Table of Contents

Acknowledgement-------------------------------------------------------------1

List of Acronyms---------------------------------------------------------------5

List of Tables-------------------------------------------------------------------6

Executive Summary-----------------------------------------------------------7

CHAPTER 1--------------------------------------------------------------------9

INTRODUCTION-------------------------------------------------------------9

Introduction to Chapter-----------------------------------------------------9

1.1 Background of the Study----------------------------------------------9

1.2 Purpose-------------------------------------------------------------------9

1.3 Limitation--------------------------------------------------------------10

1.4 Objectives--------------------------------------------------------------10

1.5 Methodology-----------------------------------------------------------10

1.6 Scheme of the Report-------------------------------------------------11

Summary of Chapter------------------------------------------------------12

CHAPTER 2------------------------------------------------------------------13

REVIEW OF ORGANIZATION------------------------------------------13

Introduction to Chapter---------------------------------------------------13

2.1 Definition of Bank----------------------------------------------------13

2.2 History of MCB Bank------------------------------------------------17

2.3 Vision Statement------------------------------------------------------19

2.4 Mission Statement-----------------------------------------------------19

2.5 Values of MCB Bank-------------------------------------------------20

2.6 MCB’s Performance Overview-------------------------------------22

2.7 Nature of the Organization-------------------------------------------23

2.8 Management and Departments Of MCB Bank--------------------24

1

2.9 Main Departments and Their Jobs----------------------------------25

2.10 Divisions of MCB Bank--------------------------------------------32

Summary of the Chapter--------------------------------------------------33

CHAPTER 3------------------------------------------------------------------34

PRODUCTS AND SERVICES OF MCB Bank-------------------------34

Introduction to Chapter---------------------------------------------------34

3.1 MCB Salary Club-----------------------------------------------------34

3.2 Current Account-------------------------------------------------------34

3.3 Savings Account-------------------------------------------------------35

3.4 MCB Advisory Services---------------------------------------------35

3.5 MCB Islamic Banking------------------------------------------------35

3.6 MCB Agri Products---------------------------------------------------36

3.7 MCB Home Remittance----------------------------------------------36

3.8 MCB Corporate Financing-------------------------------------------36

3.9 MCB Channel Financing---------------------------------------------36

3.10 MCB Local Correspondent Banking------------------------------37

3.11 MCB Rupee Traveler Cheque--------------------------------------37

3.12 MCB Investment Services------------------------------------------37

3.13 MCB Visa Credit Card----------------------------------------------38

3.14 Mahnama Khushali Scheme----------------------------------------38

3.15 MCB Khushali Bachat Account-----------------------------------39

3.16 MCB Investment services------------------------------------------39

3.17 Capital Growth Certificate Scheme-------------------------------39

3.18 Fund Management Scheme-----------------------------------------39

3.19 Consultancy Services------------------------------------------------40

3.20 Self Supporting Scheme--------------------------------------------40

3.21 MCB Mobile Banking----------------------------------------------40

3.22 MCB Car 4 U---------------------------------------------------------41

3.23 MCB Master Card---------------------------------------------------41

2

3.24 MCB Smart Card----------------------------------------------------42

3.25 Remit Express--------------------------------------------------------42

3.26 MCB Pyara Ghar----------------------------------------------------43

3.27 MCB Virtual----------------------------------------------------------43

Summary of the Chapter--------------------------------------------------44

CHAPTER 4------------------------------------------------------------------45

ANALYSIS OF MCB Bank------------------------------------------------45

Introduction to Chapter---------------------------------------------------45

4.1 Ratio Analysis---------------------------------------------------------45

4.2 Financial Ratio of MCB Bank --------------------------------------47

4.3 SWOT ANALYSIS---------------------------------------------------55

4.4 PEST Analysis---------------------------------------------------------57

Summary of the Chapter--------------------------------------------------59

CHAPTER 5------------------------------------------------------------------60

FINDING AND RECOMMENDATIONS-------------------------------60

Introduction to chapter----------------------------------------------------60

5.1 Findings----------------------------------------------------------------60

5.2 Recommendations:----------------------------------------------------63

Summary of the chapter---------------------------------------------------65

3

List of Acronyms

ATM Automatic Teller Machine

FED Federal Excise Duty

WHT with Holding Tax

TDR Term Deposit Receipts

CDR Call Deposit Receipts

PBA Personal Banking Advisor

BBA Basic Banking Account

PLS Profit and Loss A/C

TD Term Deposit

AOF Account opening Foam

AMO Account maintenance officer

KYC Know your customers

SSC Specimen Signature card

GBO General banking officer

LC Letter of credit

4

List of TablesTable No Table name Page No

Table no 2.1 Board of Directors 25

Table no 4.1 Assets turnover ratio 48

Table no 4.2 Current ratio 49

Table no 4.3 Debt to equity ratio 50

Table no 4.4 Interest earned ratio 51

Table no 4.5 Net profit margin ratio 52

Table no 4.6 Debt to total assets ratio 53

Table no 4.7 Return on equity ratio 54

5

Executive Summary

MCB Bank Limited (Formerly Muslim Commercial Bank Limited) has

a solid foundation of over 60 years in Pakistan, with a network of over

1165 branches, over 850 of which are Automated Branches, over MCB

690 ATMs in 41 cities nationwide and a network of over 12 banks on

the MNET ATM Switch.

MCB Bank operations continued to be streamlined with focus on

rationalization of expenses, re-alignment of back-end processing to

increase productivity, enhancement of customer service standards,

process efficiency and controls. The Bank has taken the lead in

introducing the innovative concept of centralizing Trade Services in

the country by providing centralized foreign trade services to branches

with a view to improve efficiency, expertise and reduce delivery cost.

During the course of internship I learned about different functions

performed by Remittances, Advances, account opening and Customer

Service Office department and bank as a whole. I also learned bank’s

correspondence with their customers and within branches. I learned

about documentation requirements and record keeping for different

activities and processes, especially the documentation requirement for

different kinds of financing facilities.

MCB Bank offers different products and services to its customers .The

main types of accounts are the current and savings accounts, the loan

schemes offers by MCB Bank are also much attractive with less

Markup rates and also with easy terms and conditions. Besides these

MCB Bank offers different types of services to their customers just

like MCB home remittance, MCB rupee traveller cheque etc.

6

Some of the finding or problems of MCB Bank Limited are given

bellow:

Report Findings are as follows:

Asset turnover ratio has been increased from 2010 to 2012

High trend of debt to equity shows that the firm is relying on

debt

They are utilizing their resources very well

Communication gap between different levels of management

Some of the recommendations are:

MCB Bank introduce easy and cheap way for home remittance.

MCB Bank should introduce Islamic banking for agricultural

sector.

MCB Bank should keep enough cash in order to meet daily

customer demand.

They should tale more deposits and less borrowing.

Shift from Interest based income to Fee-based Income

7

CHAPTER 1

INTRODUCTION

Introduction to Chapter

In this chapter general introduction of the report is discussed, which

includes background of the study , scope of the study .More over the

chapter tells regarding the purpose of study foe which I conducted the

study ,methodology of study that how data was acquired ,and at the

end scheme of study is discussed.

1.1 Background of the Study

Internship training program during Bachelor in Business

administration Program is necessary for the partial fulfillment of the

completion of Degree of bachelor in Business Administration. It is

necessary for me to complete an internship session of about 8 weeks in

some manufacturing or service industry relevant to my area of interest

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

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

sector.

1.2 Purpose

Internship is the capstone experience that provides me with hands-on,

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

interns to:

(a) Integrate and use my knowledge and skills from the classroom.

(b) Discover where further competence is needed.

(c) Take steps to gain that competence under educational supervision.

8

(d) Become better acquainted with the types of work settings in which

such competence can be applied.

1.3 Limitation

The study is done with the sole purpose of doing the best work but

there were certain limitation faced during the internship period. The

most important limitation from which the study suffers are:

The non-availability of information in a manner required for

analysis and the secrecy of the bank.

Time and space constraint.

1.4 Objectives

I worked as an internee in MCB Bank Ashraf Road branch Peshawar.

