Punjab National Bank

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INTRODUCTION

A commercial Bank is a financial institution which runs purely for the benefit of the people. It is a business venture working for providing services to boost up the economy of a nation. Bank plays a vital role by playing the role of an intermediary between the saver group and the investing group of the economy. The saver group deposits their earnings and savings in commercial banks for the purpose of getting back their savings with interest as and when they require. The bank accepts deposits from the public for the purpose of lending or investment in the industry or trade and thereby boosting up the nation’s economy. Since the banker is carrying his business with other people’s money, he cannot be reckless in investing his funds. So the bank has to build up its resources in such a way that it will have adequate income to pay interest at the prescribed rates to different kind of depositors, meet establishment expenses, build reserves, pay dividend to the shareholders etc. Further the banker cannot be free in deciding the manner in which the funds are to be deployed. The legal requirements, directions issued by RBI and other social obligations consistent with the national objectives are very relevant to the operations of a bank. So in order to obtain the goals of the bank, their financial resource must be utilised affectively. Financial analysis is necessary to understand the financial performance. Financial statements are prepared to depict financial position of a concern. For the present study Punjab National Bank (PNB) has been selected. The reason for selecting PNB is that it is the leading Nationalised Bank in India after SBI. It became the first Nationalised Bank to book Rs. 1000 crore as net profit in single quarter of Oct-Dec 2008. The bank achieved 100% Core Banking Solution (CBS) even by the year 2008.

Objectives of the Study The study aims to:
Examine earning capacity,
Determine short term

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    National Bank of Pakistan & Credit Agricole Commercial Banking Group 1: Adam Ali, Arsalan Haider, Bakhtawar Amjad, Bilal Ahmed Butt, Danish Obaid, Maryam Tanveer, Navaira Zia, Raza Khan, Rukhaam Ahmed and Suhaib Ali Kamal. National Bank of Pakistan & Credit Agricole 2 Table of Contents 1.0 National Bank of Pakistan 1.1 History and Background ………………………………… 3 1.2 The NBP Group ……………………………………………… 4 1.3 Subsidiaries of NBP ………………………………………… 5 1.4 Types of Funds ……………………………………………….. 7 1.5 Timeline of Operations …………………………………… 7 1.6 Vision and Mission ………………………………………… 9 1.7 Organizational Structure ……………………………… 12 1.8 Application of CAMELS Framework ……………… 15 1.9 Competitor Analysis …………………………………… 22 1.10 Ratio Analysis……………………………………………… 23 1.11 Cross Bank Cultural Comparison ………………… 35 1.12 Recommendations ……………………………………… 36 2.0 Credit Agricole …………………………………………………… 37 2.1 Business Operations …………………………………… 37 2.2 Global Positioning….….………………………………… 41 2.3 Events………..………………………………………….…… 43 2.4 Other Line of Business ………………………………… 45 National Bank of Pakistan History and Background The National Bank of Pakistan is one of the biggest commercial banks of Pakistan. It is ranked number one commercial bank of Pakistan because it offers a comprehensive range of commercial banking services. At first it was claimed by the Pakistan government, however, now it has been privatized partially and has proceeded towards modernized commercial banking. Incorporated in 1949, under The National Bank of Pakistan Ordinance 1949, the bank has evolved into a modern all service banks. It offers a complete set of commercial banking services that have evolved from the traditional public sector to the modern day banking and include agricultural services to farmers all under one bank which has helped make it the largest commercial bank. Taking after the episode of war in Korea, in 1950 Cotton costs shot up to exceptional levels and the credit facilities accessible for financing the development of the cotton product missed the mark largely of the requirement. The National Bank of Pakistan approached to secure its offices in the Cotton developing territories and amplified credit facilities generously with a specific end goal to restore steadiness to the business sector. At first, NBP was supposed to be set up at some point in the early 1950 yet the discriminating circumstance, which was created in the jute trade as a consequence of India 's refusal to acknowledge the exchange rate of the Pakistani Rupee, brought about right premature initiation of the bank. NBP give banking services to both the commercial and public sector. The bank has greatly developed several consumer products that allow it to cater to varying segments of the society and in turn increase profitability. While it keeps on going about as a trustee of public funds and as the State Bank of Pakistan agent (in areas not in the vicinity of SBP), it has differentiated its business portfolio