investing in short-term investment, to increase their profit margin. Investments, as
being a non-interest source of income are more promising than advances that are

37
becoming more profitable due to inclining interest rates. Bankers prefer to give
advances when the interest rate was high but then prefer to invest in non interest
income in 2015 .

4.1.1.2 Vertical Analysis of NBP`s Income Statement

Table 4.2 Vertical Analysis of NBP Income Statement

Year 2015 2015% 2014 2014%

Rs in “ooo” Rs in “ooo”

Markup revenue 115,251,748 100 100,192,320 100

Markup Expense 70099505 39 60894358 61

Net Markup 45152243 61 39297962 47

Provision against non 11083973 12 17459330 25

performing advances

Reversal of provision 1441758 58 1397122 19

for diminution in
investment values

Bad debt written off - 12 3020 65

Provision against 3392200 64 70230 64

balance sheet
obligations

9303015 14 19567702 14

Net Markup Income 35,849,228 28 19,730,260 26

SOURCE: Annual Report 2014-2015

Interpretation

The Vertical Analysis of Income Statement of NBP as given in the above table shows
a decreasing trend in 2014 and then increasing trend in 2015. Markup expenses are
actually cost of sale in case of a bank. Increasing trend in gross profit shows the
efficiency of the bank`s management in controlling markup expenses. A look at the

38
figure of total of total income of the bank reveals a decrease. As total income is the
sum of both markup income and the non markup income, this decrease in total income
is due to the decrease in the markup income. This organization`s total non markup
income consists of fee and commission, dividend income, exchange income and other
income.

4.1.1.3 Horizontal Analysis of NBP`s Balance interpretation

Table 4.3 Horizontal Analysis of NBP`s Balance interpretation

Year 2015 2014 2015 vs

2014 %
Rs in “000” Rs in “000”

ASSETS

Cash and balance with treasury bank 982,46783 158,230033 37%

Balance with other banks 125,43964 18388738 -31%

Lending to financial inst 111794127 519,41866 115%

Investments 561767518 396411825 41%

Advances 630229649 620163029 2%

Operating fixed assets 33353526 34568864 -3%

Defferred Tax Assets 9884256 10968824 -10

Other assets 91839258 81576084 13

1,549,659,081 1,372,249,263 12.9%

LIABILITIES

Bills payables 11011827 13894667 -21%

Borrowings 38208413 23258971 69%

Deposits and other accounts 1234405050 1101845283 12%

Finance lease 1691 3636 0%

Deferred tax liabilities - - 0%

Other Liabilities 83439108 72583176 16%

Total liabilities 1367066089 1211585733 12.8%

39
 Net Assets 182592992 160663530 14%

Share capital 21275131 21275131 0%

Reserves 32996496 33536713 2%

inappropriate profit 59751578 49734161 19%

equity 114023205 104,546,005 9%

Surplus on revaluation of Assets 678,52770 55,296,862 23%

182,592,992 160,663,530 14%

Source: Annual Report 2014-2015

Interpretation

Common size horizontal analysis of NBP for the year 2014-2015, in asset side of the
NBP balance sheet. Cash and balance with treasury banks, Balances with other bank
shows positive trend in 2014 and 2015 in both years. Lending to financial institution
investment are decreased in 2015 than 2014. Advances shows increase in 2015 net
advances. Operating fixed assets are decreased in 2015. Deferred tax assets also
decreased in 2015. Other assets are increased in 2015 as compare to 2014.

The liability part of the NBP balance sheet shows negative trend of bills payable in
shows increase in 2015 as compared to 2014. Borrowings, deposits and other accounts
shows increase in 2015. it shows that bank have sufficient funds to main tain its
financial position. Liabilities against assets subject to finance lease, deferred tax
liability they show decrease in 2015. Net Assets of share capitals, Reserves,
Inappropriate profit of the bank shows increase in 2015 it means that bank have
sufficient funds for investments.

4.1.1.4 Horizontal Analysis of NBP`s income statement an

Table 4.4 Horizontal analysis of NBP`s Income Statement

Year 2015 2014 2014 vs 2015%

Rs in “ooo” Rs in “ooo”

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 Markup revenue 115,251,748 100,192,320 15

Markup Expense 70099505 60894358 15

Net Markup 45152243 39297962 46

Provision against non 11083973 17459330 12

performing advances

Reversal of provision for 1441758 1397122 11

diminution in investment
values

Bad debt written off - 3020 12

Provision against balance 3392200 70230 12

sheet obligations

9303015 19567702 11

Net Markup Income 35,849,228 19,730,260 16

Source Annual Report 2014-2015

4.2 Ratio Analysis

Ratio analysis is an important and old technique of financial analysis. Ratios are
important and helpful in the reference that:

These simplify the comprehension of financial statement and tell the whole story of
changes in the financial conditions of the business. These provide data for inter-firm
comparison. The ratios highlight the factors associated with successful and
unsuccessful firms, also reveal strong and weak firms. These help in planning and
forecasting these can assist management in its basic functions of forecasting,
planning, coordination and control. These help in investment decision in case of
investor and lending decision in case of Bankers etc.

