Internship Report Nation Bank Limited 02

8/4/2019 Internship Report Nation Bank Limited 02

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INTERNSHIP REPORT ON NATIONAL BANK OF PAKISTAN

MAIN BRANCH SWABI (0406)

SUPERVISED BY

SIR ASIM

SUBMITTED BY

TAHIR AHMAD

ROLL NO: 19130

MBA (FINANCE)

SEESION 2009-11

DEPARTMENT OF MANAEMENT SCIENCES

HAZARA UNIVERSITY MANSEHRA


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INTERNSHIP REPORT ON NATIONAL BANK OF PAKISTAN

MAIN BRANCH SWABI (0406)

Internship Report Submitted To the Department Of Management Sciences

for the Partial Fulfillment of the Requirements for the Degree of Master of

Business Administration

DEPARTMENT OF MANAEMENT SCIENCES



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COMMITTEE APPROVAL FOLIO

External Assessor

Mr.__________________________________Signature___________________

Supervisor

Mr.__________________________________Signature___________________

Chairman

Mr.__________________________________Signature___________________

DEPARTMENT OF MANAGEMENT SCIENCES



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INTERNSHIP CERTIFICATE


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I

DEDICATION

I dedicate my efforts and hard working to my beloved parents, respected

teachers and great friends whose love, Prayers and supports have a great

contribution in my carrier development.

Tahir Ahmad


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II

PREFACE

This is a compulsory obligation of MBA (Finance) program to complete an internship in

finance and give report on its activities. This requirement provides me a chance to

explain the student of MBA with practical working of an organization.

Apparently, NBP being a large organization of Pakistan became the best choice for me. I

performed my practical work of about two months in NBP Main branch SWABI. During

my internship I was rotated in different sections of finance & advance department and got

some understanding of their operation and procedures.

The staff of NBP was very much supportive to me. They provided me with guidance and

related material to write a report. I feel satisfaction to convey my sentiments that it was

got a lot time in my career.


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AKHNOWLEDGEMENT

First of all on the completion of my report I am very thankful to all those people and their

sincere cooperation that they provide on various stages. The problem which is faced by

every student is the selection of a report. I am very thankful to my honorable supervisor

Mr. ASIM UR-REHMAN for helping me in the time of uncertainty. During the

execution and preparation of my report. I had a real chance to learn from his huge

knowledge and vast experience.

Then I am very thankful to all staff members of national bank main branch SWABI they

guide me and provide me valuable information which helpful in the preparation of my

report.

Finally I am very thankful to almighty Allah who gives me strength to complete my task

successfully.

Tahir Ahmad

MBA (Finance)


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IV

TABLE OF CONTENTS

Dedication I

Preface II

Acknowledgement IIITable of Contents IV

Executive Summary VIII

List of Tables IX

List of Charts X

Chapter # 1 Introduction to Study 1

1.1 Background of research study 1

1.2 Purpose of the research study 11.3 The study objectives 21.4 Restriction of the research study 21.5 The Benefit of the study 31.6 Methodology of the Research 3

Chapter # 2 Evolution of Banks in Pakistan 4

2.1 Introduction 4

2.2 Definition of Bank 52.3 Banking Evolution in Pakistan 5

2.4 Banking Growth during (1948-1970) 6

2.5 Banking Reforms 1972 8

2.6 Islamization of banking system in Pakistan 10

2.6.1 Islamization of banking 11

2.6.2 Reinvestment and deregulation of bankig-1991 12

2.6.3 Interest free Banking 13

2.6.4 History of National Bank of Pakistan 13

2.6.4.1 Mission statement of NBP 142.6.4.2 Objective and Goals 14

2.6.4.3 Board of Directors 14

2.6.5 Branches of NBP 15

2.6.6 Objectives of NBP 15

2.6.7 Main function of national bank 16

2.6.8 Accept deposits 16


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2.6.9 Agency services 17

2.6.10 Summary of the chapter 17

Chapter # 3 Departmentalization of NBP 18

3.1 Introduction 18

3.2 Demand drafts 18

3.3 Swift system 18

3.4 Letters of credit 19

3.5 Travelers cheques 19

3.6 Pay order 19

3.7 Ail transfers 20

3.8 Foreign remittances 20

3.9 Short term investments 21

3.10 National Income Daily Account (NIDA) 22

3.11 Equity investments 223.12 Commercial finance 22

3.13 Trade finance other business loans 22

3.13.1 Agricultural Finance 22

3.13.2 Corporate Finance 24

3.14 International banking 25

3.15 Cash and Gold Finance 26

3.16 Advance salary loan 26

3.17 Departmentalization 26

3.17.1 Cash department 27

3.17.1.2 Receipt 27

3.17.1.3 Payments 27

3.17.1.4 Cheques and their Payment 27

3.17.1.5 The Characteristics of Cheque 28

3.17.1.6 Parties to Cheque 28

3.17.1.7 Types of Cheques 28

3.17.1.8 Payment of cheques 293.17.2 Clearance department 30

3.17.2.1 In - Word Clearing Books of bank 30

3.17.2.2 Out-Word Clearing Books of bank 313.18 Advances department of Bank 32

3.18.1 Name and address of the borrower 32

3.18.2 Principles of Advances 33

3.18.3 Different Forms of Loans 35

3.19 Remittance department of Bank 36

3.20 Human resource management 38


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3.21 Deposit department of the bank 40

3.21.1 Account opening in a bank 40

3.21.2 Cheque issuing 42

3.22 Department of foreign exchange 42

Chapter # 4 SWOT ANALYSIS 44

4.1 Introduction 44

4.2 Strength 45

4.2.1 Oldest institution 45

4.2.2 Alternate duties in SBP is absence 45

4.2.3 More deposit than other banks 45

4.2.4 Employees benefits 46

4.2.5 Broad network 46

4.2.6 Strictly followed rules & regulation 46

4.2.7 Professional competence 46

4.2.8 Healthy environment 46

4.2.9 Relation between staff & employees 47

4.3 Weaknesses of NBP 47

4.4 Opportunities 48

4.4.1 Electronic banking 48

4.4.2 Micro financing 48

4.5 Threats 49

4.5.1 Emergence of new competitors 49

4.5.2 Political pressure by elected government 49

4.5.3 Downsizing 49

4.5.4 Customers complaints 49

4.6 Competitive analysis 50

Chapter # 5 Financial Ratio Analysis 52

5.1 National bank of Pakistan five years performances at glance 52

5.2 Ratio analysis of the bank 535.3 Those parties which is interested in ratio analysis 54

5.4 Ratio analysis 55

5.4.1 Cash ratio 56

5.4.2 Gross profit margin ratio 57

5.4.3 Net profit margin ratio 58

5.4.5 Return on equity 59


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5.5.5 Return on assets 60

5.5.6 Investment deposit ratio 61

5.4.7 Debt to equity ratio 62

5.4.8 Debt to Assets Ratio 63

5.4.9 Ratio of Advance deposits 64

5.4.10 Ratio of Assets Turn over 65

5.4.11 Earning to Price Ratio 66

5.4.12 Dividend yield ratio 67

Chapter # 6 My Internship Program 68

6.1 Introductions 68

6.2 Department of account opening 68

6.3 Opening account 69

6.4 Deposits 706.5 Withdrawals 70

6.6 Issuance of cheque book 70

6.7 At counter 71

6.8 Recording of voucher 71

6.9 Recording of pension 72

6.10 Clearing department 72

6.11 Remittances department 72

6.12 Collections of bills department 73

6.13 Sequence of cheques 73

Chapter # 7 Recommendation and Suggestion 74

7.1 Introduction 74

7.2 Planned and healthy competitions 747.3 To establish a research cell 74

7.4 National Bank Reward System 75

Bibliography 78

Annexure 1 79


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EXECUTIVE SUMMARY

One of the most important functions of the bank is to do as financial agents for their

customer. And get reward which they offer .Bank Performed a key role in the economic

development of the country. A strong economy depends on a good banking system. NBP

is one of the leading banks in Pakistan, and it is consider one of the best banks in south

Asian region. My report consists on the various functions which are performed by

national bank. My report is mainly consisting on secondary data with use of primary data.

