Professional Documents
Culture Documents
History
Before independence on 14 August 1947, during British colonial regime the Reserve Bank
of India was the central bank for both India and Pakistan. On 30 December 1948 the British
Government's commission distributed the Reserve Bank of India's reserves between Pakistan and
India -30 percent (750 M gold) for Pakistan and 70 percent for India.
The losses incurred in the transition to independence were taken from Pakistan's share (a
total of 230 million). In May, 1948 Muhammad Ali Jinnah (Founder of Pakistan) took steps to
establish the State Bank of Pakistan immediately. These were implemented in June 1948, and the
State Bank of Pakistan commenced operation on July 1, 1948
Under the State Bank of Pakistan Order 1948, the state bank of Pakistan was charged with
the duty to "regulate the issue of bank notes and keeping of reserves with a view to securing
monetary stability in Pakistan and generally to operate the currency and credit system of the
country to its advantage".
A large section of the state bank's duties were widened when the State Bank of Pakistan
Act 1956 was introduced. It required the state bank to "regulate the monetary and credit system of
Pakistan and to foster its growth in the best national interest with a view to securing monetary
stability and fuller utilisation of the country’s productive resources". In February 1994, the State
Bank was given full autonomy, during the financial sector reforms.
On January 21, 1997, this autonomy was further strengthened when the government issued
three Amendment Ordinances (which were approved by the Parliament in May 1997). Those
included were the State Bank of Pakistan Act, 1956, Banking Companies Ordinance, 1962 and
Banks Nationalisation Act, 1974. These changes gave full and exclusive authority to the State
Bank to regulate the banking sector, to conduct an independent monetary policy and to set limit
on government borrowings from the State Bank of Pakistan. The amendments to the Banks
Nationalisation Act brought the end of the Pakistan Banking Council (an institution established to
look after the affairs of NCBs) and allowed the jobs of the council to be appointed to the Chief
Executives, Boards of the Nationalised Commercial Banks (NCBs) and Development Finance
Institutions (DFIs). The State Bank having a role in their appointment and removal. The
amendments also increased the autonomy and accountability of the chief executives, the Boards
of Directors of banks and DFIs.
The State Bank of Pakistan also performs both the traditional and developmental functions to
achieve macroeconomic goals. The traditional functions, may be classified into two groups:
1. The primary functions including issue of notes, regulation and supervision of the financial
system, bankers’ bank, lender of the last resort, banker to Government, and conduct of
monetary policy.
2. The secondary functions including the agency functions like management of public debt,
management of foreign exchange, etc., and other functions like advising the government
on policy matters and maintaining close relationships with international financial
institutions.
Regulation of liquidity
The State Bank of Pakistan has also been entrusted with the responsibility to carry out
monetary and credit policy in accordance with Government targets for growth and inflation with
the recommendations of the Monetary and Fiscal Policies Co-ordination Board without trying to
effect the macroeconomic policy objectives.
The state bank also regulates the volume and the direction of flow of credit to different
uses and sectors, the state bank makes use of both direct and indirect instruments of monetary
management. During the 1980s, Pakistan embarked upon a program of financial sector reforms,
which lead to a number of fundamental changes. Due to these changed the conduct of monetary
management which brought about changes to the administrative controls and quantitative
restrictions to market based monetary management. A reserve money management programme
has been developed, for intermediate target of M2, that would be achieved by observing the
desired path of reserve money - the operating target.
State Bank of Pakistan has changed the format and designs of many bank notes which are
currently in circulation in Pakistan. These steps were taken to overcome the problems of
fraudulent activities.
Banking
The State Bank of Pakistan looks into a lot of different ranges of banking to deal with the
changes in economic climate and different purchasing and buying powers. Here are some of the
banking areas that the state bank looks into;
• State Bank’s Shariah Board Approves Essentials and Model Agreements for Islamic
Modes of Financing
• Procedure For Submitting Claims With Sbp In Respect of Unclaimed Deposits
Surrendered By Banks/Dfis.