However, the ratios are only indicators, they cannot be taken as final regarding good
or bad financial position of the business other things have also to be seen. Great care
is needed while calculating meaningful ratios and in interpreting them. Although there
are several ratios, which an analyst can employ yet the type of ratios he would, use
entirely depends on the purpose for which the analysis is done i.e., a creditor would

41
keep him abreast about the ability of a concern to cover up its current obligations and
so would care about current and liquid ratios, Turnover of receivables, coverage of
interest by the level of earnings etc.

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Table 4.5 Ratio Analysis

S.No Ratio Type 2015% 2014%

1 Current Ratio 1.13 1.13

2 Acid Test Ratio 0.69 0.73

3 Return on Total Assets 1.4 0.51

4 Return on total Equity 14  5.07

5 Debt Ratio 1.13 1.13

6 Debt Equity Ratio 11.9 11.5

7 Dividend per Share 0.5440 0.4582

8 Earning Per Share 1.0   1.0

9 Market Capitalization Ratio 1.122379 1.1162772

10 Interest Coverage Ratio  0.8 0.7

4.2.1 Explaination & Interpretation

Liquidity Ratios

In graphs 2015should be near origin. Round the figures upto 2 decimal places We
need to provide complete working of the ratios. we are required to carefully study the
table regarding “maturities of assets and liabilities”. Where you can easily find the
current and long term part of assets and liabilities. Assets and liabilities having upto 1
year maturity are considered as current assets and current liabilities. This table is
given in the annual report of the selected bank. You need to re-calculate the current
and long-term parts of assets and liabilities according to this table.

These are includes:

Current ratio

Current ratio = current asset/current liabilities

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The current ratio of 2015 and 2014 is almost same. It means that its current ratio is
less liquid. There is small increase in industry’s ratio which can meet the short term
obligations of 2015 and 2014.

 Acid Test Ratio

Acid test ratio = current asset – inventories – prepaid expanses/current liabilities.

The acid test ratio shows the liquidity by showing its ability to pay off its current
liabilities with quick assets has decreased from 0.73 to 0.69 in 2015. If a firm has
enough quick assets to cover its total current liabilities

Profitability Ratios 

“Profitability measures enable the analyst to evaluate the bank or firm’s profits with
respect to a given level of sales, a certain level of assets or the owner’s investment.
Without profits, a bank or firm could not attract outside capital”

Return on Total Assets:

Return on Asset = Profit before Tax / Total Assets *100 

This ratio shows that the returns on assets are Increasing as compare to previous years
and overall profit with its available assets is increasing as well.

Return on Total Equity

Return on total equity = (Net income/ total equity)*100

Return on equity indicates the net income by the total equity of the owners. In the
year of 2015, In the year of 2015, the total equity is grater than net income. It means
that generally, the bank has high return.

Debt Ratio:

Debt Ratio= Total liabilities/ total assets.

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These values indicate that the firm has financed close to total of its assets with debt.
This ratio is same in both 2014 & 2015.The higher this ratio, the greater the firm’s
degree of indebtedness and the more financial leverage it has.

Debt-Equity Ratio:

Debt-equity ratio = total liabilities / total share holder equity.

Debt Equity Ratio slightly increased in the year 2015 than the previous year 2014.

Market Ratios

Market ratio relates a firm’s market value, as measured by its current shares price to
certain accounting values.

These include:

Dividend per share

Dividend per share =Total dividend/ no of share outstanding

Dividend per Ratio Ratio slightly increased in the year 2015 than the previous year
2014

Earning per Share:

Earning per share = Net income/ no of share outstanding.

This ratio is same as in previous year. In these ratios, net income is greater than no of
shares outstanding. That’s why, the earning per share is same and growth rate as well
as. It shows profitability between the shareholders.

Market Capitalization Ratio:

Debt to total capital ratio = outstanding shares x share value

This ratio is relating the long-term debt to the permanent capital of the bank. It shows
that the fixed assets decrease than previous years which show a good sign. This ratio
is considered to be satisfactory.

