Financial Reporting and Anlaysis Report on MCB Limited

7/27/2019 Financial Reporting and Anlaysis Report on MCB Limited

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FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

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Topic: MCB LimitedFinancial Analysis

Submitted to:Miss Fehmida Akram

Report of

Financial Reporting and Analysis

Submitted by:Arooj Abdullah 106

Madiha Shahid 114

Mubeen Mujahid 115Muhammad Abdullah Zuberi 116

Rafia Kanwal 125

MBA G1 6th


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ACKNOWLEDGEMENT

Pen can do what sword cannot. I pause to think what do justice to express my

gratitude to Almighty Allah for his unlimited graciousness because words are scare and

knowledge is unlimited to express his majesty. I have the pearls of my eyes to admire

the blessings of the compassionate, omnipotent, the Merciful and the Beneficent Allah

who is the entire source of knowledge and wisdom.

Due to his bounteous blessings, I become able to contribute this comprehensive report

toward the deep ocean of knowledge already exist. Heart is warmth with love &

thoughts have turned to the city of knowledge The Holy Prophet (P.B.U.H) his saying

learn from Cradle to Grave inspired the strong desire in me to undertake this course of

valuable studies.

That project has been accomplished due to the input of so many people who provided

their time expertise & support. Firstly I gratefully acknowledge the contribution of my

esteemed TEACHER, they really deserve very special thanks for this unflagging

support by his advises & editorial whetting that was crucial to transfer the data to us.

Their patience, constructive criticism, guidance and imaginative thinking have helpedme in incorporating and reviewing different methodologies and techniques used for

business operations in any organization. I especially acknowledge the efforts of Mam

Fehmida Akram who enormously helps me throughout the preparation of that report.

Thirdly I would like to thank my fellows who provide me help for the completion of that

report they provide me time & expertise to complete the report.


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TABLE OF CONTENTS

Sr # TITLE Page

1 Executive Summary 6

2 Introduction to Industry 8

3 Introduction to MCB Limited 11

4 Balance Sheet 17

5 Income Statement 18

6 Vertical Analysis of Balance sheet 19

7 Vertical Analysis of Income Statement 20

8 Horizontal Analysis of Balance Sheet 21

9 Horizontal Analysis of Income Statement 22

10 Ratio Analysis 23

11 SWOT Analysis 45

12 Suggestions & Recommendations 51

13 Conclusion 52


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EXECUTIVE SUMMARY

Pakistan after getting its independence did not have a strong banking industry. However

today the banking industry of Pakistan has been growing over the past few years,

mainly because Government of Pakistan implement some policies to betterment of the

banking sector, including the privatization of banks in Pakistan and secondly the friendly

behavior of STATE BANK OF PAKISTAN in the shape of monetary policy can help to

improve the banking sector in our country. Today there are number of different banks

established in Pakistan, including foreign incorporated commercial banks, local

incorporative commercial banks, Islamic banking and so many more.

My report divided into three parts. In the first parts I briefly introduce the MCB .The MCB

is a semi public commercial bank. And they can provide the many types of products for

example a Consumer banking services, Islamic banking services, Agricultural finance

solutions, Corporate and investment banking..

In the second portion we have studied the 5 years Income Statement and Balance

sheet of the MCB and perform horizontal and vertical analysis on these financial

statements and then finally trying to analyze the financial health of the MCB by doing its

Ratio analysis. The ratio analysis can help to determine the SWOT in our sector and the

use of this analysis the company can solve our problem and built our business sector

again in the highest rank.

In the third part of the report we gave some recommendations and suggestions by

analyzing the overall performance of the MCB.


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INTRODUCTION OF SECTOR

The word 'Bank' is said to have been derived from the words Bancus or Banque or Bank.

This history of banking is traced to as early as 2000 B.C. Banking in fact is primitive as human

society, for ever since man came to realize the importance of money as a medium of exchange,

the necessity of a controlling or regulating agency or institution was naturally felt. The priests in

Greece used to keep money and valuables of the people in temples. These priests thus acted as

financial agents. The origin of banking is also traced to early goldsmiths. They used to keep

strong safes for storing the money and valuables of the people. The first stage in the development

of modern banking, thus, was the accepting of deposits of cash from those persons who had

surplus money with them.