• Banking Sector Supervision in Pakistan
• Micro Finance
• Small Medium Enterprises (SMEs)
• Minimum Capital Requirements for Banks
• Remittance Facilities in Pakistan
• Opening of Foreign Currency Accounts with Banks in Pakistan under new scheme.
• Handbok of Corporate Governance
• Guidelines on Risk Management
• Guidelines on Commercial Paper
• Guidelines on Securitization
• SBP.Scheme for Agricultural Financing
Departments
• Agriculture credit
• Audit
• Banking Inspection
• Banking Policy & Regulations
• Banking Supervision
• Corporate Services
• Economic Analysis
• Financial Monitoring Unit
• Monetary Policy
• Research
• Statistics and Data Warehouse
• Exchange Policy
• Human Resource
• Information Systems & Technology
• Islamic Banking
• Legal Services
• Library
• Payment System
• Real Time Gross Settlement System (RTGS System)
• Small and Medium Enterprises
• Training and Development Department (TDD)
• Treasury Operations
• Strategic & Corporate Planning
• Microfinance
• Pakistan Remittance Initiative
Governor
The principal officer of the SBP is the Governor. The current Governor of State Bank of
Pakistan is Mr. Shahid Hafiz Kardar.
ANNUAL ACCOUNTS
At the expiration of each calendar year every banking company incorporated in Pakistan,
in respect of all business transacted by it, and every banking company incorporated outside
Pakistan, in respect of all business transited through its branches in Pakistan, shall prepare with
reference to that year a balance-sheet and profit and loss account as on the last woking day of the
year in the prescribed forms(Section 34 of Banking Companies Ordinance, 1962).
SUBMISSION OF RETURNS.
The accounts and balance-sheet referred to in section 34 together with the auditor’s report
as passed in the annual General Meeting shall be published in the prescribed manner, and three
copies thereof shall be furnished as returns to the State Bank within three months of the close of
the period to which they relate (Section 36 of Banking Companies Ordinance, 1962).
Under the State Bank of Pakistan Order 1948, the Bank was charged with the duty to
"regulate the issue of Bank notes and keeping of reserves with a view to securing monetary
stability in Pakistan and generally to operate the currency and credit system of the country to its
advantage". The scope of the Bank’s operations was considerably widened in the State Bank of
Pakistan Act 1956, which required the Bank to "regulate the monetary and credit system of
Pakistan and to foster its growth in the best national interest with a view to securing monetary
stability and fuller utilisation of the country’s productive resources". Under financial sector
reforms, the State Bank of Pakistan was granted autonomy in February 1994. On 21st January,
1997, this autonomy was further strengthened by issuing three Amendment Ordinances (which
were approved by the Parliament in May, 1997) namely, State Bank of Pakistan Act, 1956,
Banking Companies Ordinance, 1962 and Banks Nationalisation Act, 1974. The changes in the
State Bank Act gave full and exclusive authority to the State Bank to regulate the banking sector,
to conduct an independent monetary policy and to set limit on government borrowings from the
State Bank of Pakistan. The amendments in Banks Nationalisation Act abolished the Pakistan
Banking Council (an institution established to look after the affairs of NCBs) and institutionalised
the process of appointment of the Chief Executives and Boards of the nationalised commercial
banks (NCBs) and development finance institutions (DFIs), with the Sate Bank having a role in
their appointment and removal. The amendments also increased the autonomy and accountability
of the Chief Executives and the Boards of Directors of banks and DFIs.
Like a Central Bank in any developing country, State Bank of Pakistan performs both the
traditional and developmental functions to achieve macro-economic goals. The traditional
functions, which are generally performed by central banks almost all over the world, may be
classified into two groups: (a) the primary functions including issue of notes, regulation and
supervision of the financial system, bankers’ bank, lender of the last resort, banker to
Government, and conduct of monetary policy, and (b) the secondary functions including the
agency functions like management of public debt, management of foreign exchange, etc., and
other functions like advising the government on policy matters and maintaining close
relationships with international financial institutions. The non-traditional or promotional
functions, performed by the State Bank include development of financial framework,
institutionalisation of savings and investment, provision of training facilities to bankers, and
provision of credit to priority sectors. The State Bank also has been playing an active part in the
process of islamization of the banking system. The main functions and responsibilities of the State
Bank can be broadly categorised as under.