The main objectives to study in MCB Bank were:

To get some experience in working with well reputed

organization.

To gain knowledge about the professional environment of

the bank.

To know about the technology utilized in the banks.

To deal and manage with the situation of stress.

1.5 Methodology

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

Primary Data

Observation of functions of Branch operations on the spot.

Observation of different processes of Branch on the spot.

9

Secondary Data

Internet is very helpful for me to study more about banking

sector of Pakistan.

Different type of booklets of the Bank.

Annual reports

Journals

Newspapers

1.6 Scheme of the Report

My internship report consists of five chapters which are:

Chapter 1

Chapter 1 is introduction to report which encompasses the background

of the study. It also looks into the purpose, scope, limitation,

objectives, methodology and scheme of the study.

Chapter 2

Chapter 2 is review of the organization which consist of brief

introduction of overall banking sector, the banking sector in Pakistan.

This chapter further elaborate about the history of MCB Bank and their

overall functions across the country and also brief introduction about

the management and hierarchal structure of MCB bank.

Chapter 3

Chapter 3 consists of different products and services offered by MCB

bank. The different types of accounts offered by MCB bank, the

different types of loan schemes offered the credit cards and master

cards etc.

10

Chapter 4

Chapter 4 consists of the analysis of MCB bank which contains the

SWOT analysis their strength, weaknesses, opportunities and threats,

and also the financial analysis of MCB bank through different types of

ratio analysis like the current ratio, debt to equity ratio and so on….

Chapter 5

Chapter 5 consists of the findings through the different types of

analysis based and then according to these findings I have given the

concerned

Summary of Chapter

It is sufficed to say that this chapter is about the background, and

importantly the purpose of the study which is that to learn about the

banking work and also to analyze the financial position of the

organization. Similarly this chapter also tells regarding the

methodology of the study that what the source of data is. Now in the

coming chapter the history and importance of banking is

discussed ,this chapter also includes the history of banking in

Pakistan.it further elaborates about the historical background of MCB

bank, their overall performance and their present status .It will also

discuss about the management and about different departments of

MCB bank.

11

CHAPTER 2

REVIEW OF ORGANIZATION

Introduction to Chapter

First chapter was about the introduction of the report. This chapter

consists of brief introduction of overall banking sector, the banking

sector in Pakistan. This chapter further elaborate about the history of

MCB Bank and their overall functions across the country and also brief

introduction about the management and hierarchal structure of MCB

Bank.

2.1 Definition of Bank

Bank is derived from Bancus or Banque it is Italian word. History of

Banking is traced to 2000 B.C in Greece. Priests and goldsmiths acted

as financial agents by keeping money and valuables of people in

temples in strong safes. Thus the first stage in the development of

modern banking thus was accepting of deposits of cash from those who

had surplus money with them.

Different authors define the term bank in different terms some are:

According to Sir John Paget

 No one and no body corporate and otherwise can be a banker who

does not (i) take deposit accounts (ii) take current accounts (iii) issue

and pay Cheques drawn upon himself (iv) collect Cheques crossed and

uncrossed for his customer (Siddiqui 2004).

12

According to Timothy j. Gallagher 2003

Commercial banks are the financial institutions that exist primarily to

lend money to businesses, banks also lends to individual , government

and other entities but the bulk of their profit comes from businesses

2.1.1 Importance of banking

Banks play very important role in the economic life of a nation. The

growth of the economy is dependent upon the soundness of its banking

system. Although banks so not create new wealth but borrow,

exchange and consume. These make generation of wealth. In this way

they become most effective partners in the development of that

country. To encourage the habit of saving and to mobilize these

savings is its basic purpose. Banks deposit surplus from the public and

then advances the surpluses in the form of loans to the industrialists,

agriculturists, businessmen and unemployed people under different

schemes so that they setup their own business. Thus banks help in

capital formation.

If there are no banks, then there would be concentration of wealth in

few hands great portion of wealth of a country would be idle. In the

fewer developing countries rate of saving is very low and due to this

rate of investment and rate of growth is very low. Banks provide

transfer of payment facility, which is cheaper, quicker and safe. Many

difficulties in the international payment have been overcome and

volume of transactions has been increased. These facilities are very

much helpful for the development of trade and commerce.

13

2.1.2 Overall Respective Sector In Pakistan

Banking is one of the most sensitive businesses all over the world.

Banks play very important role in the economy of a country and

Pakistan is no exemption. Banks are custodian to the assets of the

general masses. The banking sector plays a significant role in a

contemporary world of money and economy. It influences and

facilitates many different but integrated economic activities like

resources mobilization, poverty elimination, production and

distribution of public finance

2.1.3 History of Banking in Pakistan

At the time of independence, commercial banking facilities were

provided fairly well here. There were 487 offices of schedule banks in

the territories now constituting Pakistan. An Expert committee was

appointed. The committee recommended that the reserves bank of

India should continue their function in Pakistan until 30 September.

1948, and Pakistan would take over the management of public debt and

exchange control from reserve bank of India on April 1948 and that

Indian notes would continue to be legal tender in Pakistan until 30

September 1948. Moreover the banks including those having their

registered office in Pakistan transferred them to India in order to bring

a collapse of a new state. By 30 June 1948 the number of the offices of

scheduled banks in Pakistan declined from 487 to only 195.In order to

make necessary arrangement for the assumption of control and expert

committee was appointed to recommend necessary steps, including the

required legislation to establish a central bank for Pakistan. The

governor-general of Pakistan Quaid-i-Azam Muhammad Ali Jinnah

inaugurated the State Bank of Pakistan order was promulgated on May

12, 1948. The first Pakistani notes were issued in October 1948 in the

State Bank of Pakistan withdrew the reserves Bank of India notes of

14

the value of Rs. 125.02 crores with the help the Pakistan notes

( Faheem, 2010).

On 1st January, 1974 all Pakistani banks were nationalized through

Nationalization Act 1974. Under this law all Pakistani Banks become a

public property. All small banks were merged in bigger banks to create

five major Pakistani banks. These banks were to control by Pakistani

Banking Council. There are still controversies about this act of Govt.

as whether it contributed in success of failure of banks. However the

major changes after Nationalization were as follows:

Working of banks was extended to under-developed areas.

Market expansion for credit and deposits.

Decrease in service level of bank officers.

Decrease in profitability as well.

In 1990 the govt. decided to denationalize all the nationalized

institutions. Same was also suggested in banking sector. For this

purpose, amendments were made to Nationalization Act 1974 and two

nationalized banks were privatized. Along with this a permission to

open banks in private sector was also granted. The rules regarding

establishment of new banks and for incoming foreign banks were also

relaxed. The two privatized banks are: MCB Bank taken up by a

private group in April, 1991 & ABL taken up by its own employees in

September, 1991. After these changes a large number of private and

foreign banks started their operation in Pakistan (Faheem, 2010)

Now, Pakistan has a well-developed banking system, which consists of

a wide variety of institutions ranging from a central bank to

commercial banks and to specialized agencies to cater for special

requirements of specific sectors. The country started without any

worthwhile banking network in 1947 but witnessed phenomenal

15

growth in the first two decades. By 1970, it had acquired a flourishing

banking sector.

2.2 History of MCB Bank

MCB Bank Limited formerly known as Muslim Commercial Bank

Limited was incorporated by the Adam Jee Group on July 9, 1947 in

Kolkata in Bengal, under the Indian Companies Act, VII of 1913 as a

limited company`. But due to changing scenario of the region, the

certificate of incorporation was issued on 17 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.

Adam Jee was appointed its first chairman. It was incorporated

with an authorized capital of Rs. 15 million. The Bank transferred its

registered/Head office from Dhaka to Karachi on August 23, 1956

through a special Resolution (MCB bank, 2012).

The bank was established with a view to provide banking facilities to

the business community of the South Asia. The bank was nationalized

in 1974 during the government of Zulfiqar Ali Bhutto. This was the

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

consortium of Pakistani corporate groups led by Nishat Group.