The goldsmiths used to issue receipts for the money deposited with them. These receipts

began to pass from hand to hand in settlement of transactions because people had confidence in

the integrity and solvency of goldsmiths. When it was found that these receipts were fully

accepted in payment of debts; then the receipts were drawn in such a way that it entitled any

holder to claim the specified amount of money from goldsmiths. A depositor who is to make the

payments may now get the money in cash from goldsmiths or pay over the receipt to the creditor.

These receipts were the earlier bank notes. The second stage in the development of banking thus

was the issue of bank notes.

The goldsmiths soon discovered that all the people who had deposited money with them

do not come to withdraw their funds in cash. They found that only a few persons presented the

receipts for encashment during a given period of time. They also found that most of the money

deposited with them was lying idle. At the same time; they found that they were being constantly

requested for loan on good security. They thought it profitable to lend at least some of the money

deposited with them to the needy persons. This proved a profitable business for the goldsmiths.

They instead of charging safe keeping charges from the depositors began to give them interest on

the money deposited with them. This was the third stage in the development of banking.


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At the time of independence, there were 631 offices of scheduled banks in Pakistan, of

which 487 were located in West Pakistan alone. As a new country without resources it was very

difficult for Pakistan to run its own banking system immediately. Therefore, the expert

committee recommended that the Reserve Bank of India should continue to function in Pakistan

until 30th

September 1948, so that problems of time and demand liability, coinage currencies,

exchange etc. be settled between India and Pakistan.

The non-Muslims started transferring their funds and accounts to India. By the end of

June 1948 the number of officers of scheduled banks in Pakistan declined from 631 to 225.

There were 19 foreign banks with the status of small branch offices that were engaged solely in

export of crop from Pakistan, while there were only two Pakistani institutions, Habib Bank of

Pakistan and the Australian Bank. The customers of the bank are not satisfied with the uncertain

condition of banking. Similarly the Reserve Bank of India was not in the favor of Govt. of

Pakistan. The Govt. of Pakistan decided to establish a full-fledge central bank. Consequently the

Governor-general of Pakistan Quaid-I-Azam inaugurated the State Bank of Pakistan on July 1,

1948. Thus a landmark was made in the history of banking when the state bank of Pakistan

assumed full control of banking and currency in Pakistan. The banking structure in Pakistan

comprises of the following types.

State Bank of Pakistan

Commercial Bank of Pakistan

Saving banks.

Cooperative banks

Specialized credit institutions.

Commercial banks have been the most effective mobilizers of savings and have beenproviding short-term requirements of working capitals to trade, commerce and industry.


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Up to December 31, 1973, there were 14 Pakistan commercial banks that functioned all

over the country and in some foreign countries through a network of branches. All these

commercial banks were nationalized in January 1, 1974, and were recognized and merged into

the following five banks:

National Bank of Pakistan

Muslim commercial bank limited

Habib Bank Limited

United Bank Limited

Allied Bank of Pakistan

The state bank of Pakistan is the Central bank of the country and was established on July

1, 1948. The separation of East Pakistan and its repercussion in the form of economic depression

has caused a lot of difficulties to the banking system in Pakistan. The network of bank branches

now covers a very large segment of national economy. The numbers of branches have increased

appreciably and there is now on branch of bank for every 3000 heads of population

approximately. There is done reasonable growth in deposits from the establishment of Pakistan.

Besides this growth, specialized credit and financial institutions have also developed over the

years.

The Government of Pakistan in the late 90s introducing the need for the privatization of

state owned banks and companies. The private sector has accepted the challenge and most of the

banks are privatized today. The State Bank of Pakistan issues the shares of these periodically.

Bank employees and other common peoples can also purchase these shares and earn profit.

Throughout the period of banking history the banks have been expanding rapidly and achieved

the desired goal of progress.


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MCB Bank LTD INTRODUCTION

Brief:

MCB is one of the leading banks of Pakistan with a deposit base of about Rs. 230 billion

and total assets of around Rs.300 billion. Incorporated in 1947, MCB soon earned the

reputation of a solid and conservative financial institution managed by expatriate

executives. In 1974, MCB was nationalized along with all other private sector banks.

