Professional Documents
Culture Documents
Dear Reader:
company’s position in the market and the operations it is carrying out. All
reader.
work.
Sincerely,
We are submitting here our term report on the Business Plan of National of
Pakistan. Initial pages of this report also contain the brief information about
company’s background and the activities they are doing.
If there are any questions or queries you have about the material presented in
this report, we will be extremely glad to appear before you.
Sincerely,
With the blessings of ALLAH the almighty, the report enclosed has reached its
enthusiastic work. We extend our heartiest thanks to Ms. Uzma Bashir Ghaus,
for conducting this course and making it interesting and knowledgeable, without
her efforts and co-operation the report would not have been possible. We also
thankful for her confidence and trust she had in us, importance of which can in
We hope readers of this report can complement the depth of the study and
Thanking You
Sincerely,
National Bank of Pakistan Mailsi Branch District Vehari and to know how I will work in
financial institutions and among various types of people have different attitude.
The objective of this Internship was to explore the issues relating to Finance and to find out
organization during the internship and study the system of National Bank of Pakistan. There
are many possible improvements, which we can make positive changes in the system.
system the load of work can be decreased. All the staffs do not know about computer. There
is almost one or two employees are trained to operate the system in every branch.
Especially, the cash department is not familiar with computer and information system.
It is not easy for it to implement a new system immediately it takes a lot of time to replace
systems. Once implemented its testing takes more time. So it is important for the Bank to
The Finance of the bank is experienced but not adequate with the changing environment of
financial institutions. I observed that seniors are illiterate of computer and not technical
hands. New comers have more knowledge about business administration and skilled in
Bank of Pakistan Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. Its
registered and head office is situated at I.I. Chundrigar Road, Karachi. The bank is engaged
in providing commercial banking and related services in Pakistan and overseas. The bank
also handles treasury transactions for the Government of Pakistan (GoP) as an agent to the
State Bank of Pakistan (SBP). The bank operates 1,189 branches in Pakistan and 18
overseas branches (including the Export Processing Zone branch, Karachi). Under a Trust
Deed, the bank also provides services as trustee to National Investment Trust (NIT)
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.
The Bank is providing all banking services of mercantile and commercial banking
Providing services under a Trust Deed as Trustee to the National Investment Trust
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Accepting of deposits of money on current, fixed, saving, term deposit and profit and
exchange.
Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco, etc.
Carrying on agency business of any description other than managing agent, on behalf
Joint venturing with foreign dealers, agents and companies for its representation
abroad.
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Branch Network
Presently the Bank is divided into 10 Groups headed by SEVPs/EVPs. 9 Regions reporting
to as many Regional Chiefs and 15 Single Branch Zones headed by Zonal Chiefs; 12
Corporate branches and 1,189 domestic branches headed by Branch Managers control its
field operations.
With the geographical development of its branches, the Bank has been able to extend its
services to a much larger number of Pakistanis all over the country. Today it has more than
8.5 million accounts. Bank maintains its presence in all the major financial centers of the
world through its 21overseas branches and 4 representative offices. Ofthese, three
CIS countries. Bank’s role globally is well assisted by its network of correspondent banks
Apart from having a vast branch network, Bank is at the forefront in the acquisition and
application of new technologies in every aspect of its banking facilities. It has acquired
leased telephone lines for on-line banking. The Bank has 12 Regional Computer Centers to
cover various on-line and batch system requirements of branches and controlling offices.
Bank has also a presence on the Internet. It has modernized its services by installing
Automated Teller Machines (ATMs) called "CASH LINK" at selected branches and
Branch Network:
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(As of September, 2003) 1236 Domestic Branches, 18 Overseas Branches, 4 Representative
Seoul, Bahrain, Dhaka, Chittagong, Ashgabat, Bishkek, Baku, Kabul, Jalalabad and KEPZ
Representative Offices:
Beijing, Tashkent, Chicago, and Toronto.
Subsidiaries:
» CJSC Almaty, Kazakhstan
» NBP Capital Ltd.
» National Bank Modaraba Management Co.
» Taurus Securities Ltd.
» NBP Exchange Company Ltd.
Joint Venture:
United National Bank Ltd., UK
(Economic Indicators Pakistan, Published by Economic research Wing NBP, Head Office
Karachi.
institutions both within and outside the country is expected to further enhance the
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Prospects:
The Bank's principal strategic going forward objective is to make the transition from a
public service institution to a modern commercial bank. Being the country's largest financial
institution, the Bank is uniquely positioned to leverage its large branch network and its 8.5
million-customer base to consolidate its core businesses as well as develop new revenue
generating opportunities.
The new management team is in place combining the Bank's existing personnel with
professionals recruited from outside. Operating procedures are being re-defined and internal
Managers (RMs). For this purpose, new RMs as well as team leaders have been inducted to
expedite this process. Area Managers will be appointed to manage relationships and to
In investment banking team has also been formed to offer specialized services to major
relationships including advisory and debt syndications (TFCs). Furthermore, to stem the
growth in non-performing loans, the existing risk / credit management practices at the Bank
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Treasury / International Banking:
The deregulation of foreign exchange treasury business has ensured that a growing Volume
of business now flows through the inter-bank market where rates are determined by the
market forces. This can prove to be an immense profitable proposition for the Bank.
Towards this objective, the Bank is shifting focusing on expanding its market share in trade
Mission:
NBP will aspire to the values that make NBP truly the Nation’s Bank, by :
Core Values:
» Highest standards of Integrity.
