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ABSTRACT:
National bank is one of the Government owned banks working on behalf of State bank of Pakistan under agency
arrangements where SBP has no operational offices. In addition NBP is working as commercial bank too since
1949 and has play a vital role in the economy of Pakistan since its inception. National bank has a vide outreach
throughout the country including the far flung areas of all the provinces, and AJK, Gilgit and Bultistan also.
NBP is chaired by the president having his office at head office I.I. Chundrigar raod Karachi with 29
controlling offices named as regional offices situated in different main cities. These regional offices are
supposed to supervise the whole operational control of 1345 online branches. National bank has its overseas
network also consisting of 23 branches with 10 regional representative offices working in various Islamic and
non-Islamic countries.
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Internship Report National Bank of Pakistan
1. Introduction
Bank serves as an intermediary between depositors and borrowers. Bank receives funds from surplus side
(depositors) and lends it to the needy side (Borrowers). Decision of lending depends upon different factors i.e
banks policy, available products, purpose of loaning, type of population, type of requirements of the borrowers,
repayment capacity and credit worthiness of the intending clients.
At the time of freedom, business banking offices were given decently well here. There were 487 work
places of planned banks in the domains now constituting Pakistan. An Expert council was selected. The board
prescribed that the store bank of India ought to keep on functioning in Pakistan until 30th September 1948, and
Pakistan would assume control over the administration of open obligation and trade control from Reserve Bank
of India on first April 1948 and that India Notes would keep on being legitimate delicate in Pakistan till 30th
September 1948. Also the banks including those having their enlisted work places in Pakistan exchanged them
to India with a specific end goal to bring a breakdown of another state. By 30th June1948 the number work
places of planned banks in Pakistan declined from 487 to just 195.
Keeping in mind the end goal to make essential courses of action for the supposition of control an
Expert council was designated to suggest fundamental steps, including the obliged enactment to build a Central
Bank for Pakistan. The Governor General of Pakistan QUAID-E-AZAM MUHAMMAD ALI JINNAH initiated
the State Bank of Pakistan on July 1, 1948, after the state Bank of Pakistan Order was proclaimed on May 12,
1948. The main Pakistan notes were issued in October 1948 in the group of Rs. 5, 10, 100; and by August 1949
the State Bank of Pakistan withdrew the Reserve Bank of India notes of the estimation of Rs. 125.02 Corer with
the assistance of Pakistan notes. In spite of the exertion "Administration of Pakistan" engraved notes of the
estimation of Rs. 51.57 corers were still in flowed along these lines the aggregate Pakistan case of advantages of
the issue Department of Reserve Bank of India added up to Rs.176.59crores. However the Reserve Bank of
India exchanged stakes of the estimation of Rs.127.67 corers just to the State Bank of Pakistan and halted such
further exchanges on March 23, 1949 on extremely shaky grounds. The issue has so far stayed uncertain
regardless of secured arrangement between the two nations.
As the Centered Bank of the nation, the State Bank tended to itself with the similarly pressing
undertaking of making a national banking framework. Keeping in mind the end goal to achieve this objective it
give d each assistance and support to Habib Bank to extend its system of extensions furthermore propose to
Government the foundation of another bank which could serve as an executor or the State Bank. As the result
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Internship Report National Bank of Pakistan
the National Bank of Pakistan came into over the organization capacity from the Imperial Bank of India. More
Pakistan planned banks kept on being built which incorporated the Commerce Bank Limited and the Standard
Bank Limited. By June 1965, the amount of booked banks remained at 36; the stores expanded to Rs.688.28
corers while credit development by the banks to the private division rose to Rs.575.87 corers because of sharp
request under the effect of economy development and better extension private endeavors. The systems
administration of banks limbs now blankets an expansive fragment of national economy.
NBP was made under the National Bank of Pakistan Ordinance 1949 in Pakistan. NBP involves an one
of a kind position in the monetary division of Pakistan. It goes about as an executor of the Central Bank
wherever the State Bank does not have it Branch. It additionally attempts Government Treasury operations. The
National Bank of Pakistan is a Commercial Bank and transacts numerous sorts of Banking Business. The
National Bank of Pakistan was made on November 29, 1949 as a semi open business bank. The Bank has the
qualification of acting operator of the State Bank of Pakistan and works treasuries where the State Bank of
Pakistan does not have any office. The Head Office of the Bank is at Karachi. After its stronghold in 1949 it has
been heading Commercial Bank of the country, sole operator of the Government of Pakistan's hitter exchange
with nations and of State Bank of Pakistan for the Government Treasury. In Pakistan, the bank gives complete
bank offices to the individuals. NBP is 100% claimed by the Government of Pakistan.
