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LIST OF CONTENTS

Chapter No Title page No

Preface ..5

Acknowledgement.6

Executive summary....7

Chapter-1 : Introduction to the report .......8

1.1Background of study..8

1.2 Purpose of study ....8

1.3 Scope of study ...9

1.4 Limitation of the study ..9

1.5 Methodology of report...9

CAPTER- 2 : Development of Banking in Pakistan ..11

2.1 Definition ofBanking..11

2.2 Banking during Muslim rule in India..11

2.3 Banking in Pakistan.12

2.4 NBP historical background.16

2.5 The history of NBP...17

2.6 Nationalization of banks in Pakistan under nationalization

Act of 1947...18

2.7 Privatization of nationalized banks19

2.8 Opening of other private sector banks in Pakistan.20

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Chapter-3: Introduction to National of Pakistan ......................22

3.1 Introduction 22

3.2 Early inception.22

3.3 Organizational objectives.22

3.4 The change program ...24

Chapter -4: Organizational Structure .26

4.1 Head office 26

4.2B

oard of Directors...26

4.3 Regional head quarter27

Chapter 5 : Objectives of NBP ...30

5.1 Increase in Deposits............................30

5.2 Extension of loans....30

5.4 Functions of NBP.31

Chapter -6: Departmentalization35

6.1 Deposits .35

6.2 Remittances....36

6.3 Advances ...38

6.4 Cash .......39

Chapter -7: Financial highlights..40

7.1 balance sheet as on (Sep 30,2009 ...40

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7.2 profit and loss accounts For the year ended

(Sep30,2009)...41

7.3 Cah flow statement ......42

7.4 Financial analysis ....43

7.5 Common sized an trend analysis...43

7.6 Total Assets...46

7.7 Profit Before Tax...47

7.8 Profit After Tax......48

7.9 Earnings Per Share....49

7.10 Ratio Analysis .....50

Chapter -8 : Swot Analysis56

8.1 strengths..56

8.2 weaknesses..57

8.3 opportunities59

8.4 threats...60

Chapter-9: Findings and Recommendations .61

9.1 Availability of required staff 61

9.2 Computerization of branches...61

9.3 Inter departmental transfer...62

9.4 Customer friendly environment62

9.5 Professional attitude 63

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9.6 Professional marketing.63

9.7 Equal distribution of workload64

9.8 ATM facility64

9.9 Delegation of authority64

9.10 Role of presentation....65

9.11 Competitions...65

9.12 Consumer satisfaction.65

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Preface

Bank play an important role in the productivity, growth and prosperity of a

country .it is better and quick mean of transferring money from one region of a country to

another.

Internship is the requirement for the completion of BBA (hons)degree program

at IBMS. In these eight weeks of my internship, I found it very interesting and

informative .it was my first chance to implement my first knowledge in a repetitive

organization like NBP khyber bazar branch .i found it a first step of my professional life .

The second experience was the report writing which test the personal

observation and writing skills .the report consists of general overview which include itsorganizational structures, department analysis and recommendations .

This report is the essence of my internship, which I conducted in eight weeks

at NBP khyber bazar branch. i have exclusively observed the functions of different

departments of the bank .

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Acknowledgment

I am highly grateful to almighty Allah the most benevolent and gracious on the

completion of this report .the report writing is really a cumbersome job. It is Almighty

Allah who helped me in surmounting the obstacles in my way.

I am thankful to my adviser Mrs.Rehana Saeed who guided me till the completion

of my final report .I cannot forget my honorable and respectable co-adviser Mr.Pervaiz

khan Mr.Mian Muhammad Ijaz Lecturer IBMS NWFP Agricultural University Peshawar

and director IBMS Dr Farzand Ali Jan ,who all helped me a lot to complete my laborious

internship report successfully .

Last but not the least, I appreciate and acknowledge with thanks the cooperation ofall my friends specially Abdul Nasir and Farhan Ali Khan.

Sajjad Ahmad

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Executive summary

The main purpose if internship is to prepare and submit the report as partial

fulfillment for the award ofBBA (Hons) degree. This report is based on the findings of

two months Internship. This report is aimed at studying and analyzing the NationalBanks

of Pakistan Khyber bazar branch Peshawar.

The methodology used in this report is based on two types of data. One is primary

data consisting of interviews, discussion with executive and official, and personal

observation. Other type of data is secondary data consisting of annual report, manuals,

circulars, brochures and relevant books. During internship, one of the major problems

was limitation of time and also there were very little material available in the branch but

my sense of personal observation moved me to collect the material as much as possible

from the National Bank of Pakistan khyber bazar branch Peshawar. But also from other

branches of National bank of Pakistan.

National bank of Pakistan was established on 0 November 1949 and started

functioning from November 20, 1949. The bank is also authorized to act as an agent and

trustee of state bank of Pakistan (SBP) has no branches. The bank therefore performs

dual responsibility, one as commercial bank in its own right and at the same time a

trustee of business finance.

Quite a few banks are operating in developed part of the world. Savings and loans

associations and farm loan associations are some of the well-known forms of the

mortgage bank. Consumer finance companies and credit unions are some of the popular

forms of consumer banks.

The development of banking in Pakistan can be traced back from Indo-Pakistan sub

continent. There were 19 foreign banks with the status of small branch offices which

were engaged solely in export of corps from Pakistan, while there were only two

Pakistani institution i.e Habib Bank and the Australasia Bank.

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institution NBP as a financial institution that has the unique distinction as being the

oldest and well organized bank. The main focus of this study is on the retail banking.

Apart from this there are other purposes such as:

y It provides an opportunity to understand various operations of the bank.

y To apply the knowledge of class rooms lectures in practical work.

y To analyze and interpret the NBPs annual Reports.

y To make the recommendations in the light of analysis.

1.3 SCOPE OF THE STUDY

As an internee the main focus of my study was to gain knowledge about the retail

banking procedures of NBP.

These retail- banking procedures include clearing, remittances, deposits, and cash

and to some extent advances. This report identifies the problems faced by the bank in

these procedures and give workable recommendations for the solution of these problems.

1.4 LIMITATIONS OF THE STUDY

As the functions of a financial institution are much wider in scope so it is verydifficult to clearly understand all these functions in a limited time. Therefore, the

performance of the Accounts Department of NBP KhyberBazaarBranch Peshawar is

viewed in detail and rest of the departments is just glanced through.

1.5 METHODOLOGY OF THE STUDY

During my internship in National Bank of Pakistan KhyberBazaarBranch, the

most important task was to collect more quality information about the organization asmuch as possible that is why I used a number of techniques to collect the required

material and collect the report. The methodology, which I adopted for this report is based

on both primary data as well as secondary data regarding the overall operation of NBP .

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1.5.1 Primary data

The primary data sources which I used for the data collection are as follows

y

Interviews with Executivey Interviews with the Managers heading their respective sections

y Interviews with the old employees of the bank

y Interviews with the customer of the bank

y Personal observation

1.5.2 Secondary data

The sources of secondary data which I used are as follows

y Annual Reports

y Manuals

y Circulars

y Relevant books

y Brochures

During this process it is observed that enough material regarding my topic was notavailable in the books so I had to count on my personal observation and interviews for

writing this report.

I have spent 8 weeks in the branch; during my stay I interviewed few staff members

of the bank and held discussion with others. As such most of the data used is primary in

nature.

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other hand. Industrial development was not ignored at all. Small scale unities as well as

factories were working efficiently under the patronage.

Muslims historian of the 12th

century have also mentioned some bankers known as

Muslim and Shroffs who were acting as an agent to the Government to collect

revenue , as also to change money to Government such a prosperous society did need a

well regulated financial administration and monetary system. Muhammad Tughlaq was

the first king to have introduced token currency in India. He issued metal coins as well as

paper currency from the Royal Mints. In later year Sher Shah Suri and then the Moghual

emperors further streamlined this system Akbar established Mints all over the country

under a well conceived plan so that they should function as the offices of the central bank

of that time and also as driving and disbursing offices to the government.

