CHAPTER 2

Financial Analysis of the National Bank

Analysis of financial statements is called financial analysis of the organization

These are three types of analysis
2.1 Horizontal analysis
In this analysis one particular can compare with the same category of item of other year. More
than one year data is required for this analysis.
2.2 Vertical analysis
Common size or vertical analysis we compare it to the total assets and other factors as a base
year. Companies can purchase the fixed assets and a credit to its customers. As investment
increases, which means that it has increased the company's loans growth and their ability to work
because of this.
2.3 Horizontal Analysis of Balance Sheet
Particulars

2013

Cash and Balance with treasury

banks
Balances with other banks

2014

2015

1,574,693

977,744

1,634,144
318,016

183,003

124,837

85,240

516,921

147,892
526,118
10,685,519
580,230
-

138,279
231,471
10,965,479
722,342
-

1,112,566
Lending to financial institutions
Liabilities
Bills payable
Borrowings from Financial
Deposits and other accounts
Subordinates loan
Liabilities against leased Asset
Other Liabilities
Defer Tax Liabilities

109,589
380,247
12,284,703
830,380
-

Total Liabilities

11,940,154

12,057,608

13,604,938

1,607,602

1,598,910

1,817,149

3,530.270
6,807,482
831,062
305,860
35,682
13,547,756
1,607,602

3,945,060
6,171,814
811,839
344,027
109,161
13,656,518
1,598,910

5,590,668
6,271,996
913,977
331,932
98,367
15,422,087
1,817,149

2013

2014

2015

Net Asset
Current Asset
Investments
Advances
Other Asset
Operating Fixed Asset
Defer tax Asset
Total Asset
Total Representation
2.4 Vertical Analysis of Balance Sheet
Particulars
Cash and Balance with treasury
banks
Balances with other banks

1,574693

977,744

1,634,144
318,016

183,003

124,837

85,240

516,921

3,530,270
6,807,482
831,062
305,860
35,682
13,547,756

3,945,060
6,171,814
811,839
344,027
109,161
13,656,518

5,590,668
6,271,996
913,977
331,932
98,367
15,422,087

147,892
526,118
10,685,519
580,230

138,279
231,471
10,965,479
722,342

10,9589
380,247
12,284,703
830,380

1,112,566
Lending to financial institutions
Current Asset
Investments
Advances
other Asset
Operating Fixed Asset
Defer tax Asset
Total Asset
Liabilities
Bills payable
Borrowings from Financial
Deposits and other accounts
Subordinates loan
Liabilities against leased Asset
Other Liabilities

Defer Tax Liabilities

Total Liabilities

11,940,154

12,057,608

13,604,938

Net Asset
Represented By
Share Capital

1,607,602

1,598,910

1,817,149

190,429

211,728

211,728

333,755
494,951
1,040,434
550,310
1,598,910

328,379
594,641
1,134,748
675,265
1,817,149

311,943
Reserves
Unappropriated profit
Total
Surplus revaluation of asset
Total Representation

727,017
370,072
1,607,602

2.5 Ratio Analysis

For the analysis of the financial statements of the NBP we use the ratio analysis in order to get a
clear vision about the financial position with simple interpretation.
2.5.1 Liquidity Ratios
The liquidity of a business firm as a nanny is measured by its ability to meet its short term
obligations. The overall financial position, liquidity and solvency of the firm refers to the ease
with which it can pay its bills. The main measures of liquidity are:
Current ratio
Net working capital
Cash ratios
2.5.1.1 Current ratio
Formula:

Current Ratio=Current Assets/Current Liabilities

Year

2014

Year

2015

=13,656,518/12,057,608

= 15,422,087/13,604,938

=1.1133

= 1.134

Interpretation:

1.0 current ratio is often referred to as acceptable, but relies on the approval of one of the
industry in which the firm operates. In 2014 as compared to 2013. The higher current assets to
current liabilities was more liquid banks. This means that the bank's profit, but its fixed assets
with current liabilities, which risk areas at the same time (as long-term investments and deposits)
financing. In 2014 the Bank's current liabilities (increase in current deposits) but an increase in
current assets (short Advances) is greater. It has improved its liquidity position through
investment in existing assets rather than bank fixed assets in 2014.