My report is objective in nature and gives subjectivity on financial analysis. First part

consists on the evaluation of bank. Function and services in second part. The third part is

about financial analysis and recommendation is given. The NBP is one of the leading

commercial banks in Pakistan which consist of round about one thousand two hundred

branches all over Pakistan.NBP perform various function for his customers. The

commercial banking is stated as a conventional business. One of the major functions of

the NBP is the custodian of the public fund and these funds are safe in the bank. The

banks advance the fund to the needy person and make living. The bank performs all these

function efficiently and effectively.


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LIST OF TABLES

S.NO DESCRIPTION PAGE. NO

1 NBP Board of directors & designations 14

2 NBP FIVE years performance at a glance 54

3 Cash ratio 57

4 Gross profit margin ratio 58

5 Net profit margin ratio 59

6 Return on equity ratio 61

7 Return on assets ratio 62

8 Investment deposit ratio 63

9 Debt to equity ratio 65

10 Debt to assets ratio 66

11 Advance deposit ratio 67

12 Asset turnover ratio 69

13 Earning to price ratio 70

14 Dividend yield ratio 71


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LIST OF CHARTS

S.NO DESCRIPTION PAGE.NO

1 Cash ratio 58

2 Gross profit margin ratio 59

3 Net profit margin ratio 60

4 Return on equity ratio 62

5 Return on asset ratio 63

6 Investment deposit ratio 64

7 Debt to equity ratio 65

8 Debt to asset ratio 67

9 Advance deposit ratio 68

10 Asset turnover ratio 69

11 Earning to price ratio 71

12 Dividend yield ratio 72


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Chapter # 1 INTRODUCTION OF REASERCH STUDY

1.1 Back Ground of Research Study

With the name of Allah, I am starting to write my internship report it is a part of the

academic requirement according to the higher education commission plan for the

completion of 16 years study in MBA (Finance). Therefore as a student of management

sciences it is required for a student to undergo for an internship program for the period of

two months as an internee in an organization. The internship will help the students to gain

the practical knowledge of working environment in an organization.

National bank of Pakistan was established in 1949 and is performing its duties efficiently.

And rapidly expand his branches in all over the country, due to this it becoming the

largest commercial bank of the country. The commercial bank offer various function for

his customer.

1.2 Purpose of the research study

The main purpose of the study is to collect the relevant information is to prepare

internship report on national bank of Pakistan. To watch carefully, analyze and

communicate the relevant data successfully and in a useful manner.

The main purpose of the study is:

To put theories in practically work done in organization The second is the is developmental interpersonal skill


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1.3 The Study Objectives

Discuss the detail study of National Bank of Pakistan. Discuss thorough study ofNational Bank of Pakistan.

To knowing the different operations and getting practical knowledge of theNational Bank of Pakistan.

1.4 Restriction of the Research Study

Doing something is far better than doing nothing it is not possible that the report is

complete in all respect. This study was organized in accordance with the objective of the

study. The study may not consist on detail explanation of various facts and figures due to

the nature of study. The second limitation is that the bank not offers all the facts because

some facts are very important and keep them. Another limitation is that the required data

is not easily available due to most important in nature. In the limited time period it is not

possible to understand and analyze all the operation of the bank in a very short time

period.

1.5 The Benefit of the Study

This study gives benefit to the finance student particularly the banking students because

in this report the financial analysis section and provide a detail financial analysis which is

helpful for finance student. In addition, NBP main branch SWABI a little

recommendation given at the last of the report.


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1.6 Methodology of the Research

My report is consisting on my two months internship program in NBP Main branch

SWABI. My research methodology in this report based on collection of primary as well

as secondary data. My personal observation is my best source of observation while

having discussion and working with staff members. Suitable organized interviews and

discussion also help me in this concern.

My personal observation and take a comprehensive interview from staff memberof the staff member is the primary source of data collection in my report.

In the preparation of my report I get help from study magazines, Annual report ofthe bank as well as from internet


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Chapter # 2 EVALUTION OF BANKS IN PAKISTAN

2.1 Introduction

There are separate view about the word bank that how it originated. Some of the author

says that the word of bank is derived from the Latina word BANCUS which means

bench another view about the word bank is that it is derived from the word Bank which

means a joins tock company. The word bench is used because the JEWS doing business

and exchange money on benches in the market place therefore it is used the word bench.

When the business is failed? The people are damaging the bench. For this the word

Bankruptcy is introduce.

In fact human feel the importance of bank when it start to become aware the importance

of money used as a medium of exchange. The banking system is develop as early as

2000BC.At that time the bank give more importance to Bank for this temples are used

for the respect. During (1686-1788BC) the term loan were started. The Bank gives loan

and gets interest in return. For this purpose the borrowers provide guarantee or pledge

their valuable goods with bank. In Greek the temples are used for the identification

people deposit their saving for safe custody with banks. In middle of the twelve century

in Europe the trade and commerce expand and the banks give advances to business man

and the banking business at that time expand. The modern Banking system starts on

14century from Barcelona.


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2.2 Definition of Bank

A Bank is financial institution deals with money and credit .It accept deposit from

individual, companies and household at a lower rate of interest and gives them at a high

rate of interest to those who need them. Another definition of bank is it accepts deposit

from household and firm and give to other house hold and firm.

2.3 Banking Evolution in Pakistan

The first stage in the evolution of banking in Pakistan is very difficult days for the entire

banking sector. Began almost from scratch in 1947, now days the county has complete

power of banking and financial institution to deal effectively with different need of the

economy.

In March 1947 there are 3599 offices of India scheduled bank out of which 499 are

situated in Pakistan. At time of division it was clearly decide that Indian bank should

continue his function in the new dissolving state of Pakistan till Sep 30, 1948. In 1947

due to instability the banking sector suffer losses.

Due to this instability the banking services is badly effect in Pakistan. At that time the

offices which are registered in Pakistan are transfer to India. The action is taken to save

the emerging state of Pakistan. The number of schedule bank is decline.


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2.4 Banking Growth during (1948-1970)

In this difficult situation it is necessary is to make a committee to develop a scheme of

central banking laws for Pakistan. The opinions of many specialists are the insufficiency

of skilled employed. In this situation it is difficult to arrange and functioning as a Central

bank.

For this the government takes alternative decision to set up a full valuable central banking

power. Another factor of this decision is that the country current situation is not good

enough for this the rehabilitation of bank is necessary and this work is only done by

Central Bank. The step is taken to establish Central Bank the step is taken by QUAID-E-

AZAM Muhammad Ali Jinnah on July 1, 1948.

The first function of the Central bank is to issuing notes of Rs 5, 10 and100. Another task

of Central Bank is to organize for the substitute of the reserve bank of India notes which

is continued without interpretation at time of transitional period by Pakistan currency.

Another quick and important task of new Central Bank is to develop national Banking

system in the country. To serve as an agent and as the movement of its credit policies,

NBP was establishing under an ordinance in November 1949. It start his work with six

offices from the former East Pakistan. The important task is given to the new institution

is to appointed the head of its Board of Director in 1950. Due to the support of the

government the new institution grows rapidly. The State Bank provides advances to the

new bank to help it to spread his credit facilities in the country. The state bank governor

serves as a president of the National Bank of Pakistan.


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To widening the institutional framework of the financial system the state bank also

provide loan to the Agriculture and Industry to promote it. The State Bank of Pakistan

takes power to control the operation of banking business in Pakistan. Furthermore the

shortage of trained person is the most serious problem faced by the State Bank of

Pakistan. For this the central bank starts a scheme which is called the employ training

scheme in which the skilled person is adopted for banking service.

