nbp adnan final report

7/31/2019 NBP Adnan Final Report

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INTERNSHIP REPORT

Specialization: Banking and Finance

Submitted To: Chairman

Department of Business

Administration

Submitted By: Name: Adnan Umar

Roll No: AD514963

Registration No: 09-PLR-08174

Mailing Address: P No#76,77/B, Street #9, Weavers colony No# 1, G.M Abad,

Faisalabad.

Contact No: 03457770037 / 03137711137

Date of submission: 10.11.2011

DEPARTMENT OF BUSINESS

ADMINISTRATION

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ALLAMA IQBAL OPEN UNIVERSITY

ISLAMABAD

AcknowledgementAcknowledgement

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ACKNOWLEDGEMENTACKNOWLEDGEMENT

All praise is for ALLAH, the most merciful and his Prophet Muhammad (P.B.U.H) forevery torch of guidance and knowledge for humanity. I offer humblest and sincerest words

of thanks to GOD Almighty WHOblessed me with potential and ability to make materialcontribution to already existing ocean of knowledge.

I would like to convey my cordial thanks to my father Mr. Umar Hayat and my family who

help and guidance I am enabling to acquire knowledge and get a respectable position in the

society. They always appreciated and prayed for my success in life. I am also very much

thankful to my admirable teacher Mr. Ejaz Baigas well extremely thankful to all my other

honorable teachers. Their dedication and guidance to complete my studies with theirutmost devotion and professional commitment is superb and sublime.

It would not be fair if I don't express my profound gratitude to National Bank of Pakistan,

Ghulam Muhammad Abad Branch Faisalabad for providing me proper assistance to get

some practical experience of Financial Analysis. Brief interaction with National bank was a

great opportunity for me to understand practical aspects of business in general and Finance

in particular.

I hope this report will be according to the requirements and will help the reader to

understand the various aspects of National Bank of Pakistan.

Adnan Umar

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Table of ContentsTable of Contents

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TABLE OF CONTENTSTABLE OF CONTENTS

Ch.Ch.

NoNo TopicsTopics P. NoP. No

11 Objectives of Studying the Organization 0101

22 Overview of the Organization National BankOverview of the Organization National Bank 0303

2.12.1 Brief HistoryBrief History 0404

2.22.2 Nature of the OrganizationNature of the Organization 0606

2.32.3 Business VolumeBusiness Volume 0606

2.42.4 Number of employeesNumber of employees 0606

2.52.5 Product line 0707

33 Review of Various DepartmentsReview of Various Departments 2121

44 Structure and Functions of the Accounts Departments 2626

4.14.1 Structure of Account Department 2727

4.24.2 Accounting Procedure in NBP 3232

4.34.3 Role of Financial Manager 3232

4.44.4 Electronic Data in Decision Making 3333

4.54.5 Sources of Fund for last Latest Five years 3535

4.64.6 Generation of Fund for last Latest Five years 3636

4.74.7 Allocation of Funds for last Latest Five years 3838

55 Critical Analysis of the theoretical concepts relating to practical 3939

66 Financial Analysis 4141

6.16.1 Five Latest years Latest Balance Sheets 4242

6.26.2 Five Last year latest Income Statements 4444

6.36.3 Ratio Analysis for last Latest five years 4747

6.46.4 Horizontal Analysis of Balance Sheet 6363

6.56.5 Horizontal Analysis of Income statement 6666

6.66.6 Vertical Analysis of Balance Sheet 7070

6.76.7 Vertical Analysis of Income statement 7272

77 Compare the Organization with its Competitors 7474

88 Future prospects of the National bank of Pakistan 7878

99 SWOT Analysis 8080

1010 Conclusion 8484

1111 RECOMMENATIONS 8787

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References 9191

Annexes 9393

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List of TablesList of Tables

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List of TABLESList of TABLES

Sr.

No.Table Name Page No.

1 Business Volume 06

2 Number of Employees 06

3 Balance Sheets 42

4 Income Statements 44

5 Horizontal Analysis of Balance Sheets 63

6 Horizontal Analysis of Income Statements 66

7 Vertical Analysis of Balance Sheets 70

8 Vertical Analysis of Income Statements 72

9 Compare the Organization with its Competitors 74

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OBJECTIVES OF STUDYING ORGANIZATIONOBJECTIVES OF STUDYING ORGANIZATION

Chapter No. 1

OBJECTIVES OF STUDYING ORGANIZATIONOBJECTIVES OF STUDYING ORGANIZATION

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The objectives of internship are to learn the existing accounting and finance practices being

followed in the bank. The main objectives are given as under:

1. To understand financial system of banking.

2. To understand role of banking sector in financial system of country.

3. I want to get job in bank so I select bank for studying.

4. To understand the application of theoretical knowledge in practical life.

5. To understand application of Prudential Regulation issued by SBP.

6. To study the accounting and financial internal control system of National Bank

of Pakistan.

7. To attain specialization in banking and finance.

8. To review its appraisal and auditing system.

9. To be a part of a competitive environment and enhances my skills.

10. To analyze the financial system and financial reports.

11. To printout/identify problems, opportunities and providing recommendation

there on.

12. To study the role of National bank of Pakistan in banking Sector of Pakistan.

13. To get the thorough knowledge of different credits offered by bank.

To develop understanding of finance and accounting function integrated, National Bank of

Pakistan is an organization, which can help a student to learn finance and accounting

practices in a system fully equipped with latest technology to cater for the needs of present

business environment.

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Overview of National Bank of PakistanOverview of National Bank of Pakistan

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Chapter No. 2

Overview of National Bank of PakistanOverview of National Bank of Pakistan

2.1: BRIEF HISTORY

National Bank of Pakistan is the premier commercial Bank of the country. National Bank

of Pakistan was established under the National Bank of Pakistan Ordinance 1949 and is

listed on all the stock exchanges in Pakistan. Its registered and head office is situated at I.I.

Chundrigar road, Karachi. The bank is engaged in providing commercial banking and

related services in Pakistan (GOP) as agent to State Bank of Pakistan (SBP). National Bank

of Pakistan has built an extensive branch network with 1289 branches in Pakistan and

operates in major business centre abroad. The Bank has representative offices in Beijing ,

Tashkent , Chicago and Toronto .Under a Trust Deed, the bank also provides services as

trustee to National Bank of Pakistan investment Trust (NIT) including safe custody of

securities on behalf of NIT. At the time of independence in 1947, Government of Pakistan

decided that Reserve Bank of India would act as the common monetary authority of both

countries up to September, 1948. But this arrangement did not worked due to certain

reasons. In October 1947, there was fighting in Kashmir and India refused to pay the share

of Pakistan amounting Rs.550 million. Due to Indian government attitude and role of

Reserve Bank of India in creating problems to cater to the banking needs of Pakistan.

Government of Pakistan established its own central bank SBP on 1 st July 1948.

Soon after independence of Pakistan, most of our foreign trade was with India and Britain.

Britain and other countries of Commonwealth devaluated their currencies. India also

followed Britain and devalued her currency. They were also compelling Pakistan to do so.

But the Government of Pakistan felt that devaluation of currency was not in the interest of

the country, so GOP refused to follow instructions of Commonwealth countries. It resulted

in a very serious situation. Stocks of jute in East Pakistan and that of cotton in West

Pakistan were accumulating. At that time to rescue the economy of the country, the

Government of Pakistan established National Bank of Pakistan under National Bank of

Pakistan Ordinance 1949. NBP acted promptly and advanced loans to the farmers.

National Bank of Pakistan was set up with authorized and paid-up share capital of Rs.30

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(M). The government held 75% of shareholding and remaining 25% of the share capital

was held by the private sector.

In 1952 NBP replaced Imperial Bank of India. This arrangement was negotiated by Mr.

Mumtaz Hassan as Acting Governor of SBP. In 1962 when Mr. Mumtaz Hassan became

MD (He had already served NBP for 10 years as its Chairman or Government Director), at

that time NBPs branches were increased from 6 to 239 and deposits from Rs.5 core (50

million) to 106 core (1 billion & 60 million), profit from 0.3 million (3 lac) to 21 million

(2.1 core) and the staff increased from 380 to 7091 as compared to year 1949-50. In

December, 1966 its 600th branches was opened raising the deposits to 2.31 billion and staff

to 14, 963. Upto 1965, the shareholders had received 225% of their original investment.

In 1974 during the era of nationalization, different small banks including Bank of

Bahawalpur were merged in National Bank of Pakistan. In addition to this Bank of Mehran

and NDFC were merged in it. National Bank of Pakistan maintains its position as

Pakistan's premier bank determined to set higher standards of achievements. It is the major

business partner for the Government of Pakistan with special emphasis on fostering

Pakistan's economic growth through aggressive and balanced lending policies,

technologically oriented products and services offered through its large network of

branches locally, internationally and representative offices.