2.3 BANKING IN PAKISTAN

At the time of independence, the areas which now constitute Pakistan were

producing only food grain in agriculture raw material for Indo-Pakistan sub continent.

There were practically no industries in whatever raw material was produced was

being exported from Pakistan .However commercial banking facilities were provided

fairly well here. There were 487 offices of scheduled bank in the territories now

constituting Pakistan.

As a new country without resources it was very difficult for Pakistan to run its own

banking system immediately. Therefore in accordance with the provision of India

independence act of 1947, an Expert Committee was appointed to study the issue. The

committee recommended that the Reserve Bank of India should continue to function in

Pakistan until 30th

September 1948, so that the problems of time and demand liability,

coinage, currencies, exchange etc are settled between India and Pakistan. It was also

stipulated that Pakistan would take over the management of public debt and exchange

debt and exchange control from Reserve Bank of India on 1st

April, 1948, and That

Indian notes would continue to be legal tender in Pakistan till 30th

, September 1948.

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Following the announcement of independence plan in June 1947, the Hindus residing in

the territories now comprising Pakistan started transferring their registered offices in

Pakistan, transferred them to India in order to bring a collapse of the new state. By 30th

june 1948, the number of offices of scheduled banks in Pakistan declined from 487 to

only 195.

There were 19 foreign banks with the status of small branch offices which were

engaged solely in export of crops from Pakistan, while there were only 2 Pakistani

institutions i.e. Habib Bank and Australasia Bank. The panic of uncertain future shook

the confidence of the people. The Government therefore, promulgated the Banking

Companies Ordinance, 1947, to safeguard the interest of both the bankers and the

customers.

The Imperial Bank of India which had been acting as the Agent of Reserve Bank of

India closed down most of its offices in Pakistan, and also was not willing to purchase

even token amounts of Government of Pakistan securities on the pica that these securities

were not marketable. To add the difficulties, the Indian Government withheld Pakistans

share Rs.75 crore in cash balances held by them at the time of partition. The urgency of

assuming control of banking and currency in Pakistan was very badly felt now.

Therefore, it was agreed between the Government of India and Pakistan to advance

the date from 30th

September, 1948 to 30th

June 1948 up to which date Reserve Bank of

India could serve as the monetary authority in Pakistan.

In order to make a necessary arrangement for the assumption of control an Expert

Committee was appointed to recommend necessary steps, including the required

legislation to establish a Central bank of Pakistan.

The foreign expert advised that due to actual shortage of qualified staff theestablished of a Central Bank was not practicable, but the recommended a Currency

Board until such time as the conditions become favorable. However, contrary to the

recommendation, the Government of Pakistan decided to establish a full-fledged Central

Bank. Consequently the Governor general of Pakistan and the Father of the Nation,

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Quaid-e-Azam Muhammad Ali Jinnah, inaugurated the state Bank of Pakistan on july 1

,1948 after the state bank of Pakistan order was made promulgated on May 12, 1948 .

Thus a landmark was made in the history of banking when the State Bank of of

Pakistan assumed full control of banking and currency in Pakistan. As a central Bank of

the country, the State Bank addressed itself with the equality urgent task of creating a

national banking system. In order to attain this goal it provided every help and

encouragement to Habib Bank to expend its network of branches, and also recommended

to Government the establishment of a new bank which could serve as an agent of the

State Bank. As a result the National Bank of Pakistan came into being in 1949, and by

1952 it become strong enough to take over the agency function from the imperial Bank of

INDIA.

The outbreak of Korean War in 1950 provided a great boom for Pakistans exports,

and thus the demand for bank advances increased sharply. However, when the Korean

War ended in 1952, there was shortfall in the countrys export earnings with no

appreciable change in imports. This naturally caused a drain on the foreign exchange

reserves, and in turn, affected the balances of payments positions. The Government had,

therefore, to reduce imports and provide adequate incentives to the business and industry

in the form of protective tariffs. This induced banks to provide working capital for

industries. The state Bank of Pakistan sponsored the setting up of an Industrial Finance

Corporation.

The food shortage compelled the Government to embark upon agriculture credit

;and the Agriculture Development Bank was set up to attend to agriculture finance

Development of agriculture largely depends on agriculture finance, but the scheduled

banks were not very willing to undertake this risky venture. Therefore, the state bank

assisted and sponsored the Agricultures DevelopmentB

ank to attune exclusively toagricultural finance.

All these measures and the devaluation of Pakistan Rupee on August 1,1955 , had

a very favorable effect on commodity market and the balances of payments positions in

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1955 -56. Pakistan now entered into a phase of planned economic development in 1956,

and normally, further expansion in the banking and credit facilities was essential.

Though there had been a remarkable expansion in the number of offices of Pakistani

Banks since Independence, it has remained heavily consented in large cities. Therefore,

the State Bank had to accord priority to the establishment of branches in the interior of

the country.

More Pakistani scheduled banks continued to be established, which included the

Commerce Bank Limited and the Standard Bank Limited. By june 1965, the number of

scheduled bank stood at 36 the deposited increase to Rs 688.28 crores, while credit

expansion by the bank to the private sectors rose to Rs 575.87 crores due to keen demand

under the impact of economic growth and better scope for private enterprises.

Specialized credit and financial institution also development over the years to cater

to needs of specific sectors. National Investment Trust, peoples finance corporation,

Equity participation fund, and National Development Finance Corporation Bankers

Equity Ltd, and House Building Finance Corporation etc, contributed their due share in

the countrys economic life.

At the time of Independence in 1974 the bank services were badly affected and by

june 30,1948 the number of officers of scheduled banks came down to only 81 in the

territories now comprising Pakistan ,but by December 31 ,1973 ,there were following 14

scheduled Pakistani commercial banks with 3,323 officers all over Pakistan and 74

Branches in foreign countries :

y National Bank of Pakistan

y Habib bank Limited

y Habib bank (Overseas )limited

y United Bank Limited

y Muslim Commercial Bank Limited

y Commerce Bank Limited

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y Standard Bank limited

y Australasia Bank Limited

y Bank ofBahawalpur limited

y PremierBank Limited

y PakBank Limited

y Sarhad Bank Limited

y Lahore Bank Limited

y Punjab provincial Co operate Bank Limited

These facts show that commercial banking made a tremendous progress and

achieved phenomenal growth since independence, and that the commercial

banks duly played a vital role as mobilizes of peoples savings to constitute

the most important source of financing in the countrys economy.

2.4 NBP HISTORICAL BACKGROUND

With the establishment of Central Bank, the country has unshared in new era in the

development of banking. Soon the industry was faced another problem of considerable

magnitude. This happened in late 1949. The british government devalued its currency in

September 1949 both Indian and Pakistan currencies were fogged on a fix exchange rate

basis with the pound sterling.

In line with the British Government decision, the Indian Government also

devalued its rupee to maintain parity with the pound sterling. Pakistan however, did not

devalue its currency. India did not view the Pakistani decision in the right spirit and

Pakistans refused to bring its currency at par with that of India led to crises in trading

between the two countries. Indias refusal to lift the Pakistani jute, as rerisal resulted in a

financial crises for the jute growers, who could not be paid. Only the Commercial bank in

public sector could have offered payment, in lieu to magnitude the financial sufferings of

jute growers.

The government responded to the situation quickly and decisively, on November

9, 1949, an order was promulgated by the Governor General bringing in being the

National Bank of Pakistan which started functioning from November 20, 1949.

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In the course of its department the National Bank of Pakistan, in addition to being

a commercial bank in the public sector at a time when all other commercial bank were in

the private sector also came to acquire certain characteristics. The most important of

these characteristics is that the National Bank acts as an agent on the central bank where

the State Bank owes the National Bank act as a trustee to the National Investment Trust

(NIT), one of the premier financial institutions of the country, charged with the

responsibility of mobilizing small savings.

