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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MISSION:
• NBP will aspire to the values that make NBP truly
the Nation’s Bank, by:
• Institutionalizing a merit and performance culture
• Creating a distinctive brand identity by providing the highest standards of services
• Adopting the best international management practices
• Maximizing stakeholder’s value
• Discharging our responsibility as a good corporate
SWOT ANALYSIS:
The SWOT analysis is done by the organization for the environmental scanning. The strength
and weaknesses and opportunities and threats are analyzed by organization from the external
environment. NBP SWOT analysis is given below.
STRENGTHS:
A National Bank brand image is its major strength. It has always been considered as the pillar of
the country's economic scenario asset wise or balance sheet wise. Its image, work force, network
and reputation have created a sentimental and emotional attachment of the people with the bank.
Complete computerized networking in strength of the bank. Now the bank has the ability to
compete with any multinational bank as to keep pace with the changing and fast growing world
of today computer have become necessities. The reserve funds indicate positive sign as they have
increased as compared to the previous years.
Another competitive edge that the bank has on the rest of the competitors is its expanding
business worldwide catering for a large and vast group of customer and maintaining standards of
excellence globally and other strength of NBP.
ORGANIZATION CULTURE:
NBP's organization culture was very friendly and interesting. Employees have created a very
cooperative environment among each other. They have created loyalty toward the organization
by deviating their future efforts and energies. The employees take the organizational problem
personals and try their best for the prosperity of the organization.
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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.
INDUSTRIAL POLICIES:
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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January 19, 2010 [ANALYSIS OF FINANCIAL STATEMENT]
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. But
a 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 is
increasing 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 not
only 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 INSTABILITY
This 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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January 19, 2010 [ANALYSIS OF FINANCIAL STATEMENT]
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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January 19, 2010 [ANALYSIS OF FINANCIAL STATEMENT]
Habib Bank Of Pakistan:
History:
HBL established operations in Pakistan in 1947 and moved its head office to Karachi. Our first
international branch was established in Colombo, Sri Lanka in 1951 and Habib Bank Plaza
was built in 1972 to commemorate the bank’s 25th Anniversary.
With a domestic market share of over 40%, HBL was nationalized in 1974 and it continued to
dominate the commercial banking sector with a major market share in inward foreign
remittances (55%) and loans to small industries, traders and farmers. International operations
were expanded to include the USA, Singapore, Oman, Belgium, Seychelles and Maldives and
the Netherlands.
On December 29, 2003 Pakistan's Privatization Commission announced that the Government
of Pakistan had formally granted the Aga Khan Fund for Economic Development (AKFED)
rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD
389 million). On February 26, 2004, management control was handed over to AKFED. The
Board of Directors was reconstituted to have four AKFED nominees, including the Chairman
and the President/CEO and three Government of Pakistan nominees.
Our Culture:
At HBL we have created a challenging environment that encourages creativity and commitment.
In our pursuit of excellence, we are focused on attracting, developing and retaining the best
talent in the marketplace. Our dynamic culture offers diverse growth opportunities across
Pakistan and in 25 countries around the world. HBL fosters a work environment where
employees can realize their potential whether locally or in the international arena. Thus, we
enable our employees to achieve their professional goals while keeping in synch with the bank’s
overall objectives.
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January 19, 2010 [ANALYSIS OF FINANCIAL STATEMENT]
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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January 19, 2010 [ANALYSIS OF FINANCIAL STATEMENT]
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 depositor’s 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 a
modern 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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January 19, 2010 [ANALYSIS OF FINANCIAL STATEMENT]
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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January 19, 2010 [ANALYSIS OF FINANCIAL STATEMENT]
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 to
earnings 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 margin
and 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 returns
that 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 and
charges 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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January 19, 2010 [ANALYSIS OF FINANCIAL STATEMENT]
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 as
NBP 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 didn’t improve because this asset is not yet used to
increase 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% 266.74 250.13
Deferred 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 0
Other 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 investments
Provision 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 on
Investments 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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