REGULATION OF LIQUIDITY
Being the Central Bank of the country, State Bank of Pakistan has been entrusted with the
responsibility to formulate and conduct monetary and credit policy in a manner consistent with
the Government’s targets for growth and inflation and the recommendations of the Monetary and
Fiscal Policies Co-ordination Board with respect to macro-economic policy objectives. The basic
objective underlying its functions is two-fold i.e. the maintenance of monetary stability, thereby
leading towards the stability in the domestic prices, as well as the promotion of economic growth.
To regulate the volume and the direction of flow of credit to different uses and sectors, the
Bank makes use of both direct and indirect instruments of monetary management. Until recently,
the monetary and credit scenario was characterised by acute segmentation of credit markets with
all the attendant distortions. Pakistan embarked upon a program of financial sector reforms in the
late 1980s. A number of fundamental changes have since been made in the conduct of monetary
management which essentially marked a departure from administrative controls and quantitative
restrictions to market-based monetary management. A reserve money management programme
has been developed. In terms of the programme, the intermediate target of M2 would be achieved
by observing the desired path of reserve money - the operating target. While use in now being
made of such indirect instruments of control as cash reserve ratio and liquidity ratio, the
program’s reliance is mainly on open market operations.
One of the fundamental responsibilities of the State Bank is regulation and supervision of
the financial system to ensure its soundness and stability as well as to protect the interests of
depositors. The rapid advancement in information technology, together with growing
complexities of modern banking operations, has made the supervisory role more difficult and
challenging. The institutional complexity is increasing, technical sophistication is improving and
technical base of banking activities is expanding. All this requires the State Bank for endeavoring
hard to keep pace with the fast-changing financial landscape of the country. Accordingly, the out
dated inspection techniques have been replaced with the new ones to have better inspection and
supervision of the financial institutions. The banking activities are now being monitored through a
system of ‘off-site’ surveillance and ‘on-site’ inspection and supervision. Off-site surveillance is
conducted by the State Bank through regular checking of various returns regularly received from
the different banks. On other hand, on-site inspection is undertaken by the State Bank in the
premises of the concerned banks when required.
To deepen and broaden financial markets as also to diversify the sources of credit, a
number of non-bank financial institutions (NBFIs) were allowed to increase substantially. The
State Bank has also been charged with the responsibilities of regulating and supervising of such
institutions. To regulate and supervise the activities of these institutions, a new Department
namely, NBFIs Regulation and Supervision Department was set up. Moreover, in order to
safeguard the interest of ultimate users of the financial services, and to ensure the viability of
institutions providing these services, the State Bank has issued a comprehensive set of Prudential
Regulations (for commercial banks) and Rules of Business (for NBFIs).
The "Prudential Regulations" for banks, besides providing for credit and risk exposure
limits, prescribe guide lines relating to classification of short-term and long-term loan facilities,
set criteria for management, prohibit criminal use of banking channels for the purpose of money
laundering and other unlawful activities, lay down rules for the payment of dividends, direct
banks to refrain from window dressing and prohibit them to extend fresh laon to defaulters of old
loans. The existing format of balance sheet and profit-and-loss account has been changed to
conform to international standards, ensuring adequate transparency of operations. Revised capital
requirements, envisaging minimum paid up capital of Rs.500 million have been enforced.
Effective December,1997, every bank was required to maintain capital and unencumbered general
reserves equivalent to 8 per cent of its risk weighted assets.