National Bank has earned recognition and numerous awards internationally. It has been the

recipient of The Bank of the Year 2001, 2002, 2004 and 2005 Award by The Banker

Magazine, the Best Foreign Exchange Bank Pakistan for 2004, 2005, 2006 and 2007,

Global Finance, Worlds Best Foreign Exchange Bank 2008 awarded by worlds leading

financial journal Global Finance and Bank of the Year awarded for the year2010 by

the world renowned. The Banker magazine owned by the Financial Times Group,

London, Global Finance, Kissan Time Awards 2005 for NBP's services in the agriculturefield. It is listed amongst the Region's largest banks and also amongst the largest banks in

South Asia 2005, The Asian Banker. It has also been presented a Recognition Award

2004 for having a Gender Sensitive Managementby WEBCOP AASHA besides other

awards.

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2.2: NATURE OF THE ORGANIZATION

National Bank of Pakistan maintains its position as Pakistan's premier bank, determined to

set higher standards of achievements. The bank is engaged in providing commercial

banking and related services in Pakistan and overseas. The bank also handles treasurytransactions for the Government of Pakistan (GOP) as an agent to the State Bank of

Pakistan. Under trust deed, the bank also provides services as trustee to National

Investment Trust (NIT) including safe custody of securities on behalf of NIT. 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 1250 branches.

2.3: BUSINESS VOLUME (Rs. In Million)

2006 2007 2008 2009 2010

Revenue 43,789 50,569 60,943 77,948 88472

Deposits 501,907 591,907 624,939 726,465 832,152

Advances 316,110 340,319 412,987 475,243 477,507

Investments 139,947 211,146 120,822 217,643 301,324

2.4: NUMBER OF EMPLOYEES

2006 2007 2008 2009 2010

Permanent 13,434 11,264 11,403 14,796 14,963

Temporary/on contractual basis 775 2,815 3,801 1,452 1,494

Daily wages - - - - -

Commission based - - - - -

Outsourced 1,362 - - - -

Total Staff at the end of the years 15,571 14,079 15,204 16,248 16457

Data Source: National Bank of Pakistan Annual Reports from 2006 to 2010.

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2.5: PRODUCT LINE

Product and Services:

National Bank of Pakistan provides the following main services to its customers:

It acts like a financial intermediary between importers and exporters.

Better computer system through which statement of accounts of a client

could be made rapidly.

Full and efficient services of foreign trade.

It provides services in share of deposits, advances guarantees etc.

Product of a bank includes all those services which a customer can use effectively in

his general and business life.

NBP offer a wide range of banking service to public and private sector corporations,

individuals and others. However, some of these basic services which at present

offered to its customers include:

1. Commercial and Retail banking

2. Corporate & investment

3. Agricultural banking

4. Islamic Banking

5. NBP Cash Card

6. Treasury Product

1) Commercial and Retail Banking:

NBP has the largest retail client base in the country with one of the highest retail portfolios.

The banks retail strategy focuses on its extensive branch network and leveraging the

customer base. In 2009 however due to the high interest rate environment and pressure due

to non performing loans, the consumer advances registered decline.

Despite an ailing economy and adverse macroeconomic factors, the Commercial & Retail

Banking Group (C&RBG) closed 2009 with the key performance indicators being positive.

The absolute domestic deposits base increased by 22% with emphasis on growth in low

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cost deposits. As a major initiative in this direction the bank launched CASA Deposit

Mobilization Scheme in late 2009 aimed at mobilizing Current / Saving Accounts through

incentivizing employees. With the increase in NPLs, the focus on recoveries has been

heightened, along with prudent growth in advances.

SME financing is an area of good future potential. Due to negative impact of high inflation

& interest rates, power shortages, fluctuation in commodity prices and reduction in export

orders, this sector suffered considerable pressure that reduced the repayment capacity of

the borrowers for existing loans and also their willingness to go for fresh financing. Due to

these factors SME loans registered decline.

Commodity support prices were raised by the Government to provide much needed support

and encouragement to the growers and as a result the loans under commodity operations

witnessed robust growth during 2009 and increased by 110% and in 2010 slightly increased

up to 135% just because of banking sector decline along with business sector . These loans

are fully backed by GOP guarantee.

Products

1. NBP Premium Saver

2. NBP Premium Aamdani

3. NBP Saibaan

4. NBP Advance Salary (Personal Loan)

5. NBP Card (ATM + Debit Card)

6. NBP Investment Certificate

7. Cash in Gold (Small Finance)

8. NBP Kisan Taqat

9. NBP Kisan Dost

10. NBP PakRemit

11. NBP Protection Shield

12. Cash Finance (SMEF)

13. Cash Management Services

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14. Rupee traveler cheques

15.Student Loan

Cash in Gold:

Under this type of loan which is granted to the borrower. The Head Cashier estimates the

value of Gold or Gold ornaments through an agent (Gold smith) and keeps a margin of 40

to 50 per cent. After the opening the gold loan account a token is given to the borrower that

is a bank receipt.

On repayment of loan, the gold or ornaments held as security for it, together with the

demand promissory note duly discharged is returned to the borrower and his receipt for the

gold ornament taken in the demand loan ledger. This receipts states that the ornaments

returned are complete and in order. Part delivery of ornaments is given against part

payment of a loan but care is taken that the ornaments still in the banks possession fully

covers the balance of the loan outstanding. The interest on gold loan is to be applied with

quarterly rests.

Features:

Facility of Rs. 35, 000/-against each 10 gms of net weight of Gold Ornaments

Markup Rate 15.50% P/A

No maximum limit of cash

Repayment after one year

Renewal facility

Weight and quality of gold to be determined by NBP's appointed schroffs

No penalty for early repayment

Required Documents:

Application form

Introductory reference sanction advice

Valuation certificate by gold smith

Insurance letter

IB-12 (Promissory Note)

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IB-26 (Letter of Pledge)

IB-6A (Agreement Form)

Delivery letter(f.205)

Only N.B.P. performs the function of advancing of loan against pledging gold. No other

bank advance gold pledged loan.

ADVANCE SALARY:

This loan is given to those peoples who are permanent employees of Government, Semi

Government, Autonomous bodies and receive salaries through NBP account. They can get

a loan up to the salary of twenty months, no minimum income collateral or insurance

charges are required and maximum loan limit is Rs.250,000. Payment period is 1 to 60

months at your choice and mark up rate is 19% p.a.

Cash Finance:

Under this type of credit N.B.P grant loan to its customers in cash. Under the cash

credit arrangement a customer is granted an advance up to certain limit which is sanctioned

by the head office, which he can draw time to time as required by him. In this case, a new

cash credit account is opened in the name of customers. These are long term loans.

Features:

3 Month KIBOR + 4.25%

Quarterly Payment

Time Period One Year

No Maximum Limit for Cash Finance

Securities:

Hypothecation of stock

Mortgage of properties

Personal guarantees of all the partners of directors and owners of property.

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NBP Card (ATM + Debit Card):

This facility provides by the NBP very efficiently, you can withdraw cash up toRs.20,000/- per day. Automatically account balance inquiry, mini statement and NBP also

provides PIN Change facility.

Automated Teller Machine enables a customer to perform basic banking activities

(checking balance, withdrawing or transferring funds) even when the bank is closed.

A card entitling the owner to make automatic withdrawals from a bank account to make

purchases or to receive cash. That is, when one uses a debit card, the issuing bank

transfers funds from the holder's account to the seller electronically. The holder of a debit

card may therefore use it tobuy a good or service.

NBP Premium Aamdani:

Under this scheme you can earn up to 11.25% per year and for this return minimum

amount must be Rs. 20,000/- and maximum deposit of Rs. 10,000,000/- for 5 years. This

scheme is also provide the running finance facility up to 90% of deposit value and free cost

services for Demand Draft, Pay Order, NBP Cash Card (ATM + Debit) and Cheque Book.

It is also called monthly income scheme. Profit paid every month as follows:

Year Profit Rates (%)

1st 11.25

2nd 11.50

3rd 11.75

4th 12.00

5th 12.25

NBP Karobar:

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Thisscheme is also called Presidents Rozgar Scheme and has been specifically designed

for the low income segment of the population who are not in a position to run your

business. Under this scheme you can get up to Rs. 200,000/- for tenure 1 to 5 years (for

PCO 2years) and the age for gaining the loan is 18-45 years. The customer can get three

months grace period facility. The mark up is 1 year KIBOR + 2% p.a (for the first year

mark up will be 12%) and the customer will pay markup at 6% p.a as long as GOP

provides the balance mark up to NBP on a monthly basis (rest will be borne by GOP). The

customer life and disability insurance is paid by Government of Pakistan (GOP).

NBP give loan for self employment in following categories:

NBP Karobar Utility Store

NBP Karobar Mobile Utility Store

NBP Karobar Mobile General Store

NBP Karobar Transport

NBP Karobar PCO

NBP Karobar Tele-Centre

Required minimum down payment is 10% of asset and 5% for PCO and Tele-Centre.

