BENI Mcb Internship Report

8/2/2019 BENI Mcb Internship Report

1/58

__________________________________________________________________

INTERNSHIP REPORT ON MUSLIM COMMERCIAL

BANK LIMITED.

By

BENISH SHAKOOR

Roll No # 1217

Submitted in partial fulfillment of the requirement

For the degree of Master of Business Administration.

at

IMIT Group of Colleges.

2011-2012

Internship Report On MCB 1


2/58

__________________________________________________________________

Start in the name of Allah, the one who controls our destiny. Start

in ALLAH name, whose promise will never fail us. Start with

ALLAH guidance, that which will never mislead me. Start with

his help, that which will always suffice you.



3/58

__________________________________________________________________

PREFACE

to join the MCB Faisalabad Medina town branch for the said propose for a

period of 6 weeks Practical involvement was a great experience as interaction both

with experienced executive and clients cemented the base of knowledge I have been

acquiring in classroom.

This internship report includes the material about MCB and different

departments along with their working procedure.

For the completion of this project I meet various persons of this

organization.

As for my knowledge and hard work is concerned, this report will provide a good in

sight of MCB.

BENISH SHAKOOR



4/58

__________________________________________________________________



5/58

__________________________________________________________________

LIST OF ACRONYMS

MCB Muslim Commercial Bank

SBP State Bank of Pakistan

EBIT Earning Before Interest and Taxes

DD Demand Draft

TT Telephonic Transfer

MT Mail Transfer

RTC Rupee Traveler Cheque

SEVP Senior Executive Vice President

AVP Assistant Vice President

SVP Senior Vice President

VP Vice President

GM General Manager

HO Head Office

OGI Officer Grade I



6/58


7/58

__________________________________________________________________

CHAPTER-3 FINANCIAL ANALYSIS

3.1 PURPOSE OF FINANCIAL STATEMENT ANALYSIS 16

3.2 LIMITATIONS OF FINANCIAL STATEMENTS 173.3 TOOLS OF FINANCIAL STATEMENT ANALYSIS 17

3.4 BALANCE SHEET ANALYSIS 21

3.5 FORMULAE FOR THE CALCULATION OF THE RATIOS 323.6 RATIOS ANALYSIS 34

3.7 INTERPRETATION 35

3.8 LIQUIDITY AND CREDIT RISK MEASUREMENT 353.9 PROFITABILITY MEASUREMENT 37

CHAPTER#4 SWOT ANALYSES

4.1 STRENGTHS 41

4.2 WEAKNESS 424.3 OPPORTUNITIES 444.4 THREATS 45

CHAPTER-5 FINDINGS AND RECOMMENDATIONS

5.1 DEPOSITS DEPARTMENT 46

5.2 REMITTANCES DEPARTMENT 475.3 CASH DEPARTMENT 48

5.4 BILLS AND CLEARING DEPARTMENT 49

5.5 ADVANCES DEPARTMENT 50

5.6 FOREIGN EXCHANGE DEPARTMENT 515.7 OTHER FINDINGS AND RECOMMENDATIONS 51

BIBLIOGRAPHY 54



8/58

__________________________________________________________________

CHAPTER-1 HISTORY OF BANKING

1.1 BRIEF HISTORY

Consensus on the origination of word Bank is not yet reached at. Some

authors opinion is that this word is derived from the words Bancus or Banque,

which mean a bench and they further relate banking business inception to Jews in

Lombardy. Other authorities state that the word Bank is derived from the German

word Back which means Joint Stock fund and later on due to German

occupation of Italy, this word was Italianated into Bank. Authors quote

Babylonians (few quotes Chinese) who developed banking system as early as 2000.

B.C1

A banker is described as a person transacting the business of accepting for the

purpose of lending or investment of deposits of money from the public, repayable

on demand or otherwise and withdraw-able by cheque, draft order and includes any

post office savings bank.

1.2 BANKING IN PAKISTAN:

Banking started in Pakistan after the bold and emergent decision of

formulation of SBP on July 30, 1948. Thereafter this sector has witnessed

enormous growth. In 1974 banks were nationalized, in the hope that new era of

growth could be achieved through it.

1



9/58

__________________________________________________________________

However the process is reverse since 1991, up till now MCB, ABL, and UBL have

been privatized and HBL is in the process of its privatization.

On 14th August 1947, 487 branches of different banks were operating in Pakistan.

By 30th June, 1948, 292 branches winded up their business in Pakistan and the

remaining 195 branches restricted their banking operations to a minimum level.

The only bank, which shifted its head office from Bombay to Karachi, was the

Habib Bank Limited. MCB with the assistance of Quaid-e-Azam Mohammad Ali

Jinnah, started operation in July 9, 1947 with an Authorized capital of Rs.3 crores.

Indo-Pak subcontinent, the Bank moved to Dhaka from where it commenced its

business in August 1948. And in 1956 the bank shifted its head office to Karachi,

where it is still working.

In 1948 Ms. Ispahanani and Mr. Abdul Hameed Adamjee purchased the bank. At

that time the bank showed a historical performance and profit.

1.3 NATIONALIZATION

In 1974 the government felt a harsh need of nationalization of banks and

financial institution and the nationalization act was introduced. Under this act,

MCB was the first bank, which was nationalized. In the same year Premier Bank

was merged with MCB and it started work as a government bank this

nationalization affected the bank badly.

1.4 PRIVATIZATION

All the financial institutions and banks did not show good performance after

nationalization, and again the government felt a big need to privatize these banks.

In 1991 the bank was privatized again. The government of Pakistan transferred the

management of the bank to National group, one of the leading groups in the field of

business. They were sold 25% shares. Now this group has 50% of the total shares.

Government has 25% shares and general public also has the same shares.



10/58

__________________________________________________________________

1.5 AN OVERVIEW OF MCB

The MCB was established one month before the independence in June 1947

first head quarter in Calcutta and after independence it was shifted from Calcutta to

Dhaka and afterward its Head quarter was shifted from Dhaka to Karachi in 1948.

