Internship Report on MCB Bank Ltd. (2011)

INTERNSHIP REPORT ON MCB BANK LTD.

University of Sargodha Department of Commerce P a g e | 1

The Internship Report on

MCB Bank Ltd.



PREFACE

Internship is an integral part of B.Com (HONS) program. For the sake of internship the

most initial thing is to have a practical experience. This effort may get as a student to get a

practical experience if right organization is selected. During this internship, a student

comes to particle knowledge. He learns what the has so far studied. As a B.Com (HONS)

student I have also done my internship in MCB Bank Ltd. Sargodha. Here I come to know

a different and very interesting experience of learning and working with people. First of all

I will tell you about Bank then I will tell operations of different departments.

This internship report is specially meant for the students of B.Com (HONS). It is concerned

to a brief study of operation, functions, tasks and services of the MCB Bank Ltd. Banking

play very important role in the commerce and economic development of any country. Now-

a-days banks are using different modern technologies which influence the managerial

activities that are why I decided to do my internship training in the bank.

In preparation of this report I have tried my best to provide all possible information about

the operation, functions, task and the corporate information of the MCB Bank Ltd. in brief

and comprehensive way. This internship ends with some recommendations after

identification of problems that I observed during the course of my internship training.

Ali Raza Sahni



Dedication

My report is dedicated to my parents, teachers and my cute friends who are

always with me in Every Hardships of life and has waited for me to be here

at Final stage.

May! Allah Give them Long Life (AMEEN)



Acknowledgement

Most grateful to Almighty Allah who enabled me to utilized my knowledge and skills for

the preparation and completion of this internship report. I want to express my most humble

gratitude to my supervisor and all other teachers and class fellows who furnished me with

the opportunity to complete report I m also thankful to the manager Mr. Rashid Iqbal of

MCB, Girls College Road Branch, Sargodha. I am also grateful to my colleagues and

friends who provided with the moral support during the completion of this report.

Ali Raza Sahni



EXECUTIVE SUMMARY

The banking structure in Pakistan comprises of the following types, State Bank of Pakistan,

Commercial Bank of Pakistan; Exchange Banks, Saving banks, Cooperative banks,

specialized credit institutions. The state bank of Pakistan is the Central bank of the country

and was established on July 01, 1948. The network of bank branches now covers a very

large segment of national economy. The State Bank of Pakistan issues the shares of these

periodically. Bank employees and other common people can also purchase these shares

and earn profit. In 1956, MCB transferred its registered office to Karachi, where the Head

Office is presently located. In April 1991, MCB became Pakistan‟s first privatized bank.

The corporate branch at Shahrah-e-Faisal Karachi (SFK) branch is the corporate branch of

MCB in Karachi. The bank is using SWIFT for transfer of information about imports and

exports.

MCB SFK branch has Currently Following three Departments General Banking

Department, Advances Department & Foreign Exchange Department. To open an account

the customer has to meet the general banking manager with an introducer. The procedure

begins with the punching of account opening form to the customer file i.e. customer‟s

master file. Before closing any account, bank send letter to the account hold for informing

him that his account is going to be closed. There is need an approval form higher authority

to close any account. Current deposits are those which are payable to bank whenever

demanded by the customer.

Bank does not pay any profit on current deposits. The following are the financial

products/services of MCB Malay Mail Scheme, PLS Account, Saving 365 Account,

Capital growth certificate scheme, Fund Management Scheme, Khushali Bachat Account,

Term/ Fixed Deposits and others like night banking, credit cards, traveler cheques. In

remittance department like any other bank MCB also have instruments for transferring of

money, Telegraphic Transfer, Mail Transfer.

In cash department both deposits and withdrawals go side by side. This department works

under the accounts department and deals with cash deposits and payments. This department

maintains the following sheets, books, and ledger of account cash received voucher sheet.

Cash paid voucher sheet, Paying- in-slip, Cheque Book, Cash balance book. The clearing in



Karachi at MCB or other banks is being done through NIFT (National Institute of

Facilitation Technology). Bank provides this facility to the people who need advance

money to meet their requirement.

Party dealing with other banks financial condition of borrower business and as a first step

credit proposal is being made. MCB provides advances, which are of two types. Secured

Advances, Unsecured Advances. MCB usually classified advances in to following types

Agricultural Advances, Commercial Advances Industrial Advances. Commercial Advances

are of following types Demand Finance, Cash Finance, Foreign bills purchased, Finance

against imported goods, Finance against foreign bills, Export Refinance Part I (Pre

Shipment) & others. Banks Agriculture division deals with the agriculture advances. Bank

provides the Agriculture Advances in order to enhance and support the agriculture sector of

the country. Farm Credit & Non Farm Credit. In foreign exchange, MCB is dealing Foreign

Currency Accounts, Foreign Remittances, and Foreign Bills for Collection, Imports &

Exports Foreign currency accounts & the foreign currency department deals with the

following types of accounts, Dollar Khushali account, Current account, Saving bank

account, Term deposit, Prime Currency Scheme. Foreign accounts are convertible on

floating rate available to the bank. Letter Of Credit facility is being provided by MCB in

foreign exchange.

HISTORY OF THE MCB BANK LIMITED

Before separation of Indo Pak, the need for more Muslim banks was felt. And Muslims

having strong financial capacity were thinking to invest in this sector as well. This was the

idea which paved the way for setting up MCB Bank Ltd known as MCB. This was the third

Muslim bank in the subcontinent.

This bank was incorporated under companies‟ act 1913 on 9th July, 1947 (just before

partition) at Calcutta. But due to changing scenario of the region, the certificate of

incorporation was issued on 17th August, 1948 with a delay of almost 1 year; the certificate

was issued at Chittagong. The first Head office of the company was established at Dacca

and Mr. G.M. Adamjee was appointed its first chairman. It was incorporated with an

authorized capital of Rs. 15 million.



After some time the registered office of the company was shifted to Karachi on August

23rd, 1956 through a special resolution, now recently the Head office of MCB has been

transferred to Islamabad in July, 1999 and now Head office is termed as Principle Office.

This institute was nationalized with other on January 1st, 1974. At that time it had 506

branches and deposits amounting to Rs. 1,640 million. Although. MCB has a reputation of

a conservative bank but nationalization also left its effects on this institute as well and by

end of year 1991 in which it was privatized the total number of branches were 1.287 and

deposits amounting to as high as Rs. 35,029 million

Privatization

When privatization policy was announced in 1990, MCB was the first to be privatized upon

recommendations of World Bank and IMF. The reason for this choice was the better

profitability condition of the organization and less risky credit portfolio which made'' it a

good choice for investors. On April 8th, 1991, the management control was handed over to

National Group (the highest bidders). Initially only 26% of shares were sold to private

sector at Rs. 56 per share.

After Privatization

Ten years after privatization, MCB is now in a consolidation stage designed to lock in the

gains made in recent years and prepare the groundwork for future growth. The bank has

restructured its asset portfolio and rationalized the cost structure in order to remain a low

cost producer.

After privatization, the growth in every department of the bank has been observed.

Following are some key developments:

Launching of different deposit schemes to increase saving level.

Increased participation on foreign trade.

Betterment of branches and staff service level.

Introduction of Rupee Traveler Cheques & Photo Credit Card for the first time in

Pakistan.



MCB Bank – Today

MCB today, represents a bank that has grown with time, experience and Pakistan. A major

financial institution, in scope and size, it symbolizes a fully growing tree evergreen, strong,

and firmly rooted.

Foreign Trade

The bank conducted import business during the year amounting to RS. 54.0 billion as

compare to RS. 56.4 Billion In 2005. The export business slightly improves to RS. 36.9

Billion From RS. 35.1 Billion. In 2006. Home remittances decline to RS. 16.7 Billion From

30.7 Billion the decline in home remittances business was due to freezing of Foreign

Currency Accounts, which has affected the confidence of Pakistanis working overseas.

COMPALINCE YEAR 2006

MCB‟s strength lies in providing a technological base at the gross root level of the society

with a challenge to educate and assimilate such systems across vast cultural and economic

backgrounds. With over 768 automated branches, 263 online branches, over 151 MCB

ATMs in 27 cities nationwide and a network of over 16 banks on the MNET ATM switch,

MCB continuously innovates new products and services that harness technology for the

customer‟s benefits.

SOCIAL SECTOR

The bank activity participating in the Prime Minister self-employment Scheme. The

application received from various applicants is being processed on merit and disposed off

as quickly as possible.



THE BUSINESS

MCB is in it‟s over 50 years of operation. It has a network of over 1,000 branches all over

the country with business establishments in Sri Lanka and Bahrain. The branch break-up

province wise is Punjab (57%), Sindh (21%), NWFP (19%) and Blochistan (3%)

respectively.

MCB has an edge over other local banks, as it was the first privatized bank. The State Bank

of Pakistan has restricted the number of branches that can be opened by foreign banks, an

advantage that MCB capitalizes because of its extensive branch network.

Fourteen years after privatization, MCB is now in a consolidation stage designed to lock in

the gains made in recent years and prepare the groundwork for future growth. The bank has

restructured its asset portfolio and rationalized the cost structure in order to remain a low

cost producer.

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. The Bank provides 24 hour banking

convenience with the largest ATM network in Pakistan covering 27 cities with over 151

ATM locations. The Bank‟s Rupee Traveller Cheques have been market leaders for the

past six years and have recently launched their Gift Cheque Scheme.

MCB looks with confidence at year 2007 and beyond, making strides towards fulfillment

of its mission, "to become the preferred provider of quality financial services in the country

with profitability and responsibility and to be the best place to work".

A major achievement of MCB is that the state bank of Pakistan has issued a license to

MCB to start Islamic banking. Now MCB is setting up a 1 st Islamic banking branch at 1st

floor shaheen complex, Karachi. This complex starts working from September 1, 2003.



Vision Statement

CHALLENGING AND CHANGING THE WAY YOU BANK

Mission Statement

To become the preferred provider of quality financial services in our country

with the profitability and responsibility and to be best place to work

Our Core Values

CUSTOMER FOCUS

We treat each of our customer equality & as the most important person while we interact

with him/her. We must ensure that we do everything to meet and exceed the customers

expectations with perfect to times, accuracy & quality services.

EMPLOYEE RESPECT & DIGNITY

We treat each of our employees with fairness, which includes giving constructive feedback

for their development. We celebrate diversity and seek suggestions from all employees for

improvement. We ensure that responsibility & fairness in all our decision-making.