The "Rules of Business" for NBFIs became effective since the day NBFIs came under
State Bank’s jurisdiction. As from January, 1997, modarbas and leasing companies, which are
also specialized type of NBFIs, are being regulated/supervised by the Securities and Exchange
Commission (SECP), rather than the State Bank of Pakistan.
One of the major responsibilities of the State Bank is the maintenance of external value of
the currency. In this regard, the Bank is required, among other measures taken by it, to regulate
foreign exchange reserves of the country in line with the stipulations of the Foreign Exchange Act
1947. As an agent to the Government, the Bank has been authorised to purchase and sale gold,
silver or approved foreign exchange and transactions of Special Drawing Rights with the
International Monetary Fund under sub-sections 13(a) and 13(f) of Section 17 of the State Bank
of Pakistan Act, 1956.
The Bank is responsible to keep the exchange rate of the rupee at an appropriate level and
prevent it from wide fluctuations in order to maintain competitiveness of our exports and maintain
stability in the foreign exchange market. To achieve the objective, various exchange policies have
been adopted from time to time keeping in view the prevailing circumstances. Pak-rupee
remained linked to Pound Sterling till September, 1971 and subsequently to U.S. Dollar.
However, it was decided to adopt the managed floating exchange rate system w.e.f. January 8,
1982 under which the value of the rupee was determined on daily basis, with reference to a basket
of currencies of Pakistan’s major trading partners and competitors. Adjustments were made in its
value as and when the circumstances so warranted. During the course of time, an important
development took place when Pakistan accepted obligations of Article-VIII, Section 2, 3 and 4 of
the IMF Articles of Agreement, thereby making the Pak-rupee convertible for current
international transactions with effect from July 1, 1994.
After nuclear detonation by Pakistan in 1998, a two-tier exchange rate system was
introduced w.e.f. 22nd July 1998, with a view to reduce the pressure on official reserves and
prevent the economy to some extent from adverse implications of sanctions imposed on Pakistan.
However, effective 19th May 1999, the exchange rate has been unified, with the introduction of
market-based floating exchange rate system, under which the exchange rate is determined by the
demand and supply positions in the foreign exchange market. The surrender requirement of
foreign exchange receipts on account of exports and services, previously required to be made to
State Bank through authorized dealers, has now been done away with and the commercial banks
and other authorised dealers have been made free to hold and undertake transaction in foreign
currencies.
As the custodian of country’s external reserves, the State Bank is also responsible for the
management of the foreign exchange reserves. The task is being performed by an Investment
Committee which, after taking into consideration the overall level of reserves, maturities and
payment obligations, takes decision to make investment of surplus funds in such a manner that
ensures liquidity of funds as well as maximises the earnings. These reserves are also being used
for intervention in the foreign exchange market. For this purpose, a Foreign Exchange Dealing
Room has been set up at the Central Directorate of State Bank of Pakistan and services of a
‘Forex Expert’ have been acquired.
The responsibility of a Central Bank in a developing country goes well beyond the
regulatory duties of managing the monetary policy in order to achieve the macro-economic goals.
This role covers not only the development of important components of monetary and capital
markets but also to assist the process of economic growth and promote the fuller utilisation of a
country’s resources.
Ever since its establishment, the State Bank of Pakistan, besides discharging its traditional
functions of regulating money and credit, has played an active developmental role to promote the
realisation of macro-economic goals. The explicit recognition of the promotional role of the
Central Bank evidently stems from a desire to re-orientate all policies towards the goal of rapid
economic growth. Accordingly, the orthodox central banking functions have been combined by
the State Bank with a well-recognised developmental role.
The scope of Bank’s operations has been widened considerably by including the economic
growth objective in its statute under the State Bank of Pakistan Act 1956. The Bank’s
participation in the development process has been in the form of rehabilitation of banking system
in Pakistan, development of new financial institutions and debt instruments in order to promote
financial intermediation, establishment of Development Financial Institutions (DFIs), directing
the use of credit according to selected development priorities, providing subsidised credit, and
development of the capital market.
