Chapter - 1

INTRODUCTION OF STUDY

1.1 BACKGROUND OF THE STUDY

Internship training program during Masters in Business administration

Program is necessary for the partial fulfillment of the completion of

Degree of Masters in Business Administration as per HEC (Higher

Education Commission) requirement. It is necessary for me to

complete an internship session of about 8 weeks in some

manufacturing or service industry relevant to my area of interest and

specialization. So, I choose the Banking field because I have the

interest in this sector because my study background is related with this

sector.

1.2 PURPOSE OF THE STUDY

Internship is the corner stone experience that provides me with hands-

on, real-world experience in a work setting. Ideally, internship will

enable internees to:

Use my knowledge and skills get from the classroom,

Discover where further competence is needed,

Convert the bookish knowledge into practical life

Become better acquainted with the types of work settings in

which such Competence can be applied.

1.3 SCOPE OF THE STUDY

This study will facilitate to me regarding the working of Banking

sector of Pakistan because most of the teachers during their lectures

use the examples of Banks like MCB, National Bank, UBL, Bank

1

Alfalah and many others, Students should study about the functioning

of such Banks. It will help for me in future.

1.4 METHODOLOGY

There are mainly two methods that are used for the collection of data.

Primary Data

Secondary Data

(A) Primary Data

Observation of functions of Branch operations on the spot.

Observation of different processes of Branch on the spot.

(B) Secondary Data:

Internet is very helpful for me to study more about banking

sector of

Pakistan.

Different type of booklets of the Bank.

Annual reports

Journals

Newspapers

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1.5 SCHEME OF THE REPORT

Chapter 1

This chapter encompasses the background of the study. It also looks

into the purpose, scope, limitation, objectives, methodology and

scheme of the study.

Chapter 2

It gives over all view of the Bank. In this I have discussed

comprehensively the history of Banking as well as historical

background of MCB, its present operations, mission as well. Some

light has also been shed on management and organizational structure of

MCB.

Chapter 3

This chapter contains SWOT analysis, critical analysis and financial

analysis of MCB.

Chapter 4

It summarizes the conclusions and recommendations based on the

analysis.

Chapter 5

This chapter includes the implementation plan.

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Chapter - 2

REVIEW OF MCB

2.1 HISTORICAL BACKGROUND

MCB Bank Limited formerly known as Muslim Commercial Bank

Limited MCB Bank is not an overnight success story. It was

incorporated by the Adam jee Group on July 9, 1947, under the Indian

Companies Act, VII of 1913 as a limited company. The bank was

established with a view to provide banking facilities to the business

community of the South Asia

After the partition of the Indo-Pak subcontinent, the bank moved to

Dhaka (then the capital of former East Pakistan) from where it

commenced business in August 1948. In 1956, the bank transferred its

registered office to Karachi, Where the head office is presently located.

Thus, the bank inherits a 59 years legacy of trust of its customers and

the citizens of Pakistan.

2.1.1 Nationalization

In January 1974, the Government of Pakistan nationalized MCB

following the Banks (Nationalization) Act 1974. MCB was the only

bank which was nationalized solely as neither it nor any other bank

being merged with it due to its consistent and firm policies and its

sound position.

2.1.2 Privatization

A wave of economic reforms swept Pakistan in the lattes introducing

the Need for privatization of state owned banks and companies. This

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was the first bank to be privatized in 1991 and the bank was purchased

by a consortium of Pakistani corporate groups led by Nishat Group.

Nishat Group is one of the leading and most diversified business

groups in Pakistan. The group has strong presence in the most

important business sectors of the country such as banking,

textile,cement and insurance.

Mian Mohammad Mansha is the Chairman of the group (and also

MCB) and has played instrumental role in its success. In recognition of

Mr. Mansha’s contribution, the Government of Pakistan has conferred

him with "Sitara-e-Imtiaz", one of the most prestigious civil awards of

the country.

2.2 ABOUT MCB (1)

Over the years MCB has developed strong relationships with its

customers by understanding their needs and treating them with respect,

dignity and importance. The driving force behind its commitment and

services is its focus on customers ensuring that it not only meets, but

also exceeds their expectation.

They strive to achieve excellence by ensuring that every moment of

their time is spent in adding value, making sure that they do things

right, first time, and every time. With the quest of quality MCB has

always taken initiatives bringing banking into a new arena; from cash

to the convenience of plastic; from branch banking to internet banking

and from face to face customer interaction to online accessibility.

MCB now focuses on three core businesses namely Corporate,

Commercial and Consumer Banking. Corporate clientele includes

public sector companies as well as large local and multi national

concerns. MCB is also catering to the growing middle class by

providing new asset and liability products. MCB Bank Limited

(Formerly Muslim Commercial Bank Limited) has a solid foundation

5

of over 63 years in Pakistan, the Bank provides 24 hour banking

convenience with a network of over 1000 branches, the largest ATM

network in Pakistan over 450 ATM locations in the market.

During the last fifteen years, the Bank has concentrated on growth

through improving service quality, investment in technology and

people, utilizing its extensive branch network, developing a large and

stable deposit base.

2.3 ORGANIZATIONAL STRUCTURE

As MCB is a banking company listed in stock exchange therefore it

follows all the legalities, which are imposed by concerned statutes.

MR. Mian Mohammed Mansha is chairman & chief executive of the

company with a team of 10 directors and 1 vice chairman to help in the

business control and strategy making for the company.

A team of 10 professionals is handling operational management of the

bank. MR. Mian Mohammed Mansha also heads this team.

The different operational departments are:

Consumer Banking & IT Division

Financial & Inter Branch Division

Banking Operations Divisions

HRD & Legal Division

Financial Control & Audit Division

Credit Management Division

Commercial Banking Division

Corporate Banking Division

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2.4 VISION & MISSION

Vision Statement

“To be the leading financial services provider, partnering with our

customers for a more prosperous and secure future.”(2)

Mission Statement

“We are a team of committed professionals, providing innovative and

efficient financial solutions to create and nurture long-term

relationships with our customers. In doing so, we ensure that our

shareholders can invest with confidence in us.”(3)

Providing innovative

Efficient financial solutions

Long-term relationships with our customers

Shareholders invest with confidence

2.4.1 Values of MCB (4)

Integrity

We are the trustees of public funds and serve our community with

integrity. We believe in being the best at always doing the right thing.

We deliver on our responsibilities and commitments to our customers

as well as our colleagues.

Respect

We respect our customer’s values, beliefs, culture and history. We

value the equality of gender and diversity of experience and education

that our employees bring with them. We create an environment where

each individual is enabled to succeed.

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Excellence

We take personal responsibility for our role as leaders in the pursuit of

excellence. We are a performance driven, result oriented organization

where merit is the only criterion for reward.

Customer Centricity

Our customers are at the heart of everything we do. We thrive on the

challenge of understanding their needs and aspirations, both realized

and unrealized. We make every effort to exceed customer expectations

through superior services and solutions.

Innovation

We encourage and reward people who challenge the status quo and

think beyond the boundaries of the conventional. Our teams work

together for the smooth and efficient implementation of ideas and

initiatives.

2.4.2 Awards and Achievement (5)

Euro money Awards

Best Bank in Asia Award 2008

MCB has been awarded as a Euromoney Award 2008 for the “Best

Bank in Asia".Best Bank in Pakistan Award 2006

MCB has yet again received the esteemed Euromoney Award for the

“Best Bank in Pakistan”.

It is the only bank to receive the Euromoney Award for Excellence for

the sixth time in the past seven years.

Best Bank in Pakistan Award 2005

Best Bank in Pakistan Award 2004

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Best Bank in Pakistan Award 2003

Best Bank in Pakistan Award 2001

Best Domestic Bank Award 2000

MCB was awarded as a Euromoney Award 2000 for the “Best

Domestic Bank in Pakistan.

Asia Money Awards

The Best Domestic Commercial Bank Award 2005

MCB Continues to shine as once again Asia Money declares MCB as

"The Best Domestic Commercial Bank in Pakistan" for the year 2005.

The Best Domestic Commercial Bank Award 2004

MCB has a distinction of winning the Asia Money 2004 award for

being "The Best Domestic Commercial Bank in Pakistan".

