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    INTERNSHIP REPORT ON

    NATIONAL BANK OF PAKISTAN MANDIAN BRANCH

    (1348)

    ABBOTTABAD

    Submitted by:

    MUHAMMAD RASOOL

    Roll # S32-MBA-011

    Supervised by:

    DR.AMJAD RAFIQ

    GOVERNMENT COLLEGE OF MANAGEMENT SCIENCES

    ABBOTTABAD

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    (Session 2011to 2013)

    INTERNSHIP REPORT ON

    NATIONAL BANK OF PAKISTAN MANDIAN BRANCH

    (1348)

    ABBOTTABAD

    Submitted by:

    MUHAMMAD RASOOL

    Roll # S32-MBA-011

    Supervised by:

    DR.AMJAD RAFIQ

    This internship report is submitted in partial fulfillment of the

    requirements for the degree ofMaster of Business Administration

    awarded by Hazara University, Mansehra

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    GOVERNMENT COLLEGE OF MANAGEMENT SCIENCES

    ABBOTTABAD

    (Session 2011 to 2013)

    GOVERNMENT COLLEGE OF MANAGEMENT SCIENCES

    ABBOTTABAD

    Approval Committee

    1. External Examiner

    Mr. /Miss. ________________________________ Signature_______________

    2. Supervisor

    DR.AMJAD RAFIQ_______________________ _Signature_______________

    Designation: ( Professor)

    3. Head of Department

    Professor M ushtaq Ahmed_____________________ Signature_____________

    Designation: (Principal)

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    DEDICATION

    This report is dedicated to my parents for giving me this opportunity to attend this degreeand supporting me throughout my student life who acted as a backbone and a major

    reason behind my accomplishment, my grand parents who have always supported me

    with their prays and also to my honorable teachers and friends who have always guided

    me.

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    ABSTRACT

    To every country and the people living there, a need of such an institution is always

    needed that can circulate and deal in money. Such institutions are also required to fulfill

    other financial needs such as provision of place to deposit money, serving for the utilities

    and also advancing money in order to facilitate the needs of people and the businesses.

    These organizations in any form can collectively be called as Banks.

    Banking services are extremely important for both economies developed and developing

    economy such as Pakistan. Banking services serve two primary purposes.

    First, by supplying customers with the basic mediums-of-exchange (cash, current

    accounts, and credit cards), banks play a key role in the way goods and services are

    purchased. Without these familiar methods of payment, goods could only be exchanged

    by barter (trading one good for another), which is extremely time-consuming and

    inefficient.

    Second, by accepting money deposits from savers and then lending the money to

    borrowers, banks encourage the flow of money to productive use and investments. This

    in turn allows the economy to grow. Without this flow, savings would sit idle insomeones safe or pocket, money would not be available to borrow, people would not be

    able to purchase cars or houses, and businesses would not be able to build the new

    factories the economy needs to produce more goods and grow. Enabling the flow of

    money from savers to investors is called financial intermediation, and it is extremely

    important for the growth of economy

    This report covers all the areas of the NBP bank that clearly show that how the bank is

    being excelling in many areas. The report also covers the analysis portion with the help of

    which we come to know that where it is strong and where it needs to be strong.

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    TABLE OF CONTENTS

    _______________________________________________________________________iv

    DEDICATION___________________________________________________________vABSTRACT_____________________________________________________________vi

    LIST OF TABLE________________________________________________________xii

    Table 2.1: Board of directors_________________________________________ 14___xii

    Table 2.2: Senior managers of NBP ___________________________________ 15___xii

    Table 2.3: NBP Overseas Branches____________________________________ 16__xii

    Table 4.1: NBP Performance in 2008-2010______________________________ 34__xii

    Table 4.2: Vertical Analysis of Balance Sheet___________________________ 37___xii

    Table 4.3: Vertical Analysis of Income Statement_______________________ 38____xii

    Table 4.4: Horizontal Analysis of Balance Sheet_________________________ 41___xii

    Table 4.5: Horizontal Analysis of Income Statement_____________________ 42____xii

    Table 4.6: Ratio Analysis ___________________________________________ 46___xii

    Table 4.7: Ratio Analysis ___________________________________________ 46___xii

    Table 4.8: Return on Earning Assets__________________________________ 47___xii

    Table 4.9: Operating Cost to Income Ratio_____________________________ 48____xii

    Table 4.10: Equity to Total Assets_____________________________________ 49___xii

    Table 4.11: Credit Ratio_____________________________________________ 50___xii

    Table 4.12: Long loss coverage ratio___________________________________ 50___xii

    Table 4.13: Interest Income per employee______________________________ 51___xii

    Table4.16 Business per branch______________________________________ 53____xii

    Table 4.17: Employee per branch____________________________________ 53____xii

    Table 4.18: Return on equity________________________________________ 54____xii

    Table 4.19: Return on Assets________________________________________ 55____xii

    Table 4.20: Deposit Ratio___________________________________________ 56____xiiTable 4.21: Assets Ratio____________________________________________ 56____xii

    LIST OF FIGURE/DIAGRAMS___________________________________________xiii

    Figure 2.1: NBP Organization Chart________________________ 11____________xiii

    Figure 2.2: NBP Main Branch Organization Chart_________ 17_______________xiii

    Figure 4.1: Equity and liability_____________________________ 41____________xiii

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    Figure 4.2: Ratio Analysis_________________________________ 46___________xiii

    Figure 4.3: Return on earning assets________________________ 47____________xiii

    Figure 4.4: Operating Cost to income ratio___________________ 48____________xiii

    Figure 4.5: Operating Cost________________________________ 48____________xiii

    Figure 4.6: Equity to total assets____________________________ 49____________xiii

    Figure 4.7: Credit ratio____________________________________ 50___________xiii

    Figure 4.8: Interest Income per employee____________________ 51____________xiii

    Figure 4.9: Profit per employee_____________________________ 51____________xiii

    Figure 4.10: Business per employee__________________________ 52___________xiii

    Figure 4.11 Business per branch____________________________ 53___________xiii

    Figure 4.12 Employee per branch___________________________ 54___________xiii

    Figure 4.13 Return on equity_______________________________ 54___________xiii

    Figure 4.14 Return on Assets_______________________________ 55___________xiii

    Figure 4.15 Deposit ratio___________________________________ 56__________xiii

    ACKNOWLEDGEMENT_________________________________________________xiv

    __________________________xiv

    EXECUTIVE SUMMARY_______________________________________________xvii

    CHAPTER 1____________________________________________________________1

    INTRODUCTION TO THE REPORT________________________________________1

    1.1 Objective of the study___________________________________________________11.2 Limitations of the study_________________________________________________1

    1.3 Merits of the study_____________________________________________________2

    1.4 Methodology of the Study_______________________________________________2

    1.4.1 The primary data was collected through__________________________________3

    1.4.2 Secondary data______________________________________________________3

    1.5 Scheme of the report ___________________________________________________3

    1.6 Organizational structure of Mandian Branch Abbottabad_____________________3

    CHAPTER 2____________________________________________________________4

    HISTORY AND INTRODUCTION TO NBP__________________________________4

    2.1 Evolution of Banking__________________________________________________4

    2.1.1 Meaning of Bank:____________________________________________________4

    2.1.3 Banking in South Asia:_______________________________________________5

    2.1.4 History of Banking in Pakistan:________________________________________6

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    2. 2 Historical background of National Bank of Pakistan________________________7

    2.2. 1 Present Status of the Bank____________________________________________8

    2.2.2 Existing NBP Branches in Pakistan_____________________________________9

    2.2.3 Credit Rating________________________________________________________9

    2.2.4 Auditors __________________________________________________________10

    2.3 Organizational structure_______________________________________________10

    2.4 The Vision statement of NBP___________________________________________12

    2.5 The Mission statement of NBP__________________________________________12

    2.6 Objective of NBP_____________________________________________________12

    2.6.1 Maximum profit____________________________________________________12

    2.6.2 Maximize deposits___________________________________________________12

    2.6.3 Economic Growth___________________________________________________13

    2.6.4 Customer service____________________________________________________13

    2.6.5 Expenditure discipline_______________________________________________13

    2.6.6 Facilities to staff & utilization of staff___________________________________13

    2.7 Goals______________________________________________________________13

    2.8 Core values of NBP___________________________________________________13

    2.9 Corporate profile_____________________________________________________14

    2.10 Executive Committee _____14

    2.10.1. Board of Directors:________________________________________________142.10.2 Regional Manager_________________________________________________14

