Naveed JamalNaveed Jamal

Mc 110202929Mc 110202929

MBAMBA

(FINANCE)(FINANCE)

INTERNSHIP REPORTINTERNSHIP REPORT

OnOn

NATIONAL BANK OF PAKISTANNATIONAL BANK OF PAKISTAN

Brief Introduction of the Brief Introduction of the OrganizationOrganization

National Bank of Pakistan was established in 1949 National Bank of Pakistan was established in 1949 in Pakistan. in Pakistan.

Government owned bank.Government owned bank. It acts as an agent of the central Bank where State It acts as an agent of the central Bank where State

Bank does not have its own branch. Bank does not have its own branch. NBP has an extensive domestic branch network of NBP has an extensive domestic branch network of

over 1500 branches located all over Pakistanover 1500 branches located all over Pakistan. .

Competitors of National Bank of Competitors of National Bank of PakistanPakistan

Habib Bank LimitedHabib Bank Limited Bank Alfalah LimitedBank Alfalah Limited United Bank LimitedUnited Bank Limited Muslim Commercial BankMuslim Commercial Bank Faysal Bank LimitedFaysal Bank Limited Allied Bank LimitedAllied Bank Limited Askari Bank LimitedAskari Bank Limited Bank of Punjab LimitedBank of Punjab Limited Meezan Bank LimitedMeezan Bank Limited JS Bank LimitedJS Bank Limited

Training ProgramTraining Program I worked in the following departments of the National Bank of I worked in the following departments of the National Bank of

Pakistan in my internship period:Pakistan in my internship period:

Account Opening DepartmentAccount Opening Department

Remittance DepartmentRemittance Department

Credit DepartmentCredit Department

Clearing DepartmentClearing Department

Account opening Account opening DepartmentDepartment

This department is concerned with the opening of the This department is concerned with the opening of the accounts of the customers.accounts of the customers.

I worked in this department from I worked in this department from 20-10-2014 to 03-20-10-2014 to 03-11-201411-2014..

It provides different types of accounts for different It provides different types of accounts for different customers.customers.

In this department I learned that how an account is In this department I learned that how an account is opened.opened.

Information required for the opening of the account.Information required for the opening of the account.

Remittance DepartmentRemittance Department::

Remittance department is concerned with the Remittance department is concerned with the transfer of money.transfer of money.

In this department I worked from 02-12-2014 to In this department I worked from 02-12-2014 to 15-12-2014. 15-12-2014.

Some instruments are used for the transfer of Some instruments are used for the transfer of money such as demand drafts and pay orders.money such as demand drafts and pay orders.

Credit DepartmentCredit Department

Credit department is concerned with granting loans to different Credit department is concerned with granting loans to different people.people.

In this department I worked from 18-11-2014 to 01-12-2014In this department I worked from 18-11-2014 to 01-12-2014 National bank grants loans for different purposes.National bank grants loans for different purposes. Work assigned to me was filling the forms of the customers.Work assigned to me was filling the forms of the customers.

Clearing DepartmentClearing Department

This department is concerned with the This department is concerned with the clearance of payments and cheques within city clearance of payments and cheques within city or with different cities.. or with different cities..

I worked in this department 04-11-2014 to 17-I worked in this department 04-11-2014 to 17-11-201411-2014

In this department I learnt about the inward In this department I learnt about the inward clearing, outward clearing. clearing, outward clearing.

Learning ExperienceLearning Experience

Knowledge Gained:Knowledge Gained:I observe the role of manager and know about I observe the role of manager and know about

management.management.Skills Learned:Skills Learned:I learn about customer dealing and filling the I learn about customer dealing and filling the concerned slips.concerned slips.Attitudes Observed/Values Gained:Attitudes Observed/Values Gained:I practically know about team work and cooperation.I practically know about team work and cooperation.Most Challenging Task Performed:Most Challenging Task Performed:The most challenging thing is to understand the The most challenging thing is to understand the behaviors and perception of different clients.behaviors and perception of different clients.

Ratio AnalysisRatio Analysis

Ratio analysis compare the financial position of the Ratio analysis compare the financial position of the organization with previous years and shows that organization with previous years and shows that whether the business’s financial position is better or whether the business’s financial position is better or worse as compare to previous years.worse as compare to previous years.

Net Profit Margin:Net Profit Margin:  

The net profit margin ratio tells us the amount of net profit and The net profit margin ratio tells us the amount of net profit and turnover a business has earned in a specific year. turnover a business has earned in a specific year.

