Final Report of NBP

CHAPTER # 01
INTRODUCTION OF THE REPORT
1.1 Background of Study:

Sarhad Group of Colleges has provided us with the opportunity to undergo an internship
program for purpose of practical experience in the field of management in any national or
international organization.
Report submission is an integral part for the fulfillment of degree requirements for BBA
(Hons). This report encompasses the theoretical and practical experience of an internee, my
learning and analysis, in the light of which recommendations are made. The organization,
which I choose for internship was “NBP Sikandarpur Branch Haripur”. The main purposes of
selecting the NBP are:
 It is a multipurpose organization.
 It is one of strong financial institution of the country.
1.2 Objectives of the Study:
The main objectives of studying the NBP are:
 To work practically in an organization.
 To understand the various operations and to equip with practical knowledge of the
National bank of Pakistan.
 To get a touch of professional life and get a chance to work with professionals.
 To improve the personal skills i.e., human relations, communication skills, working
with people, conflict resolution and data analysis etc.
 To understand and walk through the various operations and functions of the bank.
 To analyze the overall performance of the bank.
 To develop concrete and practical recommendations in the light of the analysis.
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1.3 Scope of the study:
The scope of my work is based on the observation of NBP Sikandarpur Branch Haripur.
During my internship in NBP Sikandarpur Branch Haripur, I did my practical work in four
(4) departments.
 Deposit Department
 Remittances Department
 Government Receipts and Payments Department
 Establishment and Advances Department
While working in these departments I have identified problems and gave recommendations to
overcome these problems. I have done comparative analysis of five years financial statements
and SWOT analysis of NBP Sikandarpur Branch. An overview of the five year performance
of the overall NBP is also included.
1.4 Limitation of the Study:
This study was conducted in accordance with the objectives of the study. Firstly, The study
may not include broad explanations of facts and figures due to the nature of the study.
Secondly, the problem of short time period also makes the analysis restricted as one cannot
properly understand and thus analyze all the operations of a bank just a very short time of
eight weeks.
1.5 Research Methodology:
The report is based on my two months internship program in NBP Sikandarpur Branch
Haripur. The methodology reported for collection of data is primary as well as secondary
data. The biggest source of information is my personal observation while working with staff
and having discussion with them. Formally arranged interviews and discussions also helped
me in this regards.
o Primary Data:
Primary data include Personal observation and Interviews of the Staff Members.
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o Secondary Data:
Secondary data consist of Manuals, Journals, magazines, Annual Reports, Internet and
Previous internship reports.
1.6 Scheme of Report
o Chapter # 1:
Chapter 1 includes introduction of report, background of study, purpose of study,

methodology of data collection, and scheme of report.
o Chapter # 2:
This Chapter includes history of NBP, nature of study, branches in foreign, business volume,
current position of NBP, departments in branch, vision, mission, goals, core values, corporate
banking.
o Chapter # 3:
This chapter includes product and services of NBP.
o Chapter # 4:
This chapter includes organizational structure, branch network of NBP and review of various
departments.
o Chapter # 5:
This chapter includes about the finance and accounts Department, sources and generation of
funds are discussed.
o Chapter # 6:
This Chapter includes work done by me during internship.
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o Chapter # 7:
This Chapter includes ratio analysis of income statement and balance sheet of financial year
of 2007, 2008, 2009, 2010, and 2011.
o Chapter # 8:
This Chapter includes competitor’s analysis of NBP.
o Chapter # 9:
This Chapter includes SWOT analysis.
o Chapter # 10:
This chapter includes recommendations, suggestions, and conclusion.
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CHAPTER # 02
OVERVIEW OF THE NATIONAL BANK OF PAKISTAN
2.1Overview of National Bank of Pakistan

The NBP was established under NBP Ordinance No. XIX of November 9, 1949. It was the
time when British Government devalued its currency in September 1949, India devalued its
rupees but Pakistan did not. It led to a crisis in trading between the two countries and India
refused to lift the Pakistani Jute. To solve this problem i.e. to export jute NBP was established
through an Ordinance of Government of Pakistan.
In the year 1950, the bank had one subsidiary in the name of ‘The Bank of Bahawalpur’ on
December 4, 1947 by the former Bahawalpur State. NBP was undertaking Treasury
Operations and Managing Currency Chests or Sub Chests at 57 of its offices where the
turnover of the business under the head amounted to Rs.2460 million.
1. Deposits held by NBP constituted about 3.1% of total deposits of all Pakistani Banks
in 1949, which rose to 38% in 1952.
2. NBP advances reached Rs.554.4 million by December 1959, which was one third of
the total schedule bank credit.
3. Growth in Deposits was accompanied by increase in Bank portfolio in advances. NBP

lent out to Textile, Yarn, Iron and Steel and played a pioneer role in support of
agriculture and commerce.
In the hope that banking would enter a new era of future development and progress, NBP
along with 13 other scheduled Pakistani banks were nationalized on 1st January 1974 by the
promulgation of the Banks (nationalization) ordinance 1974 and shares not held formally by
the Government of Pakistan acquired from the private shareholders after compensating them.
But it was subsequently realized that this step proved to be counter productive, hence reversal
has been initiated since January, 1991. Besides disinvestments and privatization of
nationalization of commercial banks, establishment of commercial and other banks in private
sector is being encouraged.
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Consequently large numbers of commercial and other banks have come into operations since
1991. Like all business in Pakistan, NBP was also put under a great pressure in this period
when the biggest bank of the country was faced with losses government of Pakistan also
made some reforms in this time. The Pakistan Banking Council was demolished and all banks
were put under independent boards of governors. Default of loans was the big issue since that
time in 1996 – 97 the government of Pakistan has led all the institutions of the country to
down size their staff so as to cut down the expenses. This was the demand of IMF. As a result,
a Golden Hand Shake scheme was offered to the employees of bank under which over 7500
employees were removed. In the second phase of the cost reduction program, the numbers of
branches were closed which included all the branches that were making losses.
The decision of May 28, 1998 blasts followed by a political decision of freezing of foreign
currency accounts also created a hard time for NBP. But still NBP performed well in such
difficult conditions and succeeded in the increase of deposits and also collected a reasonable
amount of money from the defaulters. The situation becomes worst by the economic crises of
East Asian Countries but again NBP performed well in that area and maintained its credibility
in these areas.
National Bank of Pakistan, as per its tradition, forwarded for revival of fifty six units with Rs.
3.5 billion in 1998 and also participated in the self employment scheme with Rs. 1.9 billion.
NBP also introduced ATM Card System and it also became a member of SWIFT in New
York. It has also prepared a plane for electronic banking and Electronic Commerce. By seeing
all these improvement we can say that the officials and directors of the bank are well aware of
all the necessity is of modernization.
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2.2Mission and Vision Statement of National Bank of Pakistan
MISSION STATEMENT
WHAT IS OUR BUSINESS?
“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 stakeholders value
• Discharging our responsibility as a good corporate
citizen of Pakistan and in countries where we
operate”.
VISION STATEMENT
WHAT WE WANT TO BECOME?
“To be recognized as a leader and a brand

synonymous with trust, highest standards of service
quality, international best practices and social
responsibility”.
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o Core Values:
 Highest standards of Integrity.
 Institutionalizing teamwork and performance culture.
 Excellence in service.
 Advancement of skills for tomorrow’s challenges.
 Awareness of social and community responsibility.
 Value creation for all stakeholders.
o Goals:
To enhance profitability and maximization of NBP share through increasing leverage of

existing customer base and diversified range of products.
 Excellence in Direction.
 Excellence in Growth.
 Excellence in Performance.
 Excellence in Management.
 Excellence in Achievement.
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2.3Nature of National Bank of Pakistan
NBP is a government bank as well as commercial bank and functional point of view it carry
out all the banking company works for government and general public. The nature of the
reorganization is public services-oriented. In the view of highly impressive growth and
development achieved during its 60 year of experience, NBP has been accepted as one of the
most progressive and dynamic component of the banking industry is Pakistan.
A bank, like the society it serves should be dynamic as banking is about people, customers
with their needs and opportunities and staff with skills, experience and resources. NBP has
shown dynamism since its inception. There have been many changes in structure, function
and services that they provided. These changes reflect the changing requirement of our
developing economy as a whole and those of industry, commerce and individuals.
NBP is the fastest growing bank in banking sector of Pakistan. NBP is basically government
bank and having different level of working at corporate to regional level. It is the primer
commercial institution of Pakistan that cater the large diversified customer base of 9.009
million the biggest figure in the country and conduct the agency function of State Bank of
Pakistan, in addition to provision of other financial and allied services. The profitability of a
bank largely depends on the amount given to people as loan and the type of people to whom
credit is given i.e. the credit worthiness of the borrowers. This strategy has worked quite well
for NBP. Deposits are collected from the people and invested in different projects. NBP
prefers to give loans to financially sound and reliable parties, after securing the collators.
NBP has an extremely well organized section. The staff is adequately trained, educated and
competent. They carry out extensive financial analysis before deciding on the Loan. Interest
charged on the loans potentially contributes to higher profits.
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2.4Business Volume:
The business volume of NBP is depicted in the following table which represents the bank
performance in detail as markup revenue, fee & commission, dividend, exchange of foreign
currency, securities gain and other income.
Rs in Million
2007 2008 2009 2010 2011
Mark-up revenue 50,569 60,943 78,125 88,681 95,325
other Income sources 13,545 16,416 19,109 18,150 19,337
Source: NBP annual report of last five years from website
2.4.1 Business volume in revenue:
The mark-up revenue has been increasing from the year 2007 to 2011 with a best pace.
However, in the year 2008, the revenue increased 20.5% as compared to FY-07 because of
the growth in the banking sector. In FY-07 the bank keeps its pace of speed and reach to the
20.51% as to last financial year Fee & Commission was increased from year to year and went
up to 28.2 % in 2009 as compare to year 2008. Similarly the dividend income, exchange
income and other income tend to increase from year to year. In FY-11 the income of bank is
going up as bank reach to its Sixty one year of existing and achievements.
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Business Revenue in ( Million)
2007 2008 2009 2010 2011
Years
50,569 60,943 78,125 88,681 95,325
Amount
Source: NBP annual report of last Five year from website
2.4.2 Business Volume in deposits:
Deposits are the life blood of organization and main sources of bank loaning. FY-07 the
deposits are increased 17.93% as compared to last year, however, in FY-08 it increased by
5.5% as compared to FY-07 due to increase in saving of the peoples. In the FY-09 it increased
to 16.2% increased as to last year. However in the FY-10 it increased to 14.5 % as to year 09.
In the FY-11 it increased only 11.53% as to last year growth. In this way analysis shows that
bank performance is good in FY-07 and 11.
Business Volume in Deposits in ( Million)

2007 2008 2009 2010 2011
Years
591,907 624,939 726,513 832,134 927,421
Amount
Source: NBP annual report of last five year from the website
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The business volume in terms of deposits was deemed to be increased from the year 2007 to
2011. It clearly showed that bank has succeeded to achieve market share and in the same
manner, the bank attracted the new account holders. The volume shown above is no doubt
was highest as compared to other banks.
2.4.3 Business volume in term of advances:
The advances of the banks depend upon the deposits from the clients. As the deposits
increased from year to year, definitely, the advances also increased as shown in the below
table ad diagram.
Business Volume in Advances ( Million)

2007 2008 2009 2010 2011
Years
340,677 412,987 475,338 478,887 525,046
Amount
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In accordance with the directives of the SBP, the bank is required to maintain general
provision against consumer portfolio equivalent to 1.5% in respect of secured advances and
5% in respect of unsecured advance. However, during the period, the SBP vide its letter #.
BRD-04 (121-06)/2007/3707 dated April 19, 2007 has allowed the bank to maintain general
provision for the Advance Salary Product at 3% instead of 5%. This has resulted in reversal
of general provision against the said product amounting to Rs. 638.050 million during the
period.
2.4.4 Business volume of Investment:
Business investment is showing the trend of business development and its expansion
program. The investment of NBP is depicted in the following table and diagram.
Business Volume in Investment ( Million)

2007 2008 2009 2010 2011
Years
210,788 170,822 217,596 301,078 319,531
Amount
In the analysis above table, it could be noted that the investment of the bank had increased
from year 2007 to 2011, and in the year 2008 it falls and in year 2009, it reaches to 217
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million rupees. In FY-2010 it reaches to Rs, 301,078 millions. In FY-2011 it reaches to Rs,
319,531 millions.
2.5Number of Employees in NBP:
Years 2006 2007 2008 2009 2010 2011

No of employees 14019 14079 15441 16248 16447 16924
Cadre Wise break up of Employee for the year- 2011

SEVP
EVP
SVP
VP
AVP
OG-I
OG-II
OG-III
Clerical Staff
Clerical staff
Non-
Total
11 23 250 962 1057 2971 3690 4426 3079 1407 16924
Employees are the central bone of any institution, without manpower institution cannot show
any performance.
Due to GHS-1999, many employees in various categories left the bank. But regular hiring of
70-80 MBA’ annually since 2002, 2003, 2004, 2005, 2006 & 2007 will further improve the
quality of workforce.
NBP firmly believes that a highly motivated and well-trained workforce is the key factor to
success. Heavy emphasis is being placed on institutionalizing a merit culture through
performance based rewards and career development. The Bank remains committed to
improve the quality and banking skills of its human resource, to ensure its position as a
market leader.
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CHAPTER # 03
PRODUCT & SERVICES
3.1Product Lines of NBP:

3.1.1 Premium Aamdni
o Amount of investment required from Rs. 50,000/- to

Rs. 5,000,000
o Investment period is 5 years
o Free Demand Draft, Pay Order and NBP Online Aasan Banking Free Cheque
Book / NBP Cash Card (ATM + Debit)
o Profit paid every month as follows:
Period Profit Rates
1 year 7.50%
2 years 8.50%
3 years 9.50%
Source: NBP annual report of
last five year from 4 years 10.50% the website
5 years 11%
o Financing facility available up to 90% of the deposit value Premature encashment

will attract penalties
o Zakat and withholding tax is deductible as per rules.
3.1.2 Premium Saver
o Minimum saving balance of Rs. 20,001 and a

maximum balance of Rs. 300,000*
o Free NBP Cash Card (ATM + Debit)
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o Two debit withdrawals allowed in a month and no limit on number of deposit
transactions
o Profit calculated monthly and paid on half yearly basis.
o Earning up to 7.25% p.a.
3.1.3 President Rozgar Scheme
President's Rozgar Scheme is for the person aged between 18 and 40 years, eligible for easy
financing for self employment in the categories below:
o NBP Karobar Utility Store
o NBP Karobar Mobile Utility Store
o NBP Karobar Mobile General Store
o NBP Karobar Transport
o NBP Karobar PCO/ Tele-Centre
3.1.4 NBP Saibaan Scheme
o Home Purchase / Home Construction
Financing Amount Up to 35 Million
Financing Period 3 to 20 Years
Debt to Equity 85:15 (Maximum)

o Home Renovation
Financing Amount up to 15 Million

Source: NBP annual
report of last five Financing Period 3 to 15 Years year from the website
o Purchase of Debt to Equity 70:30 (Maximum) Land and for

Construction thereon
Financing Amount up to 35 Million
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Financing Period 3 to 20 Years
Debt to Equity 70:30(Maximum)