National Bank of Pakistan is the biggest business bank working in Pakistan. Its monetary record size surpasses
that of any of alternate banks working provincially. It has re-imagined its part and has moved from an open
segment association into an advanced business bank. The Bank's administrations are accessible to people,
corporate substances and government. While it keeps on going about as trustee of open trusts and as the
executor to the State Bank of Pakistan (in spots where SBP does not have a vicinity) it has enhanced its business
portfolio and is today a significant lead player in the obligation value market, corporate financing banking, retail
and shopper banking, rural financing, treasury administrations and is indicating developing enthusiasm toward
pushing and creating the nation's little and medium ventures and in the meantime satisfying its social
obligations, NBP base camp in Karachi, Pakistan with in excess of 1,345 extensions nation wide and 23 limbs
abroad. The bank gives both business and open area banking administrations. In today's focused nature, NBP
required to rethink its part and shed general society area bank picture, for a current business bank. It has
offloaded 23.2 percent experience stocks, keeping in mind it has not been totally privatized like the other three
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Internship Report National Bank of Pakistan
open segment banks, fractional privatization has occurred. It is presently recorded on the Karachi Stock
Exchange. National Bank of Pakistan is today a dynamic, productive, and client centered establishment. It has
created an extensive variety of purchaser items, to upgrade business and coddle the diverse portions of society.
A few plans have been particularly intended for the low to center pay sections of the populace. These
incorporate NBP Karobar, NBP Advance Salary, NBP Saiban, NBP Kisan Dost, NBP Cash n Gold.
2.1 Vision
To be recognized as a leader and a brand synonymous with trust, highest standards of service quality,
international best practices and social responsibility.
2.2 Mission
NBP will aspire to the values that make NBP truly the Nation’s Bank, by:
2.4 Goals
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Internship Report National Bank of Pakistan
To enhance profitability and maximization of NBP share through increasing leverage of existing
customer base and diversified range of products.
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Internship Report National Bank of Pakistan
keeping an eye over the potential customers in that area. It gives motivation to branches to achieve targets
through different campaign and schemes like cash prizes and special increments. Terms and condition for
deposits is also fixed by this department. Almost all the transactions involving receipts of funds from general
public, associations, organizations and other clients and payments thereto are dealt by this department at branch
level.
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Internship Report National Bank of Pakistan
Finance department reviews organizations expenses and cost and also estimate profit. Before investing they
analyze the business properly its financial condition and risk involved. Banks always invest where risk is low ad
return is high. And borrow from that source where cost is less.
There is a division which deals with accounts. Accountants are hired for accounting purposes. They prepare
financial statements. Financial statements present picture of the business. It is also very technical work.
Gathering of data, compiling, arranging, recording, analyzing and preparing financial statements from them is
the job of accounts departments. They prepare conditions for analyst to conduct financial analysis of the
business. Finance officer evaluate and make decisions according to that.
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Internship Report National Bank of Pakistan
to give him. After evaluating the need for cash bank takes decision of investment. It always invests in higher
return area.
2. Capital budgeting: Capital budgeting is decisions about the investment in fixed assets. These decisions effect
overall position. Complete analysis is important before investing in fixed assets. Investment in fixed assets is
irreversible decision; it means decisions can not be taken back. Bank has to be very careful before taking
decision.
3. Capital structure: Capital structure means ratio of debt and equity in the business. Mostly business prefer to
take debt in small quantity and equity in large. Equity is cushion for the investors. They prefer high rate of
investment. If there are high rate of debts it indicates high risk associated with it. Finance officer tries to
maintain the balance between equity and debt.
4. Inventory: Inventory is also a critical decision. Decision relating to inventory effects financial condition of
the business. There is no such inventory in banking business. But in some cases stock of some companies is in
ban’s custody. Its maintenance is a big deal for the banks.