Net Profit Margin = Net Profit & (Loss) after Taxation / Net Net Profit Margin = Net Profit & (Loss) after Taxation / Net Sales*100Sales*100

  Year 2011 Year 2012 Year 201317,604,722/95,325,179*100 =18.468%

16,162,635/100,092,132 *100 =16.15%

5,500,024/99,027,563 *100=5.55%

00.020.040.060.08

0.10.120.140.160.18

2011 2012 2013

Net Profit Margin

Gross Spread RatioGross Spread Ratio: : Gross spread ratio is spread of interest between borrowing and lending. We Gross spread ratio is spread of interest between borrowing and lending. We can use the gross spread ratio to determine the profitability and liquidity of a can use the gross spread ratio to determine the profitability and liquidity of a

bank.bank.Gross Spread Ratio=Gross Spread Ratio= NIM or gross income *10NIM or gross income *1000

Interest Income  Interest Income Net sales = Net sales = Interest Income =Markup/ Return/Interest earned (P&L A/C)Interest Income =Markup/ Return/Interest earned (P&L A/C)

NIM= NIM= Net Interest Margin= Interest earned less interest expense (P&L A/C)Net Interest Margin= Interest earned less interest expense (P&L A/C)

Year 2011 Year 2012 Year 2013

46809561/95,325,179*100 =49.11%

43674305/100,092,132*100 =43.63%

38204682/99,027,563*100 =38.58%

0

10

20

30

40

50

2011 2012 2013

Gross Spread Ratio

Spread Ratio:Spread Ratio:  

Spread Ratio is the strategy in options trading that involves buying Spread Ratio is the strategy in options trading that involves buying some number of options and selling a different number of other some number of options and selling a different number of other

options of the same underlying market, but of a different strike price.options of the same underlying market, but of a different strike price.  

Spread Ratio = Spread Ratio = Interest Earned / Interest ExpenseInterest Earned / Interest Expense

Year 2011 Year 2012 Year 201395,325,179/48,515,618 =1.96 time

100,092,132/56,417,827 =1.77 time

99,027,563/60,822,881 =1.63time

0

0.5

1

1.5

2

2011 2012 2013

Spread Ratio

Non Interest Income to Total Income RatioNon Interest Income to Total Income Ratio  

Non Interest Income to Total Income Non Interest Income to Total Income = Non interest mark up/Income = Non interest mark up/Income Total Income Total Income

  Total Income = Total Income = Interest Earned + Non interest incomeInterest Earned + Non interest income

Year 2011 Year 2012 Year 201319,337,048/95,325,179+19,337,048 19,337,048/114662227=0.17 times

23,849,322/100,092,132+23,849,32223,849,322/ 123941454 =0.19 times

25,569,773/99,027,563+25,569,773 25,569,773/124597336 =0.21times

0

0.05

0.1

0.15

0.2

0.25

2011 2012 2013

Non Interest Income to TotalIncome

Return on Assets (ROA):Return on Assets (ROA):Return on Assets gives an idea as to how efficient bank is at using its Return on Assets gives an idea as to how efficient bank is at using its assets to generate earning. The higher the Return on Assets (ROA) assets to generate earning. The higher the Return on Assets (ROA)

number, the better, because the number, the better, because the bankbank is earning more money on less is earning more money on less investment. investment.

  Return on Asset=Net profit after tax/ Average total assets Return on Asset=Net profit after tax/ Average total assets

*100*100

Year 2011 Year 2012 Year 201317,604,722/1093664027*100 =2 %

16,162,635/1229458520.5*100 =1%

5,500,024/1336934680.5* 100=0.4%

0

0.5

1

1.5

2

2011 2012 2013

Return on Asset

Du Pont Return on Assets Ratio:Du Pont Return on Assets Ratio:  

Return on Return on assetsassets (ROA) is a percentage of the after-tax income as (ROA) is a percentage of the after-tax income as compared to the total assets of the company. The approach compared to the total assets of the company. The approach

determines the impact of assets turnover and profit margin on determines the impact of assets turnover and profit margin on profits. profits.