STUDENT LOAN:

This scheme is especially designed for those students who are not in a position to continue

their study due to finance problem and under this scheme interest free loan is give to

students who have obtained 70% marks in the last public examination, age not exceeding

20 years for graduation, 30 years for post-graduation and 35 years for Ph.D at the time of

admission and are unable to pursue their studies within Pakistan due to financial

difficulties. Loan is granted only to those students who have been admitted to the approved

under noted Affiliated Colleges /Universities selected subjects. The detail of subjects is as

under:

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Engineering

Oil Gas & Petro-Chemical Technology

Medicine

Chemistry

Mathematics

DAWA and Islamic Jurisprudence (LL.B/ LL.M Sharia)

Economics, Statistics and Econometrics

Commerce

Electronics

Agriculture

Physics

Biology, Molecular Biology & Genetics

Other Natural Sciences

Computer Science/ Information System and Technology including hardware.

Business Management Sciences

ELIGIBILITY:

Under the scheme the students are eligible to apply for loans provided.

He/She has obtained admission on merit through normal course/procedure in theapproved Universities/Colleges of the public sector mentioned hereunder.

He/She falls at the time of admission within the age bracket of.

For Graduation Not exceeding 21 Years

For Post-Graduation Not exceeding 31 Years

For Ph.D Not exceeding 36 Years

He/She has secured 70% marks in the last public examination.

He/She has undertaken the study of the subjects given below.

He/She is unable to pursue studies due to financial constraints.

TYPES OF LOAN

The loan facility will be available for entire duration of the study for

Schedule Fee Paid directly to the

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University/CollegeBoarding expenses excluding meal charges

Procurement of textbooks--- Disbursed directly to the student

The loan facility will be available for entire duration of the study for Institution fee and

boarding expenses excluding meal charges are paid directly to Institution and the expenses

of purchasing textbooks are directly paid to the student.

The maximum period of repayment of loan is 10-Years from the date of disbursement of

first installment .The borrower shall repay the loan in monthly installment after six months

from the date of first employment or one year from the date of completion of studies,

whichever is earlier.

The following documents are required for processing the loan:

1) Attested copies of all Education Certificates, Domicile, Computerized NIC, and

Three Photographs.

2) A certificate from the Vice Chancellor/Principal/Registrar of concerned University

Letter Head confirming date of admission and completion date of study.

3) Attested Photocopies of fee challan demanded by the Institution and Boarding

expenses excluding meal expenses.

4) Four un-stamped self-addressed envelope (5 X 11)

TRAVELER CHEQUES:

When a traveler proceeds from one place to another he needs money at different places.

The remittances explained so far will be available to the beneficiary only at a particular

place, and that too all in one time; whereas the requirement of a traveler may be otherwise.

National Bank of Pakistan has designed its own travelers cheques to be used in Pakistan

only. For different denominations their colors are different.

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The denominations of travelers cheques provided by National Bank of Pakistan are:

Rs.5, 000/-Rs.10, 000/-Rs.50, 000/-Rs.100, 000/

-The face of Traveler Cheque consists of:

Signature of the purchaser, Name of the purchaser, Name of issuing office and the date of

issue

On the back of the cheque this can preferably be done by means of small rubber stamp.

Application for the purchase of the cheque application forms is taken. The original remains

with the issuing office as voucher and the duplicate is passed to the main branch of the

bank where account of bank is kept.

Recording:

The issuance of cheque is recorded in the travelers cheque issue register .The total amount

of T.C. sold is credited to the main branch of the bank and the exchange charged credited

to the branch exchange account.

Delivery:

The travelers cheques are delivered to the purchaser in thick cardboard cover for their

safety.

NBP PREMIUM SAVER:

Under this scheme the Profit and d Loss Saving Account (PLS) is introduce.

PLS Saving account:

In profit and loss saving account you can earn up to 8.50% per year and for it minimum

balance should be Rs. 20,000/- and maximum balance of Rs.1,000,000/-.The Depositor will

have the flexibility to withdraw a part or the whole of their balances at any time as per their

requirement and there is no limit on number of deposit transactions.

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Profit calculated on monthly basis and paid on half yearly basis. The Bank will give profit

to the Depositors on the basis of agreed ratio of actual profits to be announced by the Bank

from time to time.

In the case of financial loss, the depositors will bear the loss in proportion of their

investment. The Depositors will not participate in the management of the business of the

Bank other terms and conditions as well as rules for PLS Deposit Account to be advised by

the Bank at the time of opening of Account.

2) Corporate and Investment:

Corporate & Investment Banking Group enjoys robust relationship with premier corporate

clients. The length and breadth of corporate clientele has been built on corporate strategy of

providing comprehensive and customized financial solutions to corporate customers.

Varied banking and investment products are offered to the corporate clients:

Working capital financing

Infrastructure project financing

Structured and syndicated financing,

Divestitures financing

Financial restructuring,

Mergers financing

Acquisitions assignments associated financing solutions

This group facilitated 122 projects and syndicate financing proposals which were mainly in

financing for energy and power sectors. Advisory fee on corporate finance was a major

contributor as the bank executed a number of large transactions in the energy and

infrastructure projects. The bank also focused on increasing trade finance income by

leveraging the banks relationship with clients.

Corporate & Investment Banking Group is geared to take advantage of tremendous growth

potential of corporate accounts and continued its efforts to remain a major contributor to

the banks earnings. It is striving to market new clients and retain the existing relationships

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and build market share through offering superior services, competitive pricing and wide

product range to valued corporate clients.

3) Agriculture Finance:

The bank aims to cater to the entire farming and non-farming agriculture business and

provides finances ranging from short to long term for the production and development of

crops and non-crop items for agriculture business related to packing, grading, processing,

storage, marketing and exports.

Pakistans rural economy has high growth potential and offers attractive opportunities. The

banks product and services are offered to address the needs of both the farm and nonfarm

sectors. Presently, the agriculture financing facility is offered under the product category of

NBP Kisaan Dost where 30 agriculture financing schemes are offered.

The importance of agriculture financing cannot be over emphasized as agriculture is key to

Pakistans future. Rural banking in Pakistan is in nascent stages and deployment of

technology and modern banking channels continue to be an evolving process.

NBP Kisaan Dost:

The Kisaan Dost Agriculture Farming Program (KDAFP) has been designed to meet credit

requirements of farmers on the most convenient, flexible, easy terms and conditions. The

program features:

Competitive mark-up rate 16.5% p.a

Quick & easy processing

Delivery at the farmers doorstep

Technical guidance to farmers

Wide range of financing schemes for farmers

Finance facility up to Rs. 100,000/- for landless farmers against personal guarantee

Financing available against pass book, residential/commercial

property, gold ornaments and paper security

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Loan facility on revolving basis for three years (renewable on yearly basis without

documentation and approval)

4) 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

Karachi, Lahore and Peshawar.

The bank believes that Islamic Banking offers good potential for growth. The bank has

opened eight (8) branches since 2007, of which three were opened in 2009. During the last

two years its asset size has grown significantly with offering of market-driven products like

Murabaha and Ijarah. Islamic Banking is making its mark by catering to the Banks alreadyexisting large customer-base as well as exploring new and untapped markets including

SME, Commercial and Corporate. Islamic Banking is developing policies for new products

like Diminishing Musharikah, Salam and Istisna to meet customers needs. The overall

operations showed loss as a result of higher start up cost of three new branches opened this

year.

Commercial and Corporate customers requiring financing will have the following financing

facilities available to them to meet their requirements:

Murabaha:

Murabaha may be defined as a contract between a Buyer and Seller under which the Seller

discloses to the Buyer the cost of goods being sold and adds an agreed profit. Price is

payable on spot or at a certain future date, in lump sum or in installments (deferred

payments).

Murabaha Facility:

Under the MURABAHA FACILITY, the Bank will first purchase the required

goods directly or through an Agent. All costs incurred on such purchases will be

borne by the Bank.

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Subsequently the Bank will sell the goods to the customer on deferred payment

basis (30 days to one year) at an agreed price comprising cost of goods purchased

and Bank's profit.

On due date the customer will pay to the Bank the agreed price, in lump sum or as

per the agreed installment schedule.

Ijarah (Leasing):

Ijarah means to give something on rent. The term IJARAH is analogous to the English

term leasing.

Firstly the Bank will purchase the Assets as required by the Customer and subsequently the

assets will be leased to the Customer on the terms and conditions as agreed with him.

Ijarah Facility will be offered for the following assets:

Vehicles (both Commercial and Private)

Office Equipment

Plant and Machinery

5) ATM + Debit Card:

This facility provides by the NBP very efficiently, you can withdraw cash up to

Rs.20,000/- per day. Automatically account balance inquiry, mini statement and NBP also

provides PIN Change facility.

Automated Teller Machine enables a customer to perform basic banking activities

(checking balance, withdrawing or transferring funds) even when the bank is closed.

A card entitling the owner to make automatic withdrawals from a bank account to makepurchases or to receive cash. That is, when one uses a debit card, the issuing bank

transfers funds from the holder's account to the seller electronically. The holder of a debit

card may therefore use it tobuy a good or service.