Home Finance Facility outstanding with another bank can have it transferred to NBP through
a hassle-free process. All home financing facilities below Rs. 15 M Debt to Equity Ratio will
be 85:15 & for Rs. 15 M and above Debt to Equity Ratio will be 80:20.*50% of the loan will
be disbursed at the time of land purchase and rest of the 50% for its construction will be
disbursed in 4 trenches.
3.1.5 NBP Advance Salary
This is the most popular form of lending against the personal grantee of the authorized person
of the concerned department. In this form of lending maximum 15 net salaries is given as
advance on 11% mark up per annum on reducing balance method. There is no processing
charges, no collaterals & no insurance charges.
3.1.6 NBP Cash & Gold
This is a roll over facility of lending offered by NBP against gold. NBP give Rs.2500/=
against 1 gm of gold on 15.5% mark up per annum. The maximum period is one year & there
is no limit of credit.
3.1.7 NBP Kissan Dost
This loan facility Loans available for the formers for production,
development purposes, for purchase of tractors, for installation of
tube wells, for purchase agricultural implement, macro loans, for
go down construction, for construction of fish pond, for livestock
farming, for milk processing, for cold storage & for bio-gas
plants etc. This loan is offered by NBP at the farmer’s doorstep
on 9% mark up per annum. NBP Kissan Dost is available against
agricultural passbook, gold ornament & paper security.
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3.1.8 Pak Remit Scheme
NBP's Internet Based Home Remittance Service
o Product Information
Pak remit is an internet based Home Remittance Service. This service is available to U.S.
residents for sending money to their family and friends in Pakistan. One must have a valid
US Dollar account with a U.S. bank or a US Dollar credit or debit card in order to remit funds
through this channel.
Remitters in USA can log on to our user friendly website, www.pakremit.com and easily
remit funds to Pakistan from the comfort of their homes, in a matter of minutes. The service
is fully secure with advance encryption application and is available for use 24 hours a day, 7
days a week. Fees and exchange rate have been set at competitive levels and the remitters
have the ability to track delivery of funds as well.
o Process:
 Remitters log on to www.pakremit.com and after completing the registration process,

are able to remit funds. The whole process takes a few minutes.
 Funds in Pak Rupees can be sent to beneficiaries, having an account with any bank in
Pakistan, including NBP. While funds are credited directly to beneficiaries
maintaining accounts with NBP, a pay order or demand draft is couriered to other
banks for their customers. Pay order or demand draft can also be couriered directly to
the beneficiary’s office or home, if requested by the remitter.
 Funds in US Dollars can be sent only to a Beneficiary maintaining a US Dollar

account with one of NBP’s Foreign Exchange Branches.
3.1.9 NBP Protection Shield Scheme
Personal Accident Insurance
o Insurance Coverage:
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In case of Accidental Death (Including death due to Riots, Strikes, Civil commotion, Acts of
Terrorism and Natural Calamities like Flood, Earth Quake, Cyclones etc) provided that the
insured is not directly involved in these activities
Coverage of Rs. 200,000/- for Rs. 20/- per month
o Eligibility
 NBP PLS account holders
 18 years and above
3.1.10 NBP Student Loan Scheme

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.
o Eligibility
Under the scheme the students are eligible to apply for loans provided: He / She have
obtained admission on merit through normal course/procedure in the approved
Universities/Colleges of the public sector mentioned hereunder. He / She falls at the time of
admission within the age bracket of:-
For Graduation Not exceeding 21 Years

For Post-Graduation Not exceeding 31 Years
For PhD Not exceeding 36 Years
 He / She have secured 70% marks in the last public examination.
 He / She are unable to pursue studies due to financial constraints.
o Repayment
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The maximum period of repayment of loan is 10-Years from the date of disbursement of first
installment. The borrower shall repay the loan in monthly installment after six months from
the date of first employment or one year from the date of completion of studies, which ever is
earlier.
3.2 Services of NBP

1. Demand Draft:
For a safe, speedy and reliable way to transfer money, the NBP’s Demand Drafts at very
reasonable rates. Any person whether an account holder of the bank or not, can purchase a
Demand Draft from a bank branch.
2. Mail Transfer:
Movement of money safely and quickly anyone can use NBP Mail Transfer service. And
NBP offer the most competitive rates in the market.
3. Pay Order:
NBP provides another reason to transfer money using the pay order facilities. NBP pay orders
are a secure and easy way to move money from one place to another. And, as usual, NBP
charges for this service are extremely competitive.
4. Traveler's Cheque:
The traveler Cheque of NBP is very attractive for traveler in Pakistan and having reasonable
charges of these services at 700 branch network.
5. Commercial Finance:
NBP provides the facilities of finance its customer of very reasonable and comparative prices.
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CHAPTER # 04
NBP STRUCTURE
Organizational structure is the framework which defines the boundaries of the formal
organization and organizational operation area. A suitable organization structure depends on
the organizational operations that lead to better performance.
The NBP structure constitutes of a Board of Directors and an executive committee as the
governing bodies. The NBP has 1300 branches all over the country and 23 overseas branches.
The Head Office is operationally in charge of central affaires including the delegation of
powers and authority to the Regional Headquarters all over the country. These Regional
Headquarters direct the function of the 12 corporate branches. The NBP has 29 regions
(circles) in four provinces and organizational structure attached at end as Annexure-1.
4.1Comments on the NBP structure
The stationery provision of the company ordinance 1984 & Banker company ordinance 1962
allowed the NBP to control all affairs & managed by a Board of Directors. The Board
comprises of a President / Chief Executive and six (6) other members as Directors. Out of
total seven (7) directors’ two (2) directors are appointed by the Government of Pakistan MOF,
while the remaining directors are selected from renowned businessmen of the country and are
nominee of the Government from private sector. The Board formulates the policy and
delegate financial and administrative powers for handling the day to day business of the bank.
In order to assist the board of directors, an executive board is vested the responsibility of
supervision and control of affairs of the branches. In the management of banks, the board of
directors is at the top of the controlling bodies. Since there are no private shareholders now,
so there is no general meeting of the shareholders and are no elected directors. The board now
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consists of a nominated president, a secretary and other members. The secretary of the board
presents the annual report of the bank. The board has limited administrative powers. Board
members of NBP is led by the chairman who is the president or Chief executive officer
(CEO) of the bank, together with a selected group of six directors, who bring with them vast
experience and qualities. The government appoints these directors.
The board of directors is as under:
President Qamar Hussain

Director Ms. Nazrat Bashir
Director Tariq Kirmani
Director Mrs. Haniya Shahid Naseem
Director Mr. Zahid Hussain
Director Mr. Shahid Aziz Siddiqi
EVP (Secretary) Syed Muhammad Ali Zamin
The general direction and supervision of the affairs of commercial banks lies in their
respective executive boards. The federal government appoints the president, secretary and
other members of the board. The president and the chief executive of the board direct,
controls, and manage the affairs of the bank.
NBP has an executive committee with the President as its Chairman, 5 senior executive vice
presidents (SEVPs) as its members and President’s advisor as an observer. This body looks
after to the day-to-day affairs of the bank, having sanctioning authority for financial and
business proposals.
The President is the administrative head of a bank. He presides over the meetings of the
Executive Board, manages and controls the affairs of the bank. The president holds office at
the pleasure of federal government.
In order to improve the management and operation of the bank, it has been split-up into a
number of divisions; detail of these divisional and regional committee organogram is attached
at end Annexure 2. The Head office of NBP is at Karachi and the Group Chiefs controls all
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the divisions of the Bank. The Group Chiefs are directly reporting to the President of the
Bank.
4.2 NBP Sikandarpur Branch Haripur:
Sikandarpur Branch Haripur is situated near the “Sheranwala gate Haripur”. It is the most
important organization for the whole area of Haripur. Large numbers of business centers are
very close to the National Bank. This branch was established in 1979. Sikandarpur Branch
Haripur has staff more than 15 persons as employee.
All of them are most experienced in their respective fields. They are very cooperative with
each other as well as with customers. Through them we can have a complete picture of this
branch of NBP. This type of bank or organization is most important for the study purpose to
get more practical approach. This branch shows the real image of NBP as well as banking
field.
Keeping in view the size of the branch the operation manger is directly responsible for some
of the operational functions depending on the nature of activities in the branch.
The Operations comprise of Cash Counter Services and Customer Services. The Branch
Manager with the assistance of relationship officer(s), (if required) will concentrate and fully
devote to credit marketing and business/deposit development. Operations manager will report
directly to the Regional Chief Operations with dotted line reporting to the Branch Manager. A
Compliance Officer is also present in this branch. He is responsible of the checking of the all
the work done in the bank. Whenever an Inspector came to the bank, he provides him all
documents which he requires for inspection.
The branch organogram of NBP is attached end of Annexure -3.
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4.3 Review of various departments
4.3.1 Deposit Departments
There are few organizations to which funds are provided by their owners, but most of the
organizations depend on external sources for their funds need. Borrowing funds from
different sources has become an essential feature of today’s business enterprises. But in the
case of a bank borrowing funds from outside parties is all the most vital because the entire
banking system is based on it. The main function of a bank is to receive deposits and lend
them to earn interest. Therefore, deposits are considered to be the “life-blood” of a bank. The
Deposit Department of NBP, Sikandarpur Branch Haripur mainly performs the function of
1. Opening of Accounts
2. Closing of Accounts
3. Issuance of Cheque book
4. Issuance of Statement of Account
NBP Sikandarpur Branch Haripur offers local currency accounts.
o Types of local currency accounts

1. Current Account:
These are payable to customers upon the demand and the bank is bound to honors the Cheque
to the extent of the balance in the account. These deposits are treated as current liabilities by
the bank. No profit is given on these deposits and no service charges are deducted by the
bank. A higher percentage of cash reserves are kept against these deposits by the bank. The
initial amount required for opening of such an account is Rs. 500/-
2. PLS Saving Account:
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The main objective of the savings deposits is to encourage saving among peoples of small
(such as children, married and household women etc) and initial deposit must be in cash.
Cheque may only be accepted as part of initial deposit in case of undoubted parties & on the
personal responsibilities of Managers. The depositor is issued with a Cheque book for
withdrawal. Profit is paid at a flexible rate calculated monthly or semi-annually. Usually,
there is no restriction on the withdrawals and the amount of money withdrawn is deleted for
assessment of profit which discourages unnecessary withdrawals from the deposits. PLS
saving account can be opened with an initial deposit of not less then Rs.500/-. Withdrawals
are allowed twice a week. PLS saving account may be opened in the name of an individual or
jointly in the name of two or more persons.
3. Term Deposit Account:
There are the deposits that can be withdrawn after a certain specified period of time. The
period of time varies from three months to five years. On these deposits return / interest
varies with the duration for which the amount is kept with the bank. The rate of interest /
return on term deposit is higher than that of a saving deposit. Its interest / return are
unaffected for the duration of the deposit irrespective of market fluctuations. Term deposit is
best suited for short-term investment. Individuals as well as joint account can be opened by,
sole proprietorships, partnership, joint stock companies, limited companies, clubs / trusts,
administration, executors, etc. Profit is paid at the maturity of deposit. On these deposits
premature withdrawal is permitted but against a reduced rate of interest as agreed at the time
of deposit.
4. Finance Facility:
Bank also extends finance facility to clients against saving and fixed term deposits on
comparatively low markup rate. The deposit is kept under lien; however the customer may
withdraw the profit amount credited to his account. Opening of an account with the bank it
required the documents are formal request, obtaining introduction, specimen signature and
minimum initial deposits
5. Accounts Term and Condition:
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Against the submission of the bank's prescribed application form, duly introduced in the
manner provided and on supply of documents required, the account is made fully functional
under certain conditions. In case of account on PLS basis, bank invest the amount in any
manner it considers under PLS system.
6. Deposits:
All money to be deposited to the credit of an account is accompanied by pay-in-slip showing

the name and number of account to be credited. Putting Bank's stamp under the signatures of
two bank officers on the pay-in-slip then authenticates the entry.
7. Withdrawals:
Withdrawals from the account can be made only by mean of Cheque supplied by the bank.
Cheque should be signed according to the specimen signature.
8. Statement of Account:
Account statement is provided to the customer on demand by the bank. In these statements
the bank assures that all debit entries are correct. In case of error, the bank passes an adjusting
entry to rectify the error.
9. Closure of Account:
While closing the account, the account holder returns the unused Cheque and passbook to the
bank. The customer also withdraws the credit balance of the account (if any).
10. Issuance of Cheque book:
Before issuing anew Cheque book the bank is required to give requisition slip to the
customer. The customer put his signature on the requisition slip. After verifying the signature
the cost of Cheque book is charged.
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4.3.2 Remittance Department
Remittance is a major function of the bank. It is the transfer of money from one place to
another place without directly involving cash. By proving this service to the customers of the
National Bank earns a lot of income in the form of “Exchange”.
There are two types of bills remittance:
1. Remittance inward:
“Cheques & Drafts received for payment and clearance or drawn on us from customer or
other banks on behalf of their customers is called remittance inward”.
2. Remittance outward:
“All instruments issued by us, which are drawn on other branch of the same bank or
instruments deposited for collection from other bank locally or out of the city are called
outward remittances”. Bills remittances & collection are mainly lies under two heads i.e.
Local Short Credit (LSC) & Short Credit (SC).
o Local Short Credit (LSC):
All bills for remittance & collection from customer or bank within the city are recorded
under this head in LSC book. These bills are passed along with a covering schedule &
Advice/ Ex-advice to Sikandarpur Branch of the bank, from where an agent of SBP received
that bill for clearance.
o Short Credit (SC):

All bills for remittance & collection from customer or bank outside the city/ country are
recorded under this head in SC book. If bill is drawn on the bank itself then it passed along
with a covering schedule & an Advice/ Ex-advice directly by courier service to the concerned
branch on which it is drawn for realization. If bill is drawn on another bank then it is passed
to the Sikandarpur Branch of our bank of mentioned city for realization.
NBP deals with the following type of remittances:
1) Demand Draft (DD):

“Demand draft is a written order given by the one branch of a bank on behalf of customer to
another branch outside the city of the same bank for a certain amount to the certain person”.
It is an unconditional order. The payee is not bound to have an account in the bank. It is
27
issued on the request of customer and bank receives the charges & exchange. Exchange rate
is based on the amount of the instrument.
o Procedure for Prepare Demand Draft
1. Name of the parties involved, Date, Amount to be sent & Account number (if DD is
crossed)
2. A credit voucher is filled in order to get the exchange commission & preparation charges.
3. The sender deposits the total amount of the two vouchers i.e. the debit and credit
vouchers.
4. Then the cashier sends the cash receipt voucher to the accounts department and the
account records the amount paid in his cash scroll.
5. Accountant gives the DD leaf along with the DD voucher to his assistant who records the
sender’s name, amount and receiver’s name. After writing all the information in the DD
register he gives it to the officer along with the DD for authentication.
6. Head Cashier and Operations Manager make a secret code with the help of code book;
this code is written on the advice &Frankfort.
7. After authentication the DD is handed over to the sender and bank sends the advice with a
Frankfort (debit f-15) to the concerned branch. DD documents must have a TR code
which is 22. So when the party presents the DD in the concerned branch, its payment
could be made.
2) Mail Transfer (MT):