» Institutionalizing teamwork and performance culture.
» Excellence in service.
» Advancement of skills for tomorrow’s challenges.
» Awareness of social and community responsibility.
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» Value creation for all stakeholders.
we must, therefore, serve our present customers and promise to serve our potential
try to provide a total and integrate package of services to create satisfied clientele.
Our braches, regional offices and head office should regard the customer as their
most priority, serving them with maximum possible helpfulness and courtesy.
Our second most important responsibility is the employees who work for our great
institution. They must have their security , stability and fair treatment in their jobs in
placement . till separation. They should be treated with dignity and should be made
Our third most important responsibility is our executives and officers. They should
have talent, education, experience and ability with a premium, place on commitment,
Our fourth responsibility is to the communities that r served by our great institution.
Our 1st community is the Pakistani nation whose service is the reason for our
existence.
Our 5th responsibly is to our owners and stockholders. We must make a sound profit
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Objectives of National Bank
Objectives are ends towards which an enterprise activity is aimed. The purpose of business
is production and marketing of economic goods and services but to accomplish these
R Advancing loans
One of the main objective of NBP is advancing loans to industrialists and traders against
security of stock, debentures or other securities
R Accept deposits
Bank provides deposit facility to its customers. The types of deposits are
o Profit and loss saving accounts
o Fixed account
o Current account
R Remitting of funds
The bank provides the facility to its customers remitting large amounts of money in the
form of bank Drafts, Telegraphic Transfer, Mail Transfer to where ever the customers
want.
R Sale of promissory notes
To sell and realize the proceeds of sale of any promissory notes, debentures, stock
receipts, bounds, shares etc.
R Selling and realizing property of bank claims
To manage sell and realize all property whether moveable or immoveable which may
come in any way of the bank in satisfaction of its claim.
R Investment or underwriting of stocks
To invest the funds of the bank in or the underwriting of any of stocks, funds, shares
securities, debentures, bonds or scripts or other securities for money issued by any
public limited companies and to convert them into money when required.
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National Bank of Pakistan is a Governmental Organization. It is functioning as an agent of
State Bank of Pakistan. It implements the policies of SBP. Its basic objective was to extend
credit to the agriculture sector. 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. It deals all Govt. Revenue, collection and payments
of salaries, pensions and Govt. Treasury. It is a complete commercial, retail and corporate
bank as well. National Bank of Pakistan is naturally a Financial Organization, which deals
The National Bank of Pakistan a commercial bank generally makes advances for a period
not exceeding one year, except in case of small and medium industries for which advance
may be made for a maximum period of five years. The bank makes not only against the
security of stocks and goods hypothecated or pledged to the bank, but also against
documents of goods and properly, shares are various joint stock companies, Government
securities, Insurance policies deposits receipts, etc. The margin and rate of interest are
determined by several factors including the type of security the size of loan and the integrity
of the party.
The nature of responsibilities of the Bank is different and unique from other Banks/financial
institutions. The Bank acts as the agent to the State Bank of Pakistan for handling
Provincial/Federal Government Receipts and Payments on their behalf. The Bank has also
played an important role in financing the country’s growing trade, which has expanded
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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 and internationally and representative offices.
ORGANIZATIONAL STRUCTURE
In National Bank of Pakistan, the head is called “Chairman” or “President” of the Bank.
And after President there is Five Broad of Directors. National Bank of Pakistan has eleven
Groups which control the working of the Divisions, Wing, Department, Section and
Page 10
National Bank of Pakistan is structurally divided into Groups and groups are also
subdivided into Departments, Wings, and Divisions. National Bank of Pakistan has different
Department in the Group and each department performing work, as their task assign.
FUNCTIONAL DEPARTMENT
GEOGRAPHIC DEPARTMENT
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PROCESS DEPARTMENT
CUSTOMER DEPARTMENT
National Bank of Pakistan (NBP) provides Services through more than 1200 branches in
Pakistan and 22 branches in overseas. And there are 29 Regions. All Branches of National
Bank of Pakistan report to five Head of RMT Members. And these five members reported to
regional Offices. Regional Offices report to the Group Chief of the Groups. All the process
is working very quickly and it not consume more time. And the Group Chief of each Group
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Report to the President of the National Bank of Pakistan. All the data were proceed to the
National Bank of Pakistan is relatively Wide span of control and Flat Structure. National
Bank of Pakistan are less layers of management to pass a message through, so the message
reaches more employees faster. More skillful Group Chief Managers can control a greater
number of employees. National Bank of Pakistan assess that the internal Control
the Bank.
National Bank of Pakistan is having Decentralization in the Bank. And give the authority of
Decision Making to their Group Chief of every Group, to take decision, which is benefit for
the Organization. National Bank of Pakistan provides facility of making decision to their
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Accounts/Finance Department
The department of finance and accounting is a large department and the head of this
department is chief executive Finance and second major controlling authority is the assistant
executive finance and all the reporting comes to the executive finance in the end. In this
major department there are two major operation authorities, one is the head of finance
department and the second is the head of accounts department and both the heads have
separate duties and responsibilities and they report to the executive finance in the end.
Head of finance department works with the sub-ordinates like manager business operations
and finance manager business and senior business analyst etc. and they perform their duties
like budgeting controlling and analyzing the different activities of finance department. And
the other officer is the accounts manager, who performs managing the accounts operations
Accounts Department
Accounts Department plays a vital role in the development of banking functions. It’s
computerized as well as manual. It handles each and every transaction is being made into
the bank, and control expenses and allocation of funds through appropriation of accounts.