TEAM BASED APPROACH

We work towards achievement of our vision & mission as a combines group. We

encourage inter & intra-departmental communications. We treat our colleagues as our

internal customers & ensure that the requirements of internal customer focus are always

met.



QUEST FOR QUALITY

We ensure that each moment of our time is spent on value adding activity. We always seek

ways for exceeding expectations of customers & colleagues. We also ensure that we do

things right, first time every time.

GOOD CORPORATE CITIZENSHIP

We ensure that we contribute our due share to the Govt. we realize that we have a

responsibility to the society in which we operate & we seek ways of playing a positive role

for the betterment of the community at large.

Board of Directors

Mian Mohammad Mansha Chairman

S.M. Muneer Vice Chairman

Mohammad Aftab Manzoor President & Chief Executive



Tariq Rafi Director

Sheikh Mukhtar Ahmed Director

Mohammad Arshad Director

Shahzad Saleem Director

Mian Umer Mansha Director

Sarmad Amin Director



Audit Committee

Mian Mohammad Mansha Chairman

Shaikh Mukhtar Ahmed Member

Shahzad Saleem Member

Chief Financial Officer

Ali Amin

Company Secretary

Tameez-ul-haque

Auditor

A.F.Ferguson & co

Chartered accountants

M. Yousuf Adil Saleem & co

Chartered accountants

Legal Advisor

Chartered accountants Mandviwalla & Zafar

Advocates & legal consultants

Shariah Advisor

Dr. Muhammad Zubair Usmani



ORGANIZATIONAL HIERARCHY OF MCB

PRESIDENT

EXECUTIVE VICE

PRESIDENT

SENIOR EXECUTIVE

VICE PRESIDENT

SENIOR VICE

PRESIDENT

OFFICERS GRADE

I II III

VICE PRESIDENT

ASSISTANT VICE

PRESIDENT

CASHIER

ASSISTANTS

PEONS



MANAGEMENT LEVEL

The organization chart within a department and in different offices is as follows:

Divisional Heads ………..…………………… Head Office

Regional Head (EVP) ………..…………………… Regional Office

Zonal Head (VP) ………..…………………… Zonal Office

Branch Manager ………..…………………… Branch

(VP, AVP, GRADE 1, 2, 3)

ORGANIZATIONAL SETUP OF MCB

PUNJAB

NWFP & AZAD

KASHMIR

SINDH

BALOCHISTAN

KARACHI

LAHORE

PESHAWAR

PROVINCIAL HEAD

QUARTERS

QUETTA

HEAD QUARTER

CIRCLE OFFICES

BRANCH OFFICES

KARACHI



ORGANIZATIONAL STRUCTURE OF MCB

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

legalities which are imposed by concerned statutes Mr. Muhammad 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.

Operational Management of the bank is being handled by a team of 10 professionals. This

team is also headed by Mr. Muhammad Mansha. The different operational departments are

Consumer Banking & IT div; Financial & Inter branch div; Banking operations div; HR &

Legal div; financial control & Audit div; Credit management div; Commercial Banking

div; Corporate Banking div; Treasury management & FX Group and lastly Special Assets

Management (SAM) Group.

For effective handling of branches, it has been categorized into three segments with

different people handling each category. These categories are:

Corporate Banking

Commercial Banking

Consumer Banking

Corporate Banking

These are branches which have an exposure of over Rs. 100 million. Usually includes

multinational & public sector companies.

Commercial Banking

The branches which has a credit exposure of less than Rs. 100 million but having a credit

portfolio of more than Rs. 20 million (excluding staff loans). Usually branches in large

markets and commercial areas come under this category.



Consumer Banking

These are the branches which have exposure up to Rs. 20 million and these include all the

branches which are neither corporate nor commercial branches.

Recently the organizational structure was re-designed as follows:

Province wise branches

MARKETING MIX OF MCB BANK LIMITED

Marketing is the task of creating, promoting and delivering goods and services to

consumers and businesses. Organizations identify and profile distinct group of buyers who

might prefer or require varying products and marketing mixes. The customer seeks for

value and satisfaction. The organizations can increase the value of the customer offering in

several ways e.g. raising benefits, reducing costs etc. marketing mix is a set of marketing

tools that the firm uses to pursue its marketing objectives in the target market. These

marketing tools are known as 4 p‟s of marketing.

To identify the customer needs and fulfilling hem is the basic objective of an organization.

Marketing is not just satisfying your customers, you have to delight them and this can be

done by acting upon this phrase.

“Under Promise and Over Deliver”

MCB Bank provides a winning combination of products and services to its prime

customers. It is one of the country‟s leading commercial banks, which ensures complete

security, and reliability in all- financial transactions.



PRODUCT MIX & PRICES OF MCB BANK

MCB Rupee Traveler Cheque

MCB Rupee Travelers Cheques are as good as cash, infact better.

Better because with Rupee Travelers Cheques you have the power

to purchase and a feeling of security that should you lose them, you

will get a refund.

MCB Rupee Travelers Cheques are accepted at major shops, travel agents, hotels, business

establishments and MCB branches all over Pakistan. You don't have to be an MCB account

holder to buy the Rupee Traveler Cheques. Anybody can purchase them. It's a safe and

convenient way to conduct everyday business. At a time when thefts and robberies are on

the increase, you are better off carrying Travelers Cheques rather than money.

Mahnama Khushali Scheme

A 5- year fixed Deposit Scheme, targeted to persons with small savings who would desire a

regular monthly return on their investment.

Salient Features

Minimum amount of investment shall be Rs.0.010m and the maximum amount of

investment would be Rs. 1.000m.

Khushali Certificates can be purchased by individuals (singly or jointly) or by the

Proprietorship/Partnership concerns or Companies, etc. in their name

The Khushali Certificate will be of five years maturity.

The interim rate of profit offered will be minimum 1% per month. If the profit

declared by the bank is higher, additional profit will be paid.

Zakat will be deducted wherever applicable on yearly basis whether you will be

receiving your profit or encashing your certificates.6

As per Government Directions, tax on the profit / return is to be deducted by MCB

branches at the time of payment.



MCB Khushali Bachat Account

Salient Features

8% rate of return per annum.

Returns calculated on daily.

Average balance and paid half yearly.

Introduced first time in Pakistan.

The facility of helping account holders pays utility bills (electricity, telephone and

gas) through their account. No queues. No delays.

Prime Currency Account Scheme

Launched to attract deposits in foreign

currencies. US Dollars, Pound Sterling,

Euro and Japanese Yen.

Salient Features

Owing foreign currency account

under the Prime Currency Scheme allows you to earn attractive rates of interest in

foreign currency.

You have a choice between opening this account in your personal name and

opening it under joint names.

Whether you are a resident or a non-resident Pakistan, MCB Prime Currency

Scheme invites all to operate a foreign currency account.

Foreign nationals and foreign companies can also open a foreign currency account

under the Prime Currency Scheme.

Your foreign currency account can be opened in four global currencies: The United

States Dollar, the Pound Sterling, the Japanese Yen and the Euro.

Travellers Cheques and Foreign Currency Notes can also be issued to holders of

persona! and Joint accounts.

Rupee Loan facility will also available against this account.



You can draw any amount of foreign exchange from your foreign currency account

and transfer or remit the amount freely to any part of the world without any

restrictions.

The restrictions imposed by the State of Pakistan for the opening of foreign

currency accounts in case of passport; Work-permit and resident Visa have been

withdrawn. Your account will be restriction free.

The Prime Currency Scheme is exempt from al! forms of taxes including Income

Tax, Wealth Tax and Zakat deductions.

MCB Prime Currency Scheme is a world in itself.

Hajj Mubarak Scheme

A saving scheme, of 2/3 years duration, for the convenience of persons, with a limited

income, who desire to perform Hajj, was introduced. Under the 2 years scheme, a monthly

deposit of Rs.1800 is required, whereas under the 3 years scheme, the required monthly

deposit is only Rs.1200

Capital Growth Certificate Scheme

For long term depositors under which the amount deposited almost doubles at the end of 5

years. For the scheme, the minimum amount of deposits is Rs. 10000 while there is no

maximum limit. In case of premature encashment of the certificate, the depositor will profit

at the same rates as that of PL Saving Account.

Fund Management Scheme

This scheme is offered to corporate and customers and is aimed at providing better rate of

return up to 15% per annum. One of the objectives of the scheme is to develop secondary

market for Government Securities.



Consultancy Services

In the process of privatization of public sector units, prospective buyers need professional

assistance and MCB, with its expertise, offers to them specialized service for valuation of

the market value of the industrial unit,

preparing bid documents and arranging

finance for the purchase of the unit.

Self Supporting Scheme

For the benefits of genuine worker/borrowers

who are poor and needy and for small entrepreneur the bank as evolved a self supporting

scheme: maximum amount of loan Rs.25000 and minimum Rs.5000 per individual. Loan

will be totally free of mark-up. Fax Press

This product was first of its kind introduced by using modem technology of The Fax

Machine. It facilitates speedy transfer of funds within Pakistan. The service guarantees

transfer of from one city to another, within an hour.

Night Banking Service

For the convenience of the account holder, service has, especially, been introduced at busy

commercial centers. Traders and other clients can now make deposit, with case, at such

centers up to 8.00PM.

Utility Bill Collection

With the aim of extending this service to wider range of customers, the number of MCB

branches collecting Utility Bills more than 900.

MCB Mobile Banking

At the forefront of technological excellence, MCB proudly introduces MCB MOBILE

BANKING. The convenience of accessing account balance information and mini

statements whenever want or wherever may need them, with comfort and peace of mind.

MCB Mobile Banking service is available to all MCB ATM cardholders, 24 hours - 365

days.



MOBILE BANKING AT A GLANCE

MCB Mobile Banking gives easy and quick access to account(s) at a time find convenient,

including all holidays.

WITH MCB MOBILE BANKING

Check balance

View the last 4 transactions of your MCB account(s).

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.

BANKING AT FINGERTIPS

Dial in anytime to get information regarding balance and mini statements.

MCB Islamic Banking Services

Islamic banking services through exclusive units/branches offering a range of liability and

asset based Sharia compliant products like Musharika, Murabaha, Ijara and Istasana.

MCB Car Cash

Car financing and leasing at competitive rates with flexible options Car cash finances both

semi-commercial and non-commercial vehicles for personal and business use.

