Financial Analysis of NBP 2013

Table of Content
Topics
 Introduction
 History about National Bank
 Nature of National Bank
 Vision and Mission Statement
 Goals and Core values
 Board of Directors
 Products of National Bank
 Hierarchy Chart of National Bank
 Departments of National Bank
 Principles of Lending
 Ratio Analysis
 SWOT Analysis
 PESTEL Analysis
 Conclusion and Recommendations
Numl Multan Page | 1

INTRODUCTION
What is bank?
An establishment authorized by a government to accept deposits, pay interest,
clear checks, make loans, act as an intermediary in financial transactions,
and provide other financial services to its customers.
deposits as well as supplying short-term loans to individuals and small businesses.
Consumers primarily use these banks for basic checking and savings accounts,
certificates of deposit and sometimes for home mortgages. Investment banks focus on
providing services such as underwriting and corporate reorganization to
institutional clients.
While many banks have both a brick-and-mortar and online presence, some banks have
only an online presence. Online-only banks often offer consumers higher interest rates
and lower fees. Convenience, interest rates and fees are the driving factors in
consumers' decisions of which bank to do business with. As an alternative to banks,
consumers can opt to use a credit union.

HISTORY OF NATIONAL BANK OF PAKISTAN
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. 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.
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.
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
2008, 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.i

NATURE OF NATIONAL BANK OF PAKISTAN
National Bank of Pakistan is the largest commercial bank operating in Pakistan. Its
balance sheet size surpasses that of any of the other banks functioning locally. It has
redefined its role and has moved from a public sector organization into a modern
commercial bank.
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. NBP maintains its position as Pakistan's Premier Bank with a network of over
1310 branches locally, 23 overseas branches, 9 National and International Subsidiaries
and 10 Regional/Representative Offices all over the world
NBP also have a Joint Venture with UBL at U.K., with the name of Pakistan
International Bank (UK) Ltd., with seven branches at Main Branch, London,
Manchester Branch, Glasgow Branch, Bradford Branch, Sheffield Branch, Birmingham
Branch and Knightsbridge Branch (London)
The Bank has employed more than 15,000 people world wide. The various departments
include:
Consumer Banking – Corporate Finance – Investment Banking – Agricultural Banking
– Transactional Banking – Operations – Software Development and Automation –
Financial Control – Treasury – Internal Audit – Risk Management & Credit –
Economic & Business research – Training & Development – Strategic Planning –
Human Resources.
The bank operates 1350 online 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 total
no ATMs are 350 over all Pakistan.
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.

OVERVIEW OF ORGANIZATION
VISION
To be recognized as a leader and a brand synonymous with trust, highest
standards of service quality, international best practices and social responsibility.
MISSION
NBP will aspire to the values that make NBP truly the Nation’s Bank, by :
• Institutionalizing a merit and performance culture.
• Creating a distinctive brand identity by providing the highest standards of
services.
• Adopting the best international management practices.
• Maximizing stakeholder’s value.
CORE VALUES
• Highest standards of Integrity.
• Institutionalizing teamwork and performance culture.
• Excellence in service.
• Advancement of skills for tomorrow’s challenges.
• Awareness of social and community responsibility.
GOALS
To enhance profitability and maximization of NBP share through increasing
leverage of existing customer base and diversified range of products.
• Excellence in Direction
• Excellence in Growth
• Excellence in Performance
• Excellence in Management

PRODUCTS LINE
PRODUCTS
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:
NBP Premium Saver
Period Profit
Rates
1st year 7.50%
2nd years 8.50%
3rd years 9.50%
4th years 10.50%
5th years 11%

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.
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.
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. In normal circumstances the bank has consider
following factors in view before framing financing policies.
 Capital position
 Risk and profitability of various types of financing
 Stability of deposits
 Economic conditions
 Influence of monetary and fiscal policies
 Ability and experience of bank personnel
 Credit needs of the area served.
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
(maximum)

Home
Renovation
(maximum)
Purchase of land Plus
Construction
Rs.35 Million 3 to 20 years 80:20
(maximum)
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:
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 15.5% p.a. This product has following features
• Facility of Rs. 35,000 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
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.

