Muhammad Afaaq MC MBA(Finance)

Finance (FINI-619) Internship report on National Bank of Pakistan

Brief Introduction of the Organization Established in November 9 th 1949 in Pakistan Established in November 9 th 1949 in Pakistan 100% owned by the Government of Pakistan 100% owned by the Government of Pakistan Largest commercial bank operating in Pakistan Largest commercial bank operating in Pakistan 1500 branches located all over Pakistan 1500 branches located all over Pakistan Acts as an agent of the State Bank of Pakistan Acts as an agent of the State Bank of Pakistan The Bank also has a presence in 24 international locations including the USA, United Kingdom, Europe and the Far East. The Bank also has a presence in 24 international locations including the USA, United Kingdom, Europe and the Far East. Main head Office located in Karachi Main head Office located in Karachi NBP Best bank of the world as well as Asia because its rank on number 1 positions among the 1000 banks of the world NBP Best bank of the world as well as Asia because its rank on number 1 positions among the 1000 banks of the world Awarded given best bank in 2001, 2002, 2004, 2005 & most recently in last year 2010 Awarded given best bank in 2001, 2002, 2004, 2005 & most recently in last year 2010

Business volume In Millions Description Profit before tax 26,31128,06123,00121,30024,415 Profit after tax 17,02219,03415,45917,56217,563 Shareholder’s equity 353,04569,27181,36794,142103,762 Advances – net 316,110340,319412,987475,243477,507 Total Assets 635,133762,194817,758944,5831,035,025 Deposits 501,672591,907624,939727,465832,152 Investments 139,947211,146170,822217,643301,324 Earnings per share

Competitors MCB Bank Limited MCB Bank Limited Habib Bank Limited Habib Bank Limited United Bank Limited United Bank Limited Allied Bank Limited Allied Bank Limited Bank Alfalah Limited Bank Alfalah Limited Soneri Bank Limited Soneri Bank Limited Askari Bank Limited Askari Bank Limited Bank of Punjab Bank of Punjab First Women Bank First Women Bank

Organizational Hierarchy Chart

Training Program Task assign to me in Account Opening Department Task assign to me in Account Opening Department Account Opening Forms filling Account Opening Forms filling Customer Guidance Customer Guidance Opened Different types of Accounts Opened Different types of Accounts Task assign to me in Bill Collection Department Task assign to me in Bill Collection Department Collecting utilities bills Collecting utilities bills Observing due date and what’s the amount collect in due date Observing due date and what’s the amount collect in due date

Training Program Task assign to me in Cash Department Task assign to me in Cash Department Observing the function of bank payment and receipt Observing the function of bank payment and receipt Observing government receipt and payment. Observing government receipt and payment. Task assign to me in Credit Department Task assign to me in Credit Department Observing requirements to get loan Observing requirements to get loan Observing bank charges interest against loan Observing bank charges interest against loan

Training Program Task assign to me in Remittance Department Task assign to me in Remittance Department Learn about the categories of remittance department Learn about the categories of remittance department Fill demand draft Fill demand draft Pay order Pay order LC LC

Ratio Analysis 1. Liquidity ratio Firm ability to meet its current obligations It includes current ratio, Acid test ratio, Working capital ratio

Current Ratio Ratio Analysis National bank of Pakistan Current Ratio= Current Assets/ Current liabilities Year 2008 Year 2009 Year 2010 Current Ratio 584,977,140 / 682,905,461 =0.86 Times 645,064,165 / 725,293,720 = 0.89 Times 693,463,983 / 867,626,367 = 0.80 Times

Acid Test Ratio/Quick ratio/liquidity ratio Ratio Analysis National bank of Pakistan Acid Test Ratio =Current Assets – (Prepaid items + Inventory)/ Current Liabilities Year 2008 Year 2009 Year 2010 Acid Test Ratio 582,255,871 / 682,905,461 =0.85 times 630,040,628 / 725,293,720 = 0.87 times 691,160,473 / 867,626,367 = 0.80 times

Working Capital Ratio Ratio Analysis National bank of Pakistan Net Working Capital = Current Assets - Current Liabilities Year 2008 Year 2009 Year 2010 Net Working Capital Ratio 584,977, ,905,461 = -97,928, ,064, ,293,720 = -80,229,555 = -80,229, ,463, ,626,367 = -174,162,384