6) Treasury Product:

27
http://www.businessdictionary.com/definition/automated-teller-machine-ATM.htmlhttp://www.businessdictionary.com/definition/automated-teller-machine-ATM.htmlhttp://www.investorwords.com/5877/customer.htmlhttp://www.investorwords.com/10596/perform.htmlhttp://www.investorwords.com/5413/banking.htmlhttp://www.investorwords.com/92/activity.htmlhttp://www.investorwords.com/390/balance.htmlhttp://www.investorwords.com/2130/funds.htmlhttp://www.investorwords.com/9197/closed.htmlhttp://financial-dictionary.thefreedictionary.com/Withdrawalhttp://financial-dictionary.thefreedictionary.com/Bank+Accounthttp://financial-dictionary.thefreedictionary.com/Cashhttp://financial-dictionary.thefreedictionary.com/Fundinghttp://financial-dictionary.thefreedictionary.com/Buyhttp://www.businessdictionary.com/definition/automated-teller-machine-ATM.htmlhttp://www.investorwords.com/5877/customer.htmlhttp://www.investorwords.com/10596/perform.htmlhttp://www.investorwords.com/5413/banking.htmlhttp://www.investorwords.com/92/activity.htmlhttp://www.investorwords.com/390/balance.htmlhttp://www.investorwords.com/2130/funds.htmlhttp://www.investorwords.com/9197/closed.htmlhttp://financial-dictionary.thefreedictionary.com/Withdrawalhttp://financial-dictionary.thefreedictionary.com/Bank+Accounthttp://financial-dictionary.thefreedictionary.com/Cashhttp://financial-dictionary.thefreedictionary.com/Fundinghttp://financial-dictionary.thefreedictionary.com/Buy


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Pakistan Investment Bonds issued by Government of Pakistan are a preferred means for a

majority of institutional investors to invest their surplus funds for a longer time horizon.

This way they are able to lock a higher yield for a relatively long term rather than take the

risk of re-pricing after relatively shorter time periods. Furthermore, PIBs are highly secured

and risk free as they are guaranteed by the government of Pakistan.

NBP is the leading Primary Dealer for PIBs primarily because of its inventory size and the

appetite for such a long-term instrument given its deposit base. While most foreign /

private banks would have to go to the secondary market in order to satisfy a large order

from an institutional investor, NBP can execute such large orders through its own book.

This means that it can offer tight prices for large amounts even under volatile market

conditions.

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Review of Various DepartmentsReview of Various Departments

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Chapter No. 3

Review of Various DepartmentsReview of Various Departments

VARIOUS DEPARTMENTS OF THE ORGANIZATION

This Group is responsible for serving the needs of large corporate clients in public and

private sector, managing correspondent banking relationships and undertaking money

market transactions. The Group is organized in the following divisions:

CREDIT DIVISION:

The main function of this division is to make the credit policies, and also to do credit

ceiling which means the max amount of credit that can be given to a certain client. This

division also looks for the agricultural and small loans. It also considers the cases of right

off i-e bad debts.

CORPORATE CREDIT DIVISION:

The major function of this division is to handle the big loans and industrial financing,

I.B.R.D. It also does the evaluation of credit ceiling policy devised by the credit division.

INTERNATIONAL DIVISION:

This division has to look after the administration of National Bank of Pakistan outside

Pakistan. It takes care of all the affairs about the advances given outside, the management

of the branches of the bank outside Pakistan, the posting of employees outside Pakistan etc.

RECOVERY AND LITIGATION DIVISION:

This division comes into operation when recovery of advances given becomes difficult or

impossible. It is the job of this division to decide whether to go court against the client or

not.

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AUDIT AND INSPECTION DIVISION:

The major function of this division is to carry out the inspection of rules and policies.

It also inspects the books of accounts, whether they are kept rightly or not.

The bank has an independent Internal Audit group that Conducts audit of all Branches

Regions and Groups at Head Office ongoing basis to evaluate the efficiency and

effectiveness of Internal Control System. In addition to that Compliance group is also in

place with independent Compliance Officer in 119 Branches and 29 regional Compliance

Chiefs with supporting staff to take care of compliance related issues to strengthen the

control environment.

For year 2008 the bank has made its best efforts to ensure that an effective Internal Control

system continues to perform in letter and spirit. The observation made by the external

auditors is reviewed and measures are taken by the management to address the internal

control.

It is asses that the internal Control environment is showing signs of improvement as

compared to previous years in all areas of the bank. The bank endeavoring to further refine

its internal control design and assessment process as per guidelines issued by the State

Bank of Pakistan. Accordingly Bank is making all possible efforts to improve the

professional skills and competency level of the staff through need based training programs

Treasury Management:

NBP has the largest treasury in terms of size. Its function includes liquidity, exchange and

interest rate management. The Bank is a major player in the foreign exchange and money

market and is a primary dealer of government securities. It has the capability to offer

structured products to its customers, including derivatives. For the banking industry, the

year was very volatile in terms of interest rates, varying liquidity conditions, global credit

tightening, depreciation of Pak Rupee and high inflation resulting in significant movements

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in yield curve. Treasury Management Group actively managed its portfolio and optimized

yields.

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ADMINISTRATION DIVISION:

This division consists of two wings the personnel wing and establishment wing.

The personnel wing concerns with employee welfare and administration. It looks after

things like rules relating to the administration of employees, the medical bills etc. There is

also a disciplinary cell, which is for punishments if an employee does something wrong.

The establishment wing has a main function of controlling the debt stock i-e furniture,

transport facility, stationary, sports portfolio, security arrangements, and staff welfare.

RESEARCH CORPORATE PLANNING AND HUMAN RESOURCE

DEVELOPMENT DIVISION:

Their main job is to do human resource management. For this purpose there are staff

collages in Pakistan. There are four of them. They give training to employees outside

organization and also outside the country. In 1998 National Bank of Pakistan staff collages

have trained about 7992 employees out of which 321 were executives 5553 officers and

1878 other staff. Outside National Bank of Pakistan they trained 128 executives, 113

officers and 2 other staff. They have their own staff and also engage faculty from Punjab

University and LUMS

ENGINEERING AND MAINTENANCE DIVISION:

The job of this division is maintenance of buildings, construction of projects, project

designing. The head of this division is an engineer who has designation of executive vice

president.

FINANCE AND INVESTMENT DIVISION:

It looks after the accounts, investment in resources and decides where to allocate the

surplus funds.

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CUSTOMER SERVICES DIVISION:

The main job of this division is to manage the opening and closing of branches,

Islamization policy, then there is a complaint cell where the customers make the complaints

if they are not treated well. This division also accepts Hajj application. This division is very

important as it directly concern the customers who are the ones to make the deposits, which

the bank invests.

BUSINESS PROMOTION AND MARKETING DIVISION:

It concerns the marketing and selling of the policies and interest rates of National Bank of

Pakistan through advertisements on television or in the papers etc.

LAW DIVISION:

This division consists of an executives committee and an Evaluation committee. Their job

is documents evaluation and they give legal opinion to recovery and litigation division also.

COMPUTER DIVISION:

This division does data processing through computers and develops control systems. All

these divisions perform their functions through the branches and they are located at the

head office in Karachi.

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Structure and functions of accounts DepttStructure and functions of accounts Deptt

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Chapter No. 4

Structure and functions of accounts deptt.Structure and functions of accounts deptt.

4.1: STUCTURE OF ACCOUNT DEPARTMENT

Branch Manager

Mr. Asim Waseem

Operational Manager

Muhammad Sarfraz Arshad

Incharge Account Department

Mr. Assad Abbas

ACCOUNTS DEPARTMENT:

The main function of the accounts department of NBP is to maintain general ledger

accounts and after the business hours the function of the accounts officer is to close books.

FUNCTIONS

There are many other important functions performed by accounts department of NBP. So Iam going to discuss these functions in three steps:

General Ledger

Voucher system

GENERAL LEDGER:

It is the prime record of the branch reflecting its assets and liabilities and serves as the

master control of accounting system of the branch. It consists of only those accounts,

which are authorized by the head office.

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VOUCHER SYSTEM:

Voucher is a written authorization sued in approving a transaction for recording and

payment.

Voucher is a system, which is generally designed to provide strong internal control

over the transaction, which takes place during the business hours.

Whenever a transaction takes place in any department of the bank.

One debit and one credit voucher is prepared. At the end of the day, these vouchers

are collected and recorded i.e.,

Debit vouchers are used in two cases

-Whenever any expense is incurred.-When a depositor withdraws some amount from his account

-The account of the customer is debited with the amount and debit

voucher is prepared.

The format of the debit voucher includes:

-Name of branch

-Date-Branch No.

-Account No.

-Transaction Code

-Amount and other details (Narration)

CREDIT VOUCHERS:

There are two types of transaction in which credit vouchers are used.

When a depositor deposits any amount in his account because the liability of bank.

