nternship Report on National Bank of Pakistan(NBP)

TABLE OF CONTENTS
Objectives of Studying the Organization 6
Brief History of National Bank of Pakistan 7
Nature of National Bank of Pakistan 10
Business volume of National Bank of Pakistan 12
Branch Network of National Bank of Pakistan 16
Number of Employees of National Bank of Pakistan 18
Product Lines 19
1. Deposits 19
a) Current Deposits 19
b) PLS Saving Deposits 20
c) Fixed Deposit Account (Time Deposits) 21
d) Foreign Currency Account 22
e) NBP Premium Aamdani 23
g) National Income Daily Account (NIDA) 24
2. Advances 25
a) NBP Saibaan 25
b) NBP Advance Salary 25
c) NBP Cash & Gold 27
d) Students Loan Scheme 27
e) NBP Karobar- President’s Rozgar Scheme 27
3. Corporate Advances 30
a) Cash Finance 30
b) Running Finance/ Overdraft 30
c) Demand Finance 30
4. Remittances 31
a) Demand Drafts 31
b) Travelers Cheques 32
c) Letter Of Credit 32
d) Foreign Remittances 33
e) Swift System 33
f) Mail Transfer 33
g) Telegraphic Transfer 34
h) Pay Order 34
5. Miscellaneous 35
a) Lockers 35
b) NBP Cash Card 35
c) International Banking 36
Organizational Structure of National Bank of Pakistan 37
Board of Directors 37
Senior Management 40
1. Corporate & Investment Banking Group 41
2. Compliance Group 42
3. Islamic Banking Group 43
4. Treasury Management Group 44
5. Credit Management Group 47
6. Audit & Inspection Group 48
7. Human Resource Management & Administration Group 50
8. Information technology group 51
9. Financial control Division 52
10. Overseas Coordination & Management Group 53
11. Commercial & Retail Banking Group 54
12. Special Assets Management Group 55
13. Employee Benefits, Disbursements & Trustee Division 55
14. Core Banking Application 58
15. Operations Group 59
Provincial & Regional Management 60
Branch Management 60
Organizational (Management) levels at NBP 61
Top Managers 61
Middle Managers 62
First Line Managers or Lower Level Management 62
Non Managerial Employees 62
Hierarchy of National Bank of Pakistan 63
Organization Structure of the Branch 64
a) Centralized Decision Making 64
b) Downward Communication 65
c) Chain of Command 65
d) Authority and Responsibility 66
e) Delegation 66
Departments of the Branch 67
1. Clearing House Department 68
2. Remittance Department 71
3. Account Opening Department 73
4. Cash Department 74
5. Deposits Department 76
6. Advances Department 77
7. Computer Department 78
a) Online branches 78
b) Batch Branches 78
c) Manual Branches 79
8. Pension Disbursement Department 80
9. Accounts Department 80
Structure of Branch’s Accounts Department 83
Bank Accounting Operations 86
Role Of CFO (Chief Financial Officer) 88
Use of Electronic Data in Decision Making 92
Information System Resources of NBP 93
a) People Resources 93
b) Hardware Resources 93
c) Software Resources 94
d) Data Resources 94
e) Network Resources 94
Sources of Funds 95
Generation of funds 98
Allocation of Funds 100
Critical Analysis (Theory vs Practical) 104
Balance Sheet 105
Income Statement 106
Financial Statements Analysis 107
Ratio Analysis 108
a) Profitability Ratios 108
b) Liquidity Ratios 114
c) Debt Ratios 118
d) Capital Adequacy Ratios 121
e) Operating Performance Ratios 122
Horizontal Analysis 125
Horizontal Analysis of Balance Sheet 126
Horizontal Analysis of Income Statement 135
Vertical Analysis 144
Vertical Analysis of Balance Sheet 145
Vertical Analysis of Income Statement 154
Bank Analysis with refernce to commercial Banks listed on stock exchange 161
Future prospects of National Bank of Pakistan 164
Short falls/ Weaknesses of National Bank of Pakistan 166
Conclusions 168
Recommendations 169
References 171

OBJECTIVES OF STUDYING THE ORGANIZATION

The primary purpose of this study is to fulfillment of the requirements for the degree of MBA
(Banking & Finance).For this connection each student of this particular course is required to
undertake training in a relevant organization selected by them, for a period of 6-8 weeks.
The secondary purpose of this internship is to understand how the theoretical knowledge can
be applied to the practical situations and examine an organization’s financial issues and
identify its opportunities/ problems and also suggest corrective measures. This internship is
also very necessary to gain confidence and become aware of the mechanism of an
organization. As an internee I want to achieve following objectives during my internship and
organization study:
1. To familiarize with a business organization.
2. To familiarize with the different departments in the organization and their functioning.
3. To enable myself to understand how the key business process are carried out in
organization.
4. To understand how information is used in an organization for decision making at various
levels.
5. To relate theory with practice.
6. I was also keen to gain professional experience in an actual testing environment.
7. I want to develop my skills in the application of theory to practical work situations.
8. To develop my attitude conducive to effective interpersonal relationships.
9. To acquire good work habits and sense of responsibility.
10. To enhance my learning experience by application of fundamental concepts previously
learned.
11. To observe, analyze and interpret the relevant data competently and in a useful manner.
12. To develop my interpersonal communication.
13. I want to enhance my knowledge of the discipline of banking administration.

BRIEF HISTORY OF NATIONAL BANK OF PAKISTAN

The history of National Bank of Pakistan is part of Pakistan’s struggle for economic
independence. National Bank of Pakistan was established on November 9, 1949 under the
National Bank of Pakistan Ordinance, 1949 in order to cope with the crisis conditions which
were developed after trade deadlock with India and devaluation of Indian Rupee in 1949.
Initially the Bank was established with the objective to extend credit to the agriculture sector.
The normal procedure of establishing a banking company under the Companies Law was set
aside and the Bank was established through the promulgation of an Ordinance, due to the
crisis situation that had developed with regard to financing of jute trade. The Bank
commenced its operations from November 20, 1949 at six important jute centers in the then,
East Pakistan and directed its resources in financing of jute crop. The Bank’s Karachi and
Lahore offices were subsequently opened in December 1949. The National Bank of Pakistan
came forward to establish its offices in the Cotton growing areas and extended credit facilities
liberally in order to restore stability to the market. In 1951, the country was once again faced
with a crisis in the cotton trade when prices was crashed and touched the lowest level since
independence following the cessation of hostilities in Korea. The bank in collaboration with
the cotton board provided the necessary Credit facilities to the trade and the crisis was tided
over. The nature of responsibilities of the Bank is different and unique from other
banks/financial institutions. The Bank acts as the agent to the State Bank of Pakistan for
handling Provincial/Federal Government Receipts and Payments on their behalf. The Bank
has also played an important role in financing the country’s growing trade, which has
expanded through the years as diversification took place.
The National Bank of Pakistan has its headquarters in Karachi, Pakistan. The bank operates
1249(2008) branches in Pakistan and 22(2008) overseas branches. Under a trust Deed, the
bank also provides services as trustee to National Investment Trust (NIT) including safe
custody of securities on behalf of NIT. The National Bank of Pakistan has assets worth
Rupees 737976.44 million on September 30, 2008.
National Bank of Pakistan is today a progressive, efficient, and customer focused institution. It
has developed a wide range of consumer products, to enhance business and cater to the
different segments of society. Some schemes have been specifically designed for the low to
middle income segments of the population. These include NBP Karobar, NBP Advance
Salary, NBP Saibaan, NBP Kisan Dost, and NBP Cash n Gold.
The National Bank of Pakistan has implemented special credit schemes like small finance for
agriculture, business and industries, administrator to Qarz-e-Hasna loans to students, self
employment scheme for unemployed persons, public transport scheme. The Bank has
expanded its range of products and services to include Shariah Compliant Islamic Banking
products. For the promotion of literature, NBP recently initiated the Annual Awards for
Excellence in Literature. NBP will confer annual awards to the best books in Urdu and in all
prominent regional languages published during the defined period. Patronage from NBP
would help creative work in the field of literature. The Bank is also the largest sponsor of
sports in Pakistan. It has provided generously to philanthropic causes whenever the need
arose.
It has taken various measures to facilitate overseas Pakistanis to send their remittances in a
convenient and efficient manner. In 2002 the Bank signed an agreement with Western Union
for expanding the base for documented remittances. More recently it has started Electronic
Home Remittances Project. This project introduces technology based system to handle
inward remittances efficiently, by ensuring that the Bank's branches keep a track of the
remittance received from abroad till its final receipt.
A number of initiatives have been taken, in terms of institutional restructuring, changes in the
field structure, in policies and procedures, in internal control systems with special emphasis
on corporate governance, adoption of Capital Adequacy Standards under Basel II framework,
in the up gradation of the IT infrastructure and developing the human resources.
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, Best Emerging Market Bank from Pakistan for the year 2005, Global Finance,
Kisan Time Awards – 2005 for NBP's services in the agriculture field. 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 Management by WEBCOP AASHA besides other awards.
The precise summary of National Bank of Pakistan regarding its countrywide and overseas
operations is as fallows:
1949 National Bank of Pakistan (NBP) was established under the National Bank of Pakistan
Ordinance 1949 and was 100% govt.-owned. NBP acted as an agent of the Central Bank
wherever the State Bank did not have its own Branch. It also undertook Government Treasury
operations. Its first branches were in jute growing areas in East Pakistan. Offices in Karachi
and Lahore followed.
1950 NBP established a branch in Jeddah, Saudi Arabia.
The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ on December4, 1947 by the
former Bahawalpur State
1955 By this time NBP had branches in London and Calcutta.
1957 NBP established a branch in Baghdad, Iraq.
1962 NBP established a branch in Dar-es-Salaam, Tanganyika.
1964 The Iraqi government nationalized NBP's Baghdad branch.
1965 The Indian government seized the Calcutta branch on the outbreak of hostilities
between India and Pakistan.
1967 The Tanzanian government nationalized the Dar-Es-Salaam branch.
1971 NBP acquired Bank of China's two branches, one in Karachi and one at Chittagong. At
separation of East Pakistan NBP lost its branches there. NBP merged with Eastern Mercantile
Bank and with Eastern Bank Corporation.
1974 The government of Pakistan nationalized NBP. As part of the concomitant consolidation
of the banking sector, NBP acquired Bank of Bahawalpur (est. 1947).
1977 NBP opened an offshore brain Cairo.
1994 NBP amalgamated Mehran Bank (est. 1991).
1997 NBP's branch in Ashgabat, Turkmenistan commenced operations.
2000 NBP opened a representative office in Almaty, Kazakhstan.
2001 State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani banks to
operate in the UK. NBP and United Bank agreed to merge their operations to form Pakistan
International Bank, of which NBP would own 45% and United Bank 55%.
2003 NBP received permission to open a branch in Afghanistan.
2005 NBP closed its offshore branch in Cairo.
NATURE OF NATIONAL BANK OF PAKISTAN
National Bank of Pakistan was incorporated in Pakistan under the National Bank of Pakistan
Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. The bank is engaged in
providing commercial banking and related services in Pakistan and overseas. The bank
operates 1,249 (2007:1,232) branches in Pakistan and 22 (2007:18) overseas branches
(including the Export Processing Zone branch, Karachi). Under a Trust Deed, the bank also
provides services as trustee to National investment Trust (NIT) including safe custody of
securities on behalf of NIT.
The nature of responsibilities of the Bank is different and unique from other banks/financial
institutions. The bank also handles treasury transactions for the Government of Pakistan as
an agent to the State Bank of Pakistan for handling provincial/Federal Government receipts
and payments on their behalf. The National Bank of Pakistan has also played an important
role in financing the country’s growing trade, which has expanded through the years as
diversification took place. The bank is providing all banking services of mercantile and
commercial banking permissible in the country, which include:
Accepting of deposits of money on current, fixed, saving, term deposit and profit and loss
sharing accounts.
Borrowing money and arranging finance from other banks.
Advancing and lending money to its clients.
Financing of projects, including technical assistance, project appraisal through long term/
short term loans, term finance and musharika certificates, etc.
Buying, selling, dealing, including entering into forward contracts of foreign exchange.
Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco, etc.
Receiving of bonds, valuables, etc. for safe custody.
Carrying on agency business for any description other than managing agent, on behalf of
clients including Government and local authorities.
Generating, undertaking, promoting, etc. of issue of shares and, bonds etc.
Transacting guarantee and indemnity business.
Undertaking and executing trusts.
Joint venturing with foreign dealers, agents and companies for its representation abroad.
Participating in “World Bank” and “Asian Development Bank’s” lines of credit.
Providing personalized Hajj services to intending Hajjis.

BUSINESS VOLUME OF NATIONAL BANK OF PAKISTAN

Rupees in Millions
Year 2004 2005 2006 2007 2008
Total Assets 553,231,467 577,719,114 645,132,711 762,193,593 817,758,326
Deposits 465,571,717 463,426,602 501,872,243 591,907,435 624,939,016
Advances 220,794,075 268,838,779 316,110,406 340,677,100 412,986,865
Reserves 10,813,914 13,536,041 13,879,260 15,772,124 19,941,047
Investments 149,350,096 156,985,686 139,946,995 210,787,868 170,822,491
Horizontal Analysis (%)
Total Assets 100 104 117 138 148
Deposits 100 100 108 127 134
Advances 100 122 143 154 187
Reserves 100 125 128 146 184
Investments 100 105 94 141 114

The business volume of National Bank of Pakistan is stated in terms of total assets, deposits,
advances, reserves and investments. To analyze the trend in these items the Horizontal
analysis of each item is calculated.

ANALYSIS
The Total Assets of National Bank of Pakistan fluctuates during all years as they show an
increasing trend. The total assets are increased 4 % in 2005 and 17 % in 2006. The year
2007 represents second highest percentage on account of total assets as it was increased to
38%. There was an increase of 48 % in 2008 as compare to base year and 10% as compare
to 2007.

ANALYSIS
The deposits and other accounts of National Bank of Pakistan show a mixed trend during all
years. In the year 2005, the deposits were increased very marginally, with the year 2006
represents an increase of 8%. The deposits are increased 27% & 34% in the years 2007 and
2008 respectively.

ANALYSIS
The advances made by National Bank of Pakistan shows an increasing trend in all years as
compare to base year. This implies that National Bank of Pakistan is keener to advance
money to lenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as
compare to base year. The year 2007 represents an increase of 54 % and 2008 represents
highest percentage among all years that is 87 % as compare to base year.

ANALYSIS
The Banks’ reserves are banks' holdings of deposits in accounts with their central bank plus
currency that is physically held in bank vaults (vault cash). The reserves of National Bank of
Pakistan fluctuate during all years as they show an increasing trend. The reserves are
increased 25 %, 28 % & 46 % in the years 2005, 2006 & 2007 respectively. The year 2008
represents highest increasing percentage of 84% as compare to base and previous years.

ANALYSIS
The investments made by National Bank of Pakistan fluctuate during all years. There was an
increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in investments. The year
2007 represents an increase of 41 %, highest among all years. The investments are
increased 14 % in 2008 as compare to base year; however investments are decreased 27 %
as compare to the year 2007.
BRANCH NETWORK OF NATIONAL BANK OF PAKISTAN
With the geographical development of its branches, the National Bank of Pakistan has been
able to extend its services to a much larger number of Pakistanis all over the country. Today
the Bank has more than 8.8 million accounts & Bank maintains its presence in all the major
financial centers of the world through its 22 (2008) overseas branches and 5 representative
offices. Of these, three representative offices have recently been set up at Tashkent
(Uzbekistan), Baku (Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging
opportunities in CIS countries. Bank’s role Apart from having a vast branch network, Bank is
at the forefront in the acquisition and application of new technologies in every aspect of its
banking facilities. It has acquired leased telephone lines for on-line banking. The Bank has 12
Regional Computer Centers to cover various on-line and batch system requirements of
branches and controlling offices.
Presently the National Bank of Pakistan is divided into various Groups headed by
SEVPs/EVPs. Its field operations are controlled by 29 regions ( Annexed II) reporting to as
many Regional chiefs, who control 40 zones and 15 single Branch zones headed by Zonal
Chiefs; 12 corporate branches and 1249 domestic branches headed by Branch Managers.
The bank has 12 SWIFT local centers.
Apart from having a vast branch network, Bank is at the forefront in the acquisition and
application of new technologies in every aspect of its banking facilities. It has acquired leased
telephone lines for on-line banking. Bank has also a presence on the internet. The National
Bank of Pakistan has 156 online branches throughout the country. It has modernized its
services by installing Automated Teller Machines (ATMs) called “CASH LINK” at selected
branches.
The Bank's organizational structure reflects the three levels at which it operates: international,
national and local. The Head Office formulates and implements the strategic, management
and operational policies.
The Bank's geographical organization consists of branches located in the regional capitals
and in some provincial capitals. The branches' activities relate to the State treasury service,
payment system services, currency circulation, banking and financial supervision, and the
analysis of economic and financial developments at the local level.
The Bank has representative offices abroad, in London, New York and Tokyo; a number of
officers are seconded as financial experts to Italian embassies and consulates. The Bank has
representative offices in Beijing, Tashkent, Chicago and Toronto. It has agency arrangements
with more than 3000 correspondent banks worldwide. Its subsidiaries are Taurus Securities
Ltd, NBP Exchange Company Ltd, NBP Capital Ltd, NBP Modaraba Management Company
Ltd, and CJSC Bank, Almaty, Kazakhstan. The Bank's joint ventures are, United National
Bank (UK), First Investment Bank and NAFA, an Asset Management Company (a joint
venture with NIB Bank & Fullerton Fund Management of Singapore).
The Branch network of National Bank of Pakistan is divided into following categories
ATM network ( Total ATMs 101 & Total ATMs machines 104)
Domestic network ( 1249 Branches)
Islamic network ( 5 Branches)
Online network ( 156 Branches)
Overseas network ( 29 Branches)
Swift network ( 12 Branches)
Customer Facilitation Centers (6 Customer Facilitation Centers)
Agriculture branches ( 825 Branches)

NUMBER OF EMPLOYEES OF NATIONAL BANK OF PAKISTAN

Permanent 13237
Temporary/ On Contractual basis 842
Bank's own staff strength at the end of the year 14079
Outsourced 2350
Total Staff Strength 16429

An employee may be defined as: "A person in the service of another under any contract of
hire, express or implied, oral or written, where the employer has the power or right to control
and direct the employee in the material details of how the work is to be performed." An
employee contributes labor and expertise to an endeavor. Employees perform the discrete
activity of economic production. Of the three factors of production, employees usually provide
the labour. Specifically, an employee is any person hired by an employer to do a specific
"job". In most modern economies, the term employee refers to a specific defined relationship
between an individual and a corporation, which differs from those of customer, or client. The
relationship between National Bank of Pakistan and its employees is usually handled through
the Human Resource Management & Administration Group & Employees benefit
disbursement & trustee division. These groups handle the incorporation of new hires, and the
disbursement of any benefits which the employee may be entitled, or any grievances that
employee may have.
There are differing classifications of workers within National Bank of Pakistan, these are:
Permanent
Temporary / On Contractual
Outsourced
The Employees of National Bank of Pakistan are organizing into trade unions, which
represent most of the available work force in National Bank of Pakistan. These trade Unions
utilize their representative power to collectively bargain with the management of bank in order
to advance concerns and demands of their membership.