    2.10.3 Number of Directors________________________________________________15

    2.11 Introduction to NBP Mandian Branch__________________________________17

    2.11.1 Location_________________________________________________________17

    2.11.3 Credit Committee__________________________________________________19

    CHAPTER 3___________________________________________________________20

    PRODUCTS AND SERVICES PROVIDED AT NBP__________________________20

    3.1 Functions of NBP____________________________________________________20

    3.1.1 Receiving deposits___________________________________________________20

    Current / demand deposits_________________________________________________20

    3.1.2 Advances on open account or overdraft_________________________________20

    3.1.3 Discounting on open account or overdraft_______________________________21

    3.1.4 Cash credit system or ordinary loans____________________________________21

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    3.1.5 Remitting funds ____________________________________________________21

    3.1.6 Safe custody_______________________________________________________21

    3.1.7 Agency functions___________________________________________________21

    3.1.8 Reference_________________________________________________________21

    3.2 Departments of NBP Mandian Branch ___________________________________22

    3.2.1 Deposit Department_________________________________________________22

    3.2.2 Functions of Deposit Department______________________________________22

    3.2.3 Classification of Deposits_____________________________________________23

    3.3 Products____________________________________________________________25

    3.3.1 NBP Premium Aamdani (Monthly Income Scheme) _______________________25

    3.3.2 NBP Premium Saver (PLS Saving Account)_____________________________25

    3.3.3 NBP Karobar (Mera Apna Karobar under President's Rozgar Scheme)_______26

    KIBOR + 2.00%p.a.______________________________________________________26

    3.3.4 NBP Saiban (House Finance)_________________________________________26

    3.3.5 Advance Salary (Personal Loan)_______________________________________26

    3.3.6 NBP Cash Card (ATM + Debit Card)___________________________________27

    3.3.7 Investor Advantage (Margin Finance Facility)___________________________27

    Financing Facility for Stock Investors_______________________________________27

    3.3.8 NBP Cash and Gold (Ready cash against Gold)___________________________27

    3.3.10 NBP Pak Remit____________________________________________________28

    3.3.11 Termination of Coverage___________________________________________29

    3.4 Services____________________________________________________________29

    3.4.1 International Banking_______________________________________________29

    3.4.2 Demand Drafts_____________________________________________________30

    3.4.3 Mail Transfers_____________________________________________________30

    3.4.4 Pay Order_________________________________________________________30

    3.4.5 Travellers Cheques_________________________________________________303.4.6 Letter of Credit_____________________________________________________30

    3.4.10 Short Term Investments_____________________________________________32

    3.4.11 National income daily account (NIDA)_________________________________32

    3.4.12 Equity Investments_________________________________________________32

    3.5 Trade finance and other business loans (other services)______________________32

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    Agricultural Credit______________________________________________________32

    3.5.2 Corporate Finance__________________________________________________33

    3.5.3 Islamic Banking____________________________________________________34

    CHAPTER 4___________________________________________________________36

    FINANCIAL ANALYSIS_________________________________________________36

    4.2 Financial Analysis____________________________________________________36

    4.3 Parties interested in financial analysis____________________________________37

    4.3.1 Trade creditors_____________________________________________________37

    4.3.2 Suppliers of long-term debt___________________________________________37

    4.3.3 Investors__________________________________________________________37

    4.3.4 Management_______________________________________________________37

    4.4 Vertical Analysis of Balance Sheet_______________________________________38

    Horizontal Analysis of Balance Sheet....................................................................................43

    Table 4.4................................................................................................................................ ..43

    Profit after tax reduces in all year in vertical analysis. In 2008 it is 37% then in 2009 it

    reduces to 25% and it is just 20% of total revenue of year 2011___________________46

    4.6 Ratio Analysis_______________________________________________________46

    4.6.1 Profitability Ratios__________________________________________________46

    Net Interest Margin______________________________________________________46

    4.6.2 Efficiency ratio_____________________________________________________52

    4.7.1 Return on Equity..........................................................................................................................55

    4.7.2 Return on Assets____________________________________________________56

    Table 4.19: Return on Assets______________________________________________56

    Figure No 4.15: Return on Assets__________________________________________574.7.3 Investment deposit Ratio..............................................................................................................57

    4.7.4 Debt to Assets Ratio_________________________________________________58

    CHAPTER 5___________________________________________________________59

    References_____________________________________________________________62

    ANNEXURE ___________________________________________________________63

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    LIST OF TABLE

    Table 2.1: Board of directors_________________________________________ 14

    Table 2.2: Senior managers of NBP ___________________________________ 15

    Table 2.3: NBP Overseas Branches____________________________________16

    Table 4.1: NBP Performance in 2008-2010______________________________34

    Table 4.2: Vertical Analysis of Balance Sheet___________________________ 37

    Table 4.3: Vertical Analysis of Income Statement_______________________ 38

    Table 4.4: Horizontal Analysis of Balance Sheet_________________________ 41

    Table 4.5: Horizontal Analysis of Income Statement_____________________ 42

    Table 4.6: Ratio Analysis ___________________________________________ 46

    Table 4.7: Ratio Analysis ___________________________________________ 46

    Table 4.8: Return on Earning Assets__________________________________ 47

    Table 4.9: Operating Cost to Income Ratio_____________________________ 48

    Table 4.10: Equity to Total Assets_____________________________________49

    Table 4.11: Credit Ratio_____________________________________________50

    Table 4.12: Long loss coverage ratio___________________________________ 50

    Table 4.13: Interest Income per employee______________________________ 51

    Table 4.14: Profit per employee:______________________________________ 51

    Table 4.15: Business per employee____________________________________ 52

    Table4.16 Business per branch______________________________________ 53

    Table 4.17: Employee per branch____________________________________ 53

    Table 4.18: Return on equity________________________________________ 54

    Table 4.19: Return on Assets________________________________________ 55

    Table 4.20: Deposit Ratio___________________________________________ 56

    Table 4.21: Assets Ratio____________________________________________ 56

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    LIST OF FIGURE/DIAGRAMS

    Figure 2.1: NBP Organization Chart________________________ 11

    Figure 2.2: NBP Main Branch Organization Chart_________ 17

    Figure 4.1: Equity and liability_____________________________ 41

    Figure 4.2: Ratio Analysis_________________________________ 46

    Figure 4.3: Return on earning assets________________________ 47

    Figure 4.4: Operating Cost to income ratio___________________ 48

    Figure 4.5: Operating Cost________________________________ 48

    Figure 4.6: Equity to total assets____________________________ 49

    Figure 4.7: Credit ratio____________________________________ 50Figure 4.8: Interest Income per employee____________________ 51

    Figure 4.9: Profit per employee_____________________________ 51

    Figure 4.10: Business per employee__________________________ 52

    Figure 4.11 Business per branch____________________________ 53

    Figure 4.12 Employee per branch___________________________ 54

    Figure 4.13 Return on equity_______________________________ 54

    Figure 4.14 Return on Assets_______________________________ 55

    Figure 4.15 Deposit ratio___________________________________ 56

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    ACKNOWLEDGEMENT

    I offer my humblest thanks to ALMIGHTY ALLAH, The most Beneficent and the Most

    Considerate and the entire source of all knowledge and wisdom. I thank ALMIGHTY,

    ALLAH, who gave me the capacity to complete this internship report. I offer my

    humblest respects to the HOLY PROPHET HAZRAT MUHAMMAD (Peace Be upon

    Him) who is, forever a torch of guidance and knowledge for humankind as a whole.

    Firstly this report is aimed to studying and analyzing National Bank of Pakistan in

    general and NBP Mandian Branch, Abbottabad in particular. A report encompasses the

    experience of the internee, his/her learning, and analysis in light of which

    recommendations are made. The report is then properly analyzed and evaluated on its

    description and analytical capabilities of its writer by Department of management

    sciences. This internship report has been written on National Bank (NBP) Mandian

    Branch Abbottabad.

    Secondly, the most respectable to me are all of my teachers who guided me, who taught

    all the way from the stage when I was just a kid and up till today where I am at the

    doorstep of my practical life. I cannot repay those favors back to them all in my life.In addition I am really thankful to Mr. DAWOOD (Manager NBP, Mandian Branch

    Abbottabad) and Mam.TAHIRA (Operations Manager NBP Mandian Branch) who

    granted me internship in this branch and provided me an excellent opportunity to go

    through the practical experience in banking. I have no words for all of these people.