The work in accounts department is depending on vouchers and contra entries are passed
This officer is working under the director finance, or in other words director finance is the
higher authority for this department and its functions are as under.
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The functions cover the working in accounts department is as follows.
» Budgeting
» Controlling
» Analyzing
» Directing
» Coordinating business activities
» Reporting to director finance
» Admin activities
Finance Department
It is the person, which is also bond to the executive, finance and accounts because executive
finance is the higher authority to this person but the functions of this department are not
valuation of financial resources and to provide consistent, reliable, and timely information
» Analysis of accounts
» To maintain inventory records
» Finance activities
» Audit preparation
» To keep record of loans, accounts, cash, and all banking transactions according to
accounting principles
» Funds management
» Preparation of cash flow, income statement, and balance sheet
» The use of effective budgetary techniques for budgets
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» Preparation of reports/ cash forecast
NBP is a most growing organization and performing a role as a treasury on behalf of SBP,
the whole functions of the bank is totally depend upon the finance department. It has a core
value in the promotion of banking sector. Budgets and forecasting is further assist for future
planning. Different books of accounts are prepared into the bank through computerized
system and manual. The accountants prepare daily, weekly, monthly, quarterly, and yearly
reports.
Preparation of repots
The basic purpose of accounts and finance department is to prepare financial reports for
decision-making and future planning. Different reports are prepared in NBP due to getting
information and time period requirements. Reports are prepared by using general ledger.
The following reports in accounts and finance department are prepared.
Daily reports: It summarizes the daily position of all the main heads of the bank i.e. cash,
loans, deposits, accounts and ATM’s. Other daily reports are
Balance Sheet
Reconciliation reports
Trial balance
Financial statement
Daily expense vouchers
Monthly Statement: These reports are monthly basis in order to know the position of the
bank and pay rewards on monthly basis, etc.
Balance sheet
Profit and loss statement
Monthly analysis of expenses
Actual budget analysis
Cost of funds statement
Variance analysis
Trial balance
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Quarterly Statement: It includes tax statement, reconciliation’s, others reports and interest
statements etc.
National Bank of Pakistan has low Formalization in the bank. And Employees are free to
take action or decision in their work specialization. Employees are follow the rules and
regulation in the bank is very little formalized. Employees’ behavior is little bit guided by
National Bank of Pakistan follow the Organic Model Organization. In NBP, there are Cross-
Functional teams, as well as Cross-hierarchical teams. There are free flow of Information
and Wide span of Control. NBP is Decentralization in nature and very low formalization in
the bank. Basically National Bank of Pakistan is high Diagonal Differentiation and every
employee of any department can easily communicate to other department of the Bank.
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Competitors:
Competitors of National Bank of Pakistan are all scheduled banks, which are listed/trading
Financial Analysis:
Pre-tax profit stood at Rs. 12,674 million from Rs. 14,002 million of corresponding period
of last year, a reduction of 9.5%. Bank’s operating performance have been quite impressive,
operating revenue increased by 30% from Rs. 20,376 million to Rs.26,497 million, while
pre provision profit increased by Rs. 4,293 million an increase of 31.4%. Diluted earnings
per share declined to Rs. 8.79 from Rs. 10.05 during the same period of last year. Pre tax
return on equity stands at 35.8% whereas Pre tax return on assets is at 3.3%. Cost to income
ratio of the bank remained in the top tier at 0.32 Net interest margin registered an
impressive growth of Rs. 2,670 million or 16.4% mainly due to growth in volumes.
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Net advances increased by Rs. 41 billion and Rs. 32 billion as compared to corresponding
period of last year and year end 2007. The growth in advances mainly emanated from
corporate and commodity financing.
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Deposits show impressive growth of Rs. 68 billion or 12.3% over corresponding period last
year. Compared to year end December 2003 the deposits have increased by Rs. 29 billion or
5% mainly due to our marketing efforts and the trust that customers have in NBP.
Non interest base income has shown an impressive increase of Rs. 3.4 billion or 84% over
corresponding period due to higher commission, exchange income and a one off receipt of
Rs. 977.8 million as compensation for delayed tax refunds. The compensation on delayed
Administrative expenses show a rise of Rs. 1,828 million or 27% compare to corresponding
period mainly due to inflation and salary increases. Going forward we expect that with the
technological / human resource up gradation program our costs will rise in short term
Provision charge against advances for the corresponding period last year includes one off
items of Rs. 1.4billion on account of one large cash recovery and reversal in general
provision of Rs. 825 million due to reduction in provision requirement on advance salary
from 5% to 3%. If we exclude these one offs the provision charge last year comes to Rs. 1.8
billion. Further b) last year the SBP changed its prudential regulations and withdrew the
benefit of Forced Sales Value in the third quarter of last year, therefore this year the banks
can no longer take the benefit of forced sales value of the collateral securities.
