Virtual University of Pakistan Evaluation Sheet for Internship Report Spring 2011

FINI619: Internship Report (Finance) Credit Hours: 3

Name of Student: Muhammad Afaaq

Evaluation Criteria Report writing Presentation & Viva voce Final Result

Result Pass

Students ID:

MC090400284

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

1. Title Page:
Name of the organization: National Bank of Pakistan Name of the Internee: Muhammad Afaaq Student ID: MC090400284 Session: 2009 - 2011 Submission date of the internship report: 07-07-2011 Name of the University: Virtual University of Pakistan

VU logo:

2. Letter of Undertaking

3. Scanned copy of the internship certificate (provided by the organization)

4. Dedication

At first dedicating this work to Almighty ALLAH, without his mercy and sympathy I was not able to accomplish this work Almighty ALLAH gave me power and 3

confidence to done my internship and also HOLY PROPHET HAZARAT MUHAMMAD (Peace be upon him) who is a light for humanity. I also dedicate this work to my lovely parents and also dedicating this work to our honorable instructor of Fini619 who help me a lot to do my work accurately and guide me in my every difficulty.

5. Acknowledgement
1st of all I thanks to my Almighty ALLAH who gave me power and confidence to done my internship and HOLY PROPHET HAZARAT MUHAMMAD (Peace be upon him) who is a light for humanity.

In starting am little bit confuse because its my 1st experience to work in practical life but my 1st experience is vary good I many good peoples help me to do my work effectively specially my instructor of FINI 619 help me a lot when I confuse in some parts of internship I mail to instructor respected Sir were always ready to guide me during the report work, which gave me a lot of back-up. I also thanks to my bank employees of the NBP who remained supportive and cooperative throughout the report to complete it and specially branch Manager Miss Asia Aslam. My some senior friends also guide me to make my internship report I would like to say thanks to all that peoples. Allah blesses them all and gives success all in every field of life.

6. Executive summary
I am doing my internship in famous and reputed bank of Pakistan the name of that bank is National Bank of Pakistan the report is based on my six weeks internship program in National Bank of Pakistan. According to my observation during internship the NBP maintains an excellent position in banking sectors in Pakistan and this is based on the over all performance of National Bank of Pakistan. This report contains the detail of NBP and the departments where I worked during internship and these departments includes Account Opening Department, Bill Collection Department, Cash Department, Credit Department and Remittance Department. It also includes the Ratio Analysis and these ratios include all ratios that my university required with complete formula, working, table, graph and interpretation. I also mention my work experience during internship in different sectors. I also discuss in my report the executive summary of NBP and Recommendations for Improvement and the sources that I used to make this report. I have learned and informed about different

aspects specially about banking sector, its my 1st working experience so it will help me while I will be professional. NBP has 1254 nationwide and almost 25 branches operating in other foreign countries including USA, China, France, Hong Kong, Azerbaijan, Bangladesh, and Hong Kong. The objective of this Internship was to explore the issues relating to Finance and to find out problems regarding the theoretical concepts with practical experience working in an organization during the internship and study the system of National Bank of Pakistan. According to my knowledge there is much possible perfections, which we can make positive changes in the system of NBP in coming years. In this my NBP report I also talk about the way of investment, rates of investment, all types of financing and loans services the National Bank of Pakistan provides. The problems of branch where I am doing internship F-10 markaz branch are also discussed.

7. Table of content
Lesson No. Title / Topic

1.
a. b. c. d. e.

Title page
Name of the organization Name of the Internee, Student ID and session Submission date of the internship report Name of the University VU logo

2. 3. 4. 5. 6 7. 8. 9.
a. b. c.

Letter of Undertaking Scanned copy of the internship Dedication Acknowledgement Executive summary Table of contents Brief introduction of the organizations business sector Overview of the organization
Brief history Organizational Hierarchy chart Business volume (Total number of stock, shares, bonds/ commodities, future contracts planned for a particular

Page No. 1 1 1 1 1 1 2 3 4 5 6 9-10 11-21 11-13 14-15 16

d. e. f. g.

period etc). Product lines (List complete range of products/ services of the organization) Competitors Brief Introduction of all the departments Comments on the organizational structure

17 18 19-20 21 22 17 17 17

10. a. b. c. 11.
1st 2nd 3rd 4th 5th

Plan of your internship program

A brief introduction of the branch where you did your internship Starting and ending dates of your internship Names of the departments in which you got training and the duration of your training

Training program
Account Opening Department Bill Collection Department Cash Department Credit Department Remittance Department

12.
a) b) c)

Ratio Analysis
Liquidity Ratios Liquidity ratios measure a firms ability to meet its current obligations. Current Ratio Acid Test Ratio Working capital Leverage Ratios Leverage ratios measure the degree of protection of suppliers of long term funds. Times Interest Earned Debt Ratio Debt / Equity Ratio Debt to Tangible Net worth Ratio Total Capitalization Ratio Profitability Ratios Profitability ratios measure the earning ability of a firm. Net Profit Margin Return on Assets DuPont Return on Assets Operating Income Margin Return on Operating Assets Return on Total Equity

23 23 25 26 27 28 29 29

29 31 33 35

35 37 38 40 41 43

43 45 47 49 50 52

 d)

e)

Gross Profit Margin Activity Ratios Activity ratios measure a firm's ability to convert different accounts within their balance sheets into cash or sales. Total Assets Turnover Fixed Assets Turnover Market Ratios Market ratios are commonly used by the investors to assess the performance of a business as an investment and also the cost of issuing stock. Dividend per share Earning per Share Price/Earning Ratio

54 55

56 57 59

13. 14. 15. 16. 17.

Future Prospects of the Organization Conclusion Recommendations for Improvement Reference & Sources used Annexes

59 61 63 65 66-67 68-70 71 71

8. Brief introduction of the organizations business sector

Am doing my internship in NBP f-10 branch markaz Islamabad now I will discuss the brief introduction of national Bank of Pakistan in business sector The national bank of Pakistan was established in 9 th November 1949 under the ordinance XIX. The NBP commenced its operations from 20th November 1949. The Bank was incorporated under the National Bank of Pakistan Ordinance 1949 and is listed there Pakistani stock exchanges. The bank controls treasury dealings for the Government of Pakistan as a representative to the State Bank of Pakistan. NBP offers a commercial banking and interrelated services in Pakistan as well as out side of Pakistan. The business sector of NBP is banking sector and the banks plays a vital role in an economy of country NBP also played an important role NBP also provide banking or financial services in Pakistan bank plays a major part in economy now a days the current economics crisis in united stares and Europe as well as Pakistan as we see day by day down sizing and is because the ongoing weakness of major bank and the result of all this is credit and 8

capital crush so we can say its prove from history that the banking sector is plays a vary important role in national and global economy. National bank of Pakistan provides to its customers the following benefits saving accounts, home financing, personal loans, ATM and debit cards, financing facility for stock investors, Internet based home remittance service, cash against gold, and personal accident insurance these benefits is vary useful for customers. In between 2002 to 2007 the accelerated economy growth of Pakistan was underpinned by a strong banking sector the banking industry assets is above $60 its profit remain high and its NPLS are low. Pakistan is Islamic country and the national bank of Pakistan offers is Islamic banking services these services include deposit schemes, like current deposit scheme and profit and loss sharing deposit scheme and also financing facilities and also provided letters of credit facility, issuance of bank drafts and pay orders, handling of remittances, government collections, collection of export bills and local bills, and utility bills collection services. It also provided international banking trade that provide services comprise letters of credit, trade financing, international payments and collection services, structured trade finance, document presentation and payment services, pre and post shipment financing, banktobank reimbursements, documentary credits, import finance, shipping guarantees, and cash management solutions. NBP is government bank so peoples trust to NBP is high as compare other banks and NBP provides trustee services to national investment trust, long-term credit fund, and endowment fund for student loans scheme.

