Muhammad Afaaq MC090400284 MBA (Finance) Finance (FINI-619) Internship report on National Bank of Pakistan Brief Introduction of the Organization Established in November 9th 1949 in Pakistan 100% owned by the Government of Pakistan Largest commercial bank operating in Pakistan 1500 branches located all over Pakistan Acts as an agent of the State Bank of Pakistan The Bank also has a presence in 24 international locations including the USA, United Kingdom, Europe and the Far East. Main head Office located in Karachi NBP Best bank of the world as well as Asia because its rank on number 1 positions among the 1000 banks of the world Awarded given best bank in 2001, 2002, 2004, 2005 & most recently in last year 2010 Business volume In Millions Description 2006 2007 2008 2009 2010 Profit before tax 26,311 28,061 23,001 21,300 24,415 Profit after tax 17,022 19,034 15,459 17,562 17,563 Shareholder’s equity 353,045 69,271 81,367 94,142 103,762 Advances – net 316,110 340,319 412,987 475,243 477,507 Total Assets 635,133 762,194 817,758 944,583 1,035,025 Deposits 501,672 591,907 624,939 727,465 832,152 Investments 139,947 211,146 170,822 217,643 301,324 Earnings per share 12.65 14.15 11.49 13.05 13.05 Competitors MCB Bank Limited Habib Bank Limited United Bank Limited Allied Bank Limited Bank Alfalah Limited Soneri Bank Limited Askari Bank Limited Bank of Punjab First Women Bank Organizational Hierarchy Chart Training Program Task assign to me in Account Opening Department • • Account Opening Forms filling Customer Guidance Opened Different types of Accounts Task assign to me in Bill Collection Department • Collecting utilities bills Observing due date and what’s the amount collect in due date • • Training Program Task assign to me in Cash Department • • Observing the function of bank payment and receipt Observing government receipt and payment. Task assign to me in Credit Department • Observing requirements to get loan • Observing bank charges interest against loan Training Program Task assign to me in Remittance Department • Learn about the categories of remittance department Fill demand draft Pay order LC • • • Ratio Analysis 1. Liquidity ratio Firm ability to meet its current obligations It includes current ratio, Acid test ratio, Working capital ratio Current Ratio National bank of Pakistan Ratio Analysis Current Ratio Current Ratio= Current Assets/ Current liabilities Year 2008 Year 2009 Year 2010 584,977,140 / 682,905,461 =0.86 Times 645,064,165 / 725,293,720 = 0.89 Times 693,463,983 / 867,626,367 = 0.80 Times Current Ratio 2010 0.8 2009 0.89 2008 0.75 0.86 0.8 0.85 0.9 Acid Test Ratio/Quick ratio/liquidity ratio National bank of Pakistan Ratio Analysis Acid Test Ratio Acid Test Ratio =Current Assets – (Prepaid items + Inventory)/ Current Liabilities Year 2008 Year 2009 Year 2010 582,255,871 / 682,905,461 =0.85 times 630,040,628 / 725,293,720 = 0.87 times 691,160,473 / 867,626,367 = 0.80 times 2010 0.8 Acid Test Ratio 2009 0.87 2008 0.76 0.85 0.78 0.8 0.82 0.84 0.86 0.88 Working Capital Ratio National bank of Pakistan Ratio Analysis Net Working Capital Net Working Capital = Current Assets - Current Liabilities Year 2008 Year 2009 Year 2010 584,977,140 -682,905,461 = -97,928,321 645,064,165 -725,293,720 = -80,229,555 693,463,983 -867,626,367 = -174,162,384 Ratio -174,162,384 2010 -80,229,555 -97,928,321 Working Capital ratio 2009 2008 -200,00 -150,00 -100,00 -50,000, 0,000 0,000 0,000 000 0 Working Of Current Assets Current Assets Year 2008 Year 2009 Year 2010 Short term- Cash and balances with treasury banks 106,503,756 115,827,868 115,442,360 Short term- Balances with other banks 38,344,608 28,403,964 30,389,664 Short term- Landings to financial institutions 17,128,032 19,587,176 23,025,156 Short term Investments 107,571,177 146,662,386 198,003,007 Short term- Advances 289,717,810 310,524,676 295,221,811 Short term- Other Assets 25,711,757 24,058,095 31,381,982 Total 584,977,140 645,064,165 693,463,980 Working Of Current Liabilities Current Liabilities Year 2008 Year 2009 Year 2010 Short Term- Bill Payable 10,219,061 10,621,169 8,006,631 Short Term- Borrowings 37,409,288 37,057,189 17,154,131 Short Term- Deposits and other accounts 614,538,859 655,031,896 816,172,861 16517 20,408 43,963 20,721,736 22,563,058 26,248,782 682,905,461 725,293,720 867,626,368 Short Term- Liabilities against assets subject to finance lease Short Term- Other liabilities Total Leverage Ratios Leverage ratios measure the degree of protection of suppliers of long term funds Times Interest Earned Measure firm ability to meet interest payment on debt National bank of Pakistan Ratio Analysis Time Interest earned ratio = Earning before interest & tax (EBIT) Interest expenses Year 2008 Time Interest 46,885,766 / 23,884,768 = 1.96 times earned ratio 2010 Year 2009 Year 2010 61,789,822 / 40,489,649 = 1.53 times 69,665,595 / 45,250,476 = 1.54 times 1.53 Times Interest Earned 2009 1.52 2008 1.96 0 0.5 1 1.5 2 2.5 Working Of EBIT EBIT Year 2008 Year 2009 Year 2010 Profit Before Tax 23,000,998 21,300,173 24,415,119 Add: Interest/ mark-up expenses 23,884,768 40,489,649 45,250,476 Total 46,885,766 61,789,822 69,665,595 Debt Ratio How much company assets finance with debt National bank of Pakistan Ratio Analysis Debt Ratio = Total liabilities / Total Assets Debt Ratio Year 2008 Year 2009 Year 2010 715,299,108 / 817,758,326 = 0.875 times 825,676,384 / 944,582,762 = 0.874 times 906,528,852 / 1035,024,680 = 0.876 times 3rd Qtr 0.876 Debt Ratio 0.874 2nd Qtr 0.875 1st Qtr 0.873 0.8735 0.874 0.8745 0.875 0.8755 0.876 0.8765 Working Of Total Debt Total Debt Year 2008 Year 2009 Year 2010 Bill Payable 10,219,061 10,621,169 8,006,630 Borrowings 40,458,926 45,278,138 20,103,590 Deposits and other accounts 624,939,016 727,464,825 832,151,888 ---------- --------- 42,629 106,704 39,656,831 42,269,623 46,160,040 --------- ---------- -------- 715,299,108 825,676,384 906,528,852 Sub-ordinated loans Liabilities against assets subject to finance lease Other liabilities Deferred tax liabilities Total ----------- 25,274 Working Of Total Assets Total Assets Year 2008 Year 2009 Year 2010 Cash and balances with treasury banks 106,503,756 115,827,868 115,442,360 Balances with other banks 38,344,608 28,405,564 30,389,664 Landings to financial institutions 17,128,032 19,587,176 23,025,156 Investments 170,822,491 217,642,822 301,323,804 Advances 412,986,865 475,243,431 477,506,564 Operating fixed assets 24,217,655 25,147,192 26,888,226 Deferred tax assets-net 3,204,572 3,062,271 6,952,666 Other Assets 44,550,347 59,666,438 53,496,240 817,758,326 