CHAPTER 1

INTRODUCTION TO REPORT

1.1. Background of study:

The study is about the internship at NBP. Internship is an integral part of all management courses
at Department of Management Sciences Hazara University. Students are required to spend a
certain period of time in an organization to get the firsthand knowledge about the actual situation.

This study has been conducted in NBP, Shinkiari Branch. National bank is a highly profitable
bank, having a large network at home country and abroad. To know about the organization and
function of the organization, it is important to work there. Internship for two months has helped
students to get some useful information about the NBP.

The NBP is one of the first government-recognized banks in Pakistan. National bank was founded
on 9, Nov 1949 and began functioning 20, Nov 1949.

There are certain characteristics that place the NBP apart from other nationalized commercial
banks. These characteristics are the reasons for the development of the NBP. The most important
feature of the NBP is, it acts as an agent for the State Bank, where SBP does not have its own
branch. National bank is also the trustee of the National Investment Trust (NIT), one of the nation's
top financial institutions. We have a responsibility to mobilize small savings. The establishment
of the NBP thus meant another milestone in the development of the banking industry in Pakistan.

1.2. Purpose of study:

The purpose of this report is to define and describe the various functions and products that banks
offer to their valued customers, identify some of the drawbacks associated with bank operations,
analyze the performance of the bank, Recommendation to management.
This study can help students write reports about Bank. This can help management of NBP in
improving bank performance. National bank is one of the oldest and most well-established banks
in the public sector, the NBP is preferred to gain more knowledge of the organization. It is also a
source of degree requirements and practical knowledge. The NBP internship had the following
specific goals:

 Observe working in various departments of National bank.

 Develop relationships to get more information.

 Apply management skills in the actual workplace.

 To gain confidence while interviewing heads of different departments.

 Development of analytical techniques for organizational analysis and financial analysis.

1.3. Scope of study:

The two-month period was well adequate to the completion of bank report and observation. NBP
is one of the oldest and best-established banks in Pakistan. Efforts have been made to study the
bank's existing settings and functions.

Problems faced by Bank identified and remedial measures have been proposed to solve these
problems. During the internship at National bank shinkiari branch, the following departments were
observed.

 Department of deposits.

 Department of remittances.

 Department of advances.

 Department of A/C opening

 1.4. Limitations:

It is difficult to analyze the large range of banking business within a limited period of six months.
Lack of information is another limitation of the study.

1.5. Methodology:

During internships, the most important task is to collect as much quality information as possible
about the organization. For this reason, we used many of the techniques to gather the necessary
data and compile reports. The methodology adopted for this study is based on primary and
secondary data.

1. Primary Data:

The first hand data, i.e. the data collected for the first time is called as Primary Data.

Firsthand data, i.e. first collected data, is called primary data

Primary data sources:

 Unstructured interviews of bank staff.

 Private conservation.
 Questionnaire.
 2. Secondary Data:

 National bank Annual Reports.

 Guidebooks of departments of NBP.

 Appropriate books to study.

 Brochures.

 Internet.
 CHAPTER-2

INTRODUCTION TO NBP

2.1. Organogram:
2.2. NBP history:

With the establishment of a central bank, banks have reached a new era of bank development.
Soon, the industry was facing another problem of considerable size. This took place in late 1949.
In September 1949 the UK government devaluated the British currency and fixed the currency in
both India and Pakistan at a fixed exchange rate in pounds. In line with the UK government's
decision, the Government of India also devalued the Rupee to maintain its equality with the pound.
However, Pakistan did not lower the value of the currency. India did not see Pakistan's decision in
the right spirit, and Pakistan refused to bring in currencies alongside India, resulting in a crisis of
transactions between the two countries. India refused to dismiss Pakistani jute because retaliation
led to the financial crisis of jute growers and jute growers could not get paid. Only commercial
banks in the public sector can provide payments to replace the financial distress of jute growers.

On 9th November 1949, the order was promulgated by the Governor-General, NBP, which began
functioning from 20th November 1949, promptly and decisively depending on the situation. The
establishment of the NBP showed the achievement of another milestone in Pakistan's banking
development.

2.3. Activities performed by NBP:

NBP provides commercial banking services including:

 Dealing with treasury transactions of GOP as an agent to the SBP.

