NATIONAL BANK OF PAKISTAN THE NATIONS BANK...

MARIAM NASIR
Manager Research
June 25 - July 01, 2007

NBP is the largest bank of Pakistan with the customer base of over 10 million account holders. It has the largest borrower base exceeding one million customers and growing. The bank was incorporated in Pakistan in 1949. It has a well-established domestic network comprising more than 1,100 branches and 29 regional centers covering the entire country. The bank has 16 overseas branches, four representative offices, one subsidiary and one joint venture. NBP is the largest Universal (commercial & investment) bank in Pakistan with assets over US $9.3bn and deposits over US $7.8bn. NBP is 76% owned by the government of Pakistan and is professionally managed by a team led by its Chairman and President, Syed Ali Raza. This is after three stock offerings, one each in 2001, 2002, and 2003. It is the only large public sector bank left, after the privatization of four of the five big banks in the country. The bank has a strong international presence with offices located in Afghanistan, Azerbaijan, Bangladesh, Bahrain, Canada, China (including Hong Kong), Egypt, France, Germany, Japan, Kazakhstan, Kyrgyzstan, South Korea, Turkmenistan, United Kingdom, United States & Uzbekistan. The bank has programs to expand further. Recently over an interview on television the bank's President stated that in order to capture growing trade finance activities the bank was working aggressively toward overseas expansions. For this purpose, a branch in Saudi Arabia is likely to come online by Oct-Nov 2007. The bank also plans to open up a branch in India, and for that purpose they have received approval for setting up 2 branches. These branches, expected to start sometime in 2008, would also have a focus to tap rising trade finance activities between India and Pakistan. NBP also has plans to expand its presence in Afghanistan and Bangladesh as it looks to add 2 more branches in each of these countries, totaling them to 4 branches for each country.

ACHIEVEMENTS OF THE BANK

* NBP awarded 'Best Bank in Pakistan, 2001, 2002 & 2004' by The Banker, a publication of the Financial Times, London.

* NBP awarded 'Best Bank in Pakistan for 2005' by Global Finance magazine.

* NBP awarded 'Best Foreign Exchange Bank in Pakistan, 2004 & 2005' by the Global Finance magazine.

The Bank maintains its position as Pakistan's premier bank determined to set higher standards of achievements. It is the major business partner for the Government of Pakistan with special emphasis on fostering Pakistan's economic growth through aggressive and balanced lending policies, technologically oriented products and services offered through its large network of branches locally, internationally and representative offices. National Bank of Pakistan is at the forefront of international banking in Pakistan which is proven by the fact that NBP has its branches in all of the major financial capitals of the world.

SALIENT FEATURES OF THE BANK

* Largest bank in Pakistan according to asset base.
* 16.7% share in deposits.
* 15% share in consumer lending.
* 33% share in personal loans.
* Focused on domestic market.
* Consumer lending is 15% of the total loan portfolio.
* Primarily a corporate/SME lender.
* Government/public sector deposits account for 34% of total deposits

ISLAMIC BANKING

Islamic banking is growing at a fast pace in the country. At present the assets of Islamic banks stood at around Rs.89 billion which is 2.41 percent of the total banking industry assets and comparatively high in the region. Keeping this in view and the demand of Shariah Compliance products in the country, State Bank of Pakistan (SBP) issued a license to National Bank of Pakistan. With the issuance of this license to the NBP, the total number of conventional banks that are having stand-alone Islamic banking branches has increased to 12. In addition to Shariah acceptable standards, general banking services are also being offered at the Islamic Banking Branch such as Letter of Credit Facility, Handling of Remittances, Issuance of Bank Drafts and Pay Orders, Collection of Export Bills, Collection of Local Bills, Government Collections and Utility Bills Collection.

CONSUMER BANKING

Consumer lending still remains an untapped area for the bank. NBP is one such bank, which basically relies on one product, namely advance salary. This is a personal loan product extended to government employees, whose salaries are deposited in NBP by their employers. This provides a hedge against possible delinquencies, as there is little possibility of default with salaries being deposited in the bank. This product has outstanding loans of slightly over Rs40 billion, with a customer base of 0.65 million. The other consumer lending product being marketed by NBP is its mortgage product, NBP Saaiban. This product has seen disbursement of close to Rs5 billion, and accounts for close to 10% of all mortgage lending in Pakistan. The bank a scheme in named Karobar Scheme which was test launched in October 2006 from 125 branches country wide and currently the bank if offering five distinguished products under that scheme which include:

*NBP KAROBAR Utility Store (Shop): Financing facility available to set-up a small scale Retail Outlet (Utility Store in a shop) for purchase of furniture & fixtures.

*NBP KAROBAR Mobile Utility Store: Financing facility available to purchase a 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (Auto Scooter / Motorcycle Rickshaw) with attached Loader body (Thehla type) under franchise from the USC to carry utility goods for retail sale ideally in areas where accessibility to conventional utility stores is difficult.

*NBP Karobar Mobile General Store (without USC Franchise): This financing program has been designed on the similar pattern of Mobile Utility Store.

*NBP Karobar Transport: The NBP Karobar Transport is designed to finance 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (Auto Scooter / Motorcycle Rickshaw) to the eligible citizens of Pakistan for providing less expensive environment friendly transport facility.

*NBP Karobar PCO: This product is designed to finance setting-up a PCO. NBP will be providing financing for the purchase of Mobile/Wireless Telephone Set with connection, Credit Balance.

*NBP Karobar Tele-center: This product is specially designed to finance setting-up a Tele-center. NBP will be providing financing for the purchase of Mobile/Wireless Telephone Set with connection, Computer, Printer and Fax machine cum Photocopier etc. to establish tele-center.

Through this Rozgar Scheme the bank has until April 2007, received 25,000 applications with Rs2bn as total disbursements. NBP plans to disburse Rs10bn in this scheme in 2007 and Rs100bn in the next 5 years. The bank has also announced the re-launch of NBP's visa card in the next 6 months. NBP first launched its credit card in 1994, but it was later rolled back. This card, according to the President, would be crucial part in bank's product portfolio, since he believed that a bank of this large size should have a credit card. Installation of required systems for this purpose is expected to be completed soon.

NATIONAL BANK GDR

National Bank plans to sell as much as $250 million of shares overseas by December, joining rivals such as MCB Bank Ltd. and United Bank Ltd. in tapping international investors. A listing in London will give more visibility and access to a wider investor base to National Bank.

SELL-OFF OF AL-JAZIRA SHARE

The bank has 13.1mn shares of Bank Al-Jazira. In a recent press statement by NBP's President it was reiterated that the sell-off of those shares would take place only when the Bank Al-Jazira shares come to their 'right' price.

FUTURE OUTLOOK

National Bank's profit rose 34 percent to Rs.17.25 billion last year and has soared from Rs. 461 million since the government brought the new president Mr. Ali Raza in to run the bank seven years ago. The bank is well poised to grow locally as well internationally and to prove it self as a Nations Bank.