MCB is Pakistan’s fourth largest bank by assets having an asset base of

770,283 million, and the largest by market capitalization having a

market capitalization of PKRS 192,950 million. The Bank has a

customer base of approximately 4 million and a nationwide

distribution network of 1,165 branches, including 22 Islamic banking

branches, and over 690 ATMs, in a market with a population of 160

million (MCB bank, 2012).

In 2008 the head office of MCB was shifted from Karachi to Lahore in

a newly constructed building, namely MCB House located at Sharia

Ghous-ul-Azam, commonly known as Jail Road. (MCB bank, 2012).

16

2.2.1 Nationalization

In January 1974, the government of Pakistan nationalized MCB

following the banks (Nationalization) Act 1974, subsequently, in June

1974, Premier Bank limited merged with MCB.

2.2.2 Privatization

A wave of economic reforms swept Pakistan in the late 1990’s

introducing the need for privatization of state owned banks and

companies in April 1991, MCB because Pakistan’s first privatized

Bank, the government of Pakistan transferred the management of the

Bank to Nishat Group– group of leading industrialists of the country

by selling 26% shares of the Bank. With a view to broaden equity

holding the government sold 25% of the paid up capital to the general

public. In terms of agreement between the government of Pakistan and

the Nishat Group additional 24% shares have been purchased by the

group making their holding 50%.

2.2.3 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.

17

Introduction of Rupee Traveler Cheques & Photo Credit Card

for the first time in Pakistan.

2.2.4 Overall Organization and Functions of MCB Bank Limited

MCB bank is one of the leading banks of Pakistan with a deposit base

of about Rs. 280 billion and total assets of around Rs. 770,283 million

Incorporated in 1947, MCB soon earned the reputation of a solid and

conservative financial institution managed by expatriate executives. In

1974, MCB bank was nationalized along with all other private sector

banks.   The Bank has a customer base of approximately 4 million, a

nationwide distribution network of over 1,165 branches and over 690

ATMs in the market.

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

through improving service quality, investment in technology and

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

stable deposit base. (MCB bank, 2012).

2.3 Vision Statement

To be the leading financial services provider, partnering with our

customers for a more prosperous and secure future. (MCB bank, 2012).

2.4 Mission Statement

We are a team of committed professionals, providing innovative and

efficient financial solutions to create and nurture long-term

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

shareholders can invest with confidence in us. (MCB bank, 2012).

Providing innovative

Efficient financial solutions

Long-term relationships with our customers

Shareholders invest with confidence

18

2.5 Values of MCB Bank

Integrity

We are the trustees of public funds and serve our

community with integrity. We believe in being the best

at always doing the right thing. We deliver on our

responsibilities and commitments to our customers as

well as our colleagues.

Respect

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

history. We value the equality of gender and diversity of

experience and education that our employees bring with

them. We create an environment where each individual

is enabled to succeed.

Excellence

We take personal responsibility for our role as leaders

in the pursuit of excellence. We are a performance

driven, result oriented organization where merit is the

only criterion for reward.

Customer Centricity

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

thrive on the challenge of understanding their needs and

aspirations, both realized and unrealized. We make

every effort to exceed customer expectations through

superior services and solutions.

Innovation

We encourage and reward people who challenge the

status quo and think beyond the boundaries of the

conventional. Our teams work together for the smooth

and efficient implementation of ideas and initiatives.

19

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 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

(MCB Bank, 2012).

20

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

2.6 MCB Bank’s Performance Overview

MCB is Pakistan’s fourth largest bank by assets having an asset base of

770,283 million as at December , 2012, and the largest by market

capitalization having a market capitalization recorded at USD 1.2

billion at year end 2012 which was comparatively lower than USD 1.8

billion the year before, mainly on account of lower market value.

The Bank has a customer base of approximately 4 million and a

nationwide distribution network of 1,165 branches including 22

Islamic banking branches (December 31, 2011) within Pakistan and 8)

branches outside the country (December 31, 2011 including the

Karachi Export Processing Zone Branch), , and over 650 ATMs in 110

cities, in a market with a population of over 190 million. In 2011,

MCB reported a profit after tax of PKR 19.4 billion (appx.USD 205

million) and generated a return on average equity of 26.23% and a

return on assets of 3.18% (2010: 3.13%).

The Bank’s asset quality is strong with a gross NPL ratio of 8.64%.

During the last two decades, 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 .MCB Bank has 1165 branches

(December 31, 2011) including local branches, and business

establishments in Sri Lanka and Bahrain including newly established

Rep. Office in Dubai, UAE. The Bank has also formed a private

company in Hong Kong (fully owned subsidiary of MCB) in

partnership with Standard Chartered Bank, handling trade transactions

of select countries in the Asia-Pacific region. MCB has been successful

in turning around its operations since its privatization and is moving

forward to set high performance standards with the continuous support

21

of its customers and leadership in banking technology. To further

strengthen its financial services base, MCB has also incorporated an

Asset Management Company in the year 2005 known as MCB Asset

Management Company. MCB has also incorporated a leasing company

in Azerbaijan in 2009. (MCB bank, 2012).

Awards: Year 2012

The Asset Triple A: Best Domestic Bank - Pakistan

Euro money: Best Bank in Pakistan

NFEH: CSR Business Excellence Award “Best Media Coverage”

ICAP and ICMAP: 2nd Best Corporate Report Award 2011- Banking

Sector

World Finance: Best Commercial Bank – Pakistan

Pakistan Centre for Philanthropy: PCP Corporate Philanthropy Award

(MCB bank, 2012).

2.7 Nature of the Organization

MCB Bank Limited is a banking company incorporated in Pakistan

and is engaged in Commercial banking and related services. The

Bank’s ordinary shares are listed on all the stock Exchanges in

Pakistan. MCB Bank Limited is a Pakistan-based Public limited

company. The Bank operates in four business segments:

1• Corporate finance

2• Trading and sales

3• Retail and consumer banking

4• Commercial banking

22

2.7.1 Corporate Finance

Corporate finance includes underwriting, securitization, investment

banking, syndications; initial public offerings (IPO) related activities

(excluding investments) and secondary private placements.

2.7.2 Trading & Sales

Trading & sales segment includes fixed income, equity, foreign

exchange commodities, lending’s to financial institutions and

brokerage debt.

2.7.3 Retail & Consumer Banking

Retail & consumer banking includes retail lending and deposits,

banking services, private lending and deposits, banking services and

retail offered to its retail customers and small and medium enterprises.

2.7.4 Commercial Banking

Commercial banking segment includes project finance, export finance,

trade finance, leasing, lending, guarantees and bills of exchange

relating to its corporate customers.

2.8 Management and Departments of MCB Bank

2.8.1 Organization Structure

As MCB Bank is a banking company listed in stock exchange

therefore it follows all the legalities, which are imposed by concerned

statutes. MR. Mian Mohammed Mansha is chairman & chief executive

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

in the business control and strategy making for the company.

A team of 10 professionals is handling operational management of the

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

23

Table 2.1 Board of directors

1. Mian Mohammad Mansha Chairman

2. S. M. Muneer Vice Chairman

3. Tariq Rafi Director

4. Shahzad Saleem Director

5. Sarmad Amin Director

6. Mian Raza Mansha Director

7. Aftab Ahmad Khan Director

8. Mian Umer Mansha Director

9. Dato' Seri Ismail Shahudin Director

10. Datuk Abdul Farid Director

11. Ahmad Alman Aslam Director

Source MCB bank 2012

2.9 Main Departments and Their Jobs

There are three main departments in any branch of MCB Bank

General banking

Foreign exchange

Advances/credit

2.9.1 General Banking

General banking deals with following services:

2.9.1.1 Remittance

It is transfer of funds. Funds can be transferred in shape of pay orders,

demand draft, mail telegram and telegraph transfer. Payments of fees

of different organizations, fulfillment of tenders, and collection of

24

funds are the main functions of remittance. Maximum part of general

banking depends on this department.

