Aiou's Blog
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.
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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.[i]
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.[ii]
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.[iii]
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.[iv]
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.
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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.
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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.
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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.
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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.
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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.
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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.
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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).[v]
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)
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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." [vi]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.
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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.[vii] 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”.[viii] The followings are the main consumer banking products of NBP.
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.
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.[ix] 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.
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.[x]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.
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.[xi] 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.
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.[xii] 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.
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.[xiii] 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% |
a) 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.[xiv]
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 |C |Debit (-) |Credit (+) |
| | |of | | | |
| | |Transaction | | | |
|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 |
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.[xvi] 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|Up to 20 net take home salaries |
|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 |
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[xvii]
• 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
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. [xviii]
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
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.
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.
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.
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.
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.
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
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.[xix]
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.[xx]
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 | | | |
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|Encashment | At all 400 branches of NBP | | | | |
|Safety | NBP Traveler’s Cheques are the safest way to carry our money |
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.[xxi] 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.
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.
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.
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.
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.
Miscellaneous
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.
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
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
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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:[xxii]
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 | | |
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 challenges at NBP, our corporate team not only increased the volume as well as the yield of the loans they also maintained a strong franchise with the leading Pakistani corporate so as to ensure that NBP not only maintains its market share but is in a position to meet any challenges in future. NBP during the year also participated in a number of TFC issues and mutual funds subscriptions thereby increasing the overall yield on investment portfolio.
NBP has the largest equity portfolio in the banking sector primarily due to 27% holding in NIT units, the largest mutual fund in Pakistan. During the year 2008 the bank redeemed 10% of its NIT holding covered under LoC, which resulted in capital gain of Rs. 1.8 billion in 2008.
The National Bank of Pakistan has initiated a structured approach to corporate banking by introducing a single point of contact through Relationship Managers. For this purpose, new Relationship Managers as well as team leaders has been inducted to expedite this process. The Area Managers of National Bank of Pakistan are appointed to manage relationships and to better service the needs of multinationals and large local corporate. An investment banking team has also been formed by National Bank of Pakistan to offer specialized services to major relationships including advisory and debt syndications. The National Bank o Pakistan have special focus on Corporate Banking with a presence in all major locations through out the country, offering full range of Banking products / services and one window interface through designated Relationship Managers. Corporate Banking offers tailor made products / solutions as required by corporate customers which includes:
The key features of corporate Banking includes:
•
• Funded facilities, ranging from short to medium and long term lending
• Trade related financing.
• Foreign currency financing.
• All sorts of non-funded facilities / services which include Cash receipts / payments, Remittances, Collections, guarantees, letter of credit etc.
• Customized products / solutions
Compliance Group
The Compliance Group of National Bank of Pakistan is headed by Mr. Ziaullah Khan and is report directly to the President/ Chief executive of NBP. In order to keep the working of Audit Department aligned with the best international practices 'Compliance Group’ has been created. This group is responsible for monitoring compliance of various administrative / operative instructions, rules, and regulations by constantly reviewing and reporting status of compliance and non-compliance. The Compliance Group of NBP is set to ensure that all relevant laws are complied with, in letter and spirit, and, thus, minimize legal and regulatory risks. The Compliance officers will primarily be responsible for Bank’s effective compliance relating to:
• Relevant provisions of existing laws and regulations.
• Guidelines for KYC.
• Anti money laundering laws and regulations.
• Timely submission of accurate data / returns to regulator and other agencies.
• Monitor and report suspicious transactions to President / Chief Executive Officer of the bank and other related agencies.
• The Compliance Officers will serve as a contact point between President /Chief executive officers and senior management, with regard to functioning of compliance program provide assistance in this area to branches and other departments of the bank, and act as liaison with State Bank of Pakistan concerning the issues related to compliance.
The functions of compliance group of National Bank of Pakistan are as fallows:
• Study and emphasize compliance of best international practices in audit of various functions of NBP.
• Monitor compliance of Administrative/Operational Instructions, Rules, Regulations issued from time to time by the Management.
• Review over the compliance carried out by the audit departments.
• Prepare and put up a consolidated Report to the Directors of National Bank of Pakistan regarding the status of compliance and non-compliance of the recommendations agreed by the Departmental Management.
Islamic Banking Group
The divisional head of Islamic Banking group is Mr. Anwar Ahmed Meenai. Islamic Banking is one of the emerging field in global financial market, having tremendous potential and growing at a very fast pace all around the world. Al-Hamdulillah, the progress of Islamic Banking in Pakistan has also been commendable during the last Five years. The year 2007 marked the first year of Islamic Banking operations. During the year under review, in addition to active participation in various Sukuk transactions, two more Islamic Banking branches at Lahore and Peshawar started operations. NBP's plans for the year 2008 include opening of Faisalabad and Rawalpindi branches with the focus on growing organically by opening more standalone Islamic Banking branches, utilizing NBP's existing branch network of 1,200 plus conventional branches and looking into strategic acquisitions for expansion in this field. The products & services being offered by National Bank of Pakistan’s Islamic Banking are fully Shariah Compliant and have been certified by NBP’s Shariah Advisor. Deposit Schemes being offered by NBP’s Islamic Banking Branches include the following:
a) Current Deposit Scheme
b) Profit & Loss Sharing (PLS) Deposit Scheme
Commercial and Corporate customers requiring financing will have the following financing facilities available to them to meet their requirements:
a) Murabaha
b) Murabaha Facility
c) Ijarah (Leasing)
In addition to Shariah acceptable standard general banking services, following services are also being offered at the Islamic Banking Branches:
• Letter of Credit Facility
• Handling of Remittances
• Issuance of Bank Drafts and Pay Orders.