BANKS/ DEVELOPMENT FINANCE
INSTITUTIONS
BEING REGULATED BY STATE BANK OF
PAKISTAN
PUBLIC SECTOR BANKS
National Bank of Pakistan
First Women Bank Limited
The Bank of Khyber
The Bank of Punjab
SPECIALIZED BANKS
Industrial Development Bank of Pakistan
SME Bank Limited
PRIVATE BANKS
Allied Bank Limited
Summit Bank Limited
Askari Bank Limited
Atlas Bank Limited
Bank Alfalah Limited
Bank Al Habib Limited
Faysal Bank Limited
Habib Bank Limited
Habib Metropolitan Bank Limited
JS Bank Limited
KASB Bank Limited
MCB Bank Limited
Mybank Limited
NIB Bank Limited
SAMBA Bank Limited
SILKBANK Limited
Soneri Bank Limited
Standard Chartered Bank (Pakistan) Limited
The Royal Bank of Scotland Limited
United Bank Limited
ISLAMIC BANKS
BankIslami Pakistan Limited
Dawood Islamic Bank Limited
Dubai Islamic Bank Pakistan Limited
AlBaraka Bank (Pakistan) Limited
Meezan Bank Limited
FOREIGN BANKS
Barclays Bank PLC
Citibank N.A. - Pakistan Operations
Deutsche Bank AG - Pakistan Operations
HSBC Bank Middle East Limited - Pakistan Operations
Oman International Bank S.A.O.G -Pakistan Operations
The Bank of Tokyo-Mitsubishi UFJ Limited - Pakistan Operations
These Essentials are proposed to be enforced as Prudential Regulations for Islamic banks
in due course. Similarly, in order to facilitate the existing Islamic banks and the potential market
players to develop Islamic banking products in particular and to create awareness about Islamic
banking products in general, Model Agreements for the following modes have also been updated
in the light of stakeholder’s comments by the SBP Shariah Board. The following links may be
clicked to access the same from our website (http://www.sbp.org.pk/)
It may be pointed out that these are model agreements, which can be modified, according
to the products designed by the banks conducting Islamic banking business, with the approval of
banks Shariah Adviser to ensure that such changes are consistent with the principles of Shariah.
Under the WTO commitments the operational status of branch network of foreign banks
operating in Pakistan as on 31-12-1997 has been protected and frozen. However, existing foreign
banks having less than 3 branches can have branches to the extent of maximum number of 3 only.
New foreign banks desirous of entering banking business in Pakistan will now be required to
incorporate as domestic bank under the local laws. The branches of foreign banks operating in
Pakistan can also be converted into a local commercial bank by incorporating under the local laws
and subject to a minimum paid up capital of Rs.1 billion provided foreign share holding is
restricted to a maximum of 49%.
At present there are 41 scheduled banks, 6 DFIs, and 2 MFBs operating in Pakistan whose
activities are regulated and supervised by State Bank of Pakistan. The commercial banks comprise
of 3 nationalized banks, 3 privatized banks, 15 private sector banks, 14 foreign banks, 2
provincial scheduled banks, and 4 specialized banks.
Under the Banking Companies Ordinance, 1962 the State Bank of Pakistan is fully
authorized to regulate and supervise banks and development finance institutions. During the year
1997 some major amendments were made in the banking laws, which gave autonomy to the State
Bank in the area of banking supervision. Under Section 40(A) of the said Ordinance it is the
responsibility of State Bank to systematically monitor the performance of every banking company
to ensure its compliance with the statutory criteria, and banking rules & regulations. In every case
in which the management of a bank is failing to discharge its responsibility in accordance with the
applicable statutory criteria or banking rules & regulations or is failing to protect the interests of
the depositors or for advancing loans and finance without due regard for the best interests of the
bank or for reasons other than merit, the State Bank is empowered to take necessary remedial
steps. The State Bank of Pakistan can, interalia, exercise the following powers vested upon it
under the Banking Companies Ordinance:-
Prohibiting the bank from giving loans, advances & credits. Prohibiting the bank from
accepting deposits. Cancel license of a bank. Give directions to the bank as it deem fit. Remove
chairman, directors, chief executive or other managerial persons from the office and appoint a
person as chairman, director or chief executive.
