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January 19, 2010 [ANALYSIS OF FINANCIAL STATEMENT]

Introduction About Standard Company:

NATIONAL BANK:

National Bank of Pakistan is the largest commercial bank operating in Pakistan. Its balance sheet

size surpasses that of any of the other banks functioning locally. It has redefined its role and has

moved from a public sector organization into a modern commercial bank. The Bank's services

are available to individuals, corporate entities and government. While it continues to act as

trustee of public funds and as the agent to the State Bank of Pakistan (in places where SBP does

not have a presence) it has diversified its business portfolio and is today a major lead player in

the debt equity market, corporate investment banking, retail and consumer banking, agricultural

financing, treasury services and is showing growing interest in promoting and developing the

country's small and medium enterprises and at the same time fulfilling its social responsibilities,

as a corporate citizen.

History:

NBP was established under the National Bank of Pakistan Ordinance 1949 in Pakistan.

Special Role: NBP occupies a unique position in the financial sector of Pakistan. It acts as an

agent of the Central Bank wherever the State Bank does not have its own Branch. It also

undertakes Government Treasury operations.

VISION:

To be recognized as a leader and a brand synonymous with trust, highest standards of service

quality, international best practices and social responsibility.

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STRATEGIC TOP MANAGEMENT:

Fortunately NBP has got from time to time best top management. Currently the NBP Chairman

and as well as President S. Ali Raza Sahid he is the person who has saved the life of the

organization and contributed a lot.

INDUSTRIALPOLICIES:

NBP helps the government on the implementation of its industrial policies with respect to

economic growth of the country.

BEST RESEARCH APPRAISAL TEAM

Before the project financing NBP has the research appraisal team that justifies the economic and

financial feasibility of not project in the future. That is the strength is the scare that it helps the

organization from any loss that is to over in the future in case of failure of the project.

LENIENT POLICY WITH THE CLIENTS:

This is one of the best policies of NBP that it does not kept rude behavior with this client if they

make late in their repayment of loan. But it has adopts lenient way in dealing with them, it helps

its customers in the repayment making rescheduling and restructuring of their loans.

YOUNG BLOOD:

NBP has young generation aged 27 to 30 graduates that would be helpful to maintain the quality

of their service by hiring new graduates but also would be helpful changing the overall culture of

the organization.

WEAKNESSES:

National Bank created its own weakness by downsizing. Due to downsizing various experienced

and devoted employees were either forced or given the option to leave. Only those people were

left who had no organization better to join. Due to right sizing a lot of confusions have taken

place as well. For example higher-level management has come from institution or others

organizations where everything is computerized. Whereas have by ten staff members (over

staffing) hence, the higher management finds it difficult to get work done. From 1995 onward

bank exhibits a downward trend indicating its low performance-showing decline in total assets.

Total deposits, saving deposits advances investment and total income. This downward trend can

caused a great threat to the bank as its competitors are talking its market share, which can cause

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ruining the image and reputation of the bank thus posing danger in the long run. The graph

depicts a decline in the performance of the bank. NBP's major weaknesses are given below

LESS ATTENTION TO THE RURAL DEVELOPMENT

NBP's portfolio shows that it has made project financing only in the major cities of Pakistan. Buta reasonable attention is needed in the project financing of the rural based industrial project of

the country.

POOR ADVERTISEMENT

I keenly observe this that as compared to other banks. NBP is very poor in advertising itself and

institution, which works a lot in the development of the country, but unfortunately in the

business community most of the people are in award of it.

POOR NETWORK

NBP has only 1500 branches all over the Pakistan and in major cities of Pakistan in which other

competitors has their branches NBP don't have:

- The formalities involved in getting loans are time concerning and complicated enough.

- It is observed that most of the loans, which have been granted on political basis, are either

default or their loans are forcefully written off.

- It is seemed that the recovery system of NBP is not effective that's why number of defaulters isincreasing at the growing age.

- Political interference in the recruitment system.

OPPORTUNITIES

National Bank has very bright prospects for the future. They plan to region their lost glory notonly in terms of profitability but also include latest technology and competent work force.

Furthermore, NBP is the only bank which is providing facility of bills collecting from 9 AM. to 5

PM. NBP is considering setting up an exclusive utility bank in collaboration with a private firm,

which would provide this service for 12 hours.