• Collection of Export Bills.
• Collection of Local Bills.
• Government Collections
• Utility Bills Collection
Treasury Management Group
The group chief of Treasury management group of National Bank of Pakistan is Mr. Muhammad Nusrat Vohra. The NBP treasury and capital market group has developed a reputation of being the market leader in coming up with customized solutions for a large and varied client base that is spread virtually all across the country. The client base does not consist of only blue chips ones but encompasses public sector clients, retail sector, multinationals, local conglomerates as well as individuals.
National bank treasury is currently regarded as a market leader in both foreign exchange and rupee denominated products because of its emphasis on service quality. The Treasury management group of National Bank of Pakistan’s offer:[xxiii]
• Narrowest bid / offer spread and quickest on line quotes
• Customized solutions to minimize risk and optimize returns as per the needs and circumstances of the clients
• Focus on building sustained and long term relationship with institutional, corporate and retail clients.
• Local presence across the nation as well as internationally.
Currently the National Bank of Pakistan offer following Treasury Products:[xxiv]
Plain Vanilla FX Products
NBP Treasury Management Group is a market price maker and trend setter in the plain vanilla Foreign Exchange products. Its ability to offer tight prices, coupled with timely and accurate research making it a bank of choice for clients seeking to favorably position their currency risk As a result, National bank has one of the largest FX book in the country.
Pakistan Investment Bonds
Pakistan Investment Bonds issued by Government of Pakistan are a preferred means for a majority of institutional investors to invest their surplus funds for a longer time horizon. This way they are able to lock a higher yield for a relatively long term rather than take the risk of re-pricing after relatively shorter time periods. Furthermore, PIBs are highly secured and risk free as they are guaranteed by the government of Pakistan.
NBP is the leading Primary Dealer for PIBs primarily because of its inventory size and the appetite for such a long-term instrument given its deposit base. While most foreign / private banks would have to go to the secondary market in order to satisfy a large order from an institutional investor, NBP can execute such large orders through its own book. This means that it can offer tight prices for large amounts even under volatile market conditions.
Derivatives Products
NBP treasury Management group has been at the forefront in developing the derivatives market in Pakistan and has contributed both individually and from the FMA (Financial Market Association) front as well. The first ever Derivative transaction of the Pakistani banking sector was done by NBP. Some of the more common derivative structures being offered include:
Currency Options
An option gives the buyer the right but not the obligation to buy or sell an asset at a pre-specified date and price. So the upside profit potential is unlimited whereas the downside loss is protected at a pre determined level. Various structures of currency options are available including
• Knock-ins / Knock outs
• Participating Forwards
Interest Rate Swaps and FRAs
A client can convert a fix rate loan into floating rate one or vice versa by using these derivative instruments. This allows the clients to develop and implement their views about the evolving interest rate scenario. For example, if the borrower feels that the interest rate might go up in the future, than he may choose to enter into a Pay Fixed – Received Floating swap with its bank to effectively hedge its floating rate loans.
Cross Currency Swaps
This product allows a client to convert its rupee based loans into a dollar based loan. The client’s exposure is shifted from PKR KIBOR to USD LIBOR.
The functions of Treasury management group include:
• The Management of National Bank of Pakistan’s holdings in and trading in government and corporate bonds, currencies, financial futures, options and derivatives, payment systems and the associated financial risk management.
• The management of cash flows, banking, money-market and capital-market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks.
• Presentations of information on which treasury-management decisions are to be taken reflect the principles of trustworthiness, honesty, truthfulness and objectivity.
• Employing National Bank of Pakistan’s treasury-management policies and practices accurately reflect the legal and regulatory regimes under which the Bank operates.
• Review of National Bank of Pakistan’s treasury-management policies and practices on a regular basis with a view to identifying ways of minimizing the risks of losses through improved checks and safeguards and through clarity and segregation of responsibilities and dealing procedure.