Among the other 22 scheduled banks with 3525 branches network nationalized on

01st January, 1947through the nationalization of Banks Act, 1974 under the

nationalization policy of the Government. MCB was also nationalized and at that

time of nationalization Premier Bank was merged in M.C.B LTD in 1974.

After the failure of the communism, it was realized though the world the idea of

nationalization was not correct and has no any positive effects on economy. This

idea developed especially in 1980 decade under which in sub-continent of Asia its

importance was also realized. In Pakistan Privatization and de-regulation policy

was started in 1998 under this policy the first unit privatized was M.C.B, with a

view to stable the economy and to reduce the burden on national exchequer of other

sick units.

In 1990 this bank was announced for Privatization on the grounds that 51% shares

would be for general public out of which 26% shares would be offered to a

particular party, which will take administration of bank and lead by Mian

Mohammad Mansha who was the first chairman of MCB LTD.

Now out of 10% shares only 14.90% shares are being held by State Bank of

Pakistan and all other being held by individuals, directors and joint Stock

Companies etc (Annual Report of M.C.B).

1.6 OBJECTIVES OF MCB



11/58

__________________________________________________________________

The main objectives of MCB are to earn Profit by investing the money of

depositors, who cant utilize that money for getting required return. So the bank

invests that money in the shape of advances and shares, the return or interest

Charged on those advances with the depositors. Beside above-mentioned objectives

the Bank serves the society by facilitating them in the shape of advances to

industries, agriculturists etc. it also provides employment to people; it help in

developing economy of the country. It also provides facilities in doing business

with other countries.

1.7 STRATEGIES TO ACHIEVE OBJECTIVES OF THE BANK

MCB Limited is a business entity and all its activities are directed towards

the prime objectives, which is profit. But the only difference is that it sells

intangible products i.e. the services.

Now in order to achieve this important goal, the management has evolved

multidimensional policies. Especially after privatization of the bank on April 1991,

a very enlightened management took the charge of MCB Limited. Mr. HusainLawai the renowned and experienced banker assumed the office of the Chief

Executive i.e. the President of the MCB.

Major aspects concentrating are the following:

1. Effective use of electronic media

2. Enlighten Personnel Policies

Mainly the whole program was based on the following points.

A) Special preference was given to MBA's and then to the experienced staff of

BCCI. Ultimately the 1st batch of MBA's was hired in July 1992. The management

was aware of the fact that if you offer peanuts, you will find only monkeys,

therefore they offered attractive packages and thus was able to succeed in skimming

cream of the market.



12/58

__________________________________________________________________

B) A comprehensive six months theoretical program was devised at MCB Staff

Colleges, located at Karachi and Lahore for providing some reasonable knowledge

to the newly hired qualified staff. The stated theoretical training program was

supplemented by the practical branch training.

3. Compatible Package

After privatization the staff salaries have been revised three times. The first time

was 35%, the second was 32%, and the last one was 20%.

4. Excellent Working Environment

5. Modernization of Branches

6. Launching of New Products

7. Decentralization of Authority

8. Effective Reward Punishment Policy.

1.8 MCB VISION & MISSION

Vision Statement

Challenging and Changing the Way you Bank.

Mission Statement

MCB Banks team of committed professionals is dedicated to maintaining long

term customer relationships through outstanding service and convenience.



13/58


14/58

Consideration on complaints.

Utility bills collections.

Hajj arrangements.

New and innovative policies.

2.4 FINANCE & TREASURY DIVISION

Finance and treasury division deals with following functions:

Inward and outward remittances are recorded. Surplus funds are utilized (to purchase the

shares of other companies). Balance sheet of the bank is prepared. Public sector advances

are released. The safe custody of the securities is maintained. Declaration of the rates of

return on PLS Account.

2.5 INDUSTRIAL CREDIT DIVISION

Industrial credit division was established in 1983 with the object of providing loans

for different industrial projects and to assist in economic Development of the country and

also to invest money for the purpose of earning profit.

2.6 INTERNATIONAL DIVISION

International division deals with the supervision of the foreign exchange function of

branches. It solves the problems of the branches regarding international trade.

2.7 CENTRAL ACCOUNT DIVISION

The central accounts division is categorized by the functions as under:

Payment section (purchases and procurement and fringes benefits to executives).

Reconciliation.

Stationery.

Zakat and Usher section.


15/58

2.8 AUDITS AND INSPECTION DIVISION

Inspection division is established so as to detect any fraud forgery in the branches

and sudden visits to branches to keep them alert and attentive during banking hours.This

department is working for the improvement of auditing system and continuously searchingthe best possible means of inspection for effective auditing. MCB uses the both methods

i.e. internal audit and external Audit.

2.9 ELECTRONIC AND DATA PROCESSING DIVISION

The function of this division is to record the business of the bank with computer

programming, and taking all the transactions and dealings of the bank recorded for the

particular period.

2.10 LEGAL AFFAIRS DIVISION

This division deals in following matters:

Handling on property documents sent to them by various circles and head office i.e.

loan documents etc.

Follow up, recovery cases and cases of fraud against employee. The cases against bank

are dealt too.

Give opinion on various accounts i.e. partnership, deceased and pension accounts. It

gives opinions on all-important legal matters.


16/58

2.11 ISLAMIC BANKING DIVISION

It is established with the aim of introducing the Islamic Banking at

branches in different cities.

2.12 TRAINING DIVISION

The training division is established, so as to train the newly employed

staff and the promoted staff to keep them efficient on service. At Presented their two

training centers providing facilities to new employees in the country which are situated in

Karachi and Lahore.

2.13 CREDIT MANAGEMENT DIVISION

This division generally looks after the credit policy of bank .It also maintains and

approves the advances and loans. It sets the rate of interest over the loan for specific period.

It usually receives applications from intending borrowers and submits the same application

to higher authority for approval.

2.14 DEPARTMENTS OF MCB

MCB is one of the largest private banks of Pakistan. It offers a well-organized

structure of specialized services distributed among its various departments. This

departmental segregation provides MCB with more proper and professional approach and

efficient means of performing each service. Departmentalization makes the services more

proficient and specialized procedures for every job are used.