SPONSOR THE IT BASED PROJECTS

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This is the best opportunity available to all banks and NBP as well, to sponsor the IT and

computer based projects because the coming century is the century of information technology as

now days all the business community is diverting its attention towards this field.

GOODWILL AND BETTER IMAGE

NBP has advantage of generating more deposits and attracting valuable customers due to its

better image in the business community. NBP has also advantage of increasing credit lines. This

is only due to good dealing and better image that NBP has directly acquired those lines of credit

from abroad that are only acquired by it, this better image can help further NBP in explanation of

its activities.

GROWTH IN THE INDUSTRIAL SECTOR

NBP's major function is the project financing and it is doing it with full efforts. Fortunately

industrial sector is now-a-days is Pakistan is again growing thus increasing the business

opportunities of NBP. Especially the textile sector is one again improving even the sick projects

has resumed their operations.

THREATS

If there is a threat to the whole economy, it will pose a threat for National Bank. National bank

does not consider small bank a threat to its existence because the way national bank can

accommodation large customer, these small banks cannot. sanctions imposed against Pakistan

will affect exchange. Business whereas the freezing of accounts by State Bank of Pakistan have

also caused problems for National Bank. But the recent facts and figures indicate that the banks

major rivals lime MCB and HBL are causing threats to the bank in the long run thus snatching

away the market share by attracting a large number of customer due to the their rising standards

giving quality service and value added products and other major threats are as under.

POLITICAL INFLUENCE AND INSTABILITYThis is the major threat for any business organization in Pakistan because the political officials

influence NBP in financing those projects which are not viable or write off those loans which are

still able to pay, this political influence cause many problems in daily business thus profitability

of NBP. Political industrial is even a threat for NBP in the sense that once the policies and

procedures are approved by government.

SICK PROJECTS

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NBP's sick projects are increasing day by day due to economic downfall. As our economy is

weakening day by day the no of side projects are becoming sick increasingly thus influencing the

profitability even survival of NBP.

LACK OF MODERN BANKING TECHNIQUES

NBP is following fifty years old style of banking, in the computers of NBP symphony word

processor is still used. Which is the oldest word processor due to this the deposits are looking to

be corded, because of the provision of credit cards and other such services by its competitors

both local and foreign banks is proving to be limiting factor in the deposit mobilization efforts of

the corporation.During my internship period at National Bank of Pakistan .I found out certain problems, which

are written below along with their solutions, which need proper attention of the top management:

These are given below:

Information technology.

Evening Banking Services

Staff Shortage

Dealing With Women

Frequent Transfers

Promotion

Locker Services

Standard Of Education

Introduction about Industry:Habib bank of Pakistan

The bank of Punjab

Askari bank limited

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The Bank of Punjab:

About

Us

Established in 1989, in pursuance of The Bank of Punjab Act 1989 and was given the status of

scheduled bank in 1994. The Bank of Punjab is working as a scheduled commercial bank with its

network of 272 branches at all major business centres in the country. The Bank provides alltypes

of banking services such as Deposit in Local Currency, Client Deposit in Foreign Currency,Remittances, Advances to Business, Trade, Industry and Agriculture A wholly owned subsidiary

of BOP First Punjab Modaraba (FPM) was established in 1992 and is being managed by Punjab

Modaraba Services (Pvt) Ltd.

Vision statement:

"To be a customer focused bank with service excellence"

Mission statement:

To exceed the expectations of our stakeholders by leveraging our relationship with the

Government of Punjab and delivering a complete range of professional solutions with a focus on

programme driven products & services in the Agriculture and Middle Tier Markets through a

motivated team.

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Askari Bank Limited:

History:

Askari Commercial Bank Limited was incorporated on October 9, 1991, as a Public Limited

Company, and is listed on Karachi, Lahore and Islamabad Stock Exchanges. The bank obtained

business commencement certificate on February 26, 1992 and started operations form April 1,1992. Askari Commercial Bank is scheduled Commercial Bank and is principally engaged in the

business of banking as defined in the Banking Companies Ordinance 1962.Askari Commercial

Bank Limited continues to scale new heights in all areas of its operations. The safety and

security of depositors funds, high productivity and optimum use of technology are the hallmarks

of its corporate strength.