Credit Management Group
The group chief of Credit Management Group is Mr. Shahid Anwar Khan. This group usually deals with Bank’s allocations of payments or cash application, internal fund movements, reconciliations and also maintaining positive working relationships with customer during the debt collection or credit review and approval process, screening of customers and only those who is credit worthy are allowed to do business. The divisions of this group are distributed according to different areas which are:
1) NWFP Azad Kashmir Sind & Balochistan area wing
2) Karachi area wing
3) Special Credit Cell & Punjab area Wing
The functions of this department include:
• Enforcing the State Policies, financial regulations, and credit rules of the bank
• Framing credit policies and regulations; supervising the staff to execute orders
• Putting forward the proposal of credit management and development; guiding and supervising the branch-banks to deal with credit business
• Managing the authorized business; dealing with the legal affairs consulted and coordinated
• Establishing development rules on credit; dealing with the acceptance draft; estimating the loaning accounts
• Responsible for reporting the credit statistic statement
• Responsible for training client managers
• Responsible for dealing with other work according to the directors of the bank
• Responsible for the credit-registered consulting system; regulating the five-graded loans
Audit & Inspection Group
The group chief of National Bank of Pakistan’s Audit & inspection group is Mr. Imam Bakhsh Baloch. It is one of the core departments at NBP. Its mission is to strive for soundness & stability of the financial system and safeguard interest of stakeholders through proactive inspection, compatible with best international practices. This group plays a vital role in meeting NBP’s main responsibility of supervising the bank’s soundness of the system and protection of the interest of depositors, thereby ensuring public confidence in the system. In order to assess the branches, Audit & inspection group conducts regular audit & inspection of branches. Bank's management has established and is managing an adequate and effective system of internal control which encompasses the policies, procedures, processes and tasks as approved by the Board of Directors that facilitate effective and efficient operations. The management and the employees at all levels within the Bank are required to perform as per these approved Internal Control System components. The Internal Control System ensures quality of external and internal reporting, maintenance of proper records and processes, compliance with applicable laws and regulations and internal policies with respect to conduct of business. The management ensures that an efficient and effective Internal Control System is in place by identifying control objectives, reviewing existing procedures and policies and ensuing that control procedure and policies are amended for time to time wherever required. However, Internal Control System is designed to manage rather than eliminate the risk of failure to achieve objectives and provide reasonable but not absolute assurance against material misstatement or loss.[xxv] The audit system of National Bank of Pakistan consists of following:
a) Internal Audit
b) External Audit
c) Statutory Audit
Internal Audit
The Bank has an independent Internal Audit Group that conducts audit of all Branches, Regions and Groups at Head Office on an on-going basis to evaluate the efficiency and effectiveness of Internal Control System. In addition to that, Compliance Group is also in place with independent Compliance Officer in 119 Branches and 29 Regional Compliance Chiefs with supporting staff to take care of compliance related issues to strengthen the control environment.[xxvi]
For the purpose of inspection the National Bank of Pakistan inspects its branches through inspectors. Inspections are conducted on regular basis in the branches. The current chairmen of audit committee of NBP are Azam Faruque, Ibrar. A. Mumtaz & Mian Kausar Hameed. The State Bank of Pakistan conducts the regular full scope examination of banks pursuant to an inspection schedule; however, flexibility exists in policy for frequency of inspections depending upon the need to maintain safety & soundness. The CAMELS (Capital, Asset Quality, Management, Earnings, Liquidity, Sensitivity and System & Controls) rating is a criteria to determine the frequency of inspection of banks as weak institutions are given greater attention. Special investigations (targeted inspections) are also conducted as and when circumstances so warrant on the basis of complaints or market reports about specific institution.
External Audit
The Board of Directors on the recommendations of Audit Committee has also recommended name of Messer’s Ford Rhodes Sidat Hyder, Chartered Accountants and Yousaf Adil Saleem & Co. as auditors of National Bank of Pakistan.
Statutory Audit
The statutory audit of National Bank of Pakistan is conducted to meet the particular requirements of State Bank of Pakistan. The scope and audit programs are set by the State Bank of Pakistan. The National Bank of Pakistan has to pay a penalty of Rs.20000 for each mistake in the Books and procedures as prescribed by the law plus surcharge of per day from the date of mistake to the date of statutory audit.
The functions of Audit & inspection group of National Bank of Pakistan are as fallows:
• Examine and evaluate adequacy and effectiveness of the internal control systems in the Bank.
• Review the applications and effectiveness of risk management procedures and risk assessment methodologies in financial, operational and Corporate Governance aspects of the Bank’s activities.
• Review financial, automation technology and MIS.
• Review and ensure accuracy and reliability of accounting records and financial reports.
• Perform testing of both transactions and functioning of specific internal control procedures.
• Evaluate and ensure that approved policies and procedures meet legal and regulatory requirements.
• Examine and evaluate effectiveness of existing policies, procedures and give recommendations for improvements.
• Identify opportunities for cost savings in Bank operations and make recommendations.
• Examining those resources are acquired economically, used efficiently and safeguarded adequately.
• Review various reports of Bank’s subsidiaries, recommend improvements and provide policy guideline
Human Resource Management & Administration Group
The group chief of Human resource management & administration group is Mr. Dr. Mirza Abrar Baig. This Division is responsible for fresh induction of employees and other professionals through a rigorous induction process in order to ensure presence of quality professionals. Following units and areas of work are the part of this division. This group is responsible to develop annual manpower plan for National Bank of Pakistan, conduct job analysis, prepare job descriptions, and conduct job evaluation process. The other functions of this group include attracting, selecting and recruiting the right people from the market. The group firmly works on adopting latest organizational theories & change management processes to bring in efficiency. This group also performs following functions:
• Deals from placing job advertisements to timely recruitment of competent personnel by using modern selection techniques.