MCB Locker

The best protection for your valuables. Lockers of different capacities are available

nationwide.

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.

MasterCard 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 loss.

Welcomed at over 3, 000 outlets in Pakistan.

Provides up-to 45 days Free Credit.

Joining and Annual Fees to suit you.

24 Hour Customer Services- Call 111-700-700 and you can get information from

our customer services representatives on new card application or have your queries

resolved anytime of the day.

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.

Our Consumer Banking provides customers with innovative saving schemes, products and

services. Our ATM network is the largest in Pakistan and our Pak Rupee Tra velers

Cheques are market leaders. We were the first to introduce the photo card with the

introduction of the MasterCard.



Our Corporate Banking ensures assistance from a dedicated team of professional financial

advisors for underwriting, project finance or corporate advisory services.

When it comes to banking practices, you can depend on us. We‟ve been around for over

fifty years.

MCB Smart Card

MCB now brings you MCB SmartCard -a secure

and convenient instrument of payment with

unmatched functionalities. It provides 24-hour direct

access to your bank account

The convenience and flexibility of MCB SmartCard will help live a smarter life. It not

only helps you manage your expenses, but also avoids undue interest on your day to day

credit card transactions.

Your balance is always within your reach and you spend accordingly.

MCB is the only bank to introduce a debit card that gives the option to choose from

domestic and international card for local and global usage respectively

Remit Express

Fastest to Pakistan - Anywhere in Pakistan.

The fastest way of getting your money across to

Pakistan. Remit Express offers low cost remittance

from U.A.E. and Saudi Arabia. Your relatives,

friends or business associates 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.



Easy Personal Loan

Helping You Do More

MCB Easy Personal Loan provides you with the financial advantage to do things you've

always wanted to but never had the sufficient funds for. Take that much-needed holiday.

Buy a car. Refurnish your house. Purchase a new TV. Finance a better education for your

children.

Salient Features

MCB will lend you any amount, from Rs 30,000 to Rs 490,000, depending upon

your net monthly income

You can choose tenure of 1 to 3 years for the repayment of the loan

Bank to Bank Balance transfer

Credit Card balance transfer

Loan Protector Shield- insurance coverage of balance loan amount in case of death

or permanent and total disability

Availability of early repayment option

Repayment Arrangements

Repayment of principal and mark-up is monthly and can repaid using either one of

the following modes:

Direct Salary Transfers

Payroll Deduction

Eligibility Criteria

Minimum net monthly income Rs 10,000

25 to 55 years of age

Pakistani national

At least 2 years of employment with current employer



Processing fee of 1% of the principal loan amount to be charged at the time of loan

disbursement.

MCB Pyara Ghar

MCB gives dream home at the lowest and best

possible mark-up rates. You can choose either one of

our two mark-up rate options- fixed or variable.

Early repayment option tailor-made to allow making partial prepayments at dates that suit.

Who Can Apply

Anyone who fulfills the following criteria is eligible to apply:

Pakistani national residing in the city and area where the product is launched.

25 years old or above when you apply and under 60 at the time of maturity of the

applied financing period.

Salaried person, self-employed professional or a businessman with a verifiable monthly

income stream.

Net take -Home income not less than Rs. 25,000 per month.

Have 5 years or more of business or professional experience.

Employed with the present employer for 2 years with a total employment history of 5

years.

Home Purchase Home Renovation Home Construction

Tenure 3 years to 15 years 2 years to 5 years 3 years to 15 years

MCB Virtual

MCB Virtual provides the continence of banking on

internet. Whether at office or home or traveling. Log on

at www.mcb.com.pk and enjoy 24 hours access of all

your accounts for the largest array of service.



MCB Business Sarmaya

MCB Business Sarmaya is a running finance against your residential property. It offers

running finance up to 20 millions with low markup.

MCB Car 4 U

MCB car 4 u auto finance is a power move that gets you

not only a car of your own choice but leads you best in

life. It is affordable with competitive markup, flexible

conditioning and easy processing and above all no hidden cost.

PLACING STRATEGIES OF MCB BANK

The location of the bank plays a

vital role in making its operations

profitable. If the bank is located in

some business center then it will be

very easy for it to attract business

people as its customers. Therefore

MCB has most of its branches at

places where it can reach its targets customer easily. The branch network of MCB is given

as follows:

Punjab 632

Sindh 232

NWFP 123

Baluchistan 34

Azad Kashmir 19

Domestic 1040

Overseas 4

Total 1045



PROMOTION STRATEGIES OF MCB BANK

MCB Bank is actively participating in promotion of its products and services through

advertisement and other promotional schemes.

Initially, the bank focused on the upper class customer‟s only and offered products for a

limited class of people. But now the strategy has been changed and the bank is now

targeting the middle market also. The products offered are of diverse nature to cater the

needs of maximum number of people.

Customer Oriented Attitude

MCB Bank values its customers. Customers‟ complaints are encouraged because it gives an

opportunity to know the needs of the customer and build more confidence in them.

Most of the promotional efforts are done through

Direct marketing

Public relations

MCB bank sometimes gets suggestions and recommendations from its good customers.

Branch layout is being designed in such a way that more and more customers are attracted.

Some of the branches of MCB Bank have a very good entrance and outlook but many still

need to be improved.

My Internship experience

&

FIELDS OF ACTIVITIES

Which I observed and done

The purpose of banks is to provide some services to the general public. And for this

purpose different banks provide different services to the people in different forms. The

MCB Bank is a commercial bank, in modern time commercial banks play a very important

role and their functions are manifold. The main functions and services which MCB Bank

Limited provides to different peoples are as follows.

Open Different accounts for different people

Accepting various types of deposits

Granting loans & advances



Undertaking of agency services and also general utility functions, few of those are

as under

Collecting cheques and bill of exchange for the customers.

Transfer of money from place to place.

Acting an executor, trustee or attorney for the customers. „Providing safe custody

and facilities to keep jewellery, documents or securities.

Issuing of travelers cheques and letters of credit to give credit facilities to travel.

Accepting bills of exchange on behalf of customers.

Purchasing shares for the customers.

Undertaking foreign exchange business.

Furnishing trade information and tendering advice to customers.

For proper functioning of branches and the over all bank has been divided in different

departments. These departments handle different jobs so that division of work is there for

improvement of functions and also it is easy to control the situation. The general division in

a branch is as follows:

(i) Cash department

(ii) Deposit department

(iii)Advances & credit department

(iv) Remittance department

(v) Technology department (new addition in order to cop with the growing needs of

day to day technology requirements)

CASH DEPARTMENT

The following books are maintained in the Cash Department:

Receiving Cash Book

Paying Cash Book

Token Book

Scroll Book

Cash Balance Book

When cash is received in counter, it is entered in the Scroll Book and Receiving Cashier

Book. At the close of the day, these are balanced with each other.



When the cheque or any negotiable instrument is presented at counter for payment, it is

entered in the token book and token is issued to the customer. The token clerk and the

Cashier make entries in the paying book and payment is made to payee. At the close of day,

the Token Book and Paying Cashier Book are balanced.

The consolidated figure of receipt and payment of cash is entered in the cash balance book

and drawn closing balance of cash.

Opening Balance + Receipts - Payments = Closing Balance.

This is very important department because cash is the most liquid asset and mostly frauds

are made in this department, therefore, extra care is taken in this department and nobody is

allowed to enter or leave the area freely. Mostly, cash area is grilled and its door is under

supervision of the head of that department. All the books maintained in this department are

checked by an officer.

DEPOSIT DEPARTMENT

Bank deals in money and they are merely mobilizing funds within the economy. They

borrow from one person and lend to another, the difference between the rate of borrowing

lending forms their spread or gross profit. Therefore we can rightly state that deposits are

the blood of the bank which causes the body of an institution to get to work. These deposits

are liability of the bank so from point of view of bank we can refer to them as liabilities.

The total deposits of MCB are growing since its inauguration but after privatization there is

a sharp incline in over all deposits of the bank. The increase in deposits is also a cause of

increase on total number of accounts; bank has progressed in both aspects.

TYPES OF DEPOSITS

Deposits can be segregated on two bases, one is the duration in which there funds are

expected to be with the bank and second is the cost of getting these funds. So divide

deposits in two classes according to duration of deposits i.e.

(i) Time deposits / liabilities

(ii) Demand deposits / liabilities

And on the basis of the cost to acquire these funds, a deposit can be classified as any one

of following four, High Cost Medium Cost, Low Cost No Cost.



Banks has different kinds of deposit schemes in order to induce deposits. These schemes

are a mixture of the above mentioned two types of deposits with an addition of different

services & requirements such as minimum balance' requirement, mode of transaction, basis

for calculation of profit, deductions, additional benefits, eligibility for different groups.

In the similar fashion, MCB has a large variety of deposit schemes and some of them are as

follows:

CURRENT ACCOUNT

In this type of accounts the client is allowed to deposit or withdraw money as and when he

likes. He may, thus, deposits or withdraws money several times in a day if he likes. There

is also no restriction of amount to be deposited or withdrawn. However, there is

requirement of minimum balance maintenance of Rs. 1000/-. Usually this type of account

is opened by the businessmen. No profit is paid by the bank and no service charges are

deducted by the bank on current deposits account. These types of deposits are also exempt

from compulsory deduction of Zakat.

PLS ACCOUNT

This type of account is for those persons who want to make small savings'. This type of

account is opened with a minimum deposit of Rs. 1000/-. Under this scheme deposits can be

made only up to a-costing amount and withdrawals are allowed twice a week or 8 times a

month. If a big amount is required a seven days notice is required before the withdrawal.

The profit is paid on these accounts on the minimum balance during a month for the whole

of that month. Zakat & other withholding taxes are deducted as per rules of the

government.

Zakat and withholding taxes are deducted as per rules only at the time of maturity while

making payment to the customer.

Term Deposits Receipts

This is a type of term deposit in which a receipt is issued for varying tenors ranging from 1

month to 5 years or more. These are in the form of receipts and profit on these receipts is

paid biannually. These receipts are encashable after expiry of the period for which they

were issued. Different profit rates are applied to different type of TDRs.



FUNCTIONS OF DEPOSIT DEPARTMENT

This was a brief review of different types of deposit schemes. The Deposit Department

handles the account opening, profit payment and accounting of all types of deposit

schemes.