  DuPont Return on Assets = Net Income /sales*sales/ AveragDuPont Return on Assets = Net Income /sales*sales/ Average total e total

Assets*100Assets*100Year 2011 Year 2012 Year 201317,604,722/1093664027 =0.02%

16,162,635/1229458520.5 =0.01%

5,500,024/1336934680.5 =0.004%

0

0.005

0.01

0.015

0.02

2011 2012 2013

Du Pont Return on AssetsRatio

Return on Total Equity (ROE):Return on Total Equity (ROE):  

Return on total Equity (ROE) compares net profit after taxes to the Return on total Equity (ROE) compares net profit after taxes to the Shareholder’s Equity. The Shareholder’s Equity. The amountamount of net income returned as a percentage of of net income returned as a percentage of

shareholders equity. Return on equity measures a corporation's profitability by shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders revealing how much profit a company generates with the money shareholders

have invested.have invested.  

Return on Total Equity = Net profit or loss after tax/total equity*100Return on Total Equity = Net profit or loss after tax/total equity*100

Year 2011 Year 2012 Year 2013

17,604,722/16,818,285*100 =105%

16,162,635/18,500,114*100 =87%

5,500,024/100,859,756*100=5%

0

20

40

60

80

100

120

2011 2012 2013

Return on TotalEquity

Debt Ratio:Debt Ratio:  

Debt Ratio is a financial ratio that indicates the percentage of a Debt Ratio is a financial ratio that indicates the percentage of a company's assets that are provided via debt. It is the ratio of total company's assets that are provided via debt. It is the ratio of total debt (the sum of current liabilities and long-term liability) and total debt (the sum of current liabilities and long-term liability) and total

assets (the sum of current assets, fixed assets, and other assets such assets (the sum of current assets, fixed assets, and other assets such as ‘good will’).as ‘good will’).

  Debt ratio = total liabilities/total assetsDebt ratio = total liabilities/total assets

Year 2011 Year 2012 Year 2013

1,016,926,288/1,149,577,736 =0.88 times

1,169,547,505/1,309,339,305 =0.89 times

1,208,054,552/1,364,341,256 =0.89times

0.874

0.876

0.878

0.88

0.882

0.884

0.886

0.888

0.89

2011 2012 2013

Debt Ratio

Debt / Equity Ratio:Debt / Equity Ratio:A measure of a company's financial leverage calculated, by dividing its total A measure of a company's financial leverage calculated, by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and liabilities by stockholders' equity. It indicates what proportion of equity and

debt the company is using to finance its assets.debt the company is using to finance its assets.  

Debt/Equity Ratio=Total liabilities/shareholders equity Debt/Equity Ratio=Total liabilities/shareholders equity

Year 2011 Year 2012 Year 2013

1,016,926,288/16,818,285 =60.47times

1,169,547,505/18,500,114 =63.22 times

1,208,054,552/100,859,756=11.97times

0

10

20

30

40

50

60

70

year 2011 year 2012 year 2013

Debit /Equity Ratio

Times Interest Earned Ratio:Times Interest Earned Ratio:  

Times interest earned (also called Times interest earned (also called interest coverage ratiointerest coverage ratio) is the ratio ) is the ratio of earnings before interest and tax (EBIT) of a business to its interest of earnings before interest and tax (EBIT) of a business to its interest expense during a given period. It is a solvency ratio measuring the expense during a given period. It is a solvency ratio measuring the

ability of a business to pay off its debts.ability of a business to pay off its debts.  

Time interest earn ratio EBIT= (Profit before tax + mark Time interest earn ratio EBIT= (Profit before tax + mark up)/interest expeup)/interest expensense

Year 2011 Year 2012 Year 201326,011,173+95,325,179/48,515,618 =2.50 times

23,257,706+100,092,132/56,417,827 =2.19 times

7,078,367+99,027,563/60,822,881 =1.74times

0

0.5

1

1.5

2

2.5

2011 2012 2013

Time interest earn ratio EBIT

Advances / Deposits Ratio:Advances / Deposits Ratio:  

Advances / Deposits ratio shows that how much efficiently the Advances / Deposits ratio shows that how much efficiently the bank advances the deposits of their customers to borrower. bank advances the deposits of their customers to borrower. The more money the bank has loaned out generates more The more money the bank has loaned out generates more

interest income provided the loans. If the ratio is too high, it interest income provided the loans. If the ratio is too high, it means that banks might not have enough liquidity to cover means that banks might not have enough liquidity to cover any unforeseen fund requirements; if the ratio is too low, any unforeseen fund requirements; if the ratio is too low,

banks may not be earning as much as they could be. banks may not be earning as much as they could be.   