This led to deterioration in the quality of the Banks loan portfolio and service quality.

Eventually, MCB was privatized in 1991.

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.

History:

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

has restricted the number of branches that can be opened by foreign banks. An

advantage that MCB capitalizes because of its extensive branch network.

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

the gains made in recent years and prepare the groundwork for future growth. The bankhas restructured its assets portfolio and rationalized the cost structure in order to remain

a low cost producer.

MCB now focuses on three core businesses namely corporate, commercial & consumer

banking. Corporate clientele include public sector companies as well as large local &


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multinational concerns. MCB is also catering to the growing middle class buy providing

new assets & liability products. The bank provides 24 hours banking convenience with

the largest ATM network in Pakistan covering 30 cities with over 197 ATM locations.

The banks rupee traveler cheques have been market leaders for the past six years &

have recently launched their gift cheques scheme.

MCB looks with confidence at the year 2006 & beyond, making strides towards

fulfillment of its mission, To become the preferred provider of quality financial services

in the country with profitability & responsibility & to be the best place to work.

MCB in its over fifty years of operations. It has a network of over nine hundred

branches all over the country with business establishments in Srilanka & Behrain. The

branch breakup province wise is; Punjab (57%), Sindh (31%), NWFP (19%) and

Balochistan (3%) respectively.

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


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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.

YEAR 2006 COMPLIANCE

MCBs 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 customers 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 its 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 lockin 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.


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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 multinational 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 Banks Rupee Traveler 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 1st

Islamic banking branch at 1st

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


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Vertical Analysis of Balance Sheet


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Vertical/ common Size analysis

Muslim Commercial Bank Limited

Balance Sheet

As on 31st December


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Horizontal Analysis of Balance Sheet

Horizontal/ Index Analysis

Muslim Commercial Bank Limited

Balance Sheet

As on 31st December


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Ratio Analysis

1. Current Ratio:

The current ratio measures the number of items of the firm s current assets cover its current

liabilities. The current ratio should be part of your business' basic financial planning, meaning it

should be tracked monthly or quarterly. By keeping a close eye on this figure, you will recognize

if it begins to get out of line. This will allow you to take early action to prevent your business

from ending up in a difficult position. Current assets divided by current liabilities

Current ratio=current asset/ current liabilities

2007

Current asset 261,263,732

Current liabilities 254,135,024

Current ratio 102.81%

2008




2009




2010




2011





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Interpretation of current ratios of MCB:

Current ratio shows a firms ability to cover its current liabilities with its current assets. It is

obtained by dividing current assets of the firm by its current liabilities. Current ratio of 1 or

higher means that the firm can pay all its current liabilities from its current assets, while a value

less than 1 means that the firm will be unable to pay its current liabilities completely by its

current assets. A lower value means aggressive approach of the management toward business,

but has opposite meaning for creditors, who dont like aggressive approaches of the

management. In MCB bank limited 2010 current ratio is strong than other four years. It shows

that this years liabilities could be recovered with its assets. After 2010, a bank has maintained

good current ratio in 2011 but 2007 and 2008 has weak current ratio because the difference

between assets and liabilities decreased in these years. Current ratio does not show the true

picture of the organization. Sometimes it shows that organization has ability to pay its

obligations but its profitability ratio tells that it has not ability to pay its obligation. But still it is

very useful for the analysts especially for the creditors.

2. Quick ratios:

Quick ratio shows a firms ability to meets it current liabilities with its current assets excluding

inventories and prepaid expenses, which are least liquid portion of the current assets. Since banks

dont have any sorts of inventories, therefore only prepaid expenses are subtracted from the

current assets of the bank. This is an important planning tool, especially for businesses that can

tie up a lot of assets in inventory. By tracking it monthly, management can keep an eye out for

negative trends that could hamper their business' ability to meet its obligations. Quick ration can

also use to evaluate the financial health of potential customers,

since it also indicates whether a business can pay off its debts quickly. A firm with a low quick

ratio may be more likely to delay payments because its assets are tied up elsewhere.

Quick ratio= current assets-inventories/current liabilities.