Any income received by the bank e.g. bank draft.

Different types of credit vouchers are used.

Now in second set these three important functions of Account department of NBP

are described briefly.

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All expenses vouchers are routed ask through Accounts Department.

Preparation of various statements.

Preparation daily activity report at the end of each day.

EXPENSE VOUCHER

All the expense vouchers passed by each department are routed through accounts

department. These expenses include:

Salaries given to all employees of the bank

Wages

Rent

Lease installments

Insurance - vehicle

Insurance - cash

Utility Bills

Medical allowances (reimbursed)

Cash carrying charges etc.

SALARY STRUCTURE:

Salary included the following:

Bonuses

These bonuses are credited after every six months i.e. June and December. These are first

and second profit bonuses and are equal to one month's basic salary.

Allowances:

Allowances included house allowances, transport allowance and utility allowance.

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Provident Fund:

Provident fund is provided to each employee on his retirement. Contribution by employer

and employee is 8.3%.

Preparation of statements:

Second major functions of accounts department are the preparation of various

statements. These statements are:

1) Weekly Statements:

These weekly statements are sent at first to NBP head office Karachi.

2) Monthly Statements:

These monthly statements are sent at first to NBP head office Karachi and then

these statements are sent to head office affairs in consolidated form. All vouchers

and statements signed and approved by manager accounts or who has authority to

sign on behalf of the bank and whose signatures appear in one of the banks book of

specimen signatures or a person who has authority to sign internal vouchers and

records extent of its authority will be made by the country manager.

PREPRATION OF DAILY ACTIVITY REPORTS:

It is also duty of accounts department to prepare daily activity report at the end of each day.

It includes the details of the following:

Loans transactions

General Ledger transactions

Foreign currency related transactions

Fixed deposits transactions

All vouchers prepared by different relative departments on computer.

In third and last step the following functions of accounts department of NBP are described

as follows:

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Approval of daily expenses voucher

SBP balance

Tax returns

Budgeting

Forward Cover Fee

Debit Balance Calculation

Pay order/telegraphic commission transfer

Deposit entry

Depreciation

Result/budget

Head office report

Trial balance

Commitment return

Sources and uses

Activity report

Statistics of activity

Monthly assets and liability

Liquidity 1, 2, 3, 4, 5 years

Excise duty balancing

EOM/EOY Print files floppy

Customer's/internal A/c statements

Computer complete back up

Quarterly statements size wise

FCY interest reporting

FCY interest checking

Service Charges

A/c to be dormant

Letters to customers

Classification of deposits

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List of deposits

A/c opening and closing

Staff loans

A/c blocked and unblocked

Monthly resident and non resident

Zakat Calculations.

4.2: ACCOUNTING PROCEDURE IN NBP:

Various departments use debit and credit voucher for recording the transactions.

Accounting department receives the departmental journal from the departments to

gather with all the vouchers.

Verify correction of total of all into departmental entries in departmental journals.

Sort vouchers into general ledger a/c order debit separately from debit for each

account.

From departmental journals add all debits and all credits for each general ledger

account and write total for each account in relative account and extend new

balances.

Prove debit and credit totals to department journal total. Write total obtained from

machines list for each contingent accident in general ledger and up data balances.

4.3: ROLE OF FINANCIAL MANAGER

The financial manager does all financial transactions with other financial institutions:

Payment of cheques

Payment of demand draft

Cash receive from other financial institutions

Included

Cheques

Demand Draft

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Travel Cheques

All these transactions done by financial manager of bank, he can receive and pay all such

kind of payments with all other financial institutions. And all other transactions with any

financial institutions are also done by financial manager.

Lend money to other banks and also borrow money from other banks is also responsibility

of financial manager in bank.

Preparing the bank's annual accounts and coordinating external audit is also a direct

function of the finance manager.

4.4: ELECTRONIC DATA IN DECISION MAKING

Banks use different types of electronic data in decision making. Internet is the major source

for collecting data. With the help of internet and intranet banks perform their lot of

transactions and it make possible to do E banking.

Electronic data which is most useful in decision making include

D.D. System:

Data related to computerized demand draft also include in decision making in banks

Computerized D.D. includes electronic and hard copy demand draft.

O.B.C (Outward Bill for Collection):

Banks add data of cheques which is sent by bank to other banks for collection.

Electronic Reports:

After getting information from ATM and Emails banks make electronic reports.

Such kinds of reports are very helpful in decision making.

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Software used by Bank:

Functions on Software

Debit and Credit

Transfer balance

Account Opening

Electronic Vouchers

Commission Charges

Cheque Book charges

Closing Format (day end)

Weekly Format

Basic Data (monthly closing report)

Monthly tax statement

Zakat Deduction

Enquiry Statements

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4.5: SOURCES OF FUNDS FOR LAST FIVE YEARS

Rupees in 000

2005 2006 2007 2008 2009 2010

Customers:

Fixed deposits 80,924,830 100,017,399 128,403,278 14,949,041 194,731,591 218,559,101

Savings deposits 165,513,085 170,256,433 188,687,111 179,807,400 196,373,780 266,342,659

Current accountsRemunerative

54,519,134 54,359,662 76,708,879 50,893,400 741,133,946 68,393,177

Current Accounts Non

Remune.

102,690,939 119,468,864 139,868,016 143,216,221 169,043,847 194,393,878

Financial Institutions:

Remunerative deposits 38,174,088 39,196,100 31,180,729 38,438,503 48,428,983 31,232,041

Non-remunerative

deposits

21,604,526 18,573,785 27,059,422 70,634,451 43,752,678 53,231,032

Particulars of Deposits:

In Local Currency 357,033,410 390,605,310 486,881,474 470,716,922 575,078,424 688,966,742

In Foreign Currency 106,393,192 111,266,933 105,025,961 154,222,094 151,386,401 143,185,146

Total Deposits 463,426,602 501,872,243 591,907,435 624,939,016 726,464,825 832,151,888


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4.6: GENERATION OF FUNDS FOR LAST FIVE YEARS

INVESTMENTS

Rupees in 000

2006 2007 2008 2009 2010

Fully Paid up Ordinary

Shares

2,090,780 3,036,763 4,389,715 16,252,173 19,903,410

Federal Govt.

Securities

79,449,271 148,738,405 123,203,207 143,304,875 200,294,506

Provincial Govt.

Securities

36,513 36,513

- -

-

Foreign Govt.Securities

5,618,324 5,418,086 4,807,856 1,602,171 20,440,171

Investment in

Associates

9,79,864 959,669 959,669 1,185,085 1,645,129

Investment in Joint

Ventures

1,312,335 1,312,335 1,312,335 2,412,261 2,574,164

Investment in

subsidiaries

1,352,458 1,352,458 1,352,458 1,939,953 2,274,306

Debenture, Bonds,

Partici. Term

Certificate and TermFinance Certificates

4,595,982 4,508,548 2,808,298 10,613,109 3,368,961

Mushkara, Foreign

Currency Debts

Securities and Sukuk

Bonds

7,959,446 6,454,359 17,695,681 29,914,446 61,799,389

Other/ Outside

Pakistan Investments

10,698,378 8,614,636 11,175,276 4,284,602 4,363,295

Total investment at

cost

114,093,351 167,708,327 180,431,772 210,279,084 298,732,672

Less: Provision for

Diminution in value of

Investment

(1253429) (1542273) (1173593) (2141534) (6,720,091)

Investments (net ofprovisions)

112,839,922 166,166,054 179,258,179 208,137,550 292,012,581

Surplus/Deficit on

revaluation of held for

(4464) 1707 (31964) 2355 6,730

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Sale Securities

Surplus on

revaluation of

Available for sale

Securities

27,111,537 4,654,730 31,919,823 9,502,917 9,304,493

Total investments at

carrying value:

139,946,995 170,822,491 211,146,038 217,642,822 301,323,804


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4.7: ALLOCATION OF FUNDS FOR LAST FIVE YEARS

ADVANCES

Rupees in 000

2006 2007 2008 2009 2010

Loans, cash credits, running

finances, etc.

330,945,727 354,963,801 435,142,715 508,035,607 506,703,380

Bills discounted and

purchased

17,384,518 18,817,686 22,492,752 22,765,823 31,905,816

Margin Financing /Financing

in respect of continuous

funding system

40,213 1,308,715 192,562 60,963

-

Advances gross348,370,458 375,090,202 457,828,029 530,862,393 538,609,196

Less : Provision against non

performing advances

(32,260,052) (34,413,102) (44,841,164) (55,618,962) 61,102,632

Net Advances 316,110,406 340,677,100 412,986,865 475,243,431 477,506,564

LOANS

Rupees in 000

2006 2007 2008 2009 2010

Call money loans 8,014,000 2,306,676 3,529,000 1,153,000 1,006,015

Repurchase agreement lending14,998,73

2

19,157,92

4

13,461,03

2

18,356,17

621,932,156

Purchase under resale arrangement

of equity securities- - -

--

Letter of placements - - 186,000 174,000 246,500

Others - - - -

Total Loans 23,012,732 21,464,600 17,128,032 19,587,176 231,846,671


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CRITICAL ANALYSIS OF PRACTICALCRITICAL ANALYSIS OF PRACTICAL

EXPERIENCE RELATING TO THE THEORETICALEXPERIENCE RELATING TO THE THEORETICAL

CONCEPTSCONCEPTS

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Chapter No. 5

CRITICAL ANALYSIS OF PRACTICALCRITICAL ANALYSIS OF PRACTICAL

EXPERIENCE RELATING TO THE THEORETICALEXPERIENCE RELATING TO THE THEORETICAL

CONCEPTS:CONCEPTS:

During our education we study many subjects but during any job applications of all these

subjects are not possible. But some of them must apply in any job/ business.

