INTERNSHIP REPORT ON

NATIONAL BANK OF PAKISTAN

Submitted in partial fulfillment of the requirements

For the degree of Master of Business
Administration

Submitted To : Sir Col. Imtiaz A Mohar

Submitted By : Waseem Abbasi
Program : MBA 4(B)
Enroll # : 01-122081-117
Submission Date : 26-10-2009

Bahria Institute of Management & Computer Sciences

Islamabad Campus
ACKNOWLEDGEMENT

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First of all I am thankful to “ALMIGHTY ALLAH”. Who gave me the strength,
patience, courage and enthusiasm needed to write and complete this report, then to my
friends who assisted me in this effort and we worked daylong to accomplish this
assignment and to my parents who supported me financially and encouraged me morally.
I have a debt of gratitude to all my teachers who taught me throughout my academic
career.

It was pleasure for me to be sent to The National Bank of Pakistan Passport office branch
Rawalpindi. I am very thankful to the honorable internship incharge. I learnt a lot from
this training program and this would guide me a lot while selecting my career. I also
know how to face the problems and how to find out the ways for their solutions.

The preparation of this report was a massive undertaking but the highly competent and
experienced bankers of NBP Passport Office Branch, Rawalpindi, provided me with all
assistance, information, advice and suggestions that I needed which contributed
importantly to this report.

DEDICATION
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 Dedicated to my Parents and
Teachers whose guidance

Enabled me

Achieving objectives in life, their

Prays

Enlightened and paved the way to

Success

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Table of Contents
Executive summary …………………………………………………..………………..6

CHAPTER NO.1
1.1 INTRODUCTION…………………………………………………………………8
 History of Banking in Pakistan……………………...…………..……………..8
 History of National Bank………...…………………………………..………..9
 Vision……………...……………….…………………………………..………11
 Mission……………...…………………………………………………..……...11
 Core Values………………...…………………………………………..……....12
 Objectives ……………………………...………………………………..……..13
 Services …………………….........................……………………………..….....13
 Corporate finance……………………………………………………………....17
 Departments……………………………………………………………………20
CHAPTER NO.2
2.1 COMPANY ANALYSIS………………………………………………………….30
 SWOT Analysis …………………………….………………………….....…..31
 PEST Analysis ………………………………………………………… ….. . 34

CHAPTER NO.3
3.1 Financial analysis………………………………………………………………..36
 Ratio Analysis …………………………………………………...….……….37
 Vertical Analysis ………..…………………………………………....……....42
 Horizontal Analysis ………………………………………….……...…….... 45
 Trend Analysis ………………………………………………………....……48
 Human Resource Assessment………………………………………………52
 Marketing Analysis………………………………………………………….55

CHAPTER NO.4
4.1 Internship Experience……………………………..................................................56
 First Week………..………………………………………….…………...…..57
 Second Week……………..…………………………………..……………..59

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  Third Week……………………...…………………………..………………60
 Fourth Week…………………………………………………..…...………..61
 Fifth Week………………………………………………...………..……… 64
 Sixth Week………...………………………...………………………………64
4.2 Learning ……………………………………………………………………...…65
4.3 Skills Used………………………………………….…………………………....66
4.4 Skills Gained………………………………………………….………………....67

CHAPTER NO.5
5.1 Critical Analysis…………………………………………………………………69
 Challenges…………………………………………………………………...70
 Identification of problem …………………………………………………..71
 Recommendations and Suggestions………………………………………..72

CHAPTER NO .6

Conclusion……………………………………………………………………..…….76

References………………………………………………………….…………...…....77

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 EXECUTIVE SUMMARY

National Bank of Pakistan is one of the leading banks in Pakistan. According to

international standards of banking system it is one of the best banks in South Asian
region as well. And the bank in the top ten in the world. This report explains the different
functions of NBP and their services.
The first part of the report is about my Internship Experience at National Bank of
Pakistan the second part is about History of NBP, where as the third part is about
functions and services and forth part is about SWOT Analysis.
During the critical analysis, it was observed that NBP is one of the leading commercial
banks of Pakistan with a network of around 1189 branches all over Pakistan. NBP
provides a wide variety of products and accounts that suit the lifestyle and needs of the
masses .In fact commercial banking is regarded as a “Conservative” business because the
rewards are modest and the penalties of bad banking are many. As a trustee of the public
funds, NBP has a greater responsibility for safety and prudence. Many business can enjoy
some slack in their affairs, commercial banks cannot afford this, since commercial banks
must make a living by putting the money at their disposal to work, they are faced with the
problem of making a living without jeopardizing the safety of their institution and NBP is
doing all this very efficiently.
The NBP is known for its customer services as well as for its products, which are in
demand.

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 CHAPTER # 1

INTRODUCTION TO THE
ORGANIZATION

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 INTRODUCTION
“Bank” which means a heap of anything or joint stock fund.

"A financial institution, which deals with money and credit. It accepts Deposits from
individuals, firms and companies at a lower rate of Interest and gives at higher rate of
interest to those who need them.”

“A financial establishment which uses money deposited by customers for investment,

pays it out when required, makes loan at interest, exchanges currency, etc.”

HISTORY OF BANKING IN PAKISTAN

Pakistan came into being on 14th August, 1947; sufficient banking services were
available in the areas forming Pakistan. Out of the total branches of the nearly 3,500 in
the undivided India, as many as about 1,500 branches were existing in these areas.

It was agreed between the two countries that reserve bank of India shall continue to
function in the Pakistan territory until 30th September 1948 and that Indian notes would
continue to be legal tender at Pakistan until 30th September 1948. Unfortunately,
relationship between the two countries became most strained immediately after
independence; banking was mostly in the lands of Hindus who immediately started
transferring their offices and assets into India. As a result most of the banks in Pakistan
were closed down and even those which were open were not doing any effective
business.

The number of banking office in Pakistan came down to about 200 on 30th June 1948.
Branches of some European banks were also functioning in a limited manner, financing
in export of crops, and their number was limited to about 20.

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It was only the Habib bank, which transferred its office from Bombay to Karachi Austral
Asia bank was another bank, which was in existence in the Pakistan territory at the time
of independence. Despite of best efforts on the part of government of Pakistan, no heady
way could be made on this behalf and reserve bank of India was in no mood to help the
new country. Imperial bank of India, agent of the reserve bank of India also started
closing down its branches in Pakistan.

Reserve bank also refused to advance money to Pakistan to make essential payments such
as salaries etc, also Pakistan’s share of Rs.75 billion in cash balance was with held by
bank, causing hardships to the newly born state. In view of these hopeless state affairs it
was agreed between the two countries that reserve bank would serve as monetary
authority in Pakistan only up to 30th June 1948.

The Pakistan banking council prepared a scheme for the recognition of banks. The bank
(amalgamation) scheme 1974 was notified in April, providing for the amalgamation of
the smaller banks with bigger ones and following the five units in there phases:

National bank limited

Habib bank limited

United bank limited

Muslim commercial bank limited

Allied bank of Pakistan limited

The number of branches, which stood at 3397 on Dec31, 1973, reached on 7661 by end
June 1992. The bank deposits which stood at Rs. 1925 corers at the end 1973 reached the
highest mark about 323 corers.

History of NBP

The NBP was established vide NBP Ordinance No. XIX of November 9. 1949.

British Govt. devalued its currency in September 1949, India devalued its rupees but

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Pakistan did not. It led to a crisis in trading between the two countries and India refused
to lift the Pakistan Jute. To solve this problem i.e. to export jute NBP was established
through an Ordinance of GOP. National Bank of Pakistan maintains its position as
Pakistan's premier bank determined to set higher standards of achievements.

The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ on December4, 1947 by
the former Bahawalpur State.

NBP was undertaking Treasury Operations and Managing Currency Chests or Sub Chests
at 57 of its offices where the turnover of the business under the head amounted to
Rs.2460 million. Deposits held by NBP constituted about 3.1% of total deposits of all
Pakistani Banks in 1949, which rose to 38% in 1952.

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

lent out to Textile, Yarn, Iron and Steel and played a pioneer role in support of
agriculture and commerce.

NBP advances reached Rs.554.4 million by December 1959, which was one third of the
total schedule bank credit.

National Bank of Pakistan maintains its position as Pakistan's premier bank determined to
set higher standards of achievements. It is the major business partner for the Government
of Pakistan with special emphasis on fostering Pakistan's economic growth through
aggressive and balanced lending policies, technologically oriented products and services
offered through its large network of branches locally, internationally and representative
offices.
REGIONAL OFFICES 29
TOTAL BRANCHES 1189
Division of SUBSIDIARIES 4 Branches

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Overseas Branches

OVERSEAS BRANCHES 16
REPRESATIVE OFFICES 4
SUBSIDIARY 1
JOINT VENTURE 1

VISION

The vision of NBP is:

“To be recognized as a leader and a brand synonymous

With trust, highest standards of services quality, international best
Practices and social responsibility”

MISSION STATEMENT

 Institutionalizing a merit and performance culture.

 Creating and distinctive brand identity by providing the highest standards of
services.
 Adopting the best international management practices.
 Maximizing stockholders values.
 Discharging our responsibility as good corporate citizen of Pakistan and in
countries where we operate

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CORE VALUES

 Highest standards of integrity.

 Institutionalizing team work and performance culture.
 Excellence in service.
 Advancement of skills for tomorrow challenges.
 Awareness of social and community responsibility.
 Value creation for all stakeholders.