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Interest Coverage Ratio,
Also known as Times Interest Earned Ratio (TIE), states the number of times a
company is capable of bearing its interest expense obligation out of the operating
profits earned during a period.
Interest cover Ratio= Profit before interest and tax / Interest Expense
This ratio increased from0.7 to0.8 in the year 2015

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 Chapter 5
Conclusion and recommendations

5.1 Conclusion

I will briefly explain my internship in National Bank of Pakistan, City branch

Mansehra . NBP has very strong network there are many opportunities available for
qualified persons, they can join it for long-term career, and Overall working
environment of NBP is very comfortable. Furthermore, Management of City branch
Mansehra concentrates on its employees and considers them as the Asset of bank.
Behavior of branch manager is very polite and the whole management focuses on the
individual’s career and their growth.
I found my internship at NBP to be a very knowledgeable experience and training was
very much beneficial for me, because it helped me to be aware of a real life working
environment, As far as my learning is concerned; all the employees at branch were
very much cooperative. Related to this, management of this branch helped me to
understand the procedures of a bank to possible extent; their good behavior also gave
me more confidence to learn more about the banking operations and to ask if I have
found any query in my mind.

I had made an honest effort to present the working & operations of NBP, specifically
to City branch Mansehra in simplest way. Moreover, I feel pleased that I have really
learned a lot during two months & enjoyed working with experienced cooperative &
intelligent staff.

5.2 Recommendations

National bank of Pakistan is an effectively operating and profit making organization

and carrying out its activities under a specified system of procedures. These
procedures and regulations changes with the passage of time. The state bank of
Pakistan, which is the main regulatory body, provides all the procedures and
information to ensure the effective operations of the commercial banks. The man
regulatory body is state bank of Pakistan, which provide the policy guide lines and
ensure that the money market operate on sound professional bases. While the head
offices specifies the whole procedure of functions and operations.

47
Here some suggestions are recommended, which can increase the efficiency of the
workers and as well as the performance of the NBP.

Recommendations are given in the following,

Professional Training:

The staff members do not have the strong professional background. They do not have
modern techniques and knowledge regarding the bank procedures.

Although staff training colleges are working in all major cities but they are not
performing well. For this purpose these staff colleges should be reorganized and their
syllabus should be made in such a way to help the employee understand the ever-
changing economic conditions.

Banking council, of Pakistan should also initiate some programs to equip the staff
with much needed professional knowledge.

Delegation of Authority:

To make the environment of the work place more cohesive proper authority
delegation is required in the bank. Staff members of the bank should be given a task
and authority and he or she should be ask for their responsibility. In this way no one
can put the blame of their mistake on others.

Performance Appraisal:

The manager should strictly monitor the performance of every staff member. All of
them should be awarded according to their performance. Special bounces and
incentives should be given to motivate them.

On The Job Training:

On the job training should be carried out by the management to make their staff better
concerning the global changing economic environment. For these purpose seminars,
conferences and debates should be organized.

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Transfer:

Transfer is not properly carried out. Some of the employees are continually serving at
the same post. They are simply rotated at the same branch.

Therefore it is recommended that rotation of every employee should take place in

every three years in different branches of the bank.

Changes in Policies:

There should not be any abrupt polices by the upper management, as this practice
damage the customer confidence in the bank. Policies should be made in such a
manner that any new government could not alter it.

5.5.7) Qualified Staff:

Required qualified staff should be provided to branch in order to improve the

functioning of the branch. Especially a telephone operator should be appointed.
Number of people should also increase in order to facilitate the work smoothly.

Availability of computers:

Most of the work in Baffa branch is carried out manually. Therefore it is very time
consuming and difficult task

It is recommended that every department should keep their data in computers;

similarly advance department should also keep the profile of the borrowers in
computers which will make their job easier while calculating different installments.
Special computer programs should be designed according to their needs, ensuring full
reliability and security.

Utility bills charges:

The banks are entitled to levy special charges on utility bills (electrically, gas,
telephones etc.) from consumer. It was fixed by the government. These charges are so
less that they are unable to meet the cost of the bank. These charges should be
increased to Rs.10 per bill to enable the branch to cover there handling costs and earn
some profit.

49
Link with the Head Quarter:

100 major branches of NBP should establish a direct link with the head quarter in
Karachi, through internet. This will make the functions and decision making of the
management easier and convenient.

Credit Cards:

National bank of Pakistan should start its operations in credit cards. These cards are
very helpful for the ordinary customer in general and the business in particular.

To make it more secure and to eliminate the misuse of it, the management is required
to keep proper security against the card.