PRODUCT LINES
The most precise definition of product is anything capable of satisfying needs, including
tangible items, services and ideas. In marketing, a product is anything that can be offered to a
market that might satisfy a want or need. Since 1575, the word "product" has referred to
anything produced. Since 1695, the word has referred to "thing or things produced”. The
economic or commercial meaning of product was first used by political economist Adam
Smith. In general usage, product may refer to a single item or unit, a group of equivalent
products, a grouping of goods or services, or an industrial classification for the goods or
services. The consumer banking products include personal accounts, credit cards, loans,
investment products, treasury products and many more. The National Bank of Pakistan
offering for sale several related products individually, which is commonly known as product
lining. A product line is defined as “A group of products that are closely related because they
function in a similar manner, are sold to the same customer groups, are marketed through
same types of outlets, or fall within the given price ranges”. The followings are the main
consumer banking products of NBP.
1. DEPOSITS
The National Bank of Pakistan offers to their clients a variety of Deposit Schemes with
personalized services at competitive rates of interest. Any Pakistani citizen can open his/her
account for any deposit scheme at any of its Branches strategically located throughout
Pakistan. The Bank with its huge network of 1243 branches garners savings from both the
rich and the poor in urban as well as rural areas. Even a poor farmer in a remote village, with
his meager annual income, feels secure to safe keep his minuscule savings in National Bank
of Pakistan, Because National Bank of Pakistan has a long heritage of trust and professional
commitment.
a) CURRENT DEPOSITS
These are payable to the customer when ever they are demanded. When a banker accepts a
demand deposit, he incurs the obligation of paying all cheques etc, drawn against him to the
extent of the balance in the account. Because of their nature, these deposits are treated as
current liabilities by the banks. Bankers in Pakistan do not allow nay profit on these deposits,
and customers are required to maintain a minimum balance, failing which incidental charges
are deducted from such accounts. This is because Current Deposits may be withdrawn by the
depositors at any time, and as such the bank is not entirely free to employ such deposits.
Current Accounts/ Basic Banking accounts are opened, on proper introduction and
submission of required documents along with initial deposit prescribed from time to time.
Basic banking accounts are opened for an individuals (single or joint) only whereas current
accounts are opened for individuals (single or joint) Charitable institution, provident and other
funds of benevolent nature of local bodies, autonomous corporations, companies,
associations, educational institutions, firms etc. and in all other cases where the accounts are
to opened under the order of a competent court of law. No profit is paid on the balances of
current/basic banking accounts. The bank is authorized to deduct service charges (incidental
charges) on current accounts levied through its half yearly schedule of charges, in case the
average balance falls below the minimum balance as prescribed by the bank. No balance
maintenance condition is applied on basic banking account.
b) PLS SAVING DEPOSITS
In Pakistan a Savings Deposits Account can be opened with a very small amount of money,
and the depositor is issued a cheque book for withdrawals. Profit is paid at a flexible rate
calculated on six monthly basis under the Interest Free Banking System. There is no
restriction on the withdrawals from the deposit accounts but the amount of money withdraw is
deleted from the amount to be taken for calculation of products for assessment of profit to be
paid to the account holder. It discourages unnecessary withdrawals from the deposits. In
order to popularize the scheme the SBP has allowed the Savings Scheme for school and
college students and industrial labour also. The purpose of these accounts is to inculcate the
habit of savings in the constituents. As such, the initial deposits required for opening these
accounts are very nominal. NBP charge Rs.500 for opening of PLS Savings deposits.
The silent features of profit and loss sharing and saving accounts of NBP are as fallows
1. These accounts can be opened by individuals in their own single or joint name. The PLS
savings account can also be opened for provident fund or other benevolent funds of
companies, firms, organizations, NGO’s and educational institutions.
2. PLS saving account can be opened with a minimum amount of Rs.500/- only
3. To share in the profit a minimum balance of Rs.500/- must be maintained in the account.
The minimum balance on sixth and last of month will qualify for the profits. The profits will be
calculated on the basis of monthly minimum balance for the periods of six months i.e. from
January to June and July to December
4. The head office of NBP determines the profit or loss on PLS saving deposits and advice its
branches the rate and time of distribution of these profits.
5. There shall be no restrictions on maintaining the maximum balance in PLS saving account.
6. On the first day of Ramzan each year the Zakat at the rate of 2.5% will be deducted from
these deposits on the balance of that day. But if depositors affix an affidavit of Zakat
deduction along with account opening form or he is a non-Muslim, no Zakat will be deducted
from his account.
c) FIXED DEPOSIT ACCOUNT (TIME DEPOSITS)
The deposits that can be withdrawn after a specified period of time are referred to as Fixed or
Term Deposits. The period for which these deposits are kept by the bank ordinarily varies
from three months to five years in accordance with the agreement made between the
customer and the banker. Profit/Return is paid to the depositors on all fixed or Time deposits,
and the rate of profit/Return varies with the duration for which the amount is kept with the
banker. By lending out or investing these funds, the bank earns more than the Profit/Return
that it has to pay on them to the depositors. By giving an advance notice to the bank the
deposit can be withdraw from the bank before the expiry of the period. Fixed deposit accounts
have higher rate of interest as compare to other accounts. The rate of interest rises with the
length of period and the amount of deposit. The bank grants to the depositor a fix deposit
(FDR) which is not transferable to any other person. The silent features of fixed deposit
account of NBP are as fallows
1. The PLS term deposit are opened for individuals in their own single or joint names,
companies firms and other organizations.
2. The PLS term deposit receipt are issued for any amount. There is minimum or maximum
limit or deposits in a single term deposit account.
3. PLS term depositors may be allowed some facilities against the security of these receipt
credits, after making “Lien” on the relevant receipt and subject to recovery of service charges.
4. Under term deposit scheme the depositors not cease to earn the profit immediately, after
the respective maturity date.
d) FOREIGN CURRENCY ACCOUNT
Government of Pakistan has introduced many important reforms in Foreign Exchange Control
in the country since February, 1990, for the purpose of strengthening the Foreign Exchange
Reserves. One of these reforms relates to foreign currency accounts, which can be opened in
United States Dollars, Pound Sterling, Euro and Japanese Yen in any of the authorized
branches of commercial banks throughout the country. Foreign currency accounts are
opened, on proper introduction and submission of required documents along with an initial
deposit prescribed from time to time. Rates of return on foreign currency deposits are subject
to fluctuation as determined in accordance with State Bank of Pakistan directives and will be
paid on six monthly basis whereas the return on term deposit/SNTD will be paid on maturity
or as prescribed by SBP. The bank shall have no responsibility for or liability to the account
holders for any diminution due to taxes imposed or depreciation in the value of funds credited
to the account whether due to devaluation or fluctuation in the exchange rate or other wise.
e) NBP PREMIUM AAMDANI
NBP Premium aamdani is a retail product of the bank. The amount of investment required for
this account is Rs. 20,000/-to Rs. 5,000,000.The investment period is 5 years. Zakat and
withholding tax will be deducted as per rules. In NBP premium aamdani, the account holders
have benefit of free demand draft, pay order; free cheque book and NBP cash card
(ATM+Debit). The Financing facility is available up to 90% of the deposit value. Profit paid
every period as follows:
Period Profit Rates
1st year 7.50%
2nd years 8.50%
3rd years 9.50%
4th years 10.50%
5th years 11%
f) NBP Premium Saver
NBP Premium saver is a retail product of the bank. The minimum saving balance of Rs.
20,001 and a maximum balance of Rs. 300,000 are required for opening a premium saver
account. Two debit withdrawals allowed in a month and no limit on number of deposit
transactions. The profit is calculated monthly and Paid on half yearly basis. Free NBP Cash
Card (ATM + Debit) facility is available to account holder.
g) NATIONAL INCOME DAILY ACCOUNT (NIDA)
The scheme of National income daily account was launched in December 1995 to attract
corporate customers. It is a current account scheme and is part of the profit and loss system
of accounts in operation throughout the country. Deposits in the NIDA accepted on the
condition that the depositor shall always maintain a minimum balance as prescribed by the
bank in his account. In the event however, that any depositor wishes to withdraw the amount
and the balance in his account is less than the required amount, the account will be converted
to the ordinary PLS SB account for the purpose of calculating profit. An example of how the
NIDA accounts are maintained is shown on the next page.
RATES ON NATIONAL INCOME DAILY ACCOUNT
From Rs 2/- million to Rs 50/- the rate is 1.4%.
From Rs50/- million but less than Rs 500/-million, the rate is 1.5%.
From Rs 500/- million but below Rs 1000/- the rate is 1.6%.
From Rs 1000/- and above the rate is 1.75%.
SALIENT FEATURES
Rs 2-million is required to open an account and there is no maximum limit.
Profit is paid on half yearly basis on monthly balances.
The rates of profit vary according to the slabs of deposit. On Deposits of Rs.2 million to 2,000
million, the rate fluctuates from 1.4 to 1.75
It is a checking account and there is no limit of withdrawals.

NIDA 1

Date Description of Transaction C Debit (-) Credit (+) Balance Days Products

01/05/2008 Balance 10,000,000 10,000,000

05/05/2008 Cash 500,000 9,500,000 4 38000000
08/05/2008 Cash 100,000 9,600,000 3 28800000
11/05/2008 Transfer 75,000,000 84,600,000 3 253800000
15/05/2008 Cash 3,000,000 81,600,000 4 326400000
18/05/2008 Cash 78,600,000 160,200,000 3 480600000
20/05/2008 Cash 1,000,000 159,200,000 2 318400000
22/05/2008 Cash 5,000,000 164,200,000 2 328400000
23/05/2008 Cash 700,000 163,500,000 1 163500000
25/05/2008 Cash 10,000 163,510,000 2 327020000
27/05/2008 Cash 300 163,509,700 2 327019400
31/05/2008 Transfer 500,000 164,009,700 4 656038800
01/06/2008 Cash 2,100,000 161,909,700 1 161909700
06/06/2008 Transfer 36,000,000 197,909,700 5 989548500
10/06/2008 Cash 9,870,000 188,039,700 4 752158800

2. ADVANCES
National Bank of Pakistan plays a pivotal role in translating the government's development
plans in terms of growth in industrial, commercial and agricultural sectors in Pakistan.
Accordingly the Bank has formulated its Credit Policy under the guidelines of SBP-the Central
Bank of Pakistan.
a) NBP SAIBAAN
The NBP Saibaan is retail product of the bank. It has different product items which are home
purchase, home construction, home renovation and purchase of land plus construction. If
anyone has a Home Finance Facility outstanding with another bank he can have it transferred
to NBP through a hassle-free process. A brief description of these products is as fallows
TYPE OF ADVANCE Financing Amount Financing Period Debt to equity Ratio
Home Purchase (House or Apartment) Rs. 35 Million 3 to 20 years 85:15 (maximum)
Home Construction Rs. 35 Million 3 to 20 years 85:15 (maximum)
Home Renovation Rs. 15 Million 3 to 15 years 80:20 (maximum)
Purchase of land Plus Construction Rs.35 Million 3 to 20 years 80:20 (maximum)

b) NBP ADVANCE SALARY

The NBP Advance salary has been the flag-ship product for NBP. NBP Advance Salary, the
leading personal loan product of the country, is maintaining its inimitability ever since it was
launched. This was only possible due to its swift growth and remarkable loan disbursement of
over 118 billion. You can avail up to 20 net take home salaries with easy repayment
installments. Its hassle free acquisition with no prior formalities and easy availability in a short
turn around time is attributed as the most distinguishing features of the product. The product
is offered countrywide. The terms and conditions of NBP Advance salary is shown on next
page:
TERMS & CONDITIONS

Eligibility Permanent Employees of Govt., Semi-Govt., Autonomous, Semi Autonomous, Local

& other bodies who are maintaining their Salary A/Cs at NBP.
Repayment Direct deduction from Salary A/C
Maximum Loan Amount Rs. 490,000/-
Security Employer will provide undertaking that borrower’s Salary and end of service benefits
will route through his/her Salary A/C maintained at NBP during the tenure of the loan and
his/her end of service benefits are at least equal to the amount of Advance Salary required.
Hypothecation of Consumer durables owned by the borrower.
Three (3) Undated Cheques
Max. Repayment Period 5 years (60 months)
Advance in terms of # of net take home salaries Up to 20 net take home salaries
Markup Rate 15 %
(Based on diminishing balance method)
Processing Fee 1% of Loan Amount
Verification Charges Rs 500/-
Life Insurance No Insurance of any kind.
Documentation Charges at actual
Contact Your Salary disbursing NBP Branch.
Remaining Service Age At the time of approval and disbursement the applicant’s remaining
service age should be 6 months after maturity of the loan
Debt Burden 50%
Minimum net take home salary no minimum take home requirement

c) NBP CASH & GOLD

With NBP’s Cash & Gold, the customers meet their need for ready cash against their idle gold
jewelry. The rate of mark up is 13% p.a. This product has following features
Facility of Rs. 7,000 against each 10 grams of net contents of gold
No maximum limits of cash
Repayment after one year
Only gold ornaments acceptable
Weight and quality of gold to be determined by NBP's appointed schroffs
No penalty for early repayment
d) STUDENTS LOAN SCHEME
Pursuant to the announcement made by the Federal Finance Minister in his 2001-2002
budget speech, a Student Loan Scheme (SLS) for Education was launched by the
Government of Pakistan in collaboration with major commercial banks of Pakistan (NBP,
HBL, UBL, MCB and ABL). Under the Scheme, financial assistance is provided by way of
Interest Free Loans to the meritorious students who have financial constraints for pursuing
their studies in Scientific, Technical and Professional education within Pakistan. The Scheme
is being administered by a high powered committee comprising Deputy Governor, State Bank
of Pakistan, Presidents of the commercial banks and representative of Ministry of Finance,
Government of Pakistan.
e) NBP KAROBAR- PRESIDENT’S ROZGAR SCHEME
The solution of Pakistan’s major socio-economic problems primarily lies in the development
and growth of small & micro businesses. These will not only provide employment
opportunities to ever-growing population demand but will also become the catalyst for
breaking the vicious circle of poverty. In this regard, NBP has developed a full range of
Products under the President’s Rozgar Scheme with a brand name of “NBP KAROBAR”. The
scheme will be offered to eligible young and literate citizens of Pakistan, falling within an age
group of 18-40 years having a minimum qualification of Matriculation (except for females in
the PCO/Tele-center product). The eligible borrowers will be required to make a down
payment of 15%. Asset and Life & Disability insurances will be mandatory under this scheme.
The 15% down payment will include 1st year’s asset insurance premium. However, the cost
of life and disability insurance will be borne by GOP. The mark-up rate for the 1st year will be
12% and for the subsequent years it will be 1 year KIBOR + 2%. Fifty percent (50%) of this
rate will be paid by the customer i.e. 6% and the balance of 6% will be borne by GOP.
Additionally, first 10% of the losses under the scheme will be taken-up by GOP. Initially, under
the President’s Rozgar scheme, NBP will offer following products:
a) NBP Karobar Utility Store (under a Franchise with Utility Stores Corporation)
b) NBP Karobar Mobile General Store (without USC Franchise)
c) NBP Karobar Transport
d) NBP Karobar PCO
e) NBP Karobar Tele-center
a) NBP KAROBAR UTILITY STORE
The product has been designed in collaboration with “UTILITY STORES CORPORATION OF
PAKISTAN (USC)” to provide financing facility of an average amount of Rs.100, 000/- for a
maximum period of five years with grace period of three months. This is available to all
eligible citizens of Pakistan for setting-up small-scale Retail Outlet or Mobile Utility Store. The
USC will give its franchise to qualifying Pakistani citizens. Following two financing options are
available under this product:
1. NBP KAROBAR Utility Store (Shop)
The Financing facility is available to set-up a small scale Retail Outlet (Utility Store in a shop)
for purchase of furniture & fixtures. This is also applicable on payment of security deposit /
advance rent under franchise from the USC. However, stocks will be purchased by the
customer.
2. NBP KAROBAR Mobile Utility Store
Financing facility available to purchase a 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (Auto
Scooter / Motorcycle Rickshaw) with attached Loader body (Thehla type) under franchise
from the USC to carry utility goods for retail sale ideally in areas where accessibility to
conventional utility stores is difficult.
b) NBP KAROBAR MOBILE GENERAL STORE (WITHOUT USC FRANCHISE)
This financing program has been designed on the similar pattern of Mobile Utility Store. The
only difference is that the borrower will have the liberty of procuring stock/supplies/grocery
items from open market. Under this product the average loan size of Rs.100, 000/- will be
given for a maximum period of five years with a grace period of three months.
c) NBP KAROBAR TRANSPORT
The NBP Karobar Transport is designed to finance 2/3 wheeler, 4 stroke Petrol/CNG/LPG
Vehicle (Auto Scooter / Motorcycle Rickshaw) to the eligible citizens of Pakistan for providing
less expensive environment friendly transport facility. Under this product average loan size of
Rs.100, 000/- will be provided for a maximum period of five years with a grace period of three
months.
d) NBP KAROBAR PCO
This product is designed to finance setting-up a PCO. NBP will be providing financing for the
purchase of Mobile/Wireless Telephone Set with connection, Credit Balance. The average
amount of financing under this product will be Rs.5, 000/- for a maximum period of two years
with a grace period of three months.
e) NBP KAROBAR TELE-CENTER
This product is specially designed to finance setting-up a Tele-center. NBP will be providing
financing for the purchase of Mobile/Wireless Telephone Set with connection, Computer,
Printer and Fax machine cum Photocopier etc. to establish tele-center on a rented shop or
owned premises. The average amount of financing under this product will be Rs.50, 000/- for
a maximum period of two years with a grace period of three months.

3. CORPORATE ADVANCES
a) CASH FINANCE
This is a very common form of borrowing by commercial and industrial concerns and is made
available either against pledge or hypothecation of goods, produce or merchandise. In cash
finance, a borrower is allowed to borrow money from the banker up to a certain limit, either at
once or as and when required. The borrower prefers this form of lending due to the facility of
paying markup/services charges only on the amount he actually utilizes. If the borrower does
not utilize the full limit, the banker has to lose return on the un-utilized amount. In order to
offset this loss, the banker may provide for a suitable clause in the cash finance agreement,
according to which the borrower has to pay markup/service charges on at least on self or one
quarter of the amount of cash finance limit allowed to him even when he does not utilize that
amount.
b) RUNNING FINANCE/ OVERDRAFT
This is the most common form of bank lending. When a borrower requires temporary
accommodation his banker allows withdrawals on his account in excess of the balance which
the borrowing customer has in credit, and an overdraft thus occurs. This accommodation is
generally allowed against collateral securities. When it is against collateral securities it is
called “Secured Overdraft” and when the borrowing customer cannot offer any collateral
security except his personal security, the accommodation is called a “Clean Overdraft”. The
borrowing customer is in an advantageous position in an overdraft, because he has to pay
service charges only on the balance outstanding against him. The main difference between a
cash finance and overdraft lies in the fact that cash finance is a bank finance used for long
term by commercial and industrial concern on regular basis, while an overdraft is a temporary
accommodation occasionally resorted to.
c) DEMAND FINANCE
When a customer borrows from a banker a fixed amount repayable either in periodic
installments or in lump sum at a fixed future time, it is called a “loan”. When bankers allow
loans to their customers against collateral securities they are called “secured loans” and when
no collateral security is taken they are called “clean loans”.
The amount of loan is placed at the borrower’s disposal in lump sum for the period agreed
upon, and the borrowing customer has to pay interest on the entire amount. Thus the
borrower gets a fixed amount of money for his use, while the banker feels satisfied in lending
money in fixed amounts for definite short periods against a satisfactory security.
4. REMITTANCES
a) DEMAND DRAFTS
Drafts drawn by one branch on another branch or on the Head Office of same bank or vice
versa, are not cheques or bills, as these have no distinct drawer and drawee. Section 85-A
reads:
“ Where any draft, that is, an order to pay money, drawn by one office of bank upon another
office of the same bank for a sum of money payable to order on demand, purports to be
issued by or on behalf of the payee, the bank is discharged by payment in due course”.
Banker’s drafts payable to order on demand are within the protection of Sections 10 and 131-
A of the Negotiable Instruments Act. However, if a demand draft drawn on a bank by its own
branch bears a forged endorsement, the person in possession of it cannot compel that bank
to pay it. As far as possible the banker’s draft should be crossed and it should never be drawn
payable to bearer.
When a person requires a draft he should be asked to complete the prescribed application
form in which he should state the amount of the draft, the name of the payee, and the place of
payment. This application form should be signed by the purchaser or by those persons who
have been duly authorized to act on his behalf. When a customer requests his banker to
provide him with a banker’s draft, the amount of which is to be debited to his account, he
should enclose with his written request a cheque covering the amount of the required draft
and other charges etc. payable to banker.
The National Bank of Pakistan provides demand drafts at very reasonable rates with safety,
speedy and reliable way to transfer money. Any person whether an account holder of the
bank or not, can purchase a Demand Draft form a bank.

b) TRAVELERS CHEQUES
They are generally issued for the convenience of person travelling abroad, but some
Pakistani banks issue them in Pakistan currency also for use within the country as well.
Before issuing, the bankers receive an amount equal to the face value of the cheques, and
also charge a small commission. The travelers’ cheques are for fixed amount and are treated
as Order cheques payable only to the purchaser whose specimen signature appears on each
traveler’s cheque itself. Foreign currency travelers cheques are issued and encashed in
accordance with the provisions of the Exchange Control Regulation Act, 1947. While making
payment, the paying banker must insist that the holder signs in his presence.
The National Bank of Pakistan provides their services for traveler’s cheque at very reasonable
and competitive rates. It has following features
Negotiability Pak Rupees Traveler’s Cheques are a negotiable instrument
Validity There is no restriction on the period of validity
Availability At 700 branches of NBP all over the country
Encashment At all 400 branches of NBP
Limitation No limit on purchase
Safety NBP Traveler’s Cheques are the safest way to carry our money

c) LETTER OF CREDIT
Letters of credit are very useful instruments in facilitating commercial relations between
businessmen at various places. Letter of credit state the limit of the credit and the time during
which it is held at the disposal of the grantee, but they are neither negotiable nor transferable.
Letter of credit may be revocable. There are many kinds of letter of credit such as Revolving
credit, Back to Back credit, Claused credit etc. NBP is committed to offering its business
customers the widest range of options in the area of money transfer. If you are a commercial
enterprise then our Letter of Credit service is just what you are looking for. With competitive
rates, security, and ease of transaction, NBP Letters of Credit are the best way to do your
business transactions.

d) FOREIGN REMITTANCES
To facilitate its customers in the area of Home Remittances, National Bank of Pakistan has
taken a number of measures to:
Increase home remittances through the banking system.
Meet the SBP directives/instructions for timely and prompt delivery of remittances to the
beneficiaries.
The new features of NBP foreign remittances include:
The existing system of home remittances has been revised/significantly improved and well-
trained field functionaries are posted to provide efficient and reliable home remittance
services to nonresident Pakistanis at 15 overseas branches of the Bank besides United
National Bank (the joint venture between NBP and UBL in UK)., and Bank Al-Jazira, Saudi
Arabia.
Zero Tariffs: NBP is providing home remittance services without any charges.
Strict monitoring of the system is done to ensure the highest possible security.
Special courier services are hired for expeditious delivery of home remittances to the
beneficiaries.
e) SWIFT SYSTEM
The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been
introduced for speedy services in the area of home remittances. The system has built-in
features of computerized test keys, which eliminates the manual application of tests that often
cause delay in the payment of home remittances. The SWIFT Center is operational at
National Bank of Pakistan with a universal access number NBP-PKKA. All NBP overseas
branches and overseas correspondents (over 450) are drawing remittances through SWIFT.
Using the NBP network of branches, we can safely and speedily transfer money for our
business and personal needs.
f) MAIL TRANSFER
A Mail Transfer is a form of remittance in which the amount remitted by a customer or a non-
customer is directly credited to the account of the beneficiary with another branch. Move your
money safely and quickly using NBP Mail Transfer service. And NBP also offer the most
competitive rates in the market. They charges Rs 50/- exchange rate and RS 75/- postage
charges on issuing mail transfer. When the money is not required immediately, the
remittances can also be made by mail transfer (MT). Here the selling office of the bank sends
instructions in writing by mail to the paying bank for the payment of a specified amount of
money. Debiting to the buyer’s account at the selling office and crediting to the recipient’s
account at the paying bank make the payment under this transfer. NBP taxes mail charges
from the applicant where no excise duty is charged. Postage charges on mail transfer are
actual minimum Rs. 40/- if sent by registered post locally Rs.40/- if sent by registered post
inland on party’s request.
g) TELEGRAPHIC TRANSFER
Telegraphic Transfer is a form of remittance, which is advised by telegram, telex or fax
machines. The fundamental principles of such transfer are otherwise identical with the Mail
Transfer. It is the message, which is sent from one branch to another on the order of payer to
payee through wire. It is one of the quickest means to transfer fund through the use of
telex/fax/internet or cable. Payment to the beneficiary is affected directly by the drawee office
upon identification or through credit into beneficiary’s bank account. As such remitting office is
not required to issue any instrument payment to the remitter for delivery to the beneficiary.
h) PAY ORDER
NBP provides another reason to transfer your money using our facilities. NBP pay orders are
a secure and easy way to move your money from one place to another. And, as usual, NBP
charges for this service are extremely competitive. The charges of NBP are very low all over
the Pakistan. It charges Rs 50/- for NBP account holders on issuing one payment order, and
charges Rs 100/- for NBP non-account holders on issuing one payment order. It charges Rs
25/- for students on payment of fees of educational institutions. If some one want a duplicate
of payment order they charges Rs 100/- for NBP account holders and Rs 150/- for non
account holders.