2007

Current assets 261,263732

Inventories 128,276,842



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Quick ratios 52.33

2008

Current assets 245,019,617


Current liabilities 237,825426

Quick ratios 74.77

2009




Quick ratios 80.74

2010




Quick ratios 89.06

2011




Quick ratios 76.94


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Interpretation of the quick ratio:

Inventories are considered as current assets so they are included in current ratio

calculation. Inventories are less liquid. Normally it is not easily converted into cash

on short notice. In 2010 quick ratio is better than other years it show that bank can

easily recover its liabilities on short notice.

3. Working capital:

Working capital is the difference between current assets and current liabilities. Working capital

is often considered a measure of liquidity by itself. This ratio shows the amount of liquidity.

Working capital is used to check liquidity of the organization.

Working capital=current asset-current liability.

2007



Working capital 7,128,708

2008




2009




2010





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2011




Interpretation of the working capital:

Working capital is better in 2011, which is 34,129,446 .it means that assets are utilized more

economically in 2011 as compared to 2007, 2008, 2009 and 2010.

4. Cash ratio:

Cash and cash equivalent/total assets

Cash and equivalent are the most liquid assets. The cash ratio shows the proportion of the assetsheld in the most liquid possible form. It is used to check the liquidity of the organization.

2007

Cash equivalent 25,356,261

Total assets 272,323,619

Cash Ratio 9.31

2008



Cash Ratio 11.40

2009



Cash Ratio 8.41

2010




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Cash Ratio 11.41

2011



Cash Ratio 10.60

Interpretation of cash ratios of MCB:

Higher cash ratio also shows the higher rate of satisfaction like other liquidity ratios. Cash ratio

is more important liquidity ratio. In 2007 cash ratio was 9.31%, it increased very quickly in 2008

by 11.40%, but in 2009 it declined by 2.99. 2010 was the best year as it shows 11.41% ratio, In

2011, it declined by 10.60%. In short working capital and cash ratio are more realistic and more

important ratios, which describe the true picture of any organization. In MCB 2010 is the year in

which the liquidity ratios are shown better than other years. So 2010 is mentioned a good year of

the Muslim Commercial Bank.


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Leverage Ratios:

Leverage ratios of a firm show the extent to which a firm finances its operation from the outside

sources and money. The leverage can be determined from analysis of owner equity in business,

total liabilities, current and long-term liabilities, long-term assets and total assets of the business.

Following are the common leverage ratios to show the degree of leverage the bank is using to

finance its activities and assets by liabilities.

5. Debt-To-Total-Assets Ratio

It shows that how much assets have been financed by liabilities and it also shows the

margin of protection available for the creditors.

Debt ratio

Debt ratio=Total debt/ Total assets

2007

Total debt 261,214,926


Debt Ratio 95.92

2008



Debt Ratio 94.38

2009



Debt Ratio 92.20

2010



Debt Ratio 88.06


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2011



Debt Ratio 86.57

Analysis of leverage ratio:

Financial leverage is the extent to which a firm is financed with debt. The amount of the debt a

firm uses has both positive and negative effects. The more debt the more it is that the firm will

have trouble meeting its obligations. Thus the more debts higher profitability of the financial

distress and even bankruptcy. Furthermore the chance of the financial distress and debt

obligation generally may create conflicts of interest among the stakeholders. In Muslim

Commercial bank, year 2007 was heavily financed because debt was the major source of

financing in 2007. Debt also had lower transaction cost. But better year was 2011 because

Muslim Commercial Bank in this year was not heavily financed and had no trouble to pay its

obligations.

6. Debt-To-Equity Ratio:Debt-to-Equity ratio shows the extent to which debt financing is used relative to equity

financing. Debt equity is calculated by dividing total liabilities of the bank by the total owner

equity.

Total debt divided by shareholders equity

Debt to equity ratio=Total debt / shareholders equity or Debt ratio/1-Debt ratio

2007


Shares holder equity 3,065,273

Debt to equity Ratio 85.22

2008


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2009




2010




2011




Analysis of the Debt to equity ratio:

The debt equity ratio is a simple rearranged of the debt ratio. Debt equity ratio shows how the

firms stockholder bears the risk of the firm. Greater the debt greater risk for the firm s

shareholders .In 2010 risk for the share holders was very low as compared to the other years

decrease debt to equity ratio was very small on the contrast risk was very high in 2007 because

of heavy financing.