It is the transfer of money from one branch to another branch of the same bank through mail
service. In mail transfer there is no need of advice as the amount is directly credited to the
receiver’s account. It is necessary for both parties to have accounts in the same bank. Its TR
code is also 22
o Procedure for MT:

1. First a request slip is filled in which the sender writes the amount to be sent, name,
account number of the receiving person with the branch name and date.
2. A credit voucher is filled in order to deduct exchange, postage charges according to the
amount of the mail transfer.
3. The sender deposits the total amount of the two vouchers in the cash department.
4. The cashier gives the voucher to the accountant after affixing received stamp and writing
the amount by red ink.
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5. Then the accountant writes the amount paid in the cash scroll and gives the MT to his
assistant.
6. MT leaf is filled according to the information provided in credit voucher. He also writes
the same information in the MT register. Then he gives the MT leaf and MT register to
the officer for authentication.
7. He takes two signature of the sender on the counter foil of the MT and counter foil is
handed over to the sender. He must applied his signature code with his signatures on MT
& its other documents, at the end the MT along with the Frankfort is sent to the concerned
branch through mail.
3) Telegraphic Transfer (TT):

This is the most urgent method of remitting the money from one place to another place. This
method is used when the sender desires to send money urgently, in this case the sender
request the manager of the branch to issue TT.
o Procedure for TT:

For sending the TT the manager applies a test. In the test the manager uses a coding
technique. He writes his own signature code, which is allotted to him as the bank branch
code. After making all the confirmation, the concerned branch makes the payment to the
receiver. If the sender wants to convey the same message through telephone then he has to
pay the charges of telephone along with the TT charges. First the person deposit the TT
amount along with the charges through the credit voucher then his TT sent to the relevant
branch. Its TR code is 21.
4) Pay Order (PO):

A pay order is a written order issued by the bank on its own branch, drawn upon and payable
by itself to pay a specified sum of money to the person. The purpose of a pay order is to
transfer the fund from one place to another. It is usually not issued in favor of the parties of
other cities. Usually the pay order is issued for the local transfer of money between two
parties. Every purchase of bank is paid through Payment Order e.g. Establishment charges.
o Procedure for PO
29
If the purchase of the branch is of huge amount then first the manager writes a letter to the
Zonal Chief in order to get sanction of the purchase. Then the advertisement of the purchase
is given in the newspaper in order to invite the contractors. But if the work is small then the
branch manager has discretionary power to select the party whose rate is lowest. After
finishing the work the contractor submits the bill of purchase on his stamp pad. Then the
bank issues a pay order, against the pay order the contactor gets the amount from the issuing
branch.
There are two main types of collections (a) Collection inward (b) Collection outward
1. Collection inward:
All Cheques and drafts deposited by the customer for collection from other bank locally or
out of the city are called collection inward.
2. Collection outward:
All Cheques and drafts of NBP when deposited in any other bank for collection then those
banks send that Cheques to NBP for clearance & collection through the agent of SBP, on
behalf of their customers.
o Procedure:
1. Endorsement checking: Every cheque received for collection must be checked by

Deposit section to ensure that the cheque is genuine, its particulars (date, amount,
drawer’s signature, crossing stamp, name of title, & A/c No.) are accurate etc.
2. Test Code Checking: After checking the particulars of the cheque, then it passes over to
Operations Manager for checking the accuracy of test code applied on it.
3. Signature Code Checking: After test code checking, Signature Code must be check by
the Incharge of remittance & collection section.
4. Record the Cheque: All the particulars of the cheque are written in an advices received
folder.
5. Clearance: After checking all requirements, a Frankfort affixing with a stamp of “your
LSC/SC is paid” & TR code i.e. 27 is send to SBP.
6. TRV (Transfer Voucher Register): Before sending back the cheque with an advice, the
date of sending, advice number, & sender bank name must be recorded in TRV register.
4.3.3 Govt. Receipt & Payment Department
o Govt. Receipt
1. Utility bills: All kind of utility bills are accepted at NBP branches
30
 Procedure: The cashier in cash section receives utility bills. The cashier posts the amount
of bill in respective scroll and at the end all the amount of collected bills is transferred to
the respective account. Then representative of the concerned department collects the
amount in the shape of M.T. (Mail Transfer). The bank takes the collection commission of
Rs. 2 per bill from each type of bill.
2. Federal and Provincial Taxes: Federal Taxes are: Income Tax, Central excise Tax, Sales
Tax & Domicile fees. Provincial Taxes included Provincial Excise Duty, Provincial Motor
Vehicle Duty, Duplicate fee, Transfer fee, Token Tax, Provincial Miscellaneous Tax,
Provincial property Tax & Agricultural Tax.
 Procedure: The customer deposits two or three copies of tax Performa with cash or
through transfer. The cashier enters this Performa in govt. scroll and one copy returned to
the customer. At the end of the day a summary is prepared and the total amount is credited
to the relevant head.
 Govt. Payments
1. Disbursement of Govt. Pensions and Salaries: National bank is fully authorized to

disburse the pension to the Govt. and Army retired personnel.
 Procedure: For the distribution of pension the branch maintains the pension register. In
order to get the pension, first the pensioner submits his pension voucher with his pension
book, that voucher sent to the cash department for the payment to the pensioner after
posting into his account.
4.3.4 Establishment Department

In National Bank, establishment department works for the maintenance of different types of
expenses and for the provision of funds for different activities in the branch. The in charge of
this department has two types of register.
o Charges account register.
o Suspense accounts register.
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1. Charges account Register: All routine expenses of the branch are recorded in the
charges account register under the specific heads as follows:
 Expenses for Existing Employees: the expenses of the existing employee are recorded
according to the following heads:
1. Basic salary: This account deals with the salaries of the employees within that branch
when bank have to pay the salary of any employee the amount of salary is debited to the
charges account.
2. Allowances: Under this head different allowances are paid to employees. But these are
attached with salary and paid with the salary.
3. Provident fund: It is deduction from the employee’s salaries, which is paid out at his
retirement.
4. Medical attendance: When some employee suffers from any disease the bank allocate
fund for him and this amount is debited to charges account of the patient.
5. Staff welfare: To improve the efficiency, the bank provides some special facilities and
the fund is provided from the welfare account.
6. Bonus: When the efficiency of employee’s increases and bank earn profit more than
expectation then bank gives bonus to the employees. The provision of bonus is done
through bonus account by debiting to the charges account.
7. Liveries: If the bank needs some uniform for some employees like messengers, peons &
guards etc. the funds are provided from liveries account.
 Traveling Expenses: It is for officers who visit different branches for the purpose of
auditing. The bank through this account pays their traveling expenses. Under this account
the transportation expenses of employees are also maintained for example, when a
manager goes to attend the meeting in any other city or country his expenses on
transportation are paid from this account. Similarly when some one goes for any official
work to other branch or head office the traveling expenses are paid from this account.
 Expenses for office use:

1. Cash carry expenses
2. Taxes
3. General Insurance
4. Lighting & Power:
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5. Electricity bill of the branch
6. Sui Gas bill
7. Generator Oil etc.
8. Telephone bill
9. Repairs & Renovation
10. Postage &Stamp
11. Books & News papers
12. Maintenance exp.
13. Computer exp.
14. Freight exp.
15. Petty exp.etc.
 Suspense Account:
All accidentally losses happen in branch are recorded in suspense account e.g. medical
expenses of ex-employees, loss of fire etc. These are not routine expenses.
4.3.5 Cash Department

The cash department is that through which all the receipts and payments of bank are made.
Also the bank’s cash record remains with this department. There are two types of books used
in this department a cash receipts and cash payment book.
1. Cash Receipt Book:
In which the cashier records the entry when some one comes to deposit some amount. The
clients come with pay-in or deposit slips and the cashier receives the amount according to the
pay-in slip, sort outs the notes, puts a signature on slip, stamps it and record in cash receipt
book. After stamping the slip the cashier returns the pay-in slip to the customer. Then
customer goes to another bank officer, he again record this voucher into his cash scroll and
returns one part of the pay-in slip to the customer and keeps the other part for the record.
2. Cash Payment Book:
When some client comes to the branch to withdraw some amount from his account, after
getting the token from deposit section he goes to the cashier, cashier checks his token and
Cheque which is referred to him from deposit section. The cashier makes to him required
33
payment and receives the token from the customer. After recording all the cheques in his
book he returned the cheques to the deposit section.
 Petty Cash: Petty cash (Rs. 100 only) for the stationary expenses of the branch is
handled by this section. But cheques of Rs.10 each can only withdraw it.
 Hand Cash: Head Cashier is allowed to retain a limited amount as hand cash that is
Rs.1000 now a day. Remaining balance of cash collection at the end of the day is
locked in safe. This safe opens with two keys, one is hold by cashier & other is hold
by operational Manager. Only one key cannot open the safe.
CHAPTER # 05
FINANCE /ACCOUNT DEPARTMENT
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5.1 Structure of NBP Finance
The finance department is the back bone of any organization which provides the flow of
funds towards organization project. Here the no of employees working in this department
provides the best services to manage its assets effectively.
No of employee working in accounts and finance department of NBP

S# Name of Department
SEVP
SVP
VP
AVP
OG-I
OG-II
OG-III
Clerical
Clerical
Non-
Total
1 Corporate & Investment Banking 1 4 1 6 4 2 - 2 4 24
Group
2 Credit Management group 1 2 3 8 - 2 - 3 13
3 Treasury Management Group 1 2 2 3 2 1 - 3 4 18
4 Commercial & Retail Banking 1 3 1 4 - 3 4 1 5 22
Group
5 Financial Control Division 1 2 2 3 1 5 1 - 4 19
Source: Head office Branch record
In NBP, the Finance Department headed by Executive Vice President is main controller and
the organogram is attached in Annexure-3.
This Group comprising of a team of 24 professional headed by SEVP. The group is sub
divided in the sub groups, corporate banking & investment banking. The Corporate Banking
relates to activities relating to financing of big customers of Rs.100 million and above. The
group formulates the business strategy to target the big customers & multinational
corporations & big business houses blue chips. The overall policy, procedure, relating to
facilitation of corporate clients is made in comparison the competitor’s policy (is) within the
policy framework of the Bank. Similarly, this group focuses on the need and requirements of
the big clients relating to mobilization of deposits as well. The formulating of deposits
schemes for attracting large deposit and the rate of returns to be offered to such clients is a
job of this group. This group has been assigned Administration business discretionary
powers. Any thing which exceeds the financial powers of the group is directly referred to the
board for necessary approval. The group focuses on overall advances and deposits running at
specific branches and monitored the same. Similarly, the group devises investment policy of
the bank. All deposits lying with the bank has to be invested so as to fetch a reasonable return
35
for the bank as well as for the depositors. The bank keeping in view the overall deposit basket
and formulates investments in a diversified manner. Not to put all eggs in one basket. The
group also devises the rate of return the Head Office has to pay to branches so as to ascertain
the cost of fund. Accordingly, after assessing the intermediation cost the new cost of fund is
ascertained. The Investment Banking Group always invest above the cost of fund so as not to
distribute the profit to the branches but also to retain a reasonable rate of profit for the bank
as well.
The credit management group is comprises of team of this group comprises of (13)
professional headed by one SEVP. The main areas of activity of this group are here under:
o Formulation of credit policy.

o Monitoring & implementation of credit policies.
o Assessment of credit related risks & methods to mitigate the same.
o Policy to devise recovery of advances.
o NPL and devise policy for its recovery.
o Recovery, write-off / waiver of bad loans.
o Suit filed cases, settlement / follow up.
o Restructuring, reorganizing renewals, moratorium of credit.
The Group through Regional Credit Management Chief circulates & implements the policy
within the bank.
The treasury management group comprises of 18 professional headed by one SEVP. The
main job of TMG is to keep control over the overall resources (deposit) of the bank. It
devises the policy and procedure relating to foreign currency deposits sale / purchase
disposed / transfer and its investment with the Govt. treasury. The pricing issues of FC are
also dealt by the same. The policy is formulates and then it is implemented through Regional
Operations Chiefs in the Regional Office and that too in the branches.
Commercial and retail banking group comprises of 18 professional headed by one SEVP. The
main job of TMG is to keep control over the overall resources (deposit) of the bank. It
devises the policy and procedure relating to foreign currency deposits sale / purchase
disposed / transfer and its investment with the Govt. treasury. The pricing issues of FC are
36
also dealt by the same. The policy is formulates and then it is implemented through Regional
Operations Chiefs in the Regional Office and that too in the branches This group comprises
of a team of professional of 22 person headed by SEVP. The activity has been sub divided
into: two groups Commercial Banking Group & Retail Banking Group.
All finances extended to businessmen and commercial organizations up to Rs.100 million are
being dealt by this group. The group main areas of activity are:
o Policy formulation of commercial lending.

o Implementation of commercial lending policy in the branches.
o Pricing policy of commercial lending.
o Procedures for extension of loans.
o Recovery policy.
o Write off and litigation & restoration.
o Recovery of NPL and its treatments.
The policy is implemented through Regional Credit Heads sitting in the Regional offices.
This group deals the following credit relating assignments
o Developing Consumers products for retail customers.

o Marketing of retail products.
o Systems & procedures of retail products.
o Previewing / recovery of retail products.
o Security / collateral of retail products.
o Risk investments and mitigation of retail products.
o Recovery procedures for consumer’s loans.
o Write off / waiver off credit portfolio.
o Change / modification /collection & Recovery of retail products.
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5.2 Financial Control Division
This division comprises of 19 professionals headed by the SEVP. The Division controls
overall financial issues relating to overseas branches of NBP and foreign branches of
overseas countries. The NASTRO AND VASTRO accounts are being looked after by this
division. This group keeps a close eye on overall financial transactions routed to and from
overseas branches of NBP as well overseas branches of foreign banks as well.
Furthermore, the transaction relating to import / export are taken core of this division.
Similarly, the cross borders, indemnities and guarantees instead all risk undertaken are also
looked after by this division. The service charges on all such services are also determined and
advised by this division to operations group for implementation of the same through the
branches. This division is also responsible for Taxation, fund management foreign and local
investment activities based on short term and long term investment policies of the bank.
5.3 Accounting Operations in NBP

o Various departments use debit and credit voucher for recording the transactions.
o Accounting department receives the departmental journal from the departments to
gather with all the vouchers.
o Verify correction of total of all into departmental entries in departmental journals.
o Sort vouchers into general ledger a/c order debit separately from debit for each
account.
o From departmental journals add all debits and all credits for each general ledger
account and write total for each account in relative account and extend new balances.
o Prove debit and credit totals to department journal total. Write total obtained from
machines list for each contingent accident in general ledger and up data balances.
NBP deal three types of accounts.
1. Personal Account: The accounts of persons with whom the business deals. These are
called Personal Accounts.
2. Real or Assets Account. The accounts of properties dealt in by the trader in his
business. These accounts are classified as Real or Assets Accounts.
3. Nominal or Fictitious Accounts The accounts pertaining to sources of income &
expenditures. We called these accounts as Nominal or Fictitious Accounts.
38
o Rules Governing Debits & Credits
1. Personal Accounts.
Debits the account of the receiver & credit the account of the giver
2. Real or Assets Accounts.
Debit – What comes in?
Credit – What goes out?
3. Nominal Accounts.
Debit - Expenses & Losses
Credit - Incomes & Gains
5.4 Finance System of the NBP
NBP being a financial institution, proper arrangements are made to facilitate the work of
auditors & to enable him examine the Books of accounts and make a report on them to the
shareholders. NBP finance system play a dynamic roll in Bank’s development. To day,
external factors i.e. heighten corporate competition, technological changes, volatility in
inflation & interest rate; world wide economic uncertainty, fluctuating exchange rate, tax law
exchange & ethical concern have an increasing impact on NBP finance system. NBP finance
system has the ability to adopt these changes through rising of funds, investment in assets &
increasing in interest / mark up portfolio. In these areas, NBP Finance system has a vital roll
in optimal growth both in profit & customers satisfaction. In NBP at Regional Office level
finance system has no existence, but Regional Office is directly linked with Head Office. In
Head Office finance system is controlled by Finance System Group headed by an Executive
Vice President perform the following financial functions:
o Financial Accounting,
o Taxation.
o Equity of the Bank.
o Investment.
o Fund management.
39
5.5 Role of Financial Manager
The financial manager does all financial transactions with other financial institutions:
o Payment of cheques
o Payment of demand draft
o Cash receive from other financial institutions
Included
o Cheques
o Demand Draft
o Travel Cheques
All these transactions done by financial manager of bank, he can receive and pay all such
kind of payments with all other financial institutions. And all other transactions with any
financial institutions are also done by financial manager.
Lend money to other banks and also borrow money from other banks is also responsibility of
financial manager in bank.
Preparing the bank's annual accounts and coordinating external audit is also a direct function
of the finance manager.
5.6 Electronic Data in Decision Making