The commercial Bank was settled and registered as a schedule Bank. Due to this the two

new institutions are develop which is called investment cooperation and industrial credit

was introduce. In 1958 the State Bank of Pakistan celebrates the first decade of start

working. At that time there was only 197 Bank offices is present. It is increased up to 309

at the end of June 1959.

At the time of AYUB Khan Government the banking sector was strongly influence due to

the development of transfer of business in food grains to the private sector and making up

the commodity market. The demand of fund rise and the bank expand the bank credit to

the private sector. Due to the expansion of the institutional framework the new Pakistani

bank was established which is called the United Bank Limited.

The creditor structure increases rapidly during the sixty decade. The Bank extends its

business in Pakistan as well as several countries in the world. The bank offices increase

up to 1595 at the end of June 1966.Some new banks were include as a schedule banks.


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Due to the impact of economic growth and the scope of private enterprises bank raises its

credit from Rs. 1460 millions to Rs. 5761 million. Thus total expansion to private sector

in the bank credit during the period is Rs.4305 million, which gave the annual increase of

Rs. 863 million. The bank deposit rise from Rs. 2,495 million to Rs. 6886 million during

the five years that ended June 1966 compared to Rs. 235 million in the coming five years.

Time deposit was increased from Rs.949 million to Rs.3231 million and demand deposits

rise from Rs.1998 million to Rs.3660 million. The time deposit rapidly increases. In June

1966 the ratio of time deposit to total deposit is raised as compare to five years earlier.

Next silent feature is to increase the bank deposits behind the expansion of Bank credit.

The bank mostly depends on the central bank finance. The borrowing power of central

bank rise during in 1961 to 1966.Banks advances increase as compare to their

investment.

The total number of Bank offices increased from 1,521 at the end of June 1966 and at the

close of June 1971 reach up to 3,135. At that time the bank deposits growth rapidly.

2.5 Banking Reforms 1972

In 1972, May 31, 1972 new technique is used to increase the bank performance which

is required for the economic growth and equal social treatment. The main purpose of

this reform is to equitable distribution of Bank credit, and improving bank performance.

The importance of Banking system is very impressive in organize savings of society and

fulfill the credit requirement of the economy. But at the same time the Bank had

commonly fail to develop social justice and also failed to play a successful role in


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occurring a wider and equitable benefits of economic growth. Due to the ownership the

commercial and industrial interest the misuse of bank resources. The urban area required

heavy credit, for agriculture, small business, newly export and housing had obviously

remained inadequate and the term finance facility for industry was fully absent.

The Banking reforms bring in May 31, 1972 the state bank of Pakistan have a wider

power. It has power to dismiss directors and other managerial personnel, if required and

appoint administrators during this period. The bank also has power to select directors on

the board of every bank. The time limit given to each bank director is not more than six

years continuously. According to the rule the paid up capital of not less than five percent

of its total deposits.

The bank also transfers ten percent of their profit as a cash reserve of each year it became

equal to paid up capital. With a view to varied the ownership of the bank and the bank

were required to increase new capital from market. Not secured loan given to director,

their families or firms and companies were totally forbid. The bank reform also bring to

develop new institution is to achieve objectives. The national credit advice was set up

under the supervision of the state bank with representation from the government and the

private sector. Another important task of the bank is the economy annual credit need with

the safe limit and credit expansion with reference of annual development plan.

Credit plan cover both the private and public sector. To allocate agriculture for various

purposes the advisory committee is farmed which is called national credit council and


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agriculture advisory committee, to gather the operation or agriculture credit to provide

credit to the target area to develop agriculture sector. A new export committee was

establishing at that time to encourage the small borrower to provide credit for this credit

guarantee scheme is introduce.

The same time two new financing were establish. The people finance the purpose of this

to provide finance to small income people and other which is called National finance

Development Corporation provide finance to public sector and industries.

2.6 Nationalization of Banking System in Pakistan

The reforming of banking system after eighteen months the government took action is to

nationalize the banking system. The main objective of nationalization is:

To distribute equally credit to different people and sector. Nationalization of bank act is called bank nationalization act 1974. To gather the banking policies in various area of possible joint activity.

The government gives capital in the hand of few rich bankers to develop economic

growth rapidly and get social welfare. Under this act the state bank and all commercial

banks include in Pakistan carrying his business or outside the country brought under the

government ownership with effect from Jan, 1975.The federal government get the

ownership of the entire Pakistani bank which is situated in Pakistan. Under the

nationalization act all the chairman ,directors and executive of different banks were

removed from their offices, the central board of the banks and all local bodies were also


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dissolved .Pakistan banking council was establish to carry the activity of the Nationalized

Commercial Banks. At the time of nationalization of banks, at least 15 Pakistani

commercial banks include 3324 offices all over in Pakistan and 75 offices in foreign

countries.

HABIB Bank limited National Bank of Pakistan United Bank Limited Overseas HABIB Bank limited

Muslim Commercial Bank limited

Commerce Bank limited Australia Bank limited Standard Bank limited Premium Bank Limited Bank of Bahawalpur limited SARHAD Bank limited Pak Bank limited Punjab provincial co-operative bank limited Lahore commercial limited

The government nationalization steps were very smooth and give positive result.

2.6.1 Islamization of Banking

Next major development in the banking history in Pakistan is to introduce the interest

free banking system which starts from the beginning of 1980. This decision is taken to


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get rid of inters from the operation of national investment trust and the house building

finance corporation of Pakistan. Different changes were made in banking and other laws

with the object of ushering in a new system of banking. This is called SHARIA. A new

system was introduced which is called MUDARIBA companies ordinance 1980. Thus the

interest free system is started from all nationalized commercial banks. The state bank of

Pakistan provides finance to participation term certificate and also provide against

promissory notes by MUDARIBA certificate. In order to compile interest free transaction

of different banking definition such as debtor, creditors and advances credits and deposits

were revised. The bank provide loan to the student without interest. A Banker equity

limited company was introduced in 1978 to help the industrial sector primarily on free

interest basis.

The various schemes were introduce in the Islamization process:

MUDARIBA Financing MUSHARIKAF Financing Hire purchase financing Specific purpose MUDARIBA.

2.6.2 ReInvestment and Deregulation of Bankig-1992

It is realized that the importance of public sector in the economy is more and banking

sector has more earning in the private sector the privatization of banking sector is

restarted by the Muslim league government . Muslim commercial are invested in two

phases while ABL was to its employees. During this time new banking were establish

and perform his work successfully. Now NBP is government bank rather than SBP.


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2.6.3 Interest Free Banking

In 1982 the concept of interest free banking system was introduce and for his different

technique are used to get positive result. For this new product were used in Pakistani

banks.

2.6.4 History of National Bank of Pakistan

NBP was established under NBP ordinance No.19 of November 10 .1949. British Govt.

re valued its currency in September 1950, India also doing so but Pakistan did not. Due to

this crisis start between two countries and India refused to lift the Pakistan jute. For

solving this problem a decision were taken to establish export NBP jute. NBP is a

position to set high objective and achieve it.NBP is the major business partner of the

Government of Pakistan. NBP provide high quality product and services through its large

network of branches locally and internationally and their representative offices.

In 1949there was only subsidiary bank which is called The Bank of Bahawalpur on

December 5 1948 by the previous Bahawalpur state.

i) In 1948 the total deposits of all Pakistani branches was 4.2%, which rise up to40% in 1951.

ii) Growth of deposit was also increased in bank portfolio in advances.iii) NBP advances were also rise in high margin.


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2.6.4.1 Mission Statement of NBP

The mission statement of The National Bank of Pakistan is to make complete and

competitive with all international performing standard, high quality, unique operation,

skilled staff and financial strength from other banks in the country. And also provide high

quality services to its customer. And try to do much more for its customer as compare to

other banks and to develop every activity of bank.

2.6.4.2 Objectives & Goals

An organization one aim plan that recommend clear scope and express direction to the

planning effort of organization and achieve market recognition both in the delivery of

service and quality range of product offering.