9. Overview of the organization

a. Brief history
History: NBP was established under the National Bank of Pakistan Ordinance in November 8 1949 in Pakistan and w a s 1 0 0 % g o v e r n m e n t o w n e d . The need for the establishment came due to the reason of newly country with economics crisis. In July 1948 to carry on the responsibilities of issuing the currency and most importantly controlling the flow of money in side the country. Role: The Special Role of National Bank of Pakistan is occupies a unique position in the financial sector of Pakistan. It also acts as an agent of the Central Bank wherever the State Bank does not have its own Branch. It also undertakes Government Treasury operations. Ownership: NBP is 100% owned by the Government of Pakistan. Branch Network: NBP has an extensive domestic branch network of over 1500 branches located all over Pakistan. The Bank also has a presence in 24 international locations including the USA, United Kingdom, Europe and the Far East.

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Deposits of National bank of Pakistan: NBP holds 24.6% share of time and demand deposits in the country. Local currency deposits comprise 67% of bank's total deposits while foreign currency deposits account for the rest. Head office and Branches: Head office of national bank is in Karachi with their 1431 branches local and 24 branches internationally. Provincial Headquarters: Sindh 06, Baluchistan 02, Punjab 14, NWFP 05, Azad Kashmir 02, total 29. Awarded: National bank of Pakistan was given awarded of best bank of the year in 2001, 2002, and 2004 by the banker a publication of financial times London. In 2005 the national bank of Pakistan is also given best bank of the year by the bankers by global finance magazine. 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. Precise Summary of National Bank of Pakistan year by year The precise summary of National Bank of Pakistan regarding its countrywide and overseas operations is as fallows: In the year 1949 National Bank of Pakistan was established under the National Bank of Pakistan Ordinance 1949 and was 100% govt.-owned. In the year 1950 NBP established a branch in Jeddah, Saudi Arabia. The Bank in 1950 had one subsidiary The Bank of Bahawalpur on December4, In the year 1947 by the former Bahawalpur State In the year 1955 By this time NBP had branches in London and Calcutta. In the year 1957 NBP established a branch in Baghdad, Iraq. In the year 1962 NBP established a branch in Dar-es-Salaam, Tanganyika. In the year 1964 The Iraqi government nationalized NBP's Baghdad branch.

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In the year 1965 The Indian government seized the Calcutta branch on the outbreak of hostilities between India and Pakistan. In the year 1967 The Tanzanian government nationalized the Dar-Es-Salaam branch. In the year 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. In the year 1974 the government of Pakistan nationalized NBP. As part of the concomitant consolidation of the banking sector, NBP acquired Bank of Bahawalpur (est. 1947). In the year 1977 NBP opened an offshore brain Cairo. In the year 1994 NBP amalgamated Mehran Bank (est. 1991). In the year 1997 NBP's branch in Ashgabat, Turkmenistan commenced operations. In the year 2000 NBP opened a representative office in Almaty, Kazakhstan. In the year 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%. In the year 2003 NBP received permission to open a branch in Afghanistan. In the year 2005 NBP closed its offshore branch in Cairo which opened in 1977.

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b. Organizational Hierarchy chart

Syed Ali Raza Chairman NBP Board of Directors Qamar Hussain President NBP MR. Tariq Kirmni Director Mrs. Haniya Shahid Naseem Director Ms Nazrat Bsahir Director Mr. Ekhlaq Ahmed Secretary Board of Directors

Organizational Hierarchy Chart at NBP Head Office Karachi

13

Organization Chart of NBP

14

c. Business volume
In Millions

15

Description Profit before tax Profit after tax Shareholder s equity Advances net Total Assets Deposits Investments Earnings per share

2006 26,311

2007 28,061

2008 23,001

2009 21,300

2010 2,4,415

17,022

19,034

15,459

17,562

17,563

353,045

69,271

81,367

94,142

103,762

316,110

340,319

412,987

475,243

477,507

635,133 501,672 139,947 12.65

762,194 591,907 211,146 14.15

817,758 624,939 170,822 11.49

944,583 727,465 217,643 13.05

1,035,025 832,152 301,324 13.05

d. Product lines
The product lines is given below

PREMIUM AMDANI PREMIUM SAVER SAIBAAN ADVANCE SALARY CASH CARD INVESTOR ADVANTAGE CASH AND GOLD KISAN TAQAT KISAN DOST 16

PAK REMIT PROTECTION SHIELD

Services
Islamic Banking Student Loan Scheme Demand Drafts(DD) Equity Investment Commercial Finance Trade Finance International Finance Home Finance Foreign Currency Account Short Term Investment NIDA( National Income Daily Account) Foreign remittance Travelers Cheques Swift System Letter of Credit Pay Order (PO) Mail Transfer (MT)

e. Competitors
Now a day in this world of competition the NBP is facing much competition. The competitors list of NBP is very large as there are many private and commercial banks operating in the country. Competitors of the NBP which are given below

MCB Bank Limited Habib Bank Limited Habib Metropolitan Bank Limited Saudi Pak Bank Limited

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Atlas Bank Limited SILKBANK Limited United Bank Limited Allied Bank Limited Askari Commercial Bank Limited Bank Al-Habib Limited Bank Al-Falah Limited. Standard Chartered Bank Limited First Women Bank The Bank of Khyber Bank of Punjab Faysal Bank Limited Atlas Bank Limited Bank Alfalah Limited Soneri Bank Limited Askari Bank Limited

f. Brief Introduction of all the departments

There are many departments of National Bank of Pakistan I will write the following main departments of National Bank of Pakistan F-10 Markaz branch and where I got training as internee are given below: 1st Account Opening Department 2nd Bill Collection Department 3rd Cash Department 4th Credit Department 5th Remittance Department

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I already describe in detail of these entire department in my internship report One by one I will summarize or over view all these again.