 Offering services on the basis of Trust Deed as trustee of the NIT including safe custody
of securities on behalf of NIT.

 Acceptance of deposits for current deposits, time deposits and profit and loss sharing
accounts.

 Borrow funds and raise funds from other banks.

 Lending money to customers.

2.4. Mission:

“Getting to know the market by institutionalizing a culture of merit and performance, creating a
strong and distinctive brand identity. Achieving high-level financial performance and adoption and
living from our core values”.

2.5. Vision:

“Being a prominent financial institution in Pakistan and achieving market recognition both in
quality and service delivery as well as in product range of products”.

2.6. No. of Regions of NBP:

Province No Of Regions

KPK 12

Punjab 30

AJK (Azad and Jammu 2

Kashmir

Sindh 18

Baluchistan 5

Total 65
2.7. Departments of NBP:

1. Deposits Department:

This department will open accounts, close accounts, respond to inquiries about customer accounts,
cheque books and so on. Also, there is a locker under the supervision of this department.

2. Remittances Department:

This department is responsible for internal and external remittances through the draft (DD), (TT)
or collection of cheques. It also provides account statements for clients and answering their
questions regarding their accounts.

3. Advances Department:

Its main function is to communicate with regional offices and other officials at the headquarters
and to promote consumer loans. It checks the consumer credibility and maintains loans until
maturity.

4. Cash Department:

Accountant is head of department. All cash is provided with fixed amounts in morning from which
they can make payments. Domestic currency bills and payments are handled in cash. Controls are
accepted and submitted for transfer or pickup. All the money is kept in the strong room. Money
handling is a very dangerous job, so only the authorized person is allowed to enter the cash
department.

5. Foreign Exchange Department:

This department is responsible for opening and maintaining foreign currency accounts. Currently
he deals with EURO, USD & POUND accounts. It also provides delivery and receipt facilities via
TT, MT, etc. It also facilitates exporters and importers by opening and cleaning LCs for them.
2.8. Branch setup of NBP Shinkiari Branch:
2.9. Services of NBP:

Variety of services provides by NBP.

1. Demand drafts:

This is the best service offered by the NBP. You can use this service if you want to remit money
safely and quickly. This is a fast and safe service of NBP at a very reasonable cost.

2. SWIFT system:

The SWIFT service was introduced to facilitate the client of the NBP. It digitizes the service to
make the customer easier. If a person wants to send his money rapidly this is the fastest service
sending money all over the country. This is a service based on telecommunications in the field of
home remittance.

3. LOC’s:

The NBP is like gold for businessmen. They are offering this service to ease businessmen. Now,
they can easily and safely transfer money from one place to another. If a person is a commercial
enterprise, then the National Bank letter of credit service is the tool you want to find. With its
competitive cost, safety tax and ease of trading, the National Bank letter of credit is the best way
to conduct business transactions. This is a more convenient service for NBP.

4. Traveler'scheques:

The TC’s is a negotiable instrument and there is no limit to the validity of cheque. The NBP TC is
only widely available in 700 branches. The TC can only be honored at the National Bank’s 400
branches. TC has no purchase restrictions. This is a safe and secure way.
 5. Pay order:

This is another service provided by the NBP. This is also a facility to transfer funds from one place
to another. This is the most secure and private ways to transfer your money. National Bank’s fees
for this service are very low, than competitors. If you do not have a client, the charge is very low,
Rs 200 will be charged, the client will have a 50% discount, and the student will only charge Rs
35.

6. Mail transfers:

Each time the National Bank mails the transfer service, one person can be used. This is a fast and
safe service. The National Bank offers very suitable prices in this highly competitive environment.
There is a charge of 50 rupees for the exchange rate, and 75 rupees for postage should apply.

7. Foreign remittances:

In order to compete in the market, the National Bank of Pakistan is providing remittance services
to its clients. They can use this service to receive money from foreign countries or remit money to
others.