At each branch level the duties are divided into seven departments. There is a chief

manager at the top level of each branch. He is responsible for the overall performance and

working of his branch. The authority is then divided into two heads at the next level.

There is a credit manager who handles the credit department operations of the branch. The

other one is the operations manager who is responsible for all the rest of the departments.

Each branch is divided into the following departments:


17/58

Cash department

Clearing and collection department

Remittance department

Foreign exchange department

Credit department

The functions of each department and their operations are explained as follows:

2.15 CASH DEPARTMENT

The main function of this department is Payment and receipt. It collects and pays

money to the customers, on behalf of their account, through cheques or any other

negotiable instruments.

There are three main functions of the cash department:

Payment

Clearing

Receipts

2.15.1 Payment

The cash department issues payments on request. The checks are received by the

department and after their clearance cash is issued to the check-holder.

The payment deals with that customer who withdraws money through cheques or any other

negotiable instruments. The cashier keeps the record of all payments in the register book.

At the end the payment and receipt cashier checks the balance and count the cash. They

verify that both register cash and the cash in hand are balance.

2.15.2 Clearing

Another main aspect is the clearance of checks. It includes verification of proper

date, amount, endorsements, such as issue stamp, clearing stamp and back-side stamp, and


18/58

signature. After proper verification of checks the payments are issued. At the issuance of

cash the cash is debited in the clients account.

2.15.3 Receipts

It is responsible for taking cash deposits from its clients who want to store or invest

their surplus reserves. In the receipt section, the cashier receives money from the customers

on behalf of any individual or the company. Most of the receipt goes through the accounts

of the MCB.The cash receipts are done in two forms:

Collection of money from customers in their accounts

Collection of utility bills

2.15.4 Collection of money from the customer in their accounts

The cash is received from the customers in their accounts. At the time of cash

receipt, the clients accounts are credited.

Every account holder deposit money in his account, they deposit the money through the

bank receive voucher, which is of specific nature i.e. it may be PLS, current or MBKS etc.

So the cashier deposits the money that is received. He keeps in record the voucher no,

amounts, a/c no etc and then presents to the computer department for posting.

2.15.5 Collection of utilities bills

MCB also offers the facility of payment of utility bills. The customer can deposit

electricity, gas, and telephone bills through the bank. The bills are received, stamped and

kept in record. Then it is posted in the corresponding accounts of the bank in which the

money is deposited.

It also provides this convenience to private companies as well. Private companies also

deposit their bills in the MCB accounts, which are similarly received, kept in record and

deposited in the corresponding accounts.


19/58

2.16 CLEARING AND COLLECTION DEPARTMENT

Clearing implies a system by which banks exchange cheques and other negotiable

instruments drawn on each other within a specified area and thereby secure payment for

their clients through the clearinghouse at specified time in an efficient way.The major operations of clearing departments are related to the check verification. This is

divided as follows:

Transfer of checks

Clearing of checks

Clearing department handles check related issues. It handles the checks of different other

banks such as Allied Bank, NBP etc. At the time of cash deposits, different checks from

other banks also come to MCB for deposits. This is the job of clearing department to sort

out checks of each bank. Then the net balance for each bank is calculated and adjusted.

The procedures for check transfer and clearance are as follows:

2.16.1 TRANSFER OF CHECKS

It deals within the inter-bank transfer of checks. Suppose a person X gives a check

of MCB to another person Y who also has an account in MCB, the clearing department will

handle it. The clearing department simply debits one account and credits the other one.

2.16.2 CLEARING OF CHECKS

It also deals with the checks of other banks. Suppose an NBP account-holder gives

a crosscheck for MCB. Similarly, MCB account-holders give check to people having

accounts in other banks; these all banks need to clear their overall balances with each other.

The clearing department does this.

MCB Bank

Transfer checks

XGives check

YX account Dr

Y account -- Cr


20/58

The clearing department makes different envelops for different checks of each bank. It then

sends these envelops to the clearinghouse. In the clearinghouse, representatives of different

banks take the balances of all the checks and the balances are cleared. Now National

Institution of Facilitation Technology (NIFT) takes the job of clearinghouse. It not only

separates balances for each bank but also for each branch. The clearing department of MCB

separates checks of each bank in different envelops and sends it to NIFT. After NIFT sends

the checks to other banks, they send an OK report to NIFT which sends that report back to

MCB. This ensures that all checks are safely deposited in the respective banks.

2.16.3 BILLS COLLECTION

The bills collection is the key department in each branch. The objective of this

department is to receive the cheques of different bank of different area. Often the cheque is

drawn to the clients of another bank or account holder of the MCB and similarly the

customer of another bank draw cheque to MCB account. In both cases the cheque is

cleared, endorsement conformed, or takes the disbursed

Guarantee. And then deposit to the corresponding department or banks or whatever the

case may be.Shortly the bills are divided in the following two main categories.

Local bills collection (LBC)

Country bills collection (CC)

NBP Bank

Clearing checks

XCross check

YMCB Deposited

MCBAccount-holder

NBPAccount-holder


21/58

2.17 INLAND REMITTANCES

This means transfer of funds from one branch to another within the country through

following banking instruments

Demand Drafts (DDs)Telegraphic / Telex Transfers (TTs) / Fax Press

Mail Transfers (MTs)

Mail Transfer

When a customer requests the bank to transfer his money from this bank to any other bank

or the branch of some other bank in the city, outside the city or outside the country, the first

thing he had to do is to fill an application form. In which he states that I want to transfer the

money from this bank to that bank by mail. If the customer is the account holder of the

bank, it will debit his account and the concerned officer will fill the six different forms to

make the transfer complete. The five forms used for this purpose are listed below:

2.17.1 Demand Draft (DD):

Demand draft is another way of transfer of money from one bank to another bank.

Unlike pay order, a form is required to be filled for the issuance of the demand draft in

which necessary particulars about the beneficiary and the sender are given. The sender

deposits the amount of DD plus commission and other charges on the bank counter, from

where he is given a receipt and in accordance with this receipt he is issues a demand draft.