1st Account Opening Department:

In my 1st 2 weeks of internship I work as an internee in account opening department in NBP. Its a major department of NBP the basic purpose of Account Opening Department the relationship between banker-customer. Account opening department performs the duty of opening accounts and issues checkbooks to clients. A person who requests to open an account with the bank has to fill an account opening form obtained from any branch of National Bank of Pakistan. Types of accounts that are opened I learned in my training in account opening department the following account is opened. 1. PLS Account or PLS Saving Account 2. Current Account 3. Fixed Deposit Account

2nd Bill Collection Department:

I also work in the bill collection department in NBP during my internship. The basic purpose of bill collection department is collected utility bills from customers that he pays at end of every month These bills include Water bills Gas bills Electricity bills Telephone bills

3rd Cash Department:

I also work in cash departments during internship in NBP. Cash depart in vary sensitive department o every bank as well as National Bank of Pakistan No body is allowed freely like other department this department all depend on cash a security guard is also standing for safe from theft and also sensitive department some times customer pays frauds are made in this department so extra care needed in this department.

4th Credit Department:

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In my internship program in NBP I also work in credit department. The basic purpose of this department id to collect spare, extra or surplus money or currency from peoples or customers at vary low rate and gives or provided lend this money at high rates to get more and more profit. Now a days NBP gives a vary low amount to customer because in Pakistan there is instability and day by day the investor go out from Pakistan because of in security financial crises is also big cause of it so the loan ratio is vary low down day by day with the passage of time.

5th Remittance Department:

Finally in my last week of internship as an internee in NBP I work in Remittance Department. The remittance department transfers the money from domestic to international level. According to my learning there are two categories of remittance department 1st one is domestic or local remittance department and the 2 nd one is foreign remittance department. In local remittance the transfer money with in national or domestic boundaries and in foreign transfer money out side from national or international boundaries In my internship program the manager told me the main functions of Remittance Department these main or important functions takes places in the following ways I observed these are Closing and scrolling of government collections, issuing of payment order, issuing of demand draft, issuing of call deposit, issuing of Mail transfer and issuing of call deposit. In NBP remittance takes places in the following ways. These ways are given below. 1st Telegraphic / Mail Transfers and its easy and fastest way 2nd one is Demand Draft / Pay Orders

g. Comments on the organizational structure

I understand during my internship program the Organizational Structure NBP is centralized but need some changes with the passage of time because in this world day by day technology changes and its necessary to change the Organizational Structure time by time and I also observed the NBP is the oldest bank of in Pakistan and in last 62 years a lot of changes in NBP Organizational Structure but I observed the Organizational

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Structure is not professionally developed and implemented. In NBP F-10 Markaz Branch where I work as internee in that department all employees in different department work properly and here Organizational Structure but also need some changes.

10. Plan of My internship program

Introduction of branch Name of branch: National Bank of Pakistan F-10 Markaz Branch City: Islamabad Branch Code: 1933 Branch manager: Miss Asia Aslam Operating manager: Mr. Ali Phone Number: +92-051-9218734

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I did my internship or training from National bank of Pakistan F-10/4 Markaz Islamabad and branch code is 1933.Under the branch manager Miss Asia Aslam. In this branch of national bank the branch manager is Miss Asia Aslam and Mr. Ali is operating manager both are superior working and very fair with their job. When I start my internship I face many difficulties because its my 1st experience to do training or internship in any where so I dont have experience practical work before but here cooperative management specially miss Asia Aslam Branch manager help me for my this 1st to complete my tasks efficiently and I observed the other management members or staff is also vary cooperative who also help me in a friendly manners. In start am little bit confuse but after the observed the cooperation of staff I enjoy my internship I also appreciate and thanks all management who help me to complete my tasks in good manners. Duration of My training or Internship Program

The starting date of my Internship Program is May 9, 2011 The ending date of my Internship Program is June 22, 2011 Name of the Department in which I worked in my internship.

Name of the Department Account Opening Department Bill Collection Department Cash Department Remittance Department.

Duration 2 Weeks 1 Week 1 Week 1 Week

11. Training program

My training or internship program from National Bank of Pakistan F-10 Markaz Branch Islamabad I also mention the departments where I work as internee that is given below.

1st Account Opening Department 2nd Bill Collection Department 3rd Cash Department 4th Credit Department
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5th Remittance Department

One By one I will describe in detail of all my training program departments

1st Account Opening Department

The account opening department is a first department where I learned and spent my internship maximum periods 2 weeks as compares to other departments. In my vary 1 st day I am little bit confused to start and learned about department because its my 1st experience practically but the cooperative staff and branch manager help me to understand all procedure now I observed how the employee work in this department and what is the requirements to open the account and what is the rules and procedure to follow the customer. In this department requires some basic requirements for open an account of customer the customer must have the reference of any residence of Pakistan who has already account holder of National Bank of Pakistan and when customer gives reference of some ones who has account in NBP the bank confirms it with NADRA. After 3 or 4 days I learned many things about opening account and rules and procedures and also the requirements like what is the title of account, address of the customer, recent ID card number, National tax number, PTCL and Mobile number amount deposit,

signature, Law must qualify the customer, Age of majority and must be of sound mind Than I learned and opened a account of customer under supervision of staff and these procedure must be followed the customer come to bank and meet the manager about account opening procedure than manager guide him or her about the account he or she wants to open in the bank than manager guide me and I follow the rules now give to customer account opening form along with document like signature card and Pay-in-slip. Than the customer fill the account opening from if he has any difficulty than management or account opening officer guide him or her and when customer fill are form this form sent to manager for approval than the concerned officer gives new account number and guide to deposit initial deposit in cash counter. And check book gives to customer according to customer need or requirement because some check books has 25, 50 and more its depend on customer requirement. When I opened some accounts than I know

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the procedure and after this its vary easy for me because I know now all procedures to open a accounts and I opened some accounts

Types of accounts that are opened I learned in my training in account opening department the following account is opened.

1. PLS Account or PLS Saving Account 2. Current Account 3. Fixed Deposit Account

The details of these accounts are given below one by one.

1. PLS Account or PLS Saving Account

1 I would like to discuss the PLS account or PLS saving account that I learned from manager it is interest free account mostly the lower or middle income level or small business man, Allam or Moulana or people who dont like interest like usually make such deposit in this account the transaction. In this account the transaction is not every day or daily. Funds can normally deposited through pay order, cash, check etc.
st

2. Current Account
2nd I like to discuss the current account that I learned from manager this account or current account its depend on daily bases normally through cheque, ATM, Pay order etc drawn on the bank and these deposit stand the current liability of the bank. The bank keep fund of his hand and customer normally use this account mostly now a days through ATM because its vary easy and advanced method. And there is no limit for deposit.

3. Fixed Deposit Account

3rd I would like to discuss the fixed deposit account I learned from manager that this account normally opened and high faculty or extra ordinary people or business man for a long period of time and this type of account is less use as compare to other account. In this account the customer invest in different sector for a long period of time where his or 24

her money is saved from theft and also with higher return. The other account I opened because these are daily use accounts and normal or middle class peoples use but this fixes account I dont opened because in my in my period of internship there in only 1 or 2 peoples who opened this account I learned but not accurate so I got more information from the manager of the bank.