Organizations must follow theoretical concepts but its not possible to apply as well as. Its

possible they use such concepts in their own way.

So during my MBA I study 20 subjects but I observe that few of them applicable in bank

like FINANCIAL MANAGEMENT, COST ACCOUNTING, INVESTMENTS,

FINANCIAL ACCOUNTING, CREDIT MANAGEMENT, and BANKING LAW.

Which concepts I study during my college work, I observe during my internship bank also

apply these concepts. I am not saying that they apply as well as but they follow such rules

and laws. For example we study about bank accounts, bank also follows such rules but they

divide the features of such accounts according to their products.

Theoretical concepts are relating to the rules of state bank of Pakistan and the banks also

work under the SBP.

Theoretical concepts about debit, credit, vouching, general entries, ledgers, financial

statements have the same application in bank.

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Financial AnalysisFinancial Analysis

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Chapter No. 6

Financial analysisFinancial analysis

6.1: FIVE YEAR LATEST BALANCE SHEETS

Rupees in 000

ASSETS:

2006 2007 2008 2009 2010

Cash and Balance

with Treasury Banks

78,625,227 94,873,249 10,6503,756 115,827,868 115,442,360

Balance with other

banks

40,641,679 37,472,832 38,344,608 28,405,564 30,389,664

Lending to financial

institutions

23,012,732 21,464,600 17,128,032 19,587,176 23,025,156

Investments 139,946,995 211,146,038 170,822,491 217,642,822 301,323,804

Advances 316110406 340318930 412,986,865 475,243,431 477,506,562

Operating fixed

Assets

9,681,974 25,922,979 24,217,655 25,147,192 26,888,227

Deferred tax assets - - 3,204,572 3,062,271 6,952,666

Other Assets27,113,698 30,994,965 44,550,347 59,316,438 53,496,240

Total Assets 635,132,711 762,193,593 817,758,326 944,232,762 1,035,024,680

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LIABILITIES:

2006 2007 2008 2009 2010

Bills Payable 10,605,663 7,061,902 10,219,061 10,621,169 8,006,630

Borrowings 11,704,079 10,815,176 40,458,926 45,278,138 20,103,590

Deposits and other

accounts

501,872,243 591,907,435 624,939,016 726,464,825 832,151,888

Sub-ordinate loans - - - -

Liabilities against

assets subject to

finance lease

13,235 33,554 25,274 42,629 106,704

Deferred tax

liabilities

2,387,073 5,097,831- -

Other liabilities 26,596,300 30,940,041 39,656,831 42,269,623 46,160,040

Total Liabilities 553,178,593 645,855,939 715,299,108 824,676,384 906,528,852

NET ASSETS 81954118 116337654 102459218 119556378 128,495,828

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6.2: LATEST FIVE YEAR INCOME STATEMENTS

Rupees in 000

2006 2007 2008 2009 2010

Mark_up/Return/Interest

earned

43,788,62

8

50,569,481 60,942,79

8

77,947,697 88,472,134

Less,

Mark_up/Return/Interest

expense

13,634,91

2

16,940,01

1

23,884,76

8

39,489,649 45,250,476

Net markup/Interest

income

30,153,71

6

33,629,47

0

37,058,03

0

38,458,048 43,221,658

Provision againstnonperforming loan and

advances

3,075,723 4,723,084 10,593,565 11,043,469 7,011,046

Provision for diminution in

the value of investments-net

(709,461) (40,248) 373,249 605,629 2,954,678

Provision against off

balance sheet obligations

- - 4,000 20,237 3,965

Bad debts written off

directly

5,284 39,899 - - -

Total2,371,546 4,722,735 10,970,81

4

11,669,335 9,969,689

Net markup / Interest

income after provision

27,782,170 28,906,735 26,087,216 25,788,713 33,251,969

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Add Non markup /Interest income:

2006 2007 2008 2009 2010

Fee, Commission &

Brokerage income

6,144,628 6,781,683 7,925,370 8,930,391 9,631,579

Dividend income 2,891,755 3,263,246 2,878,932 1,920,336 1,099,493

Income fromdealing in foreign

currency

1,333,840 1,042,827 3,969,057 3,028,165 2,211,139

Gain on sale and

redemption ofsecurities-net

1,365,771 2,341,690 39,5427 4,591,894 2,512,363

Un realized

loss/gain on

revaluation ofinvestments

(4,464) 31,964 1,707 2,355 6,730

Other income 627,618 147,363 1,245,369 552,216 2,171,336

Total non

markup/interest

income

12,162,892 13,544,845 16,415,862 19,025,357 17,632,640

39,945,062 42,451,580 45,814,070 44,814,070 50,884,609

Less Non markup/interest expenses:

Administrative

expenses

13,443,441 14,205,911 18,171,198 22,571,470 26,202,577

Other provisions /

write offs

(17,283) 168,027 747,521 620,780 148,026

Other charges 208,327 17,141 583,361 321,647 118,887

Total expenses 13,634,485 14,391,079 19,502,080 23,513,897 26,469,490

Profit before tax 2,631,057 28,060,501 23,000,998 21,300,173 24,415,119

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Less Taxation:

Current year 8,695,598 8,311,500 1,1762,650 8,871,513 9,835,048

Prior years 530,652 391,497 - (4,133,282) (939,256)

Deferred 61,981 323,731 (4,220,242) (999,904) (2,043,887)

Total Tax 9,288,231 9,026,728 7,542,408 3,738,327 6,851,905

Profit after tax 17,022,346 19,033,773 15458590 17,561,846 17,563,214

Un-appropriated

profit brought

forward

19,372,523 32,074,677 45,344,188 52,456,204 60,696,510

Transfer from

surplus on

revaluation of fixed

assists on A/C of

incremental

depreciation

- 39,007 130,456 123,934 117,738

Profit available for

appropriation36,394,869 51,147,457 60,933,234 70,791,984 78,377,462

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6.3: RATIO ANALYSIS FOR THE LAST FIVE YEARS

CURRENT RATIO

Formula = Current Asset / Current Liabilities

Rupees in 000

2006 2007 2008 2009 2010

Current Assets 119,266,906 132,346,081 144,848,364 144,233,432 145,832,024

Current

Liabilities

512,477,906 598,969,337 635,158,077 737,085,994 840,158,518

Ratio 0.23:1 0.22:1 0.23:1 0.20:1 0.17:1

Interpretation:

General and quick way to measure the liquidity of a firm current ratio is highly used. A

relatively high current ratio is an indication that the firm is liquid and has the ability to pay

its current obligations in time as and when they due and on the other hand, a relatively low

current ratio represents that the liquidity position of the firm is not good and firm wouldnt

be able to pay its current liabilities in time without facing difficulties.

There is large difference in the current assets and current liabilities of the bank in this

assessment period and it is not a good sign for the bank at all.

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DEBT TO EQUITY RATIO

Formula = Total Debt / Share holder Equity

Rupees in 000

2006 2007 2008 2009 2010

Total Debt 553,178,593 645,855,939 715,299,108 824,676,384 906,528,852

Share holder

equity

53,044,649 69,270,631 81,367,002 94,791,919 103,762,000

Ratio 10.4:1 9.3:1 9.8:1 9.7:1 8.8:1

Interpretation:

This ratio indicates the proportionate claims of owners and the outsiders against the firms

assets and provides a short picture of financial position of the firm. The purpose is to get an

idea of the cushion available to outsider on the liquidation of the firm.

There is high ratio in 2006 and then begin to decrease from 2006 to 2010. High ratio in

2010 is a good sign for organization.

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CAPITAL ADEQUACY RATIO

Formula =Total eligible regulatory capital/ Total Risk Weighted

Assets

Rupees in 000

2006 2007 2008 2009 2010

Total eligible

regulatory

capital

68,258,037 92,905,004 90,222,627 107,781,74

0

115,025,272

Total riskweighted

assets

413,634,331 462,360,580 543,214,422 625,211,356 667,501,605

Ratio 17% 20% 17% 17.24% 17.23%

Interpretation:

Risk weighted assets to capital ratio, calculated in accordance with the State Bank of

Pakistans guideline instructions on capital adequacy and the ratio increase from 2006 to

2007 and then decrease in 2008 and again increases from 2009 to 2010.