    MUHAMMAD RASOOL

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    ABBREVIATIONS

    ATMs: Automatic Teller Machine

    AVP: Assistant Vice Presidents

    ABL: Allied Bank Limited

    B.A: Bachelors of Arts

    B.C: Before Christ

    BOD: Board of Directors

    EBIT: Earning before Income Tax

    EPS: Earning per Share

    EVP: Executive Vice President

    GDP: Gross Domestic Product

    HR: Human Resource

    IT: Information Technology

    J/V: Joint Venture

    Ltd: Limited

    MBA: Master of Business Administration

    MTO: Management Trainee Officer

    MCB: Muslim Commercial BankNBP: National Bank of Pakistan

    NIT: National Investment Trust

    NIDA: National income daily account

    NPA: Net Performing Asset.

    PLS: Profit and Loss sharing Accounts

    Rs: Rupees

    ROCE: Return on Capital Employed

    ROI: Return on Investment

    SBP: State Bank of Pakistan

    SEVP: Senior Executive Vice President

    SVP: Senior Vice President

    SWOT: Strength Weakness Opportunity Threats

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    SS: Specimen Signature

    UK: United Kingdom

    USA: United State of America

    VP: Vice Presidents

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    EXECUTIVE SUMMARY

    This report is about National Bank of Pakistan Mandian Branch. NBP is one of the

    largest bank in the country. NBP is a gainful organization, having a large network within

    and out of the Pakistan. To know about the National Bank of Pakistan and its functions it

    was important to work there. Being a student of MBA FINANCE the purpose of this

    report is to critically define and describe different functions and services offered by the

    bank to its valued customers and other visitors. To analyze the performance of the bank

    employee and measure that how much effectively they are working and make a financial

    analysis of it and suggest recommendations I was there and I gather all of these

    information regarding banking.

    The concentrated competition among banks, the privatization of the financial institution

    and financial liberalization in general are gradually and continuously making the banking

    sectors efficient and effective.

    Because of the reasons mentioned above banking has always been the main field of

    interest for most of the students of business administration especially in Finance

    Management. It is also an academic requirement to undergo internship therefore the main

    purpose behind this report is partial fulfillment of requirements, for the degree of MBA

    in Finance. The report is categorized into the following chapters.

    In the first chapter introduction to the report, background of study, scope of the study,

    merits, limitations and scheme of the study are given. The second chapter is about history

    of banks in Pakistan, introduction to the organization, its historical background, role and

    functions of organization, its core values, and miscellanies topics related to banking.

    The third chapter is the major portion of the report. It covers the organizational structure

    of NBP, the different departments working at NBP and the different financial products of

    NBP. The fourth chapter of the report covers the analysis of report and the findings,

    which have been observed. It includes the financial analysis. The end of the report is

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    about recommendations based on the analysis in chapter four. It mainly focuses on the

    recommendations pertaining to management/administration, to let NBP capitalize on the

    opportunities and overcome the weaknesses by using its strengths.

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    CHAPTER 1

    INTRODUCTION TO THE REPORT

    This research report is about the internship in National Bank of Pakistan MandianBranch Abbottabad. Every student is required to do internship and spend, a specific time

    period in an organization in order to get first hand knowledge of real life situations and

    gain practical experience.

    National Bank of Pakistan, which is one of the leading, banks in the country. 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. NBP is a highly profitable

    organization, having a huge network within and out of the country.

    1.1 Objective of the study

    The objective of undertaking this internship is basically to aid the student in their MBA

    (Master in business administration) program and to furnish them with some experience of

    practical work. The main objective of the Internship is to gain work experience and then

    able to get opportunities of work. The internship helps the students to polish theiracademic achievements with practice and day-to-day problems, which they have been

    faced in their professional lives. It is the internship, which serves as a railway track that

    takes the train of academic knowledge of a student to its destination. The duration of

    these Internships is 8/eight weeks. During this period the students are supposed to collect

    information about their respective fields/course of an organization and prepare a

    comprehensive report on it.

    1.2 Limitations of the study

    The time period of internship was very limited for a complete understanding of

    operations and was the major factor which hinders the dynamics of bank

    processings.

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    Lack of documented material proved to be another constraint in this regard as

    most of the material is confidential; therefore, internees are not allowed to get

    handouts.

    No one is permitted to recover the official data of the branch for any purpose

    except authorized bank personnel for official purpose.

    Research students face a great difficulty as most of the time employees are busy

    to answer he queries and hence incomplete information is provided.

    There was no proper document or latest annual report available for analysis.

    Research students are not allowed to retrieve and use any confidential material for

    any purpose, as it is against the bank policy.

    1.3 Merits of the study

    While doing internship and participating in the banking operations of National Bank,

    I came to know about the financial practices and their implications practically.

    Learned how to gather and analyze financial data to interpret the financial

    position of any company.

    I gain experience in the banking sector.

    This research is very beneficial for the finance students and is the best way to

    learn about banking practices.

    The recommendations in this report would help the bank to get improved.

    1.4 Methodology of the Study

    The whole internship is base on 8/eight weeks and the facilitation organization was NBP

    Mandian Branch. Firstly it was try to gather the primarily data and then I concentrate

    toward the secondary data. The main source of information was personal observation

    while working with other staff member and having discussion with them also helps me a

    lot. During this period of time formally arranged interviews and discussions in all aspect

    helped me in this regards I was trying to collect the valuable data and information.

    Primary data

    Secondary data

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    1.4.1 The primary data was collected through

    Personal observation.

    Sitting with staff member.

    1.4.2 Secondary data

    Annual Reports.

    Manuals.

    Brochures.

    Newspapers.

    Websites.

    Reference Books.

    Internship Reports.

    Financial journals.

    1.5 Scheme of the report

    The detail of five chapter of this report is as follow.

    Chapter 1 includes background, purpose, Scope, limitations, merits and scheme of

    report.

    Chapter 2 includes background and history of banking in Pakistan as well as

    Introduction to National bank of Pakistan, Mandian Branch ABBOTTABAD

    Chapter 3 includes the financial statement, Products and services offered by NBP.

    Chapter 4 includes the analysis of financial statements and their interpretation.

    Chapter 5 includes the conclusion and recommendations are given.

    1.6 Organizational structure of Mandian Branch Abbottabad

    Organizational Structure is the framework that defines the boundaries of the formalorganization and within which the organization operates. The Organizational Structure of

    NBP Mandian Branch is also aimed at achieving specific corporate objectives of the

    branch.

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    CHAPTER 2

    HISTORY AND INTRODUCTION TO NBP

    The history and introduction of NBP is explained below:

    2.1 Evolution of Banking

    2.1.1 Meaning of Bank:

    It is generally said that the word "BANK" has been originated in Italy. In the middle of

    12th century there was a great financial crisis in Italy due to war. To meet the war

    expenses, the government of that period imposed a forced subscribed loan on citizens of

    the country at the interest of 5% per annum. Such loans were known as "Compara",

    "Mintuo" etc. The most common name was "Monte", In Germany the word "Monte" wasnamed as "Bank" or "Banke". According to some writers, the word "Bank" has been

    derived from the word Banke.

    It is also said that the word "Bank" has been derived from the word "Banco" which

    means a bench. The Jews money lenders in Italy used to transact their business sitting on

    benches at different market places. When any of them used to fail to meet his obligations,

    his "banco" or bench would be broken by the angry creditors. The word "Bankrupt"

    seems to be originated from broken banco. Since, the banking system has been originated

    from money lending business; it is rightly argued that the word "Bank" has been

    originated from the word "banco".

    Today the word "Bank" is used as a comprehensive term for a number of institutions

    carrying on certain kinds of financial business. In practice, the word "Bank" means an

    organization which borrows money from one class of people and again lends money to

    another class of people for earning interest or profit.

    2.1.2 Historical Background of Bank:

    It is very difficult to state the complete historical background of banks or banking .it is

    not possible to learn when and how the banking system came into existence. Of course, it

    is sure that the banking system did not come all of a sudden by means of any revolution.

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    Rather, it came into existence naturally and gradually. In its crude form, the banking

    business was confined in the hands of moneylenders in the pre-historic days.

    It may be said that banking in its most simple form had been as old as authentic history.

    As early as 2000 B.C. Babylonians had developed a system of banks. In ancient Greece

    and Rome the practice of granting credit was widely prevalent. In Rome some of the

    banks carried business on their own account and others were appointed by the

    government to collect the taxes. With the gradual development, different types of

    documents, hand notes, slips etc., used by the early money lenders in transacting their

    business have been developed into different documents and instruments of modern

    banking.