8. Investments for short-term:

The National Bank recently provided its clients with a very attractive short-term investment plan.
Clients can now invest a small amount of money and can obtain high value-added funds. The
period can be from 03 months to 01 years. This is a very short-term investment

9. NIDA:

The national income daily account service was launched in December 1995 for corporate
customers. This is a current account plan that is part of the profit and loss system of the entire
Pakistani operating account.
2.10. Equity investments:

The National Bank will strengthen the existence of the stock market, make it better and gain
investor confidence. The bank has taken many measures to be proactive and to dominate the stock
market
 CHAPTER- 3

FINANCIAL STATEMENTS ANALYSIS

3.1. Consolidated balance sheet:

3.2. PLS:
3.3. Cash flow statement:
3.4. Current ratios:

This ratio shows a organization ability to cover short-term debt through short-term assets.

The 2-year comparison of National bank is as follows.

USD “000”

Current asset/current debt Current ratio

2017 1,694,232/119,502 14.17

2016 1,580,201/92,261 17.12

Table# 3.1

Analysis:

 The current ratio for the financial year 2016 is in decline from the financial year 2017. It
tells that for every Rupee 1 current liability it has 14.17 rupees, which covers through
current assets.

 The current ratio for 2017 fiscal year is declining from the 2016 fiscal year. It means that
current liability of Rupee 1, it has 14.17 rupees of current assets.
3.5. Quick acid ratio:

QAR measure of liquidity. This ratio is the same as the current ratio except that this ratio does not
include inventory and prepayment is probably the least liquid part of the current asset. This ratio
mainly focuses on short-term assets, cash, securities, A/R and advances.

USD “000”

Current assets-inventory QAR

/current debts

2017 20,757,960/119,502 173.70

2016 17,212,773/92,261 186.56

Table# 2.2

Analysis:

Acid Quick Ratio for FY 2017 decreased from 186.56 in 2016 to 173.30. The ratio in 2017 is less
due to excessive prepayment. The reason we need to improve this ratio next year is because
prepayment amount is small.
3.6. Cash ratios:

Sometimes it is necessary to look at the company's liquidity from an extremely conservative

standpoint, for example the company may have committed its receivables and inventories. In such
situations, the best indicator of short-term liquidity is the cash ratio.

USD “000”

Cash/Current debts CR

2017 1,449,781/199,502 7.26

2016 1,4499,825/92,261 157.16

Table# 3.3

Analysis:

 In FY 2017 cash ratio is decline very fast because current debt increase very fast the value
of cash ratio in 2016 is 157.16 rupees.

 In 2016 the value is 157.16 decrease 7.26 in 2017

 This is bad sign for NBP Investors

3.7. Operating cashflows to current debt ratio:

The operating cashflow to current debts ratio represents the cash flow per unit of current liabilities
of the company.

USD “000”

Operating cashflow/ current Operating cashflow to current

debts debts

2017 (2,111,920)/199,502 (22.89)

2016 419,404/92,261 2.10

Table# 3.4

Analysis:

 National bank has reduced its operating cash flow to current debt ratio. The decrease was
due to cash flow operations, which fell more than seven times.

 In 2016 the value of ratio is 2.10 and its value decrease 2017 to (22.89).

 The reason is that the operating cash flow grow rapidly.

3.8. Turnover of receivables:

Turnover of receivables provides insight into the quality of receivables or advances of the company
and the extent of its success in the collection.

USD “000”

Return earned/ advances Turnover of receivables

2017 1,117,716/6,704,978 0.16

2016 1,041,765/6,057,787 0.17

Table# 3.5

Analysis:

 In 2017 bank turnover of receivables is slightly decrease from the previous years.

 In 2016 the figure of turnover of receivables is better than 2017

 The value in 2016 is 0.17 then it decrease to 0.16 in 2017.

 This ratio decrease because of in advances

3.9. Assets turnover:

In general, total asset turnover measures the ability of a business to generate interest/sales through
the use of assets.

USD “000”

Revenue earned/ total TAT

assets×100

2017 1,117,716/21,518,535 5.10%

2016 1,041,765/17,944,817 5.80%

Table# 3.6

Analysis:

NBP asset performance declined in 2017 to 5.1%0% against 2016 at 5.80%. In other words, we
can say that each dollar investment in total assets produces 6 as revenue. The decline rate is mainly
due to the decrease in the total amount of profit / gain earned in 2017.
3.10. Fixed assets turnover:

Sometimes it is necessary to find the effect of fixed assets to generate sales or profit. Fixed asset
turnover is a tool to find out the effectiveness of a firm's fixed assets to generate the Interest
revenue.