944,582,762 1,035,024,680 Total Debt / Equity Ratio It indicate what portion of equity and debt for finance its assets National bank of Pakistan Ratio Analysis Debt to Equity Ratio = Total liabilities (Debt) Shareholder equity Year 2008 715,299,108 / 81,497,458 Debt to = 8.78 times Equity Ratio 2010 Year 2009 Year 2010 825,676,384 / 94,265,853 = 8.76 times 906,528,852 / 103,880,048 = 8.73 times 8.73 Debt to Equity Ratio 2009 8.76 2008 8.78 8.7 8.72 8.74 8.76 8.78 8.8 Working Of Shareholder Equity Shareholder Equity Year 2008 Year 2009 Year 2010 Share Capital 8,969,751 10,763,702 13,454,628 Reserves 19,941,047 22,681,707 24,450,244 Unappropriate Profit 52,456,204 60,696,510 65,857,438 130,456 123,934 117,738 81,497,458 94,265,853 103,880,048 Surplus on revaluation of fixed assets Total Debt to Tangible net worth ratio It measures physical worth of the company excluding intangible assets National bank of Pakistan Ratio Analysis Debt to tangible net worth ratio Debt to tangible net worth ratio = Total Liabilities / Tangible net worth Year 2008 Year 2009 Year 2010 715,299,108 /102,453,293 = 6.98 times 825,676,384 / 118,888,848 = 6.94 times 906,528,852 / 128,487,598 = 7.05 times 2010 7.05 Debt to Tangible Worth Ratio 2009 6.94 2008 6.85 6.98 6.9 6.95 7 7.05 7.1 Working Of Tangible net worth Tangible net worth Year 2008 Year 2009 Year 2010 Net Worth= Total Assets-Total Liabilities 817,758,326 -715,299,108 = 102,459,218 944,582,762 -825,676,384 =118,906,378 1,035,024,680 -906,528,852 =128,495,828 Net intangible asset 5,925 17,530 8,230 Tangible net worth= Net Worth- Net intangible asset =102,459,218- 5,925 =102,453,293 =118,906,378-17,530 =118,888,848 =128,495,828-8,230 =128,487,598 Total Capitalization Ratio Measure long term debt of a company & how to support company operations and growth. National bank of Pakistan Ratio Analysis Total Capitalization Ratio = Year 2008 Total Capitalization Ratio Long term debt Long term debt + Share holder equity Year 2009 Year 2010 32,393,647 /113,891,105 100,382,664 / 194,648,517 = 0.28 times = 0.52 times 2010 38,902,486 / 142,782,534 = 0.27 times 0.27 T otal Capitalization Ratio 2009 0.51 2008 0.28 0 0.2 0.4 0.6 Working Of Long Term Debt Long Term Debt Year 2008 Year 2009 Year 2010 Long term- Borrowings 3,049,638 8,220,949 2,949,460 Long term- Deposits and other accounts 10,400,157 72,432,929 15,979,027 Sub-ordinated loans Long term- Liabilities against assets subject to finance lease Long term- Other liabilities Deferred tax liabilities Total - - - 8,757 22,221 62,741 18,935,095 19,706,565 19,911,258 - 32,393,647 - 100,382,664 - 38,902,486 Profitability Ratios Profitability ratios measure the earning or profit ability of a firm Net Profit Margin National bank of Pakistan Ratio Analysis Net Profit Margin = (Net Income / Sales) *100 Net Profit Margin Year 2008 Year 2009 Year 2010 15,458,590 / 60,942,798 = 25.4% 17,561,846 / 77,947,697 = 22.5% 17,563,214 / 88,472,134 = 19.9% 2010 19.9 Net Profit Margin 2009 22.5 2008 25.4 0 5 10 15 20 25 30 Working Of Net Income Net Income 2008 2009 2010 Net mark–up / interest income after provisions 26,087,216 25,788,713 33,251,969 Add: Non–mark–up / interest income 16,415,862 19,025,357 17,632,640 Less: Non–mark–up / interest expenses 19,502,080 23,513,897 26,469,490 Profit