2.6.4.3 Board of directors

The following are board of director of the NBP members and their designation

Table 1

Name Designation

Ali Raza Chairman And President

Dr. Waqar Masood Director

Iftikhar Ali Malik Director

M. Zubair Motiwala Director

Sikandar Hayat Jamali Director

M.Khalid Malik Director

S.M. Rafique SEVP & Secretary to Board of Director


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2.6.5 Branches of NBP

Branches of NBP working both within the country as well as outside country its 30

regional office in Pakistan and 1190 branches & four subsidiaries. And sixteen overseas

branches and six other branches.

2.6.6 Objectives of National Bank of Pakistan

The main objective of NBP is the maximization of profit. This objective is achieved

from two ways:

1. By increasing deposits.2. And to charging interest on loan given to business community as well as private

sector.

When the bank provides better facilities to its customer according to their requirement the

deposit will increase automatically. When deposits increase the bank borrowing power

increase and thus bank receive high profit in this way. The deposits also increase when

the bank provide attractive services to its customers. There are two factors which help to

raise deposits.

To offer maximum loan to its customer Bring improvement in the services which provide to the customer Keep better relationship with his customers


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2.6.7 Main Functions of NBP

National bank of Pakistan performs different functions. NBP involve in financing to

foreign trade. Other major function receives deposits, and gives these deposits as a loan.

Function of the National bank.

2.6.8 Accept Deposits

This function is important because the bank customer keep their funds with bank. For this

bank different types of account provide to its customer

Current Account:This type of account called demand liability on current deposits. In this type of account

the bank do not pay any inters. This type of account only by industrialist and

businessman. This type of account is opened by minimum amount of Rs.600.

Profit & Loss Sharing Deposit AccountThis type of account is open with minimum of Rs. 600/- This type of account also

called checking account. From this type of account the money can easily withdrawn and

depositing. In PLS profit is calculated in every month but only paid after six months.

Profit & Loss Term Deposits AccountIn this type of bank account the deposits are kept foe a specified time period .In this type

of account the easily not withdrawals. In this type of account the interest rate is different

depend upon on time period.


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2.6.9 Agency Services

The NBP also provide unique services to its customers which include:

I) Collection of Dividends: National bank of Pakistan deal with sales and purchase

securities due to this it also provide dividend or interest received on share or invested

money.

II) Collection of Cheques: Another important function of NBP is the collection and

payment of cheque. NBP serve as agent for his customers.

III) NBP Serves as an Agent:The NBP acts as a representative for its customers.

IV) General Utility Services: The NBP also provides different utility services:

a. Clearance of utility billsb. Lockers facilityc. Acts as a refereed. Supply of information

2.6.10 Summary of the chapter

First of all we discussed banking evolution in Pakistan than we discuss banking reforms

1973 than we discuss nationalization of banks, history of national bank and last mission

statement and function of NBP.


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Chapter # 3 DEPARTMENTALIZATION OF NBP

3.1 Introduction

This chapter includes services and departmentalization of National Bank of Pakistan.

Services are the output of the firm which is in abstract form. This is the spine of every

organization to earn profit. Different services which are offered by NBP are as under.

3.2 Demand Drafts

If you need for speedy, reliable way to transfer money the demand draft is used for this

purpose. Any person obtains demand draft from a bank branch.

3.3 Swift System

This system is used for offering quick service in the remittance area. This system is

developing of the computerized test keys, which get rid of the manual application of tests

that often cause delay in the payment of home remittance. This system is work on a

number NBP-APKKA. All overseas branches used this system for drawing remittance.

With use of this system the money can safely and speedily transfer money for personal

needs and our business.


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3.4 Letters of Credit

NBP starting to deliver for its business customers the great variety of option in the area of

money transfer. For commercial enterprise the letter of credit services is used. Due to this

the transaction is easily done.

3.5 Travelers Cheques

It is a negotiable instrument in there is no restriction on the period of the maturity of the

cheque. At all seven hundred branches uses rupees traveler cheque and this can be in

cashed in all 410 hundred branches of NBP. This type of cheque purchase at any time .It

is the safest way of carrying money.

3.6 Pay Order

Another facility which is provide by the NBP transfer money is the pay order it is a

secure way to transfer money from one place to another. For this service the bank

charges a very little amount. It is charged Rs. 50 for NBP account holder and Rs 100 is

charge by the non account holder , it charges only 25 Rs for student on payment of

fees of educational institutions. If someone want duplicate of payments order they

charges Rs. 100 for NBP account holder and Rs 150 for non account holders.


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3.7 Ail Transfers

It is another quickly and safely mode of transfer money. For this the bank deducts the

minimum amount. They charges Rs. 50 exchange rate and 75 Rs as postage charges on

issuing of mail transfer.

3.8 Foreign Remittances

Another facility which is offered for its customer in the area home remittance the NBP

taken the following step to:

Meet the SBP instruction for timely and quick offering of remittances to thebeneficiaries.

Through banking system increase home remittances.New Features:

The present system of home remittance is used and revised to bring improvement and

well trained functionaries are used to provide reliable and efficient remittance services

to nonresident at 15 foreign branches of Bank (UK) Ltd & Bank al-JAZERA Saudi

Arabia.

Apply hard monitoring system is to ensure the highest possible security. A Zero Tariffs: NBP is offer home remittance services without any deduction. For delivery of home remittance the special services are hired.


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3.9 Short Term Investments

The National Bank of Pakistan offer high profit whether the investment is made for

the short time period or for long time period. NBP profit rate are more attractive and

provide service and security as well.

3.10 National Income Daily Account (NIDA)

This system was introduced in December 1996 to attract corporate customers. This is a

current account system and part of PLS system of accounts throughout the country.

Salient Features:

Profit is paid on half yearly basis From Rs two million are required to open this account The rate of deposit vary according to the deposits There is no limit of withdrawals because this is a checking account

Rates of NIDA

From Rs 3/- million to Rs 50/- the rate is 1.5%. From Rs50/- million but less than Rs 500/-million, the rate is 1.6%. From Rs 500/- million but below Rs 1000/- the rate is 1.7%. From Rs 1000/- and above the rate is 1.85%.


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3.11 Equity Investments

National Bank of Pakistan performs his activity in the stock market to improve its

economic base and restore investor confidence. The bank now play active role in

development of stock market

NBP is involved in the following:

Introduction of capital market Investment into the capital market

NBP involve in capital market is to increase its earning which is result in return

offered to current account holder .

3.12 Commercial Finance

National bank of Pakistan devote team of professionals truly needs of professionals,

agriculture, large and small business and other segment of the economy. They are the best

source in making NBP product and services work for them.

3.13 Trade Finance Other Business Loans

There are two types of trade finance:

3.13.1

Agricultural Finance

National Bank of Pakistan provides agriculture finance to become solid confidence,

obligation and satisfaction gain of farmer who produce best agriculture product.


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Agricultural Finance Services:A new product is introduced by NBP which help the farmer to increase his production

on per acre basis from minimum amount of input. The purpose of this system is to make

farmer to role model for other farmers. It helps to increase production across Pakistan.

Agricultural Credit:Three object behind this strategy of NBP

Providing reliable infrastructure for agriculture customers

To help the farmer to utilize the funds efficiently to develop and achieve

better production

Different packages provide to farmers and additional input with technicalknowledge and supervision of farming.

Agricultural Credit (Medium Term):i) Credit offer for water course improvementii) Credit provide for production and developmentiii) Credit provide for Wellsiv) Credit also offer for farm powerv) Development loans for tea plantationsvi)

Credit provide for fencing

vii) For solar energyviii) Credit offer for equipment sprinklers


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Farm Credit:National Bank of Pakistan also support financially with time of three months to one year

on renewal basis.

i) Land improvement loanii) Operating loansiii) Equipment loans provide for the purchase of tractor also provide loan for

livestock ,care and feeding of live stock

Production Loans:The bank also provide loan to the farmer for the purchase of seeds, fertilizers, sprays and

all cover under this scheme.