USD “000”

Revenue/ Fixed assets×100 FAT

2017 1,117,716/306,313 364%

2016 1,041,765/308,451 337%

Table# 3.7

Analysis:

A two-year comparison of fixed asset sales to the National bank shows that this ratio has risen in
the year 20017. The increase in the total amount of markup income and decrease in fixed assets
has raised this ratio.
3.11. Net profit margins:

This is conservative way for sales profitability. This percentage measures the net earnings per
dollar of sale in dollars.

USD “000”

Net profit/ revenue earned NPM

2017 211,432/1,117,716 0.1891

2016 209,090/1,041,765 0.2007

Table# 3.8

Analysis:

 The bank has significantly decreases its net profit. In 2017, it earned 0.1891 USD markup
while the 2017 comparison showed 0.2007 for every dollar mark or return.

 The value of profit margin decreases from 0.2007 to 18.91

3.12. Gross profit margin:

This ratio represents the company's revenue associated with sales. This not only measures the
effectiveness of your company's operations, but also shows how your company's products or
services are delivered.

USD “000”

Gross profit/ revenue earned GPM

2017 494,527/1,117,716 0.44

2016 502,045/1,041,765 0.48

Table# 3.9

Analysis:

National bank had a lower gross profit margin in 2017 than in 2016. The NBP has become
ineffective in producing affordable services on costs and charging them. While it fell in 2017, it
showed a good sign of it.
3.13. Return on investment:

Investment returns measure the firm's ability to use the assets to make a profit by comparing profits
to assets that make a profit from the du pont approach.

USD “000”

N.P/Total investment ROI

2017 211,432/21,518,535 0.0098

2016 209,090/17,944,817 0.011

Table# 3.10

Analysis:

National bank showed a low ROI in 2017 compared to 2016. Its ROI decreased from 2016 to 0.011
to 0.0098 in 2017. Asset Turnover, though declining, is still improving. NBP will bring the ratio
up.
3.14. Return on equity:

This ratio compares Net profit to the equity that the shareholders have invested in the company.
Return on equity is high reflecting the ability to accept strong investment opportunities and cost
effective management. A high return on equity reflects the business acceptance of strong
investment opportunities and effective cost management.

USD “000”

N.P/equity ROE

2017 211,432/192,680 1.09

2016 209,090/292,680 0.20

Table# 3.11

Analysis:

In the above ratio comparison, the ROE ratio for 2017 increased from 0.20 in 2016 to 1.09.
Although stock dividend and asset turnover have declined, the improvement in net profit margins
in 2017 is favorable to the ROE ratio.
3.15. Advances to deposits ratios:

The bank compares advances with deposits and see comparisons of 2 years.

USD “000”

Advances /Deposits Advances to deposits

2017 6,704,978/15,641,216 0.42

2016 6,057,787/15,007,919 0.40

Table# 3.12

Analysis:

There is an increase in both advances and deposits in 2017. This shows a good signal to the bank.
But it declined compared to 2016.
3.16. Investment to deposits ratios:

The banks compares its investments to deposits and sees comparisons of 2 years.

USD “000”

Investment /deposits ITOR

2017 11,742,166/15,641,216 0.75

2016 8,117,221/15,007,919 0.54

Table 3.13

Analysis:

It shows that the bank made a good investment to increase its total in 2017, compared to 2016.
That is a good sign for the bank; More money is created in this way.
3.17. Equity multiplier:

Equity multiplier compares the company's assets to Equity.

USD “000”

Assets/Equity E.M

2017 21,518,535/192,680 111.68

2016 17,944,817/192,680 93.13

Table 3.14

Analysis:

Equity ratios have also been increased in 2017. The key factor here is once again the amount of
equity has increased significantly. But increased in 2017, with an increase both in assets and equity.
 CHAPTER-4

SWOT ANALYSIS OF NBP

SWOT Analysis is an acronym used for

S - Strengths,

W - Weaknesses,

O - Opportunities,

T - Threats.