5. MISCELLANEOUS
a) LOCKERS
National of Pakistan also provides lockers facility in the country. The lockers issued only to
the depositors. No lockers are issued to any unknown person. The dual control system is
used for lockers. The officer has master key to apply on the locker but he cannot open the
locker of any person. The locker holder provides the bank has specimen signature. Whenever
the locker holders come to open the locker, his signatures are verified by the officer and then
will be able to open his locker. If the key of the locker is lost company providing these lockers
breaks the locker and new lock is fitted in its locker and lock is destroyed in the presence of
the locker holder and bank charges RS 1200 for that. In case the locker holder dies, the court
opens his locker in the presence of his heir as mentioned in his will or and his belongings are
given to them and the locker is closed.
b) NBP CASH CARD
NBP Cash Card is a 24-hour direct access ATM/Debit card to your bank account, which lets
you pay directly from your account as an alternative payment method to cash. The transaction
is authorized and processed by entering PIN. The NBP Cash Card holders are able to
transact at any of the 4000 + Merchants where Orix logo is displayed and can withdraw cash
from NBP, 1-Link & M-NET ATM’s across the country. The followings are the main features of
this product:
You won't need to carry a lot of cash with you every time you go out.
Secure and Safe transaction.
Account Information on tips (like: Mini Statement, Balance Inquiry, Utility Bill Payment etc.)
Enable To Withdraw Cash From 1-Link ATMs / MNET ATMs.
Enable to Make Purchases from Around 4000 POS (Merchants) Countrywide including 2500+
POS in Karachi.
No Card Issuance Fee for first 12 Months

c) INTERNATIONAL BANKING
National Bank of Pakistan is at the forefront of international banking in Pakistan which is
proven by the fact that NBP has its branches in all of the major financial capitals of the world.
Additionally, the Bank has recently set up the Financial Institution Wing, which is placed under
the Risk Management Group. The role of the Financial Institution Wing is:-
To effectively manage NBP's exposure to foreign and domestic correspondence
Manage the monetary aspect of NBP's relationship with the correspondents to support trade,
treasury and other key business areas, thereby contributing to the bank's profitability
Generation of incremental trade-finance business and revenues

ORGANIZATIONAL STRUCTURE OF NATIONAL BANK OF PAKISTAN

A well-developed and properly coordinate structure is an important requirement for the
success of any organization. It provides the basic framework within which functions and
procedures are performed. Any organization needs a structure, which provides a framework
for successful operations. The operation of an organization involves a number of activities,
which are related to decision making, and communication of these decisions. These activities
must be well coordinated so that the goals of the organization are achieved successfully.
The Organization Structure (Annexed I) shows the internal operations and reporting lines of
the National Bank of Pakistan. The bank has clearly defined organizational structure, which
supports clear lines of communications and reporting relationships. There exists a properly
defined financial and administrative power of various committees and key management
personnel, which supports delegations of authority and accountability.
The internal operations of the Bank are organized into 15 main departments and divisions
headed by senior management of the bank and are report directly to the Board of Directors.
The organizational structure of National Bank of Pakistan is centralized because all the
decisions of the bank are taken by the top Management. The National Bank of Pakistan’s
Departmental key roles and functions are as follows:
BOARD OF DIRECTORS
Pursuant to Section 11 of The Banks’ (Nationalization) Act, 1974, the number of Directors of
the Bank shall not be less than 5 and not more than 7, excluding the President. The Federal
Government may, if deems necessary, appoint a Chairman of the Board in respect of the
Bank. At present National Bank of Pakistan’s Board of Directors consist of 6 Directors and a
President who is the Chief Executive of the Bank and presides over the meetings of the
Board. The responsibilities of Directors include the followings:
1. The Board of Directors shall assume its role independent of the influence of the
Management and should know its responsibilities and powers in clear terms. it should be
ensured that the Board of Directors focus on policy making and general direction, oversight
and supervision of the affairs and business of the Bank and does not play any role in the day-
to-day operations, as that is the role of the Management.
2. The Board shall approve and monitor the objectives, strategies and overall business plans
of the institution and shall oversee that the affairs of the institution are carried out prudently
within the framework of existing laws & regulations and high business ethics.
3. All the members of the Board should undertake and fulfill their duties & responsibilities
keeping in view their legal obligations under all the applicable laws and regulations.
4. The Board shall clearly define the authorities and key responsibilities of both the Directors
and the Senior Management without delegating its policy-making powers to the Management
and shall ensure that the Management is in the hands of qualified personnel.
5. The Board shall approve and ensure implementation of policies, including but not limited to,
in areas of Risk Management, Credit, Treasury & Investment, Internal Control System and
Audit, IT Security, Human Resource, Expenditure, Accounting & Disclosure, and any other
operational area which the Board may deem appropriate from time to time. The Board shall
also be responsible to review and update policies periodically and whenever circumstances
justify.
6. As regards Internal Audit or Internal Control, a separate department shall be created which
shall be manned preferably by professionals responsible to conduct audit of the Bank,
Various Divisions, Offices, and Units Branches etc. The Head of this department will report
directly to the BOD or Board Committee on Internal Audit.
7. The business conditions and markets are ever changing and so are their requirements. The
Board, therefore, is required to ensure existence of an effective ‘Management Information
system’ to remain fully informed of the activities, operating performance and financial
condition of the institution, the environment in which it operates, the various risks it is exposed
to and to evaluate performance of the Management at regular intervals.
8. The Board should meet frequently (preferably on monthly basis, but in any event, not less
than once every quarter) and the individual directors of an institution should attend at least
half of the meetings held in a financial year. The Board should ensure that it receives
sufficient information from Management on the agenda items well in advance of each meeting
to enable it to effectively participate in and contribute to each meeting.
9. The Board should carry out its responsibilities in such a way that the external auditors and
supervisors can see and form judgment on the quality of Board’s work and its contributions
through proper and detailed minutes of the deliberations held and decisions taken during the
Board meetings.
10. To share the load of activities, the Board may form specialized committees with well-
defined objectives, authorities and tenure. These committees, preferably comprising of ‘Non-
Executive’ Board members, shall oversee areas like audit, risk management, credit,
recruitment, compensation etc. these committees of the Board should neither indulge in day-
to-day affairs/operations of the bank and enjoy any credit approval authority for
transaction/limits. These committees should apprise the Board of their activities and
achievements on regular basis.
11. The Board should ensure that it receives management letter from the external auditors
without delay. It should also be ensured that appropriate action is taken in consultation with
the Audit Committee of the Board to deal with control or other weaknesses identified in the
management letter. A copy of that letter should be submitted to the State Bank of Pakistan so
that it can monitor follow-up actions.
The Following table mentioned the names & designation of Board of Directors of National
Bank of Pakistan:

Name Designation
Syed Ali Raza Chairman & President
Mr. Sikandar Hayat Jamali Director
Mian Kausar Hameed Director
Mr. Ibrar A. Mumtaz Director
Mr. Tariq Kirmani Director
Mr. Muhammad Arshad Chaudhry Director
Mr. Mohammad Ayub Khan Tarin Director
Mr. Ekhlaq Ahmed Secretary Board of Directors

SENIOR MANAGEMENT
The senior management of National Bank of Pakistan is consists of Group chiefs, who report
directly to the Directors of Bank. The whole functions of National Bank of Pakistan are
performed under these Groups. The National Bank of Pakistan has following groups and
divisions:
Corporate and investment Banking Group
Operations Group
Credit Management Group
Audit & Inspection Group
Compliance Group
HRM & Administration Group
Commercial & Retail Banking Group
Treasury Management Group
Special Assets Management Group
Employees benefit & Disbursements Group
Overseas & Coordination Group
Islamic Banking
Core Banking Application, PMO
Financial Control Division
Information Technology Group
Name Group Name & Designation
Masood Karim Shaikh SEVP & Group Chief, Corporate & Investment Banking Group
Shahid Anwar Khan SEVP & Group Chief, Credit Management Group
Dr. Asif A. Brohi SEVP & Group Chief, Operations Group
Imam Bakhsh Baloch SEVP & Group Chief, Audit & Inspection Group
Ziaullah Khan SEVP & Group Chief, Compliance Group
Dr. Mirza Abrar Baig SEVP & Group Chief, Human Resources Management & Administration
Group
Amer Siddiqui SEVP & Group Chief, Commercial & Retail Banking Group
Muhammad Nusrat Vohra SEVP & Group Chief, Treasury Management Group
Amim Akhtar EVP & PSO to the President
Ekhlaq Ahmed EVP & Secretary Board of Directors
Tajammal Hussain Bokharee EVP/Divisional Head, Special Assets Management Group
Mrs. Khurshid Maqsood Ali EVP & Divisional Head Employee Benefits, Disbursements &
Trustee Division
Tahir Yaqoob EVP & Group Chief, Overseas Coordination & Management Group
Anwar Ahmed Meenai EVP & Divisional Head, Islamic Banking
Naeem Syed EVP & Head, Core Banking Application, PMO
Aamir Sattar Financial Controller & Divisional Head, Financial Control Division
Atif Hassan Khan Group Chief (A), Information Technology Group

1. CORPORATE & INVESTMENT BANKING GROUP

The corporate & investment banking group is headed by Mr. Masood Karim Shaikh. This
group performs its function through its following two units:
Corporate Banking
Investment Banking
The corporate and investment banking will continue to play a major role in loan syndications,
structured financing and debt / capital raising transactions with the objective of providing
entire range of corporate and investment banking solutions to its valued clients under one
umbrella.
The Corporate Banking Group achieved excellent results in 2007 with a number of landmark
transactions in cement, energy, communication and fertilizer sectors. In addition to the funded
income, our corporate and investment banking has substantially increased its fee base
income this year by being the lead advisor in a number of transactions in the corporate world
of Pakistan
The challenges to corporate business in year 2007 were manifold including reduction in
Private Credit Investment as a result of slowing down of economy as well as rising interest
rates. The increasing pressure on the textile industry reduced the lending to this sector. In
addition the bank's corporate loans yields also faced pressure as substitute form of funding
sources are available in the market in form of Islamic financing, mutual funds, issuance of
debt instruments like TFCs and Bonds and the Capital markets.
Despite these threats and ch
ORGANIZATION STRUCTURE OF THE BRANCH
A well-developed and properly coordinate structure is an important requirement for the
success of any organization. It provides the basic framework within which functions and
procedures are performed. Any organization needs a structure, which provides a framework
for successful operations. The operation of an organization involves a number of activities,
which are related to decision making, and communication of these decisions. These activities
must be well coordinated so that the goals of the organization are achieved successfully.
The organization chart & Organogram of National Bank of Pakistan Rawat Branch is shown
on Annexed IV & Annexed V at the end of this report. This chart defines the line of authority in
the branch and its departments. It is a sort of visual presentation of the organizational
structure. It specifies the duties and responsibilities of the personnel or staff of the branch.
The purpose of an organizational structure is to help in creating an environment for human
performance. Although the structure must define the task to be done, the rules so established
must also be designed in the light of abilities and motivation of the human recourse available.
By analyzing the organization structure of the branch following elements can be found in the
structure.
a) CENTRALIZED DECISION MAKING
The Branch Manager of National Bank of Pakistan is responsible for all the affairs of the
Bank. All the decisions relating to Branch are made by him and the subordinates have to obey
these decisions. All the employees of the Bank are report directly to the Branch Manager. The
branch has two operation Managers. Operation Manager I controls Clearing house &
Remittance Department and Operation Manager II controls Deposits, Advance & Branch
accounts department. Both of them are report directly to the Manager regarding affairs of their
departments. The Chief Accountant controls Accounts department & is report directly to
branch Manager. The branch also has two cashiers responsible for cash & Pension
disbursement department reports directly to branch Manger. The BBO (Branch Back Office
System) Operator controls computer department of the branch and is report directly to
Operation Manager I and Branch Manager.

b) DOWNWARD COMMUNICATION
Communication is the process by which information is exchanged and understood by two or
more people, usually with the interest to motivate or influence the behavior of others in the
organization. Downward communication is the message and information sent from top
management to subordinates in a downward direction. The same pattern is followed at
National Bank of Pakistan Rawat branch, the Manager of the branch sent orders, information
& messages to following subordinates
Operation Manager I
Operation Manager II
BBO ( Branch Back Office System) Operator
Chief Accountant
Cashier I
Cashier II
Clerk I
Clerk II
Non Clerical Staff
c) CHAIN OF COMMAND
The chain of command is an unbroken line of authority that links all persons in an
organization and shows who reports to whom. By analyzing the organizational structure of the
National Bank of Pakistan Rawat branch it can be found that there is a scalar principle
followed with in the branch because each and every employee of the branch knows to whom
they can report. The authority and responsibility for different tasks and duties are different, as
well as every one knows the successive levels of management all the way to the top.

d) AUTHORITY AND RESPONSIBILITY

The chain of command illustrates the authority structure of National Bank of Pakistan Rawat
Branch. Authority is the formal and legitimate right of the manger to make decisions, issues
orders and allocates resources to achieve organizational desired outcomes. By analyzing the
chain of command of NBP, one can come to the conclusion that, as there is scalar pattern
followed at the organizational setup of NBP, therefore it is implied that everyone in his
position knows that what is one’s authority and what is the responsibility and the authority it
allocated.
e) DELEGATION
Delegation is the process, which managers use to transfer the authority and responsibility to
position below in the hierarchy. Most organizations today encourage managers to delegate
authority to the lowest possible level to provide maximum flexibility to meet customer needs
and adapts to the environment. At National Bank of Pakistan Rawat branch Operation
Managers have some authority & responsibility relating to affairs of the Branch.

EPARTMENTS OF THE BRANCH

Banking procedures are divided between various departments. Different departments do their
jobs in occurrence with the bank policies. In National Bank of Pakistan each branch is divided
into various departments depending on their size and volume of business. Head of
department manages each department & officials of the branch follow procedures. The
departments working within National Bank of Pakistan Rawat branch are as under:
1. Clearing House Department
2. Remittance Department
3. Computer Department
4. Deposits Department
5. Advances Department
6. Account Opening Department
7. Accounts Department
8. Cash Department
9. Pension Disbursement Department
1. CLEARING HOUSE DEPARTMENT
As part of their daily business activity, banks receive cheques and other financial instruments
from their customers drawn on other banks, to be collected and credited to their accounts.
Similarly, banks receive cheques/instruments from other banks, deposited by customers of
the banks drawn on the customers of the drawee banks. Therefore, the banks act as
Collecting Banks when they send cheques/instruments for collection and as paying Banks,
when they receive cheques/instruments for collection from other banks. Since each bank
receive and sends cheques/instruments for collection to and from an number of banks, the
process of settlement would clearly be very cumbersome and time consuming if every
cheques/instrument had to be sent by the collection bank to each of the drawee banks or
branch upon which different collection items are drawn and to individually pay the proceeds to
each of the bank sending cheques/instrument in for collection. Therefore, the banks have
evolved what is called the Bankers Clearing arrangement.
The Clearing System enables cheques to be paid or cleared centrally and settlement made
for receivables and payables between the banks. The SBP co-ordinates clearing activity
through its offices, called the Clearing Houses, set up in big cities and towns. Where SBP
does not maintain its own office, some other bank, usually National Bank of Pakistan (NBP)
performs this function. But the clearing house facility is available only for cheques/instruments
drawn on banks situated within the same city/clearing house area.
WORKING OF THE CLEARING PROCESS
Under the clearing arrangements, the State Bank of Pakistan (SBP) offers a Clearing House
or a centralized exchange facility, which works on the following general lines:
All the banks operating in a city who are members of the Clearing House maintain an account
with the SBP’s Clearing House.
Every day representatives of all the banks in every city meet the Clearing House, first meeting
in the morning, at an appointed time, for the purpose of depositing their own customers ,
cheques/instruments to be collected from other banks and receiving cheques/instrument
drawn on their account holders from the others banks.
At the Clearing House accounts of all the banks are debited by the total amount of
cheques/instruments drawn on their customer’s accounts and credited with the amount of
their customer’s cheques/instruments drawn on other banks, as per the list of cheques
submitted by each bank.
The cheques/instruments received, also called Inward Clearing, and are taking back by each
bank to its bank/branch. The amounts of each cheques/instrument is debited or recovered
from each drawee customers’ account and credited to the Clearing House account. Similarly,
against the amount credited by the Clearing House as Outward Clearing, the appropriate
customers’ accounts are credited and clearing House account is debited.
Any cheques/instruments received by a bank that cannot be paid, due to insufficient balance
in its customer’s account or for any other reason, are returned back to the Clearing House
and a credit is claimed and obtained there against.