The establishment of National Bank thus signaled the achievement of another

milestone in the development of the banking industry in Pakistan.

2.5 THE HISTORY OF NBP (1996-2009 AND

ONWARDS)

Like all businesses in Pakistan, National Bank of Pakistan also endured a great

pressure in this period. When the biggest bank of the country was faced with losses,

Government of Pakistan made some reforms. Pakistan banking council was established

and all banks were put under independent board of governor. Default of loans is the big

issue since that time. In 1996-97 the Government of Pakistan pressurized 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 Golden Handshake Scheme was offered to the

employees and a large number of employees opted to leave. This decision was very

costly and was amortized. In the second phase of the cost reduction program, the number

of branches including the branches that were running in losses was reduced by a figure of

100.

The decision of May 28, 2001 nuclear tests followed by political decision of

freezing of foreign currency accounts gave hard time to NBP. But still, BP performed

very well and succeeded in increasing the deposits. NBP was also successful in collecting

reasonable amount of money from the defaulters. After some time the situation was made

worst by economic crises of Asian Countries. National Bank of Pakistan performed well

in this region and maintained its credibility.

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National Bank of Pakistan as per its tradition, forwarded funds for revival of

almost sixty sick units with Rs 3.5 billion in 2001.NBP also participated in self

employment scheme with Rs 1.9 billion. NBP also introduced ATM card system and

became a member of SWIFT in New York as well. In November 2004, 10% share of

NBPs share were offered to general public and listed on all domestic Stock exchanges. It

has also prepared a plan for electronic banking and E-commerce.

By analyzing these improvements we can say that the Officials and Directors of

the bank are fully aware and alert for the challenges of globalization and modernization.

2.6 NATIONALIZATION OF BANKS ON PAKISTAN

UNDER NATIONALZATION ACT OF 1974

However, it was badly felt that these banks failed to ensure that the peoples

savings ,the resources so mobilized by them flow in those sectors of economy where they

would produced the goods and services needed badly by a very large number of people in

Pakistan. Accordingly the smaller banks were amalgamated with the five bigger

Nationalized Banks.

y National Bank of Pakistan

y Habib Bank Limited

y United Bank Limited

y Allied Bank Limited

y Muslim Commercial Bank

The main objectives of Nationalization were as under:-

y To enable the Government to use the capital concentrated in the hands of a

few rich bankers for the rapid economic development of the more urgent

social welfare projects.

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y To distribute equitably bank credit to different classes, sectors and regions

to co-ordinate the banking policy in various areas of feasible joint activity

without eliminating healthy competition among banks.

2.6.1 Positive effects / results of nationalization

The nationalization was very smooth though there were doubts about its

positive results, especially when tight money-market conditions resulted in heavy

withdrawals to the extent of Rs 182 crores during the period between December 28, 1973

and February 15,1974.

However it goes without saying that the nationalized banks ,under efficient

professional management, subsequently not only recovered the lost ground but also made

big unprecedented strides in expending the banking services in the nooks and corners of

the country despite extremely low level of domestic savings and heavy dependence on

external borrowings. The number of branches which stood at 3,397 on December 31,

1973 reached about 7000 by june 1998. Similarly, the bank deposited which stood at Rs

1,925 crores at the end of 1973, reached the high mark of Rs 23867 crores (Rs 238670

million) by June 1988.

The rapid pace of deposits mobilization enabled the banks to lay full emphasis on

their lending policies on priority sectors and nation-building projects, while discouraging

unproductive and unhealthy activities like speculating and hoarding. The financing of the

priority sectors like Agriculture, small business and industry and low cost housing

increased by more than 200 percent.

It was during these years of nationalizes banking that the targets for agriculture

finance have been exceeded for many times since the State Bank of Pakistan introduced it

through the small Loans scheme in 1972.

Nationalized banks grow not only in Pakistan alone. Their efficiency was

recognized by foreign entrepreneurs as well and consequent to nationalization, banks also

entered into joint ventures with foreign investors, in Saudi Arabia, United Arab Emirates,

Oman , and Malaysia, Lebanon ,Australia and Nigeria.

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2.7 PRIVATIZATION OF NATIONALIZED BANKS

During last decade of 20th

century (1990-2000) globally it was realized that it is

not the job of the Government to run the Banks and other industries, but the Government

should use their time and resources on providing civic services to the public. It was in

this scenario that the World Bank and other international agencies asked the Government

of Pakistan to privatize the National Banks. The valid grounds for De-National were as

under:-

y The Government should use their time and resources on providing civic facilities

to the public.

y Political pressure was exercised easily on the Government banks particularly in

sanctioning finances which subsequently become non-performing.

y Under Government / political pressure, the Bank opened large number of

Branches which were losing units.

y In National Banks large number of employees was appointed under

political/beurocratic pressures.

y The decision making process was in effective.

y Cost of Intermediation and cost of Fund which has direct effect on Rate of Interest

forBank Loans was higher as compared with foreign banks. The process of

Modernization, Innovation and use of Information Technology in Nationalized

Banks was low as compared with foreign banks.

2.8 OPENING OF OTHER PRIVATE SECTOR

BANKS IN PAKISTAN

To have a healthy competition in banking Industries, SB

P allowed opening of newprivate sectorBanks after 1990. Some of newly opened private sectorBanks are

providing excellent customer services with the use of Modern Technology like online

Bank, ATMS. The example of these Banks are Askari commercial Bank, Bank Al

Falah ,Union Bank , Al Faisal Bank.

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Positive effects of nationalization and opening of new

private sector banks

While concluding the topic we can say that the positive results of the above are as

under:-

y Effective use of Management Information system and new Technology

y Closure of un-necessary losing branches

y Numbers of banks employees were reduced

y Quick Decision Making

y Delivery of Quality customer service

y Effective complaint handling

y Effective collection of data

y Reduction in cost of funds

y Reduction in cost of intermediation

y Reduction in rate of interest on bank loans

y Enhanced and un-precedent profits by all Pakistani Bank from the last three

years

y

Face lifting/upkeep ofB

ranchesy Enhanced availability of loans to the public

Under SBP Directives sanction of loans to needy sector of economy like Small and

Medium Enterprises Financing consumer financing, agriculture financing.

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CHAPTER 3

INTRODUCTION TO NATIONAL BANK OF

PAKISTAN

In banking companies ordinance 1962 section 5 (b) of which say, Banking means the

accepting the deposits for the purpose of lending or investment, repayable on demand or

otherwise, draw able by cheques.

3.1 INTRODUCTION

Before we begin with a detailed explanation of the services offered by the N

BP let us

give a brief introduction of the history of NBP. The organizational culture of any

organization largely depends on its history. NBP is the beaurocratic organization and the

history of NBP was very much affected by National Political changes that occurred as

different polices were implemented by the Government.

3.2 EARLY INCEPTION

National Bank of Pakistan was established under the National Bank of PakistanOrdinance 1949 in Pakistan and it is owned by Government of Pakistan having 76

percent share holding. According to the order of Government of Pakistan the bank started

functioning on November 20, 1949. The bank has 1184 branches in Pakistan and 16 in

Overseas. In domestic banking industry of Pakistan National Bank of Pakistan passes a

unique position. It also undertakes Government Treasury operations and it is the largest

contributing agent of Government and semi Government requirements. It also acts as a

trustee to thr National Invstment Trust, a premier financial institution charged with the

responsibility of mobilizing small saving in the country.

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3.3 ORGANIZATIONAL OBJECTIVE

3.3.1 THE OBJECTIVES

All the objectives of the National Bank of Pakistan were compatible to the mission

statement of the bank. As a business organization its main objectives is profit

maximization .National Bank of Pakistan (NBP) tries to maximize its profit by its

Two basic functions, deposits and finances. Te tool used by the bank in order to increase

its deposits was to provide the best facilities to their customers. By increase in profits of

bank mean the bank becomes capable of lending more loan to the clients and hence

earning profit from them.