2.9.1.2 Issuance Of Different Kinds Of Remittance:

Pay Order

Pay order is the property of person/company that has to take the benefit

of the amount being pay ordered by the concerned person. Pay orders

are made for the payment of fees, tender or issued for the payments of

dealings. These are required for the proof of payments made between

the bank and the customer in the favor of beneficiary. These are noted

in printed block letters and yearly serial numbers are issued from

computerized system.

2.9.1.3 Demand Draft

Demand drafts are made for the beneficiary for payments, funds etc,

these are made for outstation branches of the concerned banks. An

advice is also made for the confirmation of the draft send. These are

also approved and safe way of sending amount to the beneficiary.

These are also noted by computerized system and a serial number is

issued from the computer system.

Mail Transfer

Mail Transfer is made with in the city for transfer of amount. An

advice is also made for the confirmation of the draft send. These are

also approved and safe way of sending amount to the beneficiary.

These are also noted by computerized system and a serial number is

issued from the computer system.

Payment Of Pay-Order And Demand Draft

Pay-Order and Demand Draft both could be paid in shape of physical

payment of cash and in case transfer of amounts; the amount could be

25

transferred in the beneficiary account. In case of physical payment

authorized signature of beneficiary are taken for the proof of amount

being paid to him and in case of transferring of amount authorized

signature of the beneficiary are checked and verified for reducing risks.

Cancellation of Pay-Order and Demand Draft

Any type of Pay-Order / Demand Draft is cancelled by the permission

and instructions made by the beneficiary. The customer could only

cancel the pay order/ demand draft as the verified signatures of

beneficiary are present on the advice.

2.9.1.4 Vouchers

Vouchers are made for records and they should be completed in all

respects, the amount, date, its head, particulars, amount in words,

authorized signatures and contra advice or voucher should be present.

Vouchers are advice either debit or credit slips. They are contra of each

other. If any voucher of debit is passed its contra credit voucher should

also be passed for the balancing of accounts, their respective sheets.

2.9.1.5 Inward Clearing

It depends on those checks that are cleared inter branch and with in the

city. As the concerned branch receive any type of clearing check first

of all physical checking is taken place. For clearing procedure there

should be two days margin. These cheques have their vouchers and the

amount of the cheque and voucher should be identical. Than these

cheques are stamped and noted on receiving sheet as well as feed in to

the computerized system.

2.9.1.6 Outward Clearing

It depends on those cheques that are cleared outside the city. For

outward clearing cheques are send because the home branch has their

26

accounts but checks are of other banks. Contras of these cheques are

vouchers that are recorded in the home branch.

2.9.1.7 Issuance of Cheque Books

Any account holder that has opened the account he/she could credit

his/her account and for this purpose there should be a cheque book, so

he/she could be able to credit the needed amount whatever he/she

wishes. For the issuance of the cheque book a person is advised to fill a

requisite slip with his/her full names and the account number with two

verified signatures. These signatures are checked and then another

requisite slip prepared by the bank staff send to the NIFT, and it issues

the printed cheque books after completion of the procedure in two or

three days.

Account holder can take it by singing on the issuance register or if the

absence of the account holder another person could also take the

cheque book only if he/she has authorized signature of the account

holder. When the cheque books are issued they are feed in the

computer system from the requisite slip so when the cheques are given

for the credit/transfer of amount they could checked. In this way

neither the cheques could be repeated nor could the invalid cheques be

claimed.

2.9.1.8 Issuance of ATM Cards

Head office issues ATM (Auto Teller Machine) cards with their PIN

(Personal Identification Number) codes and when the customer claims

for their ATM card they are checked from the list that is also issued

from the head office, and the claim is checked from the list and if the

name is found than the cards are issued by taking a signature and their

PIN codes are given to them by taking signatures on their ATM card

forms. The ATM card has been activated by the number provided at or

with the specific card.

27

2.9.2 Foreign Exchange

2.9.2.1 Lc’s Establishment

Any company can provide its documents containing e-form, bill of

lading, short shipment notice in case of short shipment, packaging list

etc. the information provided from the documents is recorded in the LC

establishment portion or section in the computer.

Payment or Retirement

When the transactions have been completed then approved documents

from the concerned bank are sent to the home bank for the payment or

retirement of the LC.

These transactions have recorded in the payment or retirement section

of the computer.

2.9.2.2 Foreign Currency Deposits

The Foreign Currency Deposit relates with the foreign currency

accounts, cash deposit or credit and foreign remittances.

Foreign Remittances

In this we received the messages through SWIFT for foreign

remittances, which we record in their respective accounts, if these are

relates with Pak rupees than it was transferred in Pak rupees with the

latest rate and if this relates to the foreign currency than it is dealt with

accordingly. The amount has been credited to the respective account

and the head office has been debited against it. After crediting the

amount to the respective account. All the subsequent entries have been

made in the registers and also in the computer record as the system

now have been upgraded on computers. As we are reporting daily to

the head office, so an annexure has been maintained and faxed to the

head office.

28

2.9.3 Advances / Credit

This department deals with the approval of different kinds of loans to

different business entities. The loans, which are being approved by the

department, are kept with some securities such as bonds, properties and

any other type of asset, which is equally valuable or more than this as a

guarantee. Every branch has its own limit, if the amount of loans is

within the limit of the branch then it is being approved by the branch

but if the amount of loan is exceeding the limit then it has to make it

approved by the head office. In this case the branch stored all the

required papers and sent them to the head office for necessary action.

If the head office approved the loan then mostly the period contains a

year. And if the party requires more loan than after a year the loan has

been re-approved required that they should have the limit. In case if the

head office do not approve the loans then the return letter came back

with the reasons of not approval of loan and if the reasons have been

made approved by the concerned party then it could be sent again for

approval. This whole process is recorded in the back remain with the

bank until the party has not refunded all the amount of loan and bank

has the authority to liquidate those assets for preventing it from loss.

Types Of Advances

MCB Bank provides advances, which are of two types. These are as

following:

1. Fund Based Advances

2. Non Fund Based Advances

Fund Based Advances

Funds are given to customer according to their requirement against

securities. These loans are given specially to traders, business, small

industrial units, including cottage industries, agriculturists, thus

29

ensuring an equitable distribution of bank credit among various sectors

of the country’s economy.

There are following types of advances, which are given to customer on

fund basis.

1) Industrial loan

2) Commercial loan

3) Agricultural loan

2.9.3.1 Industrial Loan

Loans are given to industrial units including cottage industries up to or

less than RS. 20 million. Loans and advances shall not exceed amount

specified by marginal restriction on the type of securities offered.

Industrial loans are granted to the manufacturing section of the

economy including finance for fixed investments and working capital

requirements of small industries.

2.9.3.2 Commercial Loan

Total principal amount of loans to a single enterprise/borrower shall

not exceed RS. 0.5 million. Maximum maturity is 3 years, depending

upon the nature and type of advances, decided upon case to case basis.

2.9.3.3 Agricultural Loan

Bank provides the agriculture advances in order to enhance and

support the agriculture sector of the country. Bank’s Agriculture

division deals with the agriculture advances (MCB Bank, 2012).

30

2.10 Divisions of MCB Bank

2.10.1 Agriculture Division

Agriculture division deals with the loans and development of

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

related to agriculture sector. This division works for the development

of agriculture in the country.

2.10.2 Audit Division

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

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

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

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

irregularities pointed out are reported to this division.

2.10.3 Business Development And Marketing Division

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

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

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

customer is also the responsibility of this division.

2.10.4 Central Accounts Division

Central Accounts Division takes care of the accounts of branches and

records all inter branch transactions and transaction of branches with

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

HO is also the responsibility of this division.

2.10.5 Corporate Affairs Division

Corporate affairs division deals with the affairs related to public

limited companies. It includes financing of large and specialized

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

31

also directly controls all those branches, which are designed as

corporate branches.

2.10.6 Credit Management Division

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

regulations in accordance with the prudential rules and regulations

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

advances department of different branches and designs their limit of

loans. This division also carries out marketing activities.