4.1. NBP strengths:

i. National bank is high profitable bank.

ii. The one bank in Pakistan providing advance salary for 10 months.

iii. National bank uses the quickest way to transfer funds.

iv. National bank strength is high liquidity.

v. National bank is excellent financial institution.

vi. Due to strong government support, people have more confidence in NBP.

vii. National bank play important role in the development of economy.

viii. Bank with more deposits than any other commercial bank.

ix. Professional trust.

x. Highest ratios of deposits from all other banks of Pakistan.

xi. Recognize employees' hardwork through motivations.

xii. Knowledge is committed to change for intellectual.

4.2. NBP weaknesses:

 NBP has an excellent combination of staff based on experience, but their training capacity
does not depend on the requirements of a rapidly changing banking environment.

 Comparison with other private banks, NBP employees have much weaker customer
relationships.

 Do not keep in touch with customers.

 Most employees come from families with a strong political background, so it is difficult to
eliminate them or punish them for negative behavior.

 Technical training for employees is insignificant. For example, if there is no computer

operator, there is no backup trainer who can record daily transactions.

 The bank is mechanized and does not have the flexibility for encourage creativity.

 Employees do not cooperate with subordinate employees in other branches. The manager's
control does not work.

 Managers have very low autonomy and can provide their customers with more incentives
and value-added services. Some employees lack commitment and professionalism. The
staff is always eager to leave the bank as soon as possible. They are also considered to start
their actions later. Organizational culture is not cooperative and friendly. Some managers
and some senior staff members observed nepotism.

 Lack of technically trained staff. Although the presence of technology many of the work
done manually such as letters, fax messages and other calculations, can be easily done in
MS Word and MS Excel.

 Job distribution is not as good as business. This is the end result of inefficiency and delay.

 A lot of time is spent searching for a weekly document.

  Staff spend more time collecting than needed. Banking collections are usually late due to
lack of staffing.

 No affords has been made to recover cash debts. There are no complaints and suggestions.

 Clients who come to the bank for TT, TC, etc. are not received with an open mind, thus
depriving the bank of income.

 Financial audits are being conducted, but operational audits do not pay appropriate
attention.

 There is a shortage of effective R & D that can scan micro and macro data for future
planning and strategy.

 There is no procedure to encourage medium to long-term management team to demonstrate

creativity.

 Major weakness is the professionalism lack in bank.

 Instructions are conveyed in a casual way rather than systematically

4.3. NBP opportunities:

 Marketing strategies put money into new projects.

 NBP has great opportunities in microfinance.

 NBP privatization.

 It is a good opportunity to use the skills of well-educated young talent to improve your
business.

 Advances is basic zone and has great potential for profit share. This area may be profitable
for bank.

 Business loan leasing.

4.4. Threats to NBP:

 The greatest threat to operational success is better competitor services. Many private
banks provide NBP with a higher rate of return.

 Banks in the neighbor of National are free online. There are Union Bank, HBL, MCB,
SCB etc.

 Gaining profits is another threat to NBP's success. The branches of NBP are very close
to each other. All these branches took away each other's customers.

 National bank has unsatisfactory customer because of growth rate. Most of these clients
were observed to be dissatisfied with the delay of the service.

 The biggest threat to NBP performance is the decline in employee morale. They felt
that they did not provide bonuses and they did not pay due attention to the speeches in
the meeting.

 A group of high-pressure interests that continually pose a threat to the NBP is

developing..

 Acquisition of different FI’s.

 Establishing and expansion of new financial institutions.

 Pressure built by politicians.

 Private bank offers new products and services.

 Human resources Quality

4.5. NBP Shinkiari Branch critical analysis:

The critical analysis is about the NBP Shinkiari Branch beside some of the good aspect of the
branch, and there are some passive aspects that should be considered first. During the internship,
I noticed some problems.

i. Professional Training:

The number of employees is six general managers to control all employees. The operations
manager controls all banking operations. Two cashiers are responsible for controlling a cash
activity at the branch. One of the cashiers is Computer Work. They do not have the necessary
background for proper banking operations. The background of many employees is completely
unrelated to the banking industry. They do not understand modern technologies like computers,
nor do they know how to use them properly. Although the Staff Training Institute has jobs in all
major cities, it has performed poorly. For this purpose, these staff colleges should be reorganized
and their syllabus should be completed to help employees understand the changing ways.