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
CORPORATE ADVANCES
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.
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.
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.
REMITTANCES
Demand Drafts
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.
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.
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.
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.
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 in
same City. 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 80/- for NBP account
holders on issuing one payment order, and charges Rs 150/- 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 150/- for NBP account holders and Rs 200/- for non account holders.

Organizational Hierarchy Chart

President
Senior Executive Vice-President
Executive Vice-President
Senior Vice-President
Vice-President
Assistant Vice-President
BranchHierarchy
Officer Grade 1
Officer Grade 2
Officer Grade 3
Senior Assistant
Assistant
Driver
Peon

BOARD OF DIRECTORS
Qamar Hussain
Chairman Board, President , NBP
Mr. Tariq Kirmani
Director
Mrs. Haniya Shahid Naseem
Director
Ms. Nazrat Bashir
Director
Syed Muhammad Ali Zamin
SVP, Secretary Board of Directors

Senior Management
Masood Karim Sheikh
SEVP & Group Chief, Corporate & Investment
Banking Group and Chief Financial Officer
Shahid Anwar Khan SEVP & Group chief, credit management group.
Dr. Asif A. Brohi SEVP & Group Chief, Operation Group.
Imam Bakhsh Baloch SEVP & Group Chief, audit and inspection group.
Ziaullah Khan SEVP & Group Chief, Complaince Group.
Aamir Sidique
EVP & Group Chief, commercial and retail banking
Group.
Muhammad Nusrat
Vohra
SEVP & Group Chief, Treasury Management Group.
Eklaq Ahmad EVP & secretary board of director.
Tajammal hussain
Bokhari
EVP & Group Chief, Special asset Management
Group.
Mrs. Khurshid
Maqsood Ali
EVP & Divisional Head, employees benefits,
Disbursement & Trustees Division
Amim Akhtar EVP & PSO to the President
Dr. Mirza Abrar Baig
SEVP & Group chief, human resource management &
administration group.
Tahir Yaqoob
EVP & Group Chief, Overseas coordination &
management Group.
Anwar Ahmad Meenai EVP & Divisional Head, Islamic Banking Division
Aamir Sattar
Financial controller & Divisional Head, Financial
control Division
Departments of the NBP

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 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.
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
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.
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.
3. 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 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.
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 follows:
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.
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)
5. Advances Department
Advances department is one of the most sensitive and important departments of the
bank. The major portion of the profit is earned through this department. As we known
bank is a profit seeking institution. It attracts surplus balances from the customers at
low rate of interest and makes advances at a higher rate of interest to the individuals and
business firms. However, at the same time, it is a very risky task and the risk cannot be
completely eliminated but could be minimized largely with certain techniques.

TYPES OF ADVANCES:
1. DEMAND FINANCE:
One time disbursement of the whole amount sanctioned, as the limit for the credit
allows.
Any person, individual, group, company, firm and all others can achieve this Mode of
financing. The mark-up or interest is calculated on the total amount disbursed and
requires to be paid before the date of final adjustment. Regarding the amount, limit and
period, it depends on the nature of the case in review.
2. CASH FINANCE:
In this mode of financing the borrower is allowed to make withdrawals of funds as he
requires, but the total amount outstanding cannot exceed the limit sanctioned. The
mark-up/interest is calculated on the amount outstanding on his account.
This finance if normally borrowed by small traders or individuals for their petty matters
involving cash transactions up to rupees three hundred thousand maximum.
3. RUNNING FINANCE:
To assist a large-scale business operator to carry on his day to day requirements of
liquid funds, this account is opened is made operation in his favor. Running finance is
provided where the amount goes beyond rupees three hundred thousand. The mark-
up/interest is calculated the same way as in case of cash finance.
4. LOANS:
When a customer borrows a fixed amount from a banker repayable either in periodic
installments or in lump sum at a fixed future time, it is called a "loan". When bankers
allow loan to their customers against collateral securities they are called secured loan
and when no collateral; security is taken it is called "clean loans"
TYPES OF LOAN:
The credit department of NBP has providing the following types of loans
a. Short term loans
b. Long term loans
c. Working capital loan
d. Syndicate (project) loan
Porter Five C’S Model