7. Equity multiplier:

Owner equity to fixed assets ratio:

Owner equity to fixed assets ratio shows that how much money does owner in

relation to fixed assets invest. If the owner equity exceeds the fixed assets, it means


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that owner finances a part of current assets. When owner equity is less than fixed

assets it means that creditors obligations have been used to finance a part of fixed

assets.

Total owner equity divided by fixed assets

Equity multiplier=Total assets /shareholders equity.

2007

Total Assets 272,323,619

Shares Holder equity 3,065,273

Equity Multiplier 88.84

2008




2009Total Assets 298,776,797



2010




2011




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Equity multiplier

Analysis of the equity multi plier:

Equity multiplier is yet another representation of the same information. It shows how much total

assets the firm has for each dollar of equity. In MCB it is better in 2007 it means that bank has

about 88.84 in total assets of 100 of equity.

Coverage Analysis:

Coverage ratios analyze the ability of a firm to cover or service its financial obligations. Most

common coverage ratios are explained below.

8. Interest Coverage Ratio

Interest coverage ratio shows the ability of a firm to cover up its interest charges on the income

before interest and taxes. The ratio is obtained through dividing earnings before interest and

taxes (EBIT) of the bank by its interest expenses. EBIT divided by interest expense

Interest coverage ratio=EBIT/Interest expense

2007

EBIT 3,162,924

Interest expense 2,932,693

Interest coverage ratio 107.85

2008

EBIT 4,057,716




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2009

EBIT 13,018,487



2010

EBIT 18,500,670



2011

EBIT 21,308,035



Analysis of the interest coverage ratio:Coverage ratio shows the number of the times a firm can recover or meet particular financial

obligations. The interest coverage ratio, which is also called the time interest earned ratio,

measure the coverage of the firm s interest expense.2009 is the best comparative better coverage

of its interest and fixed charged obligations. After 2009, 2010 is better than other three but 2007

is worst than all.

Profitability Analysis:

Profitability ratios are of two types those showing profitability in relation to sales and those

showing profitability in relation to investment. Together, these ratios indicate the banks overall

effectiveness of operation. It creates a relationship between income statement and balance sheet

of the firm. Following are the some typical profitability ratios used to analyze the profits of

firms.


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9. Cost To Sales Ratio:

Cost to sales ratio determines the cost incurred in generating the sales of the bank. The net sales

of banks are its interest/mark up earned while costs of sales are its interest/mark up expense

incurred. The ratio is obtained by dividing cost of sales by net sales. The following table shows

the cost of sales of MCB over five years of operations.

Interest or mark up expensed divided by interest or mark up earned

2007


Interest earned 10,369,994

Cost to sales ratio 28.28

2008




2009




2010





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2011




Analysis of the cost to sales ratio:

Cost to sales ratio shows the cost incurred in generating the sales of the bank. In 2007 the cost to

generate the sales is higher with respect to other financial years. After 2007, 2011 had also

higher cost. Year 2095 is best one for MCB but 2007 is worst than all.

10. Return On Investment:

Return on investment measure the ratio of profit generated in relation to the total assets

employed. Net profit after tax divided by total assets gives the return on investment. Return on

investment is an indicator of how profitable a company is. By using this ratio annually, we

compare business' performance to industry's norms. Net profit after tax divided by Total assets

Return on investment= Net profit after tax/Total assets

2007Profit after tax 2,230,145


Return on Investment 0.82

2008

Profit after tax 2,431,532



2009




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2010




2011




Analysis of the return on investment ratio

Profitability ratios focus on the profit generating performance of the firm. These ratios measure

how effectively the firm is generating its profit. They reflect its performance, its risk nests and

the effect of leverage. Muslim commercial bank was heavily financed in 2011 that financing was

used in investment thats why return on investment is high in 2009 as compare to the other years.

11. Return On Equity:

Return on equity is another summary measure of overall banks performance. It can be

calculated by dividing the net profit by the owner equity. This ratio tells us the earning power on

shareholders book value investment and is frequently used in comparing two or more firms in

any industry. A high return one quite often reflects the firms acceptance of strong investment

opportunities and effective expense management.