3.3.2 VISION OF THE NATIONAL BANK OF PAKISTAN

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

service quality, international best practices and social responsibility.

The vision statement answers the question. What do we want to become it clearly

indicates that both profit and vision are needed to effectively motivate a workforce .

When employees and managers together shape or fashion the vision for a firm, theresultant document can reflect the personal vision that managers and employees have in

their hearts and minds about their own futures. Shared vision creates a commodity of

interests that can lift workers out of the monotony of daily work and put them into a new

world of opportunity and challenge.

3.3.3 Mission statement of the NBP

NBP aspires to the value that make NBP truly the nations Bank by institutionalizing

is a merit and performance culture.

A mission statement is a written document developed by management ,normally

based on input by managers as well as on managers that describe and explain what the

mission of an organization actually is and its says what is our business. Mission statement

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is very important to an organization because it helps management increases the

probability that the organization will be successful.

A clear mission statement describes the values and priorities of an organization.

Developing a business mission compels strategies to think about the nature and scope of

present operations and to assess the potential attractiveness of future markets and

activities. A mission statement broadly charts the future direction of an organization.

y Creating a distinctive brand identity by providing the highest standards of

services.

y Adopting the best international management practices.

y Maximizing stakeholders values.

y Discharging our responsibility as a good corporate citizen of Pakistan and in

countries where we operate.

3.3.4 Core value of NBP

y Highest standards of integrity.

y Institutionalizing team work and performance culture

y Excellence in service

y Advancement of skills for tomorrows challenges

y Awareness of social and community responsibility

y Value creation for all stakeholders

3.4 THE CHANGE PROGRAME

3.4.1 The symbol of change

The logo of National Bank of Pakistan is the symbol of change. The logo

represents the tradition of intellect and security, the basis for the future of the

bank. The Eagle represents Dynamisms, symbolizing the new customer focus and

the new products, new way of working carrying the bank to be the best.

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3.4.2 Major Improvements

In the change program the bank is giving great importance to its employees.

The bank thinks that the change environment will bring three major

improvements.

First, there will be far greater recognition of an individuals contribution to

the bank. There will be an reward and respect for the efforts and achievements .

Second, the strengthening of the staff means that they can directly contribute to

the shape of their bank.

Third, steady improvements in working conditions both in terms of physical

surroundings and relationships with the colleagues and customers.

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CHAPTER 4

ORGANIZATIONAL STRUCTURE

Organizational structure is the framework that defines the boundaries of the

formal organization and in which the organization operates. A suitable organizational

structure for the nature of the organization leads to better performance.

The new organizational structure of the bank constitutes a broad of directors and

an executive committee as the governing bodies. The National Bank of Pakistan (NBP)

has 1183 branches all over the country and 16 overseas branches. The head office isoperationally in charge of central affairs including the delegation of power and authority

to the regional headquarters all over the country.

4.1 HEAD OFFICE

The National bank of Pakistan consists of Head Office situated at 1.1 Chudrigarh Road

Karachi. All branches and regional offices work according to the rules and regulations

issued by the Head Office of National bank of Pakistan, which is primarily responsiblefor making polices and execution of policy decision include.

y Board of Directors

y Group or Divisional Chiefs

The Head Office operationally in charge of central affairs including the delegation of

powers and authority to the 29 Regional Headquarters all over the country.

4.2 BOARD OF DIRECTORS

THE Board of Directors nominates the executive committee, which consists of

President or Chairman and seven Directors and among these seven members on

member perform functions of both member and Secretary .

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4.3 REGIONAL HEADQUATER

On May 13, 2002 a circular was issued in which zones were abolished and the

whole country and Azad Kashmir was divided into 29 regions. The changeover

process started from 1st August 2002 and was completed by 31st August 2002. The

new setup was made fully functional by 15th September.

4.3.1 REGIONAL MANAGEMENT COMMITTEE

A regional management committee controls all controls all region. Regional management

consists of ;

y Regional Business Chief

y Regional Operation Chief

y Risk Management Chief

y Compliance Chief

4.3.2 Provincial Level Region

Regional Headquarters No of Regions

Balochistan 2

Sindh 6

NWFP 5

Punjab 14

Azad Kashmir 2

Total 29

Source: www.nbp.com

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4.3.3 Name of Regions

No Regions No Regions

1 Karachi (south) 16 Bahawalpur

2 Karachi (west) 17 Dera Ghazi Khan

3 Hyderabad 18 Sahiwal

4 Larkana 19 Islamabad

5 Sukkhar 20 Rawalpindi

6 Quetta 21 Jehlum

7 Gawadar 22 Gujrat

8 Lahore central 23 Gilgit

9 Lahore east 24 Peshawar

10 Gujranwala 25 Mardan

11 Sialkot 26 Dera ismail khan

12 Faisalabad 27 Abbotabad

13 Jhang 28 Muzaffarabad

14 Sargodha 29 Mirpur

15 Multan .. ..

Source: www.nbp.com

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The Regional Head Quarters consist of the following Group:-

y Management Support Group

y Marketing development Group

y Inspection Group

y Credit Policy and Management Group

y Special Assts management Group

Each RHQ is headed by a Regional Chief Executive of the rank of Senior

Executive Vice President. Each Division is headed by a General Manager.

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CHAPTER -5

OBJECTIVES OF NBP

The main objectives of NBP is to enhance profitability and maximization the share

through increasing ,leverage of existing customer base and diversified range of products.

These are achieved in two ways and are explained in the following headings

5.1 INCREASES IN DEPOSITS

Bank all over the world tries to increase its deposits by providing better facilities to its

customer. By increasing its deposits a bank can extend greater amount of loan and hence

achieves higher profit. The tool used by bank in order to increase it deposits was to

provide the best facilities to their customers. By the increase in profits of bank mean that

bank becomes capable of lending more loans to the clients and hence earning profit from

them.

5.2 EXTENTION OF LOANS

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 worthness of the borrowers.

This strategy has worked quite well for NBP. Deposits are collected from the people and

invest 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 trained and educated and competent. They carry out extensive financial analysis

before deciding on the loan. Interest charged on the loans potentially contributes to higher

profits.

Some of the other objectives of NBP are:

y Improve customer service

y Quick disposal of credit

y Efficient operation of the officers

y Better cooperation

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y Operation and advisory services for foreign exchange accounts activities

5.3 FUNCTIONS OF NBP

Since NBP is a commercial bank, it performance a variety of functions like

other commercial banks, NBP is engaged in financing international trade. Its other

major functions include receiving deposits, advancing loans and discounting of

exchange. The functions performed by NBP are:

y Primary function

y Secondary function

y Role in economic development function

These functions are discussed in detail below:

5.3.1 Primary Function

Primary function includes those which form the basis of National bank

operations. These functions are central in nature and are the core of the whole operations

of bank. Primary functions include the following:

a) Accepting Deposits

This function is important because banks largely depend on the funds deposited

with them by its customers. Deposits are of many types.

b) Current Deposits

Current deposit is also called demand liability on current deposits. NBP pays

practically no interest on current deposits. Businessmen usually open current

accounts. In NBP accounts can be open with a minimum amount of Rs .500|

c) PLS Saving Deposit

Profit and loss sharing deposits (PLS) are also called checking accounts. One can

deposit and draw money easily. Profit on PLS is calculated every month but paid

after six month. PLS accounts can be opened with minimum amounts of Rs .500-

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d)PLS Term Deposits

Fixed term deposits are deposits with the bank for certain fixed period before the

expiry of which they cannot be withdrawn unless giving due notice. In this case

the rate of profit will be different depending upon the time period.