2nd Bill Collection Department

In my internship program I also worked in Bill Collection department in one week. In 1st day in bill collection department 1 get information from manager about the function, rules and procedure involve in bill collection department after get information from manager I see or observed bill collection department collects different utility bills which peoples pay every months. These bills include

Water bills Gas bills Electricity bills Telephone bills

I collect some bills according to instruction that manager gives me about bill collection department and in bill collection department my duty is when collect bill is must see the due date and whats the amount collect in due date and these are written in every bill and after date because after date extra amount paid or late payment charges paid by the customer if bill not paid within due date. Also mention in bill manually if customer gives big note like note of RS 5000 and bill id 1050 than in bill written manually 5000-1050 = 3950 it means customer give 5000 note and bill amount is 1050 we deduct from 5000 and we gives 3950 the remaining amount to customer. The amount received like in due date amount received circle the received amount within due date and if payment id after due date circle after date and in after date late payment charges included and circle and collect money and than bank stamp and also sigh on it is its guarantee that this means f10 markaz Islamabad branch received this bill. The bank also charges commission in each bill that is revenue of the bank and also for government of Pakistan. At the end of

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the day all amount counts count that received from from received against bill collection from customers and gives by the relevant bill collection department and bill collection department sends mail to the head office.

3rd Cash Department

In duration of my internship in NBP as internee I work in cash department fro 1 week. In cash department 1st I try to understand working procedure in this department I also observed that cash department is the most important section in the bank. Cash department perform the function of bank payment and receipt, government receipt and payment and collection of utility bills The cash department is vary important and sensitive because in this department no body is allowed freely like other department this department all depend on cash a security guard is also standing for safe from theft and also sensitive department some times customer pays frauds are made in this department so extra care needed in this department. And if closing the balance is not match than the cashier must match it before leave this department some times hours takes to match cash in this department if cash not match than cashier pay with its own pay or with own recourses So cash department is vary sensitive department mostly people come for the purpose of cash in this department with drawn and deposit if any account holder comes to draw the amount it must b checked the total amount on cheque, date, signature of the account holder, and then he gets payment form the cash counter from the cashier and some account holder comes for the purpose of deposit the money in cash department.

4th Credit Department

As an internee I work and observed in credit department for the duration of 1 week in National Bank of Pakistan F-10 Markaz Branch Islamabad. The basic purpose of this department id to collect spare, extra or surplus money or currency from peoples or customers at vary low rate and gives or provided lend this money at high rates to get more and more profit.

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According to my observation and work as internee in NBP during my internship I observe that the basic purpose of credit department is provide load to load seekers. These peoples get loan from bank and fulfill our requirements and bank charges interest against. I also observe now a days of technology every bank adopt this method to get profit. I observed when national bank of Pakistan F-10 branch Islamabad when NBP provide or gives to some one some basic information collect by the bank to reduce fraud because now a days some fraud peoples gets illegally loan from bank and cant return to bank some fraud peoples write wrong address and some are going out side of country and thats a big loss of bank so bank now a days bank confirm it with the customers near police station about the reputation of customer and NBP required some basic information and criteria before gives loan to peoples some basic information that banks gets like customer name, National Identity Card, The required documents checked is it in original from or not. Now a days NBP gives a vary low amount to customer because in Pakistan there is instability and day by day the investor go out from Pakistan because of in security financial crises is also big cause of it so the loan ratio is vary low down day by day with the passage of time.

5th Remittance Department

In my internship program and also last week of my internship I also worked in Remittance department in one week .I observed or learned that main purpose of Remittance department is to move money from one place to another place. The remittance department transfers the money from domestic to international level. According to my learning there are two categories of remittance department 1 st one is domestic or local remittance department and the 2nd one is foreign remittance department. In local remittance the transfer money with in national or domestic boundaries and in foreign transfer money out side from national or international boundaries In my

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internship program the manager told me the main functions of Remittance Department these main or important functions takes places in the following ways I observed these are Closing and scrolling of government collections, issuing of payment order, issuing of demand draft, issuing of call deposit, issuing of Mail transfer and issuing of call deposit. When I work in this department I also observed the important particulars of demand draft filled, Name of the branch on which draft is drawn, Address of the applicant, signature of the applicant, exchange rates of the bank, Total amount in figure and also in words, name of the person who receive the money. Under the supervision manager I fill some demand draft that gives me some useful information about this department and I also want to get more and more information about this department and manager help me a lot. In NBP remittance takes places in the following ways. These ways are given below. 1st Telegraphic / Mail Transfers and its easy and fastest way and 2nd one is Demand Draft / Pay Orders Bank is responsible for remittance from one bank to another bank in case This is my last week on internship in national bank of Pakistan and word in remittance department I work hard also cooperative staff and manager really help me for this am thankful to all management and staff of National Bank of Pakistan F-10 branch and also thankful fro bank branch manager Miss Asia Aslam she help me lot in my all Internship

12. Ratio Analysis

a) Liquidity Ratios Liquidity ratios measure a firms ability to meet its current obligations. These include: Current Ratio

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 Acid Test Ratio Working capital

Name of the ratio Current ratio

FORMULLA OF CURRENT RATIO The formula of current ratio is given below With the help of formula we calculate or find current ratio

Current Ratio = Current Assets / Current Liabilities

It means we add all current assets after add all current assets we add all current liabilities and than divide current ratio with current liabilities As we shown in given below

Show in table
YEARS
Current assets Current liabilities Current Ratio

2008
584,977,140 682,905,461 0.86 : 1

2009
645,064,165 725,293,720 0.89 : 1

2010
693,463,980 867,626,367 0.80 : 1

Working:

Which short term advances and investments?

Only fixed deposits will not be considered here

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Held for trading and available for sale will be considered as current Current asset = Cash and balances with treasury banks + Balances with other banks + Lending to financial institution-net + short term Investment + Short term Advances + Other asset (Only Short Term) After adding all current assets according to given format the current assets of 2008 = 584,977,140 and 2009 = 645,064,165 and 2010 = 693,463,980 Current liability = Bills payable + Short Term Borrowing + Short Term Deposit and other account + short term liabilities against assets subjects to finance lease + other liability(Only short term) After adding all current Liabilities according to given format the Current Liabilities of 2008 = 682,905,461 and 2009 = 725,293,720 and 2010 = 867,626,367 Finally divide current assets with current liabilities answer is current ratio
Formatted: Highlight

Graphical Presentation of Current ratio

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Current Ratio

2010 2009 2008 0.75

0.8 0.89 0.86 0.8 0.85 0.9

Interpretation
The current ratio shows in 2008 the current ratio of national bank of Pakistan is 0.85 it means the c urrent assets increases not much as compare to current liabilities and in 2009 shows the incrasing trends as compare to 2008 the current ratio of 2009 is 0.88 but again in 2010 it shows 0.79 that is much less as compared to 2008 and 2009 .