    During the early periods, although banking business was mostly done by private

    individuals, many countries established public banks either for the purpose of facilitating

    commerce or to serve their governments. The bank of Venice, established in 1157, is

    supposed to be the most ancient bank. in some other countries of Europe Deposit and

    Exchange Banks were established in 14th century.1st Bank of Sweden was established in

    1556.

    The beginning of English banking may correctly be attributed to the London GoldSmiths. They used to receive their customer's funds and valuables for safe custody and

    issue receipts acknowledging the same. These receipts, in course of time, became payable

    to then bearers on demand and hence enjoyed wide circulation like bank notes. The Bank

    of England was established on 15th April, 1694.it was a turning point in the history of

    English banking which led to the growth of modern banking.

    Ref: Professor Khurshid.H.Siddiqui (2003); Banking

    2.1.3 Banking in South Asia:

    In the Sub-continent, it is rightly assumed that banking system came into existence from

    the activities of the indigenous money lenders like, Goldsmiths, Mahajans, Sahukars etc.

    even in Vedic period between 2000 and 1400 B.C., these banks were in action in this

    region. In Muslim period, particularly in the period of Mughals indigenous private

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    banking was common and popular. Banks were enjoying many facilities and concessions

    from Government. They ere also authorized to mint coins of gold and silver which were

    used in financial and business transactions throughout the sub continent.

    Like Jewish merchants in England these big merchants of sub-continent used to finance

    the Government and many sections of people. Even in British Regime, these indigenous

    banks financed the ruling East India Company. In the year 1700 The "Hindustan Bank",

    the first Joint Stock Bank in India was established in Calcutta. In 1785, the Central Bank

    of India and the Bank of Bengal (1809) were established. After these banks the Bank of

    Calcutta, The Bank of Bombay and the Bank of Madras were established in the years

    1806, 1840 & 1843 respectively. In the year 1920-1921, these three banks were

    amalgamated with the name of The Imperial Bank of India. This bank acted as theCentral Bank of India since its inception to 1935.in 1935, the Reserve Bank of India was

    established as the Central Bank of the country. In the meantime many commercial banks

    were established in this region.

    2.1.4 History of Banking in Pakistan:

    In Pakistan, banking sector was created with the setting up of the Habib Bank in 1947,

    which was shifted to Karachi from Bombay, & Muslim Commercial Bank in 1948 from

    Calcutta. After partition of the sub-continent Reserve Bank of India assumed the

    responsibility of performing central banking functions in Pakistan, Subsequently the

    functions were taken over by the State Bank of Pakistan which was organized in July,

    1948.its one of the main feats was the rescue of the Bank of Bhawalpur which had gone

    on the brink of bankruptcy. The salvage by the State Bank wrote a glittering history of

    banking stability in Pakistan.

    In July 1948 all commercial banks were nationalized, and in August 1991 their

    privatization started. In the late 80's private sector banking was allowed.

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    2.1.5 Definition of Banking:

    According to Banking Companies Ordinance 1962 (Pakistan)"Accepting for the purpose

    of lending or investment of deposits of money from public, repayable on demand or

    otherwise and withdrawal by cheques, draft, order or otherwise.

    2. 2 Historical background of National Bank of Pakistan

    Historical background of NBP is as follows:

    The National bank of Pakistan was established on 9 November 1949 under the National

    bank of Pakistan (NBP) Ordinance, 1949 in order to cope with the crises, which were

    developed after trade deadlock with India and devaluation of Indian Rupee in 1949.

    Initially the bank was established with the objective to extend credit to agriculture sector.

    The normal procedure of establishing a bank company under the Companies Law was setaside and the bank was established through the promulgation of an Ordinance due to

    situation that had developed with regard to financing of jute trade.

    The bank commenced its operations from 20th November 1949 at six important jute

    centers in the East Pakistan (now Bangladesh) and directed its resources in financing of

    jute crop. The banks, Karachi and Lahore offices were subsequently opened in December

    1949.

    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 its behalf.

    The Bank has also played an important role in financing the countrys growing trade,

    which has expanded through the years as diversification took place. Today the Bank

    finances import/export business has reached to the tune of Rs. 62.17 billion, whereas in

    1960 financing under this head was only Rs. 1.54 billion.

    The management is being decentralized to improve customer services and enable faster

    decision-making. As a result of this de-layering, zones have been eliminated and the

    number of regions has been increased. Organizational hierarchy at the regional level has

    been restructured and operational and business activities have been completely separated.

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    This separation will improve communication, decision-making and promote teamwork.

    For the second consecutive year, the bank was recognized as the best bank in Pakistan for

    the year 2004 by the prestigious periodical, The Banker UK (a subsidiary of the

    Financial Times Group).

    2.2. 1 Present Status of the Bank

    NBP continued its journey of success based on their strategy of serving clients better A

    Company agile enough to take advantage of its unique domestic and international

    footprint, capitalizing on the largest balance sheet and customer base in Pakistan with

    high cross sell potential. Their standalone AAA rating (the highest in the industry), Their

    ROE, which is amongst the highest in the Asian Banking industry, and their comfortable

    capital adequacy ratios, position the bank well in front of its competitors for futuregrowth. Year 2007 has been yet an outstanding year with the bank recording the highest

    profit in its history. NBP's wide range of product offering, large branch network and

    committed workforce are some of their fundamental strengths that enabled them to

    achieve exceptional results in a very competitive market. The pre-tax profit increased to

    Rs. 28.06 billion, an increase of 6.6% over last year. Earning per share jumped by over

    11.6% from Rs. 20.88 in 2006 to Rs. 23.34 in 2007. Pre- tax return on equity stood at

    45.9%, whereas pre-tax return on assets stands at 4.1% and cost to income ratio of 0.30

    remained one of the highest in the sector. These results were possible despite the fact that

    NBP had to make additional provision of over Rs.3 billion as a result of withdrawal of

    Forced Sales Value (FSV).This year NBP also availed the offer by Government of

    Pakistan to redeem up to 10% of its holding in NIT units held by the bank under Letter of

    Comfort (LoC) arrangement, this sell off resulted in a Capital gain of Rs. 1.8 billion (1)

    Increase in pre-tax profit was achieved through strong growth in core banking income.

    Net Interest income increased by Rs. 3.5 billion (11.5%) due to better yields and volume

    driven growth spurred by increase in consumer loan portfolio. Dividend income and

    Capital Gains also made a healthy contribution as it increased by Rs. 371 million and Rs.

    1,145 million over 2006 respectively mainly owing to higher dividends from NIT Units

    as well as Capital gains recorded on sell of 10% NIT Units. Advances increased by Rs.

    25 billion due to impressive contribution by all business units. Deposits increased by a

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    healthy Rs. 90 billion or 18% over last year. The bank's NPL provision coverage ratio

    also stands as impressive 80%.

    2.2.2 Existing NBP Branches in Pakistan

    SINDH

    Dadu, Sanghar, Hyderabad, Jacobabad, Shikarpur, Karachi, Larkana, Mirpurkhas, Badin,

    Nawabshah, Sukkur, Khairpur, Tharparkar

    Punjab

    Bahawalpur, D.G. Khan, RYKhan, Faisalabad, Gujranwala, Sialkot, Narowal, Jhang,

    Jhelum, Gujrat, Chakwal, Darya Khan , Bhakkar, Lahore, Multan, Murree, Attock, Gilgit,

    Rawalpindi, Sahiwal, Sargodha, Sheikhupura.

    KPK

    Abbottabad, Mansehra, Bannu, D.I. Khan, Kohat, Mingora, Mardan, Peshawar and

    Haripur,

    Balochistan

    Quetta

    Azad Kashmir

    Muzaffarabad, Mirpur

    International

    NBP working at 24 different locations in the world

    2.2.3 Credit Rating

    NBP is the highest of credit ratings of AAA in the industry assigned by JCR-VIS

    Credit Rating Company Limited on a standalone basis which are used in the national

    bank of Pakistan are given as following.

    Credit rating for entity value

    Credit rating for stands alone

    9

    http://en.wikipedia.org/wiki/Punjab_(Pakistan)http://en.wikipedia.org/wiki/Balochistan_(Pakistan)http://en.wikipedia.org/wiki/Quettahttp://en.wikipedia.org/wiki/Azad_Kashmirhttp://en.wikipedia.org/wiki/Balochistan_(Pakistan)http://en.wikipedia.org/wiki/Quettahttp://en.wikipedia.org/wiki/Azad_Kashmirhttp://en.wikipedia.org/wiki/Punjab_(Pakistan)
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    2.2.4 Auditors

    Auditors are the persons who check the accountings standards in an organizations

    financial statements and check either these are true or there is fraud in the financial

    statements. The auditors of the national bank of Pakistan are, ford Rhodes Sidat Hyder &

    co and M. yaqoob Adel Saleem & CO these both companies are chartered accounts.