e) Advancing Loan

Now, what banks do with the money that they have received from the general

public in the form of deposits? The answer is, they lend from this money at a

rate of interest higher than that are paying to the deposits. This process of

advancing loans is the second fundamental function of a National bank. The

National bank do not lend blindly while lending 5 basic principles are duly

observed.

y Safety

y Liquidity

y Dispersal

y Remuneration

y Suitability

National Bank may advance loans in any of the following form.

f) Overdraft

This is short period financing facility. Under this bank allow his clients to

withdraw certain amount from his account over and above the balances

actually lying in his current account. The bank charges interest in the

amount overdrawn by the clients. When the clients have surplus funds at

his disposal, he can pay the amount to settle his overdraft balance. The

overdraft facility is for short term and is provided on the current account

only.

g) Discounting bills of exchange

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Discounting of bill is practically speaking lending for exchange at their

market worth i.e. it pays to holder of the bill an amount equal to the face

value after deducting interest at the current market rate for the period. This

bill has to be mature. This is the way used for keeping a part of assets of

the bank in liquid form.

h) Loans

National Bank of Pakistan advance short medium and long term loans

to investors and businessmen. While advancing such loans a complete legal

systematic procedure is followed. As the bank deal in some other peoples

money, the bank management takes all necessary precautions to make

certain the return of the money advanced. The loans are normally advanced

against securities which are valued by the banks experts. The amount of

the loan is credited in the borrowers account and from there money can be

drawn through cheques.

i) Cash Credit (C.C Limiy )

The bank normally provides this facility to business house and

commercial units. The facility is provided against appropriate security. The

bank in this case sanctions a particular amount. The borrower is allowed to

draw amount within the sanctioned limit. In this case the interest is charged

only in the amount drawn by the borrower.

5.3.2 Secondary Functions

The secondary functions can be classified as follows:

y Agency function

y General Utility Services

y Miscellaneous /Others

a) Agency Functions

NBP also provide best and unique service to its valued customers

means act as an agent to them. NBP provide the following agency

functions to the customers:

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y Collection of dividends

y Collection of cheques

y Selling and purchasing securities

y Obeying standing institutions

y Executor or trustee

y Funds Transfers

y Acting as an Agent

b)General Utility Services

NBP also provide general utility functions to their customers and

general public Utilities provide by NBP are as follows:

y Clearance of Utility bills

y Providing lockers

y Issuing of Credit Instruments

y Providing Trade Information

y Underwriting Services

y Financing Foreign Trade

y Export Promotion Cells

y Letter of Credit Operation

c) Miscellaneous Functions

NBP also provide miscellaneous services to customers and general

public. The following miscellaneous services are provided by NBP

y Zakat Collection

y Collection of Utility Bills

y Encashment Services

y Guarantee, Indemnity Business

y Hajj Services

y Student Loan

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CHAPTER 6

DEPARTMENTALIZATION

This section has focused the following departments of the bank.

y Deposits

y Remittance

y Advances

y Cash

6.1 DEPOSITS

Customer account is maintained in deposits department. Customer account is also

debited a credited through this department of the bank. New accounts are also opened

and accounts are also closed through department cheque books are issued through this

department.

Local currency account and foreign currency accounts are opened in this

department.

6.1.1 Local Currency Account

Local currency accounts are maintained in this department. A minimum balance of

Rs.5000 should be maintained by the customer every time and if it is less than 5000 a

deduction of 50 is done from the customer account as fine. This action is taken due to

the strict orders of State Bank of Pakistan. There are three types of local currency

accounts:

a) Current Account

Profit and loss is not shared with this account holder and customer can withdraw

his amount from the bank any t ime he wants.

b)PLS Saving Account

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Profit and loss is shared with this account holder and this customer can withdraw

cash from the account any time he needs.

c) PLS Term Deposits Account

Interest is given on this account but the account holder cannot withdraw his

amount from the account before a specified time period.

6.1.2 Foreign Currency Account

Foreign currency account can be also opened in the bank. It could be opened in

Dollars, Pounds or Euro. But the minimum balance of the account should be equivalent to

1000 dollars. And if it is less than a fine is charged by the bank.

6.1.3 Opening of Account

Four things necessary in opening of account

a) Formal Request in the form of written application to the manager

b) National Identity Card copy of the application and reference

c) Reference ID is also required by the bank

d) A minimum balance of Rs 5000 in local currency and 1000 dollar in foreign

currency account is required by the applicant to maintain.

6.2 REMITTANCES

Cleaning is done through this department. Demand draft and cheque

collection is also done through this department.

Following transaction are done through remittances department of the bank.

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6.2.1 Funds Transfer

This department is used to transfer funds usually from one branch to another orfrom one bank to another bank.

6.2.2 Demand Draft

Demand draft are issued and received from this department. Demand draft is a

cheque like instrument. Customer deposits money plus banks charges with the bank and

bank issues demand draft. There are two types of demand draft Inward and outward

demand draft.

6.2.3 Inward Demand Draft

Demand drafts that are made on us and are payable by us are called inward demand

draft.

6.2.4 Outward Demand Draft

Demand drafts that are made by us the bank and are payable by the other

bank are called outward demand draft.

6.2.5 Telegraphic Transfer

This is the fastest way to transfer from one branch to other branch. This type of

transaction is done through fax machine and bank uses special codes in this transaction is

also inward and outward.

6.2.6 Cheque Collection

Some time customers deposits cheques of other bank in their account. These

cheques are sending to clearing house of State Bank of Pakistan. Negotiation between the

bank is done through this clearing house.

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6.2.7 Issuance of TC

Travelers cheques are issued from this department. Travelers cheques are

available in the denomination of 5000, 1000 ,20000 and 40000. These travelers cheques

are usually used by the businessmen who travel from one city to other, because they are

find it difficult to carry cash with them. Travelers cheques are payable by all branches of

the issuing bank.

6.2.8 Duplicate A/C statement

Every month account statement is send to the customers home. If customer does

not receives it than a duplicate account statement is issued from this department.

6.3 ADVANCES

Short term and long term loans are given to general public through this

department of the bank. Now a day more efficient NBP advance schemes are gold

finance, advance salary and saiban .Two types of advance are given by National Bank of Pakistan

y Short Term Loan

y Long Term Loan

6.3.1 Short Term Loan

Duration of short term loan is not more than one year. And it is given for

general purposes. Three types of short term loans are given by National Bank of Pakistan.

y Cash finance

y Running finance

y Gold finance

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Running finance is given for short business requirements. Gold finance is given

against Gold that is deposited by the customer in the bank. Bank gives amount up to

some portion of the Gold.

6.3.2 Long Term Loan

Long term loans offered by National bank are :

y Demand Finance

y Staff Loans: Staff loans include Saiban (Home Finance ) and advance

salary.

6.4 Cash

Cash of the bank is maintained in this department of the bank. Cheques and

money deposited by the costumer are also received in this department therefore this is the

most sensitive area of the bank.

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CHAPTER-7

FINANCIALHIGHLIGHT

7.1 BALANCE SHEET AS ON (SEPTEMBER 30, 2009)

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7.2 PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED (SEPTEMBER 30, 2009)

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7.3 CASH FLOW STATEMENT

FOR THE MONTH END (SEPTEMBER 30, 2009)

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7.4 FINANCIAL ANALYSIS

Financial analysis is an evaluation of a firms past financial performance and its

prospects for the future. It consists of applying analytical tools and other relevant data to

obtain useful information. The financial statement with the attached schedules and

directors report on past performance and future prospects give compact information. The

interested parties need to interpret this information about performance of the company

through the use of financial tools. The main purpose of financial analysis is to give a

clear picture of the financial position by studying the relationship and comparisons

between the items in the statement. Keeping in view its importance, I have addressed

financial analysis by using the balance sheet and income statement, their common, index,

trend and ratio analysis.