Supersede the Board of Directors. Direct prosecution of directors, chief executive or other
officer. Caution or prohibit bank against entering into any particular transaction(s). Require bank
to make changes in management. Appoint its officers to observe the manner in which affairs of
bank/its branches/office are conducted. Winding up the bank through high court. Apply to Federal
Government for an order of moratorium in respect of a bank and to prepare scheme of
reconstruction or amalgamation. Impose penalties including civil money penalties.
The State Bank has framed Prudential Regulations for banks and Rules of Business for
DFIs that present a prudent operating framework within which banks and DFIs are expected to
conduct their business in a safe and sound manner taking into account the risks associated with
their activities. These regulations incorporate the spirit and essence of BIS regulations and are
constantly watched for possible improvement so that their enforcement yields the best results to
promote the objectives of supervision.
The State Bank is empowered to determine Statutory Liquidity and Cash Reserve
Requirements for banks/DFIs. Presently the Cash Reserve Requirement is 5% on weekly average
basis subject to daily minimum of 4% of Time & Demand Liabilities. In addition to that banks are
required to maintain Statutory Liquidity Requirement (SLR) @ 15% of their Time & Demand
Liabilities. Similarly, DFIs are required to maintain SLR of 14% and Cash Reserve of 1% of their
specified liabilities. Additionally, The Banking Companies Ordinance had been amended in 1997
which empowers the State Bank to prescribe capital requirements for banks. In exercise of these
powers the State Bank has laid down Minimum Capital Requirements for banks based on Basle
capital structure. The banks have to maintain a Capital Adequacy Ratio in a way that their capital
and unencumbered general reserves are, at the minimum, 8% of their risk weighted assets, and
effective from 1st January, 2003 banks are required to maintain a minimum paid up capital level
of Rs.1 Billion.
While the off-site monitoring aspect is looked after by the State Bank of Pakistan’s
Banking Supervision Department the responsibility for the on-site examination of the banking
system in Pakistan lies on the shoulders of the Banking Inspection Department. This has been
designed to ensure that institutions operate in a safe and sound manner. The focus of the
supervisory efforts by the State Bank of Pakistan is on the health and stability of the banking
system in Pakistan.
Establishment
National Bank of Pakistan (NBP) was established in 1949, under the National Bank of Pakistan
Ordinance 1949 and was government-owned. NBP acted as an agent of the central bank wherever
the State Bank did not have its own branch. It also undertook government treasury operations. Its
first branches were in jute growing areas in East Pakistan. Offices in Karachi and Lahore.
Mission
NBP will aspire to the values that make NBP truly
the Nation’s Bank, by:
• Institutionalizing a merit and performance culture
• Creating a distinctive brand identity by providing the
highest standards of services
• Adopting the best international management practices
• Maximizing stakeholders value
• Discharging our responsibility as a good corporate
citizen of Pakistan and in countries where we operate
Vision
To be recognized as a leader and a brand synonymous with trust, highest standards of service
quality, international best practices and social responsibility.
Core Values
• Highest standards of Integrity
• Institutionalizing team work and performance culture
• Excellence in service
• Advancement of skills for tomorrow’s challenges
• Awareness of social and community responsibility
• Value creation for all stakeholders
Share In Stock Market
In today's competitive business environment, NBP needed to redefine its role and shed the public
sector bank image, for a modern commercial bank. It has offloaded 23.2 percent share in the stock
market, and while it has not been completely privatized like the other three public sector banks,
partial privatization has taken place. It is now listed on the Karachi Stock Exchange.
Corporate Banking
NBP further consolidated its position as one of the top players in corporate and investment
banking of the country in 2007 and has built a strong customer relationship with the premier
corporate clients.