and is today a significant lead player in the debt-­‐equity market, corporate investment banking, retail and consumer banking, farm financing, treasury services and is indicating developing enthusiasm toward advertising National Bank of Pakistan & Credit Agricole 4 and creating the nation 's SME and in the meantime satisfying its social obligations. Its subsidiaries incorporate NBP Capital, NBP Modaraba Management Company. Head Office of NBP is in Karachi and it conducts its business through a vast network of branches domestically and globally (1310). It has 29 Regional Headquarters in the urban areas of Pakistan and 1224 branches locally. Its vicinity extends in 18 nations of the world and holds a work force of employees approximately 13,800 in number. Similarly the bank has developed systems to facilitate the overseas Pakistanis by developing technology-­‐based systems so that the expatriates can send remittances. The bank also has entered into agency arrangements with 3000 correspondent banks worldwide so that its customer needs are met globally. The bank has also offloaded 23.2% of its shares in the stock market, which means that it is moving towards privatization. The NBP Group NBP Modaraba Management Company Limited, the subsidiary company of the Bank, has control over First National Bank Modaraba, Pakistan as its management company and likewise has an immediate economic interest. The modaraba 's financial statements are with the the Bank as a definitive holding company. The Group is primarily occupied with commercial banking, management of modaraba, leasing, brokerage, remittances in foreign currencies, asset management, exchange transactions and services related to consultation in investments. A concise briefing of the holding company and subsidiaries is given below: The "Group" consists of: Holding Company Subsidiary Companies National Bank of Pakistan NBP Leasing Limited, Pakistan CJSC Subsidiary Bank of NBP in Kazakhstan CJSC Subsidiary Bank of NBP in Tajikistan First National Bank Modaraba, Pakistan NBP Exchange Company Limited, Pakistan National Bank of Pakistan & Credit Agricole 5 NBP Modaraba Management Company Limited, Pakistan Taurus Securities Limited, Pakistan NBP Fullerton Asset Management Limited, Pakistan Cast-­‐N-­‐Link Products Limited Subsidiaries of NBP NBP not only provides commercial banking and related services domestically but overseas as well. The bank also provides services as trustee to National Investment Trust (NIT), Long-­‐Term Credit Fund (LTCF) and Endowment Fund for student loans scheme. Along with all this handles the Government of Pakistan’s treasury transactions and acts as an agent to the State Bank of Pakistan (SBP). NBP Leasing Limited, Pakistan NBP Leasing Limited (NBPLL) has its registered office in Karachi. It is mainly involved in the leasing business goverened by the Non-­‐Banking Finance Companies Rules, 2003 (the NBFC Rules). IT was established in Pakistan on 7th November, 1995 as a a public limited unquoted company under the Companies Ordinance, 1984. CJSC Subsidiary Bank of NBP in Kazakhstan CJSC Subsidiary Bank of NBP in Kazakhstan (JSCK) is a joint-­‐stock bank that additionally provides commercial banking services. The registered office of JSCK is located in Almaty, which was incorporated in the Republic of Kazakhstan in 2001. CJSC Subsidiary Bank of NBP in Tajikistan Another joint-­‐stock bank, CJSC Subsidiary Bank of NBP in Tajikistan (JSCT) was incorporated in the Republic of Tajikistan in 2012 where it has its registered office in Dushanbe, Republic of Tajikistan. JSCT also provides commercial banking services. National Bank of Pakistan & Credit Agricole 6 First National Bank Modaraba, Pakistan First National Bank Modaraba ("the Modaraba"), with its registered office in Lahore, is managed by National Bank Modaraba Management Company Limited (a wholly owned subsidiary of National Bank of Pakistan), incorporated in Pakistan under the Companies Ordinance, 1984 and registered with the Registrar of Modaraba Companies. It is a multi-­‐purpose, perpetual and multi-­‐ dimensional Modaraba formed under the Modaraba Companies and Modaraba Ordinance, 1980 and Rules framed there under. It started its operations on December 04, 2003 and is involved in various Islamic modes of financing and operations including ijarah, musharakah and murabaha arrangements at present.The The Modaraba is listed on Karachi and Lahore stock exchanges. NBP Exchange Company Limited, Pakistan NBP Exchange Company Limited (NBPECL) has its registered office in Karachi and it is a public unlisted company. NBPECL is engaged in foreign currency remittances and exchange transactions. NBPECL has 13 branches. It was established in Pakistan on September 24, 2002 under the Companies Ordinance, 1984. Taurus Securities Limited, Pakistan Taurus Securities Limited (the Company) is a subsidiary of National Bank of Pakistan, which holds 58.32% of the shareholding of the Company. It is a public unquoted company, which was established on June 27, 