• Systematically observes & measures employee’s/candidate’s performance for the purpose of recruitment, selection and promotions.
• Facilitates in establishing successful productive working relationships through effectively orienting new employees to their respective departments/divisions and to their positions.
• Encourages employees to seek promotion/transfers to fill internal openings and meet employees’ personal objectives.
• Foster a culture of acknowledgement and appreciation amongst employees for introducing innovative business practices, showing extra ordinary efforts for achievement of goals and enhancing Bank’s corporate image uses various methods of recognition ranging from simple “Thank you” letters to elaborate celebrations and monetary rewards.
• Conducting motivation surveys and developing market based employee satisfaction & retention strategies.
• Conduction of evaluation of positions and grades to ascertain employees’ position in the grade structure.
• This Group supervises all the staff colleges, at Karachi, Islamabad, Lahore and Peshawar.
Information technology group
The group chief of Information technology group is Mr. Atif Hassan Khan. This group is formed to implement latest technology to keep National Bank of Pakistan online with the domestic and international financial industry, and other stakeholders in order to promote efficiency and stability in the financial market. The group’s objective is to provide appropriate technical solutions to business requirements and develop state of the art integrated system that will facilitate internal and external stakeholders to acquire accurate information in the most effective manner. The National Bank of Pakistan with its capabilities, methodologies and experience aims at technological advancement in bank, focusing on solutions that intend to reduce operating costs, improves end user performance, and meet overall business goal.
The group provides services and solutions to improve and strengthen NBP’s technology portfolio and identify future requirements. Besides providing these useful resources, IT group focuses on safeguarding the information assets and relevant systems, critical to NBP, through its Security plans and policies. The information technology group has following divisions:
• In-house Development
• Software development
• Web development
• Central Server
• System Admin – UNIX
• System Admin – Windows
• Customer Support
• Database Management
• Network Management
• Production Support
• Administration
• Director Section
Financial control Division
This division is headed by Mr. Atif Hassan Khan, who is also financial controller of National Bank of Pakistan. The financial control division is responsible to perform and manage following functions:
• Maintenance of books of accounts and preparation of financial statements of the Bank in accordance with the IAS, as adopted by the Bank.
• Coordination and facilitation for Business planning and budgeting function in the Bank and periodic reporting to the management and to the Board.
• Preparation of Annual Financial Statements Accounting Policies for the bank.
• Quarterly profit updates to the Board of Directors.
• Consolidation of Departmental Budgets.
• Maintenance of Federal & Provincial Government Account on the basis of receipt and payments.
• Monthly Abstract, Daily Reserves and Weekly review reporting.
• Short/Medium term investment and Swap deposits and maintenance of Foreign Currency accounts and revaluation of Foreign Currency Assets & Liabilities.
• Making of payments to external suppliers and employees of the Bank after independent verification of transaction documents on the basis of bills/ invoices/claims approved by the processing units.
• Checking and verifying the selected financial transactions to ensure accuracy and compliance to respective rules and regulations.
• Assets capitalization, assets transfers and overall responsibility to manage and maintain assets physical inventory, keeping track of physical location of assets.
• To ensure the smooth and unhampered running of the Fixed Assets Management function.
• To record all the expenses regarding repair/ maintenance and rent taxes for NBP buildings and equipments.
• To deal with various administrative matters arising in the Finance Department.
• To respond to various queries rose from various internal and external sources.
Overseas Coordination & Management Group
The group chief of NBP’s overseas coordination & management group is Mr. Tahir Yaqoob. This department is in charge of the management and operation of foreign exchange business including marketing and operating of the financial products and trade financing of foreign exchange in the light of National foreign exchange management policy, and is the governing department of foreign exchange. The functions of this group are as follows:
• Establishing marketing strategy, policy and management system of foreign exchange.
• Making annual operating and working plan.
• Selecting and opening overseas account under supervision, and establishing and harmonizing the business among agent banks.
• Corresponding and dealing with foreign exchange business among branches.
• Showing business requirement of costumers and development of new products; publicizing foreign exchange business; training managers of customer-service for foreign exchange business.
• Managing and operating foreign fund of the whole bank.
• Making deposit and loan rate of each wholesale foreign exchange according to management and market situation of deposit and loan rate of foreign exchange
• Focusing on direct marketing of VIP customers and overall plans to put all resources together so as to provide one-stop service.
• Examining and approving international business financing(import & export bill purchase, foreign exchange bill discount, acceptance, documentary credit, stand-by L/C, international non-financing guarantee and so on) .
• Auditing foreign exchange business.
• Management and operation of researching credit, and consult and testimony business.
• Managing turnover position of exchange settlement and sales.
• Declaring international balance, register foreign loans and manage foreign exchange account.
• Supervising wholesale foreign exchange deposit and payment to defend money laundering and bank swindle.
• Managing and operating SWIFT system and foreign exchange system.
• Organizing international business research and statistic; establishing and improving foreign exchange files; making accounting report forms and business report forms.
• Regularly examining the executive results of all system of foreign exchange and renovate all the problems.
• Contacting and corresponding with National foreign trade department, customs, industry governing department and foreign exchange department.