Working Of Current Assets Current Assets Year 2008 Year 2009 Year 2010 Short term- Cash and balances with treasury banks 106,503,756115,827,868115,442,360 Short term- Balances with other banks 38,344,60828,403,96430,389,664 Short term- Landings to financial institutions 17,128,03219,587,17623,025,156 Short term Investments 107,571,177146,662,386198,003,007 Short term- Advances 289,717,810310,524,676295,221,811 Short term- Other Assets 25,711,75724,058,09531,381,982 Total584,977,140645,064,165693,463,980

Working Of Current Liabilities Current Liabilities Year 2008 Year 2009 Year 2010 Short Term- Bill Payable 10,219,06110,621,1698,006,631 Short Term- Borrowings 37,409,28837,057,18917,154,131 Short Term- Deposits and other accounts 614,538,859655,031,896816,172,861 Short Term- Liabilities against assets subject to finance lease ,40843,963 Short Term- Other liabilities 20,721,73622,563,05826,248,782 Total682,905,461725,293,720867,626,368

Leverage Ratios Leverage ratios measure the degree of protection of suppliers of long term funds

Times Interest Earned Measure firm ability to meet interest payment on debt Ratio Analysis National bank of Pakistan Time Interest earned ratio = Earning before interest & tax (EBIT) Interest expenses Interest expenses Year 2008 Year 2009 Year 2010 Time Interest earned ratio 46,885,766 / 23,884,768 = 1.96 times 61,789,822 / 40,489,649 = 1.53 times 69,665,595 / 45,250,476 = 1.54 times

Working Of EBIT EBIT Year 2008 Year 2009 Year 2010 Profit Before Tax 23,000,99821,300,17324,415,119 Add: Interest/ mark-up expenses 23,884,76840,489,64945,250,476 Total46,885,76661,789,82269,665,595

Debt Ratio How much company assets finance with debt Ratio Analysis National bank of Pakistan Debt Ratio = Total liabilities / Total Assets Year 2008 Year 2009 Year 2010 Debt Ratio 715,299,108 / 817,758,326 = times 825,676,384 / 944,582,762 = times 906,528,852 / 1035,024,680 = times

Working Of Total Debt Total Debt Year 2008 Year 2009 Year 2010 Bill Payable 10,219,061 10,621,1698,006,630 Borrowings40,458,926 45,278,13820,103,590 Deposits and other accounts 624,939, ,464,825832,151,888 Sub-ordinated loans Liabilities against assets subject to finance lease 25,274 42,629106,704 Other liabilities 39,656,831 42,269,62346,160,040 Deferred tax liabilities Total 715,299,108825,676,384906,528,852

Working Of Total Assets Total Assets Year 2008 Year 2009 Year 2010 Cash and balances with treasury banks 106,503,756115,827,868115,442,360 Balances with other banks 38,344,60828,405,56430,389,664 Landings to financial institutions 17,128,03219,587,17623,025,156 Investments170,822,491217,642,822301,323,804 Advances412,986,865475,243,431477,506,564 Operating fixed assets 24,217,65525,147,19226,888,226 Deferred tax assets-net 3,204,5723,062,2716,952,666 Other Assets 44,550,34759,666,43853,496,240 Total 817,758,326944,582,7621,035,024,680

Debt / Equity Ratio I t indicate what portion of equity and debt for finance its assets Ratio Analysis National bank of Pakistan Debt to Equity Ratio = Total liabilities (Debt) Shareholder equity Shareholder equity Year 2008 Year 2009 Year 2010 Debt to Equity Ratio 715,299,108 / 81,497,458 = 8.78 times 825,676,384 / 94,265,853 = 8.76 times 906,528,852 / 103,880,048 = 8.73 times

Working Of Shareholder Equity Shareholder Equity Year 2008 Year 2009 Year 2010 Share Capital 8,969,75110,763,70213,454,628 Reserves19,941,04722,681,70724,450,244 Unappropriate Profit 52,456,20460,696,51065,857,438 Surplus on revaluation of fixed assets 130,456123,934117,738 Total 81,497,45894,265,853103,880,048

Debt to Tangible net worth ratio It measures physical worth of the company excluding intangible assets Ratio Analysis National bank of Pakistan Debt to tangible net worth ratio = Total Liabilities / Tangible net worth Year 2008 Year 2009 Year 2010 Debt to tangible net worth ratio 715,299,108 /102,453,293 = 6.98 times 825,676,384 / 118,888,848 = 6.94 times 906,528,852 / 128,487,598 = 7.05 times