1. Liquidity Ratios
2. Leverage Ratios
3. Profitability Ratios
4. Activity Ratios
5. Market ratios
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Internship Report National Bank of Pakistan
Formula:
Current Ratio= Current Assets / Current Liabilities
Current ratio:
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Internship Report National Bank of Pakistan
Formula:
Current Ratio= Current Assets / Current Liabilities
Interpretation:
Current ratio measures the business ability to pay its short term liabilities. Short term creditors have interest in
current ratio. Standard for current ratio is 2:1. NBPs Current for 2013 is 1.11.It means current assets are slightly
more than current liabilities. It is not a good ratio. Last year current ratio was also 1.11. In 2011 it was 1.10.
There is a very small change in the ratios. Reason is that if the assets increased in 2012 and 2013, liabilities also
increased. Due to this the ratio remains same in 2012 and 2013 but it is more than the 2011.
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Internship Report National Bank of Pakistan
Debt ratio:
Formula:
Debt ratio= (Total debt / Total assets)*100
Interpretation:
Debt ratio shows leverage in the company. High percentage means company has high leverage. Low means low
leverage. NBP has very high leverage. NBP has high debt ratio that shows that high rate of funds are obtained
from the creditors. It means it has high risk of default. Invertors do not like to invest in high risk companies.
NBP should try to lessen his amount of debt.
Table 4. Equity
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Internship Report National Bank of Pakistan
Equity ratio:
Formula:
Equity ratio= (Total equity / total assets)*100
Interpretation:
It means how much portion is financed by the equity. It is cushioning for investor’s against their investment.
They prefer high ratio. NBP has very low ratio. It will lessen the interest of the investors. NBP should try to
increase its equity. Equity position in 2012 is slightly better than the equity position in 2011. Low equity ratio
indicates high use of debt.
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Internship Report National Bank of Pakistan
Interpretation:
This ratio measures ratio of debt to equity. It is also called external internal funds ratio. It helps in assessing the
soundness of long term policies of the company. Investors like this ratio low. But NBP has very high ratio.
Debts are 7 times more than equity. Now NBP debt to equity is better because in 2011 it was 11 times more
than equity.
Interpretation:
This is the ratio of net profit after taxes to net sales. This is used to measure the overall profitability of the
company and is very useful to proprietors. The profit margin tells you how much profit a company makes for
every Rupee 1 it generates in revenue. The ratio is very useful as if the net profit is not sufficient, the firm shall
not be able to achieve a satisfactory return on its investment. This ratio also indicates the firm’s capacity to face
adverse economic conditions such as price competition, low demanding. Higher the ratio the better is the
profitability. This ratio is very important. NBP has 18.5%, 16.7% net profit margin ratio in 2011 and 2012
which is good. In 2013, it decreased to 5.5%. which is not good. Reason of decrease in ratio is increase in the
operating expenses.
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Internship Report National Bank of Pakistan
Interpretation:
ROA tells about the utilization of the assets. It tells about efficiency of the assets whether assets are utilizing in
efficient way or not. NBP has very low ROA in both years. It means assets are not being utilized in the proper
way. It needs to change strategy so that ROA can be increased. Decrease in ratio is due to increase in assets but
the profit is decreasing due to increase in expenses.
Interpretation:
The ratio is the relationship of operating income of the company divided by total revenue of the company. It is a
ratio used to measure a company's pricing strategy and operating efficiency. Operating margin is a measurement
of what proportion of a company's revenue is left over after paying for variable costs of production such as
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Internship Report National Bank of Pakistan
wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed
costs, such as interest on debt. NBP has 7.14% OPM in 2013 which is not good, as compared to last two years
because in 2011 and 2012 this ratio was 27.3% and 23.8% respectively,
Interpretation:
This is the measurement of the return which shareholders are obtaining on their investments. The ratio is the
relationship of net income and total equity of the shareholders. Every business has the basic principal to serve
the investor at most the higher the profit the higher the return and more will get by the shareholders of the
company. This is a primary tool to measure the soundness of the business. But NBP’s current position is very
poor as compared to last two year because its decreasing yearly.
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Internship Report National Bank of Pakistan
Formula:
DuPont returns on assets= ((net income / revenues)*(revenues / assets))*100
Interpretation:
The ratio is the relationship of the net income, sales and total assets of the company and measures the return on
equity (ROE). A for-profit business exists to create wealth for its owner(s). ROE is, therefore, perhaps the most
important of the key ratios; since it indicates the rate at which owner wealth is increasing the ratio provides
measures in three of the key areas of analysis, in first portion the ratio calculate the income earned by the
company against sale and in second portion the calculation of sales to total assets is measured. The
multiplication of both the answers provides us the how much the company is earning in relation to total assets.