2.5.1.2 Net working capital:

Formula:

NWC=Current Assets-Current Liabilities

Year

2014:

=13,656,518-12,057,608

Year

2015:

NWC =15,422087-13,604,938

= (1,598,910)

= (1,817,149)

Interpretation: Net working capital is generally used to measure a bank's overall liquidity. NBP
as current liabilities (current deposits), the current assets (short-term advances & investments).
Current bank loans in fixed assets is done using very aggressive approach by investing. Bank
profits but with risk at the same time. 2014 Bank NWC but also by more than the fixed assets
investment in current assets was slightly better. Liquid position of the bank through investment
in existing assets has improved.
2.5.1.3 Cash to current Liability Ratio
Cash to current liability ratio =Total Cash/Current Liability
Year

2014:

Year

2015:

=1,574,693/138,279

=977,744/109,589

=11.39

=8.92

Interpretation This ratio will compare the most liquid asset cash with the most short term
liability(current deposits). NBP has less cash then the current Liability (current deposits) so its
means that bank has invest the depositors money in different ventures.
2.5.2 Debt Ratio
The debt position of a bank indicates the amount of other peoples money being used in
attempting to generate profits.
Formula:
Debt To Assets Ratio=TL/TA*100
Year

2014:

Year

2015:

= 12,057,608/13,656,518 x 100

=13,604,938/15,422,087 x100

=88.29 %

=88.21%

Interpretation:

The ratio of debt bank creditors (measures the proportion of total assets

financed by depositors). Higher than the proportion being used in an attempt to create money
from the money of other people. 2014 Bank Bank's total assets (Advances & Investment for the
leverage ratio is decreased) had been increasing over the last liabilities (current deposits).
2.5.2.1 Debt to Equity Ratio:
Formula:

Debt to equity ratio=Total Liability/S.H.E

YEAR 2014
=12,057,608/211,728

YEAR 2015
= 13,604,938/211,728

= 56.95
=64.26 times
Interpretation: Debt is debt equity ratio indicates the relationship between taxpayers and the
total funds provided by provided by bank owners. It is usually used to measure the degree of
financial leverage. The decline occurred in 2014 and 2014 debt to equity ratio, the ratio was

lower than in 2013, though still greater than the amount of interest the bank distributed dividend
to share holders money by bank was.
2.5.2 .2 Return on Assets: Formula:

ROA=NPAT/TA*100

YEAR 2014

YEAR 2015

=8,166/13,656,518 * 100

=7,136/15,422,087 * 100

=0.06 %

=0.05%

Interpretation: 0.06% Bank and indicates that 2014 was still less than 0.06% return earned
money on every single penny of assets invested in 2013. Without bank NPAT for any additional
payments made to depositors, increased in 2014, the Commission received in 2014 on broader
and better service and compensation Bank delayed payments from customers and tax
concessions has been collected from.
2.5.2 .3 Return on Equity:
Formula:

ROE=NPAT/S.H.E

YEAR 2014

YEAR 2015

=8,166/211,728

= 7,136/211,728

= 0.04

=0.03

Interpretation: It only measures the overall effectiveness of management in generating profits

right back S.H.E. High return on equity firm, in 2013 less than a penny of each shareholder's
investment bank indicated that better0.04 2014, which has gained 0.05 per liter.

CHAPTER 3
SWOT ANALYSIS

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS (SWOT) ANALYSIS

SWOT strengths, weaknesses, opportunities and threats is an acronym. Electrical activity and
resource organization that can be measured to give a competitive edge over competitors.
Environmental conditions that can affect areas show where the weaknesses of the organization's
lack of performance to be more competitive .threats the show. SWOT analysis in the
management of light reevaluates its current mission and goals. They like the original? They need
revision? Now as we want to go?
3.1 STRENGTHS

NBP's total assets stood at Pak Rs.370 billion on December 2001. This included total
earning assets of about Pak Rs.268 billion with gross loan portfolio of Pak Rs.140 billion.
The bank also has an investment portfolio of Pak Rs.91 billion, which comprises treasury
securities, corporate bonds, shares and other securities.

NBP cash provision as percentage of nonperforming loans equal to 60% this coverage factor
for the non performing loans is the highest amongst the nationalized commercial bank.

NBP has an extensive domestic branch network of 1200 (according to the latest data)
branches located all over Pakistan. The Bank also has a presence in 19 international locations
including the USA, United Kingdom, Europe and the Far East.

NBP is working as right arm government of Pakistan as it is responsible for all claims of
government for recovery as well as payment. All depositor of NBP are in relief that their
money security is guaranteed by government of Pakistan.

It acts as an agent of the Central Bank wherever the State Bank does not have its own
Branch.