    2.3 Organizational structure

    Organizational Structure is the framework that defines the boundaries of the formal

    organization and within which the organization operates. The Organizational Structure of

    NBP is also aimed at achieving specific corporate objectives. The board of directors

    controls all the activities and the function of NBP.

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    Figure 2.1 NBP Organization Chart

    President

    Senior Executive Vice

    Executive Vice President (EVP)

    Senior Vice President (SVP)

    Additional / Assistant Vice

    President

    Additional / Assistant Vice

    President (AVP)

    Grade-I

    Grade- II

    Grade- III

    Clerk, Cashier etc

    Non-Clerical staff

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    2.4 The Vision statement of NBP

    To be recognized as a leader and a brand synonymous with, highest standards of service

    quality, international best practices and social responsibility.

    2.5 The Mission statement of NBP

    NBP will aspire to the values that make NBP truly the Nations 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.

    2.6 Objective of NBP

    National bank of Pakistan is also a commercial organization and its main objective is

    profit maximization.

    This is achieved in two ways

    1. By increasing deposits.

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

    community.

    2.6.1 Maximum profit

    The name of the Bank indicates that it is established to finance the nation. As a business

    organization its main objective is to earn more and more profit by least expenditure.

    2.6.2 Maximize deposits

    Banks income is difference between the interests it receives on loans and the interest it

    pays on the deposits. Greater the deposits, greater the ability of the bank to grant loans

    and greater will be the revenue.

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    2.6.3 Economic Growth

    An important objective of National bank of Pakistan is to promote industrial and

    economic growth in Pakistan by providing financial assistance for the establishment of

    the new projects.

    2.6.4 Customer service

    The ultimate objective of the National bank of Pakistan is to serve its customers. It

    collects money from individuals, firms and limited companies and gives loans to people.

    2.6.5 Expenditure discipline

    Banks always try to minimize its expenditure. So it keeps strict control over wastage of

    money at every stage. The branch expenditure must not increase more than 15%of last

    years budget for correspondence.

    2.6.6 Facilities to staff & utilization of staff

    The Bank gives best possible facilities to the working staff and at the same time the bank

    utilizes the staff most efficiently.

    2.7 Goals

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

    existing customer base and diversified range of products.

    2.8 Core values of NBP

    Highest standards of Integrity.

    Institutionalizing team work and performance culture

    Excellence in service

    Advancement of skills for tomorrows challenges

    Awareness of social and community responsibility

    Value creation for all stakeholders

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    2.9 Corporate profile

    The NBP's principal activities are to provide commercial banking and related services in

    Pakistan and overseas. The Bank, together with its subsidiaries, is engaged in commercial

    banking, mudarabah management, brokerage, leasing and discounting services. The bank

    handles treasury transactions for the government of Pakistan as the sister organization to

    the State Bank of Pakistan. The Bank was also operating eight Islamic banking branches

    as at June 30, 2009.

    2.10 Executive Committee

    It is also called the management committee. The general direction and supervision of the

    affairs of the bank lies in their respective executive boards. The federal government

    appoints the president, secretary and 6 other members of the board. The president beingthe chief executive controls the affairs of the bank.

    2.10.1. Board of Directors:

    In the management of the bank the board of directors is at the top of the controlling

    bodies. The board consists of a nominated president, a secretary and 6 other members.

    BOARD OF DIRECTORS

    Table # 2.1NAME DISIGNATION

    Syed Ali Raza Chairman BoG, NBP

    Qamar Hussain President , NBP

    Mr. Tariq Kirmani Director

    Ms. Nazrat Bashir Director

    Asif A. Brohi Director

    Mrs. Haniya Shahid Naseem Director

    Syed Muhammad Ali Zamin SEVP & Secretary to BD

    2.10.2 Regional Manager

    In order to improve the performance of the banking system, the bank has appointed

    regional managers also. The regional chief has the powers of sanctioning finance and

    other credit facilities.

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    2.10.3 Number of Directors

    In Pursuant to the section 11 of the bank (Nationalization) act 1974 number of directors

    of bank shall not be less than 5 and will not be more than 7, excluding the president. The

    Federal Government may, if it deems necessary, appoint the chairman of the board in

    respect of the bank... Voting Right upon the show of hand every member present in

    person or by proxy shall have one vote for every 10 shares held by him subjects to the

    maximum of the 10 votes. The Federal Government being a shareholder may also appoint

    a person to vote on his behalf.

    Senior Management of NBP

    Table # 2.2

    Dr. Asif A. BrohiSEVP & Group Chief, Commercial &

    Retail Banking Group

    Shahid Anwar KhanSEVP & Group Chief, Credit

    Management Group

    Ziaullah Khan

    SEVP & Group Chief Assets Recovery

    Group and Divisional Head, Islamic

    Banking Division

    Dr. Mirza Abrar Baig

    SEVP & Group Chief, Human

    Resources Management &

    Administration Group

    Nausherwan AdilSEVP & Group Chief, Operations

    Group

    Nadeem Anwer IlyassSEVP & Group Chief Assets Recovery

    Group & PSO to President

    Tariq JamaliSEVP & Group Chief, Compliance

    Group

    Syed Iqbal Ashraf SEVP Group Chief, Overseas Banking

    Group

    Asif Hassan SEVP & Group Chief, Small and

    Medium Assets Recovery Group

    Sheharyar Qaisrani EVP/Divisional Head Agriculture

    Business Division, C&RB Group

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    Muhammad Hassan Khaskheli EVP & Divisional Head, Personnel &

    Industrial Relations Division, HRM&A

    Group

    Tahira RazaEVP & Group Chief, Risk Management

    GroupMoizuddin Khan EVP & Divisional Head, Training &

    Organizational Development Division,

    HRM&A Group

    Aamir Sattar EVP & Financial Controller, Financial

    Control Division

    Raza Mohsin Qizilbash EVP & Head, Legal Division

    Syed Muhammad Ali Zamin SEVP & Secretary Board of Directors

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    NBP Overseas Branches

    Table 2.3

    Countries Branches Countries Branches

    U S A 02 Branches Afghanistan 02 Branches

    France 01 Branch Bangladesh 02 BranchesEgypt 01 Branch Korea 01 Branch

    Germany 01 Branch Kyrgyzstan 01 Branch

    Bahrain 01 Branch Japan 02 Branches

    Turkmenistan 01 Branch Hong Kong 02 Branches

    Source: Internship Report on NBP

    2.11 Introduction to NBP Mandian Branch

    National Bank of Pakistan Mandian branch is situated in Mandian Abbottabad that covers

    different remote villages as well as the posh colonies of Abbottabad. Its also facilitatingthe government departments which include colleges and universities.

    2.11.1 Location

    National Bank Mandian Branch is situated in Mandian mansehra road, Abbottabad.

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    Figure 2.2 NBP Mandian branch Organization Chart

    Credit &

    Administration

    Department

    Manager

    Operations Manager

    Account Opening

    Remittances

    Department

    Cash Department

    Government Section

    Clearing & Collection

    Department

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    2.11.2 Assets and Liabilities Management Committee (ALCO)

    Asset and Liabilities Committee (ALCO) manage the banks liquidity position through

    Treasury management Group. The ALCO/Management Group monitors the maintenance

    of Balance Sheet Liquidity Ratios, depositors concentration both in terms of overall

    funding mix and avoidance of undue reliance on large individual deposits and liquidity

    contingencies plan.

    2.11.3 Credit Committee

    The Credit Committee determines the Credit Policy of the Bank. The Credit Committee

    identifies possible risks assumed by the Bank for different types of transactions, which

    are not within the competence of the Assets and Liabilities Directorate. It is alsoresponsible for making final decisions on raising and use of funds within its authority

    as determined by the Executive Board of the Bank. The Credit Committee has the

    authority to make a final decision on approval or rejection of proposed transactions

    as well as to establish personal limits and client limits in accordance with its powers.

    Only the Executive Board of the Bank may overrule resolutions of the Credit Committee.