Installing Valuator

Valuator machine is used to count the currency notes and its installation will help to
eliminate the counting errors and will save time as well.

So for the purpose of saving time the installation of valuator is compulsory.

Forecasting:

Efficient forecasting may increase the profitability of the any organization. So

Forecasting needs to be introduced at NBP. Before taking any major decision it is
necessary to judge decision, which they are likely to take. Whether it has good or any
bad impacts for the bank and for the economy as a whole. It will also help in better
planning.

Interest On Overdraft:

Overdraft is a short term credit facility provided by the bank to its trustworthy
customers free of interest. Only bank commission is charge on the amount of credit
availed. It is recommended that the bank should charge small amount of mark-up on
the overdraft, which will help the bank to improve its revenue position.

Clean Loan:

Clean loan or clean overdraft is the credit facility extended to the customers without
any security. These types of small term loans should not be extend to any body,

50
because some times these loans are provided to blue-eyed people of the management
and they become a part of bad debts.

Cash Financing:

In this mode of financing the amount of credit not utilized by the borrower is remain
ed tax free. It is recommended that a small amount of interest should be charged on
this mode of financing. Because the bank does not utilize this amount anywhere.

Staff Relationship:

Good relationship among the staff members leads to the better performance in any
organization. It is observed that the staff relationship was normal but some time it is
noted that their existed a little conflicts among the staff members. So this sort of
attitude is not good because it weak the spirit of team work.

Improper Distribution of Work:

Proper distribution of work leads to success in every organization. Proper

distributions of work prevent the employee from overwork and under work situation.
For a smooth running of an organization proper distribution of work is very essential.

During the internship I observed that there was no proper distribution of work in the
bank, some of the employee work like ants while others sat idle staring here and there.
So this created a lot of overwork situation for some employees.

Favoritism and Nepotism:

In the City branch during the internship, it is observed that there is lot of nepotism and
favoritism.

When some of the employees are transfer to other places, due to there relations with
top management they can cancel their transfer in few weeks.

So I suggest that in the organization there should be no favoritism, nepotism and

politics and their transfer and promotion should be made on merit and provide
favorable environment to all the employees equally. They should be rewarded on their
performance.

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Inter Department Transfer:

It is observed during the internship that, there are number of employees who are
working on one seat since last two years. It can affect the performance and motivation
of the employees negatively. Therefore there should be the interdepartmental transfer
of the employees to make the jobs and the working environment interesting. And this
transfer should be for a reasonable time period.

Marketing Policy: The branch should adopt various marketing strategy and
promotion strategy to promote the bank and its products. These marketing strategies
may be very helpful. For this purpose the bank should conduct the seminars and
conferences within and outside the bank.

The NBP should adopt various prizing scheme just like allied bank (kar –amed
scheme) bank Alfalah (monthly income earning scheme) and various others. Media
and newspapers can be helpful in this regard.

Facilities In branch:

There is no proper facility for the customers in the bank when they enter the bank.
The proper furniture is not available for the customers. In the time of rush the people
move here and there in the bank which really create the disturbance.

So in order to main tain the good working environment the customer should be served
properly so that they can feel that they have taken the right decision to choose this
bank for the safety of their money. If the bank takes steps in this direction then, it will
increase the goodwill of the bank.

Complaint Of Customer:

There should be an inquiry desk to provide the information and to receive the
complaints of the customer in the bank.

There is no complaint box available in the branch and not any person appointed to
hear the complaints.

So I suggest that management should install a complaint box in the branch, and
recruit a special person for the guidance of the customer in the bank.

52
Analysis of the Business:

Proper analysis of the business should be conducted before extending any type of
loan. For this purpose professional training of the staff member is required.

53
 References
1. Gibson, Charles H, (2002); Financial Reporting & Analysis, 7th Edition. Prentice Hall
International Corporation”.
2. Lawrence J.Gitman, (2008); Principles of managerial Finance. 11th Edition, San
Diego State University”.
3. Siddiqi, Asrar H (2008); Practices and law Banking in Pakistan, (8th Ed), Royal Book
Company, Karachi.
4. NBP Annual report (2014), (2015 –National Bank of Pakistan
5. National bank of Pakistan 2015, executive committee, viewed 05 March, 2016,
<http:// www.nbp.com.pk>
6. National bank of Pakistan 2015, publications, annual reports, accessed on 09 March
2016<http:// www.nbp.com.pk/Publications/index.aspx>
7. Business recorder 2014, highest rating, viewed 05 may,2015,
<http://www.brecorder.com/top-stories/0/1175012/>

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