2007


Shareholders' equity 3,065,273

Return on Equity 72.76


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2008




2009




2010




2011




price earnings ratio

Return on equity is an indicator of how profitable a company is. Use this ratio annually to

compare your business' performance to your industry's norms. In year 2011, MCB has a strong

investment opportunities which reflects a high return, after this 2010 and 2009 also depicts a

high return, whereas, 2007 and 2008 are not satisfied.

12. Market value ratios:

1-P/E ratio


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Price earnings ratio=Market price per share/ earnings per share

2007

Market price per share 51.40

Earnings per share 7.28

P/E ratio 706.04

2008



P/E ratio 814.15

2009



P/E ratio 785.58

2010



P/E ratio 1,051.71

2011



P/E ratio 1,645.88

Analysis of the price-earn ings rati o:


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Price earnings ratio of MCB bank is high in 2007 as compared to the other years. Because the

market price per share is high in 2007. Because in this year MCB generate an excellent profit.

2006 is also good but 2003 is worst all of them.

13 Earning yield:

Earning yield=Earnings per share/Market price per share

2007



Earning Yield 14.16

2008



Earning Yield 12.28

2009



Earning Yield 12.73

2010



Earning Yield 9.51

2011



Earning Yield 6.08


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Analysis of the earning yield:

Earning yield of MCB bank is high in 2007 as compared to the other years. Because the market

price per share and earnings per share is low in 2007. Earning yield in 2008 and 2009 is also

high. Earning yield is unsatisfied in 2011.

14 Earnings Per Share:

This ratio determines the amount of income that has been earned on each share

outstanding. Net profit after tax divided by total numbers of shares outstanding gives

the amount earned on each share.

Net profit after tax divided by total number of shares outstanding

Earnings per share=Net profit after tax/ Total no of shares

2007


Total number of shares 306,527


2008




2009




2010



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2011




Analysis of the earning per share:

Earnings per share mostly depends upon return on investment means ratio of profit generated.

Earnings per share is better in 2011 because in this year return on investment was also satisfied.

2007 and 2008 were unsatisfied as earning per share.

15 Gross spread ratio:

This ratio indicate the firms overall effectiveness of operation. Gross profit divided

by net sales.

2007

Net mark-up/ interest income 7,437,301


Gross spread ratio 71.72

2008




2009



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2010




2011




Analysis of gross spread ratio:

This ratio tells the profit of the firm relative to sales, after deduction of cost of production. It is a

measure of the efficiency of the firms operation. Gross spread ratio of MCB bank is high in

2009 as compared to the other years. Only because of low expenses during the year. After this

2010 is good but not satisfied as of 2009.

16 Income/ expense ratio:

2007

Total Income 14,901,805

Total expenses 11,288,881

Income/ expense ratio 1.32

2008




2009


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2010




2011




Analysis of Income/ expense ratio:

Income/ expense ratio of MCB bank is high in 2010 as compared to the other years. Because in

this year the expenses as compared to earnings are very low. After this 2009 and 2010 also

depicts an excellent income/ expense ratio. But 2007 was the worst one for Muslim Commercial

Bank.


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MCBs SWOT ANALYSIS

STRENGTHS

MCB is the first Pakistani privatized bank and because of its quality management,

marketing, innovation in products and services. Owing to all such factors they have established a

good reputation in the banking market. The name of MCB makes you recall the highly

cooperative and professional individuals ready to serve you with maximum zeal and zest.

The joining of experienced people, advanced management, advance setup and facilities

gave MCB an edge over its competitors.

MUSLIM COMMERCIAL BANKS IMAGE:

MCB is a reputable financial organization and is well known all over the Pakistan.

Perception is of producing a high quality services.

CUSTOMER CARE:

The Bank not only provides high quality services but it also look for the comfort and

convenience of the clients, MCB always preferred their customers.

MARKET SHARE:

MCB has covered much of the potential market and the net profit is increasing years after

years. Deposits and advances have sufficiently increased.

LARGE NUMBER OF DIVERSIFY PRODUCTS:

This is also its main strength as it has diversified in many products such as:

Debit Card

Visa Card


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Car Financing

Agriculture Financing

BRANCH NETWORK

It is the greatest strength of the Bank. In 2004, five more branches were added to the

network and by the end of the year 2005 the total number of branches was raised from just 53 to

143. MCB has also planned to open more branches in next coming years.

SOUND MARKETING:

Skillful marketing of the products is being achieving countrywide goals of Muslim

Commercial Bank Limited.