3.13.2 Corporate Financei) Working Capital and Short Term Loans

National Bank of Pakistan also provide project finance to export refinance to exporters,

running finance, pre shipment and post shipment to exporters, cash finance, discounting

& bills purchased, export bill purchased /pre shipment / post shipment and agriculture

production loans.

ii) Medium term loans and Capital Expenditure Financing:NBP provide loan to its customer to fulfill capital expenditure and long term investment.

This type of financing prove that the bank trust on its clients capabilities and its

commitment.


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iii) Loan Structuring and Syndication:NBP want to build strong relationship not only with borrowers but also with bank

investor. Our syndication capabilities are complemented by our own capital strength and

by industry teams, who bring specialized knowledge to the structure of a transaction.

iv) Cash Management Services:With help of this service the clients sales collection will be channeled through wide

network of NBP branched which is spread throughout the country. In fact with the help of

NBP you will be provided everything, which help to manage your cash flow more

accurately.

3.14 International BankingThe national bank of Pakistan is at the leading position of international banking in

Pakistan. The national bank of Pakistan proves by the fact that it has the branches in all

of the major financial capital of the world. The new institution which recently introduce

by the national bank of Pakistan is called wings which comes under the risk management

group. The role which is performed by this institution is:

To effectively maintain the NBP exposure both in foreign and domestic level as acorrespondence.

Build and maintain the monetary quality on national bank of Pakistan relationshipwith the representative to support trade in the country as well as treasury and

other important area of business by the means to distributing the bank

profitability.


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To produce increase number of trade finance business and revenues.

National Bank Offers:

National bank of Pakistan offer very low rates on exports and other internationalbanking product.

Offer a different way to local commercial banks in international banking.

3.15 Cash and Gold Finance

It means loan given against the gold. The loan is keep with bank as mortgage and bank

give loans against the gold. It is the area of consumer financing. The loan is taken by the

borrower for common use

3.16 Advance Salary Loan

This type of loan is given to those who are the government servants. The bank gives loan

of fifteen months up to their salary.

3.17 Departmentalization

Every organization divided into different parts on the basis of their function this division

is called departmentalization. So following are the main departments of national bank.

3.17.1 Departments of National Bank Pakistan


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3.17.1.1 Cash department

This department of the bank performs the following function.

3.17.1.2 Receipt

The money which either comes or goes out from bank the record should be kept .the

recording of cash is the function of cash department. The deposit of customer with bank

is controlled and record in ledger account. The ledger account of every customer is

different and has a separate ledger card.

3.17.1.3 Payments

It is the primary responsibility of bank to repay the deposit of their customer .this

payment is made to the customer through cheque.

3.17.1.4 Cheques and Their Payment

Cheque is a negotiable instrument which is drawn on a specified bank not expressed to be

payable other than on demand. A cheque is considering the bill of exchange. It has all

characteristics which are mentioned under the negotiable instruments act, 1881.

It is a unconditional order written by the drawer which drawn on specified banker,

which is signed by the drawer the bank require to pay the stated amount on demand a

certain sum of money on order to a specified person or to the bearer of the instrument .


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3.17.1.5 The Characteristics of Cheque

There is no specific form of words or design of a cheque, but in order to attain the

requirement which is stated in section six. The characteristic of cheque are as under.

The cheque should be in written form It is an unconditional order It is drawn on a specific banker The payment of cheque is payable to a specific person It is a sum of certain money The cheque is signed by the drawer

3.17.1.6 Parties to Cheque

There are three parties of the cheque which is Drawer, Drawee and a payee

The drawer The drawee and The payee

3.17.1.7 Types of Cheques

All banks in Pakistan deal with three types of cheque.

a) Bearer Cheques

It is that type if cheque which is cashable at the counter of the bank. The bank makes

payment to the person which shows this type of cheque.


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b) Order Cheques

This type of cheque also cashable at the counter of the bank but the payment was

only made to that person which name is written on the cheque. The holder of this

type of cheque satisfies to the banker and gives specific identification.

c) Crossed Cheque

This is the third type of bank cheque which is not cashed at counter. In this type only

payees account will be credit.

3.17.1.8 Payment of Cheques

It is a primary contract between bank and customer to repay the money to its customer

which he deposits with bank. It is the important function of bank to repay the deposits to

its customer. This function is one which differentiates the bank from other. The bank

receive deposits and have a legal right to make payment is in due course. In due course

means the time of instrument is reached. It is a shorter responsibility of a bank to accept

the cheque of the customer if he fulfills the following requirement:

The first requirement is that the cheque should be in their original form The cheque should not be crossed It is drawn on a specified bank

In customer account the cash is sufficient available

The cheque should be presented on banking hours The date of the cheque should not be expired


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3.17.2 Clearance Department

A commercial bank set up an association which help to interchange and settlement of

credit claims .The main function of this department is performed by the state bank of a

country by law are by tradition. The SBP operate this system. NBP is a representative of

SBP and performed this function .after the Second World War there is a rapid growth

take place in the banking sector. The use of cheque is also increased for making payment.

Now the big problem which is faced by all commercial banks is the settlement of

obligation. When a person drawn a cheque. The holder of the cheque deposits this cheque

at the same account at the drawer bank. So the mutual obligation arises and interbank

debits from the use of cheque. Due to this the total assets and liability remain

unchanged. When a person receives cheque he is rarely the depositor of the cheque in the

same bank as the drawer. He deposits that cheque with his bank. Now the cheque is

deposited becomes a creditor of the drawer bank. The amount of this cheque will be paid

by transferring it from cash reserve .the cheque which is drawn by bank become debit to

the bank in which the cheque is deposited. At that time the creditor bank receive a large

number of cheques which is drawn on other bank giving to make payment of the cheques.

For this the bank offers the clearing facility. For this the meeting is held in the bank to

perform the clearing facility. In which all detail discuss in the meeting which is

performed.

3.17.2.1 In - Word Clearing Books of bank

This type of book used by bank to record all cheques which is being received by bank in

the opening clearing. In this book all the detail is recorded which is related with cheque.


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3.17.2.2 Out-Word Clearing Books of bank

This is the opposite of the above book the bank use this type of book to record about all

the cheque which is delivered to another bank.

3.18 Advances Department of NBP

This is the important department of bank. From this department the major portion of

profit is received by bank the main function of this department is to make plan about the

loans. All the advances are controlled by credit management division of head office.

Bank is profit earning institute. It accepts deposits from people and individual at a lower

rate of interest and gives this deposit to the needy person at higher rate of interest. The

expansion of credit is the important activity of all financial institution it is the main

source of earning but risk is also involved in credit expansion .if any person want to give

loan from NBP for this purpose a specific form is filling which include the following

information :

3.18.1 Name and Address of the Borrower.

i) The present financial position of a borrower in a particular branch from which theborrower took the loan. Whether it returns the loan or not.

ii) Also take into consideration all the detail of the account of other bankiii) Whether it provides security against loan is not.iv) Also take into consideration the present financial position of the company on the

basis of their balance sheet and income statement.


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v) At the time of lending loan take the written promise from the borrower that heshall return this loan in future.