2.10.7 Finance and Treasury Division

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

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

important function is to announce the profit rates on different schemes

from time to time. Source: MCB Bank Ltd (2012)

Summary of the Chapter

In the nutshell the chapter includes the definition of bank and the

importance of banking in a country economy. It further elaborates

about the history of banking in Pakistan, how the banking emerged

their pre nationalization and post nationalization era, and also a brief

history of MCB bank is given. This chapter briefly explains about the

management of MCB bank and also about the different departments of

MCB bank .In the next chapter different .In the next chapter different

products and services that are offered by MCB bank are discussed

briefly. (MCB bank, 2012).

32

CHAPTER 3

PRODUCTS AND SERVICES OF MCB BANK

Introduction to Chapter

In the previous chapter a brief introduction/history and different types

of MCB departments are discussed this chapter consists of different

products and services offered by MCB bank. The different types of

accounts offered by MCB bank, the different types of loan schemes

offered the credit cards and master cards etc.

3.1 MCB Salary Club

A payroll solution designed to make life easy; it simplifies all the

monthly payroll related banking needs of employers and opens the

door to a world of special offers for employees. Salary Club provides

the convenience of having an extensive range of financial services

available to employees at their place of work.

3.2 Current Account

MCB Bank offers a variety of current accounts to cater the everyday

transactional needs of various customers. These accounts ensure ease

and freedom to bank from any of the 1100+ branches across the

country. The different accounts include: the Basic Banking Account

that has no minimum balance requirement; Business Account offering

free online transactions, Demand Drafts, Pay Orders and lots more to

meet the day-to-day business requirements; Current Life Account that

offers the security of life insurance free of cost; and for all others, the

conventional Current Account.

33

3.3 Savings Account

MCB Bank offers a wide array of savings products that suit short-term

growth and transactional needs. Our savings accounts offer attractive

profit rates as well as flexibility to transact. Savings Extra is targeted

for customers having Rs. 5 million + deposit and 365 Gold offers profit

rates on daily balances with no minimum balance requirements. In

addition, two unique products, i.e. Smart Savings and Savings

Maximizer, are special saving accounts run solely via debit cards and

other remote banking channels, offering a very competitive rate to both

high and low-end savers

3.4 MCB Advisory Services

Financial and Capital Raising Advisory provides our clients with

financial advisory services, commercial structuring support and access

to capital resources to help companies successfully finance their

business/project.

3.5 MCB Islamic Banking

MCB-Islamic Banking Group provides Shariah-compliant products

and services both on the liability and asset sides to various customers

of all demographic segments to cater a wide range of Working Capital,

Capital Expenditures, Trade Business and Consumer requirements. In

addition to existing Shariah-compliant IB products, Islamic Banking

Group also provides customized solutions to its valued customers for

execution of complex financial transactions. Furthermore, Islamic

Banking Group also provides Shariah advisory services in structuring

of various syndicated transactions for its valued customers. To

facilitate its valued clients, MCB-Islamic Banking has also increased

outreach of its dedicated Islamic Banking branches to the tune of 27 in

14 cities across the country.

34

3.6 MCB Agri Products

MCB is committed to the farming community to support their national

objectives of self-sufficiency and food security to the people of

Pakistan. Dedicated and specialized staff, supervised by the Agri

Credit Division, is posted in lending branches to cater for strong

business relationships and facilitation. The bank’s extensive branch

network in all the provinces and diversified product range extends our

reach of agri credit facilities to encompass both crop and non-crop

sectors.

3.7 MCB Home Remittance

MCB Home Remittances offers unmatched services for overseas

Pakistanis to send money home FAST and FREE at no cost across

Pakistan through MCB’s large network of over 1100 branches. Money

can be sent FREE & INSTANT through our international send agents

like MoneyGram, Xpress Money and many others. We also offer

facility to Overseas Pakistanis to open accounts in their home country

through our “Motherland account”. This is designed to allow

transferring of funds to your family & loved ones through your own

personal account back home.

3.8 MCB Corporate Financing

MCB Corporate Financing provides access to diversified financing

options, including working capital loans, term loans, trade finance

services and investment banking

3.9 MCB Channel Financing

MCB Channel financing provides working capital facilities to dealers

and vendors of selected companies under a structured product

programme. This product enables our customer’s dealers to leverage

35

themselves and increase their business capacity with their respective

business partners.

3.10 MCB Local Correspondent Banking

Transaction Banking Department at MCB Bank provides Local Rupee

Drawing Arrangement, a product for small banks and financial

institutions to use our vast branch network platform to make payments

in areas where their own branch network does not exist, thus extending

their reach nationwide.

3.11 MCB Rupee Traveler Cheque

MCB Rupee Travelers Cheques are as good as cash, in fact 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 Bank branches all

over Pakistan. You don't have to be an MCB Bank 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.

3.12 MCB Investment Services

Investment Services operate with the aim to help you make the most of

your wealth with investment opportunities that match your unique

financial aspirations. MCB Bank Investment Services offers

distribution of mutual funds managed by the leading fund managers of

Pakistan. We can suggest the products most suited for your needs, or

work with you to create a personalized solution completely focused on

your expectations of the capital markets.

36

3.13 MCB Visa Credit Card

MCB offers a complete suite of Classic, Gold and Platinum Visa

Credit Cards focusing on providing superior services, travel privileges

and shopping pleasures. It also offers comprehensive insurance and

instalment plans, reward points and SMS alerts that give a different

feel to the world of credit cards. These unique features include i-

revolve, which makes variable mark-up rates available to customers

allowing them to repay at affordable rates

3.14 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 in cashing your

certificates.

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

deducted by MCB branches at the time of payment.

37

3.15 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

3.16 MCB Investment services

Investment Services operate with the aim to help you make the

most of your wealth with investment opportunities that match your

unique financial aspirations. MCB Investment Services offers

distribution of mutual funds managed by the leading fund

managers of Pakistan. We can suggest the products most suited

for your needs, or work with you to create a personalized solution

completely focused on your expectations of the capital markets.

3.17 Capital Growth Certificate Scheme

For long term depositors under which the amount deposited almost

double 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.

3.18 Fund Management Scheme

This scheme is offered to corporate and customers and aimed at

providing better rate of return up to 15% per annum. One of the

38

objectives of the scheme is to develop secondary market for

Government Securities.

3.19 Consultancy Services

In the process of privatization of public sector units, prospective

buyers need professional assistance and MCB Bank, with its expertise,

offer to them specialize service for valuation of the market value of the

industrial unit, preparing bid documents and arranging finance for the

purchase of the unit.

3.20 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.

3.21 MCB Mobile Banking

At the forefront of technological excellence, MCB Bank 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.

39

3.22 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.

3.23 MCB Master Card

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.

40

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 Travelers Cheques are market leaders. We

were the first to introduce the photo card with the introduction of the

MasterCard. When it comes to banking practices, you can depend on

us. We’ve been around for over fifty years.

3.24 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 bank 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

3.25 Remit Express

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.

41

3.26 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

3.27 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 bank, 2012).

42

Summary of the Chapter

It is suffice to say that this chapter elaborate about the different

products and services offered by MCB bank .just like the different

types of accounts their minimum balance, their procedure and criteria

and their silent features .This chapter further discussed the different

types of loans offered by MCB bank, their markup rate ,their advance

payment and criteria etc. further this chapter includes about the

different schemes offered by MCB for home and car etc. This chapter

also includes about the different types of credit cards offered by MCB

bank .In the proceeding chapter I have done the analysis of MCB bank

through different methods just like financial analysis ,SWOT analysis

and pest analysis

43

CHAPTER 4

ANALYSIS OF MCB BANK

Introduction to Chapter

In the previous chapter different types of products and services offered

by MCB bank are briefly discussed. This chapter consists of the

analysis of MCB bank which contains the SWOT analysis their

strength, weaknesses, opportunities and threats, and also the financial

analysis of MCB bank through different types of ratio analysis like the

current ratio, debt to equity ratio tec. This chapter further elaborates

about the PEST analysis of MCB bank.

4.1 Ratio Analysis

“An index that relates two accounting numbers and is obtained by

dividing one number by other” Gallagher 2003

Ratio Analysis is an important and age-old technique of financial

analysis. It simplifies the comprehension of financial statements.