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Balance Sheet as at December 31, 2003-07
Descriptions 2003 2004 2005 2006 2007
Assets
Cash and balance banks 59,420,502 94,446,552 71,196,956 78,625,227 94,873,249
Balance other banks 24,154,070 49,784,884 31,019,330 40,641,679 37,472,832
Lending fin. inst. 30,213,352 10,511,322 16,282,942 23,012,732 21,464,600
Investments 166,195,619 144,735,672 156,985,686 139,946,995 210,787,868
Advances 160,990,265 221,443,963 268,838,779 316,110,406 340,677,100
Other assets 21,946,846 18,339,514 23,941,056 9,681,974 30,994,965
Operating fixed assets 8,939,483 9,202,969 9,454,365 ----- 25,922,979
Deferred tax assets --- 1,275,949 ------ 27,113,698 ------
Total Assets 471,860,137 549,740,825 577,719,114 635,132,711 762,193,593
Liabilities & Capital
Bills payable 5,496,738 7,214,671 1,741,156 10,605,663 7,061,902
Bor. from financial inst. 16,493,514 11,084,790 8,756,847 11,704,079 10,886,063
Deposits & accounts 395,568,490 465,571,717 463,426,602 501,872,243 591,907,435
Sub-ordinated loans --- ---- ---- ---- ----
Lia. financial lease 41,117 17,058 16,629 13,235 33,554
Other liabilities 26,080,400 22,916,147 24,974,450 26,596,300 30,869,154
Deferred tax liabilities 595,864 ------ 4,462,718 2,387,073 5,097,831
Total Liabilities 444,276,123 506,804,383 503,378,402 553,178,593 645,855,939
Capital
Share capital 4,103,422 4,924,106 5,908,927 7,090,712 8,154,319
Reserves 8,133,312 11,119,613 13,536,041 13,879,260 15,772,124
Unappropriated profit 5,897,163 9,213,565 16,713,506 32,074,677 45,344,188
Surplus on re. of assets 9,450,117 17,679,158 38,182,238 28,909,469 47,067,023
Total Capital 27,584,014 42,936,442 74,340,712 81,954,118 116,337,654
T.Liabilities & Capital 471,860,137 549,740,825 577,719,114 635,132,711 762,193,593
The additional provision charge on account of withdrawal of FSV impact last year was Rs.
3.1 billion, which was made in the 3rd and 4 th quarter of last year. This benefit of Rs 3.1
billion was being carried in the first half of 2003. Therefore the comparison between the
provisions for the two periods should take into account both these factors. Additionally the
bank is making all out efforts for recovery of non-performing loans and aggressive targets
Page 21
Marketing Analysis:
Market Recognition:
For the second consecutive year, NBP was recognized as the best bank in Pakistan by the
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
Customer Satisfaction
In NBP customer dealing is will, but during rush hour the customer has to wait for a long
time for their turn. It’s quite hard for a new customer or potential customer to get the
required information.
record is needed the staff has to struggle to find it out and a lot of time is wasted.
relaxing while some others have nothing to do at all. This not only creates confusion among
employees but also hurting and disturbing for overall setup of the bank. And above all it
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Marketing visits
A useful mode of contact is through personal marketing visits. Such visits are important in
informing and perusing the existing and potential customers about the products and creating
FUNCTIONAL ANALYSIS
Formal Organization
Formal organization includes the activities of two or more person, which are cautiously
determined groups and coordinated towards a given objective. It provides base when people
are able to communicate with other, when they have common purpose and they are willing
to work.
when the activities of two or more persons are coordinated towards a given objective. The
formal organization comes into being when people are able to communicate with one
In this formal organization of NBP the activities are carried out in a more formal way. In
theoretical terms it provides basis for communication with one another but in practice it is
not exercised because an employee at high level cannot get straight away to manager or SVP
and ask him about of his problem faced by him, because first he has to talk to his immediate
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Difference between theory and practice
A vast difference exists between theory and practice and NBP has written procedure but
loudly about the account position and while getting clearance of cheque the person can
easily get the whole information from the ledge. The deposit clerk must be careful while
passing any cheque. In this regard another shortfall is in giving the information about the
balance on telephone.
burdened. They are unable to give proper attention to the clients and face difficulties in
getting their job done. One reason for lengthy procedure and excessive paper work in the
amount of deposits. NBP is more interested in increasing its number of account irrespective
to its deposit. The main reason behind it is that bank does not provide personalize service to
all the account holders and does not improve its quality and services
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Delegation of authority
Manager has very limited authority; he has to take the approval from his management
authority i-e. In case of advance he has to take the approval of general and regional
manager. The other problem is created, when the manager is not present in his office, the
customer have to wait for hours. This discourages both customer and officers because they
ADMINISTRATIVE ANALYSIS
compensated or promoted. It is very important for an organization that nature of the job is
described and job specifications are mentioned. Most of the employees are simple graduate
and do not have proper background about their job. This creates problems both for
organization and for the employees. In NBP salaries are given according to the seniority and
grades. People with simple or complex responsibility are getting the same salary and
mistake or anything which places his account in debit it will be difficult to trace him. On the
other hand he may be involved in any fraudulent activities against the bank. In this case the
Page 25
Lack of specialized training
NBP does not provide adequate facility of specialized training to their staff. Training is
generalized rather than specialized. As the worker finishes his training, he is inducted into a
specific field without having great deal of knowledge about the field.
In the Hayatabad branch the newly recruited employee training was not imparted, they all
low rates of saving deposit discourages the customers. Bank should increase their profit
department remains their forever. It reduces career opportunities as well boredom and in the
end results in career platueing. Job rotation is very important for employee especially for
those who are newly recruited. The newly recruit should be rated in all department of the
banking in order to get familiar with working of different departments so that when they get
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Lack of appreciation
Another very important thing which is ignored in the bank is appreciation if the employee
on their good performance. If hard work and performance of employees is not recognized
part of human resource management. It has been noticed that the training program of NBP is
not adequate.