before tax 23,000,998 21,300,173 24,415,119 Less: Taxes 7,542,408 3,738,327 6,851,905 Profit after tax 15,458,590 17,561,846 17,563,214 Return on Assets National bank of Pakistan Ratio Analysis Return on Assets = (EBIT / Total Assets)*100 Return on Assets Year 2008 Year 2009 Year 2010 46,885,766 / 817,758,326 = 5.73% 61,789,822 / 944,582,762 = 6.54% 69,665,595 / 1,035,024,680 = 6.73% 2010 6.73 Return on Assets 2009 6.54 2008 5.73 5.2 5.4 5.6 5.8 6 6.2 6.4 6.6 6.8 7 DuPont Return on Assets Sales comparisons with net income and assets. National bank of Pakistan Ratio Analysis DuPont Return on Assets = (Net Income / Sales) * (Sales / Total Assets)*100 DuPont Return on Assets Year 2008 Year 2009 Year 2010 0.25366 * 0.07425 = 1.89% 0.22530 * 0.08252 = 1.86% 0.19852 * 0.08548 = 1.69% 2010 1.69 DuPont Return On Assets 2009 1.87 2008 1.55 1.91 1.6 1.65 1.7 1.75 1.8 1.85 1.9 1.95 Operating income margin Operating income margin is used to measure a company's pricing strategy and operating efficiency. National bank of Pakistan Ratio Analysis Operating income margin = (EBIT or Operating profit/ Net Sales)*100 Operating income margin Year 2008 Year 2009 Year 2010 46,885,766 / 60,942,798 = 76.93% 61,789,822 / 77,947,697 = 79.27% 69,665,595 / 88,472,134 = 78.74% 2010 78.74 Operating income margin 2009 79.27 2008 75.5 76.93 76 76.5 77 77.5 78 78.5 79 79.5 Return on Operating Assets Operating assets are those assets actively used to create sale and earn profit National bank of Pakistan Ratio Analysis Return on Operating Assets = (EBIT/ Operating Assets)*100 Return on Operating Assets Year 2008 Year 2009 Year 2010 46,885,766 / 560,836,308 = 8.36% 61,789,822 / 635,805,667 = 9.72% 69,665,595 / 642,862,306 = 10.84% 2010 10.84 Return on Operating Assets 2009 9.72 2008 8.36 0 2 4 6 8 10 12 Working Of Operating Assets Operating Assets Year 2008 Year 2009 Year 2010 Cash and balances with treasury banks 106,503,756 115,827,868 115,442,36 0 Lending to financial institutions 17,128,032 19,587,176 23,025,156 Advances – net 412,986,865 475,243,431 477,506,56 4 Operating fixed assets 24,217,655 25,147, 192 26,888,226 Total 560,836,308 635,805,667 642,862,30 6 Return on Equity How much profit a company generates with the money shareholders have invested. National bank of Pakistan Ratio Analysis Return on Equity = (Net income/ shareholder’s equity)*100 Return on Equity Year 2008 Year 2009 Year 2010 15,458,590 / 81,497,458 = 18.97% 17,561,846 / 94,265,853 = 18.63% 17,563,214 / 103,880,048 = 16.91% 16.91 2010 Return on Equity 2009 18.63 18.97 2008 15 16 17 18 19 20 Gross Profit Margin Ratio Gross profit increase when reduce cost National bank of Pakistan Ratio Analysis Gross Profit Margin Ratio = (Gross Profit / Net Sales)*100 Gross Profit Margin Ratio Year 2008 Year 2009 Year 2010 37,058, 030 / 60,942,798 = 60.81% 37,458,048 / 77,947,697 = 48.06% 43,221,658 / 88,472,134 = 48.85% 2010 48.85 Gross Profit Margin Ratio 2009 48.06 2008 60.81 0 10 20 30 40 50 60 70 Working Of Gross Profit Gross Profit Year 2008 Year 2009 Year 2010 Mark–up / return / interest earned 60,942,798 77,947,697 88,472,134 Less: Mark–up / return / interest expensed 23,884,768 40,489,649 45,250,476 Total 37,058,030 37,458,048 43,221,658 Activity Ratios Activity ratios measure a firm's ability to convert