i. CHARACTER:
It is based on the borrower willingness to repay the obligation. The loan officer sees the
family background mode of living, business nature, habits, moral reputation and etc.
before giving the loan.
ii. CAPACITY:
The ability of borrower to repay the loan when due. The borrower ability to repay the
loan is assessed by the office so that he will be able to repay the loan in future.
iii. CAPITAL:
The officer assesses the capital of the borrower. If assets held by the borrower are
liquid, they can be easily convertible in cash; but if non liquid is used then it is risky to
given loan.
iv. COLLATERAL:
It is collateral security. It may consists of stocks bonds , bill of exchange, bills of
lading, etc. the bank has protect himself from any discrepancy in the future. They
increase the ability of the borrower to obtain the funds from the bank.
v. CONDITION:
The economic condition of the borrower is determined. The economic conditions of the
borrower in and outside the country effect the repayment of loan. If condition is
favorable then loan is given otherwise vice versa
6. Credit & Risk Management
Risk management function has been restructured and made independent of all risk
taking and approving units. Its functional reporting is to the Board of Directors and
administrative reporting to the President of the bank. An executive risk management
committee has been established to emphasize on the bank’s commitment to a robust risk
management process and risk culture. In compliance with the risk management
guidelines, issued by SBP, an operational risk management unit has been established.

An operational loss database, risk & control self assessment (RCSA) exercise and key
risk indicators (KRIs) are being developed and will subsequently be implemented.
A separate credit risk architecture unit has also been formed for formulation/
proposition of credit risk strategies, policies, credit assessment methodologies, credit
portfolio/sector management. A dedicated Basel II unit is responsible for managing the
Basel II project in close coordination with the consultant and with the active support &
involvement of other functions across the bank
Risk Management Framework of National Bank of Pakistan
Risk Management in any business entity is a critical function, which develops tools,
formulates risk policies to keep exposures within manageable limits in conformity to
the institutions risk taking appetite.
Risk Management Group at NBP has been suitably structured, with the required
independent reporting, a well defined risk charter, staffed with professionals having the
requisite technical skills. Simultaneously, a Basel II Implementation Project is in the
process of being executed under the guidance of external professional consultants, to
significantly enhance risk management capacity across the full spectrum of the
institution. This has enabled Risk Management Group to play a more effective role in
the achievement of its objectives and assisting the Board and Senior Management to
fulfil their responsibilities of risk oversight. Risk management is viewed holistically,
including Credit Risk, Market Risk, Liquidity Risk and Operational Risk.
National Bank of Pakistan is fully aware of its systemic and critical leading role in the
sustainable economic development of Pakistan. Keeping this in mind, NBP’s Board of
Directors and Senior Management are fully committed to strengthening the risk
management practices in NBP and an enabling risk structure as below:
 Board Risk Committee (BRC)
 Executive Risk Management Committee (ERMC)
 Independence of Risk Management Function from approvals.
 Representation of Risk Management in Asset Liability Committee (ALCO).