Islamic Banking
• NBP's First Islamic Banking Branch started operations in Karachi on December 15, 2006.
• Two more Branches started Operations by the end of 2007 – Peshawar and Lahore.
• At present 8 Islamic Banking branches are functional all over Pakistan having Group
office at Karachi, Pakistan.
• Mr. Shafiq Khan is newly appointed Group Chief of Islamic Banking Group.
• Mufti Abdul Sattar Laghari is a Shariah Advisor.
Financing Facilities
Commercial and Corporate customers requiring financing will have the following financing
facilities available to them to meet their requirements:
Murabaha
Murabaha may be defined as a contract between a Buyer and Seller under which the Seller
discloses to the Buyer the cost of goods being sold and adds an agreed profit. Price is payable on
spot or at a certain future date, in lump sum or in installments (deferred payments).
Under the MURABAHA FACILITY, the Bank will first purchase the required goods
directly or through an Agent. All costs incurred on such purchases will be borne by the
Bank.
Subsequently the Bank will sell the goods to the customer on deferred payment basis (30
days to one year) at an agreed price comprising cost of goods purchased and Bank's profit.
On due date the customer will pay to the Bank the agreed price, in lump sum or as per the
agreed installment schedule.
Ijarah(Leasing)
Ijarah means “to give something on rent”.The term “IJARAH’ is analogous to the English term
“leasing“.
Firstly the Bank will purchase the Assets as required by the Customer and subsequently the assets
will be leased to the Customer on the terms and conditions as agreed with him.
National Bank of Pakistan is today a progressive, efficient, and customer focused institution. It
has developed a wide range of consumer products, to enhance business and cater to the different
segments of society. Some schemes have been specifically designed for the low to middle income
segments of the population. These include NBP Karobar, NBP Advance Salary, NBP Saiban,
NBP Kisan Dost, NBP Cash n Gold
It has implemented special credit schemes like small finance for agriculture, business and
industries, administrator to Qarz-e-Hasna loans to students, self employment scheme for
unemployed persons, public transport scheme. The Bank has expanded its range of products and
services to include Shariah Compliant Islamic Banking products. For the promotion of literature,
NBP recently initiated the Annual Awards for Excellence in Literature . NBP will confer annual
awards to the best books in Urdu and in all prominent regional languages published during the
defined period. Patronage from NBP would help creative work in the field of literature. The Bank
is also the largest sponsor of sports in Pakistan . It has provided generously to philanthropic
causes whenever the need arose.
It has taken various measures to facilitate overseas Pakistanis to send their remittances in a
convenient and efficient manner. In 2002 the Bank signed an agreement with Western Union for
expanding the base for documented remittances. More recently it has started Electronic Home
Remittances Project. This project introduces technology based system to handle inward
remittances efficiently, by ensuring that the Bank's branches keep a track of the remittance
received from abroad till its final receipt.
A number of initiatives have been taken, in terms of institutional restructuring, changes in the
field structure, in policies and procedures, in internal control systems with special emphasis on
corporate governance, adoption of Capital Adequacy Standards under Basel II framework, in the
upgradation of the IT infrastructure and developing the human resources.
National Bank of Pakistan has built an extensive branch network with 1250 branches in Pakistan
and operates in major business centre abroad. The Bank has representative offices in Beijing ,
Tashkent , Chicago and Toronto . It has agency arrangements with more than 3000 correspondent
banks worldwide. Its subsidiaries are Taurus Securities Ltd, NBP Exchange Company Ltd, NBP
Capital Ltd, NBP Modaraba Management Company Ltd, and CJSC Bank, Almaty , Kazakhstan .
The Bank's joint ventures are, United National Bank (UK), First Investment Bank and NAFA, an
Asset Management Company (a joint venture with NIB Bank & Fullerton Fund Management of
Singapore).