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    CHAPTER 3

    PRODUCTS AND SERVICES PROVIDED AT NBP

    3.1 Functions of NBP

    NBP act as an intermediary between those who have surplus money and those, who need

    it. To receive deposits and extend loans are two main functions of NBP. The functions of

    this Bank can be summed up in one sentence. NBP borrows to lend further. It borrows

    in form of deposit and lends it in form of loans or advances. Besides these, many other

    functions are also performed by NBP. The detail of these functions is as follows:

    3.1.1 Receiving deposits

    NBP attract the idle savings and surplus money of the people in form of deposits throughvarious deposits schemes. This function is important, because banks mainly depend on

    the funds deposited by the public; deposits are usually of three kinds:

    Current / demand deposits

    These deposits are repayable on demand without any notice. As the banks utilize long-

    term deposits but demand deposits are short-term, therefore, no interest is paid on such

    deposits. The commission is charge for the services rendered by the bank.

    Fixed / time deposits

    These deposits are left with the bank for a certain fixed period before the expiry of which

    no one can withdraw except prior notice. On such deposits the bank pays higher interest.

    Saving deposits

    The main objective of the saving deposits is to encourage the people for saving. This

    account can be opened with initial amount of Rs 100/-.

    3.1.2 Advances on open account or overdraft

    Customers are given the right to over draw their accounts. In other wards, they can

    withdraw more than the actual deposits, with a nominal charge of interest payable within

    a short period. The amount of permissible overdraft varies with the financial position of

    the borrower.

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    3.1.3 Discounting on open account or overdraft

    Discounting of bills is another way of lending money. If any bill of exchange is presented

    before a bank, the bank makes cash payment after deducting its commission according to

    the date of maturity of that bill of exchange.

    3.1.4 Cash credit system or ordinary loans

    The bank not only advances loans in the form of discounting bills of exchange or

    overdraft but also establish credit line. In this case, if person wants financial assistance

    from bank, is required to submit a request in writing. After making thread base scrutiny

    about the reputation and financial position of the applicant, the request is honored. The

    applicant simply open an account and the loan will be transferred into it instead of cash

    payments He will also allotted a cheques book for bank transition, which is an officialauthorization to draw the money as and when required.

    3.1.5 Remitting funds

    NBP remit funds for its customers through bank to any place where it has branches or

    agencies. This is quite safe and cheapest way of sending money from one place to

    another. Funds can also be remitted to foreign countries.

    3.1.6 Safe custodyNBP also provide locker services for keeping ornaments and other valuable things and

    documents safely. Bank charges a small amount per year for providing this service.

    3.1.7 Agency functions

    Among all other vital functions, NBP also act as an agent of its customers, receive

    payments on their behalf, collect rents, dividends on shares etc. bank pays insurance

    premium and makes all other payments as instructed by its accounts holders.

    3.1.8 Reference

    NBP like other commercial banks give references about the dealings and financial

    position of its customer when required. NBP supply this information confidently. This is

    done when customers want to establish business connections with some new firms,

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    banks, development finance institutions etc within or outside the country. Bank also gives

    guarantees letter to its customers.

    3.2 Departments of NBP Mandian Branch

    NBP Mandian Branch Abbottabad has the following departments

    Deposits department

    Government Section

    Cash department

    Remittances department

    Clearing and collection department

    Foreign Exchange

    Western Union Money Transfer System.

    NBP Advance Salary

    3.2.1 Deposit Department

    In this department NBP accepts money deposits from customers, which provide basic

    core of all resources available to a bank. NBP accepts surplus money deposits from

    individuals, firms and corporations. In order to attract these funds it has introduced a

    number of savings accounts and investment schemes. These schemes may suit to theneeds and taste of large number of depositors.

    3.2.2 Functions of Deposit Department

    Provide guidance to the persons wishing to open an account by assistance of account

    opening form and specimen signature (SS) card. Major functions of deposit department in

    NBP include:

    To maintain existing accounts.

    To dispatch letters to customers if needed e.g. letter of thanks to introducer and

    new account holder.

    Posting of vouchers and cheques in computer and maintain records in form of

    printouts.

    Cancellation of cheques.

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    Issuance of cheques book.

    Sorting is also done of accounts to check dormant and inoperative accounts and

    also for recovery of incidental charges.

    It also deals in deduction and refund cases of Zakat.

    Maintenance and handling of various deposit schemes e.g. PLS, saving and

    current accounts.

    Making stop payments of cheques and noting cautions regarding death,

    insolvency, and insanity of account holder.

    Transfer and closing of accounts.

    Keeping the records of death/credit balance confirmations and statement of

    account.

    Provide confidential inquiries to other banks, government departments and other

    agencies.

    3.2.3 Classification of Deposits

    Deposits are the lifeblood of a bank. They constitute the main source of banks funds.

    Generally bank deposits are classified as follows:

    PLS saving account

    PLS means Profit and Loss sharing Account. Here the bank shares with the customer the

    profit or loss resulting from investment of customers funds along with the banks pool of

    funds. These accounts can be opened with Rs100/-. For profit the minimum balance is

    Rs.5, 000.profit is calculated @ 4.10% p.a. Zakat @2.5% is deducted from the balance

    outstanding on the first day of every valuation date i.e. 1st Ramadan. Generally

    withdrawals from PLS saving accounts are allowed on demand, i.e. without any prior

    notice of withdrawal.

    PLS term deposit

    The PLS Term Deposit is non-interest bearing techniques. The bank also calls it time

    liability because it is kept for a certain period of time. Initially this type of deposit was

    called as fixed deposits but after the islamization of banking system in 1985, its name has

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    been changed from fixed to PLS Terms Deposit. The bank with the sum of Rs.1000/-

    accepts the minimum deposits the maximum deposit have got no limit. The PLS term

    depositors would be eligible for sharing profit/loses with the bank at true rate determined

    by the bank. The deposits are accepted for the period from three months maximum to

    above.

    Current accounts

    A current account is that account which is payable on demand. A holder can withdraw the

    money on any date during working hours without giving any prior notice to the bank.

    That is why the bank has to keep sufficient funds to meet uncertain funds of the current

    account holder. The account holder is expected to maintain a minimum balance of

    Rs.500/- in his account or whatever the minimum amount is prescribed for the purpose.No profit or return is paid on current accounts.

    Fixed deposit account

    Fixed deposit accounts are also called time liabilities of a bank, because money is

    payable on expiry of a fixed period of time only. The minimum period for fixed deposit is

    six months and withdrawal is not permissible before the maturity of fixed period. The

    account holder earns greater amount of profit by depositing in fixed deposit account for

    longer period. The fixed deposit account is opened with minimum of Rs.5000/- Bank

    gives a receipt for withdrawal of the money at the date of maturity. The fixed period can

    be extended.

    Call deposit account

    It means the deposit from which the money deposited can be withdrawn at any time by

    presenting receipt of call deposit issued from the bank. The purpose of these deposits is to

    serve as a guarantee provided by bank to any department either public or private in taking

    or giving tenders. This type of account is for the purpose of to participate in tender bid;

    contractors are required to deposit a certain amount or percentage of the tender amount

    along with the tender documents for which Call Deposit Receipt are issued by Banks.

    Call deposit are return free.

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    Minor account

    According to Pakistan, a person is regarded as a minor until he has attained the age of

    eighteen years. There are two different ways in which the minor can open account inNBP.

    The account is opened in the name of minor along with the name of guardian. The

    total of account is given as the name of Accountholder along with guardian who

    operates the account.

    Accounts are opened directly under the name of minor and they are allowed to

    operate their accounts with their own signature. In this type of account he/she

    must be about ten years of age. No overdraft is allowed and no advances are

    extended.

    3.3 Products

    Product detail is given below:

    3.3.1 NBP Premium Aamdani (Monthly Income Scheme)

    Earn up to 11% p.a.

    Amount of investment required from Rs.20,000/- to Rs.5,000,000

    Investment period is 5 years

    Free Demand Draft, Pay Order and NBP Online Aasan Banking

    Free Cheques Book / NBP Cash Card (ATM + Debit)

    Financing facility available up to 90% of the deposit value

    Premature encashment will attract penalties

    Zakat and withholding tax will be deducted as per rules

    3.3.2 NBP Premium Saver (PLS Saving Account)

    Minimum saving balance of Rs. 20,001 and a maximum balance of Rs. 300,000

    Free NBP Cash Card (ATM + Debit)

    Two debit withdrawals allowed in a month and no limit on number of deposit

    transactions.

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    Profit is calculated monthly and paid on half yearly basis.

    Earn up to 7.25 p.a. +

    3.3.3 NBP Karobar (Mera Apna Karobar under President's Rozgar Scheme)

    People who are between 18 and 45 could be eligible for easy financing for self-

    employment in the categories below.