7.5 COMMON SIZE AND TREND ANALYSIS

Index and common size analysis are used to measure the firms performance over

time in relation to itself. Such analysis is called time series analysis.

Common size analysis is an analysis of financial statements where total assets

divide all balance sheet items and all income statement items are divided by net sales or

revenues. Common size statements can be extremely helpful to highlight changes over

time in the financial performance and financial condition of a company. However, growth

or decline in various items of balance sheet and income statement cannot be detected

from the common size percentage only changes in the data relative to a total for a

particular date or period can be determined. A statement items have increased in rupee

amount will show a decrease percentage if the total has increased at a greater rate than the

individual item of vice versa.

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BUSINESS VOLUME

Rs.in million

Years 2003 2004 2005 2006 2007 2008 September

2009

Total Assets 468,972 553,231 577,719 635,133 762,194 817.758 865,137,661

Deposits

(Rs. In Million)

395,492 465,572 463,427 501,872 591,907 624,939 653,518,020

Advances

(Rs.In Million)

161,266 220,794 268,839 316,110 340,677 412,987 435,504,840

Investments 166,196 149,350 156,986 139,947 210,788 170,822 240,518,170

Shareholders Equity 18,134 24,900 37,636 53,045 69,271 81,367 88,344

Pre-Tax Profit

(Rs.In Million)

9,009 11,978 19,056 26,311 28,061 23,001 15,000,074

After-Tax Profit

(Rs.In Million)

4,198 6,195 12,709 17,022 19,034 15,459 4,949,108

Earning Per Share (Rs.) 5 7 14 19 21 17 9.34

Return on Assets

(Pre-Tax Profit)

2% 2.40% 3.40% 4.30% 4% 3.00% 1.17%

Number of Branches 1,199 1,226 1,242 1,250 1,261 1,276 -

Number of Employees 13,272 13,745 13,824 14,019 14,079 15,204 -

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7.5 ADVANCES

(Rs. In million)

Year Advances Increase/(decrease)

2007 340,677,100 -

Dec,2008 412,986,885 72,309785

Sept,2009 435,504,840 22,517,955

For banks loans of advances are the major portion of its assets. These are the

major assets responsible for the earning of a bank. The advances of NB

P are on theincreasing trend for the last year. The bank advances have increase by Rs, 72,309785

(17.5%) and 22,517,955 (5%) in 2008 and 2009 with respect to their previous years.

Graph 9.1

2007 2008 2009

0

10

20

30

40

50

412986885

72309785

17.50%

435504840

22517955

5%

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7.6 TOTAL ASSETS

(Rs. In million)

Year Total Assets Increase/(Decrease)

2007 762,193,593 -

Dec,2008 817,758,326 55,564,733

Sept,2009 865,137,661 47,379,335

Assets are the economic resources, which are expected to benefit the future or

present operations of the business. For NBP the cash, loans and advances form the major

portion of the assets, effectively supported by fixed assets. The total assets of the bank

have increased by 55,564,733 (6.8%) in the year 2008 as compared 2007. In the year

2009 47,379,335 (5.5%) increase was shown by NBP.

Graph 9.2

2007 2008 2009

0

200

400

600

800

1E+

762193593

0

817758326

55564733

6.80%

865137661

47379335

5.50%

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7.7 PROFIT BEFORE TAX

(Rs. In million)

Year Profit before tax Increase/(Decrease)

2007 28,060,501 -

Sept,2008 19,000,776 (9,059,725)

Sept,2009 15,000,074 (4,000,702)

Graph 9.3

The profit before tax of the Bank is calculated by deducting all the expenses from

the revenue generated by the bank, it is also the Net Income of the bank because all the

expenses are paid out and only tax is included in this profit. In the year 2008 the profit

before tax is decreasing by 9,059,725 (48%) as compared 2007. But in the next year 2009

the profit before tax was also decreased at 4,000702 (27%). So this decrease will effect

the company financial position.

2007 2008 2009

-

1

28060501

0

19000776

-9059725

48%

15000074

-4000702

27%

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In the year 2008 the profit after tax is decreasing by 6,37,902 (50%) as compared

2007. But in the next year 2009 the profit after tax was also decreased at 2,644,905

(26%).

7.9 EARNINGS PER SHARE

Year Earning per share Increase/(Decrease)

2007 23.34 -

Sept,2008 11.8 (11.54)

Sept,2009 9.34 (2.46)

Table 9.6

Graph 9.5

2007 2008 2009

-15

-10

-5

0

5

10

15

20

2523.34

0

11.8

-11.54

98%

9.34

-2.46

26%

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7.10 RATIO ANALIYSIS

Net Working Capital Ratio

Working capital ratio = Current Assets current liability

years 2007 2008 Sept, 2009

Current Assets 736,270,614 790,336,099 837,239,026

Current liabilities 640,758,108 715,299,108 749,478,868

Working capital

ratio

95,512,506 75,036,991 87,760,158

There two concepts of working capital. The first define the working capital as the

investment in current assets. Current assets mean which can be converted into cash

within an according period and include cash, short-term securities, debtors, bill

receivable, stock etc. According to the other concept working capital is the excess of

current assets over current liabilities.

The net working capital in the year 2007 is 95,512,506 and in 2008 net working

capital is decreased to 75,036,991. While in 2009 the net working capital is increased to

87,760,158.

Current Ratio

Current ratio = current Assets / current liabilities

Years 2007 2008 Sept, 2009

Current Assets 736,270,614 790,336,099 837,239,026


Current ratios 1.14 1.10 1.11

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Current assets are those assets which can quickly convertible to cash are very

near to cash such as account receivable, inventory, investment, and advances etc. When

the current assets are divided by current liability of the same year we find the current

ratio. In the year 2007 the current ratio shows a positive figure of 1.14. And In the year

2008 and 2009 the current ratio is 1.10 and 1.11 it is due to increase in current assets.

Cash ratio

Cash ratio = cash / current liabilities

years 2007 2008 Sept, 2009

Cash 94,873,243 106,503,756 72,976,246


Cash ratio 14.8 14.8 9.8

In 2007 and 2008 the cash ratios is same but in 2009 it decreased at 9.8% because

the bank has increased the lending to the people. this trend show the utilization of cash

by NBP in meeting its current obligation as they rise. The is that cash on hand is most

unproductive assets and too much liquid decrease profitability.

Investment Deposit Ratio

Investment deposit ratio = Investment / Deposit *100

years 2007 2008 Sept, 2009

Investment 210,787,868 170,822,491 240,518,170

Deposit 591,907,435 624,939,016 653,518,020

Investment deposit ratio 35 27 37

This ratio shows the comparison of investment and deposits. This is calculated as

total investment divided by total deposits. From the above table it is very much clear that

NBP are using their deposit very efficiently and earning high profits, In 2007 the ratio is

35% but in 2008 it was decreased to 27%, while again in 2009 it increased at 37% which

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show the performance of NBP is very good. it show that the bank using efficiently the

deposits of the customers.

Advance Deposit Ratio

Advance deposit ratio = Advance / Deposit *100

Years 2007 2008 Sept, 2009

Advance 340,677,100 412,986,865 435,504,840

Deposit 591,907,435 624,939,016 653,518,020

Advance deposit ratio 58 66 67

This ratio show that how much efficiently the banks advances the deposits of

their customer to borrower. In 2008 the advance deposit ratio is increased at 66% as

compared to 2007 which is 58%, while in 2009 the advance deposit ratio is little

increased to 67%, This show that the bank has small concentrate on providing the loans

to the customers due to lack information about the background and assets of customers.

Dept to Asset Ratios

Dept to Asset ratio = Total dept / Total Asset

years 2007 2008 Sept, 2009

Total depts. 645,855,939 715,299,108 749,478,868

Total Assets 762,193,593 817,758,326 865,137,661

Dept to Assets ratio 85 87 87

The dept to total assets ratio measures the percentage of the firms assets that are

financed with dept.In 2007 is the dept to assets ratio is 85% while in 2008 and 2009 the

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dept to asset ratio is increasing at the same rate at 87%, In 2009 the 87% show that the

remaining 13% of financing came from equity investor.