Advance deposits ratio = Advances/depositsAdvance deposits ratio = Advances/deposits

Year 2011 Year 2012 Year 2013

525,045,764/927,421,438 =0.57 times

654,690,016/1,037,784,947 =0.63times

615,419,874/1,101,138,574 =0.56 times

0.52

0.54

0.56

0.58

0.6

0.62

0.64

2011 2012 2013

Advance deposit ratio

Dividend per Share:Dividend per Share:The dividend per share (DPS) ratio is very similar to the earning per The dividend per share (DPS) ratio is very similar to the earning per share and earning shows what shareholders earned by way of profit share and earning shows what shareholders earned by way of profit

for a period whereas dividend per share shows how much the for a period whereas dividend per share shows how much the shareholders were actually paid by way of dividends. shareholders were actually paid by way of dividends.

Dividend per share=Dividend/Number of shares Dividend per share=Dividend/Number of shares

Year 2011 Year 2012 Year 20131,681,829/16818285 =0.10 Rs.

2,775,017/18,500,114 =0.15 Rs.

NBP did not declare the dividend for the year 2013 yet

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

2011 2012

Dividend per Share

Earning per ShareEarning per ShareEarnings per share (EPS) serve an indicator of company’s Earnings per share (EPS) serve an indicator of company’s

profitability. Earning per share (EPS) is the profit attributable to profitability. Earning per share (EPS) is the profit attributable to shareholders (after interest, tax and everything else) divided by the shareholders (after interest, tax and everything else) divided by the number of shares in issue. It is the amount of a company’s profits number of shares in issue. It is the amount of a company’s profits

that belong to a single ordinary share. that belong to a single ordinary share.   

Earnings per share = Net profit or loss before tax / No. of Earnings per share = Net profit or loss before tax / No. of Shares outstandingShares outstanding

  Year 2011 Year 2012 Year 2013

17,604,722/16818285 =1.05 16,162,635/18,500,114 = 7.02

5,500,024/21,275,131 =2.59

012345678

2011 2012 2013

Earning Pershare

RecommendationsRecommendations According to my point of view organization is doing well but not in According to my point of view organization is doing well but not in

an efficient manner. I have not so much experience that I talk an efficient manner. I have not so much experience that I talk about such big organization but I will recommend some things about such big organization but I will recommend some things according to my perception during my internship program in NBP according to my perception during my internship program in NBP Branch.Branch.

As we see the Net profit ratio is going down which is critical for the As we see the Net profit ratio is going down which is critical for the

NBP so NBP should launch some new strategy to increase the NBP so NBP should launch some new strategy to increase the profit and for this they should provide the facilities to the profit and for this they should provide the facilities to the customers so they wish to work with the NBP. customers so they wish to work with the NBP.

Bank should increase quickness and fastness by focusing to Bank should increase quickness and fastness by focusing to reduce the time of delivering services instead of waiting so many reduce the time of delivering services instead of waiting so many hours by customers while receiving services from bank. hours by customers while receiving services from bank.

If we see the spread ratio it is going down it should be increased If we see the spread ratio it is going down it should be increased by increasing the interest income and interest income can be by increasing the interest income and interest income can be increased by issuing the debts which will increase the interest increased by issuing the debts which will increase the interest income and interest expenses can be decreased by doing so. income and interest expenses can be decreased by doing so.

Return on Assets ratio is going down which is not beneficial Return on Assets ratio is going down which is not beneficial for the NBP and NBP should increase the profit and should for the NBP and NBP should increase the profit and should increase the return on assets by increasing the business of increase the return on assets by increasing the business of the bank. the bank.

Return on total equity shows that the bank earnings from its Return on total equity shows that the bank earnings from its total equity and it is going down which is not good for the total equity and it is going down which is not good for the bank they should have to increase it otherwise it shareholders bank they should have to increase it otherwise it shareholders will lose confidence which will be worst for the bank. will lose confidence which will be worst for the bank.

Debt ratio is increasing which is not good as lower value of Debt ratio is increasing which is not good as lower value of debt ratio is favorable and a higher value indicates that debt ratio is favorable and a higher value indicates that higher portion of company's assets are claimed by its higher portion of company's assets are claimed by its creditors so it should be increased by minimizing the debts creditors so it should be increased by minimizing the debts taken from the external sources.taken from the external sources.

Earnings per share are decreasing which is very critical for the Earnings per share are decreasing which is very critical for the NBP because due to this shareholders will lose the confidence NBP because due to this shareholders will lose the confidence and this will be very dangerous for the bank. and this will be very dangerous for the bank.

Thank YouThank You