Our Mission:

To be the leading private sector bank in Pakistan with an international presence, delivering

quality service through innovative technology and effective human resource management in amodern and progressive organizational culture of meritocracy, maintaining high ethical and

professional standards, while providing enhanced value to all our stake-holders, and contributing

to society.

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Ratio Analysis of National bank of Pakistan:

Ratios 2006 2007 2008

Gross margin % 63.44 57.16 42.80

Operating profit % 62.9 57.12 41.84

Profit before tax % 60.08 55.48 37.74

Net profit % 83.11 101 99.98

Return on investment % 4.63 4.01 3.32

Return on equity% 81.17 79.55 53.46

Capital Turnover % 7.35 7.03 7.93

Debtor Days 530 425 332

Creditor Days 11711 34284 6967

Asset Turnover .068 .066 .074

Current ratio 15.71 17.08 15.91

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Ratio Analysis of industry (Habib bank, bank of Punjab, Askari Bank):

Average Ratios 2006 2007 2008

Gross Margin % 43.58 24.17 (12.83)

Operating Profit % 43.52 24.00 (12.54)

Profit before tax % 36.87 24.28 (19.22)

Net profit % 31.31 3.14 0.383

Return on investment% 3.31 1.88 (1.47)

Return on equity% 40.96 32.58 (9.1)

Capital turnover % 7.51 7.91 9.23

Debtor Days 433 243 162

Creditor days 7690 5989 4799

Asset Turnover 5.12 5.49 6.43

Current Ratio 28.86 28.32 31.38

Interpretation of ratios:

Gross margin%:

Gross margin is used to gain an insight into the relationship between the

production/purchasing cost and sales revenues. Gross margin of national bank of Pakistan is

higher as compare to industry percentage due to decrease in cost of sales and increase volume of

sales.

Operating profit%:

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A measure of a company's earning power from ongoing operations, equal toearnings before deduction of interest payments and income taxes, also called EBIT (earnings

before interest and taxes) or operating income. Operating profit of national bank of Pakistan is

greater as compare to industry operating profit percentage due to improvement in gross marginand from the benefits of lower distribution costs and administrative expenses.

Profit before Tax%:A profitability measure that looks at a company's profits before the company

has to pay corporate income tax. This measure deducts all expenses from revenue including

interest expenses and operating expenses, but it leaves out the payment of tax. Interest expenses

of national bank of Pakistan is lower as compare to industry, as a result the profit before tax

percentage of national bank of Pakistan is greater.

Net Profit%:

Net profit after taxes divided by sales for a given 12-month period, expressed as a

percentage. also called profit margin.Net profit ratio of national bank of Pakistan is higher than

industry because of low amount taxes and other expenses.

Return on investment%:

Return on Capital Employed (ROCE) is used in finance as a measure of the returnsthat a company is realizing from its capital employed. It is commonly used as a measure for

comparing the performance between businesses and for assessing whether a business generates

enough returns to pay for its cost of capital. This ratio of NBP is higher as compared to industry

because of the higher operating profit.

Return on equity%:

Return on equity measures the return to the owners on the book value of their

investment in a company. The return is measured as the residual profit after all expenses andcharges have been made and the equity is comprised of share capital and reserves. Return on

equity percentage of NBP is greater than industry because higher amount of profit after tax.

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Capital Turnover%:

The capital turnover expresses the number of times that capital is turned over in

the year or alternatively the sales generated by each pound of capital employed. This ratio will be

affected by capital additions that may have taken place through out the period but have not

impacted materially on the performance of that period. The ratio of capital turnover is dropped in

all the three years than the industry. The new capital introduce is expected to result in significant

increase in next few years.

Debtor Days:

Debtor days indicate the average time taken, in calendar days, to receive payments

from creditors. A ratio used to work out how many days on average it takes a company to get

paid for what it sells. Calculated by dividing the figure for trade debtors shown in its accounts by

its sales, and then multiplying by 365. The lower the number of debtor days, the better. The

debtor days of NBP are greater as compare to industry because no proper arrangement have been

made to collect the amount.