After issuing the DD, the remittance department sends credit advice to the branch to which

the DD is sent, when the responsible branch receives the DD from the originating branch,

they credit it, and when the DD comes for clearing they debit the account.

Up to 100,000

RS 150 for a/c holder

RS 250 for non a/c holder

OVER 100,000

0.1% for a/c holder

0.2% for non a/c holder


22/58

In addition to above charge a fixed excise duty of Rs. 2 per draft.

2.17.2 Telegraphic Transfer (TT):

With the changing requirements of customers, MCB has introduced a faster mode

of transfer of money. Like DD the sender is required to apply through a form in which he

will give all the necessary details about the sender and the beneficiary. The sender deposits

the amount of DD plus commission and other charges on the bank counter, from where he

is given a receipt, the remittance officials send a telegram to the concerned branch and they

make payment to the customer. Vouchers are sent by ordinary mail to keep the record. On

TT, no excise duty is charged only commission and telegram charges are charged.

CHAPTER-3 FINANCIAL ANALYSIS

Financial statement is any written report that purports to show the financial

condition of an organization. It may include balance sheet, income statement, cash flow

statement, and a report of changes in net worth.

For stakeholders of a business, analysis of the financial statements is the primary way tocritically examine its financial position, in order to seek answers to varying queries.

Publication of financial statements is a statutory requirement for corporations chiefly

addressed to stakeholders outside the business, albeit they serve the management for

internal control in many ways. The fact that the audit carried out to uncover any material

irregularity, is based on sample of items, leaves some room for incredulity. The Financial


23/58

Statements of a bank particularly need great care in analysis, as the nature and scope of

assets and liabilities differs from that of manufacturing concerns. For example verification

and valuation of plant and machinery, stock and tools etc. is grounded on some basic

sources as contrary to verification and valuation of deposits, advances, and investments.

3.1 PURPOSE OF FINANCIAL STATEMENT ANALYSIS

Analysis is generally directed towards delving into three broad aspects of a

business, which are the driving forces behind the stakeholders decisions. These are:

1. Solvency of the business.

2. Stability of the business and

Profitability of the business.

The solvency of a business means its ability to meet its liabilities as it mature. The

solvency of the business is analyzed by the means of financial statements presently and

also in any future adverse business condition.

Stability of the business is measured by its ability to meet interest and principle payment

requirements on outstanding debt and also its ability to pay dividends to its stockholders

regularly.

Profitability is measured by the success of a business in maintaining and increasing the

owners equity. The nature and amount of earning as well as their regularity and trend are

all significant in this appraisal.

3.2 LIMITATIONS OF FINANCIAL STATEMENTS

Financial statements are based on historical cost convention. They do not portray

the real or market value of the items on the face financial statements.


24/58

The credibility of financial statements is confined to the audit carried out, and most audit

evidence is persuasive rather than conclusive.

Financial statements do not disclose any significant future events or contingencies.

Financial statements do not compare the actual figures with any standards set.

Qualitative information about the business is not found in financial statements.

And finally the company management often is under heavy pressure to report rising

earnings, accounting policies may be tailored towards this objective.

3.3 TOOLS OF FINANCIAL STATEMENT ANALYSIS

3.3.1 Rupee and percentage changes

In this method the rupee amount of change from year to year and the change in

percentage are determined.

3.3.2 Trend percentages

In this method, the changes in financial statement items form a base year to

following years are determined to show the extent and direction of change.

3.3.3 Component percentagesComponent percentages are calculated to indicate the relative size of each item

included in total. For example, each item on balance sheet is expressed as a percentage of

total assets.

3.3.4 Ratio analysis

Analysis of relationship of different aspects of financial statements.

Comparative Balance Sheet

For the years ended Dec. 31, 2009 2010.

(Rupees 000)

2009 2010


25/58

Amount Percent Amount Percent

Assets

Case hand Balance with treasury banks 21,259,900 11.37% 17,867,991 7.60%

Balance with other banks 8,025,689 1.62% 2,154,190 .92%

Lending to financial institutions 15470519 8.27% 33874620 14.61%

Investments (net) 55,432,235 29.63% 89609821 38.11%

Advances (net) 76584120 40.94% 78,923,737 33.28%

Other asset 11,400,906 6.09% 8,883,163 3.78%

Operating fixed assets 3,659,646 1.99% 3,825,045 1.63%

Deferred tax assets 220500 .12%

Total Assets 187053515 100% 235138567 100%

Liabilities

Bills Payable 8,097,178 4.33% 6,2661,957 2.66%

Borrowing from financial inst. 8946624 4.78% 21,987,824 9.35%

Deposits and other accounts 14544451 82.62% 182,705,716 77.70%

Subordinate loans 1,600,000 ..68%

Liabilities against assets

Subject to finance lease

Other liabilities 8k,578,240 4.56% 9045634 3.85%

Differed tax liabilities 1838545 .78%

Total Liabilities plus stockholders equity 18066493 96.32% 223439676 95.02%

Share capital 2423140 1.30% 2665455 1.13%

Reserves 2278980 1.22% 3026517 1.29%

Unappropriated profit 283940 .15% 621985 .26%

Surpens on revaluation of asset 1900962 1.02% 5384934 2.29%

6887022 3.68% 11698891 4.98%

Total liabilities and Share holders equity 187053515 100% 235138567 100%


26/58

2008 2009 2010 2009 over

2010

2009 over

2010

Liabilities

Bill payables 7,803,443 8097178 6261957 22.66% 3.76%

Borrowing from financial

institutions

5,856,198 8946624 21987824 145.76% 52.77%

Deposit and other accounts 135,990147 154544451 182705716 18.22% 13.64%

Subordinated loans 1600000

Liabilities against assets subject to

finance lease

Nil

Other liabilities 8,43,8,055 8,578,240 9,045,634 5.44% 1.66%

Deferred tax liabilities Nil 1,838,545

Total liabilities 158,087,843 180166493 223439676 24.01% 13.96%

Net assets 5592743 887022 11698891 69.86% 23.14%

Represented by:

Share capital 2,202,855 2,423,140 2,665,455 10% 9.99%

Reserves 2,277,630 2,278,980 3,026,517 32.80% 86%

Unappropriated profit C/F 3,185 2,83,940 6,21,985 119.05% 8814.91%

Surplus on revaluation of assets

(net)

1,109,073 1,900,962 5,384,934 183.27% 71.40%

Share holders equity 5,592,743 6,887,022 11,698,891 69.86% 23.14%


27/58

BALANCE SHEET ANALYSIS

PERCENTAGE CHANGES

(Rs. In 000)

2008 2009 2010 2009 over

2010

2009 over

2010

Assets

Cash and balance with treasury

banks

12,571,424 21,259,900 17,867,991 15.95% 69.11%

Balances with other banks 4,757,413 3,025,689 2,154,190 28.80% 36.40%

Lending to financial institution 10,852,094 15,470,519 33,874,620 118.96% 42.56%

Investment (net) 43,110,947 55,432,235 89,609,821 61.65% 28.58%

Advances (net) 86,359,139 76,585,999 78,923,737 3.05% 11.32%

Other asset 13,203,910 11,400,096 8,883,163 22.08% 13.66%

Operating fixed assets 3,604,356 3,659,646 3,825,045 4.51% 1.53%

Deferred tax assets 2,55,780 2,20,500 100% 13.79%

Total Assets 174,715,063 187,055,394 235,138,567 25.70% 7.06%

3.4 BALANCE SHEET ANALYSIS


28/58

The analysis of balance sheet is an effort to evaluate the financial strength of the

business at a given date.

3.4.1 Assets

Total assets increased by 25.70% during 2009 over 2010, primarily based on

deposit growth. Increase in balance sheet volume is a healthy trend apparently, but it needs

further investigation. The balance sheet figures are reported on the day, books are closed.

These figures are not based on averages; neither financial statement discloses changes

during the year. Specific transactions may be carried out on the day to show favorable

balances. For instance on the day of closing of accounts, paying off bills payable will

improve the working capital or current ratio. In the following paragraphs assets have been

analyzed segments wise.

3.4.2 Cash and balances with treasury banks

This head of balance sheet experienced a phenomenal (base year 2010) decrease of

around 55% as compared to 28% decrease in the last year. Further breaking down the

information, we come to know that major portion of these funds i.e. around 13 billion

Rupees are lying with State Bank of Pakistan mostly in local currency current deposits.

This is a statutory practice by commercial banks to deposit extra amount of cash with State

Bank of Pakistan. Branches deposit their extra cash with head office, which subsequently

deposits this amount with central bank wallets, if not utilized by the Bank in the mean time.

Cash and Balances with Treasury Banks are around 8% of the total assets, indicating that

cash balances are not fully utilized.

3.4.3 Balances with other banks

The amount standing at around 3 billion of Rupees has decreased by 29% (as

compared to previous year). The account is chiefly held with foreign banks both in form of

current account and deposit account. The account is .92% of total assets, which is a


29/58

satisfactory indication. The account is utilized for import and export transactions with

foreign banks. The balances with other banks in normal circumstances carry an interest

rate of between 0% to 6.55%, so the amounts in these accounts do not generate much

revenue directly, but the services funded by these accounts have some worth. The

Reduction in this account can be associated with watchful economic activity because of

depending international recessionary trends.

3.4.4 Lending to financial institution

Lending to financial institution has increased by 119% as compared to 42.5%

increase in last year. Lending to Financial Institutions has two fragments:

Call Money Lending.

Repurchase Agreement Lending.

Call Money Lending has increased from Rs. 6 billion to 13.14 billion, while Repurchase

Agreement Lending has increased from Rs. 4.7 billion to Rs. 10.293 billion. Repurchase

Agreement (RPs) is an arrangement where the MCB purchases Govt. Securities from

borrower Financial Institutions (FIs) with the end to resell to FIs at a prescribed price on a

stated date. The effective interest rate is given by the difference between the purchase price

and the sale price. The maturity of RPs is generally very short, from three to 14 days, and

sometimes overnight. The RPs are auctioned by SBP almost daily. Repurchase Agreement

Lending by MCB is fully secured against Market Treasury Bills, Pakistan Investment

Bonds, and Federal Investment Bonds, thus eliminating any risk.

So lending to financial institutions are highly liquid and very secure, reaffirming the

Banks conservative policy of credit.

3.4.5 Investments

Investments at the face of balance sheet amounted to around Rs. 89.609 billion.

Investments increased by 81% as compared to a increase of 28% in the last year.


30/58

Commercial banks investments essentially include government debt securities, to minimize

credit risk. In Pakistan the capital and money markets have not matured enough to generate

funds for projects. The investments have been categorized by four classes:

Available-for-sale Securities.

Held-to-maturity Securities.

Subsidiaries.

Associated Undertakings.

Almost 85% of the investments are held in available-for-sale securities, which show the

strong liquidity position of the Bank. These securities include Market Treasury Bills,

Federal Investment Bonds, Pakistan Investment Bonds, Listed TFCs, Shares in Listed

Companies etc., which are generally, considered very safe mode of investment. Among

these securities T-Bills are highly liquid. Interest rate carried by these securities is not very

high but the main concern is the liquidity sought for prudent banking Securities given as

collateral has evidenced a sharp decrease of around Rs. 7 billion, which can be ascribed

toward decline in Borrowings from Financial Institutions. There is no out of usual

provision for diminution in the value of investments, which indicate the overall stability in

the money market.

Among the securities held-to-maturity, half of the lot include TFCs, Debentures, Bonds,

PTCs, which carry as high as 18% interest rate.

The new entry in subsidiaries was introduction of MNET Services (Pvt) Ltd. it is the

second technological initiative in a row, after the successful operation of ATM network.

Investment in associated undertakings remained unchanged.