Values to deliver you.

NBP aim to be an organization that is founded on:
 Growth through creation of sustainable relationships with our customers.
 Prudence to guide our business conduct.
 A national presence with a history of contribution to our communities.
NBP shall work to:
 Meet expectations through market-based solutions and products
 Reward entrepreneurial efforts
 Create value for all our stakeholders
NBP aim to be people who:
 Care about relationships
 Lead through the strength of our commitment and willingness to excel
 Practice integrity, honesty and hard work. We believe that these are measures of
true success
NBP have confidence that tomorrow we will be:
 Leaders in our industry.
 An organization maintaining the trust of our stakeholders.
 An innovative, creative and dynamic institution responding to the changing needs
of the internal and external environment.

After all, we are The Nation’s Bank

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OBJECTIVES:

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

exiting customer’s base and diversified range of product.
National bank of Pakistan is also a commercial organization and its main objective is
profit maximization. This is achieved in two ways:

1. By increasing deposits.

2. By charging interest on loans provided to the private sector and business

community.

SERVICES of NBP

NBP offers the following services to the people.

 DEMAND DRAFTS
You can now purchase NBP’s Demand Drafts at very reasonable rates. Any person
whether an account holder of the bank or not, can purchase a Demand Draft from a bank
branch to transfer money.

 SWIFT SYSTEM
The SWIFT system (Society for Worldwide Interbank Financial Telecommunication) has
been introduced for speedy services in the area of home remittances. The system has
built-in features of computerized test keys, which eliminates the manual application of
tests that often cause delay in the payment of home remittances. The SWIFT Center is
operational at National Bank of Pakistan with a universal access number NBP-APKKA.
All NBP overseas branches and overseas correspondents (over 450) are drawing
remittances through SWIFT.
Using the NBP network of branches, you can safely and speedily transfer money for our
business and personal needs.

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 LETTERS OF CREDIT
NBP is offering its business customers the widest range of options in the area of money
transfer. If you are a commercial enterprise then our Letter of Credit service is just what
you are looking for. With competitive rates, security, and ease of transaction.

 TRAVELER'S CHEQUES
Traveler’s cheques are negotiable instruments, and there is no restriction on the period of
validity of the cheques. Rupee traveler’s cheque is available at all 700 branches of NBP.
This can be encased in all 400 branches of NBP. There is no limit on purchase of this
cheque. It is one of the safest ways for carrying money.

 PAY ORDER
NBP provides another reason to transfer your money using our facilities. NBP pay orders
are a secure and easy way to move your money from one place to another. And, as usual,
NBP charges for this service are extremely competitive. The charges of NBP are very
low all over the Pakistan. It charges Rs 50/- for NBP account holders on issuing one
payment order. And charges Rs 100/- for NBP non-account holders on issuing one
payment order. It charges Rs 25/- for students on payment of fees of educational
institutions. If someone want a duplicate of payment order they charges Rs 100/- for NBP
account holders and Rs 150/- for non account holders.

 MAIL TRANSFERS
Move your money safely and quickly using NBP Mail Transfer service. And NBP also
offer the most competitive rates in the market. They charges Rs 50/- exchange rate and
RS 75/- postage charges on issuing mail transfer.

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 FOREIGN REMITTANCES:
To facilitate its customers in the area of Home Remittances, National Bank of Pakistan
has taken a number of measures to:
 Increase home remittances through the banking system
 Meet the SBP directives/instructions for timely and prompt delivery of
remittances to the beneficiaries

 SHORT TERM INVESTMENTS

NBP now offers excellent rates of profit on all its short term investment accounts.
Whether you are looking to invest for 3 months or 1 year, NBP’s rates of profit are
extremely attractive, along with the security and service only NBP can provide.

 NATIONAL INCOME DAILY ACCOUNT (NIDA)

The scheme was launched in December 1995 to attract corporate customers. It is a
current account scheme and is part of the profit and loss system of accounts in operation
throughout the country.

Salient Features:
 Rs 2-million is required to open an account and there is no maximum limit.
 Profit is paid on half yearly basis on monthly balances.
 The rates of profit vary according to the slabs of deposit. On Deposits of Rs.2
million to 2,000 million, the rate fluctuates from 1.4 to 1.75
 It is a checking account and there is no limit of withdrawals.

 EQUITY INVESTMENTS
NBP has accelerated its activities in the stock market to improve its economic base and
restore investor confidence. The bank is now regarded as the most active and dominant
player in the development of the stock market.
NBP is involved in the following:
 Investment into the capital market

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  Introduction of capital market accounts (under process)
NBP’s involvement in capital markets is expected to increase its earnings, which would
result in better returns offered to account holders

 COMMERCIAL FINANCE
NBP dedicated team of professionals truly understands the needs of professionals,
agriculturists, large and small business and other segments of the economy. They are the
customer’s best resource in making NBP’s products and services work for them.
 TRADE FINANCE OTHER BUSINESS LOANS
There are two types of trade finance.

1. AGRICULTURAL FINANCE
NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers
who produce some of the best agricultural products in the World.

Agricultural Finance Services:

“I Feed the World” program, a new product, is introduced by NBP with the aim to help
farmers maximize the per acre production with minimum of required input. Select farms
will be made role models for other farms and farmers to follow, thus helping farmers
across Pakistan to increase production.

Agricultural Credit:
The agricultural financing strategy of NBP is aimed at three main objectives:-
 Providing reliable infrastructure for agricultural customers
 Help farmers utilize funds efficiently to further develop and achieve better
production
 Provide farmers an integrated package of credit with supplies of essential
inputs, technical knowledge, and supervision of farming.

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Agricultural Credit (Medium Term):
 Production and development
 Watercourse improvement
 Wells
 Farm power
 Development loans for tea plantation
 Fencing
 Solar energy

Farm Credit:
NBP also provides the following subsidized with ranges of 3 months to 1 year on a
renewal basis.
 Operating loans
 Land improvement loans
 Equipment loans for purchase of tractors, farm implements or any other
equipment
 Livestock loans for the purchase, care, and feeding of livestock.

Production Loans:
Production loans are meant for basic inputs of the farm and are short term in nature.
Seeds, fertilizers, sprayers, etc are all covered under this scheme.

2. CORPORATE FINANCE

Working Capital and Short Term Loans:

NBP specializes in providing Project Finance - Export Refinance to exporters - Pre-
shipment and Post-shipment financing to exporters - Running finance - Cash Finance -
Small Finance - Discounting & Bills Purchased - Export Bills Purchased / Pre-shipment /
Post Shipment Agricultural Production Loans.

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Medium term loans and Capital Expenditure Financing:
NBP provides financing for its clients’ capital expenditure and other long-term
investment needs. By sharing the risk associated with such long-term investments, NBP
expedites clients’ attempt to upgrade and expand their operation thereby making possible
the fulfillment of our clients’ vision. This type of long term financing proves the bank’s
belief in its client's capabilities, and its commitment to the country.

Loan Structuring and Syndication:

National Bank’s leadership in loan syndicating stems from ability to forge strong
relationships not only with borrowers but also with bank investors. Because we
understand our syndicate partners’ asset criteria, we help borrowers meet substantial
financing needs by enabling them to reach the banks most interested in lending to their
particular industry, geographic location and structure through syndicated debt offerings.
Our syndication capabilities are complemented by our own capital strength and by
industry teams, who bring specialized knowledge to the structure of a transaction

Cash Management Services:

With National Bank’s Cash Management Services (in process of being set up), the
customer’s sales collection will be channeled through vast network of NBP branched
spread across the country. This will enable the customer to manage their company’s total
financial position right from your desktop computer. They will also be able to take
advantage of our outstanding range of payment, ejection, liquidity and investment
services. In fact, with NBP, you’ll be provided everything, which takes to manage your
cash flow more accurately

International Banking
National Bank of Pakistan is at the forefront of international banking in Pakistan which is
proven by the fact that NBP has its branches in all of the major financial capitals of the
world. Additionally, we have recently set up the Financial Institution Wing, which is
placed under the Risk Management Group. The role of the Financial Institution Wing is:-

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  To effectively manage NBP’s exposure to foreign and domestic
correspondence
 Manage the monetary aspect of NBP’s relationship with the correspondents to
support trade, treasury and other key business areas, thereby contributing to
the bank’s profitability
 Generation of incremental trade-finance business and revenues

NBP offers:
 The lowest rates on exports and other international banking products
 Access to different local commercial banks in international banking

Cash and Gold Finance

Cash and Gold finance means that loan is given against the gold. The gold is mortgaged
with the bank and loan is taken. It is the area of consumer finance. And borrower can
take loan for common use.

Advance salary loan:

This loan is given to those people who are Govt. servants. They can get a loan up to the
salary of fifteen months.

 NBP House Financing Scheme and its Promotion Campaign.

Housing Finance like Sieban Scheme

A housing scheme is introduced by national bank of Pakistan named Sieban. The purpose
of this scheme is to provide home to people with low income. Some important features of
this scheme are as under:-
 Finance available for home purchase, home construction and home
improvement.
 Period of repayment ranges between 3-20 years.

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  Loans available up to a Maximum of Rs. 10 Million
 Mark-up choices available. Rate ranges between 9.0 – 2.85%, rates subject to
change.
 Minimum approval and disbursement timing.
Limited to areas where there are on documentation, Fee resale and foreclosure related
issues, so to protect the bank’s interest.