RULES & REGULATIONS OF CLEARING HOUSE

Timing:(Monday to Saturday)
i. 1st Clearing at 10:00 a.m.
ii. 2nd Clearing at 2.30 p.m.
Each bank will send competent representative to exchange the cheques.
Each bank is required to insure that all cheques and other negotiable instruments are properly
stamped and suitably discharged
An objection memo must accompany each and every cheque when return unpaid duly
initialed.
Each bank is required to maintain sufficient funds in the principal account with SBP to meet
the payment obligations.
The State Bank of Pakistan debit the account of each member of the clearinghouse with the
proportionate working expenses incurred on the operation of clearing house. These expenses
are very nominal.
OUTWARD CLEARING AT THE BRANCH
The following points are to be taken into consideration while an instrument is accepted at the
counter to be presented in outward clearing:
The name of the branch appears on its face where it is drawn o.
It should not stale or post dated or without date.
Amount in words and figures does not differ.
Signature of the drawer appears on the face of the instrument.
Instrument is not mutilated.
There should be no material alteration, if so, it should be properly authenticated.
If order instrument suitably indorsed and the last endorsee’s account being credited.
Endorsement is in accordance with the crossing if any.
The amount of the instrument is same as mentioned on the paying-in-slip and counterfoil.
The title of the account on the paying-in-slip is that of payee or endorsee (with the exception
of bearer cheque).
If an instrument received other than National Bank of Pakistan then special crossing stamp is
affixed across the face of the instrument. Clearing stamp is affixed on the face of the
instruments, paying-in-slip and counterfoil (The stamp is affixed in such a manner that half
appears on counterfoil and paying-in-slip). The instrument is suitably discharged, where a
bearer cheque does not require any discharge and also an instrument in favor a bank not
need be discharged.
The instrument along with pay-in-slip is retained while the counterfoil is given to the customer
duly signed. Then the following steps are to be taken:
1. The particulars of the instrument and the pay-in-slip or credit voucher are entered in the
outward clearing register.
2. Serial no is given to each voucher.
3. The register is balanced; the credit vouchers are balanced from the instruments and are
released to the respective departments against acknowledgement in the register.
4. The instruments are arranged bank wise.
5. The schedules are prepared in triplicate, two copies which are attached with the relevant
instrument and the third is kept as office copy.
6. The house page is prepared from schedules in triplicate.
7. The schedules and house pages are signed by the house in charge with branch stamp.
8. The grand total of the house page is taken and agreed with that of the outward clearing
register.
9. The instrument along with duplicate schedule and house page are sent to the main office.
10. The entry of the instrument returned unpaid is made in Cheques returned Register. If the
instrument is not to be presented again in clearing then a covering memo is prepared. The
covering memo along with returned instrument and objection memo is sent to the customer
who sent the same to his account.
INWARD CLEARING OF THE BRANCH
1. The particulars of the instruments are compared with the list.
2. The instruments are detached and sort out department wise.
3. The entry is made in the inward clearing register (serial no. Instrument no. Account No)
4. The instruments are sent top the respective departments
5. The instruments are scrutinized in each respect before honoring the same.
SPECIAL CLEARING
In addition to the normal clearing function at Clearing house it is mutually agreed to hold an
extra clearing at the clearing house on the particular day and time which is known as “special
clearing” it is arranged due to the rush of work arising out of say, more Holidays declared by
the Central Govt. at a time, but normally special clearing is held on last working day of half
yearly and yearly closing i.e. 30th June and 31st Dec. every year.
2. REMITTANCE DEPARTMENT
The Remittance department deals with the transfer of money from one place to another.
Funds transfer facility or remittance of funds is on of the key functions of the banks all over
the world. Remittances through banking channels save time, costs less and eliminate the
risks involved in physical transportation of money from one place to another. National Bank of
Pakistan transfers money in the following ways.
Pay Order
Demand Draft
Mail Transfer
Telegraphic Transfer
Pay Slip
Call Deposit Receipt
Letter of Credit
Traveler’s Cheque
The Job responsibilities & requirements of remittance department include:
Responsible for money transfers, issuance of pay-orders & drafts, collection items,
maintenance of cheque books & ATM cards and all other counter specific products and
services
Ensure highest level of customer service in a professional and competent manner
Must ensure that the activities are carried out strictly in accordance with the laid down
procedures/processes, and SBP/Compliance guidelines
Responsible for Cash, Clearing, Inland remittances including Demand Drafts and Pay Orders
Ensure high standards of customer services within the assigned turn around time
Ensure compliance with SBP's regulations and internal controls
handling cash, clearing, local remittances, and other related activities at branch level
PARTIES INVOLVED IN REMITTANCES
There are four parties involved in Remittance, which are
Remitter
Remittee
Issuing Bank
paying Bank
REMITTER
One who initiates, or requests for a remittance. The remitter comes to the issuing or
originating branch, asks for a remittance to be made, and deposits the money to be remitted.
The bank charges him a commission for this service. He may or may not be the branch’s
customer.
REMITTEE
A Remittee is also called the beneficiary, or the payee. The person in whose name the
remittance is made. A Remittee is also the one who receive the payment.

ISSUING BANK
The bank that sends or affects the remittance through demand drafts, telegraphic transfers,
Mail Transfers, Pay order etc
PAYING BANK
Paying Bank also knows as the drawee branch, the branch on which the instrument is drawn.
It has to make the payment (usually located in a different city or country).
KINDS OF REMITTANCES
Transfer within the branch
Transfer from one branch to another
Transfer from one bank to another bank in the same city
Transfers from one bank to another bank in two cities.

ACCOUNT OPENING DEPARTMENT

The opening of an account is the establishment of banker-customer relationship. This
department performs the duty of opening accounts for customers. It also issues
checkbooks to customers. A person who wishes to open an account with the bank has
to fill an account opening form obtained from any branch of National Bank of Pakistan.
The bank officer tactfully obtains information about character, integrity, responsibility,
occupation and the nature of business of the perspective customer. Any individual,
who has attained the age of majority and is of sound mind can open and maintain
his/her account. Two or more individuals may open an account jointly. Similarly,
business organizations such as sole proprietary concerns, partnership firms, and
limited liability companies as well as non-profit organizations like clubs, trusts,
societies, associations and NGO’s etc, may open their accounts. The documents
required for National Bank of Pakistan’s Account opening are showed as Annexed VII
at the end of this report.
The following requirements are necessary for opening an account.
Identification of the new customer.
Ascertaining the genuineness of the stated occupation business of the customer.
Determining the correct residential and permanent address.
Completion of all relevant columns of the Account opening form.
Proper completion of documentation.
FUNCTIONS OF ACCOUNT OPENING DEPARTMENT
Providing account opening form according to the customer's requirements,
Guide the customer about the requirements of the account opening and form filling,
Check the forms whether they are correctly completed or not,
Preparing checklist,
Stamping on the form,
Maintaining account opening register,
Pasting of forms in register after release from general banking in charge,
Issuance of cheque books,
Issuance of accounts maintenance certificate,
Closure of account
Verification of signature in case of cheque presented before releasing of account
opening from SS card is not yet scanned
4. CASH DEPARTMENT
All physical movement of cash in the bank is made through the cash department. As
bank is borrowing and lending institution, therefore cash is the top most priority of
Bank. Another aspect is that cash department is for the security purpose, security in a
sense that there should be no embezzlement of funds or in money leaded to bank by
any party or person. The efficiency of bank is also related to this department the more
efficient the bank is the stronger and busy is the cash department. Cash department
perform following functions
Cash department owes its important to the fact that it is a major point of contract
between the bank and the customer, the bank’s most valued relationships. This
department is the showcase of the bank and conveys the first impressions about the
bank’s commitment to professionalism in its systems and procedures and to courteous
and efficient customer service.
Normally cash department performs following functions
Collection of funds
Acceptance of deposits
Collection of utility bills
Payment of checks
Remittances
Act according to any standing instructions
Transfer of funds from one account to another
Verification of signatures
Posting
Handling of Prize bond
The two main activities of cash department are as fallows:
DEPOSIT CASH IN CUSTOMER’S ACCOUNT
When the customer want to deposit amount in his account at opening of account or
after that then he has to fill a deposit slip that shows the amount and the account in
which the cash will be deposited. Then teller will receive amount and credit the
customer’s account that shows increase in customer’s bank account.
MAKE PAYMENTS FROM CUSTOMER’S ACCOUNT
When the customer draws a cheque on the bank to pay a certain amount then BBO
Operator will debit the customer’s account that shows reduction in his account balance.
CHEQUE ENCASHMENT PROCEDURE
RECEIVING OF CHEQUES
The cash is paid against the cheques of the client. The following points are important.
Cheque is drawn on same branch
Cheque is not post dated.
Amount in words and figure are same.
It should be bearer cheques so the word bearer should not cross.

VERIFICATION OF SIGNATURE
After receiving the cheques the cheques the operation manager verify the signature of
the account holder and the signature on the cheques. If the signature is not same it is
returned back otherwise forward to BBO Operator for posting.
COMPUTER TERMINAL PROCESS
The cheque is received in computer terminal, where BBO operator checks the balance
of the account holder. The BBO operator also sees the stop payment instructions,
whether received from account holder or not. After considering these points BBO
Operator post the cheque in BBO (Branch back office system) and forward to operation
manager.
PAYMENT OF CASH
After posting the cheque the operation manager cancelled the cheque and returned
back to cashier. The cashier enters the cheque in cash paid registered and pays
against the second signature of receiver on the back of the cheque.
5. DEPOSITS DEPARTMENT
The primary function of National Bank of Pakistan is to accept and receive surplus
money from the people, which they willingly deposit with the Bank. Like all other
Banks, National Bank of Pakistan also take incitation to attract as much depositor’s as
it can. The deposit department accepts/collects deposit from accountholders.
The National Bank of Pakistan offer different deposit schemes to its customers, which
includes the following:
Current Deposits
PLS Saving Deposits
Fixed Deposit Account ( Time Deposits)
Foreign Currency Account
NBP Premium Aamdani
Foreign Currency Account
National Income Daily Account (NIDA)
6. ADVANCES DEPARTMENT
The bank is profit seeking institution. It attracts surplus balance from the customer at
low rate of interest and makes advances at a higher rate of interest to the individuals
and business firms. Credit extensions are the most important activity of all the financial
institutions, because it is the main source of earnings. Advances department is one of
the most sensitive and important department of the bank. The major portion of the
profit is usually earned through this department. The job of this department is to make
proposals about the loans; the credit management division of head office directly
controls all the advances.
The advances Department receive application from intending borrowers. After
receiving application the advance department processes it further. After analyzing and
detailed investigation, they decide whether to approve the loan or not. Some loan
approvals are made by the Manager of the branch within his powers as prescribed by
the bank’s higher authorities, while some loan applications are submit to higher
authorities for their approval. Some advances are of the following nature
Loan against Gold
Agriculture advance to farmers
Medium term advance for working capital
Long term advance for setting industry
Short term advance to businessman
The National Bank of Pakistan offer following products (Advances) to its customers
NBP Saibaan
NBP Advance Salary
NBP Cash & Gold
Students Loan Scheme
NBP Karobar

The Advances department deals in following transactions:

1. Preparation and submission of proposals of Running finance, Cash finance,
Demand finance, Export finance, Staff finance, Finance against imported merchandise
etc for sanction of finance limit from the hire authority.
2. Preparation and posting of vouchering of all type of finance.
3. Accruals & recovering of Markup on finances on periodical basis.
4. Approval of transfer of funds through DD-TT, PO, MT, IBCO etc to various branches
by debiting the limits.
5. Preparation of weekly, monthly, quarterly, and annually statement to the hire
authority.
6. Transfer of funds from one account to another account of the party taking the
authority letter.
7. Preparation of advances record.
8. Timely submission of returns/reports, daily, weekly, monthly & quarterly.
9. Checking of computer outputs of the department on daily basis.
10. Balancing of all financing heads.
7. COMPUTER DEPARTMENT
This department is playing a very important role in making the banking procedures
faster and helping the bank for providing better services to its customers. The National
Bank of Pakistan has three types of branches in all over Pakistan, these included
a) ONLINE BRANCHES
The branches, which are directly, link with central computer AS-400, through wide area
networking through fiber optics. These branches have dumb terminal directly linked
with central computer.
b) BATCH BRANCHES
The branches where all transactions are carried out with the computer base system but
these branches are not connected to the central computer with wide area net working.
Batch branches are using three type of system, Branch Back Office (BBO) based on
FoxPro, Branch Automated System based (BAS) on UNIX, Branch Integrated System
(BIS) based on FoxPro in Karachi mostly branches are facing this problem. BAS was
establish in the beginning while BBO is currently implemented now efforts are under
way to convert all branches into Electronic Banking System (EBS) which is used by
online branches as this system does not require a person to remain sitting till the
branch closed its daily operation but the system automatically close it self when the
branch timing is over. The database in head office is also based on this system.
c) MANUAL BRANCHES
The branches where all transactions are carried out manually and records are
maintained on registers usually stored in big wardrobes. Manual branches reports
Regional head office regarding their daily transactions. In Regional head office through
On Line, terminal data goes to head office central computer; Except for branches those
are On Line as they transfer there daily data directly through there own terminal. As
day-to-day, activities of all branches are recorded in a central computer.
EVENING DATA RECEIVING CENTER
Data form batch branches reach the main branch in floppy diskettes while form manual
branches it is in form of hard copy. Data comprises of transactions in profit loss
account, current account, advances etc termed as “Daily Transaction Report”. Clerk in
charge register all diskettes and manual in registers called “job booking register” one
for each of two type of data. These floppies and manual are bring in by riders. There
are fourteen riders in total who bring information form all branches located in Karachi
region.
DATA ENTRY DEPARTMENT
The next task after receiving the data is to enter that data in to a computer. The floppy
disk is directly inserted in the computer. The program in used is based on “COBOL”
language. This program is designed in away that it demand “Hash Value” value before
opening the floppy for further action this value serve the purpose of password or pin
code send by the branch on entering that value the data enter in to the computer. This
computer is attached with the terminal of central computer. The operator of that
terminal takes the data from the computer and converted it in to a text file through that
terminal the data finally goes to the central computer.
DEFECTS AND ERROR HANDLING
Errors of different origin occur when the data goes to central computer. Sometime
retrieving data from the system (BAS, BBO, and BIS), other than used in HO (EBS)
also caused errors. Other errors include Unmatched (This error occurs when document
no matched with the previous one exists), no master (when opening of new account is
not mentioned), Date in Valid, duplicate cheques (this error occur when the last
objection is not removed). These and other such errors are seen by the person in
charge. In the end of day print out of the data enter in central computer is taken. Any
Incomplete information for any branch and any information require by that particular
branch is sent to that branch. More over material is used to make a WST which is sent
to State Bank of Pakistan.
8. PENSION DISBURSEMENT DEPARTMENT
The National Bank of Pakistan was Pakistan’s leading institution which performs the
function of pension payments or disbursements to pensioners. The pension
disbursement department is responsible for making pension payments to Government
Pensioners. The person who wants to receive his/her pension from National Bank of
Pakistan can open an account with any branch of National Bank of Pakistan. The bank
performs this function through Demand Draft Purchase or simply called DD Purchase.
This department performs following functions:
Making Pension Payments
Opening of Account of Pensioner
Entry of amount paid to pensioner in Government Pensioners Register
Verifications of Signatures of Pensioners
Making Demand Draft Purchase Register
9. ACCOUNTS DEPARTMENT
Accounts Department of the bank can be considered the most important department.
This department is basically concerned with processes and activities of recovering,
sorting, summarizing and reporting data resulting from the whole day transactions of all
the departments. Actually the process of this activity starts from the preparation of all
the required vouchers by different related departments. When these vouchers are
prepared, these are posted into respective computer terminals by the relevant
departments. Before merging, a batch list is printed out by Computer Department and
duly checked by the respective departments. After this, merging stage comes, after
which a proof list is printed out. This is the stage, where Accounts Department starts
performing its function. Proof list is checked by the Accounts Department. The account
department prepare following vouchers and reports
Monthly Profit & Loss account- F48
General Ledger
General Ledger- Abstract
Check Book Issue Register
Western Union payments Register
Demand Notices
Miscellaneous Book
Bank Transfer scroll
Posting NBP Advance Salary
Daily Statement- F21
General Ledger- Head wise
Hash Value Register
End of Day register
Posting National Income Daily Account (NIDA)
Monthly return register
Charges A/c register
P-L-S Profit list
Weekly Telegram
Mail Transfer Register
Government Scroll
Provident file
Government Scroll Debit & Credit
Transfer Responding Advice Dispatched Register-F15
Cash Remittance IN
Cash Remittance OUT
NBP General Account
Utilities register
Statement of affairs
Closing entries
Daily activity checking
Minor expense recording

STRUCTURE OF BRANCH’S ACCOUNTS DEPARTMENT

The structure of National Bank of Pakistan’s Accounts department is shown as
Annexed VI at the end of this report. The Accounts department of the branch is
controlled by the Chief Accountant under direct supervision of Branch Manager. The
Branch has one cashier & two clerks for assistance and help of Chief Accountant. The
BBO (Branch Back Office system) Operator has also assist Chief Accountant in
various tasks.
The head of branch’s Accounts department is called Chief Accountant, who performs
his functions under direct supervision of Branch Manager. The Chief Accountant is
responsible for the central accounting records and controls over all financial
transactions of the Branch. He also directs a wide variety of accounting activities and
meets important deadlines & analyzes and interprets accounting data of the branch.
The other responsibilities of Chief Accountant include:
Plans and directs the activities of Cashier, BBO Operator and clerical employees of the
branch engaged in the maintenance of a variety of accounting records.
Directs and participates in the development and revision of procedures in order to meet
requirements of law, provide services to Branch Manager, improve efficiency in branch
activities, and coordinate branch activities with those of other departments.
Directs and reviews the preparation of periodic and special financial statements,
reports, projections, and recommendations, on which important administrative
decisions are based.
Directs and reviews the study of new and revised laws, rules, and programs affecting
the central accounting system and records and installs or recommends changes as
appropriate.
Designing and operating a system to capture, record, process, and store all relevant
documents and information about the financial activities of the branch.
Ensuring the integrity and reliability of the information system, and preventing fraud
from inside and outside the branch.
Preparing financial statements that are reported to Regional Management of National
Bank of Pakistan.
Preparing financial statements and accounting reports for distribution to the branch
Manager for their planning, control, and decision-making needs.
The Chief Accountant with the help of branch’s clerical staff is preparing following
reports:
o Monthly Profit & Loss account- F48
o Daily Statement- F21
o General Ledger
o General Ledger Abstract
o General Ledger head wise
o Bank transfer Scroll
o Posting NBP Advance Salary
o Misc Book
o Posting National Income Daily Account (NIDA)
o Monthly return file
o Charger List
o PLS Profit list
o Weekly Telegram
o Government Scroll
o Government Scroll Dr & Cr
o Transfer Responding Advice Dispatched Register- F15
o Cash Remittance In
o Cash Remittance Out
o NBP General Account
o Clearing register
o Debit & Credit supplementary
Debit supplementary is used for debit voucher and credit supplementary is used for
credit voucher books and register maintained by bank are as fallows
General ledger included:
Statement of daily affairs
Cash book or cash cum day book
Transfer book
Income & expenditure ledger
Income & expenditure includes:
1. Discount
2. Service charges
3. Commission from utility services
4. Salaries allowances & provident fund
5. Rent taxes insurance lighting
6. Profit paid on deposits and borrowings
7. Auditor’s fee & legal charges
BANK ACCOUNTING OPERATIONS
The National Bank of Pakistan’s accounting consists in making computerized, written
and permanent records of every transaction. For Computerized recording of
transactions the bank used software called BBO (Branch Back Office). BBO enable
Bank to record a variety of transactions. The most common part of BBO which is
operating by the BBO Operator is Individual Ledgers. Individual Ledgers are the
accounts in which accounts with depositors are kept. They are kept so that the balance
of each depositor's account may at any time be readily seen, and they should be
frequently balanced to verify their correctness. The three column form of individual
ledger is used because it has a column for checks paid or other debit entries, one for
deposits or other items credited, and a third for showing the balance after each entry or
the day's entries are made in the account. The BBO enlist Chart of Accounts of the
Bank shown in Annexed VIII. All the accounts shown in Annexed are opened and
managed through BBO. All the Remittances of the bank are recorded managed and
control through BBO. The “End of the Day” report is also generated through BBO.
The most important record keeping and report generated by Bank’s Accounts
Department is Statement of the Bank. The statement of the bank shows the general, or
control, accounts of the bank, and the various books of the bank show the detail of
these items. It would not be impossible, but it would be entirely impractical, to enter
every figure directly on the statement of condition. Instead of total deposits, the
balance of each depositor would appear opposite his name. On the other side, instead
of loans and discounts, there would be an itemized list of the loans with the names of
the borrowers. The first principle in bank accounting, as in all other bookkeeping, is
that for every debit there must be a credit, and vice-versa. In accordance with this
fundamental theory the books are maintained. With respect to the statement, every
Rupee of liabilities is accounted for by another Rupee of resources. Similarly each
accounts at the end of the day for each item of cash is balanced. Each bank employee
has had the experience of remaining at his desk until a late hour at night checking up
his day's work searching for a difference of a few cents. Often they become embittered
at what seems to them a tyranny when the small sum of money involved is considered.
The reason they must settle, however, is not on account of the possible loss of ten
cents, but because the most important principle in bank accounting is involved.
"Accuracy first" is a motto that should be framed, figuratively at least, upon the wall of
every banking room.
The books used by National Bank of Pakistan are of various kinds and their purpose is
indicated by name. A ledger is a book used to keep a record of balances. To "post"
means to enter in the proper columns either the debits or credits on the ledger, and the
difference between them represents the balance either due by or to the bank. Another
important book which is used by the National Bank of Pakistan is journal, a book in
which daily transactions are listed in regular order as to accounts, and the total debit or
credit is then posted on the ledgers. All other books, cards and sheets used by bank of
whatever nature is a part or subdivisions of these books. Often they become known
among the clerks by some other name descriptive of their general appearance. For
instance, the general ledger scratcher in one bank is known as the "red book," while
the collection scratcher is the "black book."
The records made by one clerk upon one set of books go to check the records of
another clerk upon a different set of books. For instance, the paying teller and the
receiving teller will each keep a record of checks cashed or deposited payable within
the bank. The debit postings of the individual bookkeeper would agree with the teller's
figures. Skillful accounting lies in making the fullest possible use of original entries, at
the same time having a check on all figures to guard against either error or fraud.
Every transaction ultimately affects the bank's statement of condition by debit or credit.
For example, a deposit of Rs.1000 is made, consisting of Rs.200 cash and checks as
follows: Rs.200 on the bank itself and Rs. 600 payable in another city. At the end of the
day (assuming this to be the only deposit), on the liabilities side there is an increase of
Rs 800 all of which appears in the item "deposits" being the total Rs.1000, less the
check for Rs 200 which is charged to the account of the drawer. On the resource side,
then, a corresponding increase of Rs.800 and this is made up by an increase in the
cash of Rs 200 and an increase of Rs.600 in the item "due from banks." Or a
transaction may appear on one side of the statement only. The bank has sold Rs.5,
000.00 of the bonds it owns.