Working Of Tangible net worth Tangible net worth Year 2008 Year 2009 Year 2010 Net Worth= Total Assets-Total Liabilities 817,758, ,299,108 = 102,459, ,582, ,676,384 =118,906,3781,035,024, ,528,852 =128,495,828 Net intangible asset 5,92517,5308,230 Tangible net worth= Net Worth- Net intangible asset =102,459,218- 5,925 =102,453,293=118,906,378-17,530=118,888,848=128,495,828-8,230=128,487,598

Total Capitalization Ratio Measure long term debt of a company & how to support company operations and growth. Ratio Analysis National bank of Pakistan Total Capitalization Ratio = Long term debt Long term debt + Share holder equity Long term debt + Share holder equity Year 2008 Year 2009 Year 2010 Total Capitalization Ratio 32,393,647 /113,891,105 = 0.28 times 100,382,664 / 194,648,517 = 0.52 times 38,902,486 / 142,782,534 = 0.27 times

Working Of Long Term Debt Long Term Debt Year 2008 Year 2009 Year 2010 Long term- Borrowings 3,049,6388,220,9492,949,460 Long term- Deposits and other accounts 10,400,15772,432,92915,979,027 Sub-ordinated loans Long term- Liabilities against assets subject to finance lease 8,75722,22162,741 Long term- Other liabilities 18,935,09519,706,56519,911,258 Deferred tax liabilities Total32,393,647100,382,66438,902,486

Profitability Ratios Profitability ratios measure the earning or profit ability of a firm

Net Profit Margin Ratio Analysis National bank of Pakistan Net Profit Margin = (Net Income / Sales) *100 Year 2008 Year 2009 Year 2010 Net Profit Margin 15,458,590 / 60,942,798 = 25.4% 17,561,846 / 77,947,697 = 22.5% 17,563,214 / 88,472,134 = 19.9%

Working Of Net Income Net Income Net mark–up / interest income after provisions 26,087,21625,788,71333,251,969 Add: Non–mark–up / interest income 16,415,86219,025,35717,632,640 Less: Non–mark–up / interest expenses 19,502,08023,513,89726,469,490 Profit before tax 23,000,99821,300,17324,415,119 Less: Taxes 7,542,4083,738,3276,851,905 Profit after tax 15,458,59017,561,84617,563,214

Return on Assets Ratio Analysis National bank of Pakistan Return on Assets = (EBIT / Total Assets)*100 Year 2008 Year 2009 Year 2010 Return on Assets 46,885,766 / 817,758,326 = 5.73% 61,789,822 / 944,582,762 = 6.54% 69,665,595 / 1,035,024,680 = 6.73%

DuPont Return on Assets Sales comparisons with net income and assets. Ratio Analysis National bank of Pakistan DuPont Return on Assets = (Net Income / Sales) * (Sales / Total Assets)*100 Year 2008 Year 2009 Year 2010 DuPont Return on Assets * = 1.89% * = 1.86% * = 1.69%

Operating income margin Operating income margin is used to measure a company's pricing strategy and operating efficiency. Ratio Analysis National bank of Pakistan Operating income margin = (EBIT or Operating profit/ Net Sales)*100 Year 2008 Year 2009 Year 2010 Operating income margin 46,885,766 / 60,942,798 = 76.93% 61,789,822 / 77,947,697 = 79.27% 69,665,595 / 88,472,134 = 78.74%

Return on Operating Assets Operating assets are those assets actively used to create sale and earn profit Ratio Analysis National bank of Pakistan Return on Operating Assets = (EBIT/ Operating Assets)*100 Year 2008 Year 2009 Year 2010 Return on Operating Assets 46,885,766 / 560,836,308 = 8.36% 61,789,822 / 635,805,667 = 9.72% 69,665,595 / 642,862,306 = 10.84%

Working Of Operating Assets Operating Assets Year 2008 Year 2009 Year 2010 Cash and balances with treasury banks 106,503,756115,827, ,442,36 0 Lending to financial institutions 17,128,03219,587,17623,025,156 Advances – net 412,986,865475,243, ,506,56 4 Operating fixed assets 24,217,655 25,147, ,888,226 Total560,836,308635,805, ,862,30 6

Return on Equity How much profit a company generates with the money shareholders have invested. Ratio Analysis National bank of Pakistan Return on Equity = (Net income/ shareholder’s equity)*100 Year 2008 Year 2009 Year 2010 Return on Equity 15,458,590 / 81,497,458 = 18.97% 17,561,846 / 94,265,853 = 18.63% 17,563,214 / 103,880,048 = 16.91%