Banks use different types of electronic data in decision making. Internet is the major source
for collecting data. With the help of internet and intranet banks perform their lot of
transactions and it make possible to do E-banking.
Electronic data which is most useful in decision making include:
o D.D. System:
 Data related to computerized demand draft also include in decision making in banks
 Computerized D.D. includes electronic and hard copy demand draft.
o O.B.C (Outward Bill for Collection):
 Banks add data of cheques which is sent by bank to other banks for collection.
o Electronic Reports:
40
 After getting information from ATM and Emails banks make electronic reports.
 Such kinds of reports are very helpful in decision making.
o Software used by Bank in Decision making
Today banking is becoming more and more complex with the introduction of new products,
services and enhancing regulatory compliance requirements. It is the use of information
technology that can improve the customer’s services and reduce the cost at the same time.
NBP adopted “IBM Software” for service providing motives, the “IBM Software” categories
into two sections.
 BBO (Bank Branch Office)

 EBS (Electronic Banking System)
o Electronic Banking System
EBS is used for any kind of transaction within the bank .i.e. Receipts and payments, Bills
Collection, Tax receipts, etc.
BBO is use for remittances.
The use of IBM Software is one of the main purposes of collection electronic data for the
bank that further helpful in future in decision making. Now a day, the bank plans for
transformation of the entire I.T. architecture by implementing a core Banking Solutions.
The bank prepares financial statements, agricultural reports, customer’s management, risk
management and other reports for decision-making purposes. The I.T. system of the bank not
only increases distribution capabilities but also simplify internal procedures thereby reducing
the cost and lead-time for services. Now the Sikandarpur Branch of NBP is trying to
computerize its all of activities for this purpose various aspects of extension and development
have been taking into consideration.
5.7 Sources of Fund in NBP
The fund available to NBP for purpose of its business comprise of the following.
41
Paid up capital, the reserve fund
1. Deposits.
2. Borrowing from non-deposit sources.
These are very important sources of fund in NBP. And these sources play a vital roll in
maximization NBP’s financial figures.
Besides these basic sources, NBP give various services to its customers in the form of lending
& assisting daily banking transactions. In exchange of these services bank gets Mark-up,
exchange & commission from the customers which well contribute NBP’s funds.
Due to strategic business policy adopted by NBP in the last five years, these sources increase
very rapidly as shown below.
(Rs. In Million)
S.# Sources of Funds 2007 2008 2009 2010 2011
1 Reserve Fund 15,772 19,941 23,395 25,129 25,343
2 Deposits 591,907 624,939 726,513 832,134 927,421
3 Borrowings 10,886 40,459 44,828 19,657 26,371
In the above table the source of funds are which reflect the banks performance how it use
different sources of funds which varies accordingly, deposits are presenting extraordinary
growth in the FY-07 to FY-2010 that is approximately 17.93% in FY-07 as to last year, in FY-
08 it decreased slightly and growth rate was 5.80 but in FY-09 and 10, growth rate was 16
and 14 % respectively from previous years. Borrowing of bank is also increased in the year in
the year 2008 and 2009 and reduced in 2010.
5.8 Generation of Funds in NBP:
42
NBP mostly generate funds through loaning / Investment & Commission / Exchange. Giving
loans to various clients, NBP gets Markup / Interest from the client who is greater then the
bank paid to Depositors on their deposits.
NBP also giving various types of services to customers / clients, on which the Bank gets
Commission & Exchange. In this way the Bank generate fund. During the last five years from
2006-2010, aggregate profit of NBP increased. All the source of funding contributes but the
major portion was Net Mark-up / Interest Income followed by Fee Commission & Brokerage
Income.
(Rs. In Million)
S Generation of Fund 2007 2008 2009 2010 2011
1# Net Mark-up / Interest Income 28,907 26,087 6,856 33,502 46,81
2 Fee & commission 6,782 7,925 8,997 9,872 9,588
0
3 Dividend income 3,263 2,879 1,897 1,067 1,747
4 Exchange income 1,043 3,969 3,104 2,279 3,132
5 Gain on sales of securities 2,342 395 4,593 2,512 3,390
6 Investment income (32) 2 2 7 -
7 Other Income 147 1,245 553 2,183 2,520
41,01
Total Income 64,114 77,359 97,23 106,83 19,33
4 year
Source: NBP annual report of last five year from the website 7
Above all figure for the FY-07 to11 Net Mark-up / Interest Income were vital sources for
generating of fund. The bank significantly grew its customers footing, continued to expend its
delivery channels & further improve its process efficiencies. Thus reinforcing its leadership
position in the market & enhancing its share of income contribution to bank. This business
signal posted excellent results with strong revenue growth.
5.9 Allocation of Funds in NBP

NBP allocates funds in the following sectors.
43
(Rs. In Million)
S.# Sector 2007 2008 2009 2010 2011
1 Cash & balances with treasury bank 94,873 106,504 116,669 115,657 131,676
2 Balance with others bank 37,473 38,345 28,786 30,743 27,582
3 Lending to financial institutions 21,465 17,128 19,684 23,051 44,380
4 Investment 210,788 170,822 217,596 301,078 319,531
5 Advances 340,677 412,987 475,338 478,887 525,046
6 Operating assets 25,923 24,218 25,201 27,621 27,454
Source: NBP annual report of last five year from the website year
As per international practice NBP never keep their fund liquid but keep them invested in
various sector to expand their business. In order to diversify risk & yield reasonable return on
investment of deposit holders. NBP devised its policies of collection of fund, so that risk of
loss is minimized, above all SBP made certain restrictions with regards to total funds of the
bank. NBP is duly bound to adhere strictly to SBP regulations in this respect. The necessary
for doing is that SBP enforce cheek & balance on NBP, so that NBP may not invest in high
risky project. It is also predictable to safeguard the interest of depositors. It is policy of NBP
as instructed by SBP that all Banks are required to maintain it least 20% of total time &
demand liabilities with SBP.NBP maintained at least 20% of the total time & demand liability
in a highly liquid security, so that in case of any immediate demand the bank is in position to
honors its obligation & pay cash to deposit holders. Similarly like other banks, NBP is
required to make investment in stock exchange approved companies not more then 5% of
total time & demand liabilities. However Bank is enforced to make investment in Govt
approved, keeping in view the available balance with the bank. Moreover most of the time
SBP through various regulation make diversion of the bank fund in selected sector of the
economy. However there is certain restriction imposed by NBP’s Risk Management Group
owning to which not more then 50% of the total allocation be made in secured & unsecured
advances. Moreover, as per SBP regulation NBP like other banks keep 5% of its time and
demand liabilities with SBP interest free as cash reserve ratio. Keeping in view the credit
expansion SBP may increase or decrease CRR.
CHAPTER # 06
WORK PERFORMED DURING INTERNSHIP
44
I joined National Bank of Pakistan, Sikandarpur Branch Haripur on 16 April, 2012. First day,
the manager introduced me about the functioning of the branch and the staff. The manager
told me that counter is the most important place of the bank. During the eight weeks of my
internship, I worked in different sections of the branch and did the maximum practice of
banking system details of which is as under:
6.1 General Banking

First of all, I was asked to work in different sections of general banking. I was attached to
Counter with Mr. Kamran Irshad manager operations that have good command on this
section. Here we dealt with new customer who wanted to get information and to deal with the
branch. This is a very interesting department because here we met people of different types
and deal with them accordingly. In this section, I observed the following functions:
6.1.A Cheque at Counter
A cheque to withdraw the amount is presented on the counter with the following requisites:
o Name of the Account Holder

o Current or previous date
o Amount in figures
o Amount in wording
o One signature of the account holder in the right bottom corner of the cheque and two
signature of the bearer on the back
o Branch Stamp in front of the cheque
o If the Account Holder uses thumb instead of signature then the Pass Book or attested copy
of CNIC is necessary with the cheque.
Operation’s officer checks and verifies all these requisites. If it fulfills all the requisites, it is
forwarded for payment after a certain procedure.
6.1.B Cheque Payment Procedure
After all the requisites are verified and then the excessive balance is checked and prescribed
amount is deducted narrated on the cheque, then SIGNATURE VERIFIED stamp (in case of
signature only) on the signature and a PAY CASH stamp are fixed and a Token is given to the
cheque bearer after writing Token No. on the specified cheque. Then the Officer G-II verified
45
the cheque and forwarded it to the cashier where the cheque bearer receives the amount from
the account.
6.1.C Issuance of Demand Draft
A Demand Draft is provided to the client in which client has to specify that bank it is drawn.
The amount both in words and figures is written on Demand Draft.
6.2 Bills Collections Department

I spent second week of my training in bills collection department. Mr. Muhammad Tahir who
is the in charge of this section. Here we collected utility bills like electricity bills, gas bills,
and telephone bills.
6.3 Deposit Department

Deposit department deals with Current, Savings, and Fixed Accounts. In current account the
bank does not give any interest and you can deposit the whole amount in lump sum in
business hours.
However in PLS savings account we can only withdraw up to Rs.25000/- without any notice
otherwise a prior notification of a weak is required to the bank if the amount to be withdrawn
is more than Rs.25000/-
Old ages are interested in Fixed Account usually. The rate of interest is higher more than that
of in Current and PLS savings Account but the amount cannot be withdrawn before a specific
time fixed by the client.
To open the account customer have to fulfill an application form and submit to the
concerning authority. In Current and PLS saving Account, a Cheque Book is issued to the
client and he becomes the Account Holder of NBP. I worked in this department for one and a
half week.
6.4 Clearing Department
In this department, I have worked for two weeks. Main branch receives the cheques from all
of its branches and makes the lots of these cheques again. Main branch sends these cheques
to the state bank of Pakistan where a clearinghouse exits. In this clearinghouse the
representatives receive their cheques and go back to their bank's main branch. Then the main
46
branch sends these cheques to their relevant branches where the validity of these cheques is
verified and the accounts of the relevant clients are affected.
The statement of clearing was submitted before 1.00 P.M. daily. The whole procedure of
clearing is completed within two days.
6.5 Remittances Department

I worked in this department for one week. This department deals in transfer of money from
one place to another or country by:
o Demand drafts
o Mail transfer
o Telegraphic transfer
In this department internees are advised only to observe the working of transfer of money
from one place to another place of the country by the above modes of transferring money.
During my stay in this department I observed that how demands draft be issued. The
procedure is as follows:
First the bank receives a written request from the customer to issue a bank draft. The written
request is either in banks standard form or separate paper signed by the applicant enclosed
with cash or cheques covering the amount of the draft and other charges of the bank.
While issuing a bank draft it is necessary that the draft should be free from alternations. All
the details must be written clearly in ink. After issuance a demand draft it is handed over to
the applicant and its advice containing the particulars of the draft is sent to drawer branch
with its necessary information and payment of the draft is making on its presentation.
CHAPTER # 07
RATIO ANALYSIS
7.1 NBP Balance Sheet of last five years:
NATIONAL BANK OF PAKISTAN
47
BALANCE SHEET
2007-2011
Rupees in Millions
Assets 2007 2008 2009 2010 2011
Cash & Balances with treasury Banks 94,873 106,504 116,669 115,657 131,677
Balances with other Banks 37,473 38,345 28,786 30,743 27,582
Lending's to financial institutions 21,465 17,128 19,684 23,051 44,380
Investments 210,788 170,822 217,596 301,078 319,531
Advances 340,677 412,987 475,338 478,887 525,046
Operating fixed assets 25,923 24,218 25,201 27,621 27,454
Deferred tax assets - 3,205 3,064 6,954 7,935
Other assets 30,995 44,550 59,565 54,027 65,973
Total Assets 762,194 817,758 945,903 1,038,018 1,149,577
Liabilities
Liabilities 7,062 10,219 10,621 8,007 -
Bills Payable 10,886 40,459 44,828 19,657 9,105
Borrowings from financial institutions 591,907 624,939 726,513 832,134 26,372
Deposits and other accounts 34 25 43 123 927,421
Liabilities against assets subject to finance lease 5,098 - - - 76
Deferred tax liabilities 30,869 39,657 42,456 46,798 -
Other Liabilities 53,952
Total Liabilities 645,855 715,600 825,417 906,595 1,016,926
Net assets 116,338 102,460 121,442 131,299 132,652

Represented by
Share capital 8,154 8,970 10,764 13,455 16,818
Reserves 15,772 19,941 23,395 25,129 25,343
Un-appropriated profit 45,344 52,456 62,458 67,602 68,359
Surplus on revaluation of assets-net of tax 47,067 21,092 24,826 25,113 22,132
Total Equity 116,338 102,459 121,443 131,299 132,652
Total Equity 762,194 817,758 945,904 1,038,019 1,149,578
7.2 NBP Income Statement of last five years:
NATIONAL BANK OF PAKISTAN