Account Opening

Account opening is an agreement in which customer offers his funds and bank accepts

these funds, therefore the nature of relation between a banker and customer is of a

contractual one and all the conditions applicable to this contract act are also applicable.

Profit payment & calculation

Profit payment & calculation is done in accordance with the rules of each type of deposit

scheme-by the deposit department. The products for each deposit scheme are calculated

separately and added till the end of 6 month period. Then the sum total of these products is

multiplied with the respective profit rates which are issued by the Head Office at the end of

each half yearly closing. The profit provisions for each type of deposits are also calculated

on monthly basis by the same department in order to calculate the net profit or loss position

of the branch.

Accounting Entries

Accounting entries are also made in the respective books of account by this department.

However, in small and medium size branches, the accountant performs the book keeping

duties for all kinds of ledgers.

CLEARING DEPARTMENT

Every banker acts both as a paying as well as a collecting banker, It is however an

important function of crossed cheques. A large part of this work is carried out through the

bankers clearing house.

A clearing house is a place where representative of all banks of the city get together and

settle the receipts and payment of cheques drawn on each other. As the collecting banker

runs certain risks in receipt of their ownership the law has provided certain protections to

the banks.



The Negotiable Instrument Act, 1881, lays down hat drawer or holder of a cheque or draft

may cross the instrument generally or specially. It further lies down that a crossed cheque

can only be paid to a banker, who collects it for a customer in good faith and without

negligence.

Types of Cheques

Transfer cheques: are those cheques, which are collected and paid by the same branch

of bank. Both parties have account in the same bank

Transfer delivery cheques: are those cheques, which are collected and paid by two

different branches of the same bank situated in the same city.

Clearing cheques: are those chequnes, which are drawn on the branches of some other

bank of the same city or of the same area, which is covered by a particular clearing

house.

Collection cheques: are those cheques, which are drawn on the branches of either the

same bank or of another bank, but those branches, are not in the same city or they are

not the members of clearing house.( out station cheques)

Functions of Clearing Department

To accept Transfer, Transfer delivery, clearing and collection cheques from the

customers of the branch and to arrange for their collection.

To arrange the payment of cheques drawn on the branch and given for collection to

any other branch on MCB or any other members or sub member of the local

clearing house.

To collect amount of cheques drawn on members, sub-member of local clearing

house, sent for collection by MCB Branches, not represented at the local clearing

house

Receiving and scrutinizing the cheques and other deposit instruments, and the pay-

in-slip at the counter.(verify by the way of a/c number and a/c title)

Fixing the stamps.

Scrutiny and receipt by the authorized officer.

Returning the counter file to the depositor.



Certificate and confirmation by the officer in charge of the department.

Separating the cheque into transfer, transfer delivery(same bank diff branch), and

clearing cheques.

CLEARING PROCESS (FLOW CHART)

Cheque with slip taken

Cheque along with slip checked, signed &

received by officer

The same day not honored cheques are

returned to Main Branch

The day after tomorrow the banks are informed

about dishonored cheques

Provisional entries for returned cheques are

debited again in both computer & daybooks

Party is informed about returned cheques through Phone or personal contact

Cheques are mailed through TCS in case of no personal contact the same day

(If there is any availability)

Slip is asked & filled

Entries in daybooks are made

Entries checked & verified by another officer

after banking hours by officer

Cheques collected at the day end by Main

Branch’s Officials

Cheques are sent to respective banks next day

after posting in computer by Main Branch



ADVANCES DEPARTMENT

Advances are the most important source of earning for the banks. MCB is also giving full

attention towards this aspect and it is also obvious from the growing portfolio of advances

and from very low delinquency rate. The credit portfolio of this institution is in a very

much better shape than other financial institutions of Pakistan and the credit goes to the

management and the staff who are concerned about the quantity and quality as well.

Loans

Cash Credits

Overdraft

LOANS

Loans are monetary assistance by a financial institution to a business, individual etc. The

loans are granted by the bank in lump sum, so these types called fixed or demand loans.

Interest is charged on the whole amount of a fixed loan.

The borrower withdraws whole the amount of loan. This type of loan is normally granted

against security of gold documents.

In case of demand loans against gold or documents, a demand promissory note for the

amount of loan is taken from the borrower loans are granted under;

LOAN AGAINST GOLD

Under this type of loan, which is granted to the borrower the Head Cashier estimates the

value of Gold or Gold ornaments through an agent (Gold smith) and keeps a margin of 40

to 50 percent. After the opening the gold loan account a token is given to the borrower,

which is a bank receipt.

On repayment of loan, the gold or ornaments held as security for it, together with the

demand promissory note duly discharged is returned to the borrower and his receipt for the

gold ornament taken in the demand loan ledger. This receipts states that he ornaments

returned are complete and in order. Part delivery of ornaments is given against part

payment of a loan but care is taken that the ornaments still in banks possession fully covers

the balance of the loan outstanding. The interest gold loan is to be applied with quarterly.



LOAN AGAINST PLEDGE OF STOCKS

In case of advancing such types of loans, the following precautions are kept in the mind:

Stock pledged must be readily saleable

Products should be readily saleable

Advance should be within the borrows means

REQUIREMENTS OF LOAN

For granting loan to any party or individual, the bank checks following particulars of the

client:

Credibility

Feasibility Report

By Credibility, bank Judges the credibility of the client by his past bank record, CBI report

etc. it is very important in making decision about giving him loan.

Feasibility report is on the running or proposed business of the client. The report enables

the bank to judge the likely return of the business.

CASH CREDIT

Such cash account is opened in the name of the customer who borrows from the bank.

Customer is granted a loan up to a certain limit, sanctioned by the head office, from which

he can draw when he requires and interest is charged on the amount actually utilized by the

customer. In order to avoid the danger of idle fund, the bank charges a certain rate of

interest, even if the customer does not withdraw any amount. The rate charged by the bank

on cash credit in 46 paisa per thousand on daily basis.

The credit is usually given against the securities of goods or merchandize as follows:

ADVANCE AGAINST PLEDGE OF STOCKS

When cash is granted against the pledge of stock or product, cash credit form is taken, from

the certain products or stock, but the actual pledge is created when the stock or finished

products are placed under the bank's lock or the document of title is duly endorsed to the

bank by the borrower.



MORTGAGE OF PROPERTY

Title deeds of immovable property are accepted by the bank only as collateral security or

alternatively as unauthorized security.

REMITTANCE DEPARTMENT

Remittance department performs following functions:

Mail Transfer (MT)

Telegraphic Transfer (TT)

Demand Drafts (DD)

Pay order (PO)

MAIL TRANSFER (MT)

When a customer requests the bank to transfer his money from one branch of ba nk to

another branch of the same bank or from one city to another city to the same bank or any

other bank. Customer fills the form given by bank. If the customer has an account with that

amount as mentioned in the application form then concerned officer will undertake the

following procedure to make the mail transfer complete.

Branch Mail transfer form

Receiving Branch Register copy

Issuing branch register Copy

beneficiary advice

advice to customer

In case where the customer is not account holder of the bank then the customer will have to

deposit the amount which he wants to transfer under Mail. Then the above said procedure

will be done. Banks should be same branches can be different.

TELEGRAPHIC TRANSFER (TT)

This type of transfer is simple. After filling the application form the concerning officer

shall fill the telegraphic transfer form. Then it is sent to the required bank which on

receiving it immediately makes the payment to the customer and afterwards the voucher are

sent to that bank by ordinary mail.



DEMAND DRAFT (DD)

Demand draft is just like cheques and issued when the customer wants to take cash with

him personally. The idea behind is to avoid the risk and burden of currency notes in huge

quantity. Demand draft can easily be handled whatever amount it has and the money can

easily be taken from the bank when it is presented. In fact, the bank persuades the customer

to transfer money by drafts and avoid the risk of frauds involves in MT and T.T. Draft is

only issued when the bank knows customer and bank has the confidence in him

In case of transfer of money by drafts, the customer has to fill an application form. Then

the concerned officer fills the following forms:

Customer‟s advice

Customer‟s debit form

Register copy

Cover Advice

FOREIGN DEMAND DRAFT

Foreign Demand Draft is just like demand draft. The only difference is that a bank issues

FDD to the bank of another country. It requires foreign exchange and it involves seven

forms, which are to be filled



INFORMATION ABOUT MY BRANCH

Branch Manager Rashid Iqbal

Operational Manager Qaiser Waqar

General Banking Officer Ali Shahrukh

Chief Cashier Mian Iftikhar

Cashier Malik Hassan

Billing Cashier Muhammad Ali

CSO Miss Sundas Gull

ACCOUNT OPENING DEPARTMENT

Account opening and closing is the function of accounts departments. Bank‟s customers

may be individuals (Single or Joint), firms (partnership/proprietorship), Autonomous

corporations, Limited Companies, Charitable Institutions, Associations Educational

Institutions or Local Bodies.

BASICS TO OPEN AN ACCOUNT

During the span of job in MCB, I learned and observed a lot of about the opening of an

account. Basically I think that the opening of an account is the establishment of a

contractual relationship between the banker and the customer. By opening an account at a

bank a person becomes a „customer‟ of a bank. Further I am going to express the basic

requirements and steps involved in the opening of an account.



INTRODUCTION AND PRELIMINARY INVESTIGATION

Before opening an account MCB as like the other banks in Pakistan ascertain whether or

not the person who is going to open the account is a desirable customer or not. Then MCB

determine the prospective customer‟s integrity, respectability, occupation and the nature of

business by the introductory references given at the time of account opening. Negligence in

this informal preliminary investigation may result in serious consequences not only for the

banker concerned directly but also for other bankers and the general public who may be

affected indirectly.

In order to further strengthen and streamline this process, the Federal Ombudsman of

Pakistan, vide his ruling on complaint No. II/31/5186, has directed the banks to retain with

the account opening form a Photostat copy each of the National Identity Cards of the

person desiring to open an account as well as that of the introducer. As per these directions,

the concerned Branch Managers are required to obtain the original National Identity Cards

along with their Photostat copies and then return the original after attesting the authenticity

of the retained copy.

Preliminary investigation is necessary because of the following reasons:

Avoid Frauds: In this regard I learned that if a banker does not make the necessary

inquiries mentioned above he may enable dishonest persons to possess cheque books for

fraudulent purposes. If any such person happens to be an undercharged bankrupt, the

banker might be placed in an awkward position for having allowed such a person to open

and open a bank account.