2.5 DIVISIONS OF MCB (6)

2.5.1 Agriculture Division

Agriculture division deals with the loans and development of

agriculture sector. It has the responsibility to manage all the affairs

related to agriculture sector. This division works for the development

of agriculture in the country.

2.5.2 Audit Division

Audit Division is responsible for the inspection of financial affairs. It

also keeps a check over the irregularities in different branches. They

are delegated enough authority from the Board of Directors so that it

works without pressure. It appoints the audit teams and all the

irregularities pointed out are reported to this division.

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2.5.3 Business Development and Marketing Division

This division works under the Head Office (H.O). Its main concern is

to develop the business of the bank related to the introduction of new

products. Changes in the existing schemes in favor of the bank and

customer are also the responsibility of this division.

2.5.4 Central Accounts Division

Central Accounts Division takes care of the accounts of branches and

records all inter branch transactions and transaction of branches with

HO. Calculation of profit on the account of branches maintained with

HO is also the responsibility of this division.

2.5.5 Corporate Affairs Division

Corporate affairs division deals with the affairs related to public

limited companies. It includes financing of large and specialized

corporations projects. In short it manages the corporate financing. It

also directly controls all those branches, which are designed as

corporate branches.

2.5.6 Credit Management Division

This division has the duty to make and alter the credit rules and

regulations in accordance with the prudential rules and regulations

formed by SBP. It deals with all credit proposals submitted by

advances department of different branches and designs their limit of

loans. This division also carries out marketing activities about the loan.

2.5.7 Finance and Treasury Division

It manages all the assets of MCB. Management of income tax and

central excise duty is the function of this division. The most important

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function is to announce the profit rates on different schemes from time

to time.

2.5.8 Foreign Trades and Exchange Operation Division

This division is responsible for managing foreign currency reserves for

day-to-day requirements of the bank. It frames all the rules and

regulations regarding foreign exchange and opening of L/C in the light

of prudential regulations of SBP.

2.5.9 General Service Division

General service section is concerned with construction of building for

branches of the bank at various localities. It is also concerned with the

purchase of vehicles and other accessories for the banks. The supply of

stationary and equipment is the responsibility of this division.

2.5.10 Human Resource Development Division

This division manages all the methods concerns with the human

resources management like selection, promotion, transfer and

retirement etc. It settles all the matters relating to salaries, increments,

bonuses, and fringe benefits. It maintains records of employees and

conducts performance appraisal and disciplinary actions.

2.5.11 information Management Division

Information Management provides all the information to the top

management. This division monitors the information system of all

branches and is playing a very important role in computerization of

MCB.

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2.5.12 Industrial Credit Division

Previously it was a part of credit management division. It is concerned

with advances to various industrial units.

2.5.13 International Division

This division deals all the matters relating to branches located in

foreign countries. It looks after all the matters, which MCB carries out

with banks and financial institution of foreign countries. It also

manages the religious matters of hajj and Umrah.

2.5.14 Investment Banking Division

This division looks after the investment of bank in various schemes

introduced by the bank. It deals with capital market at national and

international level and also manages syndicate in case of issuing of

shares etc.

2.5.15 Islamization Division

During the era of Late President Gen. Zia, steps were taken to abolish

interest from the bank transaction, MCB developed this division. This

department deals with Zakat deduction, Iqra surcharge, Qarz-e-hasana

etc. This division also gives suggestions on the adoption of interest free

banking in Pakistan.

2.5.16 Legal Affairs Division

This division deals with the legal affairs of the bank. It handles all the

cases filed against the bank. It also gives suggestions in framing of

new rules and regulations to other division.

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2.6 ORGANIZATIONAL STRUCTURE

It is the graphical representation of authorities and responsibilities.4 It

defines the various level of management and its span of control. (It

refers to the number of personnel a manager manages by virtue of his

post.) 5

MCB is a very large and complicated organization having many

divisions, branches, and administrative offices all over the country and

outside the country. MCB is running its operations successfully since

1947 and reached to the top of the banking industry. Normally it is said

that MCB has no specific organizational structure, but it is not true

because no bank without its proper organizational structure stand No. 1

for so many years. However, MCB policies are very flexible and

changes frequently according to the situation.

MCB is a very large organization with many branches in different

areas of the country and different divisions under the Head Office. So

it is managed through broad span of control with decentralization of

authority. The tendency to disperse decision-making authority in an

organization structure. All the Executives, including Senior Executive

Vice Presidents (SEVP`s), General Managers (GM`s), Regional

Managers (RM`s), Vice Presidents (VP`s), and Branch Managers are

delegated with powers and authorities, which are fairly, match able

with their responsibilities and duties they perform.

Still many decisions of small importance, are made by Top

Management for control purposes. So there is a mix of centralized and

decentralized authority in this respect. The tendency to restrict

delegation of decision making in an organization structure, usually by

holding authority at or near the top of the organization structure.

Where practical training supports necessary, institutional training so

that the trainee can understand the actual job cooperation. It also

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provides them opportunity to work in the branch environment facing

customers practically and handle them.

2.7 PRODUCT & SERVICES (7)

In order to achieve long-term goals of expansion and penetration in the

market. Bank introduced various new products for its customers, which

cater to the needs of various segments of the society. In order to do so,

a constant process of market research, evaluation and development of

New products was started which resulted in introduction of various

new products which were earlier not introduced by any other Bank in

the country. Introduction of these products was indeed a major source

of penetration for the bank and turned out to be a differential factor as

compared to other banks.

The services provided by MCB Bank are:

Personal Banking

i. Deposits

ii. Rupee Traveler Cheques

iii. Remit Express

Corporate Banking

Investment Banking

Personal Banking

2.7.1 Deposits

Khushhali Bachat Account

Mahana khushalii Account

Pak Rupees Saving Account

Pak Rupees Current Account

Pak Rupees Term Deposit

Saving 365

Foreign Currency Saving Accounts

Foreign Currency Current Account

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Foreign Currency Term Deposit

Dollar Khushhali Account

Rupees Maximize Account

Capital Growth

Call Deposit

Khushali Bachat Account

Khushali Bachat Account, a Rupee savings account is one of MCB

Bank’s most popular products. Due to the low initial deposit, the

account can be opened by people from all walks of life and still avail

the facility of daily product profit calculation. The account offers

unique and attractive benefits to the Account holders.

Mahana Khushali Account

MCB Monthly Khushali Scheme provides you with a steady income

every month. Just purchase a Monthly Khushali Certificate and you

will enjoy a steady income of your total deposit every month.

o Minimum deposit of Rs. 50,000.

1. Your deposit to remain fixed for five years.

2. You can avail a credit facility up to 75% of the total deposit

value.

3. Profit will be paid on a monthly basis through Cash, Pay

Order,

4. Demand Draft or Direct Debit to your Saving/Current

Account.

Pak Rupees Saving Account

MCB’s Pak Rupee Savings Account offers you attractive returns on

your Pak Rupee investment.

In addition, you have access to a countrywide ATM network

convenient cash accessibility 24 hours a day. The facility also provides

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you with unlimited daily transactions with a limit on maximum

withdrawal amount through the ATM machines.

Pak Rupees Current Account

MCB’s Pak Rupee Current Account offers you the convenience of

unlimited withdrawals i.e. access to your funds whenever you want

without any notice. There is no limit on the number of transactions you

make in a day plus you can avail finance facility up to 75% of the total

deposit.

In addition, you have access to a countrywide ATM network

convenient cash accessibility 24 hours a day. The facility also provides

you with unlimited daily transactions with a limit on maximum

withdrawal amount through the ATM machines.

Pak Rupees Term Deposit

Place your investment in a MCB Pak Rupee Term Deposit and receive

a higher rate of return. Avail your choice of 1 month, 3 months, 6

months, 1 year, 2 years, 3 years, 4 years and 5 year term deposits. For

more information or to open an account at MCB visit one of our 900

branches today.

Saving 365

The MCB Saving 365 calculates profits on a daily product basis and

gives you the facility of unlimited withdrawals.

o Open a Saving 365 Account with a minimum initial deposit of Rs.