3.4.6 Advances

The total amount of advances stood at Rs. 79 billion. Advances increased 3.05%

from previous year, as compared to a decrease of 11% in the same in

The previous year. The increase can be attributed to two major factors. One was

the increase in demand for credit from the manufacturing and export clients due to the


31/58

situation prevailing after offer the govt. good economic policies (increase in foreign

exchange reserves). And second was the higher steadiness demand for seasonal financing

due to speed in the sugar season and steadiness in cotton prices leading to a speed in the

purchase of cotton. Short-term advances are less than Long-term advances by Rs. 50

billion. We can predict the high pace of long-term development projects from this piece of

statistics.

If we look at the component balance sheet analysis, it reveals that net advances are

around 33% of total assets, while the same were around 41% of total assets in the previous

year. At the same time lending to financial institutions and investments has increased as a

proportion of total assets. The bank further needs to lower the mark-up rate broaden their

deposit base, and a bit relaxation in conservative credit policy.

3.4.7 Other assets

Other assets decreased by 22% from previous year, as compared to an increase by

21% in the previous year. The major portion of this item comprises of taxation and

income/markup accrued on advances and investments. No explanation could be found

regarding the amount of taxation, which is Rs. 5 billion of worth. This amount may include

advance taxes paid and tax rebates and refunds.

3.4.8 Liabilities and shareholders equity

Deposits and Other Accounts

A profound increase in deposits is the main cause of increase in Balance Sheet

footings. Deposits and other accounts were at Rs. 182 billion, increased by 18% from

previous year. According to component balance sheet deposits are 78% of balance sheet

total. For a banking concern it is a norm to have such a composition of balance sheet. Most


32/58


33/58

The amount of share capital was at Rs. 2.6 billion, with increase of 10% from

previous year. The only reason for the increase in share capital is the issue of Rs. 220

million worth of bonus shares during the year.

3.4.12 Reserves

The reserves of the bank registered an increase of only 32% in the year 2009with

the year-end figure of Rs. 3 billion compared to last years figure of Rs. 2.27 billion. While

in the year 2008, we had seen an increase of .1% in the banks reserves.

3.4.13 Unappropriated profit

The Unappropriated profit for the year 2009 registered a increase of 119.05%

compared to last years remarkable increase of 815%. That is, profit for last year was Rs.

284 million whereas for the year 2010 it was Rs. 621 million.

3.4.14 Surplus on revaluation of assets

The bank showed a surplus of Rs. 53 billion at the end of the year, after the

revaluation of its assets; an increase of 183% over last years figures. The fixed assets of

the bank showed a increase of Rs. 165.3 million while the securities held by it registered a

significant increase of Rs. 4.8 billion in their value.

The revaluation of assets was carried out by Iqbal Nanjee & Co., Valuation and

Engineering Consultants on the basis of their professional assessment of the market values.

3.4.15 Shareholders equity


34/58

Shareholders equity at the end of the year 2009 was Rs. 11.6 billion showing an

increase of 69% over last years figure of Rs. 6.9 billion. This can be attributed to the

higher profits, the issuance of bonus shares, and the surplus declared on revaluation of

assets.

MCB

Income statement


(Rupees 000)

2010 2009 %2009 over2010

Markup/return/interest earned 15,385,869 17,033,225 9.67%

Markup/return/interest expended 6,074,682 7,544,897 9.67%

Net markup/interest income 9,311,187 9,488,328 1.86%

Provisions

Provision for diminution in the valve of invest 62064 100%

Provision against non performing loans andadvances

1704308 100%

Provision for potential to lease losses 512 636 19.49%

Bad debts written off directly 721105 448999 60.60%

Total provisions 721,617 2,216,007 67.43%

Net markup/interest income after provisions 8589570 7272321 18.11%

Non-markup/interest income

Fee, commission and brokerage income 907071 868637 4.42%

Dividend income 297748 243994 22.03%

Income from dealing in foreign currencies 503593 687854 26.78%

Other income 881746 400140 120. 35%

Total non-markup/interest inc. 2,590,158 2,200,625 17.70%


35/58

11,179,728 9,472,946 18.01%

Non markup/interest exp.

Administrative exp. 8077395 7331623 10.17%

Other provisions 40,000 100%

Other charges 1313 147 793.19%

Total non-markup/interest exp. 8078708 7,371,770 9.58%

Extra ordinary and exceptional items

Profit before taxation 3,101,020 2,101,176 47.58%

Taxation current for the year 1,531,551 957,720 59.91%

For prior years

Deferred (169125) 35280 579.37%

1362,426 993,000 37.20%

Profit after taxation 1,738,594 1,108,176 56.88%

Unappropriated profit b/f transfer from surplus on

revaluation of fixed assets

283940 3185 8814.9%

Prior years 194751

Current years (net of tax) 60916

539607 3185 16842.13%

Profit available for appropriation 2278201 1,111,361 104.99%

MCB

Income statement


(Rupees 000)

2010 2009

Amount Percent Amount Percent

Markup/return/interest earned 15,385,869 137.62% 17,033,225 179.80%


36/58


37/58

Transfer from surplus on revaluation of fixed

asset:

Prior year 194751 1.74%

Current year-net of tax. 60916 .54%

539607 4.83% 3185 .03%

Profit available for appropriation 2,278,301 20.38% 1,111,361 11.73%

3.5 FORMULAE FOR THE CALCULATION OF THE RATIOS

i) Current Ratio =sLiabilitieCurrent

AssetsCurrent

ii) Cash Ratio =sliabilitiecurrent

banksurywith treaand(actual)Cash

iii) Debt Ratio =assetstotal

sliabilitieexternalTotal

iv) Debt Equity Ratio =s)liabilitie(internalequitytotal

sliabilitieexternalTotal

v) Lendings Deposit Ratio =deposittotal

lendingsTotal

vi) Investment Deposit Ratio =deposittotal

(net)sinvestmentTotal

vii) Advances Deposit Ratio =deposittotal

(net)advancesTotal


38/58

viii) Gross Profit Margin =earnedt/returnup/interes-mark

incometup/interes-markNet

ix) net profit margin before tax =earnedinterestup/return/-mark

taxationbeforeprofitTotal

x) Net profit margin after tax =earnedinterestup/return/-mark

tionafter taxaprofitNet

xi) Asset turnover ratio =assetsTotal

earned)tup/interes-(markrevenueTotal

xii) Return on assets =equityTotal

taxationbeforeprofitTotal

xiii) Earnings per share =goutstandinsharecommonofno.