3.18.2 Principles of Advances

Loan is given to the borrower on the basis of five principal which take into

consideration while giving loan.

i) Safetyii) Liquidityiii)Dispersaliv)Remunerationv) Suitability

i) SafetyThe bank give advances to different customer on different account such is saving

account, current account, call deposit account, special notice account and time deposit

account. It identify that all the money which is hold of the bank is originally the customer

money. So the bank ensure to the depositor s that his deposit in the safe custody.

ii) CharacterAnother important factor which is related with the safety of advance. There is no

alternative for character. At the time of given loan see the character of the borrower

whether it is bad are good whether he repay the loan are not. It is the important principal


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of advancing loan to see the past record of the borrower at the time of given loan to

them.

iii) CapacityThis factor is related with the management ability it identifies business position in the

past and also tells us what future requirement is. The financial resource of a businessman

is not very wide but due to solid management ability he makes the business very

profitable. If the management is have not ability the business give him loss and the

banker also face loss.

iv) CapitalThe investor invests money in the business. The commercial bank offers short term loan

to commerce and industry. Some of the borrower demanded that the bank provide capital

which is required to their business. Due to this the bank makes the partner. The banker

must think carefully that the amount which is borrowed from bank is reasonable are not.

v) LiquidityIt is another principal of advancing loan. it means that either the borrower repay the loan

at the time of emergency or not because the borrowing amount is payable on demand or

as a whole usually the borrower repay the loan steadily so the chances of further

advancing loan is reduce and for other customer the fresh loan is allotted .so advancing

loan the principal are keep in mind while giving loan.

vi) Dispersal


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The bank advances loan is widely bases so the borrower takes the advantages from the

loan. The borrower need to use the borrowing fund in wide range sector like industry

,commerce ,farming ,agriculture ,small business ,housing projects and various other

financial concern in order of priorities. Distribution of advances is very important point

of security.

vii) Remuneration of SalaryThe major source of bank earning is the interest which is charged on the money

borrowing loan by the customers. The banker require enough earning to meet the

following

to have enough money to pay the interest on the money deposit with bank to have enough money to pay salary to the bank staff to have money to pay the expense and depreciation of bank fixed assets if any loss occurs have enough sum to cover the loss To have enough money to pay dividend to the shareholder

viii) SuitabilityIt means that advances not allowed giving selected and suitable borrowers but also keep

in mind the overall country development .before advancing loan the bank should ensure

that the purpose of loan is confirm. And loan is granted under the recent credit policy

which is applied by the state bank of the country.


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3.18.3 Different Forms of Loans

NBP advances loan to different people in different way which are as under:

i) Cash financeIt is important forms of advancing loan by bank to its customer this type of loan are

usually made against the pledge or hypothecation of goods, produce or merchandise. The

bank allow to its customer to borrow money up to a certain limit at once or when

required. The customer prefers this type of advances because the bank charges on the

amount actually utilized by the borrower. If the borrower fails to utilize the full limit in

this case the bank lose profit on the UN utilized amount. In order to fulfill this loss the

bank provide cash finance agreement to special clause according to this the borrower

paid some portion the loss occur due to un utilize amount of money.

ii) Overdraft/Running FinanceThis is another important farm of bank advance in this farm the bank allow its trusteed

customer to withdrawn the axcess amount from its current account balance so overdraft

occurs. This facility offer against colletral securities which is called secured overdraft.

When the borrower to fail to give any security except of his personal security this facility

is called clean overdraft .In overdraft the borrower take advantages because the borrower

pay the service charges only on the outstanding amount against him.


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iii) Demand Financing/LoansThe bank offer the facility of demand financing in this facility the customer borrow

money up to a fixed amount from bank which is payable at a future fixed date . The

borrower pay the loan amount in lump sum for the agreed period and also paid the

interest on the entire amount. Thus the fixed amount of money gets by the borrower for

personal consumption.

3.19 Remittance department of NBP

It is another important department of NBP it means sent sum of money for the payment

of something. The main function of this department either to transfer money from one

bank to another bank, or and from one branch to another branch the following remittance

offer by NBP:

i) Demand draftii) Tele graphic transferiii) Pay orderiv) Mail transfer

i) Demand DraftIt is important mode of transfer for this the customer must fill the application form. this

form consist on important information related with customer such as name ,account

number and senders name .The amount of demand draft is deposited by the customer in

the branch. When the payment made the demand draft is prepared and give to the

customer. The bank credit the customer account when the demand draft is originating


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branch comes to the responding branch when the DD comes for clearance the account is

debited. Two types of DD:

a) Open Demand draft: in this type of draft the payment is made directlyb) Cross Demand Draft: in this type of draft through account the payment is madeNBP Charges for demand draft

When the amount is up to Rs. 50,000/- only 50 rupees is charged If the amount is increase from Rs. 50,000/ only 0.1 % is charged

ii) Pay OrderThis is another important facility of the bank for his customer when the money is transfer

locally from one place to another place for this purpose the pay order were made . It is

the simplest, easier and secure way to transfer money the fixed amount of commission of

Rs. 25 per pay order from the account holder and from non account holder Rs. 100

commission is charged.

iii) Telegraphic TransferIt is another facility which is offered by bank for his customer it is also called cable

transfer for making remittance it is the quickest method. It is an order by telegram to a

bank to pay a specified amount of money to a specific person. The application form is

filling by customer to avail this facility. To keep the record the voucher is prepared and

sent by email for keep as a record .From the customer the TT charge is deducted and

these charges are:

Fax charges on telegraphic transfer = actualminimum Rs.125.


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While in cable transfer the bank uses secret codes which are only known to this

department and branch manager.

iv) Mail TransferIt is another important facility offer by bank for its customer it is used when the money is

not required immediately through mail transfer the remittance can also paid. The bank

send written instruction through mail to the paying bank for a specified amount of money

should be paid. NBP charges on taxes mail no extra charges are taken by bank. Minimum

postage charges on email transfer is Rs. 40/-

3.20 Human Resource Management

For the success of any service organization HR play very important role .Due to this the

interaction is made among men and machines .The customer satisfaction depend upon on

their attitude the positive attitude win the customer and negative lose it. The positive

attitude develop when there is contributing environment available due to this

environment the organization achieve its objectives. Man is more important than machine

to keep the customer happy. But some organization gives a little importance to it

Some aspect which is related with human resource of national bank is as under:

i) Selection & Recruitment of an EmployeeThe bank believes on merit but practically the selection of employees is not done. some

of the bank employee are low educated , appointed on the basis of their family back

ground etc. due to this qualified student remain jobless.


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ii) Job for LifeSome of the bank employees enjoying their job for life .Because there is no risk involve

in early retirement the fixed period is sanction for the bank employee so they not their

job potentially the productivity of bank employee is low due to this reason.

iii) Performance EvaluationThe evaluation of bank employee defends on their annual confidence at the end of each

year. This is the out dated method due to the following reason is no longer used:

The subjectivity method is involved in this method After a long period the employees performance is evaluated The employees objective are not quantified In the process evaluation employee participation is not ensured

iv)

Inter Personal Relationship

It is consider the most important assets of an organization. But the human being is also

considering the most volatile. In a place where people work together the relationship is

build with the each other which lead to conflict and NBP is no exception. Most conflict is

traced by NBP in the following heading: Lack of communication is the biggest reason for

conflict.

v) Diversity in ValuesAnother reason which is responsible for conflict is the perception of value, cultural

background and life style.


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vi) Discipline & AuthorityThe key success of any organization is depending on maintaining discipline and

implementation of authority. In NBP this table is not strictly maintained.

3.21 Deposit Department of the Bank

These kinds of department perform and control the following activity

i) Opening of an account in the bankii) After the opening of account next the issuance of cheque book to customeriii)Either the opening of bank current accountiv)Either the opening of saving accountv) Cancelation of chequevi)Cash

3.21.1 Account opening in a bank

The relationship between customer and banker start while opening a bank account.

Before the opening of bank account the check the customer from different aspect such

as customer integrity .its occupation , its financial position all detail are given at the time

of opening an account .the bank investigate the following reason.