Ratio is very low that indicates the utilization of the assets is very poor.
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Internship Report National Bank of Pakistan
Interpretation:
Earning per share is calculated by net income divided by outstanding number of shares. It determines how much
a shareholder will get. Shareholders view earning per share before investing in a company. Earning per share of
the NBP is very low that is not good for NBP.
Formula:
= Dividends / Number of Share
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Internship Report National Bank of Pakistan
Interpretation:
This ratio show the actual cash position of the company. Cash flow items deals with actual cash receipts and
payments. This ratio gives real picture of the business. This ratio is in poor condition in both years.
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Internship Report National Bank of Pakistan
Interpretation:
It shows how much a share gets from operating cash flow of the company. This ratio is 16.27 in 2013 which is
very low from previous years.
Interpretation:
This ratio tells that how much loan was issued against deposits. In 2011 loan was 0.56 of deposits that increased
in 2012 to 0.63. In 2013 bank stables its percentage and again it came on the level of 2011.
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Internship Report National Bank of Pakistan
This ratio tells that how much bank earns and how much pays against interest. According to this ratio bank
earns more and pay less interest. This ratio is decreasing year by year but still a good ratio.
Interpretation:
In this ratio a comparison of mark up income and gross income is evaluated. Banking sector relies on the mark
up income. This ratio shows that net mark up profit earned more in 2012 and decreases in 2013 which is not a
good sign.
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Internship Report National Bank of Pakistan
Interpretation:
This ratio tells that what is the earning of bank and what are the expenses of bank. This is very important from
the creditor’s point of view. A high ratio ensures a periodical interest income for lenders. This ratio is
decreasing since 2011 that is less than 1. It means the bank is likely to have problems in paying interest on its
borrowings.
6. Current Condition:
According to the ratio analysis I concluded:
Company’s overall condition is satisfactory.
Decrease in profitability but still enough profit no other company can meet this.
Earning per share is not good in 2013 and needs to improves in coming years.
ROE has been decreased and also needs to improve.
Debt ratio is very high, high leverage, high risk.
NBP is a very strong company financially.
This is a only bank that have deposits in trillion.
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Internship Report National Bank of Pakistan
8. Conclusion:
According to the calculated ratios analysis over all position is decreasing in 2013 than 2011, 2012. But to me its
still a very sound bank. NBP has the biggest system in Pakistan and in Asian mainlands. It remains on the
number 8 in the world. It is the main bank possessed by the Government of Pakistan. Clients trust NBP in light
of the fact that it is more secure. It has biggest structure in Asia. No other foundation can even think to take its
place. It has solid budgetary position. NBP earned enormous benefit in previous years. Total assets is high. It
gives banking that is competitive to each kind of clients. It offers items which are gainful for each one.
Anyway there are a few weaknesses which can influence its reputation. Like its methodology of
authorizing credit is excessively protracted. Cost rate is additionally high. Absence of automated framework is
the greatest impediment. Absence of proper staff training. Over loaded staff. Asset utilization is improper. In
any case despite all these elements NBP is in solid position. In the event that it tries to tackle these issues,
nobody can touch its statures.
9. Recommendations:
There are some recommendations for improvement:
To me, what I have observed in the branch where I did my internship that this branch is newly opened but there
is no proper facilities are provided by the bank, like no ATM at all, very bad internal environment, no help desk,
lack of equipments, because it’s a semi government bank that’s why if the manager wants to provide a facility
to the customer he has to ask for approvals from regional office that takes too long , regional office should
facilitate the branch with full equipments so that customers can feel comfortable. Here are some more
recommendations generally:
Staff Training and development is important.
Retail and consumer banking must be improved.
Internal structure of branches needs to improve.
ATM facilities should be provided nationwide.
Staff lacks the accounting knowledge. Only persons with sufficient knowledge of finance and
accounting should be hired.
All records must be held electronically nationwide in all branches.
Profit rate is good try to retain them.
Adopt modern accounting systems.
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Internship Report National Bank of Pakistan
11. Annexes
All the material used in the report is obtained from website of NBP. All financial statements are downloaded
from annual report of NBP www.nbp.com.pk. Financial reports has been presented in Annual reports. I took
financial statements of 2011, 2012 and 2013 from their respective annual reports.
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