DEPARTMENTS

GENERAL BANKING DEPARTMENT

 Account opening department
 Remittances department
 Cash department
 Clearing department
PRIVILEGE BANKING DEPARTMENT
 Online banking
 Lockers
 Utility services
CREDIT DEPARTMENT

ACCOUNT OPENING DEPARTMENT

Functions of Account Opening Department:
 Providing account opening form according to the customer's requirements,
 Guide the customer about the requirements of the account opening and form
filling,
 Check the forms whether they are correctly completed or not,
 Preparing checklist,
 Stamping on the form,
 Maintaining account opening register,
 Pasting of forms in register after release from general banking in charge,

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  Issuance of cheque books,
 Issuance of accounts maintenance certificate,
 Closure of account
 Verification of signature in case of cheque presented before releasing of account
opening from SS card is not yet scanned

ACCOUNT OPENING PROCEDURE & PRECAUTIONS:-

 Customer name:
 Address:
 Contact Numbers:
 Other/ secondary/ mailing address:
 Special instructions:

REMITTANCE DEPARTMENT
The remittance department deals with the transfer of money from one place to another.
This department deals with the local currency transfer only.
Functions of remittance department:
 Handling of transaction of D.D., M.T. Pay Order, CDR, LBC, OBC
 Clearing SNTD, TDR and checking of respective supplementary sheets
 Checking of Extract and H.O reconciliation
 Handling of tax matters and responsible for timely deposit of tax in government
account
 Safe custody of specimen signature book
 Preparation of periodical statements
 Any other work/ Duty assigned by the manager

CASH DEPARTMENT
Cash department performs following functions:

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 Receipt
 Payments
 Act according to any standing instructions
 Transfer of funds from one account to another
 Handling of ATM
 Verification of signatures
 Posting
Categories
A. Payment department
B. Receipt department

PAYMENT DEPARTMENT

Process of payment

Cheque is recorded & token

Cheque is presented at token # is allotted
counter

Cancellation officer cancels

Cashier counts the amount cheque
& payment is made

Two signatures on back of Posting is made

the cheque by customer

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Functions of payment department:
Daily
1. Transactions related to payments and maintenance of liquidity.
2. To maintain cash related books.
 Balance book
 Paying cashier
 Vault register
 Token book
 Pass book
 Cash remittance register and file
 Cash indent book
 National prize bond and fortnightly statements
3. In addition he will act as in-charge cash department and is responsible for the
 Work done by the cash department.
 To assign duties to other officers working in cash department.
 Any other matter related to cash department.
4. Daily statement
5. Periodical balancing
6. Any other work/ duty assigned by the manager

Weekly
1. Recheck and update the following books
 Cash remittance register & file
 Cash indent book
2. weakly statements
3. weakly balancing of books

Monthly

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 1. Monthly statements
2. Monthly balancing of books

Quarterly
1. Quarterly statements
2. Quarterly balancing of books
3. Quarterly balancing of
 Stationery
 Furniture/ Fixture and bank’s other fixed assets

Half yearly
1. Half yearly statements
2. Half yearly balancing of books
3. Quarterly balancing of
 Stationery
 Furniture/ Fixture and bank’s other fixed assets

Functions of Cash Receipt Department

Daily
1. Transactions related to receipts (including evening banking if any).
2. To maintain receiving cashier book.
3. To collect fee challan of different departments and prepare/maintain relevant
scrolls/files.
4. To collect utility bills and prepare/maintain relevant scrolls/files.
5. Periodical balancing.
6. To maintain following books.
 Voucher register
 Voucher movement register
7. Any other work/duty assigned by the manager.

DEPOSIT DEPARTMENT

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 Process of
deposits

Cashier counts the

Deposited on Receipt amount and fulfills other
Fill- up deposit slip Customer requirements

Functions of deposit department

1. Maintenance of transactions related to deposit department (including clearing).
2. Maintenance of record of account opening and closing- safe custody of S.S cards,
insurance of account statements.
3. To maintain following books.
 Maintenance of scroll books
 Transfer books
 Supplementary books
 Progressive books
4. Supervision of all vouchers.
5. Transfer of funds of SAPS, and SNGPL to their concern branches.
6. Preparation of voucher cover.
7. Periodical balancing of deposit books.
8. Preparation and timely submission of periodical statements i.e. Daily, Weekly,
Fortnightly, Monthly, Quarterly, Half yearly, yearly and any other statement.

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 9. Any other information required by Head Office or Regional Office from time to
time.
10. To rectify the audit irregularities of deposit department.

CLEARING DEPARTMENT

OUTWARD CLEARING AT THE BRANCH:

The following points are to be taken into consideration while an instrument is accepted at
the counter to be presented in outward clearing:

 The name of the branch appears on its face where it is drawn.

 It should be stale or post dated or without date.
 Amount in words and figures does not differ.
 Signature of the drawer appears on the face of the instrument.
 The amount of the instrument is same as mentioned on the paying-in-slip and
counterfoil.
 The title of the account on the paying-in-slip is that of payee or endorsee (with
the exception of bearer cheque).
INWARD CLEARING OF THE BRANCH:
1. The particulars of the instruments are compared with the list.
2. The instruments are detached and sort out department wise.
3. The entry is made in the inward clearing register (serial no. Instrument no.
Account no. is written).
4. The instruments are sent to the respective departments
5. The instruments are scrutinized in each respect before honoring the same.

ONLINE BANKING:
Online banking (or Internet banking) allows customers to conduct financial
transactions on a secure website operated by their retail or virtual bank, credit union or
building society.

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The common features fall broadly into following categories
 Transactional (e.g., performing a financial transaction such as an account to
account transfer, paying a bill, wire transfer... and applications... apply for a loan,
new account, etc.)
o Electronic bill presentment and payment - EBPP
o Funds transfer between a customer's own checking and savings accounts,
or to another customer's account
o Investment purchase or sale
o Loan applications and transactions, such as repayments
 Non-transactional (e.g., online statements, check links etc.)
o Bank statements
 Financial Institution Administration - features allowing the financial institution to
manage the online experience of their end users

UTILITY SERVICES
Keeping in view the difficulties faced by the general public NBP has taken the initiative
to provide service for collection /receipt of utility bills on behalf of WAPDA, Sui Gas
and PTCL from 9.00am 4.30 p.m. all the branches throughout the countries are observing
this practice to ease the long queues lined –up at the counters of banks.

CREDIT DEPARTMENT

Although the study of money is important for the understanding of the way in which our
Economic system operates, we must recall this point that most exchange transactions in
This system are carried on today without the use of actual money, i.e. those are carried on
By means of credit and credit instruments rather than money. While money still forms
The basis of credit and deferred payments, it is necessary to examine the nature of credit
Operations, and the instruments and institutions trough, which these operations are
carried on, in considerable detail.

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THE NATURE OF CREDIT
On the surface, credit operation appears to be of many kinds, but they all have a
fundamental similarity. In credit transactions, one party to the transaction, the creditor,
turns over to the debtor a certain amount of money, commodities or services at the
present time and relies on the debtor to repay an equivalent amount, usually the money in
the future plus interest at some future time.

TYPES OF CREDIT INSTRUMENTS

There are various types of credit instruments. The more important credit instruments are
as follows:

 Bills of exchange:
A bill of exchange is define by negotiable instruments act as "an instrument in writing,
containing an unconditional order, signed by the maker, directing a certain person, to pay
certain sum of money, only to or to the order of a certain person, or to the bearer the
instrument".

 Cheque:
A Cheque is defined “a bill of exchange drawn on specific banker and not expresses to
be payable otherwise than on demand."

 Drafts:
These are bills of exchange issued by a banker on his branch office. Banks draft like bills
of exchange, are of great importance in the financing of trade, especially foreign trade

 Promissory note:
It is an instrument in writing containing an unconditional undertaking, signed by the
maker, to pay the certain sum of money only to or to the order of a certain person to the
bearer of the instrument. A promissory note in order to be the so, must fulfill all
conditions.

28
  Letter of credit:
A letter of credit as name signifies does one person or bank to another requesting the
letter to pay any amount of money up to a certain limit to the person write a letter named
in the letter or in whose favor the letter is written. In this letter generally a date is fixed up
to only the addressee should make which advances. Thus a letter of credit remains in
force up to a certain date only. Generally banks grant this letter of credit.

29
 CHAPTER # 2

COMPANY’S ANALYSIS

30
SWOT ANALYSIS

An analysis indicating towards the organizations strengths, weaknesses, opportunities and

threat is termed as SWOT Analysis. Such an analysis is very important for the
management in retaining the strength, overcoming the weaknesses, capitalizing over the
emerging market opportunities, and carving ways to successfully tackle with the threats
and ultimately converting them in the strengths for the organization.
During six weeks of my stay at NBP Passport office Branch, I have come across the
following SWOT analysis of the bank.

STRENGTHS
 Full Day Banking
One can avail the benefit of the services provided at the bank from 9:00a.m- 5:00p.m.
This is highly useful for those customers who find it difficult to leave their officers in the
morning.
 Customized Solutions
The management of the bank believes in customer focused banking rather than the
product oriented banking. The products and services designed by the bank are
specifically tailored to the individual needs of its customers.

 Customer Oriented Banking

The different branches of the bank offer unmatched services where the customer receives
highly privileged services in a highly elegant environment. It gives the chance of
experiencing new standards in banking. Designed specially for those who appreciate only
the finest things in life, customer priority banking offers the very highest levels of
personalized banking to match customer’s unique status.