    NBP Karobar Utility Store

    NBP Karobar Mobile Utility store

    NBP Karobar Mobile General Store

    NBP Karobar Transport

    NBP Karobar PCO

    NBP Karobar Tele-CentreIn this facility NBP give loan of Rs.200, 000 only for one to five years and only 2 years

    for PCO Minimum down payment, 10 % of asset price. Mark-up (variable) 1 year

    KIBOR + 2.00%p.a.

    3.3.4 NBP Saiban (House Finance)

    Home Purchase

    Home Construction

    Home Renovation

    Purchase of Land + Construction

    Balance Transfer Facility (BTF)

    For home purchase, and home construction criteria is that the finance amount is

    35million, financing period is 3 to 20 years while debt to equity ratio must be 85:15

    maximum. While for home renovation finance amount is to 15 million, financing period

    3 to 15 years and debt to equity ratio 80:20 maximum. For purchase of land +

    construction finance amount is up to 35 million, financing period is 3 to 20 years and

    debt to equity ratio is 80:20 maximum

    3.3.5 Advance Salary (Personal Loan)

    Easy installments of 1 to 60 months at customer's choice.

    No minimum income collateral & insurance charges required

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    Quick processing and fastest disbursement

    The product is for permanent employees of Government, Semi Government

    and Autonomous bodies receiving salaries through NBP accounts

    3.3.6 NBP Cash Card (ATM + Debit Card)

    NBP Cash Card is a 24-hour direct access ATM/Debit card to your bank account, which

    lets you pay directly from your account as an alternative payment method to cash. The

    transaction is authorized and processed by entering PIN. The NBP Cash Card holders are

    able to transact at any of the 4000 + Merchants where Orix logo is displayed and can

    withdraw cash from NBP, 1-Link & M-NET ATMs across the country.

    3.3.7 Investor Advantage (Margin Finance Facility)

    The detail about investor advantage is as follows: (1)

    Financing Facility for Stock Investors

    Comfortable environment for trading

    No security requirement, except for the customers equity

    Customers equity freely available for investment

    Equity acceptable in cash or approved shares

    Financing Facility for Retail Investors

    Features of the financing facility for retail investors are as follows.

    Comfortable and secure environment for trading.

    NBP financing at very easy terms requiring minimum documentation.

    Minimum turn around time.

    No security requirement from the customer except for the customer's equity.

    Customer's equity freely available for investment.

    Equity acceptable in cash or approved share.

    3.3.8 NBP Cash and Gold (Ready cash against Gold)

    In this is a roll over ability of lending is offered by NBP against gold. NBP give Rs.

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    10, 000/= facility against 10 gm of net weight of gold ornaments on 11% mark up per

    annum. The maximum period is one year & there is no limit of credit

    3.3.9 NBP Kissan Dost (Agriculture Farming Program)

    In this facility, Loans are available to the farmers for production, development purposes,

    for purchase of tractors, for installation of tube wells, for purchase agricultural

    implement, macro loans, for go down construction, for construction of fish pond, for

    livestock farming, for milk processing, for cold storage & for bio-gas plants etc. This

    loan is offered by NBP at the farmers doorstep on competitive mark up rate. NBP Kissan

    Dost is available against agricultural passbook, gold ornament & 0paper security. They

    also provide technical guidance to farmers and also provide financing facility up to Rs.

    500,000/- for landless farmers against personal guarantee

    3.3.10 NBP Pak Remit

    Pak Remit is an Internet based Home Remittance Service. This service is available to

    U.S. residents for sending money to their family and friends in Pakistan. One must have a

    valid US Dollar account with a U.S. bank or a US Dollar credit or debit card in order to

    remit funds through this channel

    Remitters in USA can log on to our user friendly website, www.pakremit.com and easily

    remit funds to Pakistan from the comfort of their homes, in a matter of minutes.

    The service is fully secure with advance encryption application and is available for use 24

    hours a day, 7 days a week. Fees and exchange rate have been set at competitive levels

    and the remitters have the ability to track delivery of funds as well (1)

    USPs

    Unique Selling Propositions is convenient and fast, reliable and secure and available at

    twenty four hours.

    NBP Protection Shield (Personal Accident Insurance)

    No documentation

    No medical required

    Premium Auto Debit facility & choice of deactivation

    Coverage includes death due to:

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    Natural Calamities e.g. Earthquake, Flood, Cyclone etc.

    Accident

    Riots

    Civil Commotion Strikes

    Acts of Terrorism

    Eligibility

    NBP PLS account holders

    18 years and above

    3.3.11 Termination of Coverage

    The date the policy executed by NBP with ALICO is terminated.

    The date the Insured Person is no longer eligible within the Classification of

    Insured Person(s).

    If the required premium is not paid/deducted for the particular month.

    The date the benefits are paid to the extent of the Principal Sum in respect of any

    Insured Person.

    The date the Insured Person cancels coverage under this policy.

    3.4 Services

    The services provided by NBP are:

    3.4.1 International Banking

    National Bank of Pakistan is at the forefront of international banking in Pakistan, which

    is proven by the fact that NBP has its branches in all of the major financial capitals of the

    world. The role of the Financial Institution Wing is:-

    To effectively manage NBP's exposure to foreign and domestic correspondence

    Manage the monetary aspect of NBP's relationship with the correspondents to

    support trade, treasury and other key business areas, thereby contributing to the

    bank's profitability and generate trade finance business and revenues.

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    3.4.2 Demand Drafts

    The safe, speedy and reliable way to transfer money is provided by NBP by purchasing

    Demand Drafts at very reasonable rates. Any person whether an account holder of the

    bank or not, can purchase a Demand Draft from a bank branch.

    3.4.3 Mail Transfers

    Money can be moved safely and quickly using NBP Mail Transfer service .NBP also

    offer the most competitive rates in the market.

    3.4.4 Pay Order

    NBP provides another way to transfer money using their facilities. NBP's pay orders are a

    secure and easy way to move money from one place to another. And, as usual, charges

    for this service are extremely competitive.

    3.4.5 Travellers Cheques

    To safe cash for traveling and travel related purposes. This product has been extremely

    popular and is preferred over cash by customers while traveling and in all walks of life.

    Characteristics of Pak rupees travelers cheques

    Negotiability Pak Rupees Traveler's Cheques are a negotiable instrument

    Validity There is no restriction on the period of validity

    Availability At 700 branches of NBP all over the country

    Encashment At all 400 branches of NBP

    Limitation No limit on purchase

    Safety NBP Traveler's Cheques are the safest way to carry our money

    Table 3.1 Characteristics of Pak rupees travelers cheques

    3.4.6 Letter of Credit

    NBP is committed to offering its business customers the widest range of options in the

    area of money transfer. With competitive rates, security, and ease of transaction, NBP

    Letters of Credit are the best way to do business transactions by the commercial

    enterprise.

    Commercial Finance

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    The dedicated team of professionals of NBP truly understands the needs of professionals,

    agriculturists, large and small business and other segments of the economy. They are the

    customer's best resource in making NBP's products and services work for them. (1

    Foreign Remittances

    To facilitate its customers in the area of Home Remittances, National Bank of Pakistan

    has taken a number of measures to:

    Increase home remittances through the banking system

    Meet the SBP directives/instructions for timely and prompt delivery of

    remittances to the beneficiaries

    New Features

    The existing system of home remittances has been revised/significantly improved and

    well-trained field functionaries are posted to provide efficient and reliable home

    remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides

    United National Bank (the joint venture between NBP and UBL in UK)., and Bank Al-

    Jazira, Saudi Arabia.

    Zero Tariffs: NBP is providing home remittance services without any charges.

    Strict monitoring of the system is done to ensure the highest possible security.

    Special courier services are hired for expeditious delivery of home remittances to

    the beneficiaries.

    SWIFT (Society for Worldwide Inter bank Financial Telecommunication)

    The SWIFT system has been introduced for speedy services in the area of home

    remittances. The system has built-in features of computerized test keys, which eliminates

    the manual application of tests that often cause delay in the payment of home

    remittances.

    The SWIFT Center is operational at National Bank of Pakistan with a universal access

    number NBP-PKKA. All NBP overseas branches and overseas correspondents aredrawing remittances through SWIFT.

    Using the NBP network of branches, one can safely and speedily transfer money for

    business and personal needs.

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    3.4.10 Short Term Investments

    NBP offers excellent rates of profit on all its short-term investment accounts. People

    looking to invest for 3 months or 1 year, NBP's rates of profit are extremely attractive,

    along with the security and service only NBP can provide.