dividendpreferred-incomeNet

xiv) Operating expense-total expense ratio =expensetotal

expenseOperating

xv) Operating expense total revenue ratio =revenuetotal

enseexpOperating

xvi) Operating expense total assets ratio =ratioasetstotal

enseexpOperating

xvii) operating expense total deposit ratio =ratiodepositTotal

expenseOperating

xviii) price earnings ratio =shareperearnings

shareperprice,Face

xix) dividend yield =goutstandinsharestotal

dividendTotal

3.6 RATIOS ANALYSIS


39/58

Liquidity and credit risk measurement

2008 2009 2010

Current ratio .98 1.00 .63

Cash ratio .08 .12 .03

Debt ratio .97 .96 .95

Debt equity ratio 30 26 19

Lending deposit ratio .04 .10 .18

Investment deposit ratio .27 .36 .49

Advances deposit ratio .63 .49 .43

Profitability measurement

Gross profit margin .49 .56 .60

Net profit margin before tax .09 .12 .20

Net profit margin after tax .05 .07 .11

Asset turnover ratio .08 .09 .06

Return on assets .76% 1.12% 1.32%

Return on equity .13 .16 .19

Earning per share 3.03 4.57 6.52

Operating expense total expenses ratio .53 .49 .57

Operating expense total revenue ratio .59 .43 .52

Operating expense total assets ratio 5.10% 3.94% 3.43%

Operating expense total deposit ratio .06 .05 .04

3.7 INTERPRETATION

Ratio is a simple mathematical expression of the relationship of one item to

another. Ratios are particularly important in understanding financial statements because

they permit us to compare information from one financial statement with information from

another financial statement. There are some limitations to financial ratios. First different


40/58

firms use different accounting policies; secondly different businesses have different

volumes and different conditions.

3.8 LIQUIDITY AND CREDIT RISK MEASUREMENT

3.8.1 Current ratio

It is used to determine the short-term debt-paying ability of the business. The ratio

is computed by dividing total current assets by total current liabilities. The higher the

current ratio, the more liquid the company appears to be. According to the ratio calculated

for MCB, the current assets are lower. Than the current liabilities. But there would be

enough liquid assets to pay the current liabilities. As the decreased has occurred only due to

the increase in deposits. The ratio is particularly an imperative for present deposit holders

and prospective deposit holders to base their decisions upon. In general, the current ratio of

the Bank is satisfactory with a nominal variation over years.

3.8.2 Cash ratio

The cash ratio determines the position of the business to pay its liabilities with the

cash in hand. The cash ratio of MCB for year 2010 is .03 which means that only 3% of

liabilities can be paid through cash in hand. At first glance, this ratio may show a very

gloomy picture of the business. But it is noteworthy, that the banks are not allowed to keep

surplus of their cash with them, they have to deposit it with central bank. Moreover

the banks have to pay its depositors, which is not possible by keeping the cash in their

wallets. They have to invest it in some profitable ventures.

3.8.3 Debt ratio

Debt ratio is a measure of creditors long-term risk. The ratio is a percentage of

total liabilities of total assets. If there are more liabilities in proportion to assets, creditor

will hesitate to lend the money, as the chances of payback will shrink. So the lower the

debt ratio, the safer the position of creditor. The debt ratio of MCB for the year is .95,


41/58

almost the same over previous years. The debt ratio for a bank over 0.90 is considered

normal. It also suggests that proprietors finance only 5% of total assets.

3.8.4 Debt-equity ratio

It shows the relationship of total liabilities and equity. Total liabilities are divided

by equity. If liabilities outnumber equity, the chances of paying off to the creditors become

less in case of liquidation. For stockholders the higher debt-equity ratio means that they

will be paid less return, as first the interest will be paid. But there is a positive aspect too. If

the return earned on the funds borrowed from creditors is adequately more than the interest

paid to the creditors on these funds, stockholders will be left with more profits for

appropriation.

The debt-equity ratio for MCB is 19, which means that liabilities are 19 times larger than

the equity. The ratio for previous years was 26, which enunciate that the equity has

increased for the year. The reasons for increase are the issue of bonus shares, increase in

interim dividend, and increase in un-appropriated profit.

3.8.5 Landings deposit ratio

This ratio shows the relationship between the total lendings of bank to its total

deposits. For the year 2009, this ratio was 18%, which means that the bank has utilized

18% of the deposits for lending purposes. Comparing it to the 10% ratio for previous year

we see positive change regarding the profitability.

3.8.6 Investment deposit ratio

Taking the investment of bank as percentage of deposit we see that its 49% of

deposit for year 2009. While for previous year it was 36% only which clearly indicates that

the management of the bank is focusing more on the better and productive investment

prospective during the year.


42/58

3.8.7 Advances deposit ratio

Advances were 43% of the deposits for the year 2009 while this ratio was 49% for

previous year. Since the overall economic conditions were favorable and predictable (for

investment) the management had focused more on investments in year 2009.

3.9 PROFITABILITY MEASUREMENT

3.9.1 Gross profit margin

Gross profit margin for the year was 60%. Profit margin has improved over the

years, which indicates the attractive profitability of the Bank. The major reason for increase

in profit margin is the greater proportionate increase in interest/return earned and

comparatively lower proportionate increase in the interest/return expensed. It is possible

only because of better asset portfolio. Further analysis reveals that the Bank made possible

attracting large deposits despite of low PLS and mark-up rates, in turn more

Funds were available for investment at less cost. On the other hand the Bank made huge

profits on comparatively less amount of advances

3.9.2 Net profit margin before tax

A considerable improvement in net profit margin before tax affirms better internal

control by management over administrative expenses. The main reason for control over

administrative expenses is the postponement of increase of increase in salaries.