1993 under the Companies Ordinance, 1984 in Pakistan and has its registered office in Karachi. The Company holds a Trading Rights Entitlement (TRE) Certificate from Karachi Stock Exchange Limited (KSEL). The Company is conducts of stock brokerage business, investment counseling and fund placements. NBP Fullerton Asset Management Limited, Pakistan NBP Fullerton Asset Management Limited (the Company), has its registered and principal offices situated in Karachi. It was established in Pakistan as a public limited Company on August 24, 2005 under the Companies Ordinance, 1984. It obtained the certificate for commencement of business on December 19, 2005. The Company is mainly involved in the business of investment advisory services and asset management. The main sponsors of National Bank of Pakistan & Credit Agricole 7 Company are National Bank of Pakistan and Alexandra Fund Management Pte Ltd, member of Fullerton Fund Management Group in Singapore. Types of Funds As at December 31, 2012 the company was managing the following funds and discretionary portfolio: • NAFA Income Opportunity Fund • NAFA Income Fund • NAFA Islamic Aggressive Income Fund • NAFA Islamic Multi Asset Fund • NAFA Multi Asset Fund • NAFA Stock Fund • NAFA Government Securities Liquid Fund • NAFA Savings Plus Fund • NAFA Riba Free Savings Fund • NAFA Asset Allocation Fund • NAFA Financial Sector Fund • NAFA Money Market Fund • Discretionary portfolios All the above funds are ‘Open end Funds’. Timeline of Operations · 1950 NBP established a branch in Jeddah, Saudi Arabia. · 1955 By this time NBP had branches in London and Calcutta. · 1957 NBP established a branch in Baghdad, Iraq. National Bank of Pakistan & Credit Agricole 8 · 1962 NBP established a branch in Dar-­‐es-­‐Salaam, Tanganyika. · 1964 The Iraqi government nationalized NBP 's Baghdad branch. · 1965 The Indian government seized the Calcutta branch on the outbreak of hostilities. · 1967 The Tanzanian government nationalized the Dar-­‐Es-­‐Salaam branch. · 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. · 1974 The government of Pakistan nationalized NBP. As part of the concomitant consolidation of the banking sector, NBP acquired Bank of Bahawalpur. · 1977 NBP opened an offshore branch in Cairo. · 1994 NBP amalgamated with Mehran Bank. · 1997 NBP 's branch in Ashgabat, Turkmenistan commenced operations. National Bank of Pakistan & Credit Agricole 9 · 2000 NBP opened a representative office in Almaty, Kazakhstan. · 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%. · 2002 Pakistan International Bank renamed itself United National Bank Limited (UNB). The ownership structure of the UNB remained as before. The only change to the shareholding structure is that UNB had recently been privatized in Pakistan and was now owned 49% by the Government of Pakistan and 51% by a joint foreign consortium of Abu Dhabi. · 2003 NBP received permission to open a branch in Afghanistan. Vision and Mission Vision “To be recognized as a leader and a brand synonymous with trust, highest standards of service quality, international best practices and social responsibility” The vision of NBP states market leadership, high level of customer trust, service quality and sound national and international banking practices as its long-­‐term goals. To some extent it has achieved its targets owing to the fact a large part of it is still owned by Govt. of Pakistan. It works as agent of GoP in various transactions such as disbursements employee salaries and pensions and bailouts etc so it has a huge market share. Since it is backed by GoP so nobody National Bank of Pakistan & Credit Agricole 10 can doubt its trust-­‐worthiness as evident from its credit ratings. In terms of service quality it is not that good due to slow paced modernization and lack of employee efficiency. Since it has branches in various countries so it can be said NBP follows international banking norms. In past it has taken various initiatives which shows its commitment with society and also it has facilitated various GoP initiatives being its agent. The vision statement of NBP symbolizes its resolve to become leaders and a trustworthy bank. It also includes its commitment to social responsibility. In the modern era of today excelling only in the field of business is not the only criteria for a concern to be called successful and a leader in its field. Efforts towards contributing positively to the society through various initiatives has become a must do thing for the businesses. Contributions in social sector create a positive image about a business and help in improving the social conditions of a society as a whole. NBP is a government owned bank and enjoys a lot of leverage because of this and has branches virtually everywhere. It is mandatory for government departments to have accounts in NBP and conduct their transactions through it. In our opinion this gives an undue advantage to the bank and makes it a leader in many fields without any regard to its performance. Until recently, it