 Electronic Banking
The revolution in the banking in the form of electronic banking operations have opened
avenues of excellent, efficient and quick services saving the time and costs of the
customers and fortunately NBP is among those few banks that are already reaping the
benefits of electronic transactions.

31
  Electronic Funds Transfer
NBP management is quite prepared to adopt the latest advancements in technology
resulting in revolution in the banking operations such as check clearing process,
automatic teller machines, and electronic funds transfers among the others.

 Telephonic Services
Telephonic service is very attractive for those classes of customers who don’t have time
to personally come to the bank i.e. collecting information on the phone line instead of
personally visiting the bank thus saving the precious time of the customers.

 Ethical Concerns and Public Image

The organizations showing concern for the people, ethics, and environment enjoy good
public reputation and are able to reap the benefits in the long run NBP management is
quite sensitive to this issue.
 Training Facilities
NBP provides training facilities to its employees over small intervals

WEAKNESSES
 Lack of Advertisement

NBP has formulized a lot of products and services for its customers, even more than
other commercial banks, but any advertisement on electronic media has not been seen.
 Burden of Work
I observed during my internship that some of the employees were burdened with over
work. So I think that the work should be distributed according to their post and
capabilities.
 Biasness
Biased selection of employees.
 ATM Network
The bank has a large ATM Network across the country. The customers of NBP withdraw
or access their funds any time at all the ATM Sites of NBP.

32
OPPORTUNITIES
The bank is facing the following threats and opportunities currently. These are positive
external environmental factors effecting the organization.
 It deals in bulk business:
Due to more portfolio of the business it has an opportunity from other banks to attract the
potential business
 A large amount of foreign investment is attracted:
It branches are in maximum major country of the world that attract more foreign
customers for investment.
 Strong potential for growth:
In every coming day it invest in the new area of business for the increasing of the profits.
 Steady increase in Customer Deposits:
It is a public bank in the Pakistan everybody is making business through this bank for the
secure and steady. Every day many customers come for the deposits in every branch.
 Branches In Remote Areas:
It has a branches in all the main as well as the local areas which is in the access of
everybody relating to any business

THREATS
 Reduce the Charges
The schedules of charges indicate that the fees charged by the bank on the various
services it provides are extremely high. It may result in decrease in the number of its
existing customers. Furthermore, this could be very alarming situation for the bank in
case some of the competitors grasped the opportunity and lowered its rates. The result
would be either the loss of market share or decrease in the charges resulting in lowering
the bank’s income.
 Less Attractive Rate Of Return
Commercial banks face considerable competition in attracting deposits from individuals
or small investors. In contrast, the Govt. of Pakistan national saving scheme offers
attractive rates of return (approx. 16 to 18 percent annually) on 10-15 year fixed
accounts.

33
  Stiff Competition
NBP is currently facing strict competition from the other banks that enjoy a good market
position that include Askari Commercial Bank Limited, Habib Bank Limited, Standard
Chartered, United Bank Limited, Citi Bank, Soneri Bank etc.

PEST ANALYSIS

Political Analysis
NBP despite their capital positions being viewed as somewhat weak on a fragile
operating environment, susceptible to political risk. The banks' performance over the near
to medium term could be adversely affected by recent political developments in Pakistan
though the ratings agency views such risks to be adequately reflected in the low
individual ratings

Economic Factor
Pakistan’s economy continued to suffer from the after effects of the economic
sanctions of 1998 and the impact of the international economic recession. Even some
of the macro-economic indicators improved during 2000, the operating environment
of the banking sector continued to remain difficult. The overall demand for bank
credit remained lower because of no investment in any of the sector .this low demand
led to an intense competition among banks for relatively few good borrowers in the
market, resulting in substantial reduction in the lending rates. At the same time
managed exchange rate

Social Factors

 Threat of new entrants

 New market positioning assumed by new banks especially HBL
 The low demand of bank credit led to increase competition among banks for
relatively few good borrowers in the market

34
Technological Factors
National bank of Pakistan is the largest banking group signified its renewed
commitment to building its IT infrastructure to deliver growth and improved services
to its customers across Pakistan and across the globe and provides services like
 ATMs System
 Electronic Banking
 SWIFT
 Telephone Banking

35
 Financial Analysis of NBP
IMPORTANCE
Analysis is vital to figure out, weigh up and evaluate the operating performance of
the firm. Another reason that depicts the importance of ratio is that investors make their
investment decision in certain firm based on these ratios.

Analysis of Financial Statements

Financial analysis involves the use of various financial statements, e.g. balance
sheet, income statement etc. There are various stakeholders such as owners, managers,
creditors, government agencies, employees, prospective investors etc. interested in the
financial condition and results of operations of a business enterprise. In general, the
varying interests of all groups fall in four broad categories:

 Solvency
 Profitability; and
 Stability
 Efficiency

Solvency refers to the company’s ability to meet its debt on due dates. Profitability means
the success that the firm has had in earning a return on the assets. Stability is composed
of several factors, continues demand for a company’s product or services, a reasonable
and stable relation between revenues and expenses and sufficient shows net income to
pay a regular dividend. Efficiency ratio shows the performance the company that how
effective it is working.

36
Ratio Analysis

Financial ratios are calculated from one or more pieces of information from a company's
financial statements. For example, the "gross margin" is the gross profit from operations
divided by the total sales or revenues of a company, expressed in percentage terms. In
isolation, a financial ratio is a useless piece of information. In context, however, a
financial ratio can give a financial analyst an excellent picture of a company's situation
and the trends that are developing. In this project the following ratios are calculated;
 Liquidity Ratios
 Debt Management Ratios
 Profitability Ratios

LIQUIDITY RATIO

Liquidity is a pre-requisite for the very survival of a firm. It is the ability to meet current /
short term obligations. Since a bank is also a business firm so to maintain adequate
liquidity is also crucial to carry out business activity.

Current Ratio= Current Assets / Current Liabilities (Rupees in `000)

2007 2006 2005
Current Ratio 7.35 5.35 9.74
Current Assets 132,346,081 119,266,906 102,216,286
Current Liabilities 17,947,965 22,309,742 10,498,003

This shows the degree of high liquidity, maintained by the bank. The policy of high
liquidity however is not maintained at the cost of profitability. The bank is maintaining
optimal balance between liquidity and profitability in order to keep competitive edge on
its competitors. The current ratio is decreasing from 9.74 to 7.35, which is covering the
minimum limit of current ratio for Bank i.e. 3. So the company position is best in the
industry.

37
DEBT RATIOS / SOLVENCY RATIOS

The long-term solvency of a firm is examined by leverage or capital structure ratio. It is

the ability of the bank to assure following payments:

Debt to Asset = Total Debt /Total Asset (Rupees in `000)

2007 2006 2005
Debt Ratio 0.8474 0.8709 0.8713
Total Debt 645,855,939 553,178,593 503,378,402
Total Asset 762,193,593 635,132,711 577,719,114

Debt to Asset Ratio shows that how much asset the company has to honor their
obligations. This ratio is decreasing from .8713 to .8474. This is very good for the
company because the company has 1 asset to Pay .8474 debts.

Debt to Equity = Total Debt /Total S.H.Equity (Rupees in

`000)
2007 2006 2005
Debt to Equity
9.323 10.428 13.921
Ratio
Total Debt 645,855,939 553,178,593 503,378,402
Total Equity 69,270,631 53,044,649 36,158,474

High total debt ratio of shows that the creditors have faith in the bank and they feel
comfortable to invest in this bank. Debt to equity ratio is the relationship between
borrowed funds and owners capital and Equity multiplier is the relationship between total
assets and total equity. But it is good that the this ratio is decreasing from 13.921 to 9.323

The overall leverage position is showing better trend as compare to previous year. The
contribution of equity in total assets is decreasing, while the debt contribution is
decreasing which is better for business. Equity ratio is decreased which don’t show the

38
better condition of the bank. Solvency Ratio is in good condition. So we can say that
overall Solvency condition of the NBP is better with the comparison to the previous year.
Profitability Ratio

Net Profit Margin= Net Profit / revenue *100 (Rupees in `000)

2007 2006 2005

Net Profit Margin 37.64 % 38.60 % 37.79 %
Net Profit 19,033,773 17,022,346 12,709,444
Revenue 50,569,481 44,100,934 33,633,735

Results of the ratios indicates net profit margin ratio more than average. In 2007 and
2005 the ratios are less their general and operating expenses are increasing with the same
rate of increasing in their revenues. So that’s why their net income is not so much high.
In 2007 the company position is good because the 37.64 is a percentage between net
profit and Revenues

Return on Equity= Net Income / Average total Equity (Rupees in `000)

2007 2006 2005
Return On Equity 27.48 % 32.09 % 35.15 %

Net Income 19,033,773 17,022,346 12,709,444

Equity 69,270,631 53,044,649 36,158,474

This ratio shows that how much equity is generating income for the company .it is
decreasing every year with different rate.

Return on Total Assets= Net Income / Average Total Assets *100 (Rupees in `000)
(Rupees in `000) 2007 2006 2005
ROA 2.50 % 2.68 % 2.20 %
Net Income 19,033,773 17,022,346 12,709,444

39
 Total Assets 762,193,593 635,132,711 577,719,114

Results of the ratios are more than its average which shows the ability to utilize its assets
to create profits. Higher the percentage is good, the value decreases by 0.18 as compare
to the 2006, but still performing well.