Once the candidate is selected and placed on the respective job. It becomes essential to train
him adequately for the task. They should learn new methods for motivating customers. The
training programmed of the bank should include scientific techniques to improve the
decision making and interpersonal as will individual needs of the employee both specialized
control on financial and administrative matters. Manager is not only responsible for their
own units in business, but also in people terms i.e. training, recruiting, grievance handling
and taking immediate initiative in crisis situation to take major decision affection the future
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Recruitment policy
Human resources are the lifeblood of the organization. If the personnel are recruited
carefully they can become asset to the organization in the case of carelessness a liability on
the organization. Bank is not following its recruitment policy properly due to favoritism,
nepotism and political pressure. Both the top authority and staff union tries their best recruit
their favorites, indulgence of political pressure add salt to the wounds. The persons selected
through these channels are infantile and do not work for the betterment for the bank.
Promotions
Promotion in NBP is purely on the basis of seniority, so the new young person having high
qualification remains behind for quite a lot of time. Top management and staff union put
pressure for the promotion of their favorites, which gives a sense of deprivation to the
deserving employee and their efficiency is affected. As the concept of promotion is attached
with better in terms of greater responsibility, more prestige, greater skills and increased rate
of salary is necessary. Thus a better and impartial policy of promotion needs to be followed.
Transfer
Transfer means when a person is shifted from one place to another place. It is done either
that person is needed more on the other branch or for improving his skill variety. It is the
Marketing at desk
Bank employee come in daily contact with many people who happen to deal with the casual
remittance, travelers cheques, safe custody, pensioners, depositing license fee and variety of
other functions and variety of other people with whom the Bank has no account or regular
Page 28
business relationship. The Bank employees are doing very little on their own to explore the
possibilities of selling banking services to them as a marketing contributor. The entire Bank
community should make a conscious effort in addition to their normal work to explore the
possibilities of selling banking services to them. The market opportunities are hidden in
every dealing a banker handles; the question is that if he has the art and urge to seize such
opportunities.
dissatisfaction and tension in the mind of customer, and deficiency of the service, it is
recommended that the bank should provide brochures etc containing information in details.
Some general information should be placed in information notice board on the entrance
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Industry Analysis:
Banking is one of the most sensitive businesses all over the world. Banks play very
important role in the economy of a country and Pakistan is no exemption. Banks are
custodian to the assets of the general masses. The banking sector plays a significant role in a
contemporary world of money and economy. It influences and facilitates many different but
and distribution of public finance. It is purchase of car or building of a home banks are
always there to serve you better. It is play ground or any educational or healthy societal
development of the country the sponsor-ship of banks is very much involved. Banks play
very positive and important role in the overall economic development of the country.
institutions ranging from a central bank to commercial banks and to specialized agencies to
cater for special requirements of specific sectors. The country started without any
worthwhile banking network in 1947 but witnessed phenomenal growth in the first two
Page 30
IFE Matrix (Internal Factor Evaluation)
Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or
IFE matrix also provides a basis for identifying and evaluating relationships among those
areas. The Internal Factor Evaluation matrix or short IFE matrix is used in strategy
formulation.
The IFE Matrix together with the EFE matrix is a strategy-formulation tool that can be
Page 31
The weighted score is 2.55, which shows that NBP is internally strong with respect to the
factors which determine its potential of excelling in its operation. It has the capability to
overcome various obstacles which might hinder the success in its future.
for assessment of current business conditions. The EFE matrix is a good tool to visualize
The EFE matrix is very similar to the IFE matrix. The major difference between the EFE
matrix and the IFE matrix is the type of factors that are included in the model. While the IFE
matrix deals with internal factors, the EFE matrix is concerned solely with external factors.
External factors assessed in the EFE matrix are the ones that are subjected to the will of
Page 33
SWOT Analysis of the organization:
Strengths
Western union facility: National Bank of Pakistan is only one bank which has the facility
of Western union. In this particular scheme money is transfer in Pakistan from abroad. This
is the fastest way to money transfer. You can receive the money from bank to see the name
ATM finder: There is also strength of NBP that they are found the ATM. They now provide
Government’s bank: In commercial banking system NBP is only the government bank.
They make their policies according to the government’s rules and regulations. It enjoys its
Page 34
position in the market of banking system in Pakistan. Government of Pakistan is also
Online banking: There is also strength of NBP that 130 branches are online. It helps the
speedy services giving to the customers. There is also help in checking the balances and
Employee’s loyalty: Employees are very much loyal to NBP. Employee’s turnover is very
low in NBP. Very few employees are leaving the jobs in NBP. So it is very big strength that
Wide area of services: They provide the wide area of services. They offer no. Of services
relating to the banking system like, pension to retired government employees, traffic
challans, fees received of AIOU, farms of AIOU, utilities bills, deposits, sales tax ,
Page 35
Disbursing Salaries and Pensions to the Government employees and earning high
profit on NBP-Advance Salary Loan Scheme.
Earning commission from SBP on Government transaction.
Facing never problem of cash/currency being its Chest and Sub-chest
Branches all over the country.
NBP have presence in the countries having sizeable trade volumes with Pakistan by
its overseas operations
Holds largest deposit base in the market share in terms of number of accounts.
Leading bank in agriculture financing amongst commercial banks with the market
share of 15%
Helping in earning of foreign exchange, remittances and leading agent of Western
Union Money Transfer.
SBP rated “Fair” for capital & human resources, “Strong” for assets, “Fair” for
management and “Satisfactory” for both earning (Rs.24.1 for per share) and
liquidity.
Weakness:
Lack of communication between employees: During the internship in NBP I found the
problem of lack of communication between the employees and management. They have not
very much understanding with each other and not share the work of each other.