To eliminate are avoiding from frauds Provide safe guard against unintentional overdraft To full detail about customer And lack of proper attention and care

Some other formalities are also check while opening a bank account


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i) Proper applicationii) Prefaceiii)Sample of a signatureiv)Minimum require depositv) Carrying the account

Pay-In-Slip Book Pass book Issuing of cheque

i) Customer QualificationThe banker and customer relationship is a contractual one. The customer has the

following qualification.

i) The customer is noise mindii)

The customer has the age of majority

iii)The customer is which is not prohibit by lawiv)Legally the agreement should be madev) Expressly not declare

a) Accounts typesThe main types of account are as under

Individual Account Joint account Special type of account


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i) Partnership accountii) The account of joint stock companyiii)Society, club and association accountiv)The Agents accountv) The Trust accountvi)Administrator and executive accountvii)The account of Pak rupees nonresident accountviii)Foreign currency accounts

3.21.2 Cheque Issuing

To account holder the bank issue the cheque book the basic requirement for issuing

cheque

Application slip must be signed by the account holder While at time of transaction the entry should be record in issuing cheque book.

3.22 Department Of Foreign Exchange

This department mainly perform function which is related with foreign business. The

department main function is as under:

i) Dealing in letter of creditii) Dealing in foreign currency in foreign accountiii)Dealing foreign remittance


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i) Dealing in Letter of CreditIn the area of transfer money beginning to offer to business customer the wide range of

transfer money. Letter of credit is essential for commercial enterprises it is the best way

to do your business transaction.

ii) Dealing Of Foreign Currency AccountThis account mainly deal with currency which include euro, dollar account etc.

iii) Dealing Of Foreign RemittanceForeign remittance is the main function of this department.


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Chapter # 4 SWOT ANALYSIS

4.1 Introduction

SWOT analysis is the abbreviation of S stand for strength , W stand for weaknesses , O

stand for opportunities and T stands for threats .SWOT analysis carefully assess the

value of an organization strength and weakness related with internal position of an

organization and opportunities and threats related with organization external

environment.

It is a situational analysis which consists on strengths, Weaknesses, opportunities and

threats which affect the organizational performance.

The overall evolution of a company strengths, weaknesses, opportunities and threats is

called SWOT analysis.

It is a best strategy to develop organization mission by

1. Explore the organizations opportunities and threats2. Naturalizing it threats.3. Avoiding ,correcting are eliminate the organization weaknesses

For formulating strategy SWOT analysis is one of the important step using the

organization mission that clarify its meaning. Manager evaluates the value of internal

strengths different competencies and weaknesses and external opportunities and threats.

The main goal of every organization is to establish good strategies and exploit


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opportunities and to enhance strengths neutralize threats and avoid weaknesses. In SWOT

analysis identify the problem which is faced by an organization and its remedial action.

4.2 Strength

4.2.1 Oldest Institution

National Bank of Pakistan is one of the oldest banks of Pakistan therefore people have

confident on that bank and hence its customer base is strength from the plus point as a

customer and the additional value services as the privilege for the bank. It is the largest

commercial bank in Pakistan with a network of over 1199 branches inside country and

one subsidiary indifferent 17 countries.

4.2.2 Alternate Duties in SBP Absence

The National Bank of Pakistan performs additional services for its customer as well as for

other banks in the absence of the state bank.

4.2.3 More Deposits than Other Banks

It is the important quality of a bank to have more deposits as compare to other banks.

This is because of confidence which a customer have on bank. Due to this the NBP is the

oldest bank in banking sector and enjoy this benefit over all others bank which have not

by other banks.


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4.2.4 Employee Benefits

The national bank of Pakistan provides different benefit for its customer. The bank offer

two benefits on EID UL AZHA & EID UL FITAR .This additional benefit is given to

motivate the employees.

4.2.5 Broad Network

Another advantage of the bank over his competitors is the broad bases of network

branches which are spread in the country as well as outside country. Due to this the bank

offers its services to its customer on time.

4.2.6 Strictly Followed Rules & Regulation

It is strength of national bank of Pakistan to follow rules and regulation strictly by their

employees.

4.2.7 Professional Competence

The employees of NBP are highly professional and skilled with background in business

administration, Banking and economic etc. These professional skills enable the employee

to perform and understand the employee and carry his function effectively.

4.2.8 Healthy Environment

It has a pleasant working environment as compare to other to other bank branches in the

area. There is very healthy environment for working which is increasing the employees

performance.


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4.2.9 Relation between Staff & Other Employees

There is a good relationship between managers and their employees. And manager is very

cooperative with its customer as well to their customer. The manager helps the staff at

time of critical situation.

Highest profitability is also the strength of the branch. It deals almost all affairs in the government. NBP open different branches in different rural area to facilitate farmer. Offer 15 package advance salary given to needy people. National bank of Pakistan acts as agent of the state bank.

4.3 Weaknesses of NBPi) One of the weakness of national bank of Pakistan is that it not taken into

deliberation to employee

ii) Complaint of the customer is not taken into thought. It hampers the image ofthe bank.

iii) During the hurry hours due to the lack of staff, clients wait for their role forlong time.

iv) Marketing efforts are not make to encourage the bank.v) Generalpeople didnt have the knowledge about the polices and new post of

the national bank of Pakistan.

vi) NBP is under the taking sides force.vii) It is a nationalized bank, so the government manipulate is very much in the

management of national bank of Pakistan.


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viii) Discrimination and preferential treatment during selection, transfer,encouragement, and increments.

ix) No job revolution according to rules and regulation.x) The number of branches of NBP is diminishing every year.xi) Poor quality counters service during the dash hours.xii) Lack of scheme and projects to invest the money.xiii) Limited staffing and no adequate period of management.xiv) Irregular distribution of work.xv)

No much utilize of computer as it is vital.

4.4 Opportunities

4.4.1 Electronic Banking

Due to the advancement of technologies the world is become a global village particularly

the communication sector. More emphasize is to get the modern technology is to improve

the performance. The national bank uses this technology to ensure the 24 hours on line

banking service a day. Due to this the National bank has advantage over its competitors.

4.4.2 Micro Financing

In the field of micro financing there in the market a lot of opportunities available so for

NBP to take step and adopt this system to fulfill the requirement of its customer.

Other opportunities which are available are: Offer different services to its customer on

time than competitor to get confidence of its customers due to this deposit will increase


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and opportunities of advancing more loan and get profit. Due to this the financial position

of bank increases from its competitors.

4.5 Threats

4.5.1 Emergence of New Competitors

The availability of competitors is the major threat for NBP specifically the foreign banks.

Because the foreign bank has more financial power and have skilled employees . For

this the bank takes the step to avoid this kind of threats.

4.5.2 Political Pressure by Elected Government

Now a day the power of political pressure in the country is affecting the performances of

banks. The Bank give loan to the political members due to this the sense of insecurity

develops.

4.5.3 Downsizing

Thebank now a days take the step of downsizing which is threat of bank employees and

they feel insecurity when they perform its work and job. Due to this it affect the overall

performance of the employees as well as the bank

4.5.4 Customer Complaints

There is no specific system is to finish the complaint of its customers. Now days it is a

time to satisfy the customer satisfaction. And the NBP take no action in this regard.


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4.6 Competitive Analysis

Porters five forces model:

The porters five forces model is widely used approach for competitive analysis this is

because of the high extreme of competition among companies the main five competitive

forces.

i) Rivalry among Competitive Firms:

In this competitive force the only company is successful when they provide competitive

advantage over its competitors. It is a lowering price strategy and also has best quality

series. NBP charging a very little amount on the service which they provide to its

customer such as demand draft, telegraphy transfer , mail transfer and some other

services to the customer and to the nation, because the NBP is a nation bank.

ii)

Potential Entry of New Competitors

When the entry of a new firms into a particular industries is easy the competition among

firm increase. The entrance is restricted of a firm which have own tariff and patents etc.

this type of market exist in Pakistan there are quality service and low charges is available.