    3.4.11 National income daily account (NIDA)

    The scheme was launched in December 1995 to attract corporate customers. It is a

    current account scheme and is part of the profit and loss system of accounts in operation

    throughout the country. Mode of Calculation: Average balance during a calendar month.

    3.4.12 Equity Investments

    NBP has accelerated its activities in the stock market to improve its economic base and

    restore investor confidence. The bank is now regarded as the most active and dominant

    player in the development of the stock market. NBP is involved in the following:

    Investment into the capital market

    Introduction of capital market accounts

    NBP's involvement in capital markets is expected to increase its earnings, which would

    result in better returns offered to account holders

    3.5 Trade finance and other business loans (other services)

    They are explained below:

    3.5.1 Agricultural finance

    NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers

    who produce some of the best agricultural products in the World.

    Agricultural Finance Services

    I Feed the World program, a new product, is introduced by NBP with the aim to help

    farmers maximize the per acre production with minimum of required input. Selected

    farms will be made role models for other farms and farmers to follow, thus helping

    farmers across Pakistan to increase production.

    Agricultural Credit

    The agricultural financing strategy of NBP is aimed at three main objectives:-

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    Providing reliable infrastructure for agricultural customers

    Help farmers utilize funds efficiently to further develop and achieve better

    production

    Provide farmers an integrated package of credit with supplies of essential inputs,

    technical knowledge, and supervision of farming.

    Agricultural Credit (Medium Term)

    Production and development

    Watercourse improvement

    Wells

    Farm power

    Development loans for tea plantation

    Fencing

    Solar energy

    Equipment for sprinklers

    Farm Credit

    NBP also provides the following subsidized with ranges of 3 months to 1 year on a

    renewal basis.

    Operating loans

    Land improvement loans

    Equipment loans for purchase of tractors, farm implements or any other

    equipment.

    Livestock loans for the purchase, care, and feeding of livestock

    Production Loans

    Production loans are meant for basic inputs of the farm and are short term in nature.

    Seeds, fertilizers, sprayers, etc are all covered under this scheme.

    3.5.2 Corporate Finance

    The offerings of NBP in category of Corporate Finance are:

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    Working Capital and Short Term Loans

    NBP specializes in providing Project Finance, Export Refinance to exporters, Pre-

    shipment and Post-shipment financing to exporters, Running finance, Cash Finance,

    Small Finance, Discounting & Bills Purchased, and Export Bills Purchased / Pre-

    shipment / Post Shipment Agricultural Production Loans

    Medium term loans and Capital Expenditure Financing

    NBP provides financing for its clients' capital expenditure and other long-term

    investment needs. By sharing the risk associated with such long-term investments, NBP

    expedites clients' attempt to upgrade and expand their operation thereby making possible

    the fulfillment of their clients' vision. This type of long term financing proves the bank's

    belief in its client's capabilities, and its commitment to the country.

    Loan Structuring and Syndication

    National Bank's leadership in loan syndicating stems from ability to force strong

    relationships not only with borrowers but also with bank investors. Because NBP

    understand their syndicate partners' asset criteria, they help borrowers meet substantial

    financing needs by enabling them to reach the banks most interested in lending to their

    particular industry, geographic location and structure through syndicated debt

    offerings. NBP's syndication capabilities are complemented by their own capital strength

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

    Cash management services:

    With National Banks Cash Management Services (in process of being set up), the

    customers sales collection will be channeled through vast network of NBP branches

    spread across the country. This will enable the customer to manage their companys total

    financial position. They will also be able to take advantage of NBP's outstanding range

    of payment, ejection, liquidity and investment services.

    3.5.3 Islamic Banking

    NBP is proud to expand its range of products and services to include Shariah Compliant

    Islamic Banking products, now available at our dedicated Islamic Banking Branches at

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    Karachi, Lahore and Peshawar. Commercial and Corporate customers requiring financing

    will have the following financing facilities available to them by NBP to meet their

    requirements:

    Murabahah

    Murabahah 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).

    Murabahah Facility

    Under the Murabahah 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 Banks

    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 Englishterm 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.

    Ijarah Facility will be offered for the following assets:

    Vehicles (both Commercial and Private), Office Equipment, Plant and Machinery

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    CHAPTER 4

    FINANCIAL ANALYSIS

    4.2 Financial Analysis

    Financial analysis is the process of identifying the financial strengths and weakness of the

    organization by properly establishing relation ship between the items of balance sheet and

    profit and loss accounts, in order to make rational decision in keeping with the objectives

    of the organization, for that purpose the management use analytical tools. To evaluate the

    financial condition and performance of the business entity, the financial analyst needs to

    perform "checkups" on various aspects of the business financial health.

    A tools frequently used during these checkups is a financial ratio analysis, which relates

    two piece of financial data by dividing one quantity by the other we calculate ratios

    because in this way we get a comparison that may prove more useful than the raw

    number by themselves. The business itself and outside providers of capital (creditors and

    investors) all undertake financial statement analysis. The type of analysis varies

    according to the specific interest party involved... Financial analysis, though varying

    according to the particular interests of the analyst, always involves the use of variousfinancial statements. NBP performance shows in the table below.

    Table 4.1

    Years 2009 in Rupees 2010 in rupees 2011 in rupees

    Total assets 817,758,326 944,232,762 1,035,024,680

    Deposits 624,939,016 727,464,825 832,151,888

    Advances 412,986,865 475,243,431 477,506,564

    Investment 170,822,491 217,642,822 301,323,804

    Share holder equity 8,969,751 10,763,702 13,454,628After tax profit 15,458,590 18,211,845 17,863,214

    Earning per share 14.36 16.92 13.42

    Return on assets 3% 5.2 % 6.7%

    No of Branches 1,248 1,250 1,256

    No of Employees 1,5015 16,072 16,457

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    From the above table it is very much clear that the NBP performance is going higher and

    higher. Total assets are at the crest in 2011. If we draw a graph this will shows that the

    graph is upward trend. Profit is increasing from year to year. NBP decrease the number of

    its branches and employees because of automation and large networks of other banks

    4.3 Parties interested in financial analysis

    Following are the parties that are interested in the financial analysis of a bank:

    4.3.1 Trade creditors

    Trade creditors are interested in firm's ability to meet their claims over a very short

    period of time. Their analysis will, there fore confine to the evaluation of the Firms

    liquidity positions.

    4.3.2 Suppliers of long-term debt

    Suppliers of long-term debt on the other hand are concerned with firm's long-term

    solvency and survival. They analysis the firms profitability over time, its ability to

    generate cash to be able to pay interest and repay interest and repay principal and the

    relationship between various source of funds. (Capital structure relationship). Long-term

    creditors do analyses the historical financial statements but they place more emphasis on

    the firm's projected financial statement to make analysis about its future solvency andprofitability.

    4.3.3 Investors

    Investors who have invested their money in the firms share are most concerned about the

    firm steady growth in earning. As such, they concentrate on the analysis of the firm's

    present and future profitability. They are also interested in the firms financial structure of

    the extent it influence the firms earning ability and risk.

    4.3.4 Management

    An organization would be interested in every aspect of the financial analysis. It is their

    overall responsibility to see that the resources of the firm are used most effectively and

    efficiently and that the firm's financial condition is sound. So thus management employee

    financial analysis for the purpose of internal control and to better provide what capital

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    supplier seeks in financial condition and performance from the business and from an

    internal control standpoint, management needs to take financial analysis in order to plan

    and control effectively.

    There are three broad categories of the statement analysis.

    Vertical analysis

    Horizontal analysis

    Ratio analysis

    4.4 Vertical Analysis of Balance Sheet

    In balance sheet we compare each amount by taking Total Assets as 100%.

    Asset

    Vertical Analysis of Balance Sheet

    Table 4.2

    ASSETS and LIABILITIES 2009 2010 2011

    Cash and balances with treasury banks 13.02

    %

    12.26% 11.15

    %

    Balances with other banks 4.68% 3.08% 2.93%

    Lending to financial institutions- net 2.09% 2.07% 2.51%

    Investments- net 20.88

    %

    23.04% 29.11

    %

    Advances- net 50.5% 50.31% 46.13

    %

    Operating fixed assets 2.96% 2.66% 2.59%

    Deferred tax assets 0.39% 0.32% 0.67%

    Other Assets 5.44% 6.31% 5.16%

    Total Assets 100% 100% 100%

    Bills payable 1.24% 1.12% 0.77%

    Borrowing 4.95% 4.79% 1.94%

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    Deposits and others accounts 76.42