The Bank's financial performance has been remarkable. In 2006, total assets are estimated at
Rs635 billion, while deposits have grown to nearly Rs502 billion. Pre-tax profit rose to Rs26
billion. Earnings per share have jumped to Rs24.01 in 2006. The increase in profit was achieved
through strong growth in core banking income. Interest income increased by Rs10 billion through
growth in the loan portfolio as well as increase in spreads. Advances increased by Rs48 billion to
Rs316 billion. The Bank maintains a sound loan portfolio diversified in nature to counter the risk
of credit concentration. It ranges from providing credit to the un-banked market segment under
NBP Karobar, to small and medium enterprises, to agricultural loans, to large corporate
customers.
Trade Services
NBP Financial Institutions & Cash Management Division (FI & CMD) division provides global
trade services & solutions in the major financial hubs; we offer complete solution for importers as
well as exporters. The services offered covers:
Letter of Credit
• Advising
• Confirmation
• Negotiation/Discounting
• Reimbursement
Payment Services
Trade Financing
• Risk Participation
• FI Syndication
• FI Lending
• Bridge/Project Financing
• Document presentation and payment services: Our team of experts can expedite the
preparation, presentation of documentation & collection of receivables.
• Pre– and post–shipment financing: Sell on both letter of credit and open account
payments; reduce payment cycles; enhance access to liquidity and eliminate routine
inquiries.
• Export bills collection service: Combine courier delivery of open receivables letters,
payment tracing, tracking, reporting and received funds. Concentrated approach to quickly
deposit the funds due from export receivables into your account while keeping you
informed of paid and open items. Along with fine rebate offers; Export Bills Collection
financing is also available for valued clients.
• Documentary Credits
• Import Finance
• Shipping Guarantees
We also offer traditional trade finance solutions that suits your requirement including private label
letters of credit, import documentary collections, banker's acceptances and standby letter of
credits.
Investment synopsis
National Bank of Pakistan (NBP) is one of our picks in our banking sector universe, delineating
48% upside to our Justified Price to book target of Rs 133.3/share. NBP is expected to announce
its CY08 results within a fortnight. We expect CY08 earning deceleration by 17%.
The bank is expected to report after tax earning of Rs 15,817 mn (EPS: Rs 17.63) as against Rs
19,033 mn (adjusted EPS: Rs 21.22). We expect bank to announce cash dividend of Rs 3.0/share
(CY07: Rs 4.5) and also bonus issue of 15%. Some of the main highlights in our earning
estimations include 1) our forecasted spreads of 6% which is lower than MCB and UBL,
nevertheless, looks better if we consider magnitude of the balance sheet 2) our assumed 65% -
70% proportion of low cost deposit base 3) only 4% y-o-y growth in net interest income of Rs
35,018 mn given peculiar increase in cost of funds 4) only 6% y-o-y increase in non-core income
despite some good impact of dividend income of Rs 2.35 bn from NIT unit holding and nearly
tripling of income from FCY dealing to Rs 3.3 bn 5) our assumed provisioning against legacy
loans to the extent of Rs 8.5 bn 6) regressive growth in deposits during 9M-CY08 to Rs 561 bn as
against Rs 592 bn reported in CY07.
We expect bank to book lesser revaluation surplus of Rs 7 bn from NIT holdings as against nearly
Rs 17 bn reported last year. Moreover, there might be a lesser gains from old stakes in Saudi
Arabia based Bank Al-Jazira (BJAZ) which is 5.8% due to steep decline in share prices of BJAZ
at Tadawul Exchange (TASI). We see bank’s book value to remain fluctuating given ups and
down coming in investments in equities (our estimated CY08 BVS: Rs 107.47/share).
Stock data- NBP
Last Closing PKR/Share 67.90
Paid up Capital in mn shares 896.98
Free Float in mn shares 179.40
Free float Market CAP in mn US$ 153.22
Stdev 1 Week 3.55%
Stdev 30 day 4.48%
Stdev 60 day 4.17%
52-Week High/Low 272.90 / 46.56