 Representation of Risk Management in Credit Committee (CC) is mandatory while
discussing any policies, product plans, programs and portfolio reviews.
Under the umbrella of above, various initiatives were undertaken and achieved, some of
which are listed below:
 Development of Internal Capital Adequacy Assessment Process (ICAAP) as per
latest SBP guidelines.
 Performed both, the model and internally designed stress tests as per SBP
guidelines.
 Development and implementation of Internal Risk Rating model(s) and
scorecard(s) for Retail borrowers.
 Development and updating of the overall Risk Management Policy.
 Reviewed, refined and updated a wide range of policies and product programs.
 Regular portfolio reviews and analytics of diversified facets to apprise and facilitate
Senior Management and Board in decision making and strategy formulation.
 Development of Credit Risk Tolerance Limits / Concentration Policy.
 Development of capital charge calculation tools.
 Performed post facto credit risk reviews of corporate, commercial and SME asset
classes identifying gaps in credit granting process, to improve the quality of credit
portfolio.
Board Risk Committee
The committee is responsible to oversight risk related issues at the bank level and took
Several decisions including the restructuring of risk management department including
its revised role and responsibilities, with the help of Basel II consultant. Other tasks
executed during the year included designation of Chief Risk Officer, appointment of

consultant and monitored progress on Basel II implementation, formation of executive
risk management committee, enhancing risk management unit’s role, improvement in
portfolio reviews and development of Institutional Risk Management Framework
(IRAF) improvement plans. In the coming year, steps are being taken to review the gap
analysis reports provided by the consultant, to improve the quality of risk rating models
through rating review process and introduction of risk strategies and appetite statement.
Ratio Analysis
Liquidity Ratios

A class of financial metrics that is used to determine a company's ability to pay off its
short terms debts obligations. Generally, the higher the value of the ratio the larger the
margin of safety that the company possesses to cover short-term debts.
1- Current Ratio:
The current ratio is the ratio of current assets to current liabilities.
Formula
Current Ratio = Current Assets / Current Liabilities
Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders
may prefer a lower current ratio so that more of the firm's assets are working to grow
the business.
Current Ratio = Current Assets / Current liabilities
Year 2012 Year 2013
1926827691/1102403000
= 0.17
227326509/1137028080
=0.19
Interpretation:
The ratio is 0.17 in 2012 and 0.19 in 2013 and. This means that for every 1 rupee
liability of the bank it has 0.19 rupees in 2013.It shows the poor short term financial
position of NBP.
2- Cash ratio

The cash ratio is an indication of the firm's ability to pay off its current liabilities if for
some reason immediate payment were demanded. NBP cash ratios are
Formula
Cash Ratio = Cash / Current liabilities
Cash Ratio=Cash/Current Liabilities
Year 2012 Year 2013
188555046/1102403000
= 0.17
175387820/1137028080
= 0.15
Interpretation:
The cash ratio of the bank is 0.17, 0.15 in 2012, 2013 respectively. This shows an
decrease in 2013 This means that NBP have some cash than their liability, and NBP not
easily cover their liabilities with cash in hard times.
3- Advances to deposits ratio
The loan to deposit ratio is used to calculate a lending institution's ability to cover
Withdrawals made by its customers
Formula
Advances to deposits ratio= Advances / Total Deposits
Advances to deposits ratio= Advances / Total Deposits
Year 2012 Year 2013
654690016/1036739050
= 0.63
615419874/1101138574
= 0.55

Interpretation:
It means the efficiency on NBP is good and they use their deposits efficiently in
advancing to borrowers. Here high ratio is required. The next side of the picture is that
the people will think that is risky to deposit the money in the bank
Solvency ratio analysis
Solvency analysis of a firm indicates the amount of the other people’s money being
used to generate profit. In general, these analyses are more concerned with long term
debts, because these commit the firm to a stream of payments over the long run.
Solvency analysis includes
1- Proprietary Ratio
Proprietary ratio refers to a ratio which helps the creditors of the company in seeing that
their capital or loans which the creditors have given to the company are safe.
Proprietary ratio can be calculated as follows
Formula:
Proprietary Ratio = Total Asset / Total Equity
Proprietary Ratio = Total Asset / Total Equity
Year 2012 Year 2013
139980600/1309528105
= 0.106
156286704/1364341256
=0.114