Dept to Equity Ratio

Dept to equity ratio = total dept / shareholder equity

Years 2007 2008 Sept, 2009

Total depts. 645,855,939 715,299,108 749,478,868

Total equity 69,271 102,459,218 115,658,793

Dept to equity ratio 5.6 7 7

The dept to equity ratio is the percentage of dept relative to the amount of equity

of the firm; In 2007 the dept to equity ratio is increased to 5.6% as compared to previous

year. while in 2008 and 2009 the dept to equity ratios is increased at the same rate is

7%,it show that firm had 7 time as much dept as it had equity, indicating that firm

heavily relies on creditor-supplied funds than on owner-supplied funds.

Gross Profit Margin Ratio

Gross profit margin ratio = Gross profit / Total Revenue

Years 2007 2008 Sept, 2009

Gross profit 33,629,470 26,956,784 28,683,815

Total revenue 50,569,481 43,226,927 55931541

Gross profit margin ratio 66 62 51

The gross profit margin measures how much profit remains out of each sales

dollar after the cost of the goods sold is subtracted. this ratio show how well a firm

generate revenue compared to its cost. The higher the ratio, the better the cost controls

compared to the sales revenues. In 2008 the gross profit ratio is decreased to 62%

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compared to 2007 while in 2009 it was further decreased to 51%.the reason for this

decreasing trend is that gross profit of the bank is decreasing due to remarkable increase

in mark up interest, the reason for this mark up expense may be the management

inefficiency in controlling these expenses.

Net Profit Margin Ratio

Net profit margin ratio = profit after tax / total Revenue *100

Years 2007 2008 Sept, 2009

Profit after tax 19,033,773 12,695,871 10,050,966

Total Revenue 50,569,481 43,226,927 55,931,541

Net profit margin ratio 37 29 18

The net profit margin measures how much profit out of each sales dollar is left

after all expenses are subtracted, it is computed by dividing profit after tax by sales

revenue. Net profit of NBP is fluctuating trend in 2009 are 18% as compared to 2008 and

2007.this mean that selling price has increased the other expenses of the bank.

Return on Assets

Return on Assets = profit after tax / Total Assets *100

Years 2007 2008 Sept, 2009

profit after tax 19,033,773 12,695,871 10,050,966

Total Assets 762,193,593 817,758,326 865,137,661

Return on Assets 2.4 1.6 1.17

The return on assets (ROA) ratio indicates how much income each dollar of

assets produces on average, it show whether the business is investing in its assets

effectively, the return on assets is calculated by dividing profit after tax by the total assets

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of the firm, In 2009 the average income is 1.17% this return on assets figure may seen

low as compared to 2007 and 2008.

Return on Equity

Return on equity = profit after tax / Total equity *100

years 2007 2008 Sept, 2009

profit after tax 19,033,773 12,695,871 10,050,966

Total equity 116,337,654 102,459,218 115,658,793

Return on equity 16 12 8.7

The return on equity (ROE) ratio measure the average return on the firm capital

contribution from its owners. it indicates how many dollars of income were produced for

each dollar invested by the common stockholders. it is calculated by dividing net income

by stockholders equity. In 2009 the return on equity is slightly decreased to 8.7% as

compared to 2007 and 2008.

Asset Turnover Ratio

Asset turnover ratio = Total Revenue / Total Asset *100

Years 2007 2008 Sept, 2009

Total Revenue 50,569,481 43,226,927 55,931,541

Total Asset 762,193,593 817,758,326 865,137,661

Asset turnover ratio 6.7 5.2 6.4

The total asset turnover ratio measures how efficiently a firm utilizes its assets. if

a company has many assets that do not generate revenue, then the total asset turnover

ratio will be low, In 2007 the assets turnover ratio is 6.7% but in 2008 it was decreased to

5.2% while in 2009 again it slightly increased to 6.4%.

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Chapter 8

S.W.O.T Analysis

S.W.O.T Analysis is the most important part of the report, because it dependson my personal observation. SWOT analysis analyses the firms in terms of strengths,

weaknesses, opportunities and threats. Only a good keen and comprehensive analysis

leads to good recommendations for the improvement of the existing conditions. Therefore

in NBP I have observed many things and I have analyzed them to the best of my efforts

and knowledge.

8.1 Strengths

Following are the Strengths of NBP

a) Serving as an Agent

National Bank of Pakistan main serves as an agent of state bank of Pakistan. No

other bank is allowed to do the clearing task but NBP act on the behalf of SBP the

clearing task.

b)No of Branches

Other strength of NBP is that there are 1249 branches in Pakistan and 16 branches in

overseas of NBP. So NBP staff members are scattered on the land of Pakistan and world

to provide benefits and serve the people.

c) Experienced Employees

The staff members of NBP main branch are an experienced, though they are not

qualified people but yet they have enough experience to carry on the work of bank. It

is said that Knowledge is power and experienced is wisdom but experience cannot

be defeated by knowledge .

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d)ATM Machines

NBP has its strength in ATMs having 104 machines in all over the country

e) Modernization

National Bank of Pakistan is the first bank, which has started a Foreign Exchange

Company in order to regularize the inflows of foreign money and control the undesirable

blackmailing of private foreign companies in the country.

It is the only domestic bank of the country, which has been awarded The Best

Domestic Bank consecutively in 2006 and 2007.

8.2 Weaknesses

Following are the main weaknesses of NBP

a) Delegation of Authority

NBP to a great extent is a centralized bank. The manager of Khyber bazar branch

has very limited authority, especially in case of advances. Lack of delegation of authority

crates problems and when the manager is not present in his office and customer has to

wait for many hours. There is top to bottom flow of authority and lower level of

employees cannot participate in the decision making process. The top level of the

organization takes all the decision. This completely centralized decision making

decreases the interest and also reduces efficiency of the bank.

b)Seniority Based Promotions

Promotion in NBP is purely on seniority basis rather than on performance. This

really de motivates the employees because they know that it doesnt matter

whether they perform well or bad.

c) Job Rotation

Most of the employees work in particular department and hey specialized only in

one department. In case of absence of one employee, any other employee cannot

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perform this work. In this way bank can not only loses the business but also result

in dissatisfaction of the customer.

d)Lack of Theoretical Knowledge of Employees

There is a lack of theoretical knowledge of the employees of National Bank of Pakistan.

Although there is mostly routine and practical but sometimes low Background education

can disturbed the routine work. They have to consult the Regional Manager Office. This

factor affects their efficiency.

e) Discouraging Of Small Depositors

The staffs members give proper attention and respect to those customers who have

deposited huge amount of money while the small depositors mostly; the salaried peopleare discouraged to open an account within the branch. In this way they discourage saving

habits in the general public.

f) Lack of Discipline

During my internship at National Bank of Pakistan, Khyber bazar branch I

observed lack of discipline in the way that some of the employees do not care about the

office timings. They usually come late in the morning. Similarly employees take long

leaves without any valid reasons.

g) Excessive Paper Work

There is excessive paper work in NBP, which takes more time and reduce the

effective banking performance.

h) Lengthy Process of Loan

Customers require quick financing to meet the the requirements of the business but

due to centralization of decision-making there is unnecessary delay in sanctioning of

loans, resulting in dissatisfaction of the customs.

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i) Inadequate Fringe Benefits

The main purpose of the fringe benefits is to retain the employees in the

organization on long term basis. It has been analyzed that the package of fringe

benefits offered by the NBP is not much attractive as compared to other

organizations. Recently NBP has furthermore reduced the fringe benefits of the

employees that may result in de-motivation and reduction the performance of existing

employees.