500,000.

o Your Profits are calculated on daily product basis payable on a half

yearly basis.

o No restrictions on the number of withdrawals.

o You can avail a credit facility up to 75% of the total deposit value.

Foreign Currency Current Accounts:

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MCB’s Foreign Currency Current Account offers you the convenience

of unlimited withdrawals i.e. access to your funds whenever you want

without any notice. There is no limit on the number of transactions you

make in a day.

o You can invest in any of the four currencies i.e. US Dollar, UK

Pound Sterling, Japanese Yen or Deutsche Mark.

o Your foreign currency account is Zakat and withholding tax

exempted.

o You can avail a credit facility up to 75% of the total deposit value.

Foreign Currency Saving Accounts

MCB’s Foreign Currency Savings Account offers you attractive

returns on your Foreign Currency investment.

o You can invest in any of the four currencies i.e. US Dollar, UK

Pound Sterling, Japanese Yen or Euro.

o Your foreign currency account is exempted from Zakat and

withholding tax.

Foreign Currency Term Deposit

Place your investment in a MCB Foreign Currency Term Deposit and

receive a higher rate of return. Avail your choice of 1 month, 3 months,

6 months, 1 year, 2 years, 3 years, 4 years and 5 year term deposits.

Dollar Khushhali Account

The Dollar Khushali Account, a Dollar based account was introduced

in 1993 at selected MCB Bank branches. Today, you can open a Dollar

Khushali Account at over 200 branches in Pakistan.

o You can open a Dollar Khushali Account with a minimum initial

deposit of US Rs. 100.

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o Your Profits are paid on daily product basis payable half yearly on

interest calculated at the Dollar Savings Rate.

o No prior notice required for withdrawal.

o You can avail a credit facility up to 75% of the total deposit value.

o Your account is not subject to Zakat.

Rupees Maximize Account

MCB Rupees Maximize Account is our latest PLS saving Account

specially made to help MCB Foreign Currency Account holder to

convert their account into Pak Rupees. It gives individual,

businessmen and Corporation the chance to earn a high rate of return

on their deposits in Pak Rupees. The account offers unique and

attractive benefits to the account holder:

o Profits calculated on a daily product basis.

o No restrictions on number of withdrawals.

o No restriction on initial deposit.

o Free ATM Card to each customer.

o Locker facility free of cost

Capital Growth

In this scheme, deposits are to stay with the bank for five years and

every six months the profit is calculated and added into the initial

deposit in this way it is a form of compounding. The profit rate on

capital growth certificate is 4.00% Minimum Deposit of 10,000

Call Deposit

This is a type of deposit offered by MCB on which no Markup is paid.

The Call Deposit receipt is usually issued in the favor of Government,

Semi Government, and Institution Corporations etc. as security

deposit.

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2.7.2. Rupee Traveler’s Cheques (8)

Ideal for Every Deal

MCB Bank has been at the forefront of providing it’s customers with

new and innovative products and financial instruments that are safe,

secure and profitable. MCB Rupee Traveler's Cheques were first

introduced in 1993 as safe cash for traveling and travel related

purposes. The product has been extremely popular and is preferred

over cash by customers while traveling and in all walks of life. MCB

Rupee Traveler's Cheques- The safest way to Carry Cash

Rupee Traveler’s Cheques Features:

Easily available: Buy them from any of the designated branches in

Pakistan. 

As good as cash: MCB RTCs are safe to carry and can be used

without any inconvenience especially by Travelers.

Easily encased: At any designated MCB branch

Easily refunded: in case of loss or theft, you can get the full amount

back.

Exclusive security features: Due to special printing and safety

precautions, Cheques cannot be duplicated. 

Denominations: Available in denominations of Rs 1000, Rs 5000,

and Rs 10,000 and gift cheques of Rs 500.

Valid until Used: Validity of Cheques indefinite.

24-hour Service available at Airport MCB booths Karachi, Lahore

& Islamabad.

More than 900 MCB Authorized branches are selling and

purchasing Cheques all over Pakistan.

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MCB Rupee Traveler's Cheques are also available at the counters

of Foreign Banks such as ABN Amro and HSBC and private bank

i.e. Bank Al-Habib.

2.7.3 Remit Express (9)

The fastest way of getting your money across to Pakistan. Remit

Express offers low cost remittance from U.A.E. and Saudi Arabia. The

receiver i.e. business associates or relatives receive drafts within 72

hours. MCB Remit Express has been specifically designed to meet the

needs of the expatriate Pakistani community residing in the Gulf

countries.

Remit Express Features

Easiest and safest way to remit funds.

Remittance within 24 to 72 hours.

Personal delivery to the beneficiary.

Delivery confirmation to the remitter.

Message facilities for both parties.

Your beneficiary will receive the amount even if he/she does not

have an MCB account.

2.8 Corporate Banking (10)

MCB has its 20 corporate branches in major cities of all over the

Pakistan. Its area offices are located in Karachi, Lahore, and

Islamabad. The MCB corporate banking team consists of enthusiastic,

cooperative professionals with the requisite expertise to take care of

your banking needs.

Corporate branches have been established in the three prime cities

where teams of obsessive managers have been appointed. These

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managers have been delegated with the inclusive responsibility for

managing the risk of there allocated portfolios, acting as a liaison

between you and the bank, and providing you with the entire range of

products/ services presented by the bank. The corporate bank offers an

absolute range of banking products/ services that can be generally

separated in to the following categories

i. Working Capital Loans

ii. Term Loans

iii. Trade Finance Services

iv. Cash Management

2.8.1 Working Capital Loans

The corporate bank offers a number of different working capital

financing facilities together with running finance, cash finance, export

refinance, pre-shipment and post-shipment etc.

2.8.2 Term Loans

For meeting the capital expenditure and short term working capital

requirement of customers, bank offers short to medium term finance.

The loans are structured on the basis of underline project characteristic

and cash flows of the business.

2.8.3 Trade Finance Service

It include entire range of import export activities including issuing

letters of credit, purchasing export documents, providing guarantees

and other sport services.

2.8.4 Cash Management

The network of abut more than 1200 branches in Pakistan enables

MCB to collect and disburse payments efficiently with its cash

management services. It also enables the bank to offer you a choice of

paper based on electronic fund transfer solutions including collection

amounts, cross branch on-line transactions.

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2.9 Investment Banking

MCB investment banking team has emerged as a leading player in

banking arena. The team handles advisory, corporate finance, and

capital market related transactions.

Within these areas the team has developed expertise in:

Private Placement

Debt Equity Underwriting

Term Finance Certificates

Loans Syndication

Arrangement of Non Fund Facilities

Merger and Acquisitions

Privatization

Corporate Advisory

2.10 ONLINE SERVICES (11)

2.10.1 Automated Teller Machine (ATM)

MCB introduced automated teller machine in 1995 to provide 24 hours

cash facility to its customers. Over the years it got great success and

this encouraged the bank to expand its ATM Network. Now in 2003

MCB ATM network is the largest ATM network in Pakistan with over

160 ATM branches in different cities of Pakistan and 158 online

branches where ATM cards are issued. MCB placed its ATM in

Karachi, Lahore and Islamabad airports to facilitate its customers.

MCB has two kinds of ATM cards with different cash with drawl

limits.

2.10.2 MCB ATM Regular Card

The MCB ATM Regular Card allows withdrawal up to Rs10, 000 per

day and a maximum of 3 with drawl per day per card.

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2.10.3 MCB ATM Gold Card

The MCB ATM Gold Card allows with drawls up to Rs 25,000 per

day and a maximum of 6 with draws per day per card. The card holder

has to make at least two transactions to withdraw the full amount of Rs

25,000.

2.10.4 MCB Master Card

(The Future of Money)

Since the beginning of time, people have tried to find more convenient

ways to pay, from gold to paper money and checks. Today, money is

moving away from distinct hard currencies and towards universal

payment products that transcend national borders, time zones, and,

with the Internet, even physical space.

“Plastic or virtual’’ money, credit, debit, and electronic cash products,

inevitably will displace cash and checks as the money of the future.

Master card International has expanded globally in more locations in

the world than any other card. The card was introduced by MCB Bank

Limited in 1995 and now offers card members over 15 million outlets

in 232 countries.