Name of the ratio Acid Test Ratio

With the help of formula we calculate or find Acid Test Ratio Formula is given below

Acid Test Ratio =

More liquid Assets/current liabilities

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It means more liquid Assets / Current liabilities

Show in table
YEARS
More liquid Assets Current Liabilities Acid test Ratio

2008
582,255,871 682,905,461 0.85 :1

2009
630,040,628 725,293,720 0.87 :1

2010
691,160,473 867,626,367 0.80 :1

Working:
More liquid Assets = Cash and balances with treasury banks + Balances with other banks + Lending to financial institution -net + short term Investment+short term Advances + Other asset(short term)-advance(deposits, rent and other prepayments).

Current liability = Bills payable + Short term Borrowing + Short term Deposit and other account+short term liabilitiesagainst assets subjects to finance lease + other liability(short term)

Graphical Presentation of Acid Test Ratio

2010 2009 2008 0.76 0.78

0.8
Acid Test Ratio

0.87 0.85 0.8 0.82 0.84 0.86 0.88

Interpretation:
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As we see the more liquid Assets are less than current liabilities in all three years 2008, 2009 and 2010 but in year. As we see in graph the Acid Test Ratio of 2009 is higher as compare to 2008 and 2010 and we calculate Acid Test Ratio find all by subtract all prepaid expenses from current assets to find it.

Name of the ratio Working capital

To find out working capital ratio we use the following formula that is given below

With the help of formula we calculate or find Working Capital

Formula: Working Capital ratio = Current Assets - Current Liability Show in table

Make correctiosn as instructed above

YEARS
Current assets Current liabilities Working capital

2008
584,977,140 682,905,461 -97,928,321

2009
645,064,165 725,293,720 -80,229,555

2010
693,463,983 867,626,367 -174,162,384

Working Current Asset = Cash and balances with treasury banks + Balances with other banks + Lending to financial institution-net + Short

term Investment + short term Advances + Other asset(short term) Current liability = Bills payable+ Short term Borrowing + Short term Deposit and other account + Short term liabilities against assets subjects to finance lease + other liability(Short term)

Graphical Presentation of Working capital

33

-174,162,384 -80,229,555 -97,928,321 -200,000,000 -100,000,000

2010 2009 2008 0

Working Capital ratio

Working:
Current asset = Cash and balances with treasury banks + Balances with other banks + Lending to financial institution -net + short term Investment + Short term Advances + Other asset(Short term) Current liability = Bills payable + Short term Borrowing + Short term Deposit and other account + Short term liabilities against Assets subjects to finance lease + Other liability(Short term)

Interpretation:
We see in all three years 2008, 2009 and 2010 t his can show the negative trend which is the bad sign for the company. It due to the increasing of current liabilities or the excess of liabilities over current assets. In 2010 negative sigh in to much high as compare to 2008 and 2009 so its vary bad for company.

34

b) Leverage Ratios
Leverage ratios measure the degree of protection of suppliers of long term funds. These include: Times Interest Earned Debt Ratio Debt / Equity Ratio Debt to Tangible Net worth Ratio Total Capitalization Ratio

Name of the ratio Times Interest Earned

To find out Times Interest Earned we use the following formula that is given below

With the help of formula we calculate or find Times Interest Earned Formula: Times Interest Earned: EBIT / Interest Expenses

EBIT = Profit before taxation + Markup Interest Expenses / Interest Expenses

Show in table
Years EBIT Interest expenses Total interest earned EBIT/Interest 2008 46,885,766 23,884,768 1.96 Times 2009 61,789,822 40,489,649 1.52 Times 2010 69,665,595 45,250,476 1.53 Times

35

expenses

Working:
Profit before Taxation: Mark up income Markup expencess= Gross profit Gross profit - (Provision for advances + Provision for the value of Investment + Provision against off balance sheet obligations + Bad debts written off) = Net mark-up interest income Net mark-up interest income+ Fee commission & brokerage income+ Dividend income +Exchange income+ + gain on sale of securities+ Other income = Total non mark up interest income Total non markup interest income - Administrative expense-Other provisionsOther charges = Profit before tax Interest expenses: Interest expenses given in profit and loss account on 2 nd head as mark up return interest expense.

Graphical Presentation of Times Interest Earned

2010

1.53
Times Interest Earned

2009

1.52

2008 0 0.5 1 1.5

1.96 2 2.5

Interpretation:
As we see in table the Time interest ratio is decreasing over the time. In 2008 the time interest ratio is 1.96 but in 2008 its decrease it with 1.52 Time

36

interest can also show the decreasing trend in coming year and than increasing trend in next year like In 2009 it little increase 1.53 as compare to 2009.

Name of the ratio

Debt Ratio Formula: Debt Ratio = Total liabilities / Total Assets

Its simple calculate total liabilities of all year than calculate total assets of all year and than total liabilities divide by total assets than we find debt ratio

Show in table
Year Total liabilities Total Assets Debt Ratio 2008 715,299,108 817,758,326 0.875 Times 2009 825,676,384 944,582,762 0.874 Times 2010 906,528,852 1035,024,680 0.876 Times

Working
Total Debts = Bills payable + Borrowing + Deposit and other accounts + Subordinated loans +Liabilities against assets subject to finance lease + Deferd tax liability + Other liability Total Assets: Cash and balances with treasury banks + Balances with other banks + Lending to Financial I nstitution + Investment + Advances + Operating fixed asset + Defferd tax asset + other assets

Graphical Presentation of Debt Ratio

37

3rd Qtr 2nd Qtr 1st Qtr 0.873 0.8735 0.874 0.8745 0.874 0.875 0.875 0.8755

0.876
Debt Ratio

0.876

0.8765

Interpretation:
As we see in table the debt ratio is not much increase or decrease it all same in all three years. Here company have more assets then debt because debt ratio of greater than 1 indicates that a company has more debt than assets; while, a debt ratio of less than 1 indicates that a company has more assets than debt.

Name of the ratio

Debt / Equity Ratio

Formula: Debt to Equity Ratio = Total liabilities (Debt) / Shareholder equity

Show in table
Year Total Liabilities Shareholder Equity Debt to Equity Ratio 2008 715,299,108 81,497,458 8.78 times 2009 25,676,384 94,265,853 8.76 times 2010 906,528,852 103,880,048 8.73 times

Working:

38

Total debts = Bill payable + Borrowings + deposits and other Account + Sub-ordinate Loans Liabilities against Assets subjects to finance lease+ Deferred tax Liabilities + Other liabilities Share holder equity = Share Capital + Reserves + unappropriate profit + Surplus on revaluation of fixed assets.

Graphical Presentation of Debt / Equity Ratio

2010

8.73
Debt to Equity Ratio

2009

8.76

2008 8.7 8.72 8.74 8.76

8.78 8.78 8.8

Interpretation:
As we see in table the ratio of 2008 shows 6.98 which is decreased in 2009 by 6.94 but in 2010 its again increase by 7.05. Its show that the company is finances its assets and heavily relies on debt finances.