ROLE OF CFO (CHIEF FINANCIAL OFFICER)

The performance of any organization is reflected by the financial statements, any
ambiguity if remains there, makes the reflection of the performance doubtful.
Therefore, the role of CFO becomes very important as he controls the reflection of
performance, which is reported to different authorities and the organization is assessed
by them, and they must perform their job with professional competency and integrity,
so that the financial statements give credible information to its users. The code of
corporate governance provides the guidelines and opportunity to do this.
The Chief Financial Officers of National Bank of Pakistan used to perform several
tasks which were preparing accounts, preparing budgets, operational reporting and
interpreting, evaluating operating results, preparing income tax returns, establishing
internal control procedures to safe-guard the companies assets.
Due to increased governance requirement there arises a need to empower the chief
accountant and to make him responsible by requiring him to sign the accounts. There
comes the code of corporate governance, which makes the chief accountant powerful
and more responsible. With the new role, Chief Accountant becomes Chief Financial
Officer (CFO). The appointment, removal and remuneration terms and conditions of
employment of the chief financial officer of a listed company shell are determined by
the Chief Executive Officer with the approval of the Board of Directors.
QUALIFICATION REQUIREMENT
The qualification requirement is defined under the code of corporate governance that is
the person appointed as the Chief Financial Officer must be
Member of recognized body of professional accountants or
A graduate from a recognized university or equivalent, having at least 5 years
experience in handling financial and corporate affairs of a listed company.

RESPONSIBILITIES OF CFO
The new responsibilities apply to all Chief Financial Officers of Listed Companies,
Insurance Companies, Banks and DFIs. Mostly the CFO presents the financial position
 relating to the period which has been over, and the period which has to come that is
the financial position attained and the financial projection i.e. where the organization
will be.
RESPONSIBILITIES TOWARDS BOARD OF DIRECTORS
The Chief Financial Officer is required to furnish necessary and classified information
to the board of directors along with his analysis and suggestions as the Chief Financial
Officer attends the board meetings, any issue with financial implications is being
discussed, the person likely to be most in command of these implication is on the spot
and immediately available for questions.
In order to strengthen and formalize corporate decision-making process, significant
issues are required to be placed for the information, consideration and decision of the
boards of directors by the CFO. These are:
Annual business planes, cash flow projection, forecasts and long term planes.
Budgets include capital, manpower and overhead budgets along with variance
analyses.
Quarterly operating results of the company as a whole and in terms of its operating
divisions or business segments.
Details of joint ventures or collaboration agreements or agreements with distributors,
agents, etc.
Default in payment of principal and/or interest, including penalties on late payments
and other dues, to a creditor, bank or financial institution, or default in payment of
public deposit.
Failure to recover material amounts of loans, advances, and deposits made by the
company, including trade debts and inter-corporate finances.
Significant public or product liability claims likely to be made against the company,
including any adverse judgment or order made on the conduct of the company.
3.
ESPONSIBILITIES TOWARDS SHAREHOLDERS
The Chief Financial Officer is required to provide all the necessary data to be
presented in the “Director’s Report”. For this purpose Chief Financial Officer must
ensure the following.
The financial statement, prepared by the management of company, present fairly its
states of affairs, the results of its operation, cash flows and changes in equities.
Proper books of accounts of the company have been maintained
Appropriate accounting policies have been consistently applied in preparation in
financial statements and accounting estimates are based on reasonable and prudent
judgment.
International accounting standards, as applicable in Pakistan, have been followed in
preparation of financial statements and any departure there from has been adequately
disclosed.
The system of internal control is sound in design and has been effectively implemented
and monitored.
There are no significant doubts upon the companies’ ability to continue as going
concern.
There has been no material departure from the best practice of corporate governance
as detailed in the listing regulations.
INTERNAL AND EXTERNAL REPORTING
Chief Financial Officer now has extensive responsibilities for internal and external
reporting. All the information required for decision-making by the Board of Directors
and Chief Executive is processed and furnished by the Chief Financial Officer. Apart
from this, external reporting requirement is fulfilled by Chief Financial Officer, the
accounts and financial statements are signed by the Chief Financial Officer before they
are sent to concerned authorities.CCG requires that the listed companies submit their
quarterly accounts to the shareholders within one month of the close of the first and
third quarter of year of account. The CCG does not prescribe the time for submitting
half yearly accounts to the shareholders. Here we can refer to section 245 of
companies’ ordinance 1984 for this purpose, which requires half yearly accounts to be
submitted within two months of the close of first half. The CCG requires a limited
review of half yearly accounts by external auditor. Annual audited accounts are now
required to be submitted within four months of the close of financial year.
The Securities and Exchange Commission of Pakistan is exercising strict vigilance to
ensure compliance of 4th and 5th schedule of the Companies Ordinance, 1984 and
timely submission of accounts by companies. It has recently imposed penalties on
Directors of nine listed companies who failed to prepare and circulate the quarterly
accounts. Furthermore, fines have been imposed on chief executives.

USE OF ELECTRONIC DATA IN DECISION MAKING

The technological development in the field of information systems make it possible for
management to use electronic data in decision making. An understanding of the
effective and responsible use and management of information systems and
technologies is important for managers, business professionals, and other knowledge
workers in today’s internetworked enterprises. Information systems play a vital role in
the e-business and e-commerce operations, enterprise collaboration and management,
and strategic success of businesses that must operate in an internetworked global
environment. Thus, the field of information systems has become a major functional
area of business administration. The management of a business can use information
systems in their decision making process. Before proceeds it’s important to discuss
precisely about decision making.
Decision making can be regarded as an outcome of mental processes leading to the
selection of a course of action among several alternatives. Every decision making
process produces a final choice. The output can be an action or an opinion of choice. A
significant part of decision making skills is in knowing and practicing good decision
making techniques. One of the most practical decision making techniques can be
summarized in following simple decision making steps:
1. Identify the purpose of your decision. What is exactly the problem to be solved? Why
it should be solved?
2. Gather information. What factors does the problem involve?
3. Identify the principles to judge the alternatives. What standards and judgment
criteria should the solution meet?
4. Brainstorm and list different possible choices. Generate ideas for possible solutions.
See more on extending your options for your decisions on my brainstorming tips page.
5. Evaluate each choice in terms of its consequences. Use your standards and
judgment criteria to determine the cons and pros of each alternative.
6. Determine the best alternative. This is much easier after you go through the above
preparation steps.
7. Put the decision into action. Transform your decision into specific plan of action
steps. Execute your plan.
8. Evaluate the outcome of your decision and action steps. What lessons can be
learnt? This is an important step for further development of your decision making skills
and judgment.
The decision making of Management of National Bank of Pakistan rely on information
system resources which includes people and a variety of hardware, software, data, and
communications network technologies as resources to collect, transform, and
disseminate information in Bank.
INFORMATION SYSTEM RESOURCES OF NBP
a) PEOPLE RESOURCES
People are required for the operation of all information systems. These people
resources include end users and Information system Specialists. The Management
and employees of National Bank of Pakistan are end users and Knowledge workers of
information system. These are the employees of the Bank who spend most of their
time communicating and collaborating in teams and workgroups and creating, using
and distributing information.
The Information systems Specialist are people who develop and operate information
systems. They include System analysts, software developers, system operators, and
other managerial, technical, and clerical IS personnel of National Bank of Pakistan.
The system analysts of National Bank of Pakistan design information systems of the
Bank based on the information requirements of the end users. The software
developers create computer programs based on the specification of system analysts of
National Bank of Pakistan.
b) HARDWARE RESOURCES
The Hardware resources of National Bank of Pakistan include all physical devices and
materials used in information processing. Specifically, it includes not only machines,
such as computers and other equipments, but also all data media, that is, tangible
objects on which data are recorded, from sheets of paper to magnetic or optical disks.

c) SOFTWARE RESOURCES
The software resources of National Bank of Pakistan include all sets of information
processing instructions. It also includes sets of operating instructions called programs,
which direct and control computer hardware. The followings are the examples of
National Bank of Pakistan’s software resources:
System Software: The National Bank of Pakistan uses Windows Operating Systems for
controls and supports the operations of a computer system.
Application Software: These are the programs that direct processing for a particular
use of computers by employees of the Bank. Bank uses BBO system, Microsoft Office
suit as application software.
d) DATA RESOURCES
The data resources of National Bank of Pakistan are typically organized, stored, and
accessed by a variety of data resource management technologies. The data about
Branch transactions is accumulated, processed, and stored in a BBO system that can
be accessed by Manager for an analysis and decision making.
e) NETWORK RESOURCES
The network resources of National Bank of Pakistan include:
Communication Media: The Bank’s communication media include cellular and landline.
Network Support: The Bank uses hardware, software, and data technologies which are
needed to support the operation and use of a communication network. The Bank uses
communication processers such as Modems and internetwork processors, and
communication control software such as network operating systems and Internet
Browser packages (Opera).

SOURCES OF FUNDS
Rupees in Millions
Year 2004 2005 2006 2007 2008
Share Capital 4,924,106 5,908,927 7,090,712 8,154,319 8,969,751
Reserves 10,813,914 13,536,041 13,879,260 15,772,124 19,941,047
Borrowings 11,084,790 8,756,847 11,704,079 10,886,063 40,458,926
Deposits 465,571,717 463,426,602 501,872,243 591,907,435 624,939,016
Other Liabilities 23,068,314 24,974,450 26,596,300 30,869,154 39,656,831
Horizontal Analysis (%)
Share Capital 100 120 144 166 182
Reserves 100 125 128 146 184
Borrowings 100 79 106 98 365
Deposits 100 100 108 127 134
Other Liabilities 100 108 115 134 172

The National Bank of Pakistan’s sources of funds includes share capital, reserves,
borrowings, deposits and other liabilities etc. To analyze trend, Horizontal analysis of
each item is calculated.

ANALYSIS
The Share capital refers to the portion of a Bank's equity that has been obtained by
trading stock to a shareholder for cash or an equivalent item of capital value. The
share capital of National Bank of Pakistan shows an increasing trend in all years as
compare to base year. The increase in share capital during all years indicates share
holder’s concern toward National Bank of Pakistan and efficient bank’s Management
policies.

ANALYSIS
The Banks’ reserves are banks' holdings of deposits in accounts with their central bank
plus currency that is physically held in bank vaults (vault cash). The reserves of
National Bank of Pakistan fluctuate during all years as they show an increasing trend.
The reserves are increased 25 %, 28 % & 46 % in the years 2005, 2006 & 2007
respectively. The year 2008 represents highest increasing percentage of 84% as
compare to base and previous years.

ANALYSIS
The National Bank of Pakistan’s borrowings fluctuates during all years and shows a
mixed trend. The borrowings were decreased 21 % in 2005; however same are
increased 6 % in 2006 as compare to base year. There was a marginal decrease of
2% in bank’s borrowings in the year 2007. The year 2008 represents highest
percentage of borrowings as these were increased to 265 % comparing with base year
and are increased 267 % as compare to 2007.

ANALYSIS
The deposits and other accounts of National Bank of Pakistan show a mixed trend
during all years. In the year 2005 the deposits were increased very marginally, with the
year 2006 represents an increase of 8% as compare to base year. The year 2007
represents second highest percentage as deposits are increased to 27%. The year
2008 indicates an increase of 34%, highest among all years.

ANALYSIS
The other liabilities of National Bank of Pakistan are fluctuating during all years and
show an increasing trend. The year 2005 indicates an increase of 8 % and 2006
indicates an increase of 15%. The other liabilities in the year 2007 represent an
increase of 34%. The other liabilities were on their peak percentage in 2008 as the
shows an increase of 72%.

GENERATION OF FUNDS
Rupees in Millions
Year 2004 2005 2006 2007 2008
Markup/return/interest earned 20,947,333 33,692,665 44,100,934 50,569,481
60,942,798
Net markup/interest income 14,387,935 23,370,897 30,153,716 33,629,470
37,058,030
Net markup/interest income after provisions 12,639,770 21,146,970 27,782,170
28,906,735 26,087,216
Total non-markup/ Interest income 8,304,716 9,392,351 12,162,892 13,544,845
16,415,862
Total income ( Interest + non-Interest) 20,944,486 30,539,321 39,945,062 42,451,580
42,503,078
PROFIT BEFORE TAXATION 11,977,601 19,056,028 26,310,577 28,060,501
23,000,998
Horizontal Analysis (%)
Markup/return/interest earned 100 161 211 241 291
Net markup/interest income 100 162 210 234 258
Net markup/interest income after provisions 100 167 220 229 206
Total non-markup/ Interest income 100 113 146 163 198
Total income ( Interest + non-Interest) 100 146 191 203 203
PROFIT BEFORE TAXATION 100 159 220 234 192

The National Bank of Pakistan’s generation of funds include

Interest earned
Net interest income
Net interest income after provisions
Total non markup interest income
Total income ( Interest plus non- Interest)
Profit before Taxation

ANALYSIS
The interest earned by National Bank of Pakistan fluctuates during all years, as it was
increased during all years as compare to base year. The interest earned is increased
61% in 2005 and 111% in 2006. The year 2007 represents second highest percentage
on account of interest earned as it was increase 141 %. The year 2008 represents
peak percentage of 191 % as compare to all years.

ANALYSIS
The net markup/ Interest income of National Bank of Pakistan fluctuates during all
years as it shows an increasing trend. It was increased 62 % in 2005 and 110% in
2006 as compare to base year. The year 2007 represents second highest percentage
on account of Net markup/ Interest income as it was increased to 134%, comparing
with base year. The percentage is increased 158 % in 2008, highest among all years.

ANALYSIS
The net markup/ interest income after provisions fluctuates and shows a mixed trend
during all years. It was increased 67% (2005), 120% (2006) and 129% in 2007. The
income is increased 106 % as compare to base year but the same was decreased by
23% as compare to 2007.

ANALYSIS
The Total non- markup/ Interest income of National Bank of Pakistan shows an
increasing trend during all years. It was increased 13% in 2005 and 46% in 2006. The
income is increased 63 % in 2007, second highest among all years. There was an
increase of 98% in 2008, highest among all years.

ANALYSIS
The total income of National Bank of Pakistan shows an increasing trend. It was
increased 46% in 2005 and 91% in 2006. The total income is increased 103% in 2007
and also increase very marginally in 2008.

ANALYSIS
 The profit before taxation of National Bank of Pakistan fluctuates and shows a mixed
trend during all years. It was increased 59% in 2005 and 120% in 2006. The year 2007
represents highest percentage on account of profit before taxation as it was increased
to 134%. The year 2008 indicates an increase of 92% as compare with base year but it
was decreased in 2008 by 42% as compare to 2007.

ALLOCATION OF FUNDS
Rupees in Millions
Year 2004 2005 2006 2007 2008
Lending’s to Financial Institutions 10,511,322 16,282,942 23,012,732 21,464,600
17,128,032
Investments 149,350,096 156,985,686 139,946,995 210,787,868 170,822,491
Advances 220,794,075 268,838,779 316,110,406 340,677,100 412,986,865
Operating Fixed Assets 9,202,969 9,454,365 9,681,974 25,922,979 24,217,655
Other Assets 19,141,569 23,941,056 37,113,698 30,994,965 44,550,347
Horizontal Analysis (%)
Lending’s to Financial Institutions 100 155 219 204 163
Investments 100 105 94 141 114
Advances 100 122 143 154 187
Operating Fixed Assets 100 103 105 282 263
Other Assets 100 125 194 162 233

After the acquisition of the funds their allocation becomes necessary. The Bank seeks
the best way for making investment to get more profit with the maximum security. The
Bank has an investment portfolio in which it allocate its funds for crediting to borrowers,
investment in the stock market etc. The National Bank of Pakistan allocate its funds in
Lending’s to financial institutions, investments, advances, operating fixed assets and
other assets etc. To analyze trend in these items, Horizontal analysis of each item is
calculated.

NALYSIS
The lending’s to financial institutions by National Bank of Pakistan fluctuates during all years.
The lending’s increased by 55 % in 2005. The year 2006 represents highest percentage of
119 % among all years on account of lending’s to financial institutions. The year 2007 also
shows an increase of 104 % as compare to base year. The year 2008 indicates an increase
of 63% as compare to base year but lending’s decreased by 41% in 2008 as compare to the
year 2007.

ANALYSIS
The investments made by National Bank of Pakistan fluctuate during all years. There was an
increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in investments. The year
2007 represents an increase of 41 %, highest among all years. The investments are
increased 14 % in 2008 as compare to base year; however investments are decreased 27 %
as compare to the year 2007.

ANALYSIS
The advances made by National Bank of Pakistan shows an increasing trend in all years as
compare to base year. This implies that National Bank of Pakistan is keener to advance
money to lenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as
compare to base year. The year 2007 represents an increase of 54 % and 2008 represents
highest percentage among all years that is 87 % as compare to base year.

ANALYSIS
The operating fixed assets of National Bank of Pakistan shows a mixed trend during all years.
There was an increase of 3 % in 2005 & 5 % in 2006. There was a very sharp increase in
operating fixed assets in the year 2007 of 182 % as compare to base year. There was an
increase of 163% in 2008 as compare to base year but the same was decreased by 19% as
compare to 2007.

ANALYSIS
The other assets of National Bank of Pakistan are fluctuating during all years. The other
assets are increased 25 % in 2005 and 94 % in 2006. The year 2007 indicates an increase of
62% as compare to base year. The other assets of National Bank of Pakistan are on their
peak percentage of 133 % in 2008 as compare with base year.

CRITICAL ANALYSIS (THEORY VS PRACTICAL)

During Internship it was my prime objective to furnish my knowledge (Theory) to various
practical situations. The practical work presents an analytical problem while relating theory
with practice. As a result, analysis of practical versus theory requires a distinct approach. This
part of report is the essence of the internship, as this will help to better understand the
working environment of the bank by finding the relationship between what is written in the
books and what is actually going on in fields. The theory written in the books in cases is not
implemented as it is. In some cases theory is implemented with a little modification but in
other cases theory has nothing to do with practice.
In accounting, banks don’t prepare worksheet, but part of worksheet is prepared like trial
balance. The securities for the loans are handled in the same way as theory says like
mortgage, pledge, hypothecation, advances against insurance policies or liquidation
procedure is the same. There is some difference lies in types of loans in bank that is theory
talks about four or five types of loans that is cash finance, overdraft, loans etc., but in practice
there are some more types used by bank like running finance, demand finance etc. All other
concepts of remittances, bills, foreign exchange deposits, letters of credit are in accordance
with theory almost. A bank's balance sheet is different from that of a typical company. You
won't find inventory, accounts receivable, or accounts payable. Instead, under assets, you'll
see mostly loans and investments, and on the liabilities side, you'll see deposits and
borrowings.
CONCLUSION
To me, Theory gives the direction to understand the processes and the terminologies going
across the World using best business practices in a broader view covering each and every
aspect of possible business scenarios. On the contrary practical life is specific, enclosed in a
jar.