Safeguard against unintended overdrafts: Sometimes due to a mistake an account may

be given an overdraft, For instance, the ledger keeper, misreading the balance of an account

honors a cheque for an amount larger than the balance. Similarly a credit entry belonging to

a customer may be made by mistake in another customer‟s account. In such situations the

excess amount withdrawn by the customer can only be realized if the customer is a

respectable person.

Inquiries about clients: Being a banker I think MCB has a business obligation to respond

to inquiries from other banks etc. about his customer‟s financial position. Though the

banker gives only a general ideal about the financial standing of his customer, it should

nevertheless have the necessary information available with him.



Specimen Signature

When an account is opened with MCB customer provides to the bank a specimen of the

form of signature which would appear on all his cheques to express his authority for the

payment of cheques drawn on his banker. This specimen is taken generally on a card

specially designed for this purpose, and rule for the customers, full name, and account

number are entered on it.

If the bank has reasons to doubt the genuineness of a signature, he should either get it

confirmed for his satisfaction or return the cheque with the remark „Signature differs‟. I f

the signature of the customer is forged the banker cannot escape his liability because he has

actually acted on his customer‟s mandate.

HOW TO OPEN AN ACCOUNT (GENERAL)

Before opening an account in MCB I observed that the following points must be considered

in this regard.

Another account holder of the bank should properly introduce the new customer.

The account holder should sign the account opening form in the presence of bank

officer and the signature is duly verified.

A copy of identity Card is required by Bank.

Against submission of the Bank‟s prescribed application form, duly introduced in the

manner provided and on supplying such document, as may be required and account

may be opened. The Bank reserves to itself the right to refuse to open and account

without assigning any reason.

Each account shall be allotted a distinct number that is to be quoted in all

correspondence with the bank relation to the account.

Minimum amount for opening and continued maintenance of various types of accounts

is as follows:

Rs.

Saving 1000

Current 1000

Term Deposit 1000



The bank reserves the right to change the above mentioned minimum balance requirement

at any time without any notice.

PROCEDURE TO OPEN AN ACCOUNT

According to my practice in MCB, when a customer wants to open an account, the bank

officer gives him an application form. All information, which is necessary to be known by

the bank, are requirements of the application form. Form also requires the essential

documents to be attached by the customer.

Basically following information is required to open an account with MCB.

Title of Account

Full Name of Applicant

Occupation

Address

Telephone No.

Currency of account

Nature of Business

Introducer‟s Name, Address & Signatures

Special instruction regarding the account

Initial Amount of the Deposit

Signature of the applicant

DOCUMENTS TO BE ATTACHED

Further I learned that if you wanted to open an account with MCB then you should attach

the following documents with your application form which are different for different

categories.

SOLE PROPRIETOR’S ACCOUNT

In order to open an account with MCB Sole Proprietors have to submit their business

registration certificate number.

PRIVATE / JOINT ACCOUTS

For individual or private or joint accounts National Identity Card is required.



JOINT STOCK COMPANY

Before an account of a Public Limited Company is opened MCB must ask the person

authorized to do so to submit the certified copies or the following documents

Certified true copy of the Memorandum and Articles of Associat ion of the

company.

Certified true copy of the resolution of the board of directors / managing committee

/ governing body regarding conduct of the account.

Certified list containing names and signatures of the directors / office bearers.

Certified true copy of the certificate of incorporation or registration.

Certified true copy of the certificate of commencement of business (in case of

public limited companies).

Balance Sheet

I.D. Card copy of each director

Original is also enclosed for inspection and return

List of persons authorized to operate the account.

Power of Attorney in favor of the person opening account.

PARTNERSHIP FIRM ACCOUNT

Information which is required to be submitted to MCB by a partnership firm in this case is

as follows:

Full Names

Address

Specimen of signatures of the partners

Certified true copy of partnership deed

Registration No. if the Partnership is registered



SOCIETIES / CLUBS AND ASSOCIATIONS ACCOUNT

MCB is authorized to open the accounts of the societies/clubs and associatio ns, These are

non-trading organizations, formed for the promotion of culture, science, education,

recreational activities and charitable purposes etc. some of these institution are registered

under the Societies Registration Act, 1866, and are issued a certificate of registration after

they have been found fit for registration.

ISSUANCE OF CHEQUE BOOK

When a customer opens an account with the bank, he is provided with cheque book for

withdrawals from account. However, the first cheque book is given to the customer only

when all the required documents are checked. A cheque book contains ten, twenty five,

fifty or hundred leaves. The cheque book also carries a requisition slip for the issuance of

the new cheque book. This slip is duly filled and singed by the customer. The signature of

the customer is verified by the bank and new cheque book is issued to the customer and

serial numbers of the cheque are duly entered in the book of the bank. Along with the

signature, person should also write his full name & address.

Usually only one cheque book is issued at a time, however big concerns who need a

number of cheque books at a time, may ask the bank to stock as number of cheque books in

their name and to point their name on these cheque books.

Bank debits the client‟s account for excise duty of Rs.2.50/- per cheque and keeps the

cheque book ready for the customer, as on his advice.

The officer keeps and maintains the cheque book register Cheque book inventory and

cheque books issued are recorded in this register. The account number for which the

cheque book is issued and the number of leaves are also recorded in this register when the

cheque book issued an entry is passed in the cheque book issue register.

In case of loss of cheque book or requisition slip on cheque book the customer has to fill

the Form No. 216-B to obtain a new cheque book. It is issued by operations manager.



FINANCIAL

ANALYSIS "Financial statement analysis is the process of identifying of financial strengths and

weaknesses of the firm by properly establishing relationship between the items of the

balance sheet and the profit &loss account," and it is done through ratio analysis.

RATIO ANALYSIS

Ratio means “one number expressed in term of another a ratio is statistical yardstick by

mean of which relationship between two or various figures can be compared or measured.

Here we are going to explain the ratio analysis of MCB.

Financial ratios can be divided into the following six parts.

Liquidity ratios

Activity ratios

Leverage ratios

Profitability ratios

Investor ratios

Bank special ratios



A. Liquidity ratios

Current ratios

Quick ratios

Absolute Liquid ratio

B. Activity ratios

Inventory turnover ratio

Average collection period

Average payment period

Total assets turnover ratio

C. Leverage ratios

Proprietary ratio

Debt ratio

Debt to Equity ratio

Debt to Tangible net worth ratio

Debt to Funds ratio

External-Internal Equity ratio

D. Profitability ratio

Return on total assets

Return on-equity

Return on investment

Return on fixed assets

Average profit per branch

Net profit Margin

Interest income to total income

Interest expense to total expense

Return on advances



E. Investor Ratios

Earning per share

P/E ratio

Dividend per share

Dividend yield ratio

Dividend payout ratio

Break up value/Book value per share

M/B ratio

F. Bank special Ratios

Earning assets to total assets

Return on earning assets

Net margin to earning assets

Loan loss coverage ratio

Equity to total assets

Deposit time equity

Loan to deposit ratio

Because here we are discussing ratio analysis of bank, therefore we will not discuss A & B

category of ratios.

LEVERAGE/SOLVENCY ANALYSIS

Solvency analysis of a firm indicates the amount of the other people‟s money being used to

generate profit. In general, these analyses are more concerned with long term debts,

because these commit the firm to a stream of payments over the long run. Solvency

analysis includes:

Proprietary ratio

Debt ratio

Debt to Equity ratio

Debt to Tangible net worth ratio

Debt to Funds ratio



External-Internal Equity ratio

PROFITABILITY ANALYSIS

Profitability analysis of a firm indicates the overall efficiently of the management. Without

profit a company can not attract the outside capital. Profitability analysis includes:

Return on total assets

Return on-equity

Return on investment

Return on fixed assets

Average profit per branch

Net profit Margin

Interest income to total income

Interest expense to total expense

Return on advances

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.



Interpretation:

The past two years data shows an increase in all return (i.e. interest earned, interest income,

Profit after taxation) which is a positive sign. But mostly expenses (i.e. interest expensed,

Provisions, Taxation) are also increase which show negative sign of business. The Bank

should have to review its policies to decrease expenses.

FINANCIAL RATIOS 2009 2008

Profit before tax ratio (PBT/

total income) 55.91% 63.80%

Gross Spread (NIM/Int Income) 69.31% 71.13%

Income/ expense ratio Times 3.84 4.10

Return on average equity

(ROE) 27.35% 31.49%

Return on average assets

(ROA) 3.25% 3.60%

Return on Capital Employed 27.35% 31.49%

Variance compared to 2008

2009 Amount %

Mark-up / return / interest

earned Rs. M 51,616 11,572 29%

Mark-up / return / interest

expensed " 15,841 4,281 37%

Net mark-up / interest income " 35,775 7,291 26%

Provisions & write off " 7,465 3,423 85%

Non-mark-up / interest income " 5,643 (149) -3%

Non-mark-up / interest expenses " 10,797 2,433 29%

Profit before taxation " 23,155 1,287 6%

Taxation " 7,660 1,167 18%

Profit after taxation " 15,495 121 1%

EPS Rupees 22.42 0.17 1%



(ROCE)

Earnings per share (EPS before

tax) Rs. 33.50 31.64

Earnings per share (EPS after

tax) Rs. 22.42 22.25

Advances/ deposits ratio

(Gross) 73.37% 82.64%

Advances/ deposits ratio (Net) 68.89% 79.39%

Breakup value per share Rs. 88.37 75.60

Breakup value per share

(including surplus) Rs. 100.91 84.55

Earning assets to total assets

ratio 87.23% 85.70%

Earning assets to Deposits &

borrowings 107.74% 107.75%

Deposits to shareholder equity

ratio Times 6.02 6.32

Capital Adequacy Ratio 19.07% 16.28%

Interpretation:

The past two years data shows that mostly financial ratios decrease which show negative

sign of company. The Bank should have to review its policies to decrease expenses.

DIVIDEND RATIOS 2009 2008

Cash Dividend Per Share Rs. 11.00 11.50

Dividend Yield Ratio (based on

cash dividend) 5% 9.14%

Dividend Payout Ratio 53.52% 56.19%

Bonus Shares Issued 10.00% 10.00%



Interpretation:

The past two years data shows that dividend ratios decrease which show negative sign of

company. The Bank should have to review its policies to decrease expenses.