INCOME STATEMENT
Rs in Million
2007 2008 2009 2010 2011
Mark-up revenue 50,569 60,943 78,125 88,681 95,325
Mark-up exp (16,940) (23,885) (39,448) (45,170) (48,516)
Gross profit margin 37,058 38,677 43,511 46,809 37,058
Provisions (4,723) (10,971) (11,820) (10,009) (9,339)
48
Net mark-up income 26,087 26,857 33,502 37,470 26,087
Non Markup income
Fee & commission 6,782.00 7,925 8,997 9,872 9,588
Dividend income 3,263.00 2,879 1,897 1,067 1,747
Exchange income 1,043.00 3,969 3,104 2,279 3,132
Gain on sales of securities 2,342.00 395 4,593 2,512 2,390
Unrealized Gain or Loss on (32.00) 2 2 7 (41)
revaluation of Investment
Share of (Losses)/Profits form - - -42 -17 -
joint ventures
Share of Profits from - - 5 67 -
associates (Net of Tax)
Gain on revaluation of - - - 180 -
Previously held equities
interest
Other income 147.00 1,245 553 2,183 2,520
Total non mark-up 16,415 19,109 18,150 19,336 16,415
Total income 42,502 45,966 51,652 56,806 42,502
Non Markup Expenses
Administrative exp 14,206 18,171 22,817 26,732 30,117
Other (reversals provision 168 748 628 180 541
write offs)
Other charges 17 583 322 119 137
Non markup exp 14,391 19,502 23,767 27,031 30,795
Profit before tax 28,061 23,001 22,199 24,621 26,011
Taxation (9,027) (7,542) (4,100) (6,884) (8,406)
Profit after tax 19,034 15,459 18,099 17,737 17,605
2007-2011
7.3 Ratio Analysis
 Liquidity Ratios:
Liquidity Ratios are used to judge a firm's ability to meet short term obligations. It shows the
each solvency of a firm and its ability to remain solvent in the event or adversities.
7.3.1 Current Ratio:
49
Current ratios measure the number of times a company’s current assets cover its current
liabilities. The higher the ratio, the greater is the company’s ability to meet its short term
obligations as they come due. Current ratio is calculated by dividing current assets by current
liabilities. The ratio of the bank looks very attractive and stable as shown in the following
table and graph during the years 2007 and 2011. In the year 2007, it was 1.16 and goes to
1.10 in the year 2007, Again decreased in 2008 and was below 1 and remain till the year
ended 31.10.2011.
Current Ratio = Current Assets / Current Liabilities
Year 2007 2008 2009 2010 2011

705,276 745,786 858,073 949,416 1,048,216
Current Assets
609,889 675,642 782,005 859,921 962,898
Current liabilities
1.16 1.10 1.10 1.10 1.09
Ratio
 Leverage Ratios:
Financial leverage is the extent to which a company is financed with debt. The amount of
debt a company uses has both positive and negative effects. The more the debt, the more the
company will have trouble in meeting in its obligations. Thus the more debt, the higher is the
chance of financial distress and bankruptcy. On the other hand debt is the major source of
50
financing and banking industry typically uses the higher percentage of debt. Debt financing
provides significant tax advantage and its transaction costs are low than that of equity.
7.3.2 Debt Ratio:
Debt ratio shows the fraction of the company’s assets that is financed by debts. Creditor of a
company would generally like this ratio to be low. The ratio is derived by dividing a firm’s
total debt to its total assets. The ratio was improving in each year, it was 0.95 in the FY-02,
but continuously improved from year to year. And even in FY-07, it was accounted for as
0.85. In the year 2008 the ratio is increased by 2 percent. That is same to FY-07 and FY-2010,
but increase in 2011 by .01%.
Debt Ratio = Total Debts / Assets
Rs in Millions
2007 2008 2009 2010 2011
Particular
645,856 715,299 824,461 906,719 1,016,926
Total Debts
762,194 817,759 945,903 1,038,018 1,149,578
Total Assets
0.85 0.87 0.87 0.87 0.88
Debt Ratio
Source: Balance sheet of last five year
51
7.3.3 Debt to Equity Ratio:
This ratio indicates the extent to which debt financing is used relative to equity financing.
This ratio also shows a tremendous improvement from year to year. The reliance of the bank
on equity is increasing. The increase in the equity is because of constant increase in the
profitability.
Debt to Equity Ratio= Total Debts / Share holders Equity
(Rs in Million)
2007 2008 2009 2010 2011
Particulars
645,856 715,299 824,461 906,719 1,016,926
Total Debts
116,338 102,460 121,442 131,299 132,652
Shareholders Equity
5.55 6.98 6.79 6.91 7.67
Debt to Equity Ratio
Source: Balance Sheet of last five year
The relation between total debt and equity is very strong in the FY-07 and gradually increase
in FY-08. And during the following years this ratio is persistently increasing and in FY-11 it
is 7.67. It means that NBP more relying on debt financing instead of equity financing.
 Activity Ratio:
7.3.4 Total Asset Turnover (TAT) Ratio:
This ratio measures relative efficiency of total assets to generate sales.
52
TAT= Net Sales / Total Assets
(Rs in Million)
2007 2008 2009 2010 2011
Particulars
50,569 60,943 78,125 88,681 95,325
Net sales
762,194 817,759 945,903 1,038,018 1,149,578
Total Assets
0.07 0.07 0.08 0.09 0.08
TAT
In the year 2007, the ratio was 0.07; and remains constant 2008. It means that the ratio in
increase in assets and profits were the same. In 2009, due to global rescission many of the
business industries suffers badly but due to efficient management the bank successfully
maintain the last year performance. In the FY-10 the sales is goes up as compared to last year
and reach to .09 % of assets and in the year 2011 it decreases and reached to .08%
 Profitability Ratio:
7.3.5 Net Profit Margin:
53
It measures the profit that is available from each rupee of sales after all expenses have been
paid, including cost of sales, selling, general, and administrative expenses, depreciation,
interest, and taxes.
The ratio is calculated as follows:
Net Profit Margin = (Net Profit after taxes / Net sales)*100
(Rs in Millions)
2007 2008 2009 2010 2011
Particulars
19,034 15,459 18,099 17,737 17,605
Net profit after taxes
50,569 60,943 78,125 88,681 95,325
Net sales
37.64 25.37 23.17 20.00 18.46
Net profit margin %
Net profit margin of NBP has improved over time and its showing a decreasing trend. The
cost of goods sold decreased in year 2007. The administrative expense is increasing but other
charges have decreased first in year 2006 and then increased vastly in year 2007. One other
explanation might be that the tax rate on income has increased. In the year 2007, there is a
reasonable decrease and accounted for as 37.64%. In FY-09 the expenses increase and the
ratio from decline to 23.17%. In FY-11 the bank net profit margin is 18.56 % as compared to
last year it reduced by 1.9%.
7.3.6 Return On Investment (ROI):
54
Return on investment (ROI) or return on assets, measures profitability per rupee of
investment in assets.
The ratio is calculated as:
ROI= (Net Profit after Taxes / Total Assets)* 100
(Rs in Million)
2007 2008 2009 2010 2011
Particulars
19,034 15,459 18,099 17,737 17,605
Net Profit after Taxes
762,194 817,759 945,903 1,038,018 1,149,578
Total Assets
2.50 1.89 1.91 1.71 1.53
ROI %
The ROI figures of NBP show a consistent decrease over the last 5 years. The reason for this
decrease is due to decrease in the net profit of the bank. Although total assets are also
increasing but the decrease in the net profits are more than the total assets. ROI is in the FY-
07 is 2.5 percent and is decreased as compared to last year and reaches to 1.9% in FY-08 it
same 1.9 percent in 2009, 1.7 in 2010 and 1.5 in 2011. The reason is that assets increases
more as compare to the increase in net income.
7.3.7 Gross Profit Margin:
Gross profit is the difference between revenues and cost of goods or services sold. Gross
profit is critical because it represents the amount of money remaining to pay operating
55
expenses, financing costs, and taxes, and to pay for profit. Gross profit margin is the amount
of each sale rupee left over after paying the cost of goods or services sold. It is calculated as
follows:
Gross Profit Margin = Gross Profit / Net Sales X 100
(Rs in Million)
2007 2008 2009 2010 2011
Particulars
33,629 37,058 38,677 43,511 46,809
Gross profit
50,569 60,943 78,125 88,681 95,325
Net sales
66.501 60.808 49.507 49.065 49.105
Gross profit margin
During the year 2007 - 2008 gross profit margin ratio was healthier. Reason behind is that
the gross profits in these years were high as compared to the cost of good/services. In
following two years gross profit margin ratio decreases and almost 12% decrease in gross
profits. Although in FY – 2011 it again increased by 0.78% but not enough as compare to
FY-2007 - 2008. In last 2 years NBP the difference between interest earned and paid was
very short because of low rate of return and higher rate of interest on deposit to attract more
deposits and discourage lending as per monitory policy of SBP.
7.3.8 Return on Equity (ROE):
It is another measure of overall performance of a company.

The ratio is calculated as under:
56
ROE= (Net Profit after Taxes / Shareholders Equity) * 100
(Rs. in Million)
2007 2008 2009 2010 2011
Particular
19,034 15,459 18,099 17,737 17,605
116,338 102,460 121,442 131,299 132,652
Shareholders equity
16.361 15.088 14.903 13.509 13.272
Return on Equity
Return on equity of NBP is showing fluctuating trend in last five years. It is because the
shareholders equity is increasing with a constant change but net profit increased slowly. In
2007 ROE was 16.03% In the FY-08 the net income is decreased to 15.088 percent as
compared to last FY-07, due to recession. The ROE in the FY-09 is in decreases trend which
is constantly decreasing in 2011.
7.3.9 Earning Per Share
57
The ratio is used to measure the earning per share. This ratio is showing a how much earned
by each share by a bank. It can be calculated by the following formula.
ERP= Net Profit after tax/ no of outstanding shares
(Rs. in Million)
2007 2008 2009 2010 2011
Particular
19,034 15,459 18,099 17,737 17,605
815,432 1,076,377 1,076,377 1,076,377 1,076,377
No of share outstanding
2.33 1.44 1.68 1.65 1.64
Earning per share
In the above table the earning per share was very high in 2007. However in following years
performance of bank is reduced due to increased in heavy expenses on interest. In FY-07 this
ratio was 2.33 much healthier as compare to following years. In the FY-08 it reduced by 1.44
from 2.33.and again reduced in 2009 and reach 1.1.68 per share. In the FY-09 the
performance goes up and EPS is increased from 1.44 to 1.68 which is indication of batter
management and improvement of earning.
The earning per share shows that how much the earning per share. So the in the above
diagram we can see that earning per share in 2007, is 2.33% and there is some fluctuation in
following years, because it went from 2.40% to 1.65 which is not a very good sign for the
bank. In the FY-09 the EPS is improved as compared to last year and almost remains constant
in FY-2011.
7.3.10 Pre/ after Tax Return on Equity
58
The pre and after return on equity is used to calculate the return on capital after and before
tax how much earned by bank on its equity.
It can be used to calculate by the following formula.
Pre / after -tax return on equity: (In %)

Ratios 2007 2008 2009 2010 2011
Pre-tax Return on Equity 24.120 22.449 18.280 18.752 19.608
Return on Equity after Tax 16.361 15.088 14.903 13.509 13.272

In the above table the return on equity before the tax is 24.12 in FY-07 and 22.44 in the FY-
08 which decreased by 2 %. In FY-09 again reduced 18.8 % and 18.75 % in FY-10 and FY-
11 reached to 19608 %. However the returns on equities after tax were, 16.36, 15.09, 14.90,
13.51 and 13.72 percents respectively.
7.3.11 Return on Assets (Pre/ after tax)
Return on assets is used to measure how much return on assets pre and after tax.
59
It can be calculated by the following formulas
ROA= (Net Profit Pre/after Taxes / Shareholders Equity) * 100 (In %)
Ratios 2007 2008 2009 2010 2011
Pre-tax Return on Assets 3.682 2.813 2.347 2.372 2.263
Return on Assets after Tax 2.50 1.89 1.91 1.71 1.53
The return on assets is used to calculate the how much earned by assets. In connection to the
following the results is measured by the efficiency of assts pre and after tax. In the above
table the performance of assets decrease gradually from FY-07 to FY-08 in the results
performance is also decrease after tax is 2.50 to 1.89 respectively. In the FY-09 Pretax return
is 2.35 and 1.91 after tax is yet not improved as compared to last years. But in FY -10 again
pretax return slightly increases but after tax decrease and last year also decreased.
7.3.12 Capital Ratio:
60
Capital Ratio = Equity/Assets *100 (Rs. in Million)
2007 2008 2009 2010 2011

Share Equity 116,338 102,460 121,442 131,299 132,652
Total Assets 762,194 817,759 945,903 1,038,018 1,149,578
Capital Ratio 15.26 12.53 12.84 12.65 11.54
The capital ratio shows the relation between the assts to total capital. In FY-07 equity is 15.26
% of assets, which decreases gradually to 12.53 % in FY-09 which good sign of bank
development. In the FY-10 the performance is 12.65 and by the end of 2011 it reaches to
11.54%.
Source: Income NBP annual report of last five year from the website year
7.3.13 Return On Deposit:
ROD = Net Profit after Tax/ Deposits X 100 (Rs. in Million)
61
2007 2008 2009 2010 2011
Net Profit after Tax 19,034 15,459 18,099 17,737 17,605
Deposits 501,872 624,939 726,513 832,134 927,421

Ratio 3.22 2.47 2.49 2.13 1.89
Return on deposit in showing decreasing trend in the FY-06, & 07 but reduced in the 08 and
11, although the numbers of deposits are increasing. It shows the earning of deposit are
reduced which leads to economic down trends.
7.3.14 Advance to Deposit
This ratio is used to measure the relation between the deposits to advance. It shows how
much earned by the advance to its deposits.
It can be calculate by the following formulas.
62
Advance to Deposit = Advance/ Deposits*100 (Rs. in Million)
2007 2008 2009 2010 2011

Advances 340,677 412,987 475,338 478,887 525,046
Deposit 501,872 624,939 726,513 832,134 927,421
Ratio 57.56 66.08 65.43 57.55 56.61
This ratio used to show the relation between advances and deposits.FY-07 it is 57.56% and
66.08% in 08. In FY-09 65.43% again reduced to 57.55% in 2010 and in 2011 it again
reduced by 1% and reached to 56.61%.
7.3.15 Investment to Deposit
This ratio is used to calculate the relation of investment to bank deposits which can be
calculated from the following formula
Investment to Deposit = Investment / Deposits X 100 (Rs. in Million)
63
Particulars 2007 2008 2009 2010 2011
Investment 210,788 170,822 217,596 301,078 319,531

Deposit 591,907 624,939 726,513 832,134 927,421
Ratios 35.61 27.33 29.95 36.18 34.23
In FY-07 above ratio was 35.61% in FY-08 decreases to 27.33%, in FY – 09 it increases to