• Examining and approving the branches launching foreign exchange business, applying for new foreign business category to the People’s Bank of China according to current foreign exchange policy.
The National Bank of Pakistan is shifting focusing on expanding its market share in trade finance, home remittance and foreign investments. The Bank is setting high-speed satellite link along with the extension of S.W.IF.T service to large domestic and international branches.
Commercial & Retail Banking Group
The group chief of National Bank of Pakistan’s commercial & retail Banking group is Mr. Amer Siddiqui. Retail banking includes retail lending and deposits, banking services, trust and estates, private lending and deposits, banking service, trust and estates investment advice, merchant / commercial / corporate cards and private labels and retail.[xxvii] Commercial banking includes project finance, real estate, export finance, trade finance, factoring, lending, guarantees, bills of exchange and deposits.
This group is responsible for serving the needs of the retail and commercial market, focusing on individual consumers and small and medium size enterprises. This group is responsible for developing and managing brands which serve the investment needs of the consumer market, and focuses on deposit mobilization, provision of value added services based on modern technology and undertaking the centralized marketing and advertising for the Bank. This group is engaged in the development and management of retail credit schemes. The consumer market in Pakistan has not only grows exponentially over the last decade or so, but the needs of this segment have become extremely diverse. In order to sustain competition, it is but imperative to continue offering innovative consumer credit schemes.
The National Bank of Pakistan plan to establish commercial centers across the country looking at the business potential in the area, size of the branch and its capabilities to deliver the desired service in order to attract quality customers. The objective is to target the untapped sectors and provide them professional quality service, through one window operations and Relationship Managers stationed at those centers. We expect and hope to reduce the turn around time and become more competitive and market oriented. Further this customer friendly and dedicated set up at convenient locations would help in improving the image of the Bank as well. These Centers would work in conjunction with the existing set–up of Commercial Lending done throughout the NBP branch network. The main purpose of these centers is to generate ancillary business in addition to funded and non-funded facilities, with quick turn around time in decisions for customer satisfaction.
Special Assets Management Group
The group chief of Special assets management group is Mr. Tajammal Hussain Bokharee. The Special Asset Management Group (SAMG) is a group of people with specialized skills in managing the "stressed" assets of National Bank of Pakistan. The group was created with a view to enable restructuring and recoveries through various initiatives like innovative work-outs, merger & acquisition strategies, asset stripping, security enhancements and structured sell-downs. The group has also been working with / advising various governmental and regulatory bodies in evolving a framework for implementing international best practices like asset reconstruction companies in the country.
With provision coverage of 84% we believe that going forward our Special Assets Management Group will make major contribution towards the Bank's profitability through recoveries and reversal of provision charge as a result of declassification / rescheduling. We have revamped our special assets management business and have coordinated our efforts to expedite recoveries and settlements.
Employee Benefits, Disbursements & Trustee Division
The divisional head of this division is Mr. Mrs. Khurshid Maqsood Ali. The function of the National Bank of Pakistan’s Employee benefits, disbursement & trustee division is to handle the administration of trust funds, provide estate planning support, and in some cases see to the disposition of the estate of a deceased customer. One of the factors that make the use of this department so attractive is that it tends to be somewhat conservative with their management approach. This means that this department is likely to take time to evaluate all options when involved in settling estates, establishing guardianships, or administering trusts that have been set up for the survivors of a major depositor. This methodical approach is often in line with the motivation for establishing the asset in the first place, which was to provide a source of financial support for loved ones, even after a parent or significant other has died.
Along with estate settlement, this department also provides a number of other agency services, such as functioning as the trustee of record for corporate bonds or administering a pension or profit sharing plan. As a means of ensuring that the resources of the bank safely protect the investments involved, the department makes it relatively easy for the client to deal with other matters. Thus, the investor can focus more on family or other business matters, and be less involved in the task of protecting assets that are already established and set on a path of consistent growth.
Employee benefits of National Bank of Pakistan
Defined Benefit Plans
Pension Scheme
The bank operates defined benefit approved funded pension scheme for its eligible employees. The bank’s costs are determined based on actuarial valuation carried out using Projected Unit Credit Method. Net cumulative un-recognized actuarial gains/losses relating to previous reporting period in excess of the highest of 10% of present value of defined benefit obligation or 10% of the fair value of plan assets are recognized as income or expense over the estimated working lives of the employees. Where the fair value of plan assets exceeds the present value of defined benefit obligation together with unrecognized actuarial gains or losses and unrecognized past service cost, the bank reduces the resulting asset to an amount equal to the total of present value of any economic benefit in the form of reduction in future contributions to the plan and unrecognized actuarial losses and past service costs.
Post retirement medical benefits
The bank operates an un-funded defined post retirement medical benefits scheme for all of its employees. Provision is made in the financial statements for the benefit based on actuarial valuation carried out using the Projected Unit Credit Method. Actuarial gains/losses are accounted for in a manner similar to the pension scheme.
Benevolent scheme
The bank also operates an un-funded defined benefit benevolent scheme for its eligible employees. Provision is made in the financial statements based on the actuarial valuation using the Projected Unit Credit Method. Actuarial gains/losses are recognized in the period in which they arise.