Profitability analysis shows the entire performance of a business and if we study the
profitability trend of bank then it will clear to us that it showing a positive trend. Net
profit after tax is increased as compare to previous year, due to it return on assets and
investment is increasing.

Bank Special Ratio:

Investment to Total Assets = Investment / Assets (Rupees in `000)

2007 2006 2005
Investment to total assets 0.28 0.22 0.27
Investment 210,787,868 139,946,995 156,985,686
Total Assets 762,193,593 635,132,711 577,719,114

This ratio indicates that out of total asset how much bank utilize its asset for further
investing. This ratio is increasing through out of the period which is very useful for the
bank to enhance its revenues

Advances to Deposit Ratio= Total advances/ Total deposits (Rupees in `000)

2007 2006 2005

Advances to Deposit Ratio

57.55% 27.88 % 58.01%
Total Advances 340,677,100 139,946,995 268,838,779
Total Deposits 591,907,435 501,872,243 463,426,602

40
Loans or advances are the major assets of a bank while deposits are major liabilities of a
bank. Higher ratio shows the better solvency of bank. This ratio is increased instead of
previous years because advances of the bank are increased as previous years although
deposits are also increased this years but its ratio is less.
Cash to Deposit Ratio= Cash / Deposit (Rupees in `000)
2007 2006 2005
Cash to Deposit Ratio 16.03% 15.67% 15.36%
Cash 94,873,249 78,625,227 71,196,956
Total Deposits 591,907,435 501,872,243 463,426,602

This ratio shows that how much cash you have to pay the liabilities (deposits). As this
ratio show that company has fewer amounts of cash than deposits. It also indicates that
bank is investing so the bank is enhancing its business. But at the same time it could be
risk for bank for liquidation.

Equity to Assets= Equity / Assets (Rupees in `000)

2007 2006 2005

Equity to Assets 9.09 % 8.35 % 6.26 %

Equity
69,270,631 53,044,649 36,158,474
Assets 762,193,593 635,132,711 577,719,114

This ratio shows the position of equity in total assets of business. In both years this ratio
is in increasing trend. But the bank should increase its equity by increasing the wealth of
shareholders.

Equity to Deposits= Equity / Deposits (Rupees in `000)

2007 2006 2005

Equity to Deposits 11.70 % 10.57 % 7.80 %

Equity
69,270,631 53,044,649 36,158,474
Deposits 591,907,435 501,872,243 463,426,602

41
This ratio shows that how much equity part is there in total structure. The capital
advocacy requirement is 8%. The bank was not fulfilling the requirement in 2005 but
now bank has 11.70% which is good.

Earning Per Share= Net Income / No of Ordinary Shares (Rupees in `000)

2007 2006 2005
Earning Per Share Rs. 23.34 24 21.51

Net Income
19,033,773 17,022,346 12,709,444
No of Ordinary
815,431,989 709,071,295 590,892,746
Shares

As their basic earnings per common share are increasing year-by-year it means that
results of the ratio indicate that firm has paid a handsome return on investment showing
the profit generations. Because the company’s net income is increasing gradually. As
shown in table the company’s Basic Earning per share is increasing due to increase in net
income. This shows how much profit each share has earned in any particular year. It is
most important ratio for peoples who decide about investing their money.

Vertical Analysis

Vertical/Cross-sectional/Common size statements came from the problems in comparing

the financial statements of firms that differ in size. In the balance sheet, for example, the
assets as well as the liabilities and equity are each expressed as a 100% and each item in
these categories is expressed as a percentage of the respective totals. In the common size
income statement, turnover is expressed as 100% and every item in the income statement
is expressed as a percentage of turnover (sales).
BALANCE SHEET
For the year ended Dec 31, 20….

2007 2006 2005

ASSETS % % %

42
Cash and balances with treasury banks 12.45 12.38 12.32
Balances with other banks 4.92 6.40 5.37
Investments - net 27.66 22.03 27.17
Lendings to financial institutions 2.82 3.62 2.82
Advances - net 44.70 22.03 46.53
Operating fixed assets 3.40 1.52 1.64
Other assets - net 4.07 4.27 4.14
Total Assets 100.00 100.00 100.00
LIABILITIES      
Bills payable 0.99 1.75 0.32
Borrowings 1.52 1.93 1.62
Deposits and other accounts 82.77 82.79 85.89
Liabilities against assets 0.00 0.00 0.00
Deferred tax liabilities - net 0.71 0.39 0.83
Other liabilities 4.32 4.39 4.63
Total Liabilities 90.31 91.25 93.30
Net assets 16.27 13.52 13.78
Represented by:      
Share capital 1.14 1.17 1.10
Reserves 2.21 2.29 2.51
Unappropriated profit 6.34 5.29 3.10
9.69 8.75 6.70
Surplus on revaluation of assets - net of tax 6.58 4.77 7.08
16.27 13.52 13.78
Total Liabilities & Equity 100 100.00 100.00

In balance sheet we take asset as a key figure and the total liability and S.H.E as a key
figure. In asset side maximum asset value is due to the advances and the investment
which the bank has done. On thee other side that main liability is from deposits which
shows a greater position of the bank in the current era

PROFIT & LOSS A/C

For the year ended Dec 31, 20….

43
 2007 2006 2005
% % %
Mark-up / return / interest earned 100 100 100
Mark-up / return / interest expensed 33.50 31.63 30.69
Net mark-up / interest income 66.50 68.37 69.31
Provision for diminution in the value of investments -0.08 -1.61 -0.73
Provision against loans and advances 9.34 6.97 7.27
Bad debts written off directly 0.08 0.01 0.07
9.34 5.38 6.61
Net mark-up / interest income after provisions 57.16 63.00 62.70
Non-mark-up / interest income
Fee, commission and brokerage income 13.41 13.93 14.65
Dividend income 6.45 6.56 5.11
Income from dealing in foreign currencies 2.06 3.02 3.58
Gain on sale of securities - net 4.63 2.65 2.58
classified as held for trading -0.06 -0.01
Other income - net 0.29 1.42 4.68
Total non-mark-up / interest income 26.78 27.58 28.02
83.95 90.58 90.72
Non-mark-up / interest expenses
Administrative expenses 28.09 30.48 33.29
(Reversal) / Write off / other provision - net 0.33 -0.04 0.59
Other charges 0.03 0.47 0.19
Total non-mark-up / interest expenses 28.46 30.92 34.06
Profit before taxation 55.49 59.66 56.66
Taxation - Current year 16.44 19.72 21.27
*Prior years 0.77 1.20 -3.27
*Deferred 0.64 0.14 0.87
17.85 21.06 18.87
Profit after taxation 37.64 38.60 37.79
Unappropriated profit brought forward 63.43 43.93 27.24
Transfer from surplus on revaluation of fixed assets 0.08 0.09 0.13
63.50 44.02 27.37
Profit available for appropriation 101.14 82.62 65.16

Vertical analysis of profit and loss shows increase or decrease in each item as a
percentage of sales means that sales are chosen as key figure. As we have seen in the
above table the interest expense is increasing with the turnover so the company is more
utilizing on expenses. Administrative expenses shows decreasing trend from year 2005 to
2007 also the profit after tax is in both increasing and decreasing positions.

Horizontal Analysis

44
This technique is also known as comparative analysis. It is conducted by setting
consecutive balance sheet, income statement side-by-side and reviewing changes in
individual categories on a year-to-year or multiyear basis. A comparison of statements
over several years reveals direction, speed and extent of a trend. The horizontal financial
statements analysis is done by restating amount of each item or group of items as a
percentage.

BALANCE SHEET
For the year ended Dec 31, 20….
2007-2006 2006-2005
base year 2006 base year 2005
ASSETS % %
Cash and balances with treasury banks 20.67 10.43
Balances with other banks -7.80 31.02
Investments - net 50.62 -10.85
Lendings to financial institutions -6.73 41.33
Advances - net 143.43 -47.94
Operating fixed assets 167.74 2.41
Other assets - net 14.31 13.25
Total Assets 20.01 9.94
LIABILITIES
Bills payable -33.41 509.12
Borrowings -6.99 33.66
Deposits and other accounts 17.94 8.30
Liabilities against assets 153.52 -20.41
Deferred tax liabilities - net 113.56 -46.51
Other liabilities 16.07 6.49
Total Liabilities 16.75 9.89
Net assets 41.95 10.24
Represented by:
Share capital 15.00 20.00
Reserves 13.64 2.54
Unappropriated profit 41.37 91.91
30.59 46.70
Surplus on revaluation of assets - net of tax 62.81 -24.29
41.95 10.24
Total Liabilities & Equity 17.96 12.36

45
In balance sheet horizontal analysis shows that current assets increases over the period of
time, the increase in cash and decrease in loan shows that company wants to have more
cash in hand rather lending it to others and losing the return on that investment.