BRIEF SUMMARY OF NBP STRENGTHS

Quality can be characterize as a range where an organization is inside best at doing a few
operations that put the organization at any points of interest in contrast with its rival. MCB has
the accompanying qualities:

a. Has market administration in giving and administrations to the clients

throughout the year.
b. Has more branches and along these lines open to potential clients than some
other banks have item development aptitudes and assets.
c. Muslim business bank can adapt to weight of rivalry effectively.
d. It has advanced innovation and assets for its clients.
e. Staff is youthful and rich in capability and work abilities.
f. MCB has the cooperative attitude of people groups of the region, which is
additionally a resource for it.
g. Has access to all parts of the world through its remote relating bank, in this
manner likewise giving administrations to Pakistanis outside the nation.
h. Offer appealing plans and additionally putting something aside for clients
occasionally.
i. MCB of Pakistan administration has the inspiration to make it best bank of
the nation.
j. The biggest ATM (Automated Teller Machine) systems both broadly and
universally. No other bank in the area has this office of International
Network.
k. MCB RTCs (Rupee Traveler Checks) are broadly acknowledged.
l. The Training Institutes of MCB are a portion of the best Staff Colleges in the
nation where quality-keeping money instruction is given to the recently
named officers, when contrasted with other in the locale.
m. Being the pioneer of Privatization procedure of Banking Sector in Pakistan.
n. MCB is additionally getting a charge out of the administrations of probably
the most gifted Personnel.
o. Maximum rate of Debt Recovery.
p. MCB has the most created (Information Technology) IT Division among
alternate banks in the nation.
q. Having the strongest Equity Base.
r. Solid liquidity position of the bank because of huge arrangement of store.
s. Giving Loans alone in the business sector against Gold Ornamen

t. National bank is the most seasoned bank of Pakistan and initially

nationalized bank and client have more trust in the bank.
u. The NBP performs extra administrations for its clients and also the other
bank client without SBP.
v. NBP has the relative ability in having a larger number of stores than the other
bank. This is a result of the certainty the client have in the bank.
w. The businesses at NBP are offered sensible money related advantage.
Typically two rewards are given Eid-Ul-Fitar and Eid-Ul-Azha.
3.2 WEAKNESSES

NBP staff especially at lower considers their work as burden. They usually waste time in
other task a part in performing their duty. Using government property for there own need.
They are reluctant to accept change brought by latest restructuring efforts.

NBP is far behind in offering modern banking facility like automated teller machines then
other commercial bank in Pakistan as only eighteen branches in all over country have this
facility.

NBP has only forty-four on line branches. While from remaining branches data gathering is
time consuming, and not fool proof. Quantum of settlement within

Different branches are pending because of this updating daily record is becoming very
difficult.

NBP bearing up large burden in running those branches, which are not producing any income
but keep on adding expenditure.

NBP is relying on its traditional sources of income it has not taken benefit from innovation in
banking like introducing retail banking or consumer banking and using any type of scheme to
generate more deposits and producing more advances. Further, more dont even continue its
credit card due mismanagement and lack of control.

Customers have to fallow long lengthy procedure for opening of account as well applying for
debt. Which discourage most of the people to invest in NBP?

In NBP, most of the time merit not has importance in hiring of employees. Such practices are
black spot on the face of bank and resulted big losses and fraudulent acts by NBP own
employees.

The general out look and interior layout of branches are not as required according to modern
banking.

BRIEF SUMMARY OF NBP WEAKNESSES

Weaknesses can be characterize as a territory where an association is not at doing a few
operations as its rival or a thing which an association errands in this manner putting the
association at disservices in contrast with its rival. MCB has the accompanying shortcomings
Advertising abilities of the bank are great yet they have little vicinity at various media.
a. The lower level administration need clear bearing and is not having the
administrative profundity.
b. Workers are deficient with regards to inspiration.
c. No. Of branches is diminishing due to low productivity
d. Branch's interior surroundings don't introduces brilliant picture of the bank in a
large portion of the cases.
e. Correspondence hole between various levels of administration.
f. Absence of the branches in attractive zones.
g. There is no sorted out MIS office.
h. Political obstruction in getting the advance and progresses and other choice is
harming its pictures and execution.
i. There are extremely constrained items offered by the bank when contrasted with
the MNC's and other remote bank.
j. Poor Human Resource Policies
k. Minimum bolstered bank by the administration
l. Less Ratios of Advances when contrasted with stores
m. MCB ought to consider its documentation, should have been be cutoff

n. Lack of staff-per worker client is high side

o. Specialized instruction and preparing of staff is lacking
p. Fund leave give financing to Government at extremely less expensive rate
q. The bank does not advance its corporate picture, administrations, and so forth
on an aggressive way. Henceforth needs a long ways behind in advertising
exertion .A requirement for forceful showcasing in there in the period
promoting in now turning into a part of each association.
r. Inadmissible corporate society of the Bank
3.3 OPPORTUNITIES
Efforts are many opportunities to grow NBP running restructuring of the NBP. National Bank
Boarder of the current management approach. They have taken steps to streamline delectating to
create an environment to improve internal procedures and client services initiatives.