Photo security – the first bank in Pakistan to introduce the

enhanced feature of photograph on the card limiting fraud in case

of card of card loss.

Welcomed at over 3,000 outlets in Pakistan.

Provides up-to 45 days Free Credit.

Joining and Annual Fees to suit you.

Cash Advance Facilities available in Pakistan and worldwide.

With a network of over 1,000 branches and a team of dedicated

professionals, MCB is Pakistan’s largest private sector commercial

bank.

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2.10.5 MCB ATM Cash Card

The wide spread acceptability and frequent use of MCB ATM Cards

has prompted the Bank to add more value to the cards which cater to

customers evolving cash needs enabling them to go ahead with ease

and convenience. This reinforces MCB commitment to provide to its

customers safe and secure mode of cash substitute.

MCB Cash Card is useful means of cash for MCB customers and non

customers like:

o Travelers

o Businessmen

o General Public

Advantages

MCB Cash Card enables MCB customers/non customers to meet their

day to day cash requirements and settlement of their commercial

personals cash requirement transactions.

a. Secure

MCB Cash Cards are the safest alternative of the cash because the

purchaser can rest assure of its security. If MCB ATM Cash Card is

lost it would be cancelled immediately and the purchaser would get

amount refunded easily subject to completion of refund formalities.

b. Ease of Use

MCB ATM cash card is the best because unlike other mode of transfer

of funds/remittance which are drawn on particular branch can only be

cashed at that branch. MCB ATM cash card holder can draw cash from

any of MCB ATM all over the country, m-net members ATM and

cirrus member ATMs globally. MCB Cash Card is disposable and with

a prescribed determined value. When the value of MCB cash card is

utilized fully the balance amount is nil the card will be discarded.

24

Features

MCB Cash Card pin code is confidential and is only known to the

purchaser. It can be changed from MCB ATM Machine.

MCB ATM Cash Card if lost or stolen then the same will be

immediately marked “HOT” on the request of purchaser.

The amount remaining on MCB Cash Card will be refunded to the

purchaser.

Loss/theft will only be entertained through the original purchaser.

Loss/Theft is to be reported to the issuing branch by the purchaser

of MCB.

2.11 MCB Mobile Banking

At the forefront of technological excellence, MCB proudly introduces

MCB Mobile Banking. The convenience of accessing your account

balance information and mini statements whenever you want or

wherever you may need them with comfort and peace of mind. MCB

Mobile Banking service is available to all MCB ATM cardholders, 24

hour 365 days.

2.11.1 Mobile Banking at a Glance

MCB Mobile Banking gives you easy and quick access to your

account(s) at a time you find convenient, including all holidays.

2.11.2 Banking At Your Fingertips

With MCB mobile banking you can:

Check your balance

View the last 4 transaction of your MCB account.

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2.11.3 A Free Service

MCB Mobile Banking is a free service for MCB account holders who

have an ATM card of an SMS message if charged by the service

provider.

2.12 Virtual Banking

MCB Virtual Internet Banking offers you the convenience to manage

and control your banking and finances – when you want to, where you

want to. MCB’s Virtual Internet Banking facility is simple and secure.

And it’s free of cost. With MCB Virtual Internet Banking you can

access any of the banking services, 24 hours a day, 7 days a week and

throughout the year.

MCB Virtual Internet Banking offers a wide range of online services

which makes your banking accessible anytime and from anywhere.

Detailed Account Summary of all listed accounts.

Mini-statements of each of the listed accounts showing recent

transaction history for that account(s).

Statement-by-Period of each of the listed accounts, based on the

period specified.

Immediate or Scheduled Transfer of Funds between your own

accounts, as well as to third-party accounts    setup as beneficiaries,

maintaining accounts with MCB.

Scheduling of ‘One-Time’ as well as ‘Recurring’ Funds Transfers.

Payment of utility bills for registered Utility Companies.

26

Immediate or Scheduled Bills Payment. Scheduling of ‘One-Time’

as well as ‘Recurring’ bill payments. Option   for ‘Full’ or ‘Partial’

payment based on the payment conditions specified by a particular

Utility Company.

Bulk Salary Transfer for Corporate Customers, to facilitate them in

paying salary to the corporate employees,   who maintain accounts

with MCB.

Bulk Funds Transfer for Corporate Customers.

Cheque Book Request for any of your listed accounts.

Payment/Transfer Alerts for reminding, in advance, prior to the

processing of specified payments and    transfers.

Personal Alerts for reminding of pre-specified events and

occasions.

2.13 ISLAMIC BANKING (12)

Deposit Schemes

For customers who are looking for a deposit opportunity where they

can purse their funds and reap halal returns on it, MCB offer the

following products:

Al-Makhraj Saving Account

Al-Makhraj Ianat Account

Al-Makhraj Term Deposit

2.13.1 Fund Based Facilities

Ijarah Products

27

MCB’s Islamic Ijarah, analogous to the English term 'leasing’, is based

on the ‘Ijarah wa Iqtina’ concept which means the sale of the asset to

the lessee after the Ijarah has matured. Under this scheme, MCB will

be the owner of the asset, and the customer (lessee) will be given the

asset to use for a certain period of time in return for monthly rental

payments. MCB will give a separate unilateral undertaking that it will

offer to sell the asset to the customer (lessee) at the maturity of the

Ijarah agreement at a price that may be equal to the security deposit

amount, hence the term ‘Wa Iqtina’.

2.13.2 Types of Ijarah

o Car Ijarah o Equipment Ijarah

Murabahah

It is a contract between a buyer and a seller under which the later first

purchases the goods at the request of the former i.e., customer and then

sells it to same customer after adding profit.

Parties in Murabahah

Buyer Bank’s CustomerSeller Bank

AgentAppointment of customer as agent of the bank (Foreign

Transactions) / common broker (for Local Transactions).

Mode of Repayment   Immediately in cashOn mutually agreed future dateSpot Murabahah (Import Related Transactions)Deferred Sale Murabahah

2.13.3 Diminishing Musharika Equipment

28

Defination

It is a contract through which the bank and its client participate in the

joint ownership of a property. The share of the Bank is further divided

into a number of units and it is agreed that the client will purchase the

bank’s share periodically, thus increasing his own share until all the

units of the bank are purchased by him so as to make the client the sole

owner of the property.

  2.13.4 Parties in Diminishing Musharakah

Bank (In joint partnership with its customer)Partner(Bank’s customer)

Common Features  

Request of customer for starting a new project/expanding

business/buying equipment for specific purpose.

Bank and the client shall jointly contribute funds to purchase the

equipment in the pre-agreed ratio.

The client will pay rentals for using MCB’s share of equipment.

The bank will have to share all the obligations of being the co-owner.

Appropriate collateral / securities can be obtained as per mutual

consent

Insurance / Takaful will continue to execute

29

REFFERENCES

1. http://www.mcb.com.pk/mcb/about_mcb.asp

2. http://www.mcb.com.pk/mcb/mission_vision.asp

3. Ibid

4. http://www.mcb.com.pk/mcb/our_values.asp

5. http://www.mcb.com.pk/mcb/awards_accolades.asp

6. http://bizcovering.com/business/divisions-of-mcb-bank/

7. http://www.mcb.com.pk/psc/accounts/basic_account.asp

8. http://www.mcb.com.pk/psc/travelers_chq/

9. Ibid

10. http://www.mcb.com.pk/psc/corporate/

11. http://www.mcb.com.pk/virtual_banking/

12. http://www.mcb.com.pk/islamic_banking/introduction.asp

30

Chapter - 3

ANALYSIS

3.1 SWOT ANALYSIS

3.1.1 Strengths

1. The largest private sector bank in Pakistan with a network of 1040

domestic and 5 foreign branches.

2. MCB has long-term vision, which plays a very important role in

organization’s success.

3. First bank to privatize, which has, now become the leader in market

with largest on line ATM network in the country.

4. Bank’s emphasis on consumer banking by providing them with

innovative saving schemes, products and services suiting best to their

life style.

5. Extension and improvement in services to domestic as well as

foreign customer.

6. Best and optional policies and attractive compensation packages, for

employees, which has really improved their commitment, dedication

and hard work, towards the accomplishment of banks objectives.