Ratios tell the whole story of changes in the financial condition of

business. It provides data from inter firm comparison. They also reveal

strong firms and weak firms, over- valued and undervalued firms.

Ratio analysis also makes possible comparison of the performance of

different divisions of the firm. The ratios are helpful in decision about

their efficiency of otherwise in the past and likely performance in

future. Ratios also help in Investment decisions in the investors and

lending decisions in the case of bankers etc.

Following are the main types of ratios that I am going to calculate in

this report to compare and highlight the financial performance of MCB

in 2010, 2011 and 2012.

44

The various stakeholders of business are all interested in the analysis

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

For example creditors and credit reporting agencies are interested in

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

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

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

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

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

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

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

financial statement like management also analyze financial data for

planning and control.

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

1. Time Series Analysis.

2. Ratio Analysis

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

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

series analysis.

4.1.1 Common Size Analysis

Common size analysis is an analysis of financial statements where total

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

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

extremely helpful to highlight changes over time in the financial

performance and financial condition of a company. However, growth

or decline in various items of balance sheet and income statement

cannot be detected from the common size percentage only changes in

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

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

45

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

than the individual item or vice versa. .

4.2 Financial Ratio of MCB BANK

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

is obtained by dividing one number by the other”. Gallagher 2003

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

and not take the actual figures straightforwardly. Among various

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

comparison. When ratio analysts are to compare the internal

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

viable option for them. Similarly, comparison with the other

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

of financial ratios.

The number of financial ratios the might be created is virtually

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

these ratios are as:

46

4.2.1 Assets Turnover Ratio

Net sale (advances + investment)

Total Assets

This shows revenues generated per rupee investment in total assets.

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

by total assets.

Table no. 4.1 (Rs in Millions)

2010 2011 2012

Sales 467613 544231.74 641652.21

Total assets 567553 631225.3 742160.53

ATR 0.82 0.862 0.87 approx.

Assets turnover ratio for, 2010, 2011 and 2012

Source: Internee’s Analysis

Interpretation

This shows revenue generated per rupee investment in total assets. The

Ratio increased from 2010 to 2012.The graph shows a high increase

from 2010 to 2011as 0.82 to 0.862 and then grows slowly to 2012. So

we can interpret that MCB is effectively utilizes its resources.

47

4.2.2 Current Ratio

Current Assets

Current Liabilities

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

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

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

current assets by current liabilities

Table no. 4.2 (Rs in Millions)

2010 2011 2012

Current assets 546607 631225.3 742160.532

Current liabilities 483415 558135.855 655006.1

Current ratio 1.12 1.130 1.133

Current Ratios for 2010, 2011, 2012

Source: Internee’s Analysis

Interpretation

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

trend. In the year 2010 it was 1.12 and then it increased to 1.130 in the

year 2011 mainly due to an increase in current assets of the bank. But

in the year 2012 it just increased from 1.130 to 1.134. .This rise in the

current ratio of MCB shows the defensive approach of MCB towards

working capital. This surely improves profitability as the percentage of

current assets.

48

4.2.3 Debt To Equity Ratio

Total Debt

Shareholder Equity

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

Table no. 4.3 (Rs in Millions)

2010 2011 2012

Total debt 488349 564431 664148

Shareholder equity 79204 88802 101751

Debt Ratio 6.16 6.35 6.52

Debt to Equity Ratio for .2010, 2011, 2012

Source: Internee’s Analysis

Interpretation

MCB‘s High ward trend of Debt to Equity ratio shows that the bank is

relying in debt financing for the purpose of expansion of businesses

and investments. The ratio of 2012 as compared to 2010 has increased.

49

4.2.4 Interest Earned Ratio:

Earnings before interest & Taxes

Interest Expense

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

financial charges or obligation.

Table no. 4.4 (Rs in Millions)

2010 2011 2012

EBIT 26254 31,483.179 32,053.744

Interest expense 17988 23,620.274 27,500.019

Interest earned ratio 1.45 1.33 1.16

Coverage Ratios for 2010, 2011, 2012

Source: Internee’s Analysis

Interpretation

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

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

the higher the ratio, the greater the likelihood that the company cover

its interest payment without difficulty. The interest coverage ratio of

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

2012, the ratio is 1.16 which show that the income in 2012 cover only

1.16 times the interest expense.

50

4.2.5 Net Profit Margin Ratio

Net Profit after Taxes X 100

Net sale

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

expense and income taxes.

Table no. 4.5 (Rs in Millions)

2010 2011 2012

Net profit after tax 16873 19425 20941

Sales 467613 544231 641652

Net profit margin 3.60% 3.56% 3.26%

Net Profit Margin for .2010, 2011, 2012

Source: Internee’s Analysis

Interpretation

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

2010 it was 3.60% but in the year 2011 it was decreased to 3.56% and

again slightly dropped to 3.26% in the year 2012. This means that

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

like operating, general administration or selling expenses has shown a

slight decrease.

51

4.2.6 Debt to Total Asset Ratio

Total Debt

Total Assets

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

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

assets.

Table no. 4.6 (Rs in Millions)

2010 2011 2012

Total debt 488349 564431 664148

Total assets 567553 653233 765899

Debt Ratio 0.860 0.864 0.867

Debt to total Asset Ratio for the year2010, 2011, 2012.

Source: Internee’s Analysis

Interpretation

This ratio highlights the relative importance of debt financing to the

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

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

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

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

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

financing and thus lower its risks.

52

4.2.7 Return On Equity Ratio

Net Profit X 100

Total Equity

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

value of common shareholder equity.

Table no. 4.7 (Rs in Millions)

2010 2011 2012

Net profit after tax 16873 19425 20941

Shareholder equity 79204 88802 101751

ROE 21.30% 21.90% 20.60%

Return On Equity for 2010, 2011, 2012

Source: Internee’s Analysis

Interpretation

The ROE of MCB has shown a mix trend. In the year 2010 the ROI is

21.30% but increased in the year 2011 to 21.90% but in 2012 it comes

to 20.60%. This decrease in ROE is due to un improvement in Net

Profit Margin.

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4.3 SWOT ANALYSIS

SWOT is an acronym for organization, strengths, weaknesses,

opportunities and threats. SWOT analysis consists of sizing up a firm’s

internal strengths and weaknesses and its external opportunities and

threats .It is a tool to get a quick overview of firm’s strategic situation.

Kotler 2001

Following are the “SWOT” analysis of MCB of Pakistan.

4.3.1 Strengths

i. MCB bank has the ability to cope with pressure of competition

successfully.

ii. MCB RTCs (Rupee Traveler Cheques) are widely accepted

iii. Maximum rate of Debt Recovery.

iv. Maximum use of latest technology in banking that is

v. Having the strongest Equity Base.

vi. MCB has the most developed (Information Technology) IT

Division among the other banks in the country.

vii. It adopted latest technology like online banking system and

SWIFT technology.

viii. Asset turnover Ratio is also increasing that shows that MCB is

utilizing its resources effectively

ix. Current ratio of MCB is increasing from the previous 3 years

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4.3.2 Weaknesses

i. Employees are lacking motivation.

ii. The borrowings has shown a tremendous increase from

Rs.25685 Million to Rs.78951 Million in just 3 years which is

not a good sign. Shows its relying on borrowings.

iii. Communication gap between different levels of management.

iv. Debt to Equity Ratio is increasing

v. Lack of the branches in marketable areas..

vi. MCB bank advances decrease bank of its high interest rate

vii. MCB bank deposit decrease because of inflation.

4.3.3 Opportunities

i. By giving them attractive schemes. The bank can easily make a

remarkable growth in the Mobile banking industry and also

Remittance share it can increase which can increase its fee-

based income as trend is shifting towards that.

ii. The bank can also take advantage of the potential hydal power

of the province Now that the government has decided to build

small dams in the province the bank can invest in this field .It

will not only boost the agriculture sector in the country, but

also provide a great source of electricity which is the basic

requirement for development.

iii. As a result of the different steps taken by the Government

regarding the betterment of the economy, small borrowers are

attracted to get the financing and start small businesses. So

MCB has an opportunity to attract the customers

55

4.3.4 Threats

i. Global technological advancement.

ii. Weak Political and economic situation of the country.

iii. Reduction in the business activities in the country because of

electricity shortage and terrorism.

iv. Reduction the rate of saving in different segments of people

this is because of inflation in the country. People prefer to hold

property and gold in place of saving in the bank

v. The political interference in the bank regarding the decision of

loan and advances, promotion and appointment is a great threat

for the bank in its long-term existence.