J) Low Rate of Return

Due to low rate of return, the depositors are drawing their money from the banks and

depositing in the saving centers, which are offering a good rate of return as compared tothe banks.

1) Limited Application of electronic media

NBP is not utilizing the electronic media for its promotional campaign. There is lack of

awareness among the customers and general public about the schemes offered by NBP.

m) Political Interference

Banks are not free from political interference. Due to political pressures on the

management for sanctioning the loan in favor of their political persons resulted in huge

amount of bad debts because in this way the bank is unable to recover the loan very

difficult, and these loans are not used for productive purposes.

8.3 Opportunities

Following are the opportunities of NBP :

a)Financing

Now a days people have enough savings and they want some luxurious types

product such as house, car and business etc. so the opportunity for NBP is to start car

financing scheme to be beneficial for the organization (Bank).

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b) Modernization

Another opportunity for NBP is to modernize itself because all other banks have best

methodology to complete others and market their products. As I know that NBP have not

enough modernize system to be compatible with other banks.

c) Strong competition

As we know that todays era is very competitive. In Peshawar all the banks are

involved in struck competition so it is an opportunity for NBP to develop a strong

marketing policies and campaign to develop itself.

8.4 THREATS

Following are the major threats for NBP:

a ) other bank

The major threats for NBP of other banks that have started functioning such as Bank

Alfalah,MCB, UBL, ABL, PICIC, KhyberBank etc. These are the bank that NBP face

competition with them. These banks provide a wide variety of services as compared to

NBP.

b) Political interference

Banks are not free from political influences. Due to political pressure on the

management for sanctioning the loans in favor of their political person resulted in huge

amount to bad debts because in this way the bank is unable to recover the loan very

difficult, and these loans are not used for productive purposes.

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Chapter - 9

FINDINGS AND RECOMMENDATIONS

During my internship of two months I observed a lot of things and felt that there is

always nice ways of doing things so some recommendations are suggested for the bank in

accordance to the critical analysis.

9.1 AVAILIBILITY OF REQUIRED STAFF

Required staff should be provided to branch in order to the smooth functioning of the

branch. Especially a customer service officer and telephone operator should be appointed.

These are important because without the customer service officer the customers are

facing a lot of difficulties. The employees waste a lot of time in attending telephone calls.

The employees have to answer the queries of the customers such as account balances on

telephone. It wastes a lot of time of the staff. In this situation there is need of telephone

operator.

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 the bank in goodwill and better working environment.

9.2 COMPUTERIZATION OF BRANCHES

Computer should be introduced in NBP. This will reduce administration cost to the

great extent. Branch should be connected through computers with zonal office and

headquarter. This will help a lot in the operation of the bank. Computer knowledge

should be given to the employees. Communication and coordination problem will be

solved to great extent. It will enhance decision making process regarding the loans. The

branch will send these proposals instantly and the zonal office and headquarter will

process it swiftly. This will save time, which is lost in the delivery process.

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Keeping in view the new world requirement it is essential for the bank to install a

computer information system. To achieve the organization goals in limited time and

budget, it is felt that the bank must have modernization in its operation.

This will decrease the workload on the employees of the branch. The accuracy is

also another advantage which comes with the use of computers although the installation

of computers in the branch will cost a lot initially but in the long run it will produce

fruitful results. As the computers are fast they can do a lot more work than the human

being thus the need for future employment will decrease considerably. The employees

have to be paid with the fringe benefits, but the computers are brought once.

The staff should be given proper training of computers. This training can be given in

terms of 2-weeks short courses at the computer center or evening coaching can be done at

the branch itself.

9.3 INTER DEPARTMENTAL TRANSFER

There should be inter departmental transfer of employees, so that they should know about

all the departments, in this way a proper coordination could be achieved .the must have

some basic information of other departments. Proper job rotation must be there. This will

enhance the capabilities of the employees, as due to change in work they will escape

monotony. This will give them refreshing change and motivate them for their work.

In the branch there were few seats where the load of work was more than the other

seats so the need of rotation was felt there so that nobody should be overburdened. As the

officers working in those departments spent a quite a lot of time so need of

interdepartmental transfer was felt.

9.4 CUTOMER FRIENDLY ENVIRONMENT

Friendly environment should be crated because it will help to gain the interest of

employees in work. There should be no noise in the office 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, pension; in this kind of situation a cool head is required as

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there is an element of lack of discipline in the customers. It is the duty of the staff to

educate the customer to follow discipline. All the customers should be treated equally and

no relaxation should be given to the near ones.

9.5 PROFESSIONAL ATTITUDE

Bankers must have professional attitude. the management should cut their

unnecessary expenses to improve profitability. All the loop holes must be closed that are

used to incur expenses in respect of electricity, fuel, telephone, fringe benefits etc.the

bank should analyze each and every activity on cost and benefit basis.(cost benefit

analysis) .

The controllable expenses must be minimized in order to maximize the profit .the

staff of the branch should be punctual and should follow the office timings very strictly.

In todays world of competition the wastage of time is not atollerable so the staff should

be loyal to their duties.

9.6 PERSONAL MARKETING

Personal marketing visits is very useful mode of contact .such visits are very

important for products, such as information about customers financial and business

position, about his market reputation and creating a feeling of importance in the mind of

client .such visits should be properly planned with consistency and regularity.

By personal contact and goodwill the staff can attract customers to the branch so

the staff of the branch is like an ambassador of the bank. This will help in increasing the

deposits of the branch and ultimately the profit of the branch. The officers of the branchshould increase their contacts among the local businessman who are the potential

customers for the banks.

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9.7 EQUAL DISTIBUTION OF WORKLOAD

Workload should be divided equally among the employees of the branch. The

workload should be distributed in such away that there should be no undue burden on any

one. This will enhance the motivation and efficiency of the employees. Undue relaxation

should not be given to anyone. The personal contacts of some of the employees should

not spoil the environment of the branch.

There were few officers who were loaded with work, at the same time there were few

who had little work to do. This created a unfair situation in which the overloaded person

felt disheartened. For this elimination of this kind of situation the management should

distribute the work load equally. This will be helpful in creating a better environment for

work in which no body will felt overburdened.

9.8 ATM facility

NBP has 104 ATM machines.atm technology advancement is necessary for

improving the service of the bank. This will allow the customer to get 24-hour banking

service. the need of a ATM facility is felt even badly because of this fact the biggest

competitor of NBP has just introduced the ATM facility to its customer .in this way the

competitor has got a technological advantage .

9.9 Delegation of authority

In national bank of Pakistan there is a lack of delegation of authority .all of the major

decision are taken at higher level of management .major decision have to take accordance

with the employees opinion. It will benefit both the management and the organization.

As national bank of Pakistan is a centralized bank, the higher authority takes

decisions. The authority delegated to the managers of the branch is limited. They have to

take permission of the higher authority for almost every action. Same was the case in

Khyber bazaar branch where the manager had to take permission from the higher

authority for small affairs.

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9.10 Role of presentation

As it is said, first impression is the last impression. .national bank of Pakistan has to

improve its internal and external outlook of branches. As private banks are very good for

this field, so compete with them it is necessary that national bank of Pakistan should

concentrate on the internal and external outlook of its branches. The officers should be

dressed smartly so that they could attract the customer by their personality and behavior.

9.11 Competitions

Competition is one of the major problem, that every business is facing and banking

is not exempted from the competition NBP is facing competition both from private and

international banks.

9.12 Consumer satisfaction

In todays world of competition only consumers satisfaction can reduce

competitive advantage .as said in critical analysis there are some problems related to the

dissatisfaction of consumer.

The national bank of Pakistan Khyber bazaar branch has to improve services

provided to the pensioners and also they have to adopt scientific methods of paying utility

bills. Improving the quality of consumer service can do all these things if the consumer

are satisfied from the service he will expand his business with the bank .but if the level of

service is not good the bank lose its customers. For this proper training has to be imparted

to the employees.

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