BALANCE SHEET
Rupees in Millions
ASSETS 2004 2005 2006 2007 2008
Cash and balances with treasury banks 94,446,552 71,196,956 78,625,227 94,873,249
106,503,756
Balances with other banks 49,784,884 31,019,330 40,641,679 37,472,832 38,344,608
Lending’s to financial institutions 10,511,322 16,282,942 23,012,732 21,464,600 17,128,032
Investments 149,350,096 156,985,686 139,946,995 210,787,868 170,822,491
Advances 220,794,075 268,838,779 316,110,406 340,677,100 412,986,865
Other assets 19,141,569 23,941,056 27,113,698 30,994,965 44,550,347
Operating fixed assets 9,202,969 9,454,365 9,681,974 25,922,979 24,217,655
Deferred tax assets _ _ _ _ 3,204,572
553,231,467 577,719,114 635,132,711 762,193,593 817,758,326

LIABILITIES
Bills payable 7,214,671 1,741,156 10,605,663 7,061,902 10,219,061
Borrowings from financial institutions 11,084,790 8,756,847 11,704,079 10,886,063
40,458,926
Deposits and other accounts 465,571,717 463,426,602 501,872,243 591,907,435
624,939,016
Sub-ordinated loans _ _ _ _ _
Liabilities against assets subject to finance lease 17,058 16,629 13,235 33,554 25,274
Other liabilities 23,068,314 24,974,450 26,596,300 30,869,154 39,656,831
Deferred tax liabilities net 29,185 4,462,718 2,387,073 5,097,831 _
506,985,735 503,378,402 553,178,593 645,855,939 715,299,108
NET ASSETS 46,245,732 74,340,712 81,954,118 116,337,654 102,459,218

REPRESENTED BY
Share capital 4,924,106 5,908,927 7,090,712 8,154,319 8,969,751
Reserves 10,813,914 13,536,041 13,879,260 15,772,124 19,941,047
Unappropriated Profit 9,161,747 16,713,506 32,074,677 45,344,188 52,456,204
24,899,767 36,158,474 53,044,649 69,270,631 81,367,002
Surplus 21,345,965 38,182,238 28,909,469 47,067,023 21,092,216
46,245,732 74,340,712 81,954,118 116,337,654 102,459,218

INCOME STATEMENT
Rupees in Millions
2004 2005 2006 2007 2008
Markup/return/interest earned 20,947,333 33,692,665 44,100,934 50,569,481 60,942,798
Markup/return/interest expensed 6,559,398 10,321,768 13,947,218 16,940,011 23,884,768
Net markup/interest income 14,387,935 23,370,897 30,153,716 33,629,470 37,058,030
Provisions against non-performing advances 1,515,354 2,446,739 3,075,723 4,723,084
10,593,565
provision for/(reversal of) diminution in the value
of investments 185,707 -245,881 -709,461 -40,248 373,249
provision against off balance sheet obligations 14,297 Nil Nil Nil 4,000
bad debts written off directly 32,807 23,069 5,284 39,899 Nil
1,748,165 2,223,927 2,371,546 4,722,735 10,970,814
Net markup/interest income after provisions 12,639,770 21,146,970 27,782,170 28,906,735
26,087,216
NON MARKUP/ INTEREST INCOME
Fee, Commission & brokerage income 5,099,195 4,926,604 6,144,628 6,781,683 7,925,370
Dividend income 1,273,863 1,718,478 2,891,755 3,263,246 2,878,932
Income form dealing in foreign currencies 1,008,988 1,205,638 1,333,840 1,042,827
3,969,057
Gain on sale & redemption of securities-net 47,557 1,365,771 1,169,515 2,341,690 395,427
Investments classified as held for trading Nil -1,979 -4,464 -31,964 1,707
Other income 875,113 177,839 627,618 147,363 1,245,369
Total non-markup/ Interest income 8,304,716 9,392,351 12,162,892 13,544,845 16,415,862
Total income ( Interest + non-Interest) 20,944,486 30,539,321 39,945,062 42,451,580
42,503,078
NON MARKUP/ INTERSET EXPENSES
Administration expenses 8,878,801 11,221,789 13,443,441 14,205,911 18,171,198
Other provisions written off 32,243 198,298 -17,283 168,027 747,521
Other charges 8,284 63,206 208,327 17,141 583,361
Total non markup/ Interest expenses 8,919,328 11,483,293 13,634,485 14,391,079
19,502,080
PROFIT BEFORE TAXATION 11,977,601 19,056,028 26,310,577 28,060,501 23,000,998
Taxation Current 4,950,000 7,154,002 8,695,598 8,311,500 11,762,650
Prior years 847,958 -1,098,709 530,652 391,497 Nil
Deferred -15,729 291,291 61,981 323,731 -4,220,242
5,782,229 6,346,584 9,288,231 9,026,728 7,542,408
PROFIT AFTER TAXATION 6,195,372 12,709,444 17,022,346 19,033,773 15,458,590
Unappropriated Profit brought forward 5,892,902 9,161,747 19,372,523 32,074,677
45,344,188
Transfer from surplus on revaluation of fixed
assets on account of incremental depreciation 45,496 43,221 41,060 39,007 130,456
Profit available for appropriation 12,133,770 21,914,412 36,435,929 51,147,457 60,933,234
FINANCIAL STATEMENTS ANALYSIS
Financial analysis is a process which involves reclassification and summarization of
information through the establishment of ratios and trends. Financial statement analysis is the
process of examining relationships among financial statement elements and making
comparisons with relevant information. It is a valuable tool used by investors and creditors,
financial analysts, and others in their decision-making processes related to stocks, bonds,
and other financial instruments. The goal in analyzing financial statements is to assess past
performance and current financial position and to make predictions about the future
performance of a company. Investors who buy stock are primarily interested in a company's
profitability and their prospects for earning a return on their investment by receiving dividends
and/or increasing the market value of their stock holdings. Creditors and investors who buy
debt securities, such as bonds, are more interested in liquidity and solvency: the company's
short-and long-run ability to pay its debts. Financial analysts, who frequently specialize in
following certain industries, routinely assess the profitability, liquidity, and solvency of
companies in order to make recommendations about the purchase or sale of securities, such
as stocks and bonds.
The analysis of financial statement refers to the examination of the statements for the
purpose of acquiring additional information regarding the activities of the business. The users
of the financial information often find analysis desirable for the interpretation of the firm’s
activities.
The overall objective of financial statement analysis is the examination of a firm’s financial
position and returns in relation to risk. This must be done with a view to forecasting the firm’s
future prospective.
Analysts can obtain useful information by comparing a company's most recent financial
statements with its results in previous years and with the results of other companies in the
same industry. Three primary types of financial statement analysis are commonly known as
horizontal analysis, vertical analysis, and ratio analysis.

RATIO ANALYSIS
Ratio analysis enables the analyst to compare items on a single financial statement or to
examine the relationships between items on two financial statements. After calculating ratios
for each year's financial data, the analyst can then examine trends for the company across
years. Since ratios adjust for size, using this analytical tool facilitates intercompany as well as
intercompany comparisons. Ratios are often classified using the following terms: profitability
ratios (also known as operating ratios), liquidity ratios, and solvency ratios. Profitability ratios
are gauges of the company's operating success for a given period of time. Liquidity ratios are
measures of the short-term ability of the company to pay its debts when they come due and to
meet unexpected needs for cash. Solvency ratios indicate the ability of the company to meet
its long-term obligations on a continuing basis and thus to survive over a long period of time.
Financial ratios allow for comparison:
Between companies
Between industries
Between different time periods for one company
Between a single company and its industry average
a) PROFITABILITY RATIOS
The continued viability of any bank depends on its ability to earn an appropriate return on its
assets and capital. Good earning performance enables a bank to fund its operations, remain
competitive in the market and increase or decrease in market funds. Profitability ratios relate
profit to sales and investments. These ratios indicate the firm’s overall effectiveness of
operations and give us idea how well firm utilized its resources in generating profit and
shareholder value.
GROSS PROFIT MARGIN RATIO
Gross profit margin ratio is used to assess the profitability of a Bank's core activities. Gross
profit margin indicates the relationship between gross profit and interest earned. A high gross
profit margin indicates that a Bank can make a reasonable profit.
Formula = Gross Profit / Interest earned (Revenue)
Year 2004 2005 2006 2007 2008
Ratio % 57.17 56.55 59.65 55.48 37.74

ANALYSIS
The Year 2006 has been an outstanding year with the bank recording the highest profit in its
history i.e.., 59.65 %.The National Bank of Pakistan’s wide range of product offering, large
branch network and committed workforce are some of fundamental strengths that enabled
NBP to achieve exceptional in a very competitive market. The gross profit is 37.74% in 2008.
The lowest percentage among all years.
NET PROFIT MARGIN RATIO
Net profit margin measures the percentage of revenue remaining after all cost and expenses,
including interest and taxes have been deducted.
Formula = Net Profit after Taxes / Interest earned
Year 2004 2005 2006 2007 2008
Ratio % 29.57 37.72 38.59 37.63 25.36

ANALYSIS
Net profit margin shows positive trend till 2006 and was the highest in the same year as it was
38.59%, the percentage is decreased in 2007 as it was 37.63%. The net profit margin is on its
lowest level at the end of 2008 as it indicates a percentage of 25.63%. The primary reason of
this decline is current global economic conditions and current political crisis in Pakistan.
ASSETS TURNOVER
This ratio is useful to determine the amount of revenue that is generated from each Rupee of
assets. The Banks with low profit margins tend to have high asset turnover, those with high
profit margins have low asset turnover.
Formula = Revenue/ Total Assets
Year 2004 2005 2006 2007 2008
Ratio 0.03 0.05 0.06 0.05 0.05

ANALYSIS
The year 2004 represents a ratio of 0.03, lowest among all years. The years 2005, 2007 and
2008 indicates almost same percentage of 0.05% on account of bank’s assets turnover. The
National Bank of Pakistan’s assets turnover in 2006 is 0.06, peak ratio among all years.
RETURN ON CAPITAL FUND
This ratio relates the net profits to the amount of capital funds that have been employed in
making that profit.
Formula = Net markup received / Capital Funds
Year 2004 2005 2006 2007 2008
Ratio 2.92 3.95 4.25 4.12 4.13

ANALYSIS
The above given ratios suggest that the profitability of the bank has a mixed trend during five
years. The first three years 2004 (2.92), 2005 (3.95), 2006 (4.95) shows an increasing trend,
indicating more profitable operations of the bank. It was decreased in the year 2007 (4.12)
and has increased in 2008 as the ratio was 4.13.
RETURN ON INVESTMENT
This ratio indicates the profit earned by the bank on the resources employed.
Formula = Net income after taxes / Total Assets
Year 2004 2005 2006 2007 2008
Ratio 0.011 0.021 0.026 0.024 0.018

ANALYSIS
There was an increase in the utilization of the resources till 2006 i.e.., 0.011(2004), 0.021
(2005) and 0.026 (2007). The ratio was decreased to 0.024 (2007) and 0.018 (2008).
RETURN ON DEPOSITS
This ratio indicates to what extent deposits which represent funds mobilization on the part of
the bank contribute towards income generation.
Formula = Net income before taxes / Total Deposits
Year 2004 2005 2006 2007 2008
Ratio 0.025 0.041 0.052 0.047 0.036

ANALYSIS
During all five years the return on deposits ratio of National Bank of Pakistan shows a mix
trend. The year 2006 (0.052) was the best year for bank in terms of its funds mobilization.
Although the ratio was decreasing in 2008 (0.036), indicating Bank is more keen to kept
deposits and a change in policy of the Bank regarding its funds mobilization.
EFFECTIVE TAX RATE
This ratio is a measurement of a company's tax rate, which is calculated by comparing its
income tax expense to its pretax income. This amount will often differ from the company's
stated jurisdictional rate due to many accounting factors, including foreign exchange
provisions. This effective tax rate gives a good understanding of the tax rate the company
faces.
Formula = Income Tax expense/ Pretax Income
Year 2004 2005 2006 2007 2008
Ratio % 0.48 0.33 0.35 0.32 0.32

ANALYSIS
The effective tax rate of National Bank of Pakistan was highest in the year 2004 (0.48%).
However bank is able to reduce its tax burden because the Bank is able to adopt Tax
management techniques to lessen the tax burden. A relatively stable effective tax rate
percentage, and resulting net profit margin, would seem to indicate that the Bank's
operational managers are more responsible for a company's profitability than the company's
tax accountants.

b) LIQUIDITY RATIOS
The liquidity position of a bank is like a reservoir. It may be adequate, although nearly
depleted, just before the start of the rainy season. Or it may be inadequate, although three
quarters full just before the summer drought.
Liquidity can be defined as:
“The bank’s ability not only to meet possible deposit withdrawals but also to provide for the
legitimate needs of the economy as well”
CURRENT RATIO
Current ratio is a measure of the current adequacy of company's current assets to meet its
current obligations. It must be greater than 1. If it is less than 1, liabilities exceed current
assets. For every Rs.1 of liabilities, the company has a ratio amount of current assets
available. The concept behind this ratio is to ascertain whether a company's short-term assets
(cash, cash equivalents, marketable securities, receivables and inventory) are readily
available to pay off its short-term liabilities (notes payable, current portion of term debt,
payables, accrued expenses and taxes). In theory, the higher the current ratio, the better.
Formula = Current Assets / Current Liabilities
Year 2004 2005 2006 2007 2008
Ratio 0.83 0.96 1.02 1.00 1.12

ANALYSIS
The year 2004 (0.83) and 2005 (0.96) were not satisfied for bank as current assets are less
than current liabilities. However, in 2006 (1.02) the management of National Bank of Pakistan
is able to overcome this problem. The year 2007 (1.00) is also good for bank as per standards
of this ratio. Again in the year 2008 (1.12) the management of bank is able to increase its
current ratio.
CASH RATIO
This ratio shows that the cash is enough for payment of current liabilities or not. This ratio is
obtained by dividing cash by current liabilities. For a bank this is the cash held by the bank as
a proportion of deposits in the bank.
Formula = Cash / Current Liabilities
Year 2004 2005 2006 2007 2008
Ratio 4.09 2.85 2.96 3.07 2.69

ANALYSIS
The cash ratio of National Bank of Pakistan shows a mixed trend during five years of
operations. During all years, the ratio is satisfactory as per standards of this ratio. The year
2004 (4.09), representing highest and 2005 (2.85) & 2008 (2.69), representing lowest ratio in
all five years.
ADVANCES TO DEPOSIT RATIO
It demonstrate the degree to which bank has already used up its available resources to
accommodate the credit needs of its customers.
Formula = Advances / Total Deposits
Year 2004 2005 2006 2007 2008
Ratio% 47.42 58.01 62.99 57.56 66.08

ANALYSIS
This ratio, a comparison of funds generation and its funds mobilization, indicates the total
loans sanctioned by the bank in relation to total amount of money deposited with the bank,
stands highest in 2008 ( 66.08%) as compared with the previous year figures. This shows that
the bank has greater potential to advance additional loans. During all other years the ratio is
quiet satisfactory representing National Bank of Pakistan’s credit management decisions.
DUE FROM BANKS TO TOTAL ASSETS
It is an indication of Bank’s funds management policies.
Formula = Due from banks / Total Assets
Year 2004 2005 2006 2007 2008
Ratio 0.019 0.028 0.036 0.028 0.021

ANALYSIS
The National Bank of Pakistan’s due from banks to total assets ratio is fluctuating and
indicates a mixed trend during all years. The ratio is 0.019 in 2004 and 0.028 in the year
2005. The year 2006 represents highest ratio of 0.036 among all years. There was a
decrease in ratio at the end of financial year 2007 that is 0.028. The year 2008 represents a
decrease in ratio (0.021) on account of due from banks to total assets.
DUE FROM BANKS TO DUE TO BANKS
It shows the relationship between what the bank owes from other banks and what is due to it.
Formula = Due from banks / Due to banks
Year 2004 2005 2006 2007 2008
Ratio% 94.83 185.95 196.62 197.18 42.33

ANALYSIS
The ratio indicates an increasing trend till 2007 that is 94.83 (2004), 185.95 (2005), 196.62
(2006) and 197.18 in 2007. The year 2008 represents the lowest percentage of 42.33 on
account of due from banks to due to banks.
DUE TO BANKS TO TOTAL DEPOSITS
This ratio is an indicative of the proportion of the lending from the financial institutions in
relation to the total funds raised by the bank in the form of deposits.
Formula = Due to banks / Total Deposits
Year 2004 2005 2006 2007 2008
Ratio 0.024 0.019 0.023 0.018 0.065

ANALYSIS
The due to banks to total deposits ratio of National Bank of Pakistan is fluctuating and
indicates a mixed trend during all years. The ratio is 0.024 in 2004 and decreased to 0.019 in
2005. The ratio is increased in 2006 as the ratio is 0.023. The year 2007 represents the
lowest percentage of 0.018 and the year 2008 represents the peak percentage of 0.065.

c) DEBT RATIOS
These ratios give users a general idea of the company's overall debt load as well as its mix of
equity and debt. Debt ratios can be used to determine the overall level of financial risk a
company and its shareholders face. In general, the greater the amount of debt held by a
company the greater the financial risk of bankruptcy.
THE DEBT TO EQUITY RATIO
The debt-equity ratio compares a company's total liabilities to its total shareholders' equity.
This is a measurement of how much suppliers, lenders, creditors and obligors have
committed to the company versus what the shareholders have committed.
To a large degree, the debt-equity ratio provides another vantage point on a company's
leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed
to total assets in the debt ratio. Similar to the debt ratio, a lower the percentage means that a
company is using less leverage and has a stronger equity position.
Formula = Total Liabilities/ Total Shareholder’s equity
Year 2004 2005 2006 2007 2008
Ratio 112.35 97.77 89.57 93.47 91.17

ANALYSIS
The debt to equity ratio of National Bank of Pakistan shows a ratio of 112.35 % in 2004. The
ratio is decreased to 97.77% in the year 2005. The ratio is further decreased in 2006 as it
shows a percentage of 89.57%. There was an increase in the ratio as it shows a percentage
of 93.47%. The year 2008 represents the ratio of 91.17% .

INTEREST COVERAGE RATIO

It shows whether the bank is earning enough profit before mark up charges to be paid to the
financiers and the taxation obligations due to the government in order to remain solvent. The
interest coverage ratio is used to determine how easily a company can pay interest expenses
on outstanding debt. The ratio is calculated by dividing a company's earnings before interest
and taxes (EBIT) by the company's interest expenses for the same period. The lower the
ratio, the more the company is burdened by debt expense. When a company's interest
coverage ratio is only 1.5 or lower, its ability to meet interest expenses may be questionable.
Formula = Earnings before interest & Taxes / Interest expense
Year 2004 2005 2006 2007 2008
Ratio 1.83 times 1.85
times 1.89
times 1.66
times 0.97
times

ANALYSIS
The amount of interest a Bank pays in relation to its revenue and earnings is tremendously
important. The National Bank of Pakistan’s interest coverage ratio is 1.83 times in the year
2005. The ratio was increased in the years 2005 and 2006 as it was 1.85 times & 1.89 times
respectively. There sudden decrease of 1.66 times is observed in 2007. The ratio is further
decrease to 0.97 times in 2008, representing the lowest ratio among all years.
LOAN LOSS COVERAGE RATIO
Banks use the loan-loss coverage ratio to define the quality of its assets and how well it
protects itself from losses caused by problematic loans. The higher this ratio is, the better the
bank is handling itself in regards to loans.
Formula = Provision against non-performance loans & advances/ Profit or loss before
taxation

Year 2004 2005 2006 2007 2008

Ratio 0.13 0.13 0.12 0.17 0.47

ANALYSIS
The loan loss coverage ratio of National Bank of Pakistan is almost same in the years 2004
and 2005 as it was 0.13 in both years. There was a slight decrease in this ratio as it was 0.12
in 2006. The year 2006 shows an increase in loan loss coverage ratio as it was 0.17. The
year 2008 represents highest ratio of 0.47 on account of loan loss coverage, as compare to
all years.
d) CAPITAL ADEQUACY RATIOS
CAPITAL FUNDS TO TOTAL ASSETS
This ratio indicates the extent of the funds employed by the bank in the total resources as
shown in the balance sheet.
Formula = Capital Funds / Total Assets
Year 2004 2005 2006 2007 2008
Ratio% 0.89 1.02 1.10 1.07 1.09

ANALYSIS
The National Bank of Pakistan’s Capital funds to Total Assets ratio is increased during all
years. The ratio is 0.89 in 2004, representing lowest ratio in all years. The ratio is increased in
2005, 2006 and 2007 as the graph shows ratios of 1.02, 1.10 & 1.07 respectively. The ratio is
keeping its trend and also increases in the year 2008 as it was 1.09.
e) OPERATING PERFORMANCE RATIOS
Each of these ratios have differing inputs and measure different segments of a company's
overall operational performance, but the ratios do give users insight into the company's
performance and management during the period being measured.
These ratios look at how well a company turns its assets into revenue as well as how
efficiently a company converts its sales into cash. Basically, these ratios look at how
efficiently and effectively a company is using its resources to generate sales and increase
shareholder value. In general, the better these ratios are, the better it is for shareholders.
In this section, we'll look at the fixed-asset turnover ratio and the sales/revenue per employee
ratio, which look at how well the company uses its fixed assets and employees to generate
sales.
FIXED ASSETS TURNOVER
This ratio is a rough measure of the productivity of a company's fixed assets (property, plant
and equipment etc) with respect to generating revenue. For most companies, their investment
in fixed assets represents the single largest component of their total assets. This annual
turnover ratio is designed to reflect a company's efficiency in managing these significant
assets.
Formula = Revenue/ Operating Fixed Assets
Year 2004 2005 2006 2007 2008
Ratio % 2.28 3.23 4.13 1.64 1.76

ANALYSIS
The fixed assets turnover ratio of National Bank of Pakistan has an increasing trend till 2006.
The ratio increases 2.28 (2004) to 3.23 (2005). The year 2006 represents highest fixed assets
turnover ratio for National Bank of Pakistan i.e.., 4.13. The bank’s efficiency to utilize these
assets has been decreased to 1.64 in the year 2007 however it was increased in 2008 as the
ratio is 1.76.
SALES OR REVENUE PER EMPLOYEE
As a gauge of personnel productivity, this indicator simply measures the amount of Rupees
sales or revenue, generated per employee. The higher the Rupee figures the better.
Formula = Revenue/ Number of Employees
Year 2004 2005 2006 2007 2008
Ratio 1274.85 1858.87 2431.38 2583.94 2587.08

ANALYSIS
The ratio has been showing an increasing trend till 2007 i.e.., 1274.85 (2004), 1858.87
(2005), 2431.38 (2006) and 2583.94 (2007). There was a marginal increase in the year in the
year 2008 i.e.., 2587.08, representing the peak percentage in all years.