7. MCB instant financing products for customer wanting instant loan

facility at MCB branches.

8. 24 hours cash access through ATM.

9. Pioneer in introduction of MCB Master Card and RTC, which

minimize the degree of riskiness.

10. Attention and sensitivity to competition prevailing in the country.

11. Easy access to the customers at their residential localities through a

large number of branches.

12. Recognition of critical condition and need for Drastic immediate

change.

13. MCB has a brand name and recognition.

31

14. It is well aware of the Market and adopts strategy according to the

competitor’s strategy.

15. MCB has now started Mobile banking, which is definitely a truly

innovative product and according to the needs of the customers.

16. The current customers list of MCB is very large and having a large

number of deposit.

3.1.2 Weaknesses

1. Customers having account, with small amounts are not given some

services and dealing to those with high accounts.

2. No. Of branches is decreasing because of low profitability.

3. A sense Insecurity of jobs, with the down sizing, among the

employees is found.

4. Experienced but old staff, who are not aware of using modern

technologies/ equipments

5. Political pressure from vested interest group selection.

6. A very small foreign. Network

7. Financial weaknesses i.e excess operating cost

8. Human Resources i.e low morale due to following factors:

Under compensation

No accountability

No development

Political interference

No database

Untapped markets

9. No marketing of advances

10. No training for advances in-charge.

11. Not many advances to agriculture sector and small and medium

enterprises.

32

3.1.3 Opportunities

1. Due to largest ATM network, MCB can expand its 24 hours cash

facilities to the far off cities of the growing market demand.

2. They can capture a large portion of the market, if they expand its

ATM and branch network to other countries of the as well.

3. Increasing focus/target on different types of customers, MCB can

open women branches, especially in those areas where women class

want to get involved but couldn’t due to environmental restriction.

4. Growing policies of government on business and commerce sector

provides MCB and opportunity to efficiently meet with the business

people’s requirement of instant cash and financing facilities.

5. MCB has also an opportunity to expand its new technological

advancement like; tele-bank and Internet banking efficiently.

6. Stronger position to recover bad debts

7. Benefits from incoming expertise and competition.

8. Focus on small business, export/ import sector.

9. launching of new products like Mala Maal and Cash Card etc type

of product in future

10. To open overseas branches through out the world like National

Bank and HBL or merger with other foreign banks outside Pakistan.

11. New schemes should be introduced to finance commodity

operations.

12. The formation of new and energetic marketing teams can increase

the disbursement of loans and new customers can be searched out.

3.1.4 Threats

1. Increasing foreign banks in the country.

2. Privatization of other domestic banks has also increased their

services.

3. Highly specialized and attractive services provided by foreign banks

to their customers.

33

4. Un-consistency in government policies regarding to business and

economic sector.

5. Growing global technological advancement.

6. Strict regulations by the government over credit facilities to the

customers as to meet the prudential regulations.

7. Loss of confidence of the customers due to freezing of accounts

8. Rising customer’s expectations

9. Concentration risk is involved with the credit department.

10. Slower economic growth rate of the country.

11. Return of deposits is very low.

12. Inflation rate is high.

13. GNP and GDP rates are low and so the saving are low.(1)

3.2 GENERAL ANALYSIS

3.2.1 Customer Relationship

In the bank the officers come across many customers daily. There is a

need to improve the customer relationship in all the departments. The

relationship manager has a very close contact with the customers and

this is his duty to give proper guidance to the customers. Where as in

MCB I have found that the customer relationship is not up-to the

satisfactory level.

3.2.2 Inadequate Training Program

As the employee finishes his training he is induced in a specified field

since he does not have knowledge about the specific job assigned to

him thus he feel difficulty to perform his job.

There is no special training given to the employees for motivating

customers.

34

3.2.3 Shortage of Latest Computers

There is a shortage of latest computers. They have been using the same

old computers; those are out dated now a day. It results in the

inefficiency of work. There is also lack of latest software, which

results in slow processing.

3.2.4 Poor Job Rotation

There is no specific job rotation in MCB, The Mall, Pesh. Officers

spend most of the time in the same department. A person can spend

years sitting in one department, performing the same duties. The

employees of the foreign exchange and other departments have the

same routine for years after giving a seat to the probationary officer,

the management forgets about him for at least six months.

3.2.5 Lack of Security

The most important aspect consider in the bank is security. But in

MCB I have seen that there was easy accessibility to account

information.

There was not enough security as far as the accounts were concerned.

Anyone can call and can get the information from the bank, which has

been creating trouble in the bank.

3.2.6 Shortage of Staff

There is a shortage of staff in the deposit, credit and foreign exchange

department of the bank. (MCB,G.T Road). Few people are working

and the workload is very much high on them.

3.2.7 Lack of Motivation

Motivation is the most important aspect in any organization.There is a

lack of motivation in the employees of all departments, which has to be

improved. By motivating people they can create a change in the bank.

35

3.2.8 High Work Load

The workload on the employees of MCB is immense. It is usual

practice for the employees to stay beyond the official working hours.

The manager specially faces problems in this regard.

They most of the time, work till late night at stretch without getting

any over time. Moreover they even have to come to the bank early to

finish the remaining work and also sometime on holiday.

3.2.9 Improper Work Distribution

I have noticed it through out my whole internship, which was also

irritating for me that the work distribution is totally improper here.

Few people have to perform less responsibility with same grade and

few have to perform more responsibility.

3.2.10 Lack of Appreciation

Another very important thing that is ignored in different department is

appreciation of the employees who work with dedication and

efficiency. If hard work and performance of the staff members is not

recognized and appreciated, it dis-hearts them resulting in poor

efficiency.

36

3.3 FINANCIAL ANALYSIS

Financial statements are the principal means of reporting the financial

condition and results of operations of a business entity. These

statements are the means to assist various parties in decision making

who are interested in the activities of the business. These statements

are means to an end of helping stakeholders in decision making to

improve the quality of decision making proper analysis of these

statements helps a lot. Financial statement analysis helps in

determining the financial conditions at any particular point in time and

effectiveness of operations of a firm during a specific period.

The various stakeholders of business are all interested in the analysis

of financial statements. But the focus of interest of all is not the same.

For example creditors and credit reporting agencies are interested in

finding out the credit worthiness of the firm to which they have

extended credit or intend to extend credit. Short term creditors are

interested in the short term liquidity of the business and long term

creditors are interested in the long run cash flow which the firm can

generate over the long period of time. Investors are interested in the

firm’s ability to sustain profitability over a period of time. Government

agencies analyze financial data for tax purposes. The internal users of

financial statement like management also analyze financial data for

planning and control.

The financial data of MCB is analyzed in the two following ways:

1. Time Series Analysis.

2. Ratio Analysis

Index and common size analyses are used to measure a firm’s

performance over time in relation to itself. Such analysis is called time

series analysis.

37

3.3.1 Common size analysis

Common size analysis is an analysis of financial statements where total

assets divide all balance sheet items and all income statement items are

divided by net sales or revenues. Common size statements can be

extremely helpful to highlight changes over time in the financial

performance and financial condition of a company. However, growth

or decline in various items of balance sheet and income statement

cannot be detected from the common size percentage only changes in

the data relative to a total for a particular date or period can be

determined. A statement item that has increased in rupee amount will

show a decrease percentage if the total has increased at a greater rate

than the individual item or vice versa.