Comprehensive training programs has been develop to up grade the core banking skills of the
existing staff as well as integrate high quality hiring.

Setting of target for of making at least 300 branches country wide on line.

Closing of all those branches, which are burden on NBP.

To improve the motivation of staff a merit-based culture is being promoted. Through

overhauling the manpower recruitment preservation and performance appraisal system.

Brief Summary of NBP OPPORTUNITIES

An open door can be characterize as an adjustment in outside environment which if
appropriately misused with the association quality will bring about upgraded deals piece of the
pie or salary. MCB has the accompanying open doors:
a. The backwoods zone of the K.P.K from 32.1% of aggregate woods in Pakistan
Bank can put resources into ranger service since it creates vocation and salary
as well as to secure the Indus watershed.
b. So far the bank has underscored on branches inside of the nation anyway it has
disregarded a major potential business sector outside the nation.
c. The bank can likewise of scaling back.
d. Bank is not cutoff points and in this manner decreasing the effectiveness.

e. Because of biggest ATM system, MCB can extend its 24 hours money offices
to the far away urban areas of the developing business sector request.
f. Greatest number of branches, affecting the support of consistency and some
working environment build its benefit and enhance its business sector picture
by supporting amusements at commonplace and national level.
g. The bank is most likely the monetary association in the nation .It can misuse
the characteristic assets of the nation which won't just enhance its budgetary
position additionally build up the financial existence of the general population
which is a definitive goal of the bank
h. The bank can likewise exploit the potential hydal force of the region Now that
the legislature has chosen to manufacture little dams in the area the bank can
put resources into this field .It won't just support the agribusiness division in
the nation, additionally give an incredible wellspring of power which is the
essential prerequisite for advancement.
i. Because of the need for micro financing in the market, there are lot of
opportunities in this regard. Other banks have already initiated, now the time
has arrived when the NBP must realize it and take on step to cater an ongoing
demand.

3.4 THREATS
Following are the major threats which national bank of Pakistan is facing:

Major threats NBP facing is from its competitor especially from denationalized commercial
bank. In which MCB is on the top of the list, The Bank provides 24 hour banking
convenience with the largest ATM network in Pakistan covering 15 cities with over 100 ATM
locations.

Recently banks and other financial institutions have introduced innovative schemes to attract
deposits, like gift cheque scheme by MCB. These schemes offer prizes on short and long
term fixed deposits, through lucky draws.

Retail banking and consumer banking resulting in the products such as credit cards, housing
finance and automobile finance lending to small individual consumers, and purchases of

automobiles, housing, and consumer goods are generally made on a cash basis. These are
causing another threat, if not counter will result in significance loss of customers

Now banks are using technology which covers the distance no matter how far away any one,
through a satellite based, on-line real-time banking system and by offering telephone
banking, electronic funds transfer, E-Banking and other modern facilities.

BRIEF SUMMARY OF NBP THREATS

Dangers can be characterize as change in outer environment which if not met with
legitimate techniques will bring about loss of income piece of the pie or pay in the setting of
MCB environment the accompanying potential dangers exists:
a. Reduction the rate of saving in different segments of people.
b. Deteriorating confidence of people in bank uncertainties of the investors.
c. Provision of better services by private MNCs.
d. The political interference in the bank regarding the decision of loan and
advances, promotion and appointment is a great threat for the bank in its longterm existence.
e. Increase number of private/foreign bank in the country.
f. Global technological advancement.
g. Political, economic situation of the country.
h. Reduction in the business activities in the country.
i. The bank is as of now following up on the strategy of cutting back which
debilitate the earth of the bank workers feel instability in doing their
employment.
j. Customer's discuss
k. Emergence of new contenders.
l. Political weight by chose government.

3.5 SUGGESTION

NBP mistake was not keeping pace with other banks to change the banking industry. It tries
to combine all its power bank and refer to other banks.

Bank management is to put all efforts to lay the foundation for the business-oriented culture
and to change the current culture of the bank. The employees of the bank and give it to the
customer.To attract the customer in the future NBP have to make extensive effort to give
facilities of retail and consumer banking. Plus the technology in the banking which will be
necessary for future banking is another week area need to be stressed.

The outlook and interior lay out of the branches is another thing which needs to be improved.

Latest reorganizing efforts are necessary to make it cost effective also making its facility
accordingly to modern banking. These must continue.

The procedure of taking services from the bank must be made easier and straight forward not
involving long difficult procedure for simple task.