different accounts within their balance sheets into cash or sales. Total Assets Turnover Asset turnover measures how effectively a business is using assets to generate sales. National bank of Pakistan Ratio Analysis Total Assets Turnover Total Assets Turnover = Net sales/ Total Assets Year 2008 Year 2009 60,942,798 / 77,947,697 / 817,758,326 944,582,762 = 0.0745 No. of times = 0.0825 No. of times 2010 Year 2010 88,472,134 / 1,035,024,680 = 0.0855 No. of times 0.0855 Total Assets Turnover 2009 0.0825 2008 0.068 0.0745 0.07 0.072 0.074 0.076 0.078 0.08 0.082 0.084 0.086 0.088 Fixed Assets turnover Fixed Assets Turnover ratio indicates how well the business is using its fixed assets to generate sales. National bank of Pakistan Ratio Analysis Fixed Assets turnover Fixed Assets turnover = Net sales/ Fixed assets Year 2008 Year 2009 Year 2010 60,942,798 / 24,217,655 = 2.52 No. of times 77,947,697 / 25,147,192 = 3.10 No. of times 88,472,134 / 341,560,700 = 3.29 No. of times 2010 3.29 Fixed Assets turnover 3.1 2009 2008 2.52 0 0.5 1 1.5 2 2.5 3 3.5 Market Ratios Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. Dividend per share Dividend per share is used to measure the income received by shareholders from each share owned. National bank of Pakistan Ratio Analysis Dividend per share = Dividend paid to share holder Average common share outstanding Dividend per share Year 2008 Year 2009 Year 2010 6,104,894 / 896975 = 6.81 Rs. 5,820,338 / 1076370 = 5.41 Rs. 8,060,510 / 1345463 = 5.99 Rs. 2010 5.991 Dividend per share 2009 5.41 2008 6.81 0 2 4 6 8 Working Of Avg. common share outstanding Avg. common share outstanding Year 2008 Avg. common share outstanding= Share capital amount / Par value of share =8,969,751/10 =896975.1 = 896975 Year2009 Year 2010 =10,763,702/10 =13,454,628/10 =1076370.2 =1345462.8 =1076370 =1345463 Earning Per Share Earnings per share serve as an indicator of a company's profitability National bank of Pakistan Ratio Analysis Earning per Share = Profit Available to shareholders or Net income after tax/ No of shares outstanding Earning per Share Year 2008 Year 2009 Year 2010 15458590 / 896975 = 17.23 Rs. 17561846 / 1076370 = 16.32 Rs. 17563214 / 1345463 = 13.05 Rs. 2010 13.05 Earning per Share 16.32 2009 2008 17.23 0 2 4 6 8 10 12 14 16 18 20 Price Earning Ratio Price/Earning ratio is a valuation ratio of a company's current share price compared to its per-share earnings. National bank of Pakistan Ratio Analysis Price Earning Ratio = Current market Share price/ Earning per Share Price Earning Ratio Year 2008 Year 2009 Year 2010 50.32 / 17.23 = 2.92 Rs. 74.37 / 16.32 = 4.56 Rs. 76.82 / 13.05 = 5.89 Rs. 2010 5.8866 Price Earning Ratio 4.557 2009 2.9205 2008 0 1 2 3 4 5 6 7 Conclusion NBP is a part of State Bank of Pakistan and it is its major strength. Providing different products and services to its customers. Islamic banking, student loan scheme, international finance. Most rising bank with highest return on capital. Largest market share amongst all Banks in Pakistan. Highest cost to Income ratio as compare to all other commercial banks. Net assets of the NBP are increasing day by day. The net profit is also increasing which may attract the investors. Recommendations 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 . Thank You