Balance Sheet

The following table shows balance sheet of MCB for years, 2005, 2006, 2007 and Half

year 2008.

Rupees in million

Assets 2,005 2,006 2,007 2008

Cash 23,665 32,465 39,684

37,855.00

Balance with Banks 1,466 6,577 3,808 1,565

Lending to institutions 9,998 21,082 1,051

5,586.00

Investment short term 24,741 41,743 66,545 32,916

Advances short term 127,921 144,593 150,980 114,000

Other Assets 5,471 11,031 17,868 19,771

Total current Assets 193,262 257,491 279,936

211,693.00

Advances long term 52,405 53,646 75,752 115,866

Investment long term 44,741 21,743 40,635 52916

Operating fix assets 8,182 9,054 14,024 16,211

Deferred tax assets 191 172 - -

Total long term assets 105,519 84,615 130,411

184,993

Total assets 298,781 342,106 410,347

396,686.00

Liabilities

Bills payable 8,536 7,089 10,479 9,506

Borrowing short term 20,377 20,000 32,200 12,436

Deposited and other accounts 200,300 200,461 220,006 160735

Other current liab ilities 8,192 11,171 11,722 13,082

Total current liabilities

237,405 238,721 274,407

195,759

Subordinate loans

1,598 1,597 479 -



-

50,000

100,000

150,000

200,000

250,000

300,000

2005 2006 2007

Assets

Cash

Balance with

Banks

Lending to

institutions

Investment

short term

Advances short

term

Other Assets

Total current

Assets

deposits fixed 29,041 57,000 72,092 140936

Borrowing long term 7,000 3,943 7,207 3,000

Deferred tax liabilit ies - - 1,180 962

Total long term liabilities 37,639 62,540 80,958

144,898

Total debt 275,044 301,261 355,365

340,657

Shared capital 4,265 5,463 6,282 6,283

Reserve fund 9,054 24,662 34,000 34,428

Un-appropriated profit

4,990

5,530

5,131

5,709

Surplus on revaluation 5,432 5,187 9,706 9,609

Share holder equity 23,741 40,842 55,119

56,029

Total Liabilities& O’E 298,785 342,103 410,484 396,686

Source: MCB, (2005-2008) Annual Report

Graph Trend of Balance Sheet Items in absolute figures



-

50,000

100,000

150,000

200,000

250,000

300,000

2005 2006 2007

Liabilities

Bills payable

Borrowing short term

Deposited and other accounts

Other current liabilities

Total current liabilities

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2005 2006 2007

Advances long

term

Investment long

term

Operating fix

assets

Deferred tax

assets

Total long term

assets





-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2005 2006 2007

Subordinate loans

deposits f ixed

Borrowing long term

Deferred tax liabilities

Total long term liabilities

-

10,000

20,000

30,000

40,000

50,000

60,000

2005 2006 2007

Shared capital

Reserve fund

Un-appropriated prof it

Surplus on revaluation

Share holder equity

Graph 4.4 Trend of Balance Sheet Items in absolute figures

Graph 4.5 Trend of Balance Sheet Items in absolute figures



The deposits are showing up ward trend that is mainly because the current deposits have

increased. Fixed deposits are the main source of the fund, which the bank can safely

advance. The fall in fixed deposit and constant falling of interest rate will directly affect the

advances capacity of bank. So bank margin on advances is shrinking. That‟s why bank

reserve shift from advances to investment. Share holder equity shows increase

tremendously in year 2003. Long term assets shows slightly increase, the main reason for

which is the increasing in long term investment.

INCOME STATEMENT PERFORMANCE

In the coming text income statement of MCB has analyzed by help of trend analysis.

Income Statement of MCB

For the period ended 2005-2008

2,005 2,006 2,007 2,008

Mark up revenue 17,756 25,778 31,787 8,188

Markup expenses 2,781 4,526 7,865 1,992

Gross profi t margin 14,975 21,252 23,922 6,196

Provision for invest (99) 121 105 0

Bad debt provision 1,242 1,014 2,960 615

Bad debt actual 2 47 - 0

Total bad debt 1,145 1,182 3,065 615

Net markup income 13,830 20,070 20,857 5,581

Non mark up income

Fees& commission 2,449 2,311 2,635 753

Dividend income 480 812 632 92

Exchange income 532 692 693 147

gain on sales of securities 866 606 1,501 611

unrealized gain 2 - (13) 15

Other income 1,425 571 563 292

Total non markup 5,754 4,992 6,011 1,910

Total income 19,584 25,062 26,868 7,491

Non mark up expenses



(5,000)

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Mar

k up

reve

nue

Mar

kup

expe

nses

Gro

ss p

rofit m

argin

Pro

vision

for i

nves

t

Bad

deb

t pro

vision

Bad

deb

t actua

l

2,005

2,006

2,007

Administrative Exp . 6,460 6,483 5,022 1696

Other provisions (73) 11 (4) 0

Other charges 179 66 541 76

Total non- markup Exp. 6,566 6,560 5,559 1,772

Profit before tax 13,018 18,502 21,309 5,719

Taxation 4,096 6,358 6,042 1740

Profit after taxation 8,922 12,144 15,267 3,979

Source: MCB, (2005-2008) Annual Report

Graph No. 4.6 Trend of Income Statement items in absolute figures.



(500)

-

500

1,000

1,500

2,000

2,500

3,000

Fees&

com

mis

sio

n

Exchange

incom

e

unre

alis

ed

gain

2,005

2,006

2,007

(1,000)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2,005 2,006 2,007

Administrative

Exp.

Other provisions

Other charges





The income statement table and trend analysis shows that MCB has been able to control its

interest/ mark up expenses because the NI trend line is steeper than revenue trend line. Due

to decrease in markup expenses total revenue has shown an upward trend of continuous

increasing.

Net profit shows a continuous growth trend but the gross profit is higher than the net profit

margin in year 2002. The reason of this is increase in non mark up expenses and a taxation

percentage shows a constant increased.

Table – 4.3 Common Sizes Balance Sheet

Rs. In Millions Common Size %

Assets

2005

2006

2007

2005

2006

2007

Cash

23,665

32,465

39,684 7.92 9.49 9.67

Balance with

Banks

1,466

6,577

3,808

0.49 1.92 0.93

Lending to

institutions

9,998

21,082

1,051

3.35 6.16 0.26

Investment short

term

24,741

41,743

66,545

8.28 12.20 16.22

Advances short

term

127,921

144,593

150,980

42.81 42.27 36.79

Other Assets

5,471

11,031

17,868 1.83 3.22 4.35



Total current

Assets

193,262

257,491

279,936

64.68 75.27 68.22

Advances long

term

52,405

53,646

75,752

17.54 15.68 18.46

Investment long

term

44,741

21,743

40,635

14.97 6.36 9.90

Operating fix

assets

8,182

9,054

14,024

2.74 2.65 3.42

Deferred tax

assets

191

172

- 0.06 0.05 0.00

Total long term

assets

105,519

84,615

130,411 35.32 24.73 31.78

Total assets

298,781

342,106

410,347 100.00 100.00 100.00

Liabilities

Bills payable

8,536

7,089

10,479 2.86 2.07 2.55

Borrowing short

term

20,377

20,000

32,200

6.82 5.85 7.84



Deposited and

other accounts

200,300

200,461

220,006

67.04 58.60 53.60

Other current

liab ilit ies

8,192

11,171

11,722

2.74 3.27 2.86

Total current

liabilities

237,405

238,721

274,407

79.46 69.78 66.85

Subordinate loans

1,598

1,597

479

0.53 0.47 0.12

deposits fixed

29,041

57,000

72,092 9.72 16.66 17.56

Borrowing long

term

7,000

3,943

7,207

2.34 1.15 1.76

Deferred tax

liab ilit ies

-

-

1,180

#VALUE! #VALUE! 0.29

Total long term

liabilities

37,639

62,540

80,958

12.60 18.28 19.72

Total debt

275,044

301,261

355,365 92.05 88.06 86.57

Shared capital

4,265

5,463

6,282 1.43 1.60 1.53

Reserve fund

9,054

24,662

34,000 3.03 7.21 8.28



Un-appropriated

profit

4,990

5,530

5,131

1.67 1.62 1.25

Surplus on

revaluation

5,432

5,187

9,706 1.82 1.52 2.36

Share holder

equity

23,741

40,842

55,119

7.95 11.94 13.43

Total

Liabilities& O’E

298,785

342,103

410,484

100.00 100.00 100.00



Rs. In Million Indexed in %

2005 2006 2007 2005 2006 2007

Mark up revenue 17,756 25,778 31,787 100 100 100

Markup expenses 2,781 4,526 7,865 15.66 17.56 24.74

Gross profi t margin 14,975 21,252 23,922 84.34 82.44 75.26

Provision for invest -99 121 105 -0.56 0.47 0.33

Bad debt provision 1,242 1,014 2,960 6.99 3.93 9.31

Bad debt actual 2 47

- 0.01 0.18 0.00

Total bad debt 1,145 1,182 3,065 6.45 4.59 9.64

Net markup income 13,830 20,070 20,857 77.89 77.86 65.61

Non mark up income

Fees& commission 2,449 2,311 2,635 13.79 8.97 8.29

Dividend income 480 812 632 2.70 3.15 1.99

Exchange income 532 692 693 3.00 2.68 2.18

gain on sales of securities 866 606 1,501 4.88 2.35 4.72

unrealized gain 2

- -13 0.01 0.00 -0.04

Other income 1,425 571 563 8.03 2.22 1.77

Total non markup 5,754 4,992 6,011 32.41 19.37 18.91

Total income 19,584 25,062 26,868 110.30 97.22 84.53

Non mark up expenses

Administrative Exp . 6,460 6,483 5,022 36.38 25.15 15.80

Other provisions -73 11 -4 -0.41 0.04 -0.01

Other charges 179 66 541 1.01 0.26 1.70

Total non- markup Exp. 6,566 6,560 5,559 36.98 25.45 17.49

Profit before tax 13,018 18,502 21,309 73.32 71.77 67.04

Taxation 4,096 6,358 6,042 23.07 24.66 19.01

Profit after taxation 8,922 12,144 15,267 50.25 47.11 48.03



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:

(i) 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.

(ii) An analyst, when comparing financial statement, should ensure that predetermined uniform

standards are used for this purpose.

(iii)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.

Let us now calculate some of the key financial ratios of MCB for the years 2005-2007 and

try to answer the questions that these ratios suggest.