As far as the fixed assets of company are concern they are showing increasing trend and
same is case with the current and long term liabilities

PROFIT & LOSS A/C

For the year ended Dec 31, 20….
2007-2006 2006-2005
base year base year
2006 2005
% %
Mark-up / return / interest earned 14.67 31.12
Mark-up / return / interest expensed 21.46 35.12
Net mark-up / interest income 11.53 29.35
Provision for diminution in the value of investments -94.33 188.54
Provision against loans and advances 53.56 25.71
Bad debts written off directly 655.09 -77.09
99.14 6.64
Net mark-up / interest income after provisions 4.05 31.74
Non-mark-up / interest income
Fee, commission and brokerage income 10.37 24.72
Dividend income 12.85 68.27
Income from dealing in foreign currencies -21.82 10.63
Gain on sale of securities - net 100.23 35.03
Unrealized loss on revaluation of investments
classified as held for trading 616.04
Other income - net -76.52 -60.12
Total non-mark-up / interest income 11.36 29.05
6.27 30.91
Administrative expenses 5.67 20.08
(Reversal) / Write off / other provision - net -1072.21 -108.72
Other charges -91.77 229.60
Total non-mark-up / interest expenses 5.55 19.01
Profit before taxation 6.65 38.07
Taxation - Current year -4.42 21.55
*Prior years -26.22 -148.30
*Deferred 422.31 -78.72
-2.82 46.35
Profit after taxation 11.82 33.93
Unappropriated profit brought forward 65.57 111.45

46
Transfer from surplus on revaluation of fixed assets -5.00 -5.00
65.42 110.90
Profit available for appropriation 40.38 66.26
In Horizontal analysis of profit and loss we have seen that revenues increases from 2005
to year 2007 continuously but every year revenues were increased with increasing trend.
The company profit after tax decreases as compare to the 2006 because the banks
administrative and other expenses are increasing.

TREND ANALYSIS

It is also used to check the financial performance of the company through out its starts. In
this analysis we keep the first year as a base year and it remains the same for all other
periods. We compare all others periods with the base year.

BALANCE SHEET
For the year ended Dec 31, 20….

Base Year 2005

2007 2006
ASSETS % %
Cash and balances with treasury banks 133.25 110.43
Balances with other banks 120.80 131.02
Investments - net 134.27 89.15
Lendings to financial institutions 131.82 141.33
Advances - net 126.72 52.06
Operating fixed assets 274.19 102.41
Other assets - net 129.46 113.25

47
Total Assets 131.93 109.94
LIABILITIES
Bills payable 405.59 609.12
Borrowings 124.31 133.66
Deposits and other accounts 127.72 108.30
Liabilities against assets 201.78 79.59
Deferred tax liabilities - net 114.23 53.49
Other liabilities 123.60 106.49
Total Liabilities 128.30 109.89
Net assets 156.49 110.24
Represented by:
Share capital 138.00 120.00
Reserves 116.52 102.54
Unappropriated profit 271.30 191.91
191.58 146.70
Surplus on revaluation of assets - net of tax 123.27 75.71
156.49 110.24
Total Liabilities & Equity 132.54 112.36
Trend analysis shows that the cash balance is increases due to which the lending to
financial institution decreases in 2007 as compares to the year 2006.but the advances and
operating fixed assets shows the significance increase. As for as the liabilities are concern
Bills payable and borrowings decreases, but deposits and other accounts increases.

PROFIT & LOSS A/C

For the year ended Dec 31, 20….

Base Year 2005

2007 2006
Mark-up / return / interest earned 150.35% 131.12%
Mark-up / return / interest expensed 164.12 135.12
Net mark-up / interest income 144.26 129.35
Provision for diminution in the value of investments 16.37 288.54
Provision against loans and advances 193.04 125.71
Bad debts written off directly 172.96 22.91
212.36 106.64
Net mark-up / interest income after provisions 137.08 131.74
Non-mark-up / interest income
Fee, commission and brokerage income 137.65 124.72
Dividend income 189.89 168.27
Income from dealing in foreign currencies 86.50 110.63
Gain on sale of securities - net 270.37 135.03
Unrealized loss on revaluation of investments

48
classified as held for trading
Other income - net 9.36 39.88
Total non-mark-up / interest income 143.72 129.05
139.13 130.91
Non-mark-up / interest expenses
Administrative expenses 126.89 120.08
(Reversal) / Write off / other provision - net 84.73 -8.72
Other charges 27.12 329.60
Total non-mark-up / interest expenses 125.61 119.01
Extra ordinary / unusual item
Profit before taxation 147.25 138.07
Taxation - Current year 116.18 121.55
*Prior years -35.63 -48.30
*Deferred 111.14 21.28
142.23 146.35
Profit after taxation 149.76 133.93
Unappropriated profit brought forward 350.09 211.45
Transfer from surplus on revaluation of fixed assets 90.25 95.00
Profit available for appropriation 233.40 166.26
Basic and diluted earnings per share - after tax 108.51 97.07
The trend analysis of the Profit and loss shows that mark-up interest earned increases
which results in increase in interest expense ,provisions for loans and bad debts also
increases,
Administrative expenses show a slight increase, profits of the year 2007 were almost
double as compare to year 2005.

49
 HUMAN RESOURCE ASSESSMENT
Human Resource plays a vital role in the success of every service organization. They
interact between man and machine. Their attitude can win or loose the customer. The
positive attitude could only be created in a conducive environment, which can make the
staff dedicated towards the organization and its objectives. In reality the man is more
important than machine as it is the human which could get maximum out of machine to
keep a happy customer. However, most organizations give little importance to this very
important asset.

Various aspects related to human resource of National Bank of Pakistan are critically
examined in the following text:

Selection & Recruitment

Although the Bank believes in merit but in practice the selection of employees is not
done on merit. Most of the employees are low educated. This shows that candidates with
some strong family background or political pressure are given preference in recruitment
and qualified candidates are sometimes left behind.

Job for Life

Like the employee of public sector organizations in Pakistan, the employees of NBP also
enjoy their job for life. Since there is no risk of early retirement or redundancy in rank,
they do not perform with their full potentials. This is one redundancy in rank, they do not
perform with their full potentials, and this is one of the reasons responsible for the low
productivity of the employees of the Bank.

50
Performance Appraisal

The performance of employees of the Bank are appraised though their annual confidential
reports at the end of each year. This has become an outdated method of performance
appraisal and no longer used due to the following reasons:

1. The performance of employees is evaluated after quite a long time.

2. Element of subjectivity is involved in this method.

3. Employee’s participation is not ensured in the process of evaluation.

4. Objectives of employee’s are not quantified.

Inter Personal Relationship

Modern management acknowledges human resources as one ‘of the most important
assets of an organization. But by their very nature, human beings are also the most
unpredictable. Where a number of persons work together, interactions among them, of
necessity, will lead to conflicts and NBP is no exception. Most interpersonal conflicts in
NBP can be traced back to the following major heads.

Lack of Communication

Lack of communication is for the biggest reason for conflicts. Not only it is due to the
failure to send a massage but to an interpretation given to the massage by the receiver is
different from that intended.

Diversity in Values

Diversity in values, perceptions, cultural background and life-style is another reason

responsible for inter personal conflicts in NBP. Different values and perceptions about
the same issue, event or personality hinder understanding. When things come to such a
pavement, therefore, interpersonal conflicts are generated.

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The dominant trend in all modern industrial societies of the world is merit and expertise,
which helps promote cohesion and reduce conflicts. But the feudalistic mindset is still
very strong in our set up and there is no tradition of tolerance for differing viewpoints.
Hence, interpersonal conflicts are generated.

Corruption

Our social acceptance of corruption gives rise to corruption at every level of social and
organizational set up. Corruption involves financial embezzlement, favoritism, nepotism,
cronyism and other number of such practices. All these cause resentment that keep
building up and lead to conflict sooner or later.

In the past few years, some cases of frauds have happened in different branches. The
reasons can be linked with the employee dissatisfaction of NBP.

Discipline & Authority

Maintaining discipline and implementation of authority (tables) in letter and spirit is the
key to success of any organization. In NBP, The authority tables are not strictly
maintained. Line managers are not fully equipped with the authority with no vertical or
horizontal interference.

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 Marketing Analysis

4.4.1. Market Recognition

For the second consecutive year, NBP was recognized as the best bank in Pakistan by the
prestigious periodical, “The Banker" UK (a subsidiary of Financial Times Group).
Furthermore M/s JCR-VIS Credit Rating Company Limited maintained its rating of
AAA, while the standalone rating was raised by one notch to AA-, which is one of the
highest in the banking sector.

4.4.2. Future Outlook

The reduction in the interest rate environment will overall have a negative impact on the
financial sector's profitability in the short term. To meet these challenges we will focus
on building our loan portfolio, both on corporate and retail side. On the retail side focus
will be on additional fee business while maintaining stringent controls over cost. Longer
term we will be focusing on those sectors in the country, which have traditionally
received less attention from the financial sector, i.e. agriculture, small and medium
enterprises and of the entire range of retail products. Our key strength remains our
customer base of over 9 million and we are confident that we are positioned to capitalize
on the opportunities.

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 CHAPTER # 4

INTERNSHIP EXPERIENCE

54
INTERNSHIP EXPERIENCE

One of the most important aims of the student life is to express him / her correctly and
adequately..
Determined, Confident and Persistent in the pursuit of knowledge and learning, I was on
my way to National Bank of Pakistan Passport office Branch Rawalpindi in the early
morning of July 8, 2008. Normally I wanted rest and recreation after the tiring class in
June but this time I was anxiously waiting for the start of my internship.