Gross Profit Margin Ratio Gross profit increase when reduce cost Ratio Analysis National bank of Pakistan Gross Profit Margin Ratio = (Gross Profit / Net Sales)*100 Year 2008 Year 2009 Year 2010 Gross Profit Margin Ratio 37,058, 030 / 60,942,798 = 60.81% 37,458,048 / 77,947,697 = 48.06% 43,221,658 / 88,472,134 = 48.85%

Working Of Gross Profit Gross Profit Year 2008 Year 2009 Year 2010 Mark–up / return / interest earned 60,942,79877,947,69788,472,134 Less: Mark–up / return / interest expensed 23,884,76840,489,64945,250,476 Total37,058,03037,458,04843,221,658

Activity Ratios Activity ratios measure a firm's ability to convert different accounts within their balance sheets into cash or sales.

Total Assets Turnover Asset turnover measures how effectively a business is using assets to generate sales. Ratio Analysis National bank of Pakistan Total Assets Turnover = Net sales/ Total Assets Year 2008 Year 2009 Year 2010 Total Assets Turnover 60,942,798 / 817,758,326 = No. of times 77,947,697 / 944,582,762 = No. of times 88,472,134 / 1,035,024,680 = No. of times

Fixed Assets turnover Fixed Assets Turnover ratio indicates how well the business is using its fixed assets to generate sales. Ratio Analysis National bank of Pakistan Fixed Assets turnover = Net sales/ Fixed assets Year 2008 Year 2009 Year 2010 Fixed Assets turnover 60,942,798 / 24,217,655 = 2.52 No. of times 77,947,697 / 25,147,192 = 3.10 No. of times 88,472,134 / 341,560,700 = 3.29 No. of times

Market Ratios Market ratios measure investor response to owning a company's stock and also the cost of issuing stock.

Dividend per share Dividend per share is used to measure the income received by shareholders from each share owned. Ratio Analysis National bank of Pakistan Dividend per share = Dividend paid to share holder Average common share outstanding Average common share outstanding Year 2008 Year 2009 Year 2010 Dividend per share 6,104,894 / = 6.81 Rs. 5,820,338 / = 5.41 Rs. 8,060,510 / = 5.99 Rs.

Working Of Avg. common share outstanding Avg. common share outstanding Year 2008 Year2009 Year 2010 Avg. common share outstanding= Share capital amount / Par value of share =8,969,751/10= = =10,763,702/10 = = =13,454,628/10= =

Earning Per Share Earnings per share serve as an indicator of a company's profitability Ratio Analysis National bank of Pakistan Earning per Share = Profit Available to shareholders or Net income after tax/ No of shares outstanding Year 2008 Year 2009 Year 2010 Earning per Share / = Rs / = Rs / = Rs.

Price Earning Ratio Price/Earning ratio is a valuation ratio of a company's current share price compared to its per-share earnings. Ratio Analysis National bank of Pakistan Price Earning Ratio = Current market Share price/ Earning per Share Year 2008 Year 2009 Year 2010 Price Earning Ratio / / = 2.92 Rs / = 4.56 Rs / = 5.89 Rs.

Conclusion NBP is a part of State Bank of Pakistan and it is its major strength. NBP is a part of State Bank of Pakistan and it is its major strength. Providing different products and services to its customers. Islamic banking, student loan scheme, international finance. Providing different products and services to its customers. Islamic banking, student loan scheme, international finance. Most rising bank with highest return on capital. Most rising bank with highest return on capital. Largest market share amongst all Banks in Pakistan. Largest market share amongst all Banks in Pakistan. Highest cost to Income ratio as compare to all other commercial banks. Highest cost to Income ratio as compare to all other commercial banks. Net assets of the NBP are increasing day by day. Net assets of the NBP are increasing day by day. The net profit is also increasing which may attract the investors. The net profit is also increasing which may attract the investors.

Recommendations Improve its EPS because its shows company profitability. Improve its EPS because its shows company profitability. Increase sale and reduce expenses to earn better profit margin Increase sale and reduce expenses to earn better profit margin Improve liquidity position by increasing its sale Improve liquidity position by increasing its sale Increase the current assets as compared to current liabilities Increase the current assets as compared to current liabilities Proper training of staff members Proper training of staff members Prevailing friendly environment Prevailing friendly environment Complaint counter should be available Complaint counter should be available Working capital should be positive. Working capital should be positive.

Thank You