PHONE BANKING:

Every account holder can conform its balance on Phone and may ask for any query.

There are also 24 hours help lines for customers.

MOBILE BANKING:

It has been launched recently. It helps in getting accounts details and making transactions using

mobiles.

HIGHLY AUTOMATED BANK:

MCB in Pakistan is the also in the list of highly automated banks, about 750, like

Emirates because of its modern style of banking through fully computerized control and twentyfour hour banking.

FASTER BANKING SERVICE:


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MCB have faster banking services that are making it more prominent in the banking

industry especially in operations and Foreign exchange. The customer prefers this bank not only

because of its faster speedy service rather due to reasonable service charges.

INTERNATIONALLY DESIGNED PRODUCTS:

MCBs products are internationally designed products. These are valuable and

operational in all over the world.

CONTRACT WITH CIRRUS:

Now MCB has also entered into a contract with Cirrus which is a subsidiary of

MasterCard. This contract will enable an ATM card holder to use his account even when he is

out of country at all the ATMs where Cirrus logo is displayed.

WEAKNESSES

ADVERTISEMENT:

The majority of people are not well aware about the products of MCB. Therefore it

should advertise extensively especially RTC and Master Cards.

ACCOMMODATE BEHAVIORALLY:

A behavior has been noted that bank tries to feel at ease with good looking, rich and

educated people and the poor looking customers feel some bit strange in the environment of the

bank. The bank employees should try to accommodate behaviorally all type of customers.

MISMANAGEMENT OF TIME:

Mismanagement of time is another big mistake in MCB branches, the bank official time

of closing is 5:30pm but due mismanagement of time allocation and work the staff is normally

on their seats till 7:00 or 8:00 clock.


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AND ALSO,

Costly documents are required for loan sanctioning.

Some times bank also never meets stated rate of profit

OPPORTUNITIES

PRIVATIZATION:

As on December 31, 1998, sixty-eight scheduled banks with 9,106 branches are operating

in Pakistan. As on this date, total population of Pakistan is 140.03 million. Total number ofpersonal accounts with all scheduled banks as on December 31,1997, are 28.98 million. If we

consider the population statistics of working age group as on December 31,1997, it stands to the

figure of 96.64 million. Thus we can say those 28% of working age people of Pakistan are

having accounts with banks while 72% are unbanked.

The need of privatization has made people to switch to banks to satisfy their needs of

lending and borrowing. This not only increases the deposits but also the credit business.

DIVERSIFICATION:

They may enter in New business or any other consumer-durable product in order to

promote their name, by introducing Loan for the students, small businesses, and handicraft

industry.

SOME MORE OPPERTUNITIES:

Information Technology.

Credit cards can give more earning.

Establishing more foreign Branches.

They should introduce Student Finance Facility.


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They should also introduce mobile ATM

THREATS

CHANGE IN GOVERNMENT POLICIES:

Change in government policies has affected the banking business. Still banks have to wait

to get permission of state bank. The freezing of foreign currency accounts is a vital example of

letting people not to trust on banks.

COMPETITION:

The Competition has become severe by the entrants of so many banks, So to exist one

will have to prove himself in its services through excellent management and will have to satisfy

its shareholders. Otherwise he will be out the market.

LOW INVESTMENT:

The decrease purchasing power of consumer in the current economic situation of the

country affecting the business activity speed too much and the result is the low investment from

the investors in new projects can create problem for the bank because it is working a lot in trade.

STATE BANK REGULATION:

As the Bank introduces unique products so they face problem if State Bank Of Pakistan

employ taxes on them which force them to increase the rate of Interest.

EXPECTATIONS OF THE PEOPLE:

Due to huge competition among those banks and MCB,, people are the basicbeneficiaries from it and thus their expectations tend to increase about the products and the

relative rate of interest thus creating a threat for MCB.

SOME BANKS ARE OFFERING KISAN CARDS.


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SUGGESTIONS & RECOMMENDATIONS

Following are some suggestions for Muslim Commercial Bank, Ltd.