38

Table 1: Common Size Balance Sheet

2009 2008 2007ASSETS (Rs in million)Cash and balance with treasury banks

39683.88 32465.98 23665.549

Balance with other Banks 3807.52 6577.02 1466.045Lending to institutions 1051.37 21081.80 9998.828Investment 113089.26 63486.32 69481.487Advances 218960.60 198239.16 180322.753Other Assets-net 17868.76 11031.45 5471.697Total current Assets 394461.40 332881.71 290406.359Operating fixed assets 16024.12 9054.16 8182.454Deferred tax assets 0.00 172.37 191.967Total Assets 410485.52 342108.24 298780.780 LIABILITIESBills payable 10479.06 7089.68 8536.674Borrowings 39406.83 23943.48 27377.502Deposits and other accounts 292098.07 257461.84 229341.890Sub-ordinate loan 479.23 1597.44 1598.080Liabilities against assets subject to finance lease

0.00 0.00 0.00

Other liabilities 11722.49 11171.50 8192.338Total current liabilities 354185.68 301263.93 275046.484Deferred tax liabilities-net 1180.16 0.00 0.00Total liabilities 355365.84 301263.93 275046.484NET ASSETS REPRESENTED BY:Share capital 6282.77 5463.28 4265.327Reserves 34000.64 24662.43 9054.940Inappropriate profit 5130.75 5530.97 4990.260Total 45414.0 35657.0 18311.0Surplus on revaluation of assets 9705.52 5187.64 5423.769Shareholders equity 55119.68 40844.31 23734.296Total Liabilities& O’E 410485.52 342108.24 298780.780

Source: MCB, (2009) Annual Report

39

INCOME STATEMENT PERFORMANCE

Table no. 22009 2008 2007

Mark-up/return/interest earned 31787 25778 17756Mark-up/return/interest expensed 7866 4525 2781Net mark-up/ interest income 23921 21253 14975

Provision for diminution in the value of invest

105 121 -98

Provision against loan and advances

2960 1015 1242

Bad debts written off directly 0 47 13065 1183 1144

Net mark-up/interest income after provision

20856 20090 13830

Non-mark-up / interest income:Fee, commission & brokerage income

2635 2311 2449

Dividend income 632 812 480Income from dealing in foreign currencies

693 692 531

Gain on sale of securities-net 1501 606 866Unrealized loss on revaluation of investmentClassified as held for trading -13 - 2Other income-net 563 571 1425Total non-mark-up/interest income

6011 4991 5754

26867 25061 19584Non-mark-up / interest expenses:Administrative expenses 5022 6483 6459(reversal) other provision-net -4 11 -73Other charges 541 67 179Total non-markup / interest expenses

5559 6561 6566

Extra ordinary / unusual item - - -Profit before taxation 21308 18501 13018Taxation-current year 6442 5701 4611-prior years -1294 593 -150-deferred 895 63 -365

6042 6358 4096Profit after taxation 15266 12142 8922Unappropriate profit brought 5531 4990 502

40

forwardTransfer from surplus on revaluation of fixed assets- net of tax

12 32 84

5543 5022 586Profit available for appropriation 20808 17165 9509Basic & dilute earning per share-after tax

24.3 19.33 17.43

Source: MCB, (2009) Annual Report

3.3.2 Ratio Analysis

A ratio is a quantitative relation between two magnitudes of the same

kind. In ratio analysis, the financial ratios of the firm are compared to

that of its competitors. This comparison allows the firm to detect major

operating differences, which if corrected, will increase its efficiency.

Another very popular method of ratio analysis is to compare the firm’s

financial ratios to industry average or similar form in industry or to our

own past performance.

Before discussion financial ratios, three cautions are in order:

a. A single ratio does not generally provide sufficient information

to judge the overall performance of the firm. Only when a

group of ratios is used, a reasonable judgment concerning the

firm’s overall financial state can be made.

b. An analyst, when comparing financial statement, should ensure

that predetermined uniform standards are used for this purpose.

c. It must be ensured that the data used in calculating financial

ratios have been developed in the same manner and are sound

and reliable.

There is no doubt that financial ratios are a useful guide for managerial

decision-making but these are not exact and definite. Ratios only

suggest the questions that need to be answered and provide no answers.

41

Let us now calculate some of the key financial ratios of MCB for the

years 2007-2008 and try to answer the questions that these ratios

suggest.

These ratios are calculated from the “Balance Sheet” and “Profit and

Loss Account” of MCB Bank.

Financial Ratio

“A financial ratio is an index that relates two accounting numbers and

is obtained by dividing one number by the other”.

One may ponder that why there is a need to mingle with these ratios

and not take the actual figures straightforwardly. Among various

reasons one cogent reason can be put forward that ratios help in

comparison. When ratio analysts are to compare the internal

performance of the organization in relation to time, only ratios are the

viable option for them. Along with it, comparison with the other

competitors in the same industry can only be carried out with the help

of financial ratios.

The number of financial ratios the might be created is virtually

limitless. But there are certain basic ratios the are frequently used,

these ratios are as:

Financial Ratios of MCB

Current Assets

Current Liabilities

42

CURRENT RATIO

Its shows the firm’s ability to meet its short term obligations. The

higher the ratio, the greater is the company’s ability to meet its short

term obligation as the come due. Current ratio is calculated by dividing

current assets by current liabilities.

Table No.3

Current Ratios For 2007, 2008, 2009

2007 2008 2009

Current assets 290406 332882 394461

Current liabilities 275046 301264 354186

Current ratio 1.06 1.10 1.11

Graph no.1

Source: MCB, (2009) Annual Report

1.106

1.10 1.11

1.02

1.04

1.06

1.08

1.10

1.12

Ratio

2007 2008 2009

Years

Ratio

43

44

INTERPRETATION

Current Ratio of MCB for the last three years shows an increasing

trend. In the year 2007 it was 1.06 and thenit increased to 1.10 in the

year 2008 mainly due to an increase in current assets of the bank. But

in the year 2009 it was just increased from 1.10 to 1.11. this rise in the

current ratio of MCB shows the defensive approach of MCB towards

working capital. This surely improves profitability as the percentage of

current assets.

Net sale (advances + investment)

Total Assets

This shows revenues generated per rupee investment in total assets.

This ratio is calculated by dividing net sales (advances and investment)

by total assets.

Table No. 4

Assets turn over ratio for, 2007, 2008, and 2009

2007 2008 2009

Sales 249804.24 261725.48 332049.86

Total assets 298781 342108 410486

ATR 0.84 0.77 0.81

45

ASSETS TURNOVER RATIO

Graph no.2

Source: MCB, (2009) Annual Report

INTERPRETATION

This shows revenue generated per rupee investment in total assets.

This ratio is decreased in 2008 as compared to 2007 which is 0.84 and

in 2008 it comes to 0.77. but in 2009 again the ratio increased to 0.81.

so we can interpret that MCB is effectively utilizes its resources.

Total Debt

Shareholder Equity

0.840.77

0.81

0

0.20

0.40

0.60

0.80

1.0

Ratio

2007 2008 2009

Years

Ratio

46

DEBT TO EQUITY RATIO

The Ratio shows extend to which the firm is financed by debt.

47

Table No.5

Debt to Equity Ratio for 2007, 2008 and 2009

2007 2008 2009

Total debt 275046 301264 355366

Shareholder equity 23734 40844 55120

Debt Ratio 11.59 7.38 6.45

Graph no. 3

Source: MCB, (2009) Annual Report

INTERPRETATION

11.59

7.386.45

0

4

68

1012

14

Ratio

2007 2008 2009

Years

Ratio

48

MCB‘s upward trend of Debt to Equity ration shows that the bank is

not relying in debt financing. The ratio of 2009 as compared to 2007

has increased.

49

Total Debt

Total Assets

Debt ratio shows the fraction of the company’s assets that is financed

by debt. The ratio is derived by dividing a firm’s total debt by its total

assets.

Table No.6

Debt to total Asset Ratio for the year 2007, 2008 and 2009.

2007 2008 2009

Total debt 275046 301264 355366

Total assets 298781 342108 410486

Debt Ratio 0.92 0.88 0.87

Graph no.4

50

DEBT TO TOTAL ASSET

RATIO

Source: MCB, (2009)

Source: MCB, (2009) Annual Report

INTERPRETATION

This ratio highlights the relative importance of debt financing to the

firm by showing the percentage of the firm’s assets that is supported by

debt financing. Here in our case of MCB this ratio is decreasing from

last three years, the higher the debt-to-total assets ratio, the greater the

financial risk, the lower this ratio the lower the financial risk. So we

0.920.88 0.87

0.2

0.40.60.8

1.01.2

2007 2008 2009

Ratio

51

can interpret that MCB is taking continuous steps to lower its debt

financing and thus lower its risks.

Earning before interest & Taxes

Interest Expense

This ratio shows that number of time a company can cover or meet its

financial charges or obligation.