Interpretation.
The ratio shows that in 2012, it is 0.106 and in 2013 it increases to 0.114. It shows that
very small amounts of shareholders in asset contribution.
2- Debt-to-owner's equity
The ratio of debt-to-owner's equity or net worth indicates the degree of financial
leverage you're using to enhance your return. A rising debt-to-equity ratio may signal
that further increases in debt caused by purchases of inventory or fixed assets should be
restrained
Formula:
Debt-to-owner's equity= Total Debt / Equity
Debt-to-owner's equity= Total Debt / Equity
Year 2012 Year 2013
1169547505/139980600
= 8.35
1208054552/15686704
=7.72
Interpretation:
The ratio is decreasing with the passage of time that shows that their Debts are
decreasing which can create a great benefit for the shareholders and the owners.
Profitability analysis
Profitability analysis of a firm indicates the overall efficiently of the management.
Without profit a company cannot attract the outside capital. Profitability analysis
Includes:
1- Return on total assets
The return on assets ratio provides a standard for evaluating how efficiently
financial management employs the average dollar invested in the firm's assets,
whether the dollar came from investors or creditors.
Formula
Return on total assets ratio= Net Profit after Tax/ Total Assets*100

Return on total assets ratio= Net Profit after Tax/ Total Assets*100
Year 2012 Year 2013
14641010/1309528105
= 0.01 or 1%
5500024/136434156
= 0.0043 or 0.43 %
Interpretation
It shows the decrease trend of profitability. It means the assets of business are fully
utilized in 2012 and ratio is 1 but the assets of the business are fully not utilized in more
and efficient way in 2013 and ratio decreases to 0.43 and also shows the unfavorable
trend of the business.
2- Return on investment
A performance measure used to evaluate the efficiency of an investment or to compare
the efficiency of a number of different investments
Formula
Return on investment= Net Profit after Tax/ Investment *100
Return on investment= Net Profit after Tax/ Investment *100
Year 2012 Year 2013
14941010/343537529
= 0.04 or 4%
5500024/397958681
= 0.01 or 1%

Interpretation
It means the investment of the business are fully utilized in more and efficient way it
also shows that NBP have large amount of investment but it needs some improvement
and also shows the unfavorable trend of the business.
3- Return on equity
Return on equity measures a corporation's profitability by revealing how much profit
a company generates with the money shareholders have invested.
Formula:
Return on equity: Net Profit after Tax/ Total Equity*100
Return on equity= Net Profit after Tax/ Total Equity*100
Year 2012 Year 2013
14941010/139980600
= 0.10 or 10 %
5500024/1562286704
= 0.00352 or 0.35%
Interpretation
This ratio is more meaningful for share holders who are interested to know the profit
earned by the company because the dividend paid from available profit higher ratio
means factor of production fully utilized and good position but here there is big decline
in ratio.
4- Net profit margin
Net profit margin is the percentage profit your business makes for every dollar of
revenue – whether you’re making a profit after covering all of your costs.
Formula
Net Profit Margin= Net profit/ Interest Earned
Net Profit Margin = net profit/ Interest Earned
Year 2012 Year 2013
14941010/100092132
= 0.149 or 14 %
5500024/99027563
= 0.055 or 5 %

Although bank is earning huge income but its expenses increased quite a bit
simultaneously. Ultimately result is decrease in the net profit of the bank. It is decreased
14%to 5% in 2013.
Market analysis
Investor analysis or market analysis are related to firm market valve, as measure by its
current share price to certain accounting values. Investor analysis includes
1- Earnings per Share - EPS'
The portion of a company's profit allocated to each outstanding share of common stock.
Earnings per share serve as an indicator of a company's profitability.
Formula:
EPS = (Net profit after tax − Preference dividend)/No. of equity shares
EPS =(Net profit after tax − Preference dividend)/No. of equity shares
Year 2012 Year 2013
14941010/18500114
= 0.80
5500024/21275131
= 0.2585
Interpretation:
Earnings per share is a good measure of profitability when compared with similar
other business. Here decreasing EPS, which will surely decrease share price.