 FIRST WEEK

I started my internship from "General Banking" in the first week. The General banking is
basically divided into the following sub departments, which are as follows:
 Account opening
 Bills and remittances
 Clearing
 Term deposit
 Cash department

The first day of exposure to the practical field was at the (sub department) Account
opening.
 Account opening:
Although the procedure of opening an account in a bank is a quite complicated job but I
am going to tell you only the basic necessities for opening the account, which are as
follows:

55
  Introduction
 National I.D. card
 Personal data
 Details of dealing with other banks.

These are some of the basic requirements for opening the account. Then the banker
inquires about the option of opening a joint account or individual. If the customer wants
to open joint account then either it is "either or survivor" (i.e. only one persons signature
is sufficient) or jointly (i.e. both should sign the cheque)

 Issuance of cheque book

Once the account is opened, BOP issues the cheque books to the customer so that they
could withdraw their money whenever they like. The producer of issuance of the cheque
book is as follows:

For the customer who already has an account with the bank, the lastly consumed cheque
book requisition slip with the help of which a new cheque book is issued. And the person
who is going to open a new account for the first time gets the cheque book free without
any requisition slip.

For the new depositors the cheque book is not issued at the time of opening of account,
rather it is issued after three days.

I remained there in the account-opening department for one week and daily I learnt a new
thing. I came to know about the details of the account opened by the banks, which I have
explained in previous portion of "Departments".

In the start I have stated the account opening procedure and issuance of cheque book in a
very comprehensive way, now let me tell u the further related detail of account opening

56
  First of all a customer come and gets the information regarding the opening of
account. After getting the proper information he gets an introducer and goes
for opening an account of any kind whatever he wants
 He fills the form regarding the opening of account which is in fact a request.
 S.S card is filled which contains the signature that will be used in future in
order to identify that you are the same particular person who perfectly eligible
for receiving the benefits.
 The S.S card and the application form are verified and the verification stamp
is imposed on it.
 After verification the application forms are pasted in the file with the serial, no
which is actually the account no. Allocated to the respective customers.
 The cheque book is issued to the customer after three days.
 The procedure for opening the account comes to an end after sending the letter
of thanks.

 SECOND WEEK

In the second week I was shifted to the TDR (Term Depots Receipts) department. It was
again a good experience to work with the officer here. First of all he told me about the
basics of the TDR.

Deposit is lifeblood of a commercial bank. The main function of a commercial bank is to

canalize the saving from the savers to the ultimate users of the funds. This process of
collecting saving is called "deposit mobilization".

Deposits are of two types one is the demand deposit and the other one is time deposit. As
the name signifies the demand deposit is payable on demand so no interest or benefit is
given on such deposits but the time deposit is a kind of deposit, which gives you a benefit
in terms of cash. Most of the people who have surplus money with them especially the
landlords deposit their money in such accounts.

57
Term deposits are payable on demand with certain maturity. Different percentages of
profit are given in the time deposit.

These are called fixed deposit because they are fixed and no transaction is allowed till
maturity. In fix deposit you can open an A/c of the same title only than A/c number will
be changed. While in other accounts the A/c can't be opened under the same title even in
other branch of the same Bank.

 Record keeping
The record of the TDR is although fed in the computer but there is also a hard copy of the
record. The verified TDR forms are pasted with serial number of receipt given to the
customer (the receipt of the form regarding the deposit of the amount).

The certificates are attached or pasted in the file according to the date. The date may be
of any month and any year i.e. if there is a card of the 8th then on this card you will find
the only 8th date of any month and any year in which the card was issued.

 THIRD WEEK

In the third week of my internship I was shifted to the Clearing section and Bills for
collection section as well. Three days I worked with the "Clearing" and then with the
"Bills for collection" section.

 Clearing
This is an "Inter-city clearing" i.e. the cheques of Lahore city from different banks like
National Bank of Pakistan, Standard Chartered Bank, Muslim Commercial Bank are
deposited here. The deposited cheque is received carefully by checking the title of
cheque, date, amount, and signature on the cheque. All the cheques go to the State Bank
of Pakistan. Everyday NIFT receives all cheques and arranges them. By establishment of
NIFT a lot of time, cost and labor is saved. The cheques are stamped carefully. Two
stamps are required on the cheques

58
  Clearing stamp
 Payee's account will be credited

If any stamp is missed or unclear, SBP returns the cheque with a reason.
When the cheques are deposited they enter all the cheques on the computer with account
number and these figures go to SBP.
 Bills for Collection
Two types of cheques are deposited here

 Outstation cheques
 BOP other branch cheques (local)

Outstation cheques mean different cities cheques are deposited and local means BOP
other Branches are deposited. All cheques account numbers on the computer and these
figures go to SBP.
The cheques are cleared in 5-6 days. Because "NIFT" receives and delivers to SBP where
these cheques are cleared in 3 days and deliver to the banks.
If the cheques are returned due to some reasons, a returned memo is filled and entries are
recorded on the register.

 FOURTH WEEK

In the fourth week of internship I was transferred to the "Remittances department". I met
there with a quite sophisticated personality, she tells me about the issuance, procedure
and the entries of the demand drafts and pay orders.

 Demand Draft
It is an instrument payable on demand for which value has been received, issued by the
branch of the bank drawn. Demand draft is payable at some other branches of the same

59
bank. Demand draft is very useful because there is no chance of fraud. The person
deposit cash and get demand draft. It is used for outstation payment.

 Issuance of demand draft

On the application form following particulars are given:
 Name of beneficiary
 Amount
 Mode of payment
 The place where DD is drawn
 Signature
 Name and address of the beneficiary

Request shall be made on standard application form. The customer writes his name,
address, I.D number, and phone number on the backside of the application form.
Commission is charged as per schedule of charges. The issuance of DD is computerized
and the amount is automatically protectively graphed drawing printing for the avoidance
of forgery.

The withholding tax and excise duty is deducted as per schedule. When the customer
deposits cash in the cash department, he got voucher from the cash department and gave
it to the person who makes the DD.

 Payment of DD
When a person brings DD (which have been drawn on you), you will check it from your
DD payable record and ask the customer to sign twice at the back of the DD so that it
could be confirmed that he is the eligible person for receiving the benefit, along with this
you obtain the ID of that person verify it and then make the payment. After making the
payment entry is made in the register that this DD has been paid.

 Cancellation of DD

60
Following procedure is followed for the cancellation of the DD.

 Obtain the application in writing for the cancellation of DD along with the
original DD.
 Verify the signature of the applicant, which should tally, with the signature on
the application form (for opening the DD).
 Mark caution on DD issued register or on computerized entry.
 Make the payment from suspense account.
 Inform the Drawee bank regarding the cancellation. Inter Branch Credit
Advice is the advice regarding the payment (refund) of the amount which
Drawer bank have sent to them (which was deposited by the customer against
the demand draft).

 PAY ORDER
Pay order issued from one branch can only be payable from the same branch. Pay order is
used for same city payment. E.g. If BOP (Main Branch) issued pay order it is only
payable for Main Branch of BOP.

Procedure
 Applicant fill the application
 After paying charges he gets voucher and pay order is issued
 All pay orders shall be crossed "payee's A/c only".

Cancellation
 The applicant give application for cancellation
 Charges are recovered from the applicant.

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 FIFTH WEEK

In the second last week of my internship I worked in the Accounts section and the mail
dispatch section.

 Account Section
I worked in accounts department but as it is a confidential department so they did not
give me enough information regarding their working. First day I sorted out the cheques of
BOP with the help of the serial number and the nature of the account and arranged them
in sequence. After that I checked the activity which contains the title of the cheque,
amount, date etc. Accounts department maintains the record of expenses of all the
departments, it also maintain the record of all the employees regarding their basic salary,
increment, benefits etc. It is the backbone of BOP

 Mail Dispatch Section

After a few days I worked in the mail dispatch section, the person appointed here asked
me to arrange the letters and to write the mailing address on the envelopes and then to put
the letters into the envelops. It was an interesting job but, the single thing which I learned
from here was that, I learnt by heart the addresses of many branches of the BOP, which
helped me to complete the. I also had to maintain the records of the letters sent and
received in a register.

 SIXTH WEEK

Till the last week of my internship I had worked in all the major departments of the bank
and was now assigned the tasks concerning lockers and the utility bills collection.

62
  Utility Billing Section
In the billing section I received the consumer utility bills of IESCO (PWR), SNGPL
(SUI), and PTCL. The consumer number and the amount had to be entered in the system.
The printed sheets of these are counter checked to tally the amount entered and the cash
in hand, the date and time are noted. The rent must be paid on due date; otherwise the
charges are deducted from the clients accounts.

 OGDCL Salaries and Pension:

The main account at NBP F-8 branch is of OGDCL. So it is duty of responsibility of our
bank to help them out in distributing the pay in their employees. Also NBP handles its
pension every month

WHAT I LEARNT IN NBP

Here I will point out things which I learn during my internship.

 I learnt that how to apply the knowledge in practical form.

 I got the knowledge of promotional activities.

 I learnt that how the customers pay orders.

 I learnt that whenever customer comes to submit the cheque, the cheque
should be written clear and also signs and amount is mentioned correctly, the
date should not be of future and must not be 6 month before, signatures must
be verified, account number should be on the cheque, amount in both numbers
and words should be the same.

 I learnt that the customers are very important, they must be delivered first,
their complaint must be resolved as soon as possible and dealing should be
very beneficial for both..

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  I learnt that employees work better in friendly and co-operative atmosphere.

SKILLS USED DURING INTERNSHIP

The following are the skills that I got a chance to practice in the practical environment

 Interpersonal Skills
This is most common and one of the most important skills during my internship period.
This skill helps a person to interact with others in much better and pleasant manner. It is
an art to present one’s views, thoughts, and ideas before its listeners. During my
internship period it helped me to build good rapport with the other employees who guided
me in the best possible manner. My interaction and dealings with the customers helped
me to broaden my social network.