was compulsory for all retired government employees to have their accounts for pension in NBP. This caused a lot of inconvenience to the public, but increased NBPs portfolio manifold. A ruling of Supreme Court of Pakistan reversed the situation. Another advantage that the bank had was that all utility bills were to be deposited in NBP. This practice has also been undone and the customers can now pay their bills in all banks. In terms of trust, the record of NBP is not exemplary. A few years back ATM system of the bank was hacked resulting in loss to many clients. This most probably originated from its Multan offices. Since NBP is a government owned bank, its employees have security of job without regard to their performance, which makes them complacent. Being a government bank, NBP is at a disadvantage in many ways such as granting of loans etc. Due to interference by the people in power, it has given loans without proper guarantees resulting in bad loans and loss to the bank. National Bank of Pakistan & Credit Agricole 11 Mission “NBP will aspire to the values that make NBP truly the Nation’s Bank, by: • Institutionalizing a merit and performance based culture • Creating a distinctive brand identity by providing the highest standards of services • Adopting the best international management practices • Maximizing stakeholders value • Discharging our responsibility as a good corporate citizen of Pakistan and in countries where we operate” Mission of NBP aims to hire its people on the basis of merit and make its culture based upon performance. NBP has not been able to achieve this mission because its culture is based upon seniority rather on performance based. Also interference of political people in hiring process also compromise merit. As it has failed to rapidly deploy state of the art technology in its network so service standard is bad due to which it has very poor brand identity. It has somehow managed to sustain its existence in various countries despite the fact it has to compete with various international banks with a lot more advance technologies all because of its sound and healthy earnings in Pakistan as well bulk of revenue from remittance flow to Pakistan. Its financial health is quite impressive and it has grown a lot since its inception. Recently, GoP has off loaded quarter of its share to make it state of the art bank through private partnership, which would help further to enhance shareholders value. As told earlier it has various programs along with facilitating programs to GoP, which shows its commitment to society. Core Values • Highest standards of Integrity • Institutionalizing a teamwork and performance culture • Excellence in services • Advancement of skills for tomorrow’s challenges • Awareness of social and community responsibility • Value creation for all stakeholders National Bank of Pakistan & Credit Agricole 12 Above-­‐mentioned are the six core values of NBP. Some of them are followed pretty strictly like integrity, awareness of social and community responsibility and value creation for stakeholders. But in other aspects it is still lagging. For example it is still following old bureaucratic culture based upon theme of seniority. This type of culture hinders implementation performance based culture. Also there are many other competitors offering services far better than NBP owing to modern techniques and talent. NBP also lacks modern skills and very slow in application of state of the art technologies to integrate its operations to maximize efficiency. These doubts on performance problem appear from the report of JCR-­‐VIS, a credit rating agency, which says that NBP is not using its resources efficiently e.g. over staffing. Recent Developments In order to enhance customer convenience NBP opened 58 new branches 10 of which belonged to Islamic Banking. NBP is also working on development of computerized Govt. pension payment system and aims to complete it by the end of 2014. It has also used its prototype version at 200 branches for Govt. employees only. It is also rapidly enhancing its ATM services offering with special focus on Islamic banking. It is going to offer “Aitemaad ATM Card” through its Islamic Banking Group. It has also developed a comprehensive 5-­‐year plan to establish over 100 Islamic Banking branches to get maximum benefit out of largely untapped market. Right now it is in the process of installing an integrated information system across all of its functions. Right now head office, along with 17 other branches in Pakistan, is on this platform. In international branches Korean and Japanese branches are online with this system. This system would not only help in increased customer service quality but also in enhancing operational efficiency. Organizational Structure The organizational structure of NBP is briefly given below: National Bank of Pakistan & Credit Agricole 13 The various departments are as follows: • Corporate and Investment Banking Group •…

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