Table No.7

Coverage Ratios for 2007, 2008, and 2009

2007 2008 2009

EBIT 13018 18501 21308

Interest expense 2781 4525 7866

Interest earned ratio 4.68 4.09 2.71

52

INTEREST EARNED RATIO

Graph no. 5

Source: MCB, (2009) Annual Report

INTERPRETATION

The interest coverage ratio of MCB serves as one measure of the firm’s

ability to meet interest payments and thus avoid bankruptcy. In general

the higher the ratio, the greater the likelihood that the company cour its

interest payment without difficulty. The interest coverage ratio of

MCB has shown a decrease over the period of three years. In the year

2009, the ratio is 2.71 which show that the income in 2009 cover only

2.71 times the interest expense.

4.68 4.09

2.71

0

1

2

3

4

5

2007 2008 2009

Years

Ratio

53

GROSS PROFIT MARGIN RATIO

Gross Profit X 100

Net Revenue

This ratio tells that the profit of the firm relatively to sales, after we

deduct the cost of producing the goods.

Table No. 8

Gross Margin Ratio For 2007, 2008 And 2009

2007 2008 2009

Gross profit 14975 21253 23921

Revenue 17756 25778 31787

Gross profit margin 84.34% 82.44% 75.25%

Graph no. 6

84.34% 82.44%

75.25%

20.00%

40.00%

60.00%

80.00%

100.00%

Ratio

2007 2008 2009

Years

Ratio

54

Source: MCB, (2009) Annual Report

55

INTERPRETATION

It is obvious from the figures of Gross profit margin that the Trent is

constantly decreasing for the last three years. The reason for this

decreasing trend is that the gross profit of the bank is decreasing and

this decreasing in gross profits is due to the remarkable increase in

mark up interest. The reason for this increase in mark up expenses may

be the management inefficiency in controlling these expenses.

Net Profit after Taxes X 100

Net sale

It is measure of the firm profitability of sale after taking account of all

expense and income taxes.

Table No.9

Net Profit Margin For 2007, 2008 And 2009

2007 2008 2009

Net profit after tax 8922 12142 15266

Sales 249804.24 261725.48 332049.86

Net profit margin 3.57% 5.60% 4.60%

56

NET PROFIT MARGIN RATIO

Graph no. 7

Source: MCB, (2009) Annual Report

INTERPRETATION

Net profit margin of MCB has shown a fluctuating trend in the year

2007 it was 3.57% but in the year 2008 it was increased to 5.60% and

again slightly dropped to 4.60 in the year 2009. This means that

through the selling price has increased the other expenses of the bank

like operating, general administration or selling expenses has shown a

slight decrease.

Net Profit after Taxes X 100

Total Assets

3.57%5.60%

4.60%

1.00%

2.00%

3.00%4.00%

5.00%6.00%

Ratio

2007 2008 2009

Years

Ratio

57

RETURN ON INVESTMENT RATIO

This ratio measures the profitability per rupee of investment in assets.

58

Table No.10

Return on Investment Ratio for 2007, 2008, and 2009

2007 2008 2009

Net profit after tax 8922 12142 15266

Total assets 298781 342108 410485

ROI 3.00% 3.55% 3.72%

Graph no.8

Source: MCB, (2009) Annual Report

INTERPRETATION

3.00%

3.55% 3.72%

0.00%

1.00%

2.00%

3.00%

4.00%5.00%

Ratio

2007 2008 2009

Years

Ratio

59

MCB’s ROI has shown improvement over the last three years. In 2007

the ROI is 3.0% and increase to 3.55% in 2008 and then slightly

increased to 3.72%. This is due to the increase in net profit margin of

MCB.

60

Net Profit X 100

Total Equity

This ratio shows that residual profit as a proportion of the bank value

of common shareholder equity.

Table No. 11

Return On Equity For 2007, 2008, And 2009

2007 2008 2009

Net profit after tax 8922 12142 15266

Shareholder equity 23734.29 40844.31 55119.68

ROE 37.60% 29.73% 27.72%

Graph no.9

61

RETURN ON EQUITY RATIO

Source: MCB, (2009)

Source: MCB, (2009) Annual Report

INTERPRETATION

The ROE of MCB has shown a decrease trend. In the year 2007 the

ROI is 37.6% but decrease in the year2008 and also in 2009 it comes

to 27.72%. this decrease in ROE is due to unimprovement in Net Profit

Margin.

37.60%29.73%

27.72%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

Ratio

2007 2008 2009

Years

Ratio

62

REFERENCES

1. http://bizcovering.com/business/swot-analysis/

2. MCB Manual on General Banking.

3. Robert, F.M. Williams, S.F Haka and M.S. Bettner. (1999).

Accounting; the basis for business decisions, New York; Irwin

McGraw-Hill, P.13

63

Chapter - 4

CONCLUSIONS & RECOMMENDATIONS

4.1 CONCLUSIONS

With Cooperation of all branch members, I have been able to learn and

experience many new things related to the banking sector and the

banks workings. I am able to handle the public with respect to many

different workings on many different instances and also in account

opening for customers and can handle many other tasks as well.

Finally I concluded that MCB is a good organization for a person for

his long term career workings. Overall working and environment of the

bank is very comfortable and the staff is very helpful and respectful of

each other and it still maintains a professional environment.

Management of the bank is very strong. Employees of MCB Timber

Market branch work more than their working hours and all the

workings take place in a very friendly atmosphere that does not induce

pressure on the person working there. It also shows their loyalty and

commitment to the organization. This branch of MCB relatively small

and has climbed its way up very quickly and all that only because of

the employee’s efforts and consideration for each other. Understanding

and the effective management of the human resources is the most

difficult challenge faced not only by the bank but by all the

organizations. Even though the people have been sacrificed in the new

organizational developments, it is becoming clear that the true lasting

competitive advantage comes through human resources and how they

are managed. MCB seems to not focusing on this highly critical issue

as the job satisfaction level of the employees working

at MCB, was quite low.

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4.2 RECOMMENDATIONS

4.2.1 Customer Relationship

Knowing the customers and their needs is the key to business success.

By attitude the manager can improve the relationship with the

customers. By having the understanding, what a customer wants, the

manager can improve the relationship with the customers.

MCB should understand that the commitment to satisfy customer’s

needs must be fulfilled within a professional and ethical framework.

They should observe a culture of high ethical standards, based upon

development of right attitude.

Although MCB has been improving its corporate behavior, even then

they should continue their effort for better corporate behavior. There is

a need of improving customer relations in MCB. For attitude

improvement special courses should be arranged under specialized

teachers, through lectures, seminars and other interactive techniques. It

will cost the bank but will be more profitable for the bank in the long

run.

4.2.2 Management and Subordinate Relations

Employees, who are apparently ordinary workers, play a vital role in

the organization. The staff is the most valuable asset. The human

resource manager should focus on multi talent hiring and professional

grooming. The manager should improve attitude towards their

subordinates. Self-dignity is the most valuable thing to every body, if

the lower employees are given proper attention and the attitude of the

manager towards lower management is good, they will be motivated

satisfied and loyal to the organization.

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4.2.3 Top-Bottom Communication

The down ward communication is very important because the

information flows down the hierarchy from superiors to subordinates.

The downward communications needs to be improved, by making sure

that policies made at the higher level properly reach the lower level

and those policies and procedures are properly understood. Decisions

should reach as quickly as possible without any delays. Delays create

hurdles in the functioning of the bank.

Flow of information, decisions and other instructions and policies in

efficient and effective manner will enhance the over all productivity

and image of the organization.

To improve the communications in the bank the managers should

strive to become better communicator and they must accomplish to

separate tasks. They must improve their messages, the information

they wish to transmit. Secondly they must improve their own

understanding of what customers and subordinates are trying to

communicate to them; they must become better encoders and decoders.

Proper training from specialized communication teacher should be

given to the managers as well as the lower level employees so that they

become good listener as well.

4.2.4 Empowerment of Employees

Commitment is a function of empowerment down the line, therefore,

the future of MCB lies in the fact that they should remain committed

and necessary empowerment should flow regularly to lower levels of

hierarchy, so that the performance delivery is made more flexible.

With the empowerment of lower level employees they will feel secure

in the organization and they will work with devotion for the betterment

of the organization.