4.4 PEST Analysis

4.4.1 Political

i. Employment practices are expected to change.

ii. Unions, Associations are being allowed to work effectively

which can affect the performance of the company both

positively or negatively.

iii. Political interference regarding policies is expected to increase

as current government is in race of power gain.

iv. Due to lack of confidence on government investor is reluctant

so mobilization of funds is going to decrease.

4.4.2 Economical

i. Inflation is very high which will decrease the demand as

purchasing power is decreasing.

ii. Staff cost is increasing as basic wage rate has increased and

inflation has compelled to will compel to increase salaries.

iii. Operating costs are increasing due to inflation.

56

iv. Interest rate is increasing so loan taking has decreased.

v. Value of rupee is decreasing which is pressurizing the economy.

4.4.3 Social and Cultural

i. Lack of experts is in our country regarding management hence

innovative activities are slow and conventional methods are

adopted.

ii. Cultural strain to savings is the reason due to which investment

remains low.

iii. Declining work ethics is also our problem which is mainly due

to poverty, lack of training.

iv. Inadequate Accountability, lack of good governance and lack of

good infrastructure helps creditor to cheat and heavy bad debts

occur. Same situation is hoped to prevail.

v. Inadequate Empowerment is also a usual problem in our

organization as every person want to get more power hence

there is less delegation of authority and decision making.

4.4.4 Technical

i. Shortage of electricity is a big problem,

ii. Employees of each organization need IT training and

organization has this trend. MCB Bank will have to follow it.

57

Summary of the Chapter

A s we know that financial analysis is the backbone of any finance

students internship report so in this chapter I have done the financial

analysis of MCB bank through different financial ratios just like the

current ratio, debt to equity ratio ,asset turnover ratio, net profit margin

ratio, gross profit margin ratio etc. so that to analyze the financial

position of MCB bank and to judge their financial performance. This

chapter further elaborates about the SWOT analysis of MCB bank and

after this the PEST analysis of MCB bank is discussed on this

chapter .In the next chapter the finding of this chapter are discussed

and according to the finding I have given the concern

recommendations.

58

CHAPTER 5

FINDING AND RECOMMENDATIONS

Introduction to chapter

In the previous chapter analysis of MCB bank are done through

different methods .this chapter consists of the findings through the

different types of analysis based and then according to these findings I

have given the concerned recommendations.

From the quantum of the profit and its financial data it can easily judge

the after privatization Muslim Commercial Bank 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 is my observations and suggestion to improve the

efficiency for the development of the bank

5.1 Findings

First of all I will discuss some of the financial findings that I have find

from the financial analysis.

Asset turnover ratio has been increased from 2010 to 2012 i.e.

from 0.82 to 0.87, this shows that MCB bank is effectively

utilizing its resources.

Current ratio of MCB increase from 2010 to 2012 i.e. from 1.12

to 1.34,this rise shows the defensive approach of MCB towards

working capital.

High trend of debt to equity shows that the firm is relying on

debt for financing and for expansion for business operations.

59

The decreasing trend of interest earned ratio shows that MCB

Bank has low operating income to pay for its interest which

shows insufficiency.

Net profit margin of MCB Bank shows a decreasing trend from

2010 to 2012 i.e. from 3.60% to 3.26% which means that MCB

Bank net profit /dollar is decreased.

Debt to total asset ratio of MCB Bank shows a decreasing

trend, if this ratio is high financial risk will be high, so MCB

Bank is taking steps to lower its financial risks.

Besides the financial findings there are also some general findings

from the SWOT and PEST analysis of MCB bank which are:

MCB bank lakes employee motivation, employees are not

properly motivated, so that’s why their efficiencies are effected.

Communication gap between different levels of

management ,mean that there is no common communication

channel through which the low level employees convey

message to upper level management and vice versa

MCB Bank has shown a remarkable growth in mobile banking

from the time of launch 2007 to 2012.At the year end of 2007

there were only 57 thousand customers but in 2012 it increased

to 253 thousands customers showing an increase of 15 percent

approx.

There in MCB Bank by asking the Branch Manager about the

job rotation he told me that now there is a proper job rotation

and an employee has to change his job place and duties after 3

year. The rules and regulations have been changed and the

employees has not to remain on the same post for more than 3

years.

60

There were all latest computers in the branch. The advance

computers were increasing the efficiency of the branch and

members because all the works were completed in proper time

with no delay.

As the employee finishes his training he is induced in a

specified field since he does not have knowledge about the

specific job assigned to him thus he feel difficulty to perform

his job. There is no special training given to the employees for

motivating customers.

In the bank the officers come across many customers daily.

Customers are the backbone of every bank and a pool for

deposits because banks run on deposits and through that they

make advances. So there is a direct relationship between

customer satisfaction and deposits. Customer services and

relationship of Branch members with them was satisfactory and

MCB bank ltd is giving much focus on that.

Political unions are found in MCB Bank, which is I think a

barrier to the effectiveness of the work.

61

5.2 Recommendations:

5.2.1 Increase Deposits and decrease Borrowings

If we look at the balance sheet of the financial years 2010 to 2012,the

increase in deposits are relatively low to increase in the borrowings.

MCB bank should develop strategy, employee policies and emphasize

to increase the deposits reserves that will enable to reduce borrowings

because it’s not a sign of healthy speculations

5.2.2 MCB Islamic Banking and Agri loans

Growing concerns about interest and realization of people that interest

cannot be made base of a healthy economy MCB Islamic Banking

needs a research, which should be engaged in evaluating and

interpreting the ways in which the bank can flourish more and

more .MCB should also focus on Agri loans because Pakistan is an

agricultural country and their lies an opportunity for MCB to make a

share to this market despite of a strong competitor ZTBL.It can cope

with this problem through its wide spread network of branches.

5.2.3 Shift from Interest based income to Fee-based Income

MCB has basically Lending Branches and pooling branches. The

Lending branches mainly has to deal with the borrowers as it makes

advances and pooling branches are related to the deposits. In short they

operate on the interest based income. But now the state bank of

Pakistan has decreased the pool rate to 9% that is not enough to cover

the expenses of employees and banks thus the bank should now focus

on the Fee-based Income i.e. online Cheque book issuances, ATMs etc.

5.2.4 On-Line Banking

MCB should start online banking throughout the country as they are

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

62

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

methods. Online banking is impossible without the modern IT

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

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

situations, along with the trained staff. MCB Bank is moving towards

that and is using new and advanced software but still it has to make

abrupt changes.

5.2.5 Bottom-top Communication

The down ward communication is important but the upward

communication is very important. The downward communication is

efficient and strong but there is a lack of upward communication. The

Management style is dictatorship as I observed by discussion of any

problem or issue with the officers was treated as disrespect by higher

authorities.so it should be improved.

Flow of information, decisions and other instructions and policies in

efficient and effective manner will enhance the overall productivity

and image of the organization.

5.2.6 Sound Management of Return on Equity

A strong ROE is a solid signal that management is doing a good job of

generating returns for shareholders' investments. This value also

slightly decreased in last three years. MCB Bank should invest in those

projects which create maximum return in order to diversify risk. This is

done by engaging both in markup and non-markup interest bearing

activities. MCB Bank should introduce new products for maximizing

return on equity. The bank should decrease their non-markup expense.

5.2.7 Emphasize on Non-markup Income

The bank should increase its non-interest income like fees, commission

or investment in foreign currencies. This is now a trend that bank is not

63

only to accept deposit and advance loan but also provide other

specialize services so MCB Bank can get maximum benefit from it in

order to increase net profit margin.