HORIZONTAL ANALYSIS
This technique is also known as comparative analysis. It is conducted by setting consecutive
balance sheet, income statement or statement of cash flow side-by-side and reviewing
changes in individual categories on a year-to-year or multiyear basis. The most important item
revealed by comparative financial statement analysis is trend. A comparison of statements
over several years reveals direction, speed and extent of a trend(s). The horizontal financial
statements analysis is done by restating amount of each item or group of items as a
percentage. Such percentages are calculated by selecting a base year and assign a weight of
100 to the amount of each item in the base year statement. Thereafter, the amounts of similar
items or groups of items in prior or subsequent financial statements are expressed as a
percentage of the base year amount. The resulting figures are called index numbers or trend
ratios.
Formula = Current Year amount / Base Year amount * 100
Horizontal analysis, whilst simple to execute and useful to a certain extent, has its limitations.
These limitations include:
Being highly dependent on the selection of base year and the period under examination in the
financial model.
Horizontal analysis provides little insight into why the trend occurred in a financial model.
Horizontal analysis does not provide insight into whether the trend in the financial model
results was superior/inferior to some benchmark.
Horizontal analysis does not address the challenge of negative numbers.

HORIZONTAL ANALYSIS OF BALANCE SHEET

Horizontal Analysis (%)

ASSETS 2004 2005 2006 2007 2008
Cash 100 75 83 100 113
Balances with other banks 100 62 82 75 77
Lending’s to fin. institutions 100 155 219 204 163
Investments 100 105 94 141 114
Advances 100 122 143 154 187
Operating fixed assets 100 103 105 282 263
Other assets 100 125 194 162 233
Total Assets 100 104 117 138 148
LIABILITIES 2004 2005 2006 2007 2008
Share Capital 100 120 144 166 182
Reserves 100 125 128 146 184
Unappropriated profit 100 182 350 495 573
Surplus On Reval. of assets 100 179 135 221 99
Bills payable 100 24 147 98 142
Borrowings 100 79 106 98 365
Deposits and other accounts 100 100 108 127 134
Liabilities against assets 100 97 78 197 148
subject to finance lease
Deferred tax liabilities net 100 15291 8179 17467 Nil
Other liabilities 100 108 115 134 172
Total Liabilities 100 104 117 138 133

ANALYSIS
The National Bank of Pakistan’s Cash & balance with treasury banks shows a mixed trend
during all years. It was decreased by 25% in 2005 and 17% in 2006. There was a marginal
increase in the year 2007. In 2008 the percentage is increased by 13% as compare to base
year.

ANALYSIS
The Balances of National Bank of Pakistan with other banks shows a decreasing trend as
compare to base year. The year 2005 represents lower percentage (38%), while the year
2006 represents highest percentage of 18%.

ANALYSIS
The lending’s to financial institutions by National Bank of Pakistan fluctuates during all years.
The lending’s increased 55 % in 2005. The year 2006 represents highest percentage of 119
% among all years on account of lending’s to financial institutions. The year 2007 also shows
an increase of 104 % as compare to base year. The year 2008 indicates an increase of 63%
as compare to base year but lending’s decreased by 41 % in 2008 as compare to the year
2007.

ANALYSIS
The investments made by National Bank of Pakistan fluctuate during all years. There was an
increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in investments. The year
2007 represents an increase of 41 %, highest among all years. The investments are
increased 14 % in 2008 as compare to base year; however investments are decreased 27 %
as compare to the year 2007.

ANALYSIS
The advances made by National Bank of Pakistan shows an increasing trend in all years as
compare to base year. This implies that National Bank of Pakistan is keener to advance
money to lenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as
compare to base year. The year 2007 represents an increase of 54 % and 2008 represents
highest percentage among all years that is 87 % as compare to base year.

ANALYSIS
The operating fixed assets of National Bank of Pakistan shows a mixed trend during all years.
There was an increase of 3 % in 2005 & 5 % in 2006. There was a very sharp increase in
operating fixed assets in the year 2007 of 182 % as compare to base year. There was an
increase of 163% in 2008 as compare to base year but the same was decreased by 19% as
compare to 2007.

ANALYSIS
The other assets of National Bank of Pakistan are fluctuating during all years. The other
assets are increased 25 % in 2005 and 94 % in 2006. The year 2007 indicates an increase of
62% as compare to base year. The other assets of National Bank of Pakistan are on their
peak percentage of 133 % in 2008 as compare with base year.

ANALYSIS
The Share capital refers to the portion of a Bank's equity that has been obtained by trading
stock to a shareholder for cash or an equivalent item of capital value. The share capital of
National Bank of Pakistan shows an increasing trend in all years as compare to base year.
The increase in share capital during all years indicates share holder’s concern toward
National Bank of Pakistan and efficient bank’s Management policies.

ANALYSIS
The Banks’ reserves are banks' holdings of deposits in accounts with their central bank plus
currency that is physically held in bank vaults (vault cash). The reserves of National Bank of
Pakistan fluctuate during all years as they show an increasing trend. The reserves are
increased 25 %, 28 % & 46 % in the years 2005, 2006 & 2007 respectively. The year 2008
represents highest increasing percentage of 84% as compare to base and previous years.

ANALYSIS
The Unappropriated profit are Earnings of National Bank of Pakistan not paid out as dividends
but instead reinvested in the core business or used to pay off debt. Unappropriated profit is
part of shareholder equity. The bank’s Unappropriated profit is increasing very sharply during
all years as compare to base year, indicated bank’s strict dividend payout policy and concern
towards reinvestment options.

ANALYSIS
The National Bank of Pakistan’s surplus on revaluation of assets fluctuates and shows a
mixed trend during all years. It was increased 79% in 2005 and 35% in 2006. The year 2007
represents highest percentage of 121%. The percentage is decreased by 1% in 2008 as
compare to base year and 122% as compare to 2007.

ANALYSIS
The National Bank of Pakistan’s bills payable is showing a mix trend during all years. The
year 2005 is best for bank in terms of reduction in bills payable. The year 2006 represents a
higher percentage of bank’s liability as it increase 47% as compare to base year. The year
2008 also shows an increase in bank’s bills payable as it increases to 42% as compare to
base year.

ANALYSIS
The National Bank of Pakistan’s borrowings fluctuates during all years and shows a mixed
trend. The borrowings were decreased 21 % in 2005; however same are increased 6 % in
2006 as compare to base year. There was a marginal decrease of 2% in bank’s borrowings in
the year 2007. The year 2008 represents highest percentage of borrowings as these were
increased to 265 % comparing with base year and are increased 267 % as compare to 2007.

ANALYSIS
The deposits and other accounts of National Bank of Pakistan show a mixed trend during all
years. In the year 2005, the deposits were increased very marginally, with the year 2006
represents an increase of 8%. The deposits are increased 27% & 34% in the years 2007 and
2008 respectively

ANALYSIS
The National Bank of Pakistan’s Liabilities against assets subject to finance lease were
fluctuate during all years, with the year 2005 (3% decrease) and 2006 (22% decrease) shows
a decreasing trend and the year 2007 (97% increase) & 2008 (48 % increase) shows an
increasing trend as compare to base year.

ANALYSIS
The other liabilities of National Bank of Pakistan are fluctuating during all years and show an
increasing trend. The year 2005 indicates an increase of 8 % and 2006 indicates an increase
of 15%. The other liabilities in the year 2007 represent an increase of 34%. There was a
sharp increase in 2008 as it indicates a percentage of 72%, highest among all years.

HORIZONTAL ANALYSIS OF INCOME STATEMENT

Rupees in Millions
2004 2005 2006 2007 2008
Markup/return/interest earned 100 161 211 241 291
Markup/return/interest expensed 100 157 213 258 364
Net markup/interest income 100 162 210 234 258
Provisions against non-performing advances 100 161 203 312 699
provision for/(reversal of) diminution in the value
of investments 100 -132 -382 -22 201
provision against off balance sheet obligations 100 Nil Nil Nil 28
bad debts written off directly 100 70 16 122 Nil
100 127 136 270 628
Net markup/interest income after provisions 100 167 220 229 206
NON MARKUP/ INTEREST INCOME
Fee, Commission & brokerage income 100 97 121 133 155
Dividend income 100 135 227 256 226
Income form dealing in foreign currencies 100 119 132 103 393
Gain on sale & redemption of securities-net 100 2,872 2,459 4,924 831
Investments classified as held for trading Nil Nil Nil Nil Nil
Other income 100 20 72 17 142
Total non-markup/ Interest income 100 113 146 163 198
Total income ( Interest + non-Interest) 100 146 191 203 203
NON MARKUP/ INTERSET EXPENSES
Administration expenses 100 126 151 160 205
Other provisions written off 100 615 -54 521 2,318
Other charges 100 763 2,515 207 7,042
Total non markup/ Interest expenses 100 129 153 161 219
PROFIT BEFORE TAXATION 100 159 220 234 192
Taxation Current 100 145 176 168 238
Prior years 100 -130 63 46 Nil
Deferred 100 -1,852 -394 -2,058 26,831
100 110 161 156 130
PROFIT AFTER TAXATION 100 205 275 307 250
Unappropriated Profit brought forward 100 155 329 544 769
Transfer from surplus on revaluation of fixed
assets on account of incremental depreciation 100 95 90 86 287
Profit available for appropriation 100 181 300 422 502

ANALYSIS
The interest earned by National Bank of Pakistan fluctuates during all years, as it was
increased during all years as compare to base year. The interest earned is increased 61% in
2005 and 111% in 2006. The year 2007 represents second highest percentage on account of
interest earned as it was increase 141 %. The year 2008 represents peak percentage of 191
% as compare to all years.

ANALYSIS
The interest expense of National Bank of Pakistan shows an increasing trend in all years, as it
was increased 57 % (2005) and 113 % (2006). The year 2007 represents second highest
percentage on account of interest expensed as it was increases to 158% as compare to base
year. The year 2008 shows an increase of 264 %, highest among all years.
ANALYSIS
The net markup/ Interest income of National Bank of Pakistan fluctuates during all years as it
shows an increasing trend. It was increased 62 % in 2005 and 110% in 2006 as compare to
base year. The year 2007 represents second highest percentage on account of Net markup/
Interest income as it was increased to 134%, comparing with base year. The percentage is
increased 158 % in 2008, highest among all years.

ANALYSIS
The net markup/ interest income after provisions fluctuates and shows a mixed trend during
all years. It was increased 67% (2005), 120% (2006) and 129% in 2007. The income is
increased 106 % as compare to base year but the same was decreased by 23% as compare
to 2007.

ANALYSIS
The Fee, Commission and brokerage income of National Bank of Pakistan fluctuates during
all years. It was decreased 3% in the year 2005 and increases 21 % in the year 2006. The
year 2007 represents an increase of 33%. The year 2008 represents peak percentage of
55%.

ANALYSIS
The dividend income of National Bank of Pakistan fluctuates during all years, as it shows a
mixed trend during all years. The dividend income is increasing 35 % in the year 2005 and
127 % in 2006. It was increased 156% in 2007, represents higher percentage among all
years. The year 2008 represents an increase of 126 % as compare to base year and a
decrease of 30% as compare to 2007.

ANALYSIS
The National Bank of Pakistan’s income from dealing in foreign securities fluctuates during all
years as it shows an increasing trend. It was increased 19 % in 2005 and 32 % in 2006. The
income has its lowest percentage in 2007 as it was increased 3 %. The year 2008 represents
highest percentage on account of bank’s income from dealing in foreign securities as it was
increased 293 % as compare to base year and 290% as compare to the year 2007.

ANALYSIS
The other income of National Bank of Pakistan fluctuates during all years as it shows a mixed
trend. It was decreased 80 % in 2005 and 28% in 2006 as compare to base year. The year
2007 represents the lowest decreasing trend of 83%. There was a sharp increase in National
Bank of Pakistan’s other income as it was increased to 42% as compare to base year and
increased 125% as compare to 2007. to 63%, comparing with base year. The percentage is
increased 52 % in 2008 as compare to base year, but it was decreased 11% as compare to
2007.

ANALYSIS
The Total non- markup/ Interest income of National Bank of Pakistan shows an increasing
trend during all years. It was increased 13% in 2005 and 46% in 2006. The income is
increased 63 % in 2007, second highest among all years. There was an increase of 98% in
2008, highest among all years.

ANALYSIS
The total income of National Bank of Pakistan shows an increasing trend. It was increased
46% in 2005 and 91% in 2006. The total income is increased 103% in 2007 and also increase
very marginally in 2008.

ANALYSIS
The administration expense of National Bank of Pakistan is increased 26 % in 2005 and 51 %
in 2006 as compare to base year. The year 2007 represents an increase of 60%. The
percentage is increased 105 % in 2008, highest among all years.

ANALYSIS
The Total non markup/ Interest expenses of National Bank of Pakistan fluctuates and shows
an increasing trend as compare to base year. It was increased 29%, 53% and 61% in the
years 2005, 2006 and 2007 respectively. The year 2008 represents peak percentage of 119%
in 2008.

ANALYSIS
The profit before taxation of National Bank of Pakistan fluctuates and shows a mixed trend
during all years. It was increased 59% in 2005 and 120% in 2006. The year 2007 represents
highest percentage on account of profit before taxation as it was increased to 134%. The year
2008 indicates an increase of 92% as compare with base year but it was decreased in 2008
by 42% as compare to 2007.

ANALYSIS
The current taxation of National Bank of Pakistan fluctuates during all years as it was
increased during all years as compare to base year. It was increased 45 % in 2005 and 76 %
in 2006. The year 2007 and 2008 indicates an increase of 68 % & 138 % respectively.

ANALYSIS
The National Bank of Pakistan’s Profit after taxation fluctuates during all years as it was
increased during all years as compare to base year. The profit after taxation is increased
105% in 2005 and 175 % in 2006 as compare to base year. The Year 2007 has been an
outstanding year with the National Bank of Pakistan recording the highest profit after taxation
in its history as the percentage increases to 207 % comparing with base year. The year 2008
indicates an increase of 150 % as compare to base year and a decrease of 57 % as compare
to 2007.

VERTICAL ANALYSIS
When using vertical analysis, the analyst calculates each item on a single financial statement
as a percentage of a total. The term vertical analysis applies because each year's figures are
listed vertically on a financial statement. The total used by the analyst on the income
statement is net sales revenue, while on the balance sheet it is total assets. This approach to
financial statement analysis, also known as component percentages, produces common-size
financial statements. Common-size balance sheets and income statements can be more
easily compared, whether across the years for a single company or across different
companies.
Vertical analysis is a technique for identifying relationship between items in the same financial
statement by expressing all amounts as the percentage of the total amount taken as 100. In a
balance sheet, for example, cash and other assets are shown as a percentage of the total
assets and, in an income statement, each expense is shown as a percentage of the sales
revenue.
In Vertical analysis, various components of the financial statements are standardized by
expressing them as a percentage of some bases.
Examples of common-sized statements include:
Components of the balance sheet expressed as a percentage of total assets
Components of the income statement expressed as a percentage of sales or revenue

VERTICAL ANALYSIS OF BALANCE SHEET

Vertical Analysis (%)

ASSETS 2004 2005 2006 2007 2008
Cash 17.07 12.32 12.19 12.45 13.02
Balances with other banks 9.00 5.37 6.30 4.92 4.69
Lending’s to fin. institutions 1.90 2.82 3.57 2.82 2.09
Investments 27.00 27.17 21.69 27.66 20.88
Advances 39.91 46.53 49.00 44.70 50.50
Operating fixed assets 1.66 1.64 1.50 3.40 2.96
Other assets 3.46 4.14 5.75 4.07 5.45
Total 100 100 100 100 100
LIABILITIES 2004 2005 2006 2007 2008
Share Capital 0.89 1.02 1.10 1.07 1.09
Reserves 1.95 2.34 2.15 2.07 2.43
Unappropriated profit 1.66 2.89 4.97 5.95 6.41
Surplus On Reval. of assets 3.86 6.61 4.48 6.18 2.57
Bills payable 1.30 0.30 1.64 0.93 1.25
Borrowings 2.00 1.52 1.81 1.43 4.94
Deposits and other accounts 84.15 80.22 77.79 77.66 76.42
Liabilities against assets 0.0031 0.0029 0.0021 0.0044 0.0030
subject to finance lease
Deferred tax liabilities net 0.01 0.77 0.37 0.67 Nil
Other liabilities 4.17 4.32 4.12 4.05 4.85
Total 100 100 100 100 100
ANALYSIS
The cash balance of National Bank of Pakistan fluctuates during all years. The year 2004
representing highest percentage of cash balance among all years that is 17.07%. The cash
balance percentage is decreasing in 2005 (12.32 %) and 2006 (12.19%). There was a slight
increase in the year 2007 as compare to the years 2005 & 2006, of 12.45%. The year 2008
indicates second highest level of National bank of Pakistan’s cash balance as it was 13.02%.

ANALYSIS
The National Bank of Pakistan’s balances with other banks has its peak percentage of 9% in
the year 2004. The percentage is decreased to 5.37% in 2005 and has increased slightly in
2006, indicates 6.3%. The percentage is again decreased in 2007 with a percentage of 4.92
% and a percentage of 4.69% in 2008.

ANALYSIS
The lending’s to financial institutions by National Bank of Pakistan shows a mixed trend. In
the year 2004 percentage is 1.90%. The year 2005 along with the year 2007 indicates the
same percentage of 2.82%. The year 2006 represents peak percentage of 3.57% for National
Bank of Pakistan regarding its lending’s to financial institutions. The percentage is decreased
in 2008 indicating a percentage of 2.09%, second lowest among all years.

ANALYSIS
The investments made by National Bank of Pakistan are fluctuating and showing a mixed
trend. The year 2004 shows a percentage of 27% and the year 2005 show 27.17%. The
percentage is decreased to 21.69% in 2006; however it was increased in 2007 to 27.66 %,
representing peak percentage among all years. The percentage is again decreased to
20.88% in the year 2008.

ANALYSIS
The advances made by National Bank of Pakistan are fluctuating and indicates mixed trend in
all years. The first three years of analysis shows an increasing trend that is 39.91% (2004),
46.53% (2005) and 49% in the year 2006. There was a decrease in bank’s advances to
44.7% in 2007; however in 2008 the percentage is increased to 50.5%, representing peak
rate among all previous years.

ANALYSIS
The operating fixed assets of National Bank of Pakistan shows a percentage of 1.66% in the
year 2004. There was a slight decrease of 1.64% in 2005 and 1.50% in 2006. The operating
fixed assets are increased to 3.40% in 2007. The year 2008 indicates a decrease in bank’s
operating fixed assets as it reduces to 2.96%.

ANALYSIS
The other assets of National Bank of Pakistan fluctuate during all years. The year 2004 has a
percentage of 3.46%, which is increased till 2006 that is 4.14% (2005) and 5.75% (2006). The
percentage of other assets is decreased to 4.07% in the year 2007; however it was increased
to 5.45% in the year 2008.

ANALYSIS
The share capital of National Bank of Pakistan shows a mixed trend in all years. It was 0.89%
in 2005 and shows an increasing trend of 1.02% in 2005. The percentage of share capital is
further increased in 2006 and shows 1.10%. There was a slight decrease in 2007 as
percentage was 1.07%. The year 2008 represents highest percentage of 1.09% among all
years.

ANALYSIS
The reserves of National Bank of Pakistan fluctuate and indicate a mixed trend. The above
graph shows a percentage of 1.95% in 2004 with an increasing trend of 2.34% in the year
2005. The reserves of the bank are decreasing in 2006 & 2007, shows a percentage of 2.15%
and 2.07% respectively. Despite the decreasing trend in previous two years, the National
Bank of Pakistan is being able opt achieve highest percentage of reserves in 2008 as the
percentage increased to 2.43%.

ANALYSIS
The Unappropriated profit of National Bank of Pakistan is increased during all years. It shows
a percentage of 1.66% in 2004, 2.89% in 2005, 4.97% in 2006, 5.95% in 2007 and a peak
percentage of 6.41% in 2008.

ANALYSIS
The surplus on revaluation of assets is fluctuating and shows a mix trend. It shows a
percentage of 3.86% in 2004. The year 2005 represents highest percentage of 6.61%, but it
was decreased in 2006 as percentage is decline to 4.48%. There was a sharp increase in
2007 of 6.18%, however surplus is again decline in 2008 and shows a percentage of 2.57%,
lowest among all years.