29.95% and again in 2010 it increases to 36.18% and 34.23% in following year. This trend
shows inconsistency in investment to deposit ratio. Which clearly shows that bank adjust the
invested amount according to the situation and with the current market situation.
Source NBP annual report of last five year from the website year
7.4 Horizontal or Index analysis
Horizontal analysis or index analysis is used to determine the trends in financial statements
by setting the base year and the other year trends which show the changes in the year to year
how company financial statement item change over the period. The item trend is individual
performance can be measured and comparison is made with base year.
7.4.1 Index Analysis of Balance Sheet:
64
2007 2008 2009 2010 2011
ASSETS
Cash & Balances with treasury 100.00 112.26 122.97 121.91 138.79
Banks
Balances with other Banks 100.00 102.33 76.82 82.04 73.60
Lending's to financial institutions 100.00 79.80 91.70 107.39 206.76
Investments 100.00 81.04 103.23 142.83 151.59
Advances 100.00 121.23 139.53 140.57 154.12
Operating fixed assets 100.00 93.42 97.21 106.55 105.91
Deferred tax assets 100.00 - - - -
Other assets 100.00 143.73 192.18 174.31 212.85
Total Assets 100.00 107.29 124.10 136.19 150.82
LIABILITIES
Liabilities 100.00 144.70 150.40 113.38 -
Bills Payable 100.00 371.66 411.79 180.57 83.64
Borrowings from financial 100.00 73.53 126.47 361.76 365.26
institutions
Deposits and other accounts 100.00 105.58 122.74 140.59 156.68
Liabilities against assets subject 100.00 - - - 1.49
to finance lease
Deferred tax liabilities 100.00 128.47 137.54 151.60 -
Other Liabilities 100.00 - - - -
Total Liability 100.00 110.75 127.65 140.39 157.45
SHAREHOLDER EQUITIES
Share capital 100.00 110.02 132.00 165.01 206.25
Reserves 100.00 126.43 148.33 159.33 160.68
Un-appropriated profit 100.00 115.68 137.74 149.09 150.76
Surplus on revaluation of assets- 100.00 44.81 52.74 53.35 47.02
net of tax
Total Equity 100.00 88.07 104.39 112.86 114.02
Total Liabilities + Equities 100.00 107.29 124.10 136.19 150.82
7.4.2 Comments on Horizontal / Indexed analysis of Balance Sheet:
 Assets Side
While discussing the horizontal analysis we consider 2007 as base year and further analysis
base on our base year 2007. All the figures in base year considered as 100%. Now we
analyze the assets of Balance Sheet.
65
 Cash and balance with treasurer banks
In F.Y 2007 NBP has 100% cash balance and in following years this balance fluctuated and
shows upward trend in 2008-2011. In F.Y 2008 bank kept cash in hand and with treasury
banks was 112.26% of 2007. In 2009 it again increased and reached to 122.97%. In 2010 it
was 121.91% and in 2011 it was 138.79.
 Balance with other banks

Balance kept with other banks showed continuous up ward trend as in 2008 it was 102.33%
as compare to 2007. In following years it was 76, 82 and 73% in 2009, 2010 and 2011
respectively.
 Lending to financial institutions

Last 5 years were very critical for economy. Bank maintains careful policy for lending to
financial institutions. Bank lends more in 2007 and less in 2008 according to the prevailing
market conditions. As from 2007-2011 the percentage of lending was 100, 79, 91, 107 and
206% respectively.
 Investment
As 2007-2011 was the global recession period, NBP perform his duties very well. NBP inject
more investment in market to fulfill the need of capital. In 2008 bank invest 81.04% as
compare to 2007, in 2009 bank invest 103.23%, 22% more as compare to 2008 but invest
more form 2008. In 2010 it was 142.83% again increase but in 2011 more then double from
2007.
 Advances
Basic business of a bank is accept deposits and advances loan. NBP do not over look its
basic function. Bank continuously increase the percentage of advances over a period of 5
years. As compare to 2007 bank advances were 121, 139, 140 and 154% in 2008, 2009, 2010
and 2011.
 Fixed/Operating Assets
66
NBP’s strongest part is Fixed/Operating Assets. Although the total percentage of funds
diverted to this item of balance sheet is not reasonable as whole in one year. But bank
persistently increasing the funds in Fixed/Operating Assets. As compare to 2007 bank
constantly increase these assets and it was 105% in 2011.
 Other Assets
Investment in other assets is fluctuating over a period of last five years. It was 143% in 2008,
192% in 2009, 174% in 2010 and 212% in 2011.
7.4.3 Summery of Common Size Analysis of Balance Sheet Assets Side
In the above calculation and discussion can evaluate the followings.

1. Most prominent figure is Investment. Bank plays his role in recession period to help the
economical boost and provide the working capital to the businesses.
2. Over a period of 5 years bank never overlooks it primary function to advances loan.
Bank increases advances facility in different sectors to help the businessman and salaried
person for different activities.
3. Bank also maintains more liquid reserves/cash reserves for liquid capital to fulfill the
needs of its debtors and creditors.
4. Bank reduces its balance with other banks and seems to be very careful in lending to
financial institutions.
 Liabilities and Equities Side

 Bills Payable:
The bills payable are having mixed trend in base year to last year 2011, bills payable are
showing decreasing in 2008 and were 144.0 in 2009 borrowings again increased and reached
to 150.40%. In 2010 down word to 113.38%. But in 2011 goes down to 75%. In these year’s
bank tried to avoid its current liabilities.
 Deposits and other accounts

Bank attracts more customers by offering more rate of interest. As bank increase its account
holder. In 2008 bank accounts holder increased 105% and in 2009 they again increase and
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reached to 122%. Bank increase its accounts holder’s family and they were 140 and 156
percent in 2010 and 2011. It shows the public trust on NBP which is good sign for the bank.
 Borrowing from Financial Institutions

Bank reduces its advances to financial institutions and increases its borrowings from the
same. As compare to 2007 bank borrowings as it was 73.3%,
126.47%, 361.76% and 165.8% in 2008, 2009, 2010 and 2011 respectively. NBP also use
this device to reduce the circulation of money in the market. These steps are also helpful in
reduction of inflation.
 Liabilities against Assets Lease

In last five years bank heavily depend upon lease financing. As bank increase its lease
finance 1.49% in 2011.
 Other Liabilities
Bank other miscellaneous liabilities are also increased over a period of time as it increase
116%, 149%, 160% and 175% in 2008, 2009, 2010 and 2011.
 Share Holder Equity

Share holder equity shows healthier trend as it persistent increase as compare to 2007. Bank
reserves were 206.5% in 2011 as compare to 2007. Inappropriate profit was 160% and total
share holder equity was 160%. This trend shows better management and efficient use of its
available resources.
7.4.4 Index Analysis of Income Statement
2007 2008 2009 2010 2011

Mark-up revenue 100 121 154 175 189
Mark-up exp 100 141 233 267 286
Gross profit margin 100 110 115 129 139
Provisions 100 232 250 212 198
Net mark-up income 100 90 93 116 130
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Non Markup income
Fee & commission 100 117 133 146 141
Dividend income 100 88 58 33 54
Exchange income 100 381 298 219 300
Gain on sales of securities 100 17 196 107 102
Unrealized Gain or Loss on
100 (6) (6) (22) 128
Share of (Losses)/Profits
100 - - - -
form joint ventures
Share of Profits from
100 - - - -
Gain on revaluation of
previously held equities 100 - - - -
interest
Other income 100 847 376 1,485 1,714
Total non mark-up 100 121 141 134 143
Non Markup Expenses
Administrative exp 100 128 161 188 212
Other (reversals provision
100 445 374 107 322
write offs)
Other charges 100 3,429 1,894 700 806
Non markup exp 100 136 165 188 214
Profit before tax 100 82 79 88 93
Taxation 100 84 45 76 93
Profit after tax 100 81 95 93 92
7.4.5 Comments on Index Analysis of Income Statement
The figure of total revenue includes the mark up earned, Fee, commission & brokerage, profit
from dealing & investment securities, dividend income and other operating income. The total
revenue of the bank has been increasing over the years, which reflects very favorably on the
bank.
 Markup/ Return/ Interest Earned

After 2007 mark up had increasing trend till 2011 that is 121, 154, 175 and 189 percent
respectively. In short NBP interest earned had increasing trend in last 5 years. In this time
period bank was offering very low rates to its customers return on investment of available for
sale securities were also few as compared with the other assets.
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 Markup/ Return/ Interest Expense
There is also increase in expenses from 2007 to 2011 in the markup/ Return/ Interest Expense
because return on deposit is very high due to the high rates on deposits. Return subordinated
loans is not satisfied that was the reason of increasing in the return on expense. As
analytically says that the expenses increased 141, 233, 267 & 286% from base year
respectively
 Administration Expense
Administration Expenses are very high in 2011 as the investments were increasing. Auditor’s
remuneration was increased, rent, taxes insurance and electricity was also increased that’s
why vertical ratio of the administration expenses was also increased but it steadily increasing
in other years.
 Non Markup Expenses

Non markup expenses are increasing trend as 136% in 2008 and 165% in 2009, however in
the FY-10 it reaches to 188% and in FY-11 it’s up to highest level of 214 percent of base year.
7.5 Verticals/Common Size Analysis

An analysis of percentage financial statements where all balance sheet items are divided by
total assets and all income statement items are divided by net sales or revenues is called
common size analysis. Common size analysis can give analyst valuable insight into changes
that have occurred in a firm’s financial condition and performance. As common size analysis
gives us relative percentage of an item with respects to total, so the growth or decline in
various
7.5.1 Vertical analysis of Balance Sheet from 2007-2011
2007 2008 2009 2010 2011

ASSETS
Cash & Balances with treasury Banks 12.45 13.02 12.33 11.14 11.45
Balances with other Banks 4.92 4.69 3.04 2.96 2.40
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Lending's to financial institutions 2.82 2.09 2.08 2.22 3.86
Investments 27.66 20.89 23.00 29.01 27.80
Advances 44.70 50.50 50.25 46.13 45.67
Operating fixed assets 3.40 2.96 2.66 2.66 2.39
Deferred tax assets 0.00 0.39 0.32 0.67 0.69
Other assets 4.07 5.45 6.30 5.20 5.74
Total Assets 100.00 100.00 100.00 100.00 100.00
Liabilities
Liabilities 0.93 1.25 1.12 0.77 0.00
Bills Payable 1.43 4.95 4.74 1.89 0.79
Borrowings from financial institutions 0.00 0.00 0.00 0.01 2.29
Deposits and other accounts 77.66 76.42 76.81 80.17 80.67
Liabilities against assets subject to 0.67 0.00 0.00 0.00 0.01
finance lease
Deferred tax liabilities 4.05 4.85 4.49 4.51 0.00
Other Liabilities - - - - 4.69
Total Liabilities 84.74 87.47 87.16 87.35 88.46
Share Holder Equities
Share capital 1.07 1.10 1.14 1.30 1.46
Reserves 2.07 2.44 2.47 2.42 2.20
Un-appropriated profit 5.95 6.41 6.60 6.51 5.95
Surplus on revaluation of assets-net of 6.18 2.58 2.62 2.42 1.93
tax
Total Equity 15.26 12.53 12.84 12.65 11.54
Total Liabilities + Equities 100.00 100.00 100.00 100.00 100.00
7.5.2 Comments of Common Size Analysis of Balance Sheet:
The common size analysis of NBP’s balance sheet shows that on the assets side Advances are
showing increasing trend from 2007-2008. It shows that the efficiency of NBP is increasing.
Its products and different schemes of advances are favored by people and they are taking
interest in having loans from NBP. On the other way investment side is showing mixed trend.
As advances are increasing with a very good growth rate so now there is no need for NBP to
invest money in many different businesses. Advances are usually main source of income for
banks and rate of interest is also high.
On the liability side, the common size analysis of total liabilities is showing decreasing trend
which is mainly due to bills payable, borrowings, and liabilities against assets. Bills payable
have decreased too much in just one year and borrowings from financial institutions have also
decreased and all this shows that in future the liabilities side will be continuously decreasing.
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On the owners equity side the share capital and reserves are increasing which may be the
cause in increasing change in inappropriate profit.
In the year 2007 The total assets are 100% and we can analyze that cash and balances with
treasury are 12.45% of total assets. It is a not good figure for bank. Balances with other
banks are 4.92%, lending to financial institutions are 2.82% these two figures are up to
satisfaction level. Investments are 27.66% of total assets. There is big figure for the year 2007
as investment. The advances are also gaining a high figure that is 44.70 % of total assets. If
we add investments and advances we get 72.36% of total assets. It means that these two
figures are backbone of NBP.
Other assets and operating fixed assets are showing the total of 7.47% of total assets these
two figures are below average because the assets of every organization are life blood for it.
The liabilities are analyzing from 100%. Deposits are highest. That is showing the 77.66% of
total liabilities .It is very good because the deposits of NBP highest in all banking sector and
it is showing the public trust on NBP Deposits are showing a very huge figure. The share
capital and reserves are also good. The NBP is earning more profit every year that is
becoming a greater figure. The assets and liabilities are showing a satisfactory figure, when
the lending, investments, advances are more automatically our borrowings, deposits and bills
payable are also become high, it is good situation for NBP.
In the year 2008 while comparing with previous year, the assets of NBP are going up in
various items, these are cash with treasury is 13.02% in the year 2007 instead of
figure12.45% in the year 2007, there is positive sign of change. The balance with other banks
are making a down word jump because the figure in 2007 was 4.92% but in the year 2008 it
becomes 4.69% there is a big change. The investment of NBP is decreased to 20.89 % but
deposits are increasing to76.81%. The deposits of 2007.
In the year 2009 the cash and balances with treasury are 12.33% and the balance with other
bank is 3.04% of total assets but investments is increasing and 23% and advances are
showing slight decreasing trend by comparing last year. There is mix trend, deposits are
almost same and other liabilities are almost the same. Share capital is increased and was
1.14%. Reserves are also having increasing trend, the business of NBP is growing well. The
profit of NBP is reducing amount the overall NBP has negative trend. It is due to economic
un-stability in Pakistan during this period.
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In the year 2010 Cash balance, Investment and advances are the most prominent figures.
Cash balance and Investment having increasing and advances have decreasing trend but not
to much. But still advances are too much high almost 50% of the total assets. Major source
of funding of the bank was deposits that cover 80% of the total liabilities. In above analysis
we can analyze that bank have some positive and some negative effects. Although deposits
are like the life blood and major source of fund but the ratio must be below 70%. Because
sometime people, if they have some better opportunities may shift their investments and bank
have not sufficient amount to honor the checks
In the 2011 Cash balance, Investment and advances are the most prominent figures. Cash
balance and Investment having increasing and advances have decreasing trend but not to
much. But still advances are too much high almost 45% of the total assets. Major source of
funding of the bank was deposits that cover 80% of the total liabilities. In above analysis we
can analyze that bank have some positive and some negative effects. Although deposits are
like the life blood and major source of fund but the ratio must be below 70%. Because
sometime people, if they have some better opportunities may shift their investments and bank
have not sufficient amount to honor the checks.
7.6 Common size analysis of Income Statement of last five year

2007 2008 2009 2010 2011
Mark-up revenue 100.00 100.00 100.00 100.00 100.00
Mark-up exp (33.50) (39.19) (50.49) (50.94) (50.90)
Gross profit margin 66.50 60.81 49.51 49.06 49.10

Provisions (9.34) (18.00) (15.13) (11.29) (9.80)
Net mark-up income 57.16 42.81 34.38 37.78 39.31
Non Markup income
Fee & commission 13.41 13.00 11.52 11.13 10.06
Dividend income 6.45 4.72 2.43 1.20 1.83
Exchange income 2.06 6.51 3.97 2.57 3.29
Gain on sales of securities 4.63 0.65 5.88 2.83 2.51
Unrealized Gain or Loss on
(0.06) 0.00 0.00 0.01 (0.04)
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Share of (Losses)/Profits form
- - (0.05) (0.02) -
joint ventures
Share of Profits from
- - 0.01 0.08 -
Gain on revaluation of
- - - 0.20 -
previously held equities interest
Other income 0.29 2.04 0.71 2.46 2.64
Total non mark-up 26.79 26.94 24.46 20.47 20.28
Non Markup Expenses