Creditor days:

Creditor days indicate the average time taken, in calendar days, to pay for suppliers

received on credit. A ratio measuring how long on average it takes a company to pay its

creditors. Calculated by dividing the trade creditors shown in its accounts by its cost of sales, or

sales, and then multiplying by 365.This is better for any company to have more creditor days asNBP has than industry.

Asset turnover (Times):

Asset turnover measures the performance of the company in generating sales from

the assets under its control. Asset turnover ratio of NBP is lesser than that of industry because of

the new capital introduce in to the company to finance major new projects is expected to result in

significant increases in the sales level over the next few years. The denominator is increased due

to purchase of a new asset but the sales didnt improve because this asset is not yet used toincrease in sales.

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Current ratio:

The current ratio is an overall measure of the liquidity of the business. An

indication of a company's ability to meet short-term debt obligations; the higher the ratio, the

more liquid the company is. Current ratio is equal to current assets divided by current liabilities.If the current assets of a company are more than twice the current liabilities, then that company is

generally considered to have good short-term financial strength. If current liabilities exceed

current assets, then the company may have problems meeting its short-term obligations. The

current ratio of NBP is lesser as compare to industry that means the NBP is less liquid than

industry.

Horizontal Analysis:

National Bank Of Pakistan

Balance sheet

2006 2007 2008

Assets:

Cash and balances with treasury banks 100% 120.66 135.48

Balances with other banks 100% 92.20 94.34

Lending to financial institutions 100% 93.27 74.42

Investments 100% 150.87 122.06

Advances 100% 107.65 130.64

Operating fixed assets 100% 266.74 250.13Deferred tax assets 100% 0 0

Others assets 100% 114.31 164.30

Total Assets 100% 120.00 128.75

Liabilities:

Bills payable 100% 66.58 96.35

Borrowings 100% 92.40 345.68

Deposits and other accounts 100% 117.93 124.52

Liabilities against assets subject to finance lease 100% 253.52 190.96

Deferred tax liabilities 100% 213.55 0Other liabilities 100% 116.33 149.10

Total Liabilities 100% 116.75 129.30

Net Assets 100% 141.95 125.02

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Represented By:

Share capital 100% 115.16 126.50

Reserves 100% 113.63 143.67

Inappropriate profit 100% 143.37 163.54

Surplus on revaluation of assets 100% 162.80 72.95

100% 141.95 125.02

Vertical Analysis:

National Bank Of Pakistan

Profit and Loss Account

2006 2007 2008

Mark up/return/interest earned 100% 100% 100%

Mark up/return/interest expensed 31.13 33.49 39.19

Net mark up/interest income 68.86 66.50 60.80

Provision against non-performing advances 7.028 9.33 17.38

Provision for/(reversal of) diminution 1.62 0.079 0.61

In the value of investmentsProvision against off balance sheet obligations 0 0 6.56

Bad debts written off directly 0.012 0.078 0

Net markup/interest income after provision 63.44 57.16 42.80

NON MARK-UP/INTEREST INCOME

Fee, commission brokerage income 14.03 13.41 13.00

Dividend income 6.60 6.45 4.70

Income from dealing in foreign currencies 3.046 2.06 6.51

Gain on sales and redemption of securities-net 2.67 4.63 0.64

Unrealized gain/(loss) on revaluation onInvestments classified as held-for-trading 0.01 (.063) 2.80

Other income 1.43 0.29 2.04

Total non mark up/interest income 27.77 26.78 26.93

NON MARK-UP/INTEREST EXPENSES

Administrative expenses 30.70 28.09 29.81

Other provision/write offs (0.04) 0.33 1.22

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Other charges 0.475 0.034 0.95

Total non mark up/ interest expenses 31.13 28.45 32.00

PROFIT BEFORE TAXATION 60.08 55.48 37.74

Taxation - current 19.85 16.43 19.30- prior years 1.21 0.77 0

- Deferred 0.1415 0.64 (6.9)

PROFIT AFTER TAXATION 21.21 37.63 25.36

Inappropriate profit brought forward 44.24 63.42 74.40

Transfer from surplus on revaluation of fixed assets

On account of incremental depreciation 0 0.08 0.21

Profit available for appropriation 83.11 101.14 99.98

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