5.2.8 Primary Focus on Return on Asset

As from finding this value decrease gradually because of decrease in

net profit margin so MCB Bank should focus on those area where

maximum profit can be generated. The MCB Bank should increase its

investment and advances.

5.2.9 Focus on Islamic Banking

Growing concerns about interest and realization of people that interest

cannot be made base of a healthy economy. Islamic banking is an

emerging market with growth rate of about 10% so MCB Bank can get

maximum benefit from it. MCB Bank Islamic Banking needs a

research, which should be engaged in evaluating and interpreting the

ways in which the bank can flourish more and more.

Summary of the chapter

This chapter consists of the financial findings and then the SWOT and

PEST analysis findings and then I have given the concern

recommendations according to the findings just like MCB Bank online

Banking, MCB Bank has to decrease its borrowings etc.

64

Bibliography

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<http://en.wikipedia.org/wiki/Economy_of_Pakistan> [Accessed 15th

November 2013]

Hussain, I., 2006. Pakistan banking sector. Available at:

<http://ishrathusain.iba.edu.pk/speeches/WordDocs/Pakistan_Banking

_Sector.doc.> [Accessed 20th December 2013]

Van Horne, J.C., Wachowicz J. M., 2005. Fundamentals of Financial

Management. 12th Ed. New Jersey: Prentice hall..

MCB Bank Limited, 2013.MCB Home. Available at:

<https://www.mcb.com.pk/> [Accessed 11th November 2013].

MCB Bank. 2013. Annual report 2012. Available at:

<https://www.mcb.com.pk/uploads/FCG/docs/MCB%20Annual

%20Report__2012.pdf> [Accessed 10th November 2013]

Khan, M. H., 2004. Banking Industry Of Pakistan: Performances And

Constrains. Available at:

<http://www.scribd.com/doc/165116668/Banking-Industry-of-

Pakistan> [Accessed 29th November 2013]

Robert E. Wright, Vincenzo Quadrini 2009. Money and Banking. New

York: Flat World Knowledge. 15-30.

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

Accounting; the Basis for Business Decisions. 11th Ed, New York:

Irwin McGraw-Hill.

Sekaran, U. (2008). Research Methods for Business. 4th Ed. New

York: John Wiley & Sons, Inc.

65

Paget, S. J., 1904. Definition of Bank. Available at:

http://notes4students.webs.com/apps/forums/topics/show/1246517

[Accessed 11th November 2013]

Timothy j. G., Joseph D .2003. Analysis of financial statements. In:

Financial management. 3rd Ed. New Jersey: Prentice hall.

Khalil, U. 2009. Internship Report on MCB. Available at:

<http://www.scribd.com/doc/24040789/MCB-Bank-Ltd> [Accessed

21th November 2013]

66

Annexures

Annexure 1:

Organization Hierarchy of MCB Bank

Source: MCB Bank Ltd (2012)

67

Annexure 2:

Income Statement of MCB

For the period ended 2010, 2011, and 2012

(Rs in million) 2010 2011 2012

Mark-up/return/interest earned54821 68,147 68,356

Mark-up/return/interest expensed

17988 23,620 27,500

Net mark-up/ interest income 36833 44,526 40,856ProvisionProvision for diminution in the value of invest

444 778.526 (23.4)

Provision against loan and advances

3101 2,846.52 481

Bad debts written off directly 52 28.565 21Total Provision 3597 3,654 478Net mark-up/interest income after provision

33236 40,873 40,378

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

4130 5,117.2 5,934.5

Dividend income544 1,003.27

21,197.7

Income from dealing in foreign Currencies

632.3 921.262 822.9

Gain on sale of securities-net 411.8 735.639 824.6Other income-net 547.7 334.8 373.89Total non-mark-up/interest income

6285 8,112 9,153

Non-mark-up / interest expensesAdministrative expenses 12174 15,585 17,065

(reversal) other provision-net88.26 514.65 (187.31

)

Other charges966.440 1,402.38 599.97

4Total non-markup / interest expenses

13249 17,502 17,478

Profit before taxation 26253 31,483 32,054Taxation-current year 8027 9,724 9,601Taxation-prior years - 1,038 117Taxation-deferred 1352 1,296 1,396Subtotal Tax 9380 12,058 11,113

68

Profit after taxation 16,874 19,425 20,941

Source: MCB Bank Ltd (2012

69

Annexure 3:

Balance Sheet Of MCB

2010 2011 2012Assets (Rs in million)Cash and balance with treasury banks

45407 53123 57420

Balance with other Banks 1479 2281 1192Lending to institutions 4402 955 1551Investment 213061 316652 402069Advances 254552 227580 239583Other Assets-net 27706 30635 40345Total current Assets 546607 631226 742161Operating fixed assets 20948 22008 23738Total Assets 567555 653234 765899LIABILITIESBills payable 10266 9467 9896Borrowings 25685 39101 78951Deposits and other accounts 431372 491189 545061Sub-ordinate loan - - -Other liabilities 16092 18380 21098Total current liabilities 483415 558136 655006Deferred tax liabilities-net 4934 6295 9142Total liabilities 488349 564431 664148NET ASSETS REPRESENTED BYShare capital 7602 8362 9199Reserves 40163 42186 44253Inappropriate profit 21416 28366 34705Total 69181 78916 88157Surplus on revaluation of assets 10023 9887 13594Total 79204 88803 101751Total Liabilities& Owner Equity

567553 653233 765899

Source: MCB Bank Ltd (2012)

70

Annexure 4:

Pattern of Share Holdings

Description Shareholding Percentage

Directors, CEO & Children 98,928,007 10.7547

Associated Companies 197,310,846 21.4501

NIT & ICP 486,497 0.0529

Banks, DFI & NBFI 3,175,647 0.3452

Insurance Companies 60,756,081 6.6049

Modarabas & Mutual Funds 1,153,092 0.1254

Public Sector COS. &

CORP.

27,079,155 2.9438

General Public (Local) 135,480,447 14.7284

General Public (Foreign) 2,541,784 0.2763

Foreign Companies 333,904,991 36.2995

Others 59,043,576 6.4188

Company Total 919,860,123 100.0000

Source: MCB Bank Ltd (2012)

71

Annexure 5:

2010 2011 20120.790.8

0.810.820.830.840.850.860.870.88

0.82

0.862

0.87

ASSET TOURNOVER RATIO

YEARS

RATIOS

Source: Internee’s Analysis

Annexure :6

2010 2011 20121.11

1.115

1.12

1.125

1.13

1.135

1.12

1.13

1.133

CURRENT RATIO

YEARS

RATIOS

Source: Internee’s Analysis

72

Annexure 7:

2010 2011 20125.9

6

6.1

6.2

6.3

6.4

6.5

6.6

6.16

6.35

6.52

DEBT TO EQUITY RATIO

YEARS

RATIOS

Source: Internee’s Analysis

Annexure 8:

2010 2011 20120

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6 1.45 1.331.16

INTEREST EARNED RATIO

YEARS

RATIO

Source: Internee’s Analysis

73

Annexure 9:

2010 2011 20123.00%

3.10%

3.20%

3.30%

3.40%

3.50%

3.60%

3.70%3.60% 3.56%

3.26%

NET PROFIT MARGIN RATIO

YEARS

RATIO

Source: Internee’s Analysis

Annexure 10:

2010 2011 20120.856

0.858

0.86

0.862

0.864

0.866

0.868

0.86

0.864

0.867

DEBT TO TOTAL ASSET RATIO

YEARS

RATIO

Source: Internee’s Analysis

74

Annexure 11:

2010 2011 201219.50%

20.00%

20.50%

21.00%

21.50%

22.00%

22.50%

21.30%

21.90%

20.60%

ROE

YEARS

RATIOS

Source: Internee’s Analysis

75

Branch Network Of MCB Bank Limited

Annexure 12:

Source: MCB Bank, (2012)

76

Principal Office

Area Office North

Area Office South

Overseas Branches

Punjab NWFP

Sindh Baluchistan

10 Circles

25 Regions

710 Branches

2 Circles

7 Regions

199 Branches

5 Circles

12 Regions

262 Branches

1 Circle

2 Regions

38 Branches