Punishment is not very strong for employees: Punishment threat is not very strong for
employees. Some employees are not very professional in their field but top management not
Public dealing is not very effective: Public respect is not very effective in NBP.
Employees are not taking care of the customers, especially in pension and bills department.
Staff shortage: There is also weak point for NBP that staff is very short and more staff is
required to meet the needs of the branch work. They help from internees.
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Lack of respect of seniors: They are not a healthy sign for NBP that respect of seniors is
not up to the manners. Juniors try to avoid the seniors and no take the help from them.
Lowest Internal Control and Compliance System, SBP rated “Marginal” which is
alarming for the Bank.
Unsatisfactory corporate culture of the Bank.
Physical environment and atmosphere compare to other banks is not meeting the
Standard.
Less number of Online Branches.
Ineffectively use of technologies i.e. Information technology.
Shortage of staff- per employee customer is very high side.
Technical education and training of staff is insufficient.
Opportunities:
Growing banking system: Nowadays banking system is growing quickly so NBP have
opportunities to improve the standard and get the more share in the market.
Future role of government back: In growing era there is a chance for NBP to improve
itself and increase the shares in the market because it is most trustable due to government’s
bank.
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Threats:
Increase in no. of banks: Increase in no. of banks is a threat for National Bank of
Pakistan. No. of private banks (commercial and private) are operating their business and
provide the same facilities. So increase in no. of banks is a threat for NBP.
Modern type of banking: Modern and computerized banking is required to fulfill the
customer’s need, so maximum branches of NBP are worked in old traditional ways.
Highly skilled people and management required: To meet the new standard of
banking, an efficient work force is necessary. In NBP some employees are totally
irresponsible and lack of complete knowledge of banking system. So these employees are
The whole structure change to online: NBP have wide network of branches. Only 130
branches are online, so it is very difficult and time consumed to convert all branches to
online system. So there is also risk involves that if one commuter of one branch suffers in
problem, all system and all commuters of all branches must be turnoff.
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o Payments and FBR Collections create heavy workload.
PEST ANALYSIS:
Political Factors:
Political Instability
The government and NBP hold too much power.
Lack of consistency in financial policy is a problem as a serious as lack of
transparency.
High Tax Rates Policies
Trading Policies
Economical Factors:
Economic Instability
Currency Devaluation
Government spending can increase the money supply and make capital markets more stable
Inflation detriments the interest spread the bank earns.
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Economic factors affect the purchasing power of the potential customers and the
firm’s cost of capital.
Socio-cultural Factors:
Consumer attitudes and opinions
The social cultural environment encapsulates demand and tastes, which vary with
fashion and disposable income, and general changes, can provide both opportunities
and threats for NBP
Ethnic/Religious factors
Living Standards
Technological Factors:
The rapid growth in the technology of personal computers and internet presented
Online Banking
ATM Network
the country, which changed the whole complexion of the banking industry. With irrational
decision at the top all the commercial banks were made subservient to the political
leadership and the bureaucracy. Specialized banking institutions were already working in
the public sector. The new accountability paradigm changed the business ethics in the
banking industry, and with this change started the disaster. Nationalization of banking
industry was accompanied by violent changes in the external value of rupee. The
commercial banks thus lost their assets management equilibrium, initiative and growth
momentum. They ceased to be a business concern and became big bureaucracies. This was
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accompanied by indiscreet loaning under political pressure. They suffered from three
terminal diseases: non-performing loans; higher intermediation cost; and loss of initiative
and entrepreneurship. The rise to Labor Unions and Officers Associations made life tough
and working conditions ugly to honest, dedicated and industrious workers in the realms of
The era of nineties was the climax of privatization, deregulation and restructuring in the
domestic banking industry and financial institutions. The Muslim Commercial Bank was the
first bank to privatize. Followed by Allied Bank limited, United Bank Limited and now the
Habib Bank Limited have been privatized. One thing good for that particular period was the
policies of Banking Council. With the decay of Banking Council there was flood of
indulged in doubtful policies to promote business. The public sector banking, which
constituted the backbone, thus continued to suffer because of their approach, size and
carried over liabilities. Mehran Bank is the prime example of that kind of lax banking in the
country, which ultimately merged into National bank of Pakistan i.e. last resort of domestic
banking industry.
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Local Private Banks:
Askari Commercial Bank Limited Saudi Pak Commercial Bank Ltd
Bank Al-Falah Limited PICIC Commercial Bank Limited
Bank Al Habib Limited Soneri Bank Limited
Bolan Bank Limited Union Bank Limited
Faysal Bank Limited Muslim Commercial Bank Limited
Metropolitan Bank Limited Allied Bank of Pakistan
Platinum Commercial Bank Ltd Union Bank Limited
Prime Commercial Bank Limited Mashreq Bank
In the meanwhile, western banks started entering into the business. They, with the support
of ruling elite, concentrated on the big business, leaving the routine business to the local
Foreign Banks:
ABN Amro Bank Emirates Bank
Al Baraka Islamic Bank Habib Bank A. G. Zurich
American Express Hong Kong Shangai Banking Corporation
The Bank of Tokyo Mitsubishi IFIC
CITI Bank Mashreq Bank PJSC
Credit Agricole Indo Suez Oman Bank
Deutsche Bank Rupali Bank
Doha Bank Standard Chartered Bank
Specialized Banks:
Zari Tarqiati Bank Ltd.