SOWT ANALYSIS
STRENGHTS:
 NBP one of the largest financial institutions of Pakistan with eight million of
customer base NBP holds 24.6% share of time and demand deposits in the country.
Local currency deposits comprise 67% of bank's total deposits while foreign
currency deposits account for the rest.
 NBP has an extensive domestic branch network of 1350 branches located all over
Pakistan. The Bank also has a presence in 23 international locations including the
USA, United Kingdom, Europe and the Far East.
 NBP is working as right arm government of Pakistan as it is responsible for all
claims of government for recovery as well as payment. All depositor of NBP are in
relief that their money security is guaranteed by government of Pakistan.
 It acts as an agent of the Central Bank wherever the State Bank does not have its
own Branch.
 Performing social responsibilities and claiming “The Nation’s Bank”
 Earning high profit on NBP-Advance Salary Loan Scheme·
 Earning commission from SBP on Government transaction
 Facing never problem of cash/currency being its Chest and Sub-chest
 Holds largest deposit base in the market share in terms of number of accounts
 Leading bank in agriculture financing amongst commercial banks with the market
share of 15%.
WEEKNESSES:
 Lowest Internal Control and Compliance System, SBP rated “Marginal” which is
alarming for the Bank.
 Unsatisfactory corporate culture of the Bank.
 Physical environment and atmosphere compare to other banks is not meeting the
standard.
 Less number of Online Branches.
 Ineffectively use of technologies i.e. Information technology
 Shortage of staff- per employee customer is very high side
 Technical education and training of staff is insufficient The workload in NBP is not
evenly distributed and the workload tends to be more on some employees while
others abscond away from their responsibilities which server as a demotivation
factor for employees performing above average work.
OPPORTUNITIES:

 Being a Government Bank NBP having wide scope in economic market.
 Trust and reliability creates chances to enhance deposit and profitability.
 Its vast network of domestic and overseas branches can help to expand business.
 Bank’s deposit is increasing rapidly so there is a great opportunity to enhance its
investment and financing.
 Being an agent of State Bank of Pakistan it can play vital role in local economy.
 Earning commission/exchange on Government transactions.
 Amongst highest bank is Asia, NBP further expand its services proudest and earn
more profit.
 The bank is reshaping its portfolios by investing into higher area of growth
developing core competing as a result to get maximum return.
 I.T and HR are important factors for development in any organization, NBP
continue struggle to achieve this target
THREATS:
 SBP penalties due to low internal control and compliance.
 Government, SBP and Prudential Rules and Regulations.
 Schedule banks and Multinational/International bank’s profit rates.
 Its staff switching over to other private banks due to more facilities.
 Other bank’s charming atmosphere and relaxation in documentation.
 SBP rated just “Marginal” in respect of System & Control which is alarming for the
Bank to survive its license.
 NBP staff code of ethics and practices.
 High number of complaints regarding staff behavior.
 Payments and FBR Collections create heavy workload
THE PEST ANALYSIS OF NBP
Political
• Impact of economic science striking
• Denationalization strategy of the authorities and SBP’s deregulating
• Work patterns, Unions and affiliations
• Governmental obstructions and torment

• Commotions of high tax on banking business
Economical
• Restraints in mobilization of civic investments due to inflation
• Staff pays and other costs
• Operating expense is higher due to manual dealing
• Rising of debts
Social & Cultural
• Unsatisfactory HR
• Ethnical strain to investments
• Going down educational and employment morals
• Poor liability
• Debtor lobby
• Satisfactory empowerment
Technological
• Poor communication base
• Inadequate I.T services
• Insufficient I.T training
• Lack of information technology tools
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.
• 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 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.

References
www.nbp.com.pk
www.kse.com.pk
en.wikipedia.us/national-bank-pakistan
NBP Annaul report 2013
Mr. Sajjad ( Cash Head at National Bank Main Branch Multan)

Financial Analysis of NBP 2013

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Financial Analysis of NBP 2013