Gratuity scheme
The bank also operates an un-funded defined benefit gratuity scheme for its eligible contractual employees. Provision is made in the financial statements based on the actuarial valuation using the Projected Unit Credit Method. Actuarial gains/losses are accounted for in a manner similar to pension scheme.
Other employee benefits
Employees' compensated absences
The bank accounts for all accumulating compensated absences when employees render service that increases their entitlement to future compensated absences. The liability is determined based on actuarial valuation carried out using the Projected Unit Credit Method.
Trust activities of National Bank of Pakistan
National Investment Trust (NIT)
Under a trust deed, the bank provides services, as a trustee to NIT and is performing functions of sale/purchase of NIT units, safe custody and maintaining unit holder’s accounts.
Long-term Credit Fund (LTCF)
Consequent upon the NDFC amalgamation, the bank manages on behalf of the Government of Pakistan, LTCF established from the proceeds of loans disbursed by various international funding agencies for financing private sector energy development projects. The National Bank of Pakistan is in process of negotiating the charge of fee in consideration of administrative services to the LTCF.
Qarz-e-Hasna Fund
The work relating to Qarz-e-Hasna Scheme was attended by Pakistan Banking Council (PBC) since inception. PBC was dissolved in January 1997. In order to fill the void created by the dissolution of PBC and in order to continue the scheme, SBP decided to entrust all funds and transfer all record relating to Qarz-e-Hasna scheme for education to the bank with the instructions to perform all work relating to the Fund.
Core Banking Application
The head of core banking application is Mr. Naeem Syed. The core banking application is an integrated application that supports real time, multi banking and multi channel strategies. The single biggest achievement of implementing the Core Banking Solution is that each customer is truly the customer of the Bank and not just the customer of the Branch, where his/her account is maintained. The customer can go to a branch anywhere in the country and perform a transaction. This is possible as the entire Customer Database is centrally located at the central Data Centre and can be accessed throughout the network of branches. Business processes in all the branches of National Bank of Pakistan update a common database in a central server located at data centre, which gives a consolidated view of bank’s operations.
Key features of the Core banking application of NBP
• 24X7 Banking
As a result of implementing Core Banking, most of the facilities being offered by bank are available to Customers 24 hours a day, 7 days a week. The transactions are performed using multiple channels such as ATMs, Internet Banking, Phone Banking and Mobile Banking.
• Anywhere Banking
Customers can avail of banking services across the branch and Channel network irrespective of location where their account is maintained.
• Integration with strategic sectors
Core Banking integrates all strategic sectors of Banking such as Trade Finance, Treasury, Asset-Liability Management and Corporate Balance Sheet. As a result, the information related to these areas is centrally available for use or reference.
• Strengthening MIS, DSS and EIS
Core banking application is more than just a transaction processing system. It provides updated data for generating various reports for Management information system (MIS), and will facilitate Decision Support System (DSS) and Executive Information System (EIS). As data is located on CDC, branches and administrative offices can concurrently avail updated data when required.
• Business Process Re-engineering
Core Banking would enable implementation of BPR initiatives of a Bank and facilitate centralized handling of various processes. Branches would do less and less back office work and would be able to focus on marketing, customer relationship management and cross selling.
Operations Group
The group chief of National Bank of Pakistan’s Operation group is Mr. Dr. Asif A. Brohi. This group is being created to efficiently collect and utilize the feedback from the branches to support product development and enhance the quality of service. The National Bank of Pakistan is currently improving the service orientation at its branches, as these constitute the “front line” of the Bank in terms of contact with its customers. The operations group is in the process of introducing E-Commerce initiatives based on customer friendly technologies. The group creates products to utilize the benefits of E-Commerce for its customers.
We are committed and focused towards good quality customer service and in 2007 with the motto of “Putting a smile on our Customer's face.” We made concerted efforts and took a number of initiatives. Workshops and seminars were conducted to disseminate the very important message of “Excellent Customer Service”. We are transforming our branches to give a modern look and convenience. A number of branches have been shifted to prominent and spacious locations. We also have established specialized customer facilitation centers to exclusively cater to pension payments, utility and government collections. These are expected to reduce counter traffic at our branches and will increase our distribution channels for better and convenient services. Business hours have been extended with establishment of customer facilitation offices at the regional levels to help on the spot resolution of customer complaints.
Provincial & Regional Management
There are four executives of National Bank of Pakistan to supervise the Bank’s maters of every province, as they are called Provincial Chiefs. These provincial chiefs are responsible for the entire banking operations in their respective provinces. The provincial management includes:
• The Provincial Chief Punjab
• The Provincial Chief Sind
• The Provincial Chief Baluchistan
• The Provincial Chief N.W.FP & Kashmir
These provinces are sub-divided into regions, the regions are controlled and manage by Regional heads, which are responsible for the supervision in their circles and deal with the problems of their respective Regions. The regional management of National Bank of Pakistan is divided into two areas which are:
• Overseas
• Countrywide
The overseas regions include Middle East, Far East, Europe & USA, and Central Asia. The country has been divided into 29 regions by National Bank of Pakistan to facilitate its functions. The detail about National Bank of Pakistan’s regions is shown as Annexed-II at the end of the report. These regions are sub divided into Zones, the in charge of a Zone is called Zonal Chief.