Name of ratio:
39

 Debt to Tangible Net worth Ratio:

Formula: Total liability/(Net worth- Net intangible asset)

Show in table
Year Total Liabilities Tangible net worth Debt to Tangible Worth Ratio 2008 715,299,108 102,453,293 6.98 Times 2009 825,676,384 118,888,848 6.94 Times 2010 906,528,852 128,487,598 7.05 Times

Working:
Total Debts = Bill payable + Borrowings + Deposits and other Account + Sub-ordinate Loans Liabilities against Assets subjects to finance lease + Deferred tax Liabilities + Other liabilities Net Worth = Total Asset - Total liability Intangible asset = (Mention in notes of balance sheet 11.3) Intangible asset of 2008 is 5,925, Intangible asset of 2009 = 17,530 and Intangible asset of 2010 = 8,230

Graphical Presentation of Debt to Tangible Net worth Ratio:

2010

7.05
Debt to Tangible Worth Ratio

2009

6.94

2008 6.85 6.9 6.95

6.98 7 7.05 7.1

Interpretation:
40

The overall show the increasing trend of the company in 2008 it shows the 6.98 and there 2009 it decrease by 6.94 and again in 2010 it increase up to 7.05. So in year 2010 its greater as compare to 2008 and 2009 and its less in 2009 as compare to 2008 and 2010.

Name of ratio Total Capitalization Ratio:

Formula: Long term debt / Long term debt + Share holder equity

Show in table
Year Long term debt Share holder equity + long term debt Capitalization Ratio 0.28 Times 0.51 Times 0.27 Times 2008 32,393,647 113,760,649 2009 100,382,664 194,524,583 2010 38,902,486 142,664,796

Working:
Long term Debts = Long term borrowing + long term deposits and other accounts + Sub-ordinated loans + Liabilities against assets subject to finance lease +Deferd tax liability + Other liabilities(long term) Share holder equity+ long term debts = Share capital + Resevers + +unappropriated profit + surplus on revaluation of asset + Long term borrowing + long term deposits and other accounts + Sub-ordinated loans +

41

Liabilities against assets subject to finance lease + Defferd tax liability + other liabilities(long term)

Graphical Presentation of Total Capitalization Ratio

2010

0.27
Total Capitalization Ratio

2009

0.51

2008 0 0.2

0.28
0.4 0.6

Interpretation:
Total Capitalization Ratio is high in 2009 as compare to 2008 and 2010 the overall trend of debt contribution towards financing shows the increasing trend of the company. In 2008 it shows the 2.5 and there is further increase 2009 & 2010 so the overall trend of debt contribution towards financing is high.

c) Profitability Ratios Profitability ratios measure the earning ability of a firm. These include: Net Profit Margin

42

 Return on Assets DuPont Return on Assets Operating Income Margin Return on Operating Assets Return on Total Equity Gross Profit Margin Name of ratio Net Profit Margin

Formula: Net Profit Margin = Net Profit /Net Sales*100 Show in table
Year Net Profit a Net Sales b Net Profit Margin ratio: a/b 2008 15,458,590 60,942,798 25.4% 2009 17,561,846 77,947,697 22.5% 2010 17,563,214 88,472,134 19.9%

Working:
Net profit is the profit after tax which is obtained as: Mark up revenue markup expenses = Gross profit

Gross profit - (Provision for advances + Provision for investment + Provision lending to financial institution + Bad debts written off) = Net mark-up income
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Net mark-up income + Fee & commission + Dividend income + Exchange income + other income + Gain on sale of securities = Total income

Total income - Administrative expense - Other provisions - Other charges + Share of income = Profit before tax Profit before tax- tax = Profit after tax And net sale = Mark up revenue

Graphical Presentation of Net Profit Margin

2010

19.9
Net Profit Margin

2009

22.5

2008 0 5 10 15 20 25

25.4 30

Interpretation:
The table shows that Net Profit margin is showing decreasing trend in 2009, which again decreases in 2010 as compare to 2008 so NBP has not significant improved net profit margin in the this years in coming years after 2008.

Name of ratio

Return on Assets
44

Formula: Return on asset: (EBIT / Total Assets)*100

Show in table
Year EBIT a Total Assets b Return on Asset Ratio a/b 2008 46,885,766 817,758,326 5.73% 2009 61,789,822 944,582,762 6.54% 2010 69,665,595 1,035,024,680 6.73%

Working:
Revenue Markup Expenses = Gross Profit Gross profit - (Provision for advances + Provision for investment + Provision lending to financial institution + Bad debts written off) = Net mark- up income Net mark-up income + Fee & commission + Dividend income + Exchange income + other income + gain on sale of securities = Total income Total income - Administrative expense - Other provisions - Other charges + Share of income = Profit before tax EBIT = Profit before Taxation + Interest expenses

Total Assets: Cash and balances with treasury banks + Balances with other banks +
lending to financial institution + Investment+ Advances + Other asset + Operating fixed Asset + Defferd tax asset-net.

Graphical Presentation of Return on Assets

45

2010 2009 2008 5.2 5.4 5.6

6.73
Return on Assets

6.54 5.73 5.8 6 6.2 6.4 6.6 6.8 7

Interpretation:
The table shows that the return on assets of 2008 is greater as compare to 2009 and 2010 so the ratio analysis explains that Return on Assets is growing in the year 2008, which is 2.81%. But after this it increases from previous level and then it reached at 2.26% in financial year 2009, again it decrease to 2.36% in year 2010.

Name of ratio DuPont Return on Assets

Formula: DuPont Return on Assets = Net Income/Net sales * Net Sales/ total Asset

Show in table
Year Net Income / Net Sales x Net Sales/ 60,942,798/817,758,326 = 0.075 77,947,697/944,582,76 2 88,472,134/1,035,024,68 0 2008 15,458,590/60,942,798 =0.254 2009 17,561,846/77,947,697 =0.225 2010 17,563,214/88,472,134 =0.199

46

Total Asset y DuPont 1.91% Return On Assets x*y

=0.083

=0.085

1.87%

1.69%

Working:
Net Income/Net Sale:
Net Income: Net profit or net income is the profit after tax which is obtained as mark up revenue markup expenses = Gross profit Gross profit- (Provision for advances + Provision for investment + Provision lending to financial institution + Bad debts written off) = Net mark-up income Net mark-up income + Fee & commission + Dividend income + Exchange income + other income + gain on sale of securities = Total Income Total income - Administrative expense - Other provisions - Other charges + share of income = Profit before tax Profit before tax - Tax = Profit after tax or net income And net sale = Mark up Revenue

Net Sale/Total Asset:

Total Assets: Cash and balances with treasury banks + Balances with other banks + lending to financial institution + Investment+ Advances + Other asset + Operating fixed asset + Defferd tax asset-net

Graphical Presentation of DuPont Return on Assets

47

2010

1.69
DuPont Return On Assets

2009

1.87

2008 1.5 1.6 1.7 1.8 1.9

1.91 2

Interpretation:
As we see in graph and table the DuPont Return on Assets ratio decreases in 2008 and 2010 as compare to 2009 it means in year 2009 the DuPont Return on Assets ratio is high as compare to 2008 and 2010 it happens due to increase in mark-up revenue.