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

Muslim Commercial Bank.

Financial Ratios of MCB

Years 2005 2006 2007

Current Ratio 1.10 1.14 1.13

Assets turn over 0.09 0.065 0.038

Debt to total assets 0.97 0.95 0.96

Coverage ratio 1.28 1.51 2.23

Gross profit marg in 55.70% 60.51% 71.72%



Net profit marg in 6.51% 11.30% 21.51%

Return on investment 0.59% 0.74% 0.82%

Return on equity 16.09% 14.86% 20.07%

Debt to equity 26.16 19.10 23.51

Receivables turn over 5.79 5.91 5.60

Receivables turnover in days 62 days 61 days 64 days

Advances to deposits 49.55% 43.20% 45.96%

Investment to deposits 35.87% 49.05% 60.65%

Cash ratio 14.71% 10.09% 11.66%

Interest earned to advances 22.24% 19.49% 10.67%

Interest expense to Deposit 4.88% 3.32% 1.39%

Current Assets

Current Liabilities

Its shows the firm‟s ability to covers it current liabilities with it current assets.

Ratio for 2005 = 193,262 / 237,404 = 1.106

Ratio for 2006 = 257,491 / 238,721 = 1.137

Ratio for 2007 = 279,936/ 274,407 = 1.131

Current Ratios For 2005, 2006, 2007

CURRENT RATIO



2005

2006

2007

1.1

1.1

4

1.1

3

2003 2004 2005 2006 2007 2008 2009

1

2

3

Years Current Ratio

INTERPRETATION

Current Ratio of MCB has slightly decreased in 2007 as compared to 2006. Falling current

ratio of MCB shows the aggressive approach of MCB towards working capital

management. This surely improves profitability as the percentage of current assets.

However, this may increase the risk of short-term insolvency due to the inability of meeting

with small amount of current assets the short obligations as they come due.

Mark Up Revenue

Total Assets

It tells the relative efficiency with which a firm utilizes its total assets to generate sales.

Ratio for 2005= 17,756/ 298,781 = 0.091

Ratio for 2006 = 25,778 / 342,106 = 0.065

Ratio for 2007= 31,7897/ 410,347 = 0.038

Assets turn over ratio for, 2005, 2006, 2007

ASSETS TURNOVER RATIO



2005

2006

2007

0.0

9

0.0

65

0.0

38

2003.5 2004 2004.5 2005 2005.5 2006 2006.5 2007 2007.5

1

2

3

Years Assets turn over

INTERPRETATION

This shows revenue generated per rupee investment in total assets. This ratio is decreased

in 2007, because the total assets increased in 2007. Bank has relatively low ATR, because

they are selective in advancing loan.

Earning Before Income Tax

Interest Expense

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

obligation.

Ratio for 2005 = 19,584 / 6,566 = 1.28

Ratio for 2006 = 25,062/ 6,560 = 1.51

Ratio for 2007 = 26,868/ 5,559 = 2.23

Coverage Ratios for 2005, 2006, 2007

INTEREST COVERAGE RATIO



2005

2006

2007

1.2

8

1.5

1

2.2

3

2002 2003 2004 2005 2006 2007 2008 2009 2010

1

2

3

Years Coverage ratio

INTERPRETATION

The interest coverage ratio of MCB has shown an improvement over the period of three

years. In the year 2007, the ratio is 2.23. Which shows that the income in 2007 covers 2.23

times the interest expense constitute the main expense of the business, it is why the interest

expense is so higher and the ratio is so lower.

Total Debt

Total Equity

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

Ratio for 2005 = 275,044 / 23741 = 26.16

Ratio for 2006 = 301,261 / 40,842 = 19.09

Ratio for 2007 = 355,365 / 55,119 = 23.51

DEBT TO EQUITY RATIO



Debt to Equity Ratio for 2005, 2006, 2007

2005

2006

2007

26.1

6

19.1

23.5

11990 2000 2010 2020 2030 2040

1

2

3

Years Debt to equity

INTERPRETATION

MCB„s upward trend of Debt to Equity ration shows that the bank is not relying in debt

financing. The ratio of 2007 as compared to 2006 has increased.

Total Debt

Total Assets

It shows the percentage of firm assets that are supported by debt financing.

Ratio for 2005 = 275,044 / 298,781 = 0.963

Ratio for 2006= 301,261/ 342,106 = 0.950

Ratio for 2007 = 355,365/ 401,347 = 0.959

DEBT TO TOTAL ASSET

RATIO



Debt to total Asset Ratio

2005

2006

2007

0.9

7

0.9

5

0.9

6

2003 2004 2005 2006 2007 2008 2009

1

2

3

Years Debt to total assets

INTERPRETATION

Debt to assets ratio is slightly increased in the year 2007 as compared to 2006 because of

the growing debt.

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.

Ratio for 2005 = 14,975/ 17,756X 100 = 55.70%

Ratio for 2006 = 21,252/ 25,778 X 100= 60.51%

Ratio for 2007 = 23,922/ 31,787 X 100 = 71.72%

GROSS PROFIT MARGIN RATIO



Gross Margin Ratio for 2005, 2006, 2007

2005

2006

2007

55.7

0%

60.5

1%

71.7

2%

2003 2004 2005 2006 2007 2008

1

2

3

Years Gross profit margin

INTERPRETATION

MCB gross profit margin per rupee has shown a rising trend over a year. This shows that

the efficiency of the bank in controlling cost of sale and better stately of pricing product.

Net Profit after Taxes X 100

Net Revenue

It is measure of the firm profitability of sale after taking account of all expense a nd income

taxes.

Ratio for 2005 = 8,922/ 17,756 X 100 = 6.51%

Ratio for 2006 = 12,144/ 25,778 X100 =11.30%

Ratio for 2007 = 15,267/ 31,787 X 100 = 21.51%

NET PROFIT MARGIN RATIO



Net Profit Margin For 2005, 2006, 2007

2005

2006

2007

6.5

1%

11.3

0%

21.5

1%

2003.5 2004 2004.5 2005 2005.5 2006 2006.5 2007 2007.5

1

2

3

Years Net profit margin

INTERPRETATION

Net profit margin of MCB has improved, during the current year tremendously. This signal

towards higher efficiency and lower administrative cost of the bank.

Net Profit after Taxes X 100

Total Assets

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

Ratio for 2005 = 8,922 / 298,781 X 100= .59%

Ratio for 2006 = 12,144/ 342,106 X 100 = .74%

Ratio for 2007 = 15,267/ 410,347 X 100 = .82%

Return on Investment Ratio for 2005, 2006, 2007

RETURN ON INVESTMENT RATIO



2005

2006

2007

0.5

9%

0.7

4%

0.8

2%

2003.5 2004 2004.5 2005 2005.5 2006 2006.5 2007 2007.5

1

2

3

Years Return on investment

INTERPRETATION

MCB‟s ROI has shown improvement over the previous years. This is due to the increase in

net profit margin of MCB.

Net Profit X 100

Total Equity

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

shareholder equity.

Ratio for 2005 = 8,922 / 23,741 X 100= 16.09%

Ratio for 2006 = 12,144/ 40,842 X 100 = 14.86 %

Ratio for 2007 = 15,267/ 55,119 X 100 = 20.07%

Return on Equity for 2005, 2006, 2007

RETURN ON EQUITY RATIO



2005

2006

2007

16.0

9%

14.8

6%

20.0

7%

2003.5 2004 2004.5 2005 2005.5 2006 2006.5 2007 2007.5

1

2

3

Years Return on equity

INTERPRETATION

The ROE of MCB has shown a mix trend. In the 2006 it decreased as compare to year 2005

but it increase in year 2007. The increase in ROE is due to improvement in Net Profit

Margin.

Total Advance X 100

Total Deposit

This ratio shows the company advances employed per unit of deposit.

Ratio for 2005= 180,323/ 229,342 X 100= 49.55%

Ratio for 2006 = 198,239/ 257,462 X 100 = 43.20%

Ratio for 2007 = 218,961/ 292,098 X 100 = 45.96%

Advance to Deposit Ratio for 2005, 2006, 2007

ADVANCE TO DEPOSIT RATIO



INTERPRETATION

This ratio of MCB over the resent 3 years has shown a mix trend, but deposit has

increasing tremendously. This shown a concentration on investment as the rate of interest

declining on lending.

Total Investment X 100

Total Deposit

This ratio shows the bank investment employed per unit of deposits.

Ratio for 2005= 69,482/ 229,342 X 100 = 35.87%

Ratio for 2006= 63,486/ 257,462 X 100 = 49.05%

Ratio for 2007= 113,087/ 292,098 X 100 = 60.65%

Investment To Deposit Ratio For 2005, 2006, 2007

INVESTMENT TO DEPOSIT RATIO

2005

2006

2007

49.5

5%

43.2

0%

45.9

6%

2003.5 2004 2004.5 2005 2005.5 2006 2006.5 2007 2007.5 2008

1

2

3

Years Advances to deposits



2005

2006

2007

14.7

1%

10.0

9%

11.6

6%

2003.5 2004 2004.5 2005 2005.5 2006 2006.5 2007 2007.5

1

2

3

Years Cash ratio

INTERPRETATION

The year data showed that MCB has toward higher risk and consequently higher yield

investment, rather than under less risky loaning activities.

Cash & Cash Equivalents X 100

Current Liabilities

It is the ratio of cash and cash equivalents to current liabilities. It shows that how much

cash available to cover the current liabilities.

Ratio for 2005 = 23,665/ 237,405 X 100 = 14.71%

Ratio for 2006 = 32,466 / 238,721 X 100= 10.19%

Ratio for 2007 = 39,684/ 274,407 X 100 = 11.66%

Cash Ratio for 2005, 2006, 2007

CASH RATIO

2005

2006

2007

35.8

7%

49.0

5%

60.6

5%

2003 2004 2005 2006 2007 2008

1

2

3

Years Investment to deposits



INTERPRETATION

Cash ratio increased during the financial period of 2005-2007 but it indicates decrease in

2005. Because bank slope down the lending process and make payment for current and

fixed liabilities.

CONCLUSION

After doing the common size, growth and ratio analysis of MCB, bank limited, we

conclude that the financial health of MCB is continually improving. The effective control

of cost of funds and operating and administrative expenses has resulted in continuously

growing trend in profit margin. Both the slightly increasing in Total Assets turnover trend

and highly growing profit margin trend has resulted in continuously improving ROA. The

broadening of equity base and high retention ratio has resulted in growing trend in owner

equity. The bank average collection period has dropped which shows the efficiency of the

bank.