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INTEREST COVERAGE RATIO

Formula = Earning before Interest and Tax / Interest Expense

Rupees in 000

2006 2007 2008 2009 2010

Earning 39,945,062 42,451,580 45,814,070 44,965,545 51,653,038

Interest expense 13,634,485 14,391,079 19,502,080 23,513,897 27,030,751

Ratio 2.9:1 2.9:1 2.3:1 1.9:1 1.9:1

Interpretation:

Interest coverage ratio indicates a company's capacity to meet interest payments and

indicates weather the business has earned sufficient profit to pay periodically the interest

amount. A high ratio secure and assure the lender a regular and periodical interest income

but the weakness of the ratio may create some problems to the financial manage in raising

funds from dent sources.

Interest Coverage Ratio is high in 2006 and 2007 it good singe for the bank and the other

period ratio are low but 2010 ratio is also low, it is not good sing for bank.

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DEBT TO ASSETS RATIO

Formula = Total Debt / Total Assets

Rupees in 000

2006 2007 2008 2009 2010

Total debt 553,178,593 645,855,939 715,299,108 824,676,384 906,528,852

Total assets 635,132,711 762,193,593 817,758,326 944,232,762 1,035,024,680

Ratio 0.87:1 0.85:1 0.88:1 0.87:1 0.88:1

Interpretation:

This ratio is used to get information about without jeopardizing the interest of creditors the

company's ability to absorb asset reductions arising from losses.

Debt to Assets ratio almost same and less then 1 throughout evaluation period and in 2010

it is also favorable.

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Profitability to Investment Ratio

Formula =Net Profit after Tax / Investment

Rupees in 000

2006 2007 2008 2009 2010

Net profit after tax 17,022,346 19,033,773 15,458,590 17,450,811 17,809,304

Investment139,947,00

0211,146,000

170,822,000 217,643,000301,324,000

Ratio 0.12:1 0.09:1 0.09:1 0.08:1 0.06:1

Interpretation:

Profit regarding investment shows what a organization have to invest and what they gain

as a reward of their investment. Investment interest earning capacity in 2006 is extremely

very good and then constant in 2007 and 2008 after this a declining trend we can see on

ward from 2009 to 2010.

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RETURN ON INVESTMENT

Formula = Net Profit after Tax/ Total Assets

Rupees in 000

2006 2007 2008 2009 2010

Net profit after tax 17,022,346 19,033,773 15,458,590 18,211,846 17,738,405

Total assets 635,132,711 762,193,593 817,758,326 944,232,762 1,035,024,680

Ratio 0.027:1 0.025:1 0.019:1 0.019:1 0.17:1

Interpretation:

Return on investment ratio measures the income earned on the invested capital. As the

primary objective of business is to maximize its earnings (Profit) , this ratio indicates the

extent and the ability of firms assets production in which this primary objective of business

is being achieved.

The Ratio of return on investment is the same and good in 2006 but a very vast decline is

shown onward form 2007 to 2010.

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ASSETS TURN OVER RATIO

Formula = Total Earning / Total Assets

Rupees in 000

2006 2007 2008 2009 2010

Total earning 26,311,000 28,061,000 23,001,000 21,300,000 24,415,000

Total assets 635,132,711 762,193,593 817,758,326 944,232,762 1,035,024,680

Ratio 0.41:1 0.37:1 0.28:1 0.022:1 0.024:1

Interpretation:

Measuring the activity of the assets and the ability of the business to generate sales

(Production) through the use of the assets.

The ratio is good in 2006 and in 2007, 2008, 2009 and 2010 slightly decreases because

earning capacity against assets decreases due to recession in financial economy of the

whole world.

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LOANS TO TOTAL ASSETS RATIO

Formula = Total Loans / Total Assets

Rupees in 000

2006 2007 2008 2009 2010

Total loans 23,012,732 21,464,600 17,128,032 19,587,176 231,846,671

Total assets 635,132,711 762,193,593 817,758,326 944,232,762 1,035,024,680

Ratio 0.04:1 0.03:1 0.02:1 0.02:1 0.22:1

Interpretation:

Loan to total assets ratio indicates the empirical relation between loan and assets acquired

by the bank. Lower the ratio is better for the institution.

The loan to assets ratios are fluctuate in the whole period, in 2006 increase, in 2007 return

back and in 2008,2009 ratios are same and against increases in 2010.

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INTEREST EXPENSE TO INTEREST INCOME RATIO

Formula = Interest Expense / Interest Income

Rupees in 000

2006 2007 2008 2009 2010

Interest expense 13,634,912 16,940,011 23,884,768 21,198,842 24,622,287

Interest income 43,788,628 50,569,481 60,942,798 44,965,545 51,653,038

Ratio 0.31:1 0.33:1 0.39:1 0.47:1 0.48:1

Interpretation:

Interest expense to interest income ratio tells about how much expenses are occurred

against the income and the result of low ratio is in favor of the bank.

Interest Expense to income ratio constantly increases in the whole period of 2006 to 2010.

The 2006 and 2007 ratio is better because in this ratio expense are less than all other period

and the ratio of 2010 is not better because in this ratio expenses is greater as compare to

their interest income.

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MARK UP TO NON MARK UP INCOME RATIO

Formula = Mark up Income / Non Mark up income

Rupees in 000

2006 2007 2008 2009 2010

Mark up income 43,788,628 50,569,481 60,942,798 77,947,697 88,472,134

Non mark up income 12,162,892 13,544,845 16,415,862 19,109,332 18,150,883

Ratio 3.6:1 3.7:1 3.7:1 4.1:1 4.9:1

Interpretation:

Markup to Non Markup income ratio increase constantly from 2006 to 2010. The changing

percentages are high in 2009 and 2010. The big ratio in the whole period is 2010 ratio

4.9:1.

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MARK UP EXPENSE TO MARK UP INCOME RATIO

Formula = Mark Up Expense / Mark Up Income

Rupees in 000

2006 2007 2008 2009 2010

Mark up expense 13,634,912 16,940,011 23,884,768 40,489,649 45,250,476

Mark up income 43,788,628 50,569,481 60,942,798 77,947,697 88,472,134

Ratio 0.31:1 0.34:1 0.39:1 0.46:1 0.51:1

Interpretation:

Mark up to Non Markup expense ratio show the ability to recover a firms expenses form

their earning which good in 2006 after 2006 it is slightly increases from 2007 to 2010 and

the ratio increase in 2010 are high from previous period which is a very good sign for

banks.

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NON MARK UP EXPENSE TO NON MARK UP INCOME RATIO

Formula = Non Mark Up Expense / Non Mark Up Income

Rupees in 000

2006 2007 2008 2009 2010

Non mark up expense 13,634,485 14,391,079 19,502,080 23,513,897 26,469,490

Non mark up income 12,162,892 13,544,845 16,415,862 19,025,357 17,632,640

Ratio 1.12:1 1.06:1 1.19:1 1.24:1 1.50:1

Interpretation:

This ratio show the relation between Non mark up expense and Non mark up income that

how much expenses are occurred against the income.

Non Mark up expense to non mark up ratio is decrease from 2006 to 2007 but in 2008 it

once again increase up to 2010 which is not good for bank.

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ADMIN EXPENSE TO TOTAL MARKUP RATIO

Formula = Admin Expense/ Markup Income

Rupees in 000

2006 2007 2008 2009 2010

Admin expense 13,443,441 14,205,911 18,171,198 22,571,470 26,202,577

Markup income 43,788,628 50,569,481 60,942,798 77,947,697 88,472,134

Ratio 0.31:1 0.28:1 0.30:1 0.29:1 0.30:1

Interpretation:

Admin expense to markup income ratio is decrease from 2006 to 2007, increase in 2008

and then decrease in 2009 and again increases in 2010. The ratio of 2007 is better because

the ratio of that year is low from all other year ratios.

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RETURN ON EQUITY (ROE)

Formula = Net Profit after Tax / Share Holder Equity

Rupees in 000

2006 2007 2008 2009 2010

Net profit after tax 17,022 19,034 15,459 18,212 17,563

Share holder equity 53,0445 69,271 81,367 94,792 103,762

Ratio 0.320:1 0.275:1 0.190:1 0.184:1 0.169:1

Interpretation:

As the primary objective to business is to maximize its earnings/ profit, this ratio indicates

the extent to which this primary objective to business is being achieved. As this ratio

reveals how well the resources of a firm are being used, high the ratio, better are the results.

Return on equity ratio constantly decrease in the whole period of 2006 to 2010. In first two

years the change is very slightly but a very vast decline in 2008. This is due to very small

profit in 2008.