Branch Management
The National Bank of Pakistan, in order to facilitate its functions on branch level appoints Branch Managers & other staff according to branch’s activities and volume of business. The branch managers are responsible for all functions and staff within the branch office. The job of branch managers is to take charge of the entire operation of his branch, making sure that everything runs smoothly. The other functions involves scheduling of employee work hours, overseeing training, hiring and firing, assuring that proper procedures are followed, and reporting to upper management any problems or providing reports and updates as required by bank’s protocol.
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Organizational (Management) levels at NBP
Successful and profitable banking management deepens upon two principal factors:
a) The manner in which the function of banking, that is, the acquiring of deposits, the investing or converting such deposits into earning assets, and the servicing of each deposits, are performed.
b) The degree to which officers and employees contribute their talents to the progress and welfare of the bank in discharging duties and responsibilities.
Management is a distinct process consisting of activities of planning, organizing, actuating and controlling performed to determine and accomplish stated objectives with the use of human being and other resources.[xxviii] The management has two types i.e..,
a) Centralized (Centralized Management tends to concentrate decision making at the top of the organization)
b) Decentralized (Decentralized disperses decision making and authority throughout and further down the organizational hierarchy)
National Bank of Pakistan has a centralized type of management because all the decisions are taken by the top management. The National Bank of Pakistan has four types of management levels which are as fallows:
Top Managers
Top managers are responsible for making organization-wide decisions and establishing the plans and goals that affect the entire organization. These individuals typically have titles such as executive vice president, president, managing director, chief operating officer, chief executive officer or chairman of the board. The NBP have its top management in their head office at Karachi. They are responsible for making the plans and establishing goals the run their business smoothly all over Pakistan & around the globe. Among seven member of group Chief Executive is called the president. The bank has directors for superintendence and direction of its business. The Government appoints six directors as members and one president. These members are also responsible for making the policy of the bank.
Middle Managers
Middle managers include all levels of management between the first line level and the top level of the organization. These managers manage the work of first line managers and may have titles such as department head, project leader, plant manager or division manager.[xxix] NBP divided his management into various regions such as Rawalpindi region, Gujranwala region etc. In NBP, regional management falls under this category. They are responsible for the planning, organizing, leading and controlling of the resources and staff of the whole region.
First Line Managers or Lower Level Management
First level managers are the lowest level of management and manage the work of non-managerial individuals who are involved with the production or creation of the organizations products. The branch managers of NBP fall under this category. These managers are responsible for planning, organizing, leading and controlling the staff and all affairs of the branch.
Non Managerial Employees
Non managerial employees are not concerned with any decision making. They are normally specialized in their work. The nature of their job is repetitive & clerical as they do same work again & again. The non managerial employees of NBP consist of OG-II, OG III and clerical staff.
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Hierarchy of National Bank of Pakistan
The Hierarchy (An arrangement of objects, people, elements, values, grades, orders, classes etc., any system of persons or things ranked one above another) of National Bank of Pakistan is shown as Annexed III at the end of this report. The hierarchy may include:
• Categorization of a group of people according to ability or status.
• A body of clergy organized into successive ranks or grades with each level subordinate to the one above.
• A series in which each element is graded or ranked
• A body of officials disposed organically in ranks and orders each subordinate to the one above it; a body of ecclesiastical rulers.
• An organization with few things, or one thing, at the top and with several things below each other thing.
The President of National Bank of Pakistan is ranked Top at the hierarchy. The other six directors of National Bank of Pakistan are ranked second in the hierarchy. The Provisional, Regional & Zonal chiefs are ranked 3rd, 4th & 5th respectively. The vice President & assistant vice Presidents of National Bank of Pakistan are ranked 6th & 7th respectively. The Officers Grade I, II & III are ranked 8th at the hierarchy of National Bank of Pakistan. The lower level of National Bank of Pakistan is consist of Clerical & non- clerical staff.
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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.
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.
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
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.
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.
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.
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Departments 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
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.
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
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.
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)
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.
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
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.
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.
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.
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
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
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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
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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.
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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.
Responsibilities 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 G 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.
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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.[xxx] 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
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.
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.
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.
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.
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).
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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.
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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.
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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.
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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.
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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.
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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%.
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Generation of funds
|Rupees in Millions | | | | | | |
|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
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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.
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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.
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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.
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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.
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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.
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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.