Industrial Development Bank of Pakistan
Punjab Provincial Cooperative Bank
Limited
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There are 17 listed banks in Pakistan 2004. Four banks are still not listed, which are Habib
Bank, United Bank, Allied Bank of Pakistan, Dawood Bank. Standard Chartered Bank,
Citibank, Deutsche Bank and ABN AMRO Bank are main foreign banks in the country.
These four banks continue to enjoy a significant share in the market, both in terms of
deposits and advances. All the foreign banks of the country are busy to invest heavily in the
field technology and e-commerce in order to overcome branch limitation. All the foreign
banks have been busy to introduce new products and idea to grab larger proportion of the
local markets. Foreign banks are carrying major proportion of local business in credit cards,
Many domestic banks have increased their general standards. Ours is the age of plastic
money. Internet-based services are constantly increasing the number of ATM machines,
either by installing their own machines or making arrangements with other networks. The
All the domestic and foreign banks vigorously institutionalized consumer financing in the
country and earned handsome profits. The borrowing to private sector has also increased
which ultimately boasted the profitability of all the domestic banks of the country. In the
last 3 to 4 years many domestic banks have been suffering from surplus liquidity crisis
mainly due to low demand for credit and slowdown of manufacturing sector in the country.
Almost all the banks are now buy to invest in capital markets to increase their exposure in
equities. To stop that risky trend the State Bank of Pakistan issued the instructions to follow
the Prudential Regulations in letter and spirit and not invest in the capital markets beyond
the limits. The domestic bank’s lending under consumer finance and housing finance has
also been growing. The analysis of Annual Reports of banks shows that their income from
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core banking activities has been growing. The other positive point is that there are growing
The growth in advances has started matching growth in deposits. The quality of asset as well
liability products have been improving. The ratios of non-performing loans have decreased.
The SBP29 Scheme has benefited the banks as well as the borrowers to pay-off their long-
standing dues. Bank Alfalah is the first to opt for the listing policy of the government and
also offered its share to general public. Two of the state-owned banks, Habib Bank and
Allied Bank of Pakistan was privatized in early nineties. But due to many internal and
external reasons it continues to suffer. Some meaningful senior managerial changes would
be better at the earliest. Dawood Bank has recently emerged on the banking scenario of
Pakistan and it is good addition. The bank has come into existence as a result of acquisition
of Pakistan operations of a Sri Lankan bank by a local business group. It is also not listed at
the local stock exchanges. Meezan Bank is the first bank of the country, which is carrying
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Comparative Analysis:
The growth in the banking industry of Pakistan has led to an increase in the number of
banks both domestic and international to be established and create a competitive industry.
NBP competitors come in the form of both domestic and international banks working in
Pakistan because of its products and services offered. NBP is in position to increase its
market share and shareholder’s wealth by enhancing products and services and become a
Total Assets
NBP is a most growing organization in banking sector. Total assets of NBP are persistently
going to increase and show an upward trend throughout the financial year. Table show that
total assets of the bank for year 2003 are Rs.762,194/= in million while increase by 16.6%
then last year. We can see that total assets of the bank are still at top position that shows its
growth due to its competitors. The latest figures show that MCB at 50.9% less, Bank
Alfalah at 58.32% less, UBL at 49.6% less and ACB at 59.72% less, comparison in financial
year 2003. So we can say that NBP is in strong position in banking sector.
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Deposits
Deposits are treated as backbone of the banking sector. Banks offered different schemes to
allocate deposits form general public and lend them to public and corporate sectors. NBP is
also one of them. Deposits of NBP in Rs.591,907/= in million. NBP now enhance its
position by 15.21% then last year 2002. It shows NBP’s economic stability.
Advances
Loans and advances are the major sources of revenue in banking business. Advances of NBP
Bank Alfalah at Rs.197,277/=, and ACB at Rs.114,971/= in million mentioned above on the
Capital
The capital is the amount invested by the owners into business. All shareholders are the
owners of the organization. NBP’s balance of at January 1, 2003 was Rs.7,090,712/= and
issued bonus shares at 15% by Rs.1,063,607/=. The table shows persistent growth as its
competitors.
sector. So the highest profit shows that NBP received best return on capital for 2002
Sources of funds
Sources of funds reveal the organizations needs for funds, the timing of these funds when
required, and for what purpose these funds are needed. These are the main elements to
carrying out the operations of business. It involves the analysis of capital uses by the Bank
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Debt financing
NBP’s in financial year 2003 get debt in Rs.10,886/=, and Rs.11,704/= in million in year
2002, which is 7.5% low. Bills payable of the bank are also decreasing by 50% in 2003.
Equity financing
The basic purpose of financing is to get funds from different ways depending upon capital
structure mentioned by the top management during a period of time. But to finance with
lower interest rate and invest higher return is the business of banks. NBP’s share capital
Generation of funds
NBP offers different products and services to generate funds. Deposits are the main heads of
generation of funds. The banks receive from public and invest it for the sake of return.
Banks receive fees, commission on services offering; get interest of investments, and
Years/Descriptio
Interest income Total income Net profit
ns
2003 12,716 17,345 4,198
2004 14,387 20,944 6,242
2005 23,312 30,512 12,709
2006 30,153 39,945 17,023
2007 33,629 42,451 19,033
Allocation of funds
The most important functions of banks are to allocate funds and make a portfolio of funds to
profitability. NBP allocate resources from different ways i.e. reserves, and fixed asset sales.