ANALYSIS
The bills payable by National Bank of Pakistan indicates a percentage of 1.3% in 2004. The
percentage is decline in 2005 as it shows a decrease of 0.3%, lowest percentage in all years.
There was a sharp increase in 2006 of 1.64% with a decline of 0.93% in 2007. The
percentage is again increased in 2008 as it shows a percentage of 1.25%.

ANALYSIS
The Borrowings of National Bank of Pakistan shows a mixed trend in all years. The
percentage is 2% in 2004 with a decline in 2005 shows a percentage of 1.52%. The
borrowings are increased in 2006 shows a percentage of 1.81%. The year 2007 represents
lowest percentage of 1.43% of bank’s borrowing among all years. There was a sharp increase
in bank’s borrowing in the year 2008 as it shows a percentage of 4.94%.

ANALYSIS
The deposits and other accounts of National Bank of Pakistan decreased during all years.
The year 2004 represents peak percentage of 84.15%. The deposits are decline to 80.22% in
2005, 77.79% in 2006, 77.66% in 2007 and 76.42 % in 2008.

ANALYSIS
The other liabilities of National Bank of Pakistan fluctuate and show a mix trend in all years.
The percentage of other liabilities in 2004 is 4.17%. The year 2005 represents percentage
(4.32%) of bank’s other liabilities. The other liabilities were decline in 2006 and 2007 shows a
percentage of 4.12% and 4.05% respectively. The National Bank of Pakistan is not being able
to reduce its other liabilities in 2008 as the graph shows a percentage of 4.85%, highest
percentage among all years.

VERTICAL ANALYSIS OF INCOME STATEMENT

2004 2005 2006 2007 2008

Markup/return/interest earned 100 110 110 119 143
Markup/return/interest expensed 31 34 35 40 56
Net markup/interest income 69 77 75 79 87
Provisions against non-performing advances 7 8 8 11 25
provision for/(reversal of) diminution in the value
of investments 1 -1 -2 0 1
provision against off balance sheet obligations 0 Nil Nil Nil 0
bad debts written off directly 0 0 0 0 Nil
8 7 6 11 26
Net markup/interest income after provisions 60 69 70 68 61
NON MARKUP/ INTEREST INCOME
Fee, Commission & brokerage income 24 16 15 16 19
Dividend income 6 6 7 8 7
Income form dealing in foreign currencies 5 4 3 2 9
Gain on sale & redemption of securities-net 0 4 3 6 1
Investments classified as held for trading Nil 0 0 0 0
Other income 4 1 2 0 3
Total non-markup/ Interest income 40 31 30 32 39
Total income ( Interest + non-Interest) 100 100 100 100 100
NON MARKUP/ INTERSET EXPENSES
Administration expenses 42 37 34 33 43
Other provisions written off 0 2 0 1 5
Other charges 0 0 1 0 1
Total non markup/ Interest expenses 43 38 34 34 46
PROFIT BEFORE TAXATION 57 62 66 66 54
Taxation Current 24 23 22 20 28
Prior years 4 -4 1 1 Nil
Deferred 0 1 0 1 -10
28 21 23 21 18
PROFIT AFTER TAXATION 30 42 43 45 36
Unappropriated Profit brought forward 28 30 48 76 107
Transfer from surplus on revaluation of fixed
assets on account of incremental depreciation 0 0 0 0 0
Profit available for appropriation 58 72 91 120 143

NALYSIS
The interest earned by National Bank of Pakistan fluctuates and shows an increasing trend
during all years. The year 2008 is unique in terms of bank’s interest earned. The bank earned
143% interest in this year. All other years shows an increasing trend that is 100% in 2004,
110% in 2005, 110% in 2006 and 119% in 2007.

ANALYSIS
The interest expense of National Bank of Pakistan shows an increasing trend during all years.
In the year 2004, the interest expensed is 31%. The interest expense is increase in 2005 as it
shows a percentage of 34%. There was a marginal increase in 2006, as interest expanse
shows a percentage of 35%. The year 2007 also shows an increase of 40%. The year 2008
represents a percentage of 56%, highest among all years.

ANALYSIS
The net markup/ interest income of National Bank of Pakistan fluctuates and shows a mixed
trend during all years. The percentage is 69% in 2004 and shows an increasing trend in 2005
as percentage is 77%. There was a slight decrease in net markup/ Interest income as the
percentage is 75%. There was an increase in income in 2007, as the graph indicating a
percentage of 79%. The year 2008 represents peak percentage of 87% of net markup/
Interest income.

ANALYSIS
The net markup/ Interest income after provisions fluctuates and shows a mixed trend. The
percentage is 60% in 2004, lowest among all years. The year 2005 represents an increasing
trend as percentage is 69%. There was a marginal increase in 2006 as the percentage is
70%. The banks income is decreasing in 2007 & 2008 as the percentage is 68% and 61%
respectively.

ANALYSIS
The Fee, Commission & brokerage income of National Bank of Pakistan fluctuate and show a
mixed trend during all years. The year 2004 represents highest percentage of 24% on
account of fee, commission & brokerage income. The percentage is decreased in 2005 &
2006 as percentage is 16% & 15% respectively. There was a slight increase in 2007 & 2008
as percentage is 16% & 19% respectively.

ANALYSIS
The dividend income of National Bank of Pakistan is showing a mixed trend during all years.
The year 2004 and 2006 indicates almost same percentage of 6%. The year 2006 & 2008
shows a percentage of 7% each. The year 2007 represents a peak percentage of 8% on
account of dividend income.

ANALYSIS
The National Bank of Pakistan’s income from dealing in foreign securities shows a
percentage of 5% in 2004. The percentage is decreased in 2005, 2006 and 2007 as the
percentage in these years is 4%, 3% and 2% respectively. The year 2008 represents highest
percentage of 9% on account of income from dealing in foreign securities.

ANALYSIS
The Total non markup/ Interest income of National Bank of Pakistan fluctuates and indicates
a mixed trend during all years. The year 2004 represents highest percentage of 40% among
all years. The percentage is decreased in 2005 as it was 31%. There was a slight decrease in
2006 as percentage is 30%. The years 2007 and 2008 indicates an increasing trend as
percentage is 32% & 39% respectively.

ANALYSIS
The administrative and operating expenses of National Bank of Pakistan are 42% in 2004,
representing second highest percentage among all years. The expenses are decreased in
2005 as percentage is 37%. The year 2006 and 2007 also shows a decreasing trend as
percentage is 34% & 33% respectively. The administrative and operating expenses of bank
are increased in the year 2008 as the percentage is 43%, highest among all years.

ANALYSIS
The total non markup/ Interest expenses of National Bank of Pakistan are 43% in 2004,
representing second highest percentage among all years. The expense is decreased in 2005
as percentage is 38%. The year 2006 and 2007 also shows a decreasing trend as percentage
is 34% in each year. The total interest expense of bank is increased in the year 2008 as the
percentage is 46%, highest among all years.

ANALYSIS
The National Bank of Pakistan’s current taxation fluctuates and shows a mixed trend in all
years. The percentage is 23% in the year 2004. The years 2005, 2006 and 2007 shows a
slight decrease in bank’s current taxation as percentage in these years is 23%, 22% and 20%
respectively. The year 2008 represents peak percentage of 28% on account of current
taxation.

ANALYSIS
The National Bank of Pakistan’s Profit before taxation is 57% in the year 2004.The
percentage is increased in 2005 as it shows a percentage of 62%. The year 2006 and 2007
shows almost same increasing trend as percentage is 66%. There was a decrease in bank’s
Profit before taxation as percentage is reduces to 54%, lowest among all years.

ANALYSIS
The National Bank of Pakistan’s Profit after taxation is 30% in the year 2004, representing the
lowest percentage among all years. The percentage is increased in 2005 as it shows a
percentage of 42%. The year 2006 and 2007 shows a slight increasing trend as percentage is
43% & 45% respectively. There was a decrease in bank’s Profit before taxation as
percentage is reduces to 36%.

BANK ANALYSIS WITH REFERNCE TO COMMERCIAL BANKS LISTED ON STOCK

EXCHANGE
Financial Position of Commercial Banks
Registered in Pakistan
Name of As of June 2008
Commercial Paid up Reserves Assets Deposits Advances Profit Earnings Branch Credit
Bank Capital (Rs. Bn) (Rs. Bn) (Rs. Bn) (Rs. Bn) After Tax Per share Network Rating
(Rs. Bn) (Rs. Bn) (Rs) (Nos)
Habib Bank 7.59 23.6 735.71 584.85 411.36 7.5 9.75 1400 AA+
NBP 8.97 18.54 788.12 621.53 173.42 8.1 9.03 1249 AAA
Allied Bank 6.46 5.48 344.7 293.97 168.45 2.51 3.88 757 AA
MCB 6.28 35.88 450.34 350.72 228.98 7.68 12.22 1038 AA+
United Bank 10.12 12.82 576.02 465.54 328.55 5.59 5.53 1100 AA+
First Women 0.28 0.22 8.04 6.4 3.09 0.05 1.67 38 BBB+
Bank of Punjab 5.29 7.43 217.85 180.82 142.85 -2.63 -4.97 272 AA-
Soneri Bank 4.11 1.88 81.61 64.73 45.83 0.47 1.13 90 AA-
Askari Bank 4.06 7.59 194.21 153.32 114.04 0.05 1.01 155 AA
Bank Al- Habib 4.79 2.8 167.36 136.75 93.25 1.25 2.61 203 AA
Bank of Khyber 4 1.34 34.43 24.4 11.14 0.11 0.27 34 BBB+
Bank Al- Falah 8 2.95 333.02 287.77 180.02 1.69 2.12 231 AA
Saudi Pak 5 0.22 50.83 42.35 27.62 -0.81 -1.54 55 A-
Faysal Bank 5.3 3.57 137.31 99.61 87.61 0.75 1.41 111 AA
KASB Bank 4.02 0.17 53.66 44.33 32.65 0.08 0.39 41 A
Meezan Bank 4.54 0.81 71.74 57.84 38.3 0.44 0.98 111 A+
NIB Bank 28.44 8.46 177.98 112.12 85.43 -0.73 0.23 240 AA-
Mybank 4.24 0.41 45.47 31.96 23.03 0.43 1.02 69 A
Atlas Bank 5.01 0.52 30.7 22.18 17.5 -0.2 -0.39 31 A-
Standard Chartered 38.72 1.95 276.38 173.81 126.27 1.31 0.34 176 AA+
JS Bank 5.11 0.01 24.16 14.08 9.57 0.16 -0.31 11 A-
Habib Metropolitan 6.02 6.7 192.45 128.97 101.22 1.57 2.6 100 AA+

A stock exchange is a corporation or mutual organization which provides "trading" facilities for
stock brokers and traders, to trade stocks and other securities. The securities traded on a
stock exchange include: shares issued by companies, unit trusts and other pooled investment
products and bonds. To be able to trade a security on a certain stock exchange, it has to be
listed there. The initial offering of stocks and bonds to investors is by definition done in the
primary market and subsequent trading is done in the secondary market. In Pakistan
securities are traded on three stock exchanges which are Karachi stock exchange, Lahore
stock exchange and Islamabad stock exchange.
The financial position of commercial banks registered on stock exchanges in Pakistan, are
shown in preceding page in terms of their:
Paid-up Capital
Reserves
Assets
Deposits
Advances
Profit after tax
Earnings per share
Credit rating
The best way to analyze these commercial banks is to analyze their credit ratings. The
National Bank of Pakistan enjoys the highest credit rating amongst Pakistani banks; JCR- VIS
Credit rating Co. Limited awarded highest standalone credit rating of AAA to NBP. The
JCRVIS Credit rating Co. comments about NBP say a lot about the bank:
“The organization has been able to strategically manage and build on its competitive
advantages which has translated into the strong and well managed improvement in
profitability trend observed over the last few years, a substantial balance sheet of sound asset
quality, and strong liquidity and capitalization levels”
NBP’s key strength remains its extensive outreach and a low cost, stable deposit base.
Deposits are also guaranteed by the Government of Pakistan under the Banking
Nationalization Act, 1974. There have also been significant improvements in the management
practices of the bank and a focus on enhancement of systems and controls. In this regard the
management has entered into an agreement for the acquisition of a core banking software
which is likely to be implemented over the next few years.
JCR-VIS believes that the current economic situation puts certain leading industrial sectors
and the general consumer under financial stress. Therefore, the second half of 2008 and
2009 are likely to be challenging for the banking sector as a whole, in terms of maintaining
growth, asset quality and profitability.
The JCR-VIS Rating Process include following steps:
1. Signs agreement for an initial rating
2. Submits preliminary information materials
3. Conducts a preliminary study
4. Submits a detailed questionnaire to the issuer/client
5. Provides detailed information in response to detailed questionnaire
6. Conducts pre due diligence meeting analysis
7. Conducts due diligence meetings
8. Conducts post due diligence analysis
9. Brief for internal rating committee meetings is prepared
10. Sub Committee recommends preliminary/initial rating
11. Rating Committee decides the preliminary/initial rating
12. Discusses the rating rationales and rating issues with client
13. Notifies issuer of the preliminary/initial rating, deliberates on appeals by client, if any
14. Consents to release of preliminary/initial rating to the public in case of non-mandatory
ratings
15. Releases the preliminary/initial rating to the press

FUTURE PROSPECTS OF NATIONAL BANK OF PAKISTAN

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. The forward-
looking management of NBP is a firm believer in focusing on niches where there is critical
mass and to create products that meet that demand.
National Bank of Pakistan is gearing up to the challenges faced by the domestic banking
industry due to innovations and advances in the international banking world, which is the
consequence of globalization. The bank wishes to effectively utilize the financial assistance
being extended by the Government of Pakistan for banking sector reforms aimed at reducing
operating costs and improving profitability. National Bank of Pakistan is distinct from other
banks in that it has a nonprofit and service oriented motive, which has manifested itself in the
area of salary deposits of government employees and payment of utility bills. The bank
renders these services across the country reaching as far as the remotest regions; from our
northern borders to the Arabian Sea. These services do not contribute towards the earnings
of the bank; rather they put pressure on bank’s resources. Nevertheless, the bank is
committed to serving small savers and the general public of the country. National Bank of
Pakistan is everyone’s bank and does not only serve corporate customers. To extending and
targeting research to improve bank earnings, through customer focus of bank’s commercial
and corporate branches, and by enhanced efforts towards the development of human capital,
the bank shall very soon transform from a bureaucratic organization to a fast paced, modern,
and competitive bank. In conclusion, the National Bank of Pakistan have the vision, which will
enable it to achieve even better results, safeguard the interest of their customers and to assist
them in their march towards progress and prosperity in future.
The National Bank of Pakistan is confidence that tomorrow we will be…
Leaders in our industry
An organization maintaining the trust of stakeholders.
An innovative, creative and dynamic institution responding to the changing needs of the
internal and external environment
NBP’s current management has boarder vision. They have taken steps to improve customer
services, streamline internal procedure and creating a delectating climate for technology
initiative.
Reorganizing efforts going on in the NBP has open many opportunities for NBP to grow. For
instance to achieve objectives NBP have taken following measures.
Setting of target for of making at least 300 branches country wide on line.
Closing of all those branches, which are burden on NBP.
Management to offer specialized services to major corporate including advisory and debt
syndication introduces the concept of relationship manager.
Comprehensive training programs has been develop to up grade the core banking skills of the
existing staff as well as integrate high quality hiring.
To improve the motivation of staff a merit-based culture is being promoted. Through
overhauling the manpower recruitment preservation and performance appraisal system.
The actions taken by current management provide a great opportunity for NBP for making it
future prosper and can make NBP not less than any modern commercialize bank in Pakistan.
The Management of NBP assess that the Internal Control environment is showing signs of
improvement as compared to previous years in all areas of the bank. The bank is
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
effort to improve the professional skills and competency level of the staff through need based
training programs and our valued customers for their support and continued confidence in
NBP.

SHORT FALLS/ WEAKNESSES OF NATIONAL BANK OF PAKISTAN

The National Bank of Pakistan’s Advance salary, which has long been the flag-ship product
for NBP, is replete with charges of corruption, default and inefficiency.
The National Bank of Pakistan’s huge number of borrowers is untraceable or correct
whereabouts are not known.
The housing finance product of NBP lacks proper infrastructure including database support
even after five years of post launch history. The similar products launched by other
commercial banks are much smaller in size are running on well-articulated systems and are
backed by proper policies and guidelines. The NBP product, despite boasting a sizeable
portfolio built around some reckless selling, is mostly infected.
The NBP Karobar scheme is designed around President’s Rozgar scheme. The scheme
which had all the potential to become a landmark was so badly mishandled by National Bank
of Pakistan.
The Quality of infrastructure added by National Bank of Pakistan during the last few years is
quite substandard as compared to that of peer banks.
In NBP’s five year strategic plan 2007-2011 approved by board of directors does not address
any serious thinking on
Productivity improvement and benchmarking with the competition.
Development required for serving major sectors of the economy.
Infrastructure to support planned growth and vision.
Inducting and leveraging specialized human capital.
Bringing the institution on international banking landscape in the coming five years, not to
speak of the seven years which the current management has already served.
As for as public interest is concerned there were no service standards benchmarks and
guidelines available in NBP. There were only old documents that were crafted at least a
decade or more back.
Due to poor planning the bank had book losses of over 1.2 billion rupees in the Karobar
Scheme.
The National Bank of Pakistan’s outsourced employees (2350) was obtained from a single
source. Most of these are performing the core function of the bank outside their assigned
duties without any training and supervision.
The National Bank of Pakistan is incurred large expenses in running those branches, which
are not producing any income.
The up gradation of human resource is very slow in NBP. The branches of NBP have less
number of employees as their requirements. The concept of “One Man Show” is adopted in
many branches to save salary expenditure; even most of the branches use their security
guards for various tasks. The one reason for this is that the senior management is able to
decrease salary expenditure of the bank, which result an increase in the net profit. For their
performance they received handsome amounts of bonus. But in long run it has a negative
effect on bank’s productivity.
The pension’s distribution service or payments to EOBI beneficiaries, utility payments;
workers remittances are occupied lowest priority level.
In NBP Karobar scheme the product selected by the NBP is of inferior quality and develops
faults in the first few months of delivery.

CONCLUSIONS
The National Bank of Pakistan plays a key role in the strategic national development. The
bank has historically been the financial arm of the government and has enjoyed the blessings
of state support in the form of huge public sector funds and deposits.
In contract to other banks populating the FSI sector, NBP is mandated to uphold public
interest. It is critical too as all other banks and NBFIs in public sector have been closed down
or merged with NBP.
In contract to other banks populating the FSI sector, NBP is mandated to uphold public
interest. It is critical too as all other banks and NBFIs in public sector have been closed down
or merged with NBP.
The current management of National Bank of Pakistan was hired purely for their international
experience, business orientation to turn around a purely public institution into a sustainable
and commercially viable bank serving public interest along the lines of a large modern
commercial bank.
The National Bank of Pakistan has effective budgeting system in place. Annual budget of the
bank is approved by the Board and monthly comparisons of actual results with the budget are
prepared and reviewed by the senior management.
The National Bank of Pakistan has a comprehensive framework of written policies and
procedures on all major areas of operations such as Credit, Treasury Operations, Finance,
Internal audit and Compliance approved by the Board.
The National Bank of Pakistan provides sustainable financing for growth of industries of
critical national importance such as energy, education, healthcare, transport, shipping,
Research & development.

RECOMMENDATIONS
The National bank of Pakistan should be fully prepared in its management of financial crises
and its business continuity planning, within the standing committee framework, and should
work with others to strengthen national crises management preparations.
The bank should improve the quality of training of its employees and the integrity, controls
and efficiency of its systems, processes and financial reporting.
The bank should improve its recruitment, retention and development and to reform the Bank’s
pension scheme.
The bank should renegotiate the Bank’s long term financial framework and to overhaul the
Bank’s financial system.
The Bank should improve IT capability in the analytical areas and to develop a medium term
strategy for banking and market operations.
The National bank of Pakistan should monitor the impact of its operations on the environment,
which is mainly through the use of power and the generation of waste.
NBP, being the only lending arm to the government for public sector development should
design, develop and deliver product and services for economic growth.
The bank should provide support to the Micro, Small and Medium enterprises thereby
reducing unemployment and helping to create a more equitable distribution of wealth.
The NBP should adopt modern banking tools and techniques. Quality leadership, clear vision,
investment in IT infrastructure and human resource development.
The bank should develop software for pension disbursement.
As for as Islamic Banking environment is concerned the management and employees of NBP
should work together for basic research for discovering their own laws, developing theories or
concepts for the better direction of their own business environment according to Quran &
Sunnah.
The branches should reduce its large expenses in order to increase the value of the bank.
The NBP should strengthen incentives and accelerate a results-oriented training and
communications programs for management and staff.
The National Bank of Pakistan should implement a financial inclusion program to meet the
needs of underserved economic subsectors, including outreach programs to meet the
requirements of the agriculture, housing, SME and microfinance sectors.
The National Bank of Pakistan should introduce a framework for consolidated supervision and
reorganize the regulatory architecture to allow better regulation and supervision of financial
control division of bank.