ii. Transfer Criteria of transfer:

Transfer criteria and approaches truly need change. There are six individuals in the branch for all
the more then 5 years whereas some of them are dependably in turn. Accordingly, the individuals
who are for all time working they have no dread and they don't work legitimately and the
individuals who are dependably experiencing significant change they are not intrigued by buckling
down in light of the fact that they needed to leave the seat and needed to exchange to somewhere
else with net work. So there are not such settled tenets for a worker exchange. At last the bank
needs to endure misfortunes. The exchange implies when a man is moved starting with one place
then onto the next, exchange are not legitimately completed. A portion of the workers are
ceaselessly serving at a similar post. They are basically turned at a similar branch. Subsequently,
it is suggested that uniformly pivot of each worker should happen following three years in various
branches of the bank.
iii. Wrong Decision of the Government:

In the past, each department’s funds were allocated to its own department, but now education and
health department salaries are paid to teachers, doctors and nurses through banks. In order to
receive their salary, all employees of the department came to the bank, which is out of control for
bank management. Even ladies and elders have to wait for hours. And now utilities are being
received there, which is also an important burden on the banks.

iv. Dress Code:

Most employees came to the bank wearing very casual clothes. This shows that they do not care
about the reputation and image of the bank, which left a bad impression on the customer.
 CHAPTER-5

FINDINGS AND RECOMMENDATIONS

There are always good ways to do things, so there are some of the recommendations recommended
by banks based on critical analysis.

5.1. Improvement in staff qualification:

Academic staff are quite qualified, but most of the staff do not have professional qualifications. In
other words, you need to obtain a diploma in a bank. It also helps banking and promotion. The cost
of diploma in the banking industry is low. It has three stages, the cost per stage is Rs 3,500.

5.2. Required trained staff:

Appropriate training should be given to branch officials. Staff college people sometimes have
difficulty in visiting Staff Collage Peshawar for the staff to take the necessary training and need to
train the staff. Estimates for college staff for entering a branch and teaching them will be 1,000 per
day for college staff for one day. So if two people after six months two days after receiving the
money, Rs .15000 /year, which is insignificant.

5.3. Technology improvement:

The advantage of establishing a network is that it should be recommended for online banking
facilities and ATM facilities. Existing computers should be connected to each other over the
network, only 100,000 rupees at a time. Different departments will be easy to work, easy, efficient
and least time-wasting.
5.4. Avoid rank influences:

Sometimes senior officials will come and hope that they will give priority. In this case, banks
should strictly follow the "first come, first served" principle. This will keep the trust of other
customers, that is, they will not be ignored if they are not ranked

5.5. Maintain secrecy:

The branch must maintain the confidentiality of its client accounts, especially when the bank is
required to notify the bank of the financial status and balance in the account.

5.6. Locker facility:

Banks should attract potential customers to make full use of their deposits by expanding gold loans
and all other types of loans. This will increase their business circle and increase profits by reducing
unit costs.

5.7. Staff motivation:

The staff of NBP Shinkiari Branch Mansehra, especially the staff at the lower level, they are
demotivated. They are not satisfied with the bank's performance appraisal system. They also
complained about the nepotism of senior management. Branch managers should establish a
systematic and efficient assessment system to eliminate employee incentives and dissatisfaction.

5.8. Customer orientation:

Each leading organization treats customers as kings. So bank managers need to maintain close
contact with existing and potential customers. He should inform them about the bank's new
products. Customers should be asked about bank services from time to time. The customer’s stated
deficiencies should be eliminated. The relationship between clients and employees should be
gentle, gentle, polite, cooperative and caring. Compared with other private banks, NBP will not do
so now.
 5.9. Rotation of job:

Employees need to go through different seats in different departments so that each employee can
recognize the entire banking system. You can earn profits even without an employee.

5.10. Govt. decision:

The govt. is sending salaries to some of NBP's departments. This has created a lot of shock and
buzz in the banks. At the end of each month, NBP should appeal to the government and ask the
government to regain this order and send their salaries to each department independently. . In
addition to the bank's disaster, NBP did not get anything.