ADVERTISING:

Bank must let potential customers know that all attractions for banking exist. This is done

by advertising on television and obtaining press coverage, in conjunction with direct mail,

window displays, leaflet in branches and in appropriate other locations (such as hotels, shops,

etc.) and including leaflets in statement of accounts sent to existing customers in the hope that

they will tell potential customers about the services provided by our bank.

INCREASED ATMS LOCATIONS:

Some personal sector customers prefer not to come to branch. They increasingly want to

deal with the bank in other ways, such as home banking or use of Automated Teller Machines

(ATMs), which need to be at every branch or some important shopping plazas and airports etc.

INCREASED SERVICES:

One way to retain the customers is to offer a wide range of services such as tax advice,

free life insurance equivalent to amount deposited, shares portfolio management, fund

management facility, etc., complimentary to the core services. Banks must have a slightly

different mix of services and mean of providing these such that customers can choose the mix

that suits them best.

MANAGEMENT OF TIME:

There should be a good management of time for the sake of employees i.e. offering them

free break hours instead of making them work in this time as well.


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GROWTH SCOPE FOR EMPLOYEES:

MCB should provide greater facilities to its employees, and give them bonuses for their

hard work and Promotions as well. 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

BANKING PROFESSIONALS:

The bank should hire banking professionals having experience in their respective fields

that will boost the performance of the company as currently MBAs are produced for this field so

they should be hired for enhancing the performance of company.

ATTRACT CUSTOMERS:

The banking company should offer such policies which would attract customers which

are denied by other banking in the market.

JOB ROTATION AND PROMOTIONS:

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

become master of one particular job and lose their grip on other banking operation. In my

opinion all the employees should have regular job experience all out-look towards banking. The

promotion policy should be adjusted

COMMUNICATION SYSTEM FOR EMPLOYEES:

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.


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Conclusion

MCB bank Limited is a banking company incorporated in Pakistan and is engaged in commercial

banking and related services. The banks ordinary are listed on all the stock exchanges in

Pakistan whereas its global depository receipts are traded on the international order book system

of the London stock exchange. The bank operates 1020 branches including Islamic banking

branches. After analyzing its income statements, balance sheet, cash flow statement, products

and services, loans, it is concluded it is second best bank in the Pakistan. MCB taking progress

by leaps and bounds, soon it will become the first best commercial bank of the Pakistan.

The consumer banking industry has many opportunities to grow, customer wants

convenience mode of banking for which new products & services should be introduced on the

other hand it is giving huge profits to bank while the level to risk is less in consumer

financing as compare to others. Wealth Management Service which is a new service in

Pakistan Consumer Banking industry its awareness should be increased as in our survey it

reveals that most of the respondent even dont have any idea of consumer financing. Banks

customers want new services to be introduced in which InterbankTransfer Facility & Money

at door step the most are demanding services. In recent years the regulation for tenure and

amount of consumer financing has been changed many times but still the banks customers

are not totally satisfied by the tenure of consumer financing. Improper guidance, slow

processing and bank statement are the major problems faced by banks customers in getting

consumer loans. The reason for these problems is that people applying for consumer loans dont

have proper information about the requirements by the banks and due to high number of

applications & lengthy procedure by banks the loan Very few borrowers know that the rate of

interest being charges on consumer finance by the financial institutions is too high as compared

to prime interest. In case of credit cards the respondents in our survey marked High Markup

Rate as the major problem they are facing in Credit Cards. Despite of many changes in bank

policies and strict regulations by SBP still banks customers are facing hidden charges

problem. Due to unclear policies and term & condition of banks, customers are not able to

know about different charges of banks and the problem of hidden charges occurs. Although

CIB provide complete and accurate information about the banks customer credit records


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but still loans default occur in consumer financing the problem is not with only due false

customer records but also due to wrong policies and improper assessment by bank which cause

defaults on consumer loans. The target market for issuing consumer loans for banks in the

middle class because they have the strong ability to pay off their loans, banks should make

adequate polices to provide loans to lower class on easy terms and low markup rate. Upper

class is generally not focused for consumer financing because they have enough resources &

purchasing power to buy any asset.

Documents

Financial Reporting and Anlaysis Report on MCB Limited