Name of ratio Operating Income Margin Formula: Operating income margin = (EBIT/ Net Sales)*100 Show in table
Years 2008 46,885,766 60,942,798 2009 61,789,822 77,947,697 2010 69,665,595 88,472,134

EBIT a Net Sales b Operating

76.93%

79.27%

78.74%

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income margin a/b

Working:
Revenue Markup Expenses = Gross profit Gross profit - (Provision for advances + Provision for investment + Provision lending to financial institution + Bad debts written off) = Net mark-up income Net mark-up income + Fee & commission + Dividend income + Exchange income + other income + Gain on sale of Securities = Total income Total Income - Administrative expense - Other provisions - Other charges + share of income= Profit before tax EBIT = Profit before Taxation + Interest expenses Net Sale= Mark up revenue

Graphical Presentation of Operating Income Margin

2010 2009 2008 75 76

78.74
Operating income margin

79.27 76.93 77 78 79 80

Interpretation:

49

As we see in graph and table the Operating income margin is decreasing over the year 2008 and 2010 as compare to 2009 it happens due to increasing of sale more quickly than to operating profit.

Name of ratio Return on Operating Assets

Formula: Return on Operating Assets = (EBIT/ Operating Assets)*100

Show in table
Years EBIT a 2008 46,885,766 2009 61,789,822 635,805,667 9.72% 2010 69,665,595 642,862,306 10.84%

Operating Assets b 560,836,308 Return on Operating Assets (a/b)*100 8.36%

Working:
Revenue Markup Expenses = Gross profit Gross profit - (Provision for advances + Provision for investment + Provision lending to financial institution + Bad debts written off) = Net mark-up income Net mark-up income + Fee & commission+ Dividend income + Exchange income + Other income + gain on sale of securities = Total income Total income- Administrative expense - Other provisions - Other charges + share of income = Profit before tax

EBIT = Profit before Taxation + Interest expenses

50

Operating Assets = Cash and balances with treasury banks + Lending to financial institutions + Advances net + Operating fixed assets

Graphical Presentation of Return on Operating Assets

2010 2009 2008 0 5

10.84
Return on Operating Assets

9.72 8.36 10 15

Interpretation:
As we see in table and graph the Return on operating asset is increasing every year so Return on operating asset ratio is moving towards low which indicates that the Company must give attention towards its usage of operational asset.

Name of ratio Return on Total Equity Formula: Return on Equity = (Net income/Shareholders equity)*100

Show in table
Year 2008 2009 2010

51

Net income a Shareholders equity b Return on Equity a/b

15,458,590 81,497,458

17,561,846 94,265,853

17,563,214 103,880,048

18.97%

18.63%

16.91%

Working:
Net profit or net income is the profit after tax which is obtained as Mark up Revenue Markup Expenses = Gross profit Gross profit - (Provision for advances + Provision for investment + Provision lending to financial institution + Bad debts written off) = Net mark - up income Net mark - up Income + Fee & commission + Dividend income + Exchange income + other income + Gain on sale of Securities = Total Income Total income - Administrative expense - Other provisions - Other charges + share of income = Profit before tax Profit before tax- tax= Profit after tax or Net income Shareholders equity =Share capital+ reserves+ unappropriated profit + surplus on revaluation of fixed assets.

Source:
Change in equity statement under the head 20.2

Graphical Presentation of Return on Equity

52

2010

16.91
Return on Equity

2009

18.63

2008 15 16 17 18

18.97 19 20

Interpretation:
Return on Equity (ROE) tells us how much profit a company earned in comparison to the total amount of shareholders equity. In 2008 it was 18.99; it slightly decreases in 2009 by 18.65% and again decreases in 2010 by 16.93%.

Name of ratio Gross Profit Margin

Formula: GROSS PROFIT MARGIN = (Gross Profit / Net Sales)*100

Show in table
Year 2008 37,058, 030 60,942,798 60.81% 2009 37,458,048 77,947,697 48.06% 2010 43,221,658 88,472,134 48.85%

Gross Profit a Net Sales b Gross Profit Margin Ratio (a/b)*100

Working:
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Gross profit = Mark up revenue - Mark up expenses Net Sale = Mark up Revenue

Graphical Presentation of Gross Profit Margin Ratio

2010

48.85
Gross Profit Margin Ratio

2009

48.06

2008 0 20 40 60

60.81 80

Interpretation:
In 2008 the profit margin ratio is 60.381 abut in 2009 and 2010 it shows decreasing trend. It is due to increasing of mark up expenses more quickly than mark up revenue.

d) Activity Ratios Activity ratios measure a firm's ability to convert different accounts within their balance sheets into cash or sales. These include: Total Assets Turnover
54

 Fixed Assets Turnover

NAME OF RATIO Total Assets Turnover

FORMULA: TOTAL ASSET TURNOVER RATIO = Net sales / Total Assets

Show in table
YEAR Net sales a Total Assets b Total Assets Turnover a/ b 2008 60,942,798 817,758,326 0.0745 Times 2009 77,947,697 944,582,762 0.0825 Times 2010 88,472,134 1,035,024,680 0.0855 Times

Working:
Net sale = Mark up Revenue / Interest Earn / Return

Total Assets: Cash and balances with treasury banks + Balances with other banks + lending to financial institution + Investment + Advances + Other asset + operating fixed asset + Defferd tax asset-net

Graphical Presentation of Total Assets Turnover

55

2010

0.0855
Total Assets Turnover

2009

0.0825

2008 0.065 0.07

0.0745 0.075 0.08 0.085 0.09

Interpretation:
Total Assets Turnover ratio of all three years shows the increasing trend in 2008, 2009 and 2010. The trend shows that bank is using its assets well because it is contributing more towards sales. As we see in year 2010 the Total Assets Turnover is little bit increase as compare to other two years.

Name of ratio Fixed Assets Turnover

Formula: Fixed Assets turnover = Net Sales / Fixed Assets

Show in table
Year 2008 60,942,798 24,217,655 2009 77,947,697 25,147,192 2010 88,472,134 341,560,700

Net sales a Fixed assets b Fixed Assets turnover a/ b

2.52 Times

3.10 Times

3.29 Times

56

Working:
Fixed Asset = Operating Fixed Assets Net Sale = Mark up revenue / Return / Interest Earn

Graphical Presentation of Fixed Assets turnover

2010

3.29
Fixed Assets turnover

2009

3.1

2008 0 0.5 1 1.5 2 2.5

2.52 3 3.5

Interpretation:
This Fixed Assets turnover ratio shows increasing trend in every year like in 2008 Fixed Assets turnover is 2.52 times and its increases in 2009 up to 3.10 times and it also and more increase as compare to 2008 and 2009 up to 3.29 times. Fixed assets usage is satisfactory because these are contributing more towards sales.

e) Market Ratios
57

Market ratios are commonly used by the investors to assess the performance of a business as an investment and also the cost of issuing stock. These include: Dividend per share Earning per Share Price/Earning Ratio

Name of ratio Dividend per share

Formula: Dividend per share = Dividend paid to share holder / Average common share outstanding

Show in table
Year Dividend paid to shareholder Avg. common share outstanding Dividend per share 6.81 Rs. 5.41 Rs. 5.991 Rs. 896975 1076370 1345463 2008 6,104,894 2009 5,820,338 2010 8,060,510

Working
58

Avg. common share outstanding= Share capital amount / Par value of share Year Avg. common share outstanding 2008 =8,969,751/10 =896975.1 896975 2009 =10,763,702/10 =1076370.2 1076370 2010 =13,454,628/10 =1345462.8
1345463

Graphical Presentation of Dividend per share

2010

5.991
Dividend per share

2009

5.41

2008 0 2 4 6

6.81 8

Interpretation:
The given graph and table shows that in year 2008 the Dividend per share is 6.81 but it decrease in 2009 and again increase in 2010. Dividend per share ratio informs about the price of shares in the market also tells the value of the banks shares price. This ratio for the bank is rising 2010 as compared to the 2008, 2009.