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Reserves
It is the amount set aside to meet statutory requirements of SBP and maintain liquidity
position. The reserves of NBP are Rs.8,133/- in million in financial year 2000 and then
constant increase with 26.8% in 2000, 17.86% in 2001, 2.54% in 2002 and 12.01% in year
2003. It also determines the position of the bank during a period of time.
Fixed assets
Fixed assets are immoveable assets of the organization. Financial year ended December 31,
2003 shows property and equipment of NBP are Rs.29,792/= in million before depreciation
evaluate company as well its competitors by giving weights and rating to their critical success
factors than identify their strategic competitive position with its competitors. Company which
gets higher weighted score would have the strong competitive position than its competitors.
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Key success factors refer to those factors which are important to future competitive success
resources, competencies, market achievements etc. It is very important for the strategists to
understand the landscape of industry in order to identify the most important competitive
success factors. Due to changes in driving forces and competitive conditions, the key
success factors of one industry differ from other. Banking industry is broadly divided into
two types of banks i.e. virtual banks and brick and mortar banks. The key success factor of
TECHNOLOGY
Latest technology plays a very important role in the banking industry. It helps in introducing
lower down the cost of transaction and improve the quality of products. For example when
the banks realized that they can lower down their transaction cost by installing ATMs and
debit cards they did so. It saved the overhead cost and improved convenience for customer
technological change.
BEST RATES
Industry of virtual banking is attracted by low cost. Competition is such high that to survive
in industry low cost is very important. As virtual banks have no physical existence of
branches and ATM network so they have great advantage to offer their products at lower
rates than brick and mortar banks. Due to low overhead cost, virtual banks are charging
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PRODUCT INNOVATION
Product Innovation is one of the major success factors in the banking industry, Since all the
banks are offering similar products therefore differentiation is very important for the future
survival. Banks are trying to come with different innovative products in order to
QUALITY
Service Quality includes all the dimensions of quality which the consumers want. Brick and
mortar banks have the advantage to directly contact with the customers due to which
customers feel satisfaction. On the other hand, in virtual banks there is lack of person-to-
person contact which forced consumers to resolve their problems over the phone or via E-
group and ABN AMRO Group are two major players in the industry with huge resources
and they have major market share as well. That’s why most of the people wish to be their
customers. On the other hand, virtual banks are not so much popular and have a low market
share. In this way, market share and brand awareness within banking industry is a major
refers to the total market share, total assets, total number of branches and ATM’s, total
number of customers etc. Brick and mortar banks have a good market share due to which
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they can compete effectively. Contrary, virtual banks have relatively lower market share in
network then it will be convenient for the customers to make transactions easily. In this case
virtual banks have advantage over brick and mortar banks. Internet only banks can be
accessed anywhere in the world through internet. Virtual banks have no ATM network and
no branches, requiring customers to use other banks’ ATMs, or by using cash-back services
with debit cards. The growth of the internet in the last few years, has forced many brick-
help analyze a company. It can also used to determine what sort of strategy the company
should undertake. The SPACE Matrix is broken down into four quadrants as being
analysis functions upon two internal strategic dimensions which are financial strength (FS)
and competitive advantage (CA). Besides, the SPACE Matrix methodology also studies two
business’ external strategic dimensions such as environmental stability (ES) and industry
strength (IS). The CA (values from -1 to -6) and IS (values from +1 to +6) are representing
by the X-axis of the Cartesian graph whereas the FS (values from +1 to +6) and ES (values
from -1 to -6) are representing by Y-axis. After drawing these SPACE matrix graph, the
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SPACE Matrix Table:
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SPACE Matrix Graph:
According to the graph above, we noticed that NBP’s falls into the aggressive quadrant of
the SPACE Matrix. It is located at the coordinates of 3.55 for x-component and a y –
component of 3.00. It shows that NBP has a strong competitive position in the market with
rapid growth. It is also indicates that NBP should adopt an aggressive strategy. It needs to
use its internal strengths to develop a market penetration and market development strategy.
Other possible strategies include product development, integration with other banks and also
concentric diversification.
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Aggressive Position
There are numerous tactics that may fall into the aggressive strategy category. One of the
strategies is market development. As stated above, we can note that NBP is biggest bank in
Pakistan and has 1189 local branches and 18 branches in overseas. However, NBP is not
located in every area of Pakistan. Therefore, it should try to expand their branches into new
geographical areas or markets. Besides, NBP should also aggressively find ways to grow its
business overseas such as South-Asia and Middle-East. This objective can be attained
through mergers and acquisitions (M&A). Besides, NBP should carry out the market
penetration strategy. The management of NBP can think out the best way to sustain and
compete in exist market as well as new market. This method would be hire high level
Moreover, NBP should focus on doing more market research. Many clients are attracted to
the company who is doing strong research. Therefore, NBP should do research to investigate
customers’ discontent. Then, the company can improve their service and product quality
through customers’ suggestion. In addition to that, market research can show the demand in
different areas. Thus, the company will be success in every area by determining the demand
boundaries.
Other than that, NBP need to implement a strategy on product development. The
management should aim on offering new services such as helping their customers or
corporations manage interest rate and currency risks. By doing this, the NBP can move
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Conclusions
» NBP’s high reputation helps in attracting customers’ loyalty
» NBP should develop new market to various area of Pakistan as well as overseas
» They should expand its services and products such as helping corporations manage
market research to investigate unfavorable performance. Then, make full use of the
» Seek Integration Opportunities such as merger and acquiring other existing banks in
different areas
» Hire potential employee either from competitors or from other sources to get bigger
improvement
» Seek new and good management staffs to get a better company direction
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