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EARNING PER SHARE

Formula =Net Profit after Tax / Total No. of Shares

Rupees in 000

2006 2007 2008 2009 2010

Net profit after

tax17,022,346 19,033,773 15,458,590

17,450,81117,809,304

Total no. of shares 1,345,640 1,345,143 1,345,395 1,345,463 1,345,463

Ratio 12.65:1 14.15:1 11.49:1 13.24:1 12.97:1

Interpretation:

Earnings per Share ratio are very small and greater then 1. It is 12.65 in 2006 and then in

2007 increases which is very good then large decline in 2008 then again increases in 2009

and again slightly decreases in 2010.

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6.4: HORIZONTAL ANALYSIS OF THE BALANCE SHEET FOR THE LAST

FIVE YEARS

2007 2008 2009 2010

Assets

Cash and Balance with Treasury Banks 125% 125% 124% 124%

Balance with other banks 112% 112% 110% 110%

Lending to financial institutions 107% 106% 106% 106%

Investments 150% 143% 145% 151%

Advances 194% 200% 199% 195%

Operating fixed assets 106% 105% 105% 105%

Deferred tax assets - 100% 100% 101%

Other Assets 108% 109% 110% 109%

Total Assets 902% 1000% 999% 1001%

2007 2008 2009 2010

Liabilities:

Bills payable 102% 103% 102% 102%

Borrowings 104% 108% 107% 104%

Deposits and other accounts 281% 277% 278% 282%

Sun-ordinate loans - - - -

Liabilities against assets subject to finance lease 100% 100% 100% 100%

Deferred tax liabilities 102% - - -

Other liabilities 109% 110% 109% 109%

Total liabilities 798% 698% 696% 697%

Net assets104% 302% 303% 304%

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HORIZONTAL ANALYSIS OF BALANCE SHEET

The purpose of Horizontal Analysis of Balance Sheet for the last five years 2006 to 2010. I

selected 2006 as a base year and evaluate assets and liabilities of all other four years on the

base of 2006 and compare all this period. Cash and Balance with Treasury Banks, 112%

in 2006 and then increase 125% in 2007 the again same in 2008 then slightly decrease up

to 124% and in 2009 and then constant 124% in 2010.

Balance with other banks go up from 2006 to 2007 with 107%, 112% and then constant

in 2008 then slightly decreased up to 110% and constant respectively in 2009 and 2010 but

the 2010 increasing ratio is minimum from all previous years. Lending to financial

institutions increase in 2006 and 2007 by 104% to 107% respectively but after this it is

slightly decreases in 2008 by 106% and then constant this result up to 2010. Investments

repeatedly increase with 122% in 2006, 150% in 2007, 143% in 2008, 145% in 2009 and

151% in 2010 as compare to 2006. Advances of the organization continually grow in

whole evaluation period, if we compare it with base year 149% in 2006, growth in 194%

in 2007, and 200% expansion in 2008, and 199% in 2009 then 195% in 2010 but a high

growth of 200% in 2008. Operating fixed assets also grow from 102% in 2006 and 106%

in 2007 and then 105% constant from 2008 to 2010. There is a growth every year as

compare to their base year 2006 but a great growth is take place in 2007 in five year period.

Other Assets also increase constantlyin evaluation period, 104% in 2006 then increase in

2007 by 108%, 109% in 2008, 110% in 2009 and 109% slightly decrease in 2010 but a big

change in 2009 of 110% as compare to 2006 in five year period. This continuity in

expansion is due to enlarge in assets of organization every year. Total Assets of the

organization are also continually rise from base year 2006 to final year 2010 it is 800% in

2006, then constantly increases by 902% in 2007, 1000% in 2008, 999% in 2009 and

1001% in 2010 as compare to 2006.

Bills Payable is the first item of liability side, and it fluctuates during its growth. 101% In

2006, 102% in 2007 with increase then 103% in 2008, 102% in both 2009 and 2010 it

increases in 2007 and 2008. Borrowings capacityof the organizationin the selected period

increase continually such as 102% in 2006, 104% in 2007, 108% in 2008, 107% in 2009

and 104% in 2010 as compare to 2006 year 2007 and 2008 are high growth years and

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growth again decreases in 2009 and 2010 slightly. Deposits and other accounts regularly

rise with the passage of time, 190% in 2006 then increases by 281% in 2007, 277% in

2008, 278% in 2009 and 282% growth in 2010 as compare to base year. Liabilities against

assets subject to finance lease are constant by 100% from 2006 to 2010 as compare to

base year 2006. Deferred tax liabilities is 101% in 2006 and also increase 102% in 2008

as compare to base year 2006. Other liabilities are 104% in 2006 then gradually increases,

109% in 2007, 110% in 2008, 109% in 2009 and 109% in 2010 as evaluate to 2006 that is

selected as base year. Total Liability side of the balance sheet also go up continually,

698%, 798%, 698%, 696%, 697% from 2006 to 2010 on the behalf of base year 2006.

Net Assets ( Total assets Total liabilities) are also continually grow up as compare to

base year,102%, 104%, 302%, 303% and 304% growth from 2006 to 2010.

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6.5: HORIZONTAL ANALYSIS OF INCOME FOR THE LAST FIVE YEARS

2007 2008 2009 2010

Mark-up/Return/Interest earned 151% 148% 142% 143%

Less Mark-up/Return/Interest expense 49% 52%% 58% 57%

Net markup/Interest income 102% 96% 84% 85%

Provision against nonperforming loan and

advances

180% 178% 176% 152%

Provision for diminution in the value of

investments-net

(20%) (22%) (24%) (49%)

Provision against off balance sheet obligations - 0.4% 0.2% 0.4%

Bad debts written off directly 0.97% - - -

Net markup / Interest income after

provision

262% 252% 236% 189%

Add Non markup /Interest income

2006 2007 2008 2009 2010

Fee, Commission & Brokerage income 50% 100% 98% 97% 105%

Dividend income 23% 48% 40% 34% 24%

Income from dealing in foreign currency 10% 18% 35% 27% 24%

Gain on sale and redemption of securities-

net11% 28% 14%

35%26%

Un realized loss/gain on revaluation of

investments(0.50%) (0.30%) (0.40%)

(0.44%)(0.70%)

Other income 5% 6 % 13% 8% 18%

Total non markup/interest income 98.5% 199.7% 199.6% 200.5% 196.3%

Total Income 216.5% 461.7% 451.6% 436.5% 385.3%

Less Non markup/interest expenses:

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2006 2007 2008 2009 2010

Administrative expenses 99% 197% 191% 195% 194%

Other provisions / write offs -1% 1.25% 4% 3% 1%

Other charges 2% 2% 5% 3% 2%

Total expenses 100% 196.25% 200% 201% 197%

Profit before tax 116.5% 265.4% 251.6% 235.5% 188.3%

Less Taxation

2006 2007 2008 2009 2010

Current year 83% 185% 167% 157% 168%

Prior years 6% (16%) (29%) (35%) (32%)

Deferred (20%) (23%) (27%) (22%) (27%)

Total Tax 69% 146% 111% 100% 109%

Profit after tax 48% 120% 141% 135% 79%

HORIZONTAL ANALYSIS OF INCOME STATEMENT

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For the purpose of Horizontal Analysis of Income Statement for the last five years 2006 to

2010. I select 2006 as a base year and evaluate incomes and expenditures of all other four

years on the base of 2006 and compare all this period . Markup Earned of the bank is

fluctuate in the whole period, it is 77% in 2006 then increase 151% in 2007, 148% in 2008,

142% in 2009 and 143% in 2010 as compare to base year 2006. Markup Expense

gradually increase in evaluation period, thus 23% in 2006 then increase 49% in 2007, 52%

in 2008, 58% in 2009 and then 57% in 2010. This expense increase gradually due to

increase in deposits of the bank every year. Net Markup also rises constantly due to rise in

markup income and it is 54% in 2006 and growth up to 102% in 2007, 96% in 2008 and

84% in 2009 and 85% in 2010 as compare to 2006. Provision against nonperforming

loan and advances rapidly increase from base year 2006 to final year 2010. It rise 81%,

180%, 178%, 176% and then 152% from 2006 to 2010. Provision for diminution in the

value of investment are 18%% in 2006, 20% in 2007, 22% in 2008, 24% in 2009and 49%

in 2010 as compare to base year 2006. Bad debts written off directly are 0.14% in 2006

and increased 0.97% in 2007. Net Markup after Provision fluctuate in evaluation period

it is 118% in 2006 and then grow by 262% in 2007, 252% increase in 2008 , 236% increase

in 2009 and 189% in 2010 as compare to base year on base of 2006..Non Markup

Income, include Fee or Commission gradually rise with 50%, 100%, 98%, 97% and 105%

from 2006 to 2010 on the base of 2006. Divident income is 23% in 2006 and after this it is

increased 48% in 2007, 40% in 2008, 34% in 2009 and 24% in 2010 on the base of 2006 .

Income from Foreign Currency is 10% as well grow gradually 18% in 2007, 35% in

2008, 27% in 2009 and 24% in 2010 as compare to base year 2006. Gain on sale of

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investment is increased is 11% in 2006, 28% in 2007, 14% in 2008, 14% in 2009, 35% in

2009 and 26% in 2010 in the who