So there are no threats to NBP from potential entry it is a public sector bank because no

new bank takes over on it.

iii) Potential Development of Substitute ProductsThis is the factor which affects the competition. In this situation the substitute is available

the product of that industry. For example the bank offering saving facility which is also


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providing by the GPOs in Pakistan so they compete in the field. The bank offer the

saving facility which is also provide by the GPOs. If the bank offers low rate of interest

than GPOs that the people turn to GPOs instead of NBP. People prefer high interest so

why people deposit their deposits in saving account instead of current account. Another

example is the ATM which is used as a substitution of presenting cheque at counter and

cashes it. The NBP lacking in this field the bank need to improve this field to compete

with its competitors.

iv)

Bargaining Power of Suppliers:

It is another force of porter five forces model the bargaining power effect the intensity of

competition. There is the availability of large number of suppliers .In case of bank

supplier is the customer because they supplies the money to the bank. The bank charge

low charges from its customer. NBP is very good in this field. The bank cut low charges

on remittance. So that is competition to other banks.

v) Bargaining Power of Consumers:When the customer is large in number and their volume are also large so it represents the

major force to affecting the intensity of competition. So number of customer for bank is

very high in Pakistan. The bank offer different services and product to its customers. The

number of national bank is very high. Now it is the responsibility of NBP is to offer good

product and services to their customer and to attract them. There is also the interest policy

present which is also threat for national bank.


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Chapter # 5 Financial Ratio Analysis

Introduction

The financial analysis is varying according to the special interest of the analyst it always

involves the use of different financial statement primarily the balance sheet and income

statement .the balance sheet summarize assets, liabilities and owner equity of a business

at for a specified period of time and income statement summarizes revenues and expenses

over a particular period of time. The financial analysis provides the conceptual frame

work for analyst with an interlocking means for structuring the financing.

5.1 National Bank of Pakistan Five Years Performances at

Glance

Table 2

years 2010 2009 2008 2007 2006

items RS. RS. RS. RS. RS.

Total assets 4718608 4328035 4150892 3716369 3504061

Deposits 3955681 3628663 3496172 3164930 2947543

Advances 1609902 1405471 1703193 1403187 1225590

investment 1661960 1435253 717592 726091 914861

S/holder equity 181341 142793 119595 113787 103589

Pretax profit 90091 60453 30166 10231 5204


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After tax profit 41980 22532 11494 4616 318

Earnings per shr 11.23 6.49 4.08 2.24 1.21

Return on assets 5% 3.40% 2.80% 1.30% 01.20%

No. Of branches 1690 1240 1254 1482 1441

No. of employs 18972 12195 15163 15351 15541

(Source Annual reports 1998, 2000, 2002, 2003)

It is much clear from the above table that the NBP performance is going higher and

higher the total assets are increased as compare with previous years. The trend is upward

if we drawn a graph. Profit is increase from year to year. The number of NBP branches

decreases because of automation and large network of other bank. But now the NBP is in

a position to compete with other bank and now it is consider one of the best banks of the

year.

5.2 Ratio Analysis of the Bank

The financial analysis tells us the financial strength and weakness of the firm. In which

develop the proper relationship between the balance sheet and the profit and loss account

and making decision according to the organization for this the organization used a

analytical tools.

The financial analysts assess the financial condition and performance of business activity.

This analytical tool which is used by management is called ratios analysis. It is varies

according to the specific interest party. The purpose of analysis depends on the nature of

analysis.


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5.3 Those Parties Which Is Interested In Ratio Analysis

i) Trade Creditors

The trade creditor is the first party which is interested in the ratio analysis, because it is

the firm ability to recover their claim as soon as possible.

ii) Suppliers of Long Term Debt

The second party is the supplier which is interested in the ratio analysis because is mainly

concerned the survival and solvency of the firm. Analyze the firm ability to generate cash

to pay interest. Long term creditors analysis the historical financial statement to make

analysis about the future solvency.

iii) The Investors

Another party which is concerned with ratio analysis is the investor. Because the investor

invests money in the firm share are most assess about the steady growth in earning. The

investor mainly focuses on the analysis of the firm current and future profitability. They

also focus in the firm financial structure of the level it effect the firm earning power and

risk.

iv) Management

The next party which is interested is the organization and management is to see that how

much successfully utilize the available resources or not and the financial position is

sound are not.


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So thus management employee financial analysis for the purpose of internal control and

to provide what capital supplier seeks in financial condition and performance from the

business and from internal control. The management needs to take financial analysis in

order to control and plan effectively.

5.4 Ratio Analysis

The comparison between the two figures of balance sheet and income statement is called

ratio.


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5.4.1 Cash Ratio

This ratio is derived by dividing cash by current liability. This ratio is tells us that the

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

The formula of cash ratio is

Cash ratio= cash/ current liability

Table 3

year 2010 2009 2008 2007 2006

Cash ratio 0.134 0.15 0.22 0.21 0.19

Graph 1

Explanation: It is clear from the above table & graph that the national bank of Pakistan is

a better position in 2010 as compare to other years the bank has enough cash to meet their

liabilities.

Cash Ratios

0

0.05

0.1

0.15

0.2

0.25

20102009

20082007

2006

Cash Ratios

Cash Ratios


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5.4.2 Gross Profit Margin Ratio

The ratio shows the profit margin in sales/revenue. Formula for gross profit margin is:

Gross profit/interest earned

Table 4

years 2010 2009 2008 2007 2006

G/ profit margin 51.9 46.6 39.67 29.59 28.9

Graph 2

Gross profit margin relates profit of the organization to its sale interest earned in case of

bank. From the above calculation it is very much clear that the gross profit margin ration

have upward trend which shows that how much they using their profit to earn profit. The

profit of the firm relate to its revenue. It is the measure of the efficiency of the firms it

tells us that how a firm uses its deposit to earn more revenue. From the above position

that indicates the bank position is better than the previous year.

g/profit margin

010

20

30

40

50

60

20102009

20082007

2006

g/profit margin

g/profit margin


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5.4.3 Net Profit Margin Ratio

This ratio indicates the firm profitability of sales/interest received after taking consider all

the income tax and expenses.

The ratio calculation is: Net profit margin ratio= net profit after tax /interest earned.

Table 5

years 2010 2009 2008 2007 2006

Net profit margin 21.6 3.18 3.67 1.55 1.7

Graph 3

Interpretation: From the above calculation it is much clear that the performance on NBP

is very good. The trend is upward .it tells us a firms net income per rupee of revenue. In

the above table in 2010 one rupees give as advance earn 21.6 rupees which is good. The

NBP gives advances to the people at high margin which help them to earn more profit.

net profit margin

0

5

10

15

20

25

20102009

20082007

2006

net profit margin

net profit margin


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5.4.4 Return On Equity:

This type of formula derived by profit after tax dividing by share holder equity. Return on

equity compares net profit after tax to the share holder s equity. Dividing profit after

taxation by share holders equity. ROE compares net profit after taxes to the Share

holders Equity. It is calculated from the following formula:

Return on equity= profit after taxes/share holder s equity

Table 6

years 2010 2009 2008 2007 2006

Return on equity% 23.1 9.4 6.55 2.7 0.2

Graph 4

Interpretation: from the above calculation it is clear that the ratio is upward trend of NBP.

It is because that NBP get high profit. It tells us the earning power on the share holders

investment. Ratio has an upward trend of NBP. It is because of high net profit they have

earned. It tells us the earning power on the shareholders investments. It is because of

high investments by NBP and effective expense management.

return on equity

0

1020

30

20102009

20082007

2006

return on equity

return on equity


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5.5.5 Return On Assets:

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

assets to earn more profit as compare to other organization. This ratio relates profit to

assets.

The ratio is calculated as: Profit after tax/total assets

Table 7

Years 2010 2009 2008 2007 2006

Return on

assets %

0.9 0.52 0.23 0.12 0.01

Graph 5

Interpretation: the above calculation indicates that that the national bank utilizes its assets

very efficiently in 2010 as compare to other years. In 2010 the profit earnings ratio is

high as compare to 2009. It indicates that NBP is in a better position.

return on assets

0

0.2

0.4

0.6

0.8

1

20102009

20082007

Documents

Internship Report Nation Bank Limited 02