Administrative exp 28.09 29.82 29.21 30.14 31.59
Other (reversals provision write
0.33 1.23 0.80 0.20 0.57
offs)
Other charges 0.03 0.96 0.41 0.13 0.14
Non markup exp 28.46 32.00 30.42 30.48 32.31
Profit before tax 55.49 37.74 28.41 27.76 27.29
Taxation (17.85) (12.38) (5.25) (7.76) (8.82)
Profit after tax 37.64 25.37 23.17 20.00 18.47
7.6.1 Comments of Common Size Analysis of Income Statements
The profit margin is a positive and healthy sign and the bank’s management should continue
such type of efforts in order to achieve such type of results in future.
 Markup/ Return/ Interest Earned

After 2006 mark up had increasing trend till 2011 and in short NBP interest earned had
increasing trend in last five years but high increased in FY-11. In this time period bank was
offering very high rates to its customers return on investment of available for sale securities
were also few as compared with the other assets. Why it increased in 2007 and 2011. Because
earnings was high as compared to net profit after tax then other years.
 Markup/ Return/ Interest Expense

There is also increase in 2007 to 2011 in the markup/ Return/ Interest Expense because return
on deposit is very high due to the high rates on deposits. Return subordinated loans is
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satisfied that was the reason of decline in the return on expense. Again steadily growing in
2011 because rate on deposit increased and return also increase that lead to increase the
expenses. The mark-up expenses were, 33, 39, 50.5, 50.9 and 51 during the period 2007-
2011 of mark-up income. In 2010 and 2011 more then 50% of the interest income was repaid
to the account holders as interest on deposit. Which shows that bank offering high rate of
interest to encourage saving and also take part in reduction in the circulation and as result
tried to reduce the inflation.
 Other income
Like other items of balance sheet and profit and loss account other income also effects net
profit after tax. The trend of other income was different in different but its elasticity was not
too much high. It was under 2% during the last 5 years period.
 Administration Expense
Administration Expenses are very high in 2007 as the investments were increasing. Auditor’s
remuneration was increased, rent, taxes insurance and electricity was also increased that’s
why vertical ratio of the administration expenses was also increased but it steadily declined in
other years. Admin expenses are gradually increasing in 2008 to from 29.82% to 28.00%,
again rose in 2008. In 2009 administration expenses were 29.21% in 2010, 30.14% and in
2011 they were again 31.59%. It is clear that administration expenses have mixed trend
during last 5 years and remain in between 28% to 31%.
 Taxes
The rate of tax was high from FY-07 to FY-08. If look in deep, tax rat is highest in FY-07 &
08 as amount of tax were 17 and 12 percent of the total mark-up income, again it decreased
as compared to 2007 & 2008. As it was 12 and 5 percent during 2008 and 09. In 2010 it
again little bit rise and was 7.76% of the income. In 2011 again rise and was 8.82% which
reflect the policy of government to relax the corporate sector accordingly.
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CHAPTER # 08
COMPARE WITH COMPETITORS
8.1 National Bank of Pakistan vs Muslim Commercial Bank Limited
National Bank of Pakistan Muslim Commercial Bank

Particulars
2010 2011 2010 2011
Assets 1,038,018,000 1,149,578,000 567,553,000 653,233,000
Liabilities 906,595,000 1,016,926,000 488,349,000 564,431,000
Profit after Tax 17,737,000 17,605,000 16,873,000 19,425,000
Data Source: Annual Reports of Banks
8.2 National Bank of Pakistan vs Bank Alfalah Limited

Particulars National Bank of Pakistan Bank Alfalah Ltd
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2010 2011 2010 2011
Assets 1,038,018,000 1,149,578,000 411,484,000 468,174,000
Liabilities 906,595,000 1,016,926,000 389,178,000 442,396,000
Profit after Tax 17,737,000 17,605,000 968,000 3,503,000
Data Source: Annual Reports of Banks
8.3 National Bank of Pakistan vs Habib Matropolitan Bank Limited
National Bank of Pakistan Habib Matropolitan Bank Ltd

Particulars
2010 2011 2010 2011
Assets 1,038,018,000 1,149,578,000 924,699,000 1,139,554,000
Liabilities 906,595,000 1,016,926,000 828,448,000 1,029,967,000
Profit after Tax 17,737,000 17,605,000 17,034,000 22,333,000
Data Source: Annual Reports of Banks.
All above analysis with reference to other banks listed on stock exchange shows that NBP is
the large bank having huge assets and liabilities and also earn huge profit. But MCB and
HBL, both competitors of NBP use Own assets and other resources more effectively and
efficiently than NBP because profit trend is positive than NBP profit earning trend. The three
large banks enjoy a major share in the banking industry. NBP with Rs 17,605 million Profit
before tax in 2011 continues remain to be market leader.
8.4 Future prospect of the NBP
In FY-07 NBP attain its target as return after tax is 37.6% which shows the positive changes
in the performance of NBP In the year 2007, NBP manage to strengthen the gain & achieve
strong financial feat there are still mighty challenges ahead, which require intensive efforts by
all. NBP will continue to built & leverage the strong franchise to foster growth by offering a
universe of renowned products in high growth impending sector, fortify risk management
function in line with Central Bank guidelines & anticipated Basel II accord, reinforce
compliance function, invest in IT, up gradation human resource development in the country.
During 2006, the reduction in the interest rate environment will over all have a negative
impact on the financial sector’s profitability in the short turn. To meet these challenges, NBP
will focus on building loan portfolio, both on corporate & retail side. NBP will be focusing
on those sectors in the country, which have traditionally received less attention from the
financial sectors, i.e. Agricultural, SME and of the entire range of retail products. NBP key
strength remains their customer’s base of over 12 million & NBP is confident that they are in
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positioned to capitalize on the opportunities. NBP would like to express sincere appreciation
to all stakeholders for their continued support & understanding. These results have been
possible due to the commitment and decision of NBP staff. NBP express their appreciation to
the Bank’s valued customers and the regulators for their confidence as NBP consolidate our
position as the “Nation Bank”.
In the increasingly competitive market place, NBP having a solid understanding of what
management does might split the difference between NBP success & failure. NBP
Management has two types of roll, interpersonal roll & informational roll. NBP Management
deal the trends & issues i.e. workforce diversity, ethic, innovative changes, TQM,
reengineering, empowerment & team. In NBP workforce diversity require Management to
recognize & acknowledge employees differences, competent & successful management need
to aware of the ethical implications of their action. Because of the dynamic environment in
NBP management must stimulate innovation & changes to be successful. Management who
emphasis the use of TQM in NBP are committed to continues improvement of work
activities. Management in NBP who are Reengineering their department is radically
redesigning the work process to improve productivity & performance. In NBP Management
responsible for public expectation, long run profit, balancing of power & responsibility,
stockholders interest, possession of resources & prevention over cures.
CHAPTER # 09
SWOT ANALYSIS
SWOT ANALYSIS is one of the most used forms of business analysis. A SWOT examines
and assesses the impacts of internal strengths and weaknesses, and external opportunities and
threats, on the success of the "subject" of analysis. An important part of a SWOT analysis
involves listing and evaluating the firm’s strengths, weaknesses, opportunities, and threats.
9.1 STRENGTHS
1. The National Bank brand image is its major strength. It has always been considered as
the pillar of the country's economic scenario asset wise or balance sheet wise. Its
image, work force, network and reputation have created a sentimental and emotional
attachment of the people with the bank.
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2. National bank of Pakistan on June 30, 2010 became the first ever bank of the country
to cross the One Trillion Rupee bench mark.
3. NBP total assets stand at Rs. 1,149,578 Million and deposits Rs. 927,421 Million at
the year ended December 2011.
4. NBP has an extensive domestic branch network of 1300 (according to the latest data
2011) branches located all over Pakistan. The Bank also has a presence in 23
international locations including the USA, United Kingdom, Europe and the Far East.
5. NBP is working as right arm government of Pakistan as it is responsible for all
claims of government for recovery as well as payment. All depositor of NBP are in
relief that their money security is guaranteed by government of Pakistan.
6. Because of government’s bank, it is enjoying the customer’s satisfaction. Customers

feels secure their money in NBP.
7. NBP helps the government on the implementation of its industrial policies with
respect to economic growth of the country.
8. There is also strength of NBP that they are founder of the ATM. They provide this
facility to the customers.
9.2 WEAKNESSES
Perfection is only the claim of Allah Almighty. No other being living or dead can say this for
itself. Similarly, National Bank of Pakistan also has some shortcomings that need to be
mentioned:
1. The general outlook and interior layout of branches are not as required
according to modern banking.
2. NBP is far behind in offering modern banking facility like automated
teller machines then other commercial bank in Pakistan as only 149 branches of NBP
have this facility in all over country.
3. During the internship in NBP I found the problem of lack of communication between
the employees and management. They have not very much understanding of each
other and do not share the work with each other.
4. Customers have to follow long lengthy procedure for opening of account as well
applying for debt. Which discourage most of the people to invest in NBP.
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5. There is also weak point for NBP that staff is very short and more staff is required to
meet the needs of the branch work. They take help from internees.
6. This is not a healthy sign for NBP that respect of seniors is not up to the manners.
Juniors try to avoid the seniors and take no help from them.
7. In NBP, employees are recruited on the basis of favoritism or through other tools of
corruption.
8. Due to wrong recruitment policy staff of NBP is not proficient in their work.
9.3 OPPORTUNITIES
1. Despite of poor customer service of NBP, people still come to NBP because of its
Govt. ownership as they feel it secure therefore bank improve its deposit by giving
facility of night banking and also can compete its competitors with positive steps.
2. NBP has advantage of generating more deposits and attracting valuable customers due
to its better image in the business community.
3. Training and Development of employees, Training and development is a good
opportunity to get a competitive edge.
4. NBP by establishing new branches in foreign countries can expand its business and
can enjoy with the profit.
5. With proper planning can hunt more and more business from the public and private
sector as people still trust over it.
6. The basis need of the consumer such as housing, transportation and other durable
goods are not adequately financed by the banks. So by initiating these services, the
bank can enjoy with more funds.
7. To enjoy with large amount, NBP can introduce a comprehensive range of bonds.
8. It can establish advisory services in order to facilitate the customers in investing in the
securities.
9.4 THREATS
If there is a threat to the whole economy, it will pose a threat for National Bank. National
bank does not consider small bank a threat to its existence because the way national bank can
accommodation large customer, these small banks cannot and others are:
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1. Freezing of accounts by State Bank of Pakistan have also caused problems for
National Bank. But the recent facts and figures indicate that the banks major rivals
lime MCB and HBL are causing threats to the bank in the long run.
2. The no. of banks in Pakistan is increasing with the passage of time. So due to poor
working condition and poor customer service it may be possible NBP will lose its
market share in future.
3. In our country, the rate of inflation is increasing along with the unemployment. So due
to the increase in price of the products, the savings of the nation is decreasing with the
passage of time. So it is the threat for the banking sector. In the future, the deposits of
the bank will decrease.
4. On NBP Govt. policies have strong impact. A slight change in Govt. policies may
affect the performance of the bank. The bank has to work with in the regulation frame
work.
5. NBP's sick projects are increasing day by day due to economic downfall. As our
economy is weakening day by day the number of side projects are becoming sick
increasingly thus influencing the profitability even survival of NBP.
9.5 Critical Analysis of Practical Experience relating to the theoretical Concepts

During our education we study many subjects but during any job applications of all these
subjects are not possible. But some of them must apply in any job / business.
Organizations must follow theoretical concepts but it’s not possible to apply as well as. It’s
possible they use such concepts in their own way.
So during my BBA, I study 40 subjects but I observe that few of them applicable in bank
like:
o Financial Management
o Cost Accounting
o Financial Accounting
o Organizational Behaviour
o Financial Statement Analysis
o Money and Banking etc.
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Which concepts I study during my college work, I observe during my internship bank also
apply these concepts. I am not saying that they apply as well as but they follow such rules
and laws. For example we study about bank accounts, bank also follows such rules but they
divide the features of such accounts according to their products.
Theoretical concepts are relating to the rules of state bank of Pakistan and the banks also
work under the SBP.
Theoretical concepts about debit, credit, vouching, general entries, ledgers, financial
statements have the same application in bank.
This internship has proved to be a very learning opportunity for me. I saw the practical
demonstration that I have learned during passed years. It is very informative to see the theory
being put to practice. Occasional chitchats with the staff gave interesting insights into the
culture and environment of the bank. Hence, it was a great experience working in such a
prestigious organization. I am sure the knowledge and skills gained, shall help me during the
course of my career.
During the internship I also got practical experience that does not meet the theoretical
concepts in BBA (Hons).
I present here some critical analysis:
o Training:
NBP has no great facility for their employees for training of new technologies. This situation
creates difficulty for handling new challenge.
o Departmentalization:
An employee deals various nature of work.
 Staff Attitude:
Due to heavy load of work staff attitude does not ideal for an organization where public
dealing is at large scale.
 Work Environment:
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Work environment was not ideal due to heavy customers visit in a single day. Furniture, light
and sitting arrangement was not good for customers and bank employees.
 Professional Approach:
Work specialization and job specification are found very low in bank’s employees. Business
administration qualities and education is at low side.
 Less use of Technologies:

Staff hesitates to use new technologies especially the cash department. Even old employees
are not able to operate PCs.
 Shortage of Staff:
There is shortage of staff in the Bank. Number of customer per employee is very high. Cash
department is suffering very badly and facing great deal of over workload.
 Communication Gap:
I feel that there is communication gap between top management and workers. They have
fewer chances to communicate effectively.
 Unjustified Appraisal Criteria:

No justified appraisal criteria are implemented for annual increase in salary and promotion of
staff. It creates un-satisfaction among the employees of the Bank.
 Pensioner's sitting Arrangement:

Bank should take step for the sitting arrangement of the old age employees and pensioners
for. Also management should purchase more furniture and arrange them in such a way which
provides maximum space and convenient especially in deposit department and there should
also be convenient sitting place for customers.
 Need of Telephone Operator:

Branch has the problem of telephone operator which can save the time of not only manager
but other staff as well. On the other hand bank’s communication system was not doing well.
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Therefore as an internee I felt that there should be a telephone operator who can easily handle
this situation.
CHAPTER # 10
CONCLUSION AND RECOMMENDATIONS
10.1 Conclusion
Year- 2008 saw NBP continues it journey of remarkable growth & performance as the Bank
once again posted the highest over profit in Pakistan’s financial sector history. This
performance is a reflection of the strategic business & organizational initiatives taken over
the last few years coupled with the government leading to impressive growth in all sector of
economy. NBP further consolidated its position as one of the top player in corporate &
investment banking market of the country in 2007. NBP significantly grow it customers
footing, continued to expand its delivery channels and improve its process efficiency by basic
principles of customer’s needs, innovative solutions & quick turnaround time. Bank is
working in the high competitive market and it lead need to use of computer technology. It is
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also necessary to improve the importance of banks in the economy of any country is like a
backbone, so the state government decided to start the banking system in their country, and
by their own interference they control them, secure them according to the situation, and main
purpose behind that is to facilitate their nation or their public. So the government of Pakistan
has also a banking system. It is a head bank in Pakistan known as State Bank of Pakistan
which is largest bank of Pakistan. This bank works as the governmental department and its
main function is to monitor all type of banks working inside specially as well as outside the
country. NBP is the second largest bank of Pakistan by all means; NBP is widely used as an
agent for State Bank of Pakistan and is also involved in commercial banking. NBP has a vital
role in Pakistan’s banking history as well as in the economy of Pakistan, so it has a great
significance. At present the NBP has improving its internal and external conditions, but due
to the largest operations in Pakistan (because this is only bank which must cover the
backward regions of the country where no any other commercial bank wants to go). It still
faces many problems. These problems are new marketing strategies, organizational and
management problems at the branches of backward regions, and motivation. Another main
problem is faced by the NBP is labor unions because labor is most powerful because of CBA
union which protect the labor's all actions. All above factors are causing problems of banking
functional and growth of banking is being resisted. Mostly recruitment and promotions are
under influence of political system of Pakistan. So it should be eliminated or should be
reduced as much as possible and make it on merit and transparent. NBP should fully
concentrate to improve its performance and standards to meet the challenges by the economy
as well as by the competitors and for this purpose it needs to overcome the problems and
improve the quality of services especially in advance section, that will prevent it from huge
losses.
10.2 Recommendations
During my internship of 2 month I observed a lot of things and I felt that there is always nice
ways of doing things so some recommendations are suggested for the bank in accordance to
the critical analysis.
 Personal Marketing
85
A very useful mode of contact is personal marketing visits. Such visits have importance, such
as information about the customer’s financial and business position, market reputation and
Let clients feel important such visits should be properly planned with regularity and
consistency. The staff of the branch is like an ambassador of the bank, by his personal
contacts he can attract customers and can help in increasing the business of the bank
 Availability of required Staff

Required staff may be provided to branch in order to improve the functioning of the branch.
Especially a telephone operator and a customer service officer may be appointed. These are
necessary because without the customer service officer the employees waste a lot of time.
The customers are left stranded which in turn damages the reputation of the bank.
There is a need for the establishment of customer information center. It will take one
additional person who will handle both of these jobs. Although it will cost the bank but it will
benefit the bank in goodwill and better working environment.
 Professional Attitude
More professional attitude is required from the bankers. All loopholes may be closed that are
used to incur expenses in respect of telephone, fuel, electricity, and fringe benefits. All
activities may be based on cost and benefit basis (cost benefit analysis). Management may
bring controllable expenses to minimum level. The staff should be punctual and follow the
office timings very strictly. In today’s world of competition the wastage of time is not
tolerable.
 Customer friendly environment in branch

Friendlier environment may be created because it will help to gain the interest of employees
in work. Noise in the office may be reduced because it has unfavorable impact on the
working environments. At the start of the month there is a rush in the bank due to the
payment of salaries, as there is an element of lack of discipline in the customers. It is required
for the staff to educate them to follow discipline. All of them may be treated equally; no
relaxation should be given to the near ones.
 Equal distribution of workload
86
The employees of the branch may be given equal workload. No body may be given undue
relaxation. The personal contacts of some of the employees should not spoil the environment
of the branch. There were few officers who were over loaded with work, at the same time
there were few who had little work to do. This created an unfair situation in which the
overloaded person felt disheartened. For the elimination of this kind of situation the
management should distribute the workload equally. This will be helpful in creating a better
environment for work.
 Role of Appearance
As it is said, “first impression is the last impression”, NBP has to improve its internal and
external outlook of branches. As private banks are very good in this field, so compete with
them it is necessary. The officers should be dressed smartly, have personality and behave
nicely. As far as the outlook of NBP, Haripur branch is concerned its quite attractive. The
only thing that needs to be addressed is the dressing of the staff and customer relations and
dealing.
 Customer Satisfaction
In today’s world of competition only consumer’s satisfaction can reduce competitive
advantage. As said in critical analysis there are some problems related to the dissatisfaction of
consumers. The NBP has to improve services provided to the pensioners and also they have
to adopt scientific methods of paying utility bills. If the consumers are satisfied from the
service they will expand his business with the bank. But if the level of services is not good
then the bank will loose its customers. All this can be achieved just by imparting proper
training to employees.
 Job Rotation
There may be Job rotation of employees, so that they may know about all departments. This
will enhance the capabilities of the employees, as due to change in work they will escape
monotony. This will refresh and motivate employees as well.
In the branch there were few seats, which were over loaded with work as compared to other
seats. So Job rotation is must, so that no body may be overburdened and due to this their
motivation level was not up to the mark.
87
Hopefully National Bank of Pakistan will compete to its competitors
in the future and will provide quality services to its customers.
 References & Sources used
1) NBP’s Annual Report, 2007, 2008, 2009, 2010,2011

2) Economic Bulletin of NBP
3) NBP’s Economic Bulletin
4) web site www.nbp.com.pk
5) Advance accounts by M.A Ghani
6) Financial Management by Van Horn
7) http://www.mcb.com.pk
8) http://www.bankalfalah.com.pk
88
Table of Contents
Title Page I
Approval Sheet II
Internship Letter III
Acknowledgements IV
Dedication V
List of Tables & Graphs IX
List of Charts X
List of Acronyms XI
Executive summary XII
Annexes XIII
CHAPTER # 01................................................................................................................................................. 1
INTRODUCTION OF THE REPORT......................................................................................................... 1
1.1 Background of Study:.................................................................................................................................. 1
89
1.2 Objectives of the Study:.............................................................................................................................. 1
1.3 Scope of the study:....................................................................................................................................... 2
1.4 Limitation of the Study:.............................................................................................................................. 2
1.5 Research Methodology:.............................................................................................................................. 2
1.6 Scheme of Report.......................................................................................................................................... 3
CHAPTER # 02................................................................................................................................................. 5
OVERVIEW OF THE NATIONAL BANK OF PAKISTAN....................................................................5
2.1 Overview of National Bank of Pakistan................................................................................................ 5

2.2 Mission and Vision Statement of National Bank of Pakistan.......................................................7
2.3 Nature of National Bank of Pakistan.................................................................................................... 9
2.4 Business Volume:....................................................................................................................................... 10
2.4.1 Business volume in revenue:....................................................................................................... 10
2.4.2 Business Volume in deposits:...................................................................................................... 11
2.4.3 Business volume in term of advances:..................................................................................... 12
2.4.4 Business volume of Investment:................................................................................................. 13
2.5 Number of Employees in NBP:.............................................................................................................. 14
CHAPTER # 03.............................................................................................................................................. 15
PRODUCT & SERVICES.............................................................................................................................. 15
3.1.1 Premium Aamdni.............................................................................................................................. 15

3.1.2 Premium Saver.................................................................................................................................. 15
3.1.3 President Rozgar Scheme.............................................................................................................. 16
3.1.4 NBP Saibaan Scheme....................................................................................................................... 16
3.1.5 NBP Advance Salary......................................................................................................................... 17
3.1.6 NBP Cash & Gold............................................................................................................................... 17
3.1.7 NBP Kissan Dost................................................................................................................................ 17
3.1.8 Pak Remit Scheme............................................................................................................................ 17
3.1.9 NBP Protection Shield Scheme.................................................................................................... 18
3.1.10 NBP Student Loan Scheme............................................................................................................ 19
3.2 Services of NBP........................................................................................................................................... 20
CHAPTER # 04.............................................................................................................................................. 21
NBP STRUCTURE......................................................................................................................................... 21
4.1 Comments on the NBP structure......................................................................................................... 21

4.2 NBP Sikandarpur Branch Haripur:...................................................................................................... 23
4.3 Review of various departments............................................................................................................ 24
4.3.1 Deposit Departments...................................................................................................................... 24
4.3.2 Remittance Department................................................................................................................. 27
4.3.3 Govt. Receipt & Payment Department...................................................................................... 31
4.3.4 Establishment Department........................................................................................................... 32
4.3.5 Cash Department.............................................................................................................................. 33
CHAPTER # 05.............................................................................................................................................. 35
FINANCE /ACCOUNT DEPARTMENT.................................................................................................. 35
5.1 Structure of NBP Finance........................................................................................................................ 35

5.2 Financial Control Division...................................................................................................................... 38
5.3 Accounting Operations in NBP.............................................................................................................. 38
90
5.4 Finance System of the NBP..................................................................................................................... 39
5.5 Role of Financial Manager...................................................................................................................... 40
5.6 Electronic Data in Decision Making.................................................................................................... 40
5.7 Sources of Fund in NBP............................................................................................................................ 42
5.8 Generation of Funds in NBP:.................................................................................................................. 43
5.9 Allocation of Funds in NBP..................................................................................................................... 44
CHAPTER # 06.............................................................................................................................................. 45
WORK PERFORMED DURING INTERNSHIP................................................................................... 45
6.1 General Banking......................................................................................................................................... 45

6.1.1 Cheque at Counter............................................................................................................................ 45
6.1.2 Cheque Payment Procedure......................................................................................................... 46
6.1.3 Issuance of Demand Draft............................................................................................................. 46
6.2 Bills Collections Department................................................................................................................. 46
6.3 Deposit Department.................................................................................................................................. 46
6.4 Clearing Department................................................................................................................................ 47
6.5 Remittances Department........................................................................................................................ 47
CHAPTER # 07............................................................................................................................... 48
RATIO ANALYSIS........................................................................................................................... 48
7.1 NBP Balance Sheet of last five years:.................................................................................................. 48

7.2 NBP Income Statement of last five years:......................................................................................... 49
7.3 Ratio Analysis.............................................................................................................................................. 50
 Liquidity Ratios:........................................................................................................................ 50
7.3.1 Current Ratio:..................................................................................................................................... 50
 Leverage Ratios:....................................................................................................................... 51
7.3.2 Debt Ratio:........................................................................................................................................... 51
7.3.3 Debt to Equity Ratio:....................................................................................................................... 52
 Activity Ratio:............................................................................................................................ 53
7.3.5 Total Asset Turnover (TAT) Ratio:............................................................................................. 53
 Profitability Ratio:................................................................................................................... 54
7.3.6 Net Profit Margin:............................................................................................................................. 54
7.3.7 Return On investment (ROI):....................................................................................................... 55
7.3.8 Gross Profit Margin:......................................................................................................................... 56
7.3.9 Return on Equity (ROE):................................................................................................................ 57
7.3.10 Earning Per Share............................................................................................................................. 58
7.3.11 Pre/ after Tax Return on Equity.................................................................................................. 59
7.3.12 Return on Assets (Pre/ after tax)............................................................................................... 60
7.3.13 Capital Ratio:...................................................................................................................................... 61
7.3.14 Return On Depositors:.................................................................................................................... 62
7.3.15 Advance to Deposit.......................................................................................................................... 63
7.3.16 Investment to Deposit..................................................................................................................... 64
7.4 Horizontal or Index analysis................................................................................................ 65
7.4.1 Index Analysis of Balance Sheet:................................................................................................ 65
7.4.2 Comments on Horizontal / Indexed analysis of Balance Sheet:.....................................66
7.4.3 Summery of Common Size Analysis of Balance Sheet Assets Side................................67
7.4.4 Index Analysis of Income Statement......................................................................................... 69
7.4.5 Comments on Index Analysis of Income Statement............................................................70
7.5 Verticals/Common Size Analysis......................................................................................... 71
7.5.1 Vertical analysis of Balance Sheet from 2007-2011...........................................................71
7.5.2 Comments of Common Size Analysis of Balance Sheet:....................................................72
91
7.6 Common size analysis of Income Statement of last five year...................................................74
7.6.1 Comments of Common Size Analysis of Income Statements...........................................75
CHAPTER # 08............................................................................................................................... 77
COMPARE WITH COMPETITORS.............................................................................................. 77
8.1 National Bank of Pakistan vs Muslim Commercial Bank Limited...........................................77

8.2 National Bank of Pakistan vs Bank Alfalah Limited......................................................................77
8.3 National Bank of Pakistan vs Habib Matropolitan Bank Limited............................................77
8.4 Future prospect of the NBP.................................................................................................................... 78
CHAPTER # 09............................................................................................................................... 79
SWOT ANALYSIS............................................................................................................................ 79
9.1 STRENGTHS.................................................................................................................................................. 79
9.2 WEAKNESSES.............................................................................................................................................. 80
9.3 OPPORTUNITIES........................................................................................................................................ 80
9.4 THREATS....................................................................................................................................................... 81
9.5 Critical Analysis of Practical Experience relating to the theoretical Concepts..................82
CHAPTER # 10............................................................................................................................... 85
CONCLUSION AND RECOMMENDATIONS..............................................................................85
10.1 Conclusion..................................................................................................................................................... 85
10.2 Recommendations..................................................................................................................................... 86
 References & Sources used....................................................................................... 89
92

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CHAPTER # 01

INTRODUCTION OF THE REPORT

1.1 Background of Study:

 It is one of strong financial institution of the country.

1.2 Objectives of the Study:

The main objectives of studying the NBP are:

 To work practically in an organization.

 To analyze the overall performance of the bank.

 To develop concrete and practical recommendations in the light of the analysis.

 Government Receipts and Payments Department

 Establishment and Advances Department

1.4 Limitation of the Study:

1.5 Research Methodology:

1.6 Scheme of Report

Chapter 1 includes introduction of report, background of study, purpose of study,

This chapter includes product and services of NBP.

This Chapter includes work done by me during internship.

This Chapter includes competitor’s analysis of NBP.

This Chapter includes SWOT analysis.

This chapter includes recommendations, suggestions, and conclusion.

OVERVIEW OF THE NATIONAL BANK OF PAKISTAN

2.1Overview of National Bank of Pakistan

3. Growth in Deposits was accompanied by increase in Bank portfolio in advances. NBP

“NBP will aspire to the values that make NBP truly

“To be recognized as a leader and a brand

 Highest standards of Integrity.

 Institutionalizing teamwork and performance culture.

 Advancement of skills for tomorrow’s challenges.

 Awareness of social and community responsibility.

 Value creation for all stakeholders.

To enhance profitability and maximization of NBP share through increasing leverage of

Source: NBP annual report of last five years from website

Source: NBP annual report of last five years from website

2.4.1 Business volume in revenue:

Source: NBP annual report of last five years from website

Source: NBP annual report of last Five year from website

2.4.2 Business Volume in deposits:

Business Volume in Deposits in ( Million)

2.4.3 Business volume in term of advances:

Business Volume in Advances ( Million)

2.4.4 Business volume of Investment:

Business Volume in Investment ( Million)

2.5Number of Employees in NBP:

Years 2006 2007 2008 2009 2010 2011

Cadre Wise break up of Employee for the year- 2011

PRODUCT & SERVICES

3.1Product Lines of NBP:

o Amount of investment required from Rs. 50,000/- to

Period Profit Rates

o Financing facility available up to 90% of the deposit value Premature encashment

o Minimum saving balance of Rs. 20,001 and a

3.1.4 NBP Saibaan Scheme

o Home Purchase / Home Construction

Financing Amount Up to 35 Million

Financing Period 3 to 20 Years

Debt to Equity 85:15 (Maximum)

Financing Amount up to 15 Million

o Purchase of Debt to Equity 70:30 (Maximum) Land and for

Financing Amount up to 35 Million

Debt to Equity 70:30(Maximum)

3.1.5 NBP Advance Salary

3.1.6 NBP Cash & Gold

3.1.7 NBP Kissan Dost