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4.2.5 Technology Incorporation

Latest software should be introduced in all departments so that data

processing of computers can be enhanced. The officers in all deptt: of

the bank are still working with the old computers. The conditions of

the computers are not satisfactory.

Another drawback is that there is only one computer at MCB, The

Mall Branch, The workload is very high in this deptt: so to decrease

the workload a fast version of windows should be introduced. The use

of new technology can help the employees of computer deptt; i.e to

provide training on new specialized program to the employees of

computer department. So, that, they could compete on equal footings

with other banks.

4.2.6 Marketing Culture

The employees should be given special training for marketing. Proper

action should be taken for marketing so that the increased sale of

different products will result in increase

of the profit of the bank. The employees of the bank should be trained

with the basic concepts of the marketing under the guidance of the

experts.

4.2.7 Improve Productivity

In order to strengthen the operational capabilities of the employees the

bank must organize a number of in-house training courses and

seminars on different topic relate to advances and other departments.

Moreover the bank should send the employees for specialized courses.

So with the passage of time the employees become up-to date with the

latest innovations of the bank.

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4.2.8 Proper Distribution of Work Load

Load of work on the employees in all the departments of MCB The

Mall Branch is very high. This can be decreased either by hiring more

people or by introduction of advance computer technology in the bank.

For hiring the standard procedures of the bank should be applied.

4.2.9 Availability of ATM cards

Ensuring the availability of ATM cards is very important. If the

communication system is improved as earlier discussed, this problem

can be solved out. Another way to improve this facility is online

issuance of ATM cards through direct access on the net. It will take

less time and customers will receive their cards on time.

4.3 HUMAN RESOURCE DEVELOPMENT

Human resource development is a key priority of the bank. The bank

should continue to build on its human resource base with the right level

of skills and talent to meet the current and future business. Special

emphasis should be laid on the skills and personality development.

Hiring the business graduates, in different fields, from reputed

institutions, to improve the efficiency and productivity of the

organization, can solve this problem.

In addition to in-house course the officers and executives of the bank

should also send for advance level courses in management and

banking, offered by various specialized training institutions such as

Lahore University of Management sciences (LUMS) and the institute

of Bankers in Pakistan (IBP). This will help in enhancing

professionalism and employee development.

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4.4 PROPER JOB ANALYSIS

Right person for the right job is the most important factor for any

organization. Only on the basis of proper job analysis it can be decided

how a right person can be hired, trained, compensated or promoted.

Some of the employees are simple graduates; the employees being a

graduate do not have proper know how about the job. They are unable

to optimize the efficiency of the bank thus creating problems for both

organizations and the employees. However, the bank new recruitment

policy is based on hiring highly qualified young people like MBA,

MPA etc, which will surely be helpful in their operations.

4.5 PROPER MOTIVATION

Motivation is the most important aspect in any organization. So the

managers in MCB should properly motivate their subordinates.

Employees on the job must be motivated to perform at an acceptable

level. Managers themselves must be motivated to do a good job.

Proper compensation and incentives should be given as it will satisfy

their wants and in return the employees will work with dedication.

Also employees should be given some extra benefits like bonuses etc

to motivate them.

4.6 ON-LINE BANKING

MCB should start online banking through out the country as they are

the pioneers in it, still they do not have all the branches online. They

should try to improve this area and to diminish the entire book keeping

methods. Online banking is impossible without the modern IT

technology. Also, in a branch having one computer, there is a lot of

work to do with it, needs more and modern computers to handle the

situations, along with the trained staff.

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4.7 E-BANKING

MCB should try to develop e-banking as well, as it will broaden the

scope and the market for the organization. They already have its own

web site but it have no proper detail about its products and other

facilities. Also there is a need to improve the website and to improve

the facilities on it. For example, there should be the facility to open

online account and other such dealings should be made on-line.

4.8 IMPROVEMENT OF SERVICE QUALITY

MCB should try to the service quality and bring it up-to international

standards. One-window operations should be introduced so that the

customer could wind up his work as quickly as possible. It means, the

entire customers should be served at a single counter and there is no

need for the customer to move from one to other for a separate work.

4.9 FEMALE BRANCHES OF MCB

MCB should seriously consider opening of female branches to solve

the problems of those female employees who does not feel good while

working with male staff. MCB already have female staff but they are

up-to few model branches. It should seriously consider about the

female staff and also to open some exclusively female branches.

Before opening female branches proper market survey is needed which

will help the bank to judge the response of the people about the female

banking of MCB.

4.10 HEALTHY ACTIVITIES

There is lack of healthy and entertainment activities like excursions on

weekend, parties and other important days, celebration in their tidy

life. Such activities should be encouraged at once in a month.

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Chapter - 5

ACTION PLAN

ACTION PLAN

Surely if the strategy is correct and then implemented in a right way

then there will be no doubt that desired results wouldn’t be achieved by

the bank in a particular time.

Strategy involves the use and close integration of economic, political,

cultural, social, moral, spiritual, and psychological power.

Strategy can be formulated only after the objectives to be

accomplished have been determined. After banks objectives have been

determined all aspects of the problems confronting the bank must be

thoroughly examined and accurate evaluation made of the character,

size, and capabilities of the various available element of bank. Then

possible courses of action, utilizing the power elements in varying

combinations, are analyzed to develop the best strategy possible,

taking into account the opposition that may be met as the strategy

unfolds. Options should be developed to provide choices for possible

contingencies.

Following are different strategies, which MCB can follow:

Stability Strategy

This type of strategy is used when organization is in stable condition/

position or reaches its maturity period. Vertical and horizontal

integration is done in this stage.

Instead of down sizing, right sizing should be adopted so that to inject

new blood to the bank which will bring innovations according to the

demand of the market.

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Retrenchment Strategy

As MCB has a very large network of branches, out which most of the

branches are not productive/ profitable. So, Retrenchment strategy

should be adopted for those branches whose performance is not good

for the past few years and still making loss to the bank.

Implementation

In stability strategy, MCB should focus on customer retention. There is

no need to attract more and more customers. They must try to increase

focus on the already existing customer. Providing quality services to

them can retain the customers. The attitude of the employees can also

attract the customers. MCB must try to provide services at the

doorstep, as the peoples are getting busy day by day. They search for

more and more facility at banks.

The ATM network must be at each and every market, universities, and

big organizations. Account opening facility must be provided at the

doorstep. New and innovative products like cash cards must be

introduced to facilitate the customer.

All these innovations and quality services need modern technology and

heavy investment in this field. It will also take some time take action

on it, but urgency is needed.

If, all the above suggestions are seriously considered. It will help to

develop long run relations with the customers and they will become

brand loyal forever.

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REFERENCES:

1. Robert, F.M. Williams, S.F Haka and M.S. Bettner. (1999).

Accounting; the basis for business decisions, New York; Irwin

McGraw-Hill, P.13

2. Ghani, M.A. (2002). Advanced Accounting, Lahore; Pak-Imperial

Book Depot, p. 798

3. Van Horne, J.C and J.M. Wachowicz, Jr. (1998). Foundation of

Financial Management, 10th edition, New Jersey; Printice-hall,

Inc. p.143

4. Ghani. M.A, (2002). Advanced Accounting, Lahore: Pak-Imperial

Book Depot. P. 799

5. Van Horne, J.C and J.M. Wachowicz. Jr. (1998). Foundation of

Financial Management, 10th edition, New Jersey: Printice-hall Inc.

p.139

6. Ibid

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BIBLIOGRAPHY

BOOKS

Robert, F.M. Williams, S.F Haka and M.S. Bettner. (1999).

Accounting; the basis for business decisions, New York; Irwin

McGraw-Hill

Ghani, M.A. (2002). Advanced Accounting, Lahore; Pak-Imperial

Book Depot.

Van Horne, J.C and J.M. Wachowicz, Jr. (1998). Foundation of

Financial Management, 10th edition, New Jersey; Printice-hall,

Inc.

Ghani. M.A, (2002). Advanced Accounting, Lahore: Pak-Imperial

Book Depot.

WEBSITES

http://www.mcb.com.pk

http://bizcovering.com

MAGAZINES/ ANNUAL REPORTS

Magazines of MCB

Annual reports of MCB

MCB Manual on General Banking.

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