 Communication Skills
Communication means exchange of messages between people for the purpose of
achieving common meanings. It is an art to make information flow smoother. Today it is
very necessary to communicate well especially in business sector and especially for those
who are seeking information. My communication skills gave me self confidence while
interacting with everyone else.

 Conceptual Skills
I used my conceptual skills to gain an insight into the working of the bank: how the work
is done? What are the problems? their relative contribution to the economy as a whole.

 Stress Management Skills

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As this internship was my first experience in a practical environment so I faced a lot of
mental strain in terms of adapting to the new work environment, practical learning, cope
with the challenges faced etc. using my stress management skills I was able to list
priorities and work accordingly.

SKILLS GAINED DURING THE INTERNSHIP PERIOD

The following skills I gained during my internship session.

 Time Management Skills

During my internship period I have learnt punctuality and the significance of time in an
organization. I have realized that time management is an important element of work. My
practical learning has taught me to prioritize and organize my work according to schedule
that enabled me to complete my tasks in the allotted time.

 Office Working Skills

I had to maintain vouchers, registers, perform some other documentation, as well as work
on the system. Thus I learned manual as well as the system office working skills.

 Human Skills
I learnt the human skills in BOP in true manner. Human skills associated with an
employee’s ability to work well with others both as a member of a group as well as
individual leader who gets things done through others.

 Self Control
Our ability to exercise control over our own behavior by setting standards and providing
consequences for our own actions refers to self control. As an internee this skill is really
important because an internee does not have much of authority.

 Co-Ordination

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Co-ordination means the smooth flow of work that must be carried on consistently and
systematically without any breakage. In a corporate environment like banking there is
need for integration making co-ordination an essential environment. As an internee it is
necessary to co-ordinate well with supervisors and co-workers.

 Better Communication Skills

During my MBA I have attended courses on communication in different semesters
and was taught how to communicate effectively with others. This was my first hand
experience of communicating with the manager, junior officers and others and to
socialize myself among those professionals. This experience augmented my
communication skills and gave me the confidence of communicating with
professional people.

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 CHAPTER # 5

CRITICAL ANALYSIS

67
CHALLENGES

Following are the challenges that I faced during my internship.

Practical vs. Bookish knowledge

Studies teach students theoretical aspects of practical field that is why students face
difficulties in the real situation in adjusting in the practical environment of the
organization. So being a fresh student I encountered different sorts of problems that was
challenging for me. I did not find much application of my knowledge in the bank.

Lack of Banking Knowledge

Although we have had a course of money and banking in an immediate prior semester to
my internship, still I found it of very minor help in the bank. If we were given a
comprehensive and practical know how in the course, it would have been an
implementation of that knowledge in the real organization instead of learning everything
from the scratch.

Adjusting With the Employees

In an organization I came across many people who were opposite to my personality and
often found them offensive and uncomfortable because of their attitude but I had to work
and co-ordinate with them which were very challenging for me.

Responding To Work Load

As it was my first experience in the work environment, it took me some time to settle in
the bank setting. Learning new work especially in the beginning while at the same time
responding to the seniors who assigned me the tasks to be completed in short time; was a
great challenge for me. Even under such stress and strain marinating a positive attitude
towards everyone was a line of challenge for me.

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IDENTIFICATION OF MAIN PROBLEM

National Bank is well organized bank and operates efficiently in this competitive
environment so; it is difficult for me to identify only one main problem. But nothing is
perfect in this world there is always a room for improvement. According to my limited
knowledge improvement can be made in following areas:

 Behavioral problems among Senior and Junior employees.

 Lack of participation from the employees.

 Senior employees ask juniors for their personal work during the office hours.

 Break down of system also disturb the banking operation.

 Inefficient Online Banking System

 Bonds of informal relationships among the employees are very strong and so it
also affects their work to some extent.

“Lack of motivation leads to dissatisfaction among employees”

69
RECOMMENDATIONS & SUGGETIONS
The recommendations are as follows:

Professional Training
National BANK staff lacks professionalism. They lack the necessary training to do the
job efficiently and properly. Although staff colleges are in all major cities but they are not
performing well. For this purpose these staff colleges should be reorganized and their
syllabus should be made in such a way which can help the employee understand the ever-
changing global economic scenario.

Banking council of Pakistan should also initiate some programs to train the staff with
much needed professional training..

Transfer
Transfer is not properly carried out. Some of the employees are continually serving at the
same post. They are simply rotated at the same branch. Therefore it is recommended that
evenly rotation of every employee should take place after every three years in different
branches of the bank.

Need of Qualified Staff

Required, qualified staff should be provided to branch in order to improve the functioning
of the branch. Especially a telephone operator should be appointed.

Utility Bill Charges

Bank gets Rs. 2 to 3 to processes a utility bill, and it is very tire, tough and hard job
despite this working resulting in a loss to then Rs 3 to5 per transaction. These charges
should be increased to RS 10 per bill to enable the branch to cover their handling costs
and make some profit.

Technological Advancement
I would like to suggest that at least all the main branches of NATIONAL BANK should
be fully computerized in order to expedite the dealing process among bankers and their
customers. Every department should be provided a computer with adequate training

70
(especially Advances, Deposits and Foreign Exchange departments).Daily records should
be entered directly into these computers,. It will also help in reducing the use of excessive
paper work.

Bank should improve online banking system very quickly because this is the requirement
of the present age.

Proper Distribution of Work

Proper distribution of work leads to success in every organization. Proper distribution of
work prevents the employee from over and under work situation. So for a smooth running
of an organization proper distribution of work is the hint to be followed.

During my internship I observed that there was no proper distribution of work in the
bank. I saw that some of the employee worked like ants other sat idle staring here and
there. So this created a lot of over work situation for while relaxation for other.

Inter Departmental Transfer

I watched during my internship that, there employees who have worked on one seat for
many a year. It can have negative effects motivation of employee who is hard working
and intelligent. Take the example of advances section. In advance section if the employee
is transfer after sixth month or seven month, how can he be able to show his
performances and how can he be able to know the bank customer in a short period of
time.

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

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

Every person cannot go to the manager for the complaint because most of the people are
hesitant. So I suggest management to install a compliant box in the branch, and recruit a

71
special person for that guidance of the customer when they are unable to manage some
difficulties in banking matters.

Avoiding Bad Debts

Great care should be taking while extending the loan. Loans should be awarded against
reasonable securities, where market value should be equal to the loan granted.

Policies should be crafted in a way to ensure that no loan is extended on political

pressure. SBP regulation for loan approval should be strictly followed. According to
which the current ration of borrower’s business must be 1:1 and the debt to equity ratio
should be 60:40, means the liquidity position of business should be healthy.

Decentralization
The higher authorities should form team-based management rather than centralized
management. It would result in improvement in uplifting the morale of the employees.
They will be more motivated and involved in all their operations resulting in overall
effectiveness of the organization.

Working conditions
Working conditions for employees should also be made better so that they will be
motivated and enhance the performance of the bank.

72
CHAPTER # 6

CONCLUSION

73
Conclusion
The public sector banks focused on superior services, niche marketing and the intensive
use of technology to capture dissatisfied customers, In this industry segment, NBP widely
regarded as top level bank because of their financial strength in the term of their capital
position, prudent management and deposit security. The second tier included bank such
as Prime commercial Bank, Bank Al-Habib, Soneri Bank and Metropolitan Bank. While
Bolan Bank, Union Bank, Schon Bank, Prudential bank and the Bank of Punjab are in the
third and last tier. These tiers, especially the second and third, are very competitive and
are increasingly characterized by a widening performance gap. National Bank is in the
unique position of finding a balance between the strengths and weaknesses of a corporate
image that strongly identified main accounts of Pakistan government. All the new private
commercial banks suffered from a problem of credibility, as well as the collapse of the
Punjab Co-operatives, Pakistan’s equivalent of the American savings and loan crisis
.
The bank has successfully penetrated key market through branch expansion and business
diversification. A system of regional management is in the place to ensure greater trust
and improved productivity. As far as internship is concerned it is a good career
opportunity in general is scarce in Pakistan. Internship opportunities in particular are
quite limited. Internship programs take some effort to set up and not/ all companies
support the internship programs.

In my opinion good interns bring fresh ideas, perspective and energy and create goodwill
and are well worth the effort. I strongly recommend the internship program to all students
contemplating the idea work experience significantly increases the chances of
employment after internship. After all, when an employer compares two résumés, one
student with work experience against another student with none, it is quite evident which
student they would most likely choose. Internship enhances chances for a positive

74
experience that will benefit everyone. The key elements of any internship are the training
modules offered. It is crucial to identify learning goals in each module and outline the
tasks to be accomplished.

REFERENCES

 http://www.nbp.com.pk
 www.nbp.com.pk/An_Report.htm
 http://www.wekipedia.com
 Irshad, M. (2007). Money Banking and Finance, Nayyar Asad Printers.
 Siddiqui, A. H. (1998). Practice and Law of Banking in Pakistan (2 nd Ed.),
Karachi: Decent Print Enterprises P

 Emery, D.R, J.D Finnerty and J.D. Stowen, (1988). Principles of Financial
Management (1st Ed.). New Jersey: Prentice Hall.

 Van Horne, J.C. and J.M. Wachowicz, JR.11th Edition, “Fundamental of Financial
Management” New Jersey: Prentice-Hall, Inc. 1998.

 M.Y. Khan and P. K. Jain, “Financial Management” 3rd Edition, Tata McGraw
Hill

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