Present Status:

During the first half of 2010, MCB has shown an after tax profit of Rs 7.94 billion, an

increase of 2.4% over the same period last year. As a result, EPS has also increased by

2.4%, from Rs 10.2 per share to Rs 10.45 per share. EBIT increased by almost 5% as

compared to the same period last year, the improvement being attributed to an increase in

the interest margin from 30.69% to 32.96%.. Markup increased marginally over the past six

months, as compared to the first half of 2009, while markup expense increased

significantly, resulting in a decline in the net markup income. However, due to lower

provisions, a rise of 10% was seen in the net markup after provisioning. Non-markup

income increased by 8.5%, mainly due to a sharp rise in fee, commission, and brokerage

income. Non-markup expenses saw a rise of 22% over the same period last year, as a result

of which the increases in income could not be completely translated into earnings.

During the first six months of 2010, Deposits rose to Rs 419 billion, from Rs 367 billion in

December 2009, a rise of 14%. Within Deposits, Fixed Deposits saw a growth of almost

21%, followed by Current accounts and Savings Deposits growing by 15% and 10%

respectively. Borrowings declined from Rs 44.6 billion in December 2009, to only Rs 13.3

billion by June 2010. The increase in Deposits was thus offset by the decrease in

Borrowings, resulting in only a small change in liabilities. On the Assets side, lending to



financial institutions increased from Rs 3 billion in December 2009 to Rs 16.5

billion by the end of the first half of 2010. Cash and balances with treasury banks rose by

14.7% while balances with other banks declined sharply. NPLs saw an increase of 15.7%

as compared to the same period last year, rising to Rs 24.13 billion. This rise was much

larger than the increase in NPLs of UBL, which was only 6.7%. However, MCB has a

lower ratio of NPLs to Advances than its competitor, a sign of better asset quality. Due to

increased caution in lending, Advances of MCB saw a negative growth over the past six

months. The Advance to Deposit ratio also declined as a result, dropping to 63% from 74%

at the end of last year, which is lower than the industry average. MCB has announced an

interim dividend of Rs 3.00 per share, and increase from the Rs 2.50 per share announced

the previous year.

Banking sector overview:-

The banking system, as a whole, remains healthy despite the economy going

through a period of economic difficulty. The banking sector absorbed the build-up of non-

performing loans in the system while maintaining profitability and robust balance sheets.

Much of the credit for this must go to the SBP for the policies it has pursued over the last

decade to ensure that banks are adequately capitalized and adhere to prudent risk

management

INVESTMENTS

The investments, especially the Government papers, which declined in both absolute rupee

terms as well as a proportion of total assets during the first FY08, registered a slight

increase during the last quarter. Actually, the heightened credit risk on account of

deterioration in macroeconomic fundamentals and already constrained liquidity profile

induced the banks to risk-free MTB

The banking system is marked with a high concentration as a fewer number of banks hold a

major share of the system's total assets and deposits. This concentration has been following

an overall declining trend as the medium sized banks gradually gained market share.

However, due to unusual liquidity stress that affected mainly the small AND medium sized

banks the market share of 5 large banks increased.



DEPOSITS

The deposits in the industry are generally showing an upward trend, though the growth is

slow. The industry has been witnessing a gradual shift in deposits from savings to term

deposits for quite some time. This trend emerged largely in response to SBP's policy

incentives to encourage the mobilization of longer terms deposit so as to reduce the

maturity mismatches. Consequently, fixed deposits gained a significant share of savings

deposits since 2004. Other factors like general rise in interest rates and innovative deposits

scheme have also augmented depositors preference for the term deposits.

ADVANCES

the worsening business and economic environment somewhat increased the credit risk,

which compelled the banks to adopt cautious lending strategy, particularly in consumer

sector where the advances have been decreasing since the start of CY08. Some new loans

have been issued of which a significant portion of these were disbursed to public sector

enterprise thus the Advances show decling trend.

NPLs This rise in NPLs observed across all the banking groups except specialized banks,

where NPLs have actually decreased. NPLs have been on the rise mainly due to poor

economic performance of the economy and the FSV benefit, thus resulting in worsening

the Asset quality ratio. Interestingly, in the wake of economic slowdown, banks seem to

facilitate the businesses through rescheduling/ restructuring of loans; the Textile sector

being the major beneficiary. Latest banking industry numbers show an effort to keep

balance sheets clear of NPLs by recognizing and providing for NPLs on criteria that are

more stringent. This approach might look costly in the meantime but in the long run it'll

definitely benefit banks by providing a cushion to withstand

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 and managing its non-performing loans

via improved risk management processes.



In 2005, the management of the bank abbreviated its name from Muslim Commercial Bank

Limited to MCB Bank Limited to explore international markets; they were facing

resistance due to the word Muslim specially from Western Countries to avail license. In

2008 the head office of MCB was shifted from Karachi to Lahore in a newly constructed

building, namely MCB House located at Sharea Ghous-ul-Azam, commonly known as Jail

Road.

The MCB Tower in Karachi serves as the MCB's headquarters, and is also the ta llest

building in Pakistan. MCB, advised by Merrill Lynch, became the fourth Pakistani

company (the other three being Hubco, PTCL and Chakwal Cement - they all have been

delisted) to list on the London Stock Exchange when it raised US$150 million global

depositary receipts.

In May 2008 Malaysian bank, Maybank and MCB signed an agreement, whereby Maybank

will acquire up to 20% of the ordinary shares in MCB from Nishat Group. The acquisition

is in- line with Maybank‟s strategy, as Malaysia‟s financial services leader in the region, to

build its presence in key growth markets across the region. It also paves the way for MCB,

one of Pakistan‟s premier financial services groups, to engage Maybank as its exclusive

foreign commercial bank strategic partner.

Maybank initially acquired from Nishat Group 94,241,527 ordinary shares in MCB,

representing a 15% stake in the Bank, for a cash price of PKR470 per share. The total

consideration paid was approximately US$686 million. The purchase price represented a

11.4% premium to MCB‟s closing share price of PKR 422 on May 2, 2008, and a premium

of 12.9% to the average closing share price for MCB over the 30 trading days immediately

preceding the date of this announcement.

Based on MCB‟s December 31, 2007 audited book value, the purchase price represents an

implied price to book value multiple of 5.13x, a price to 2007 earnings multiple of 18.0x

and a price to 2008 earnings multiple of 15.2x. In July 2008 Maybank exercised its right to

increase its stake to 20%.

The stake in MCB allows Maybank the right to appoint two Directors to represent its

interest on the Board of MCB. One of these Directors was to be appointed immediately and

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http://en.wikipedia.org/wiki/Maybank



the second Director will be appointed upon completion of the term of the existing

Board, scheduled to be on March 27, 2009.

As part of the transaction, Maybank and MCB are also expected to enter into a business

cooperation arrangement which will include, among others, Islamic banking, retail

banking, credit cards, asset management and SME banking. Leveraging Maybank‟s

leadership and experience in these segments coupled with MCB‟s brand and broad

distribution network, Maybank and MCB believe that significant revenue synergies can be

attained. Both Maybank and MCB are also expected to benefit from increased business ties

and trade flows between Pakistan and Malaysia.

RECOMMENDATIONS

From the Quantum of the profit and its financial data it can be easily judged that a fter

privatization, MCB is performing well. Its deposits are growing day by day and so its

profitability. The controlling body is responsible for the productive performance of the

Bank.

Following are my observation and suggestion to improve the efficiency for the

development of the bank.

There is a criticism on the banking management that the salaries of the employees

are decreasing in every succeeding year. And I think this will shake the confidence

and working habit of the employees.

There is another recommendation about the bank that there is no proper timing of

the bank and there is made an unnecessary delay in the banking transactions, which

might not be a good sign for the bank from future prosperity point of view.

Staff turnover particularly of trained staff result in financial and other losses. The

amount spent by the bank on employment, induction and training of outgoing

officers constitutes to beat till another officer should ready prove this work. The

exodus of bank officer in the past has worsened the situation.

Most of the bank employees, are sticking to one seat only with the result that they

become master of one particular job and loose their grip on other banking operation.

In my opinion all the employees should have regular job experience all outlook

towards banking. The promotion policy should be adjusted.



Refresher Courses for the staff are most important in any international organization.

Alt the employees should have these courses according to their requirement.

Foreign experts can also be called for this purpose.

Every year some of the employees should be sent for training to other countries and

employees from other branches should be brought here. Some more reading

material should be provided. The purpose should be to

Educate the employees with the advance studies in their field. The employee should

be provided the opportunities to attend and participate in seminars and lectures on

banking.

Bank should give some more incentive to its employees in order to remove the

conflict between lower and higher officers and should try to improve the working

condition of the bank.

As such system should be designed that every employee who has some problems

with his officers can communicate it to the higher management and some steps must

be taken to improve that.

Recruitments should be strictly on merit basis and induction should be after proper

and extensive training.

Old and lazy staff should be replaced by young, qualified and energetic staff.

Foreign branches should be opened in order to capture the international market and

to earn international repute for the bank.

Working environment, equipment, furniture and staff dressing should be according

to the modern banking style.

Proper attention should be paid to upgrade customer services.

Bank should adopt the global organizational banking structure to meet the

international standards of banking sector.



Reference

Siddiqui Kamran (2004) An internship Report on MCB satellite . Institute of

Business and Management Science.

David, R.F, (1998). 7th Edition, Strategic Management; concepts & Cases New

Jersey; Prentice-Hall Ine.

Emery. D.R, J.D Finnerty and J.D. Stowe, (1998) Principles of Financial

Management. New Jersey; Prentice Hall.

Griffin R.W (1997) Management Essentials; Concepts and Application, Chicago

Science Research Associates, Inc.

Howard, MA (1979), Management Essentials, Concepts and Application Chicago;

Science Research Associates, Inc.

Kenney, R. D and S.Y. Me Mullen (1978). 6th Edition, Financial Statemetns; Form,

Analysis, and interpretation. London; Irwin-Dorsey International.

Meenai. S.A. Money and Banking in Pakistan, Karachi The allies Book

Corporation.

Nasir. M.S Money Banking & Finance, Kitab Markaz; Faisalabad.

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