Name of ratio

59

 Earning per Share

Formula: Earning per Share = Profit Available to shareholders or Net income

after tax/ No of shares outstanding

Show in table
Year Net income after tax No of shares outstanding 896975 1076370 1345463 2008 15458590 2009 17561846 2010 17563214

Earning per Share

17.23 Rs.

16.32 Rs.

13.05 Rs.

Working
Net Income:
Net profit or net income is the profit after tax which is obtained as mark up revenue markup expenses = Gross profit

Gross profit - (Provision for advances + Provision for investment + Provision lending to financial institution + Bad debts written off) = Net mark-up income

Net mark-up Income + Fee & commission + Dividend income + Exchange income + Other income+ gain on sale of securities = total income 60

Total income - Administrative expense - Other provisions - Other charges + share of income=profit before tax

Profit before tax- tax = Profit after tax or net income No. of share Outstanding = Share capital amount / Par value of share

Graphical Presentation of Earning per Share

2010 2009 2008 0 2 4 6 8 10 12

13.05
Earning per Share

16.32 17.23 14 16 18 20

Interpretation
Earnings per share serve as an indicator of a company's profitability. The reason of increase earning per share is to increase the net income of the company and the reason of fallen earning per share is that net income is decreasing and the outstanding share of the company. After 2008 its decreases in 2009 and 2010

Name of ratio

61

 Price/Earning Ratio
Formula: Price Earning Ratio = Current market Share price / Earning per Share

Show in table
Year Market value per share Earning per Shares Price Earning Ratio 2.9205 Rs. 4.5570 Rs. 5.8866 Rs. 17.23% 16.32% 13.05% 2008 50.32 2009 74.37 2010 76.82

Working
Source:
Current market Share price from http://www.kse.com.pk/ EPS is available in balance sheet.

Graphical Presentation of Earning per Share

62

2010 2009 2008 0 1 2

5.8866
Price Earning Ratio

4.557 2.9205 3 4 5 6 7

Interpretation
The Price Earning ratio is greater in 2010 as compare to 2009 and 2008. Price Earning ratio doesn't tell us the whole story by itself. It is usually useful to compare the Price Earning ratios of one company to other companies in the same industry

13. Future Prospects of the Organization

63

Am doing internship in national bank of Pakistan and observed during internship and see detail in NBP websites and internet that the future of National Bank of Pakistan is vary bright and the expansion of NBP is increasing day by day and during the calculation of ratio I observed that the earning of NBP is high as compare to base or previous years. The most three ratios to check the future prospects of the entity and all three ratios shows increase every year these there ratios are current asset ratio, Working capital, Gross Profit Ratio. But NBP is gearing challenges faced by the domestic banking industry due to innovation and advancement in international banking. The future of NBP is bright and NBP is maintaining its position to set higher standard of achievement because when I calculate the ratios all represent increasing moment and all are positive it means the bank has capability to pay off and its debt is also superb.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.

14. Conclusion
64

I am doing my internship program in the largest Government bank of Pakistan its National Bank of Pakistan. NBP is one of the leading banks in banking sector. During my stay of 6 weeks at NBP its my 1st practical life experience, I learnt a lot of task, many professional skills. I also learned about how to deal with public. NBP has 1254 nationwide and almost 25 branches operating in other foreign countries including USA, China, France, Hong Kong, Azerbaijan, Bangladesh, and Hong Kong. National bank of Pakistan is one of the biggest online banks in Pakistan. NBP is a government bank that why it works according to rules set by the state bank of Pakistan. NBP is also involved in commercial banking. It is a part of State Bank of Pakistan and it is its major strength.

National Bank of Pakistan establish in the National Bank of Pakistan ordinance 1949. Am doing my internship in NBP if I say the future of NBP is bright it will not be wrong. I observed during my training in NBP the paper work of NBP is awesome but now a day of technology the technology is an impact to survive in the market and to be in competition. Every organization has some weakness and during my internship in NBP F10 branch Islamabad I also observed it covers all its weakness and take opportunities at right time surely it can be in the way of progress insh Allah and will contribute in overall progress of NBP at national level as well as the international level.

When I calculate the Ratio analysis of National Bank of Pakistan it shows that NBP is a most rising bank with highest return on capital, largest market share amongst all Banks in Pakistan. NBP carries highest cost to Income ratio as compare to all other commercial banks. But still thinks that there is need for development to overcome on weaknesses in order to keep its position as an excellent in banking field. Keeping in view the financial ratios it is observed that Net assets of the NBP are increasing day by day. The net profit is also increasing which may attract the investors. The profit of national bank of Pakistan is also increasing day by day that attract the customers and investors. This ratio of NBP is increasing which shows large numbers of the assets are financed by the debts which is not good. Positive working capital ratio

65

shows that its assets are more than liabilities, so the bank is capable to pay its liabilities. Ratio shows that NBP is utilizing its Assets efficiently. NBP should fully concentrate to improve its performance and standards to meet the challenges by the economy as well as by the competitors and for this purpose it needs to overcome the problems and improve the quality of services specially in advance section, that will prevent it from huge losses.

15. Recommendations for Improvement

66

 Improve its EPS because its shows company profitability. Increase sale and reduce expenses to earn better profit margin Improve liquidity position by increasing its sale Increase the current assets as compared to current liabilities Proper training of staff members Prevailing friendly environment Complaint counter should be available Working capital should be positive .
67

16. Reference & Sources used

Website of National Bank of Pakistan www.nbp.com.pk Annual Report of National Bank of Pakistan Newspaper Dawn Newspaper The Nation Newspaper Business Recorder

68

Miss Asia Aslam (Branch Manager) Auditors report of National Bank of Pakistan Searching from different websites from Internet

17. Annexes
http://www.nbp.com.pk/Publications/index.aspx

http://www.nbp.com.pk/Publications/AnReport2008.aspx

http://www.nbp.com.pk/Publications/AnReport2009.aspx

http://www.nbp.com.pk/Publications/AnReport2010.aspx

69