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Allocation of Funds
|Rupees in Millions | | | | | |
|Investments | | |149,350,096 |156,985,686 |139,946,995 |210,787,868 |
|Other Assets | | |19,141,569 |23,941,056 |37,113,698 |30,994,965 |
|Lending’s to Financial Institutions |100 |155 |219 |204 |163 |
|Investments | | |100 |105 |94 |141 |
|Other Assets | | |100 |125 |194 |
|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 |
|Deferred tax assets | | _ | _ | _ | _ | 3,204,572 |
| | | | 553,231,467 |577,719,114 |635,132,711 |762,193,593 |
|Bills payable | | |7,214,671 |1,741,156 |10,605,663 |
|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 |
| | | | | | | |
|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 |
| | | | 24,899,767 |36,158,474 |53,044,649 |69,270,631 |
|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 |
|provision for/(reversal of) diminution in the value | | | | | |
|of investments | | | |185,707 |-245,881 |
|bad debts written off directly | | |32,807 |23,069 |5,284 |
|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 |
|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 |
|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 |
|PROFIT BEFORE TAXATION | | |11,977,601 |19,056,028 |26,310,577 |28,060,501 |
|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
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.|56.55 |59.65 |55.48 |37.74 | |
| |17 | | | | | |
|Ratio % |29.57 |37.72 |38.59 |37.63 |25.36 |
|Ratio |0.03 |0.05 |0.06 |0.05 |0.05 |
|Ratio |0.011 |0.021 |0.026 |0.024 |0.018 |
|Ratio |0.025 |0.041 |0.052 |0.047 |0.036 |
|Ratio % |0.4|0.33 |0.35 |0.32 |0.32 | |
| |8 | | | | | |
|Ratio |0.8|0.96 |1.02 |1.00 |1.12 | |
| |3 | | | | | |
|Ratio |4.09 |2.85 |2.96 |3.07 |2.69 |
|Ratio% |94.83 |185.95 |196.62 |197.18 |42.33 |
|Ratio |0.024 |0.019 |0.023 |0.018 |0.065 |
|Ratio |112.35 |97.77 |89.57 |93.47 |91.17 |
|Ratio |1.83 |1.85 |1.89 |1.66 |0.97 |
| |times |times |times |times |times |
|Ratio |0.13 |0.13 |0.12 |0.17 |0.47 |
|Ratio% |0.89 |1.02 |1.10 |1.07 |1.09 |
|Ratio % |2.28 |3.23 |4.13 |1.64 |1.76 |
|Ratio |1274.85 |1858.87 |2431.38 |2583.94 |2587.08 | |
|ASSETS | | |2004 |2005 |2006 |
|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 |
|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 |
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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.
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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%.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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Horizontal Analysis of Income Statement
Rupees in Millions
| | | | | |2004 |2005 |
|Markup/return/interest expensed | |100 |157 |213 |258 |364 |
|Net markup/interest income | | |100 |162 |210 |
|provision for/(reversal of) diminution in the value | | | | | |
|of investments | | | |100 |-132 |
|bad debts written off directly | | |100 |70 |16 |
|NON MARKUP/ INTEREST INCOME | | | | | | |
|Fee, Commission & brokerage income | |100 |97 |121 |133 |155 |
|Dividend income | | | |100 |135 |
|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 |
|Total income ( Interest + non-Interest) | |100 |146 |191 |203 |203 |
|NON MARKUP/ INTERSET EXPENSES | | | | | | |
|Administration expenses | | |100 |126 |151 |160 |
|PROFIT BEFORE TAXATION | | |100 |159 |220 |234 |
|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 |
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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.
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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.
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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.
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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.
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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%.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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 |
|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 |
|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 |
|Markup/return/interest expensed | |31 |34 |35 |40 |56 |
|Net markup/interest income | | |69 |77 |75 |
|provision for/(reversal of) diminution in the value | | | | | |
|of investments | | | |1 |-1 |
|bad debts written off directly | | |0 |0 |0 |
|NON MARKUP/ INTEREST INCOME | | | | | | |
|Fee, Commission & brokerage income | |24 |16 |15 |16 |19 |
|Dividend income | | | |6 |6 |
|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 |
|Total income ( Interest + non-Interest) | |100 |100 |100 |100 |100 |
|NON MARKUP/ INTERSET EXPENSES | | | | | | |
|Administration expenses | | |42 |37 |34 |33 |
|PROFIT BEFORE TAXATION | | |57 |62 |66 |66 |
|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 |
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Analysis
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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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%.
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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:[xxxi]
“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.[xxxii]
The JCR-VIS Rating Process include following steps:[xxxiii]
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
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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.
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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.
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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.
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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.
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References[pic][pic][pic]
-----------------------
[i]
[ii] NBP Quarterly Report September 2008
[iii]
[iv] NBP Quarterly Report September 2008
[v]
[vi] Black's Law Dictionary page 471 (5th ed)
[vii] Kotler, P., Armstrong, G., Brown, L., and Adam, S. (2006) Marketing, 7th Ed.
[viii] Principles of marketing 8 ED by Kotler & Armstrong G7
[ix] Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 87
[x] Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 91
[xi] Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 88
[xii] Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed
[xiii]
[xiv]
[xv]
[xvi]
[xvii]
[xviii]
[xix] Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 221
[xx] Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 228
[xxi] Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 228
[xxii] SBP Prudential Regulations
[xxiii]
[xxiv]
[xxv]
[xxvi]
[xxvii] NBP Annual Report 2007
[xxviii] Terry and Franklin Principles of Management
[xxix] Management 7 Ed Robbins & coulter
[xxx] Human error by James Reason
[xxxi] NBP Annual Report 2007
[xxxii]
[xxxiii]
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