3.9.3 Net profit margin after tax


43/58

Net profit margin after tax is .11, which means that 11% of total revenue is left for

stockholders equity, while equity is just 5% of total assets. Being more profitable during

the year, company issued an interim dividend of Rs. 2.5 per share, Rs. 1.25 per share more

than for previous year.

3.9.4 Assets turnover ratio

The assets turnover ratio for MCB is .06, which means that assets generate revenue

of about 6% of the total assets. The ratio suggests that assets are adequately productive.

The ratio has faced little variations in previous years. In last year it was 9%.

3.9.5 Return on assets

The ratio is calculated by taking the net income as a percentage of total assets. The

ratio was 1.12% for previous year, but suddenly jumped to 1.32% in current year. More

return on less advances, comparatively less interest paid on deposits, and better control of

administrative expenses are the facts on which the improvement in this ratio is grounded.

3.9.6 Return on equity

The ratio is calculated by dividing the net income after taxation left for

appropriation by total equity. It recounts the return, equity holders get after interest and

operating expenses are paid. Although the whole left is not distributed among shareholders,

but improves the equity composition. The ratio of MCB has improved

Considerably over last few years. Currently ratio stands at .19, which means that business

is earning 19% of the equity for shareholders. In banking business, which is

overwhelmingly debt extensive, such a return is very profitable.


44/58

3.9.7 Earning per share

The ratio is calculated by dividing the net income less preferred dividend by

number of shares outstanding. The ratio for MCB is 6.52, which means the share at par

value of Rs. 10 is earning Rs. 6.52.

3.9.8 Operating expense total expense ratio

This ratio is an indication of the percentage the operating expenses carry to total

expense. Increase in this ratio indicates that the total operating expense has increased in

relation to total expense which in turn can be used to find the positive or negative effect onthe income of the bank. For year 2009 this ratio was 57% while for previous year this ratio

was .49%. The difference (8%) is off settled by the same percentage. Increase in net profit

margin before tax.

3.9.9 Operating expense total revenue ratio

This ratio shows the operating expense as %age of total revenue. This percentage

was 52% for 2009 while it was 43% for 2008. The huge increase in short term and long

term investments (the result is the positive effects of which will appear in the years ahead)

in responsible for increase in this ratio.

3.9.10 Operating expense total assets ratio

This ratio is showing a decreasing steadily through the years. For 2003 this ratio

was 5.10%, for 2008, 3.94% and for 2009 it is 3.43%. The steady decrease in operating


45/58

expense in a positive indication for the bank but management should be careful that it

should not be at the expense of de-motivation in delaying increases in salaries and fringe

benefits over the years.

CHAPTER#4 SWOT ANALYSIS

4.1 STRENGTHS

One of the major strengths of MCB is that it has very stable deposit base.

MCB is largest private bank in Pakistan with around 1000 branches, which cover

almost every part of Pakistan.

The bank enjoys competitive advantage over other banks in Pakistan.

The bank enjoys competitive profitability in the industry.


46/58

MCB has captured majority of potential customers in Pakistan.

MCB has the accounts of big organizations like OGDCL, PTCL, EFU, PTC etc.

MCB is Successive and Market oriented.

MCB investing huge sums on HR development and training.

Customer default rate is lower as compared to other banks.

MCB has the largest ATM network in the country.

Meeting the challenges of latest Technology by introducing Smart card remit

express, mobile banking etc.

Laying foundation on sound basis; recently for this they met with the ORACLE

representative of South Asia, to purchase ORACLE software for their banking

system and transform its environment in such a way so as to come in line with those

of other international banks.

Establishment of TFC: Centralized import and export center of MCB in one special

circle taking this extensive burden from branches, whereas no other bank has done

this so far.

Maintaining an Excessive Earning Acceleration, this is expected to result in

substantial value enhancement for investors.

EUROMONEY Awards of Best Bank in Pakistan for best bank in Pakistan, plus the

accolade of best domestic band in Pakistan.

Extensive Management Restructuring to translate into bottom line improvement for

going forward. This includes induction of professionals in strategic business areas,

shedding surplus staff and shutting down loss making low potential branches. From


47/58

1996 onwards some 350 Branches were closed down & releasing staff of approx

4600 with golden handshake.

Larger Market Share: MCB accounts for 10.4% of total assets, 10.0% of deposits

and 11% of loans in the banking system. So it has a clear edge oversmaller banks.

Striving for income: New Team after massive restructuring, is looking to strive for

greater operating income, as is evident from the figure (15) that since 1996 bank

has been able to gain some net positive Profit After Tax amount consistently and

will be aiming to do so in near future.

Perhaps the only large bank in Pakistan to have a formal electronic banking

research cell that is exploring the technical requirements and market size Potential

of Internet Banking.

4.2 WEAKNESS

Decision making process is very slow.

It is not having greater no. of branches abroad.

Though ATM network is the largest in Pakistan, still some potential areas dont

have the ATM.

MCB RTC is useable only in Pakistan.

Some management positrons needed are not professional.

Although most of the branches are computerized now, still some important

branches dont have computers.

Low motivational level; non-aggressive marketing.

Employees dissatisfaction due to ill treatment and improper reward system.


48/58

Favoritism and Nepotism in recruitment.

Interest rate is very meager

Extensive Management Restructuring though beneficial has some negative impacts

on the existing performance of work. Such large scale restructuring results in too

much load on single person plus the fear of being fired from the job at any moment.

Slight neglect as part of human resource management staff. Initially employees

were given a quota of 2 weeks vacation per year or its equivalent amount in Rs. as a

Recreational Activities have been withdrawn. Such program was essential to keep

the employees in high spirit giving that extra bit of time for them to personal life.

It is extremely condemnable that sometime a circular is kept clandestine and not

disclose to the staff by the branch managers which is in line with their needs due to

some inexplicit ulterior motives.

Lack of Job Rotation: Job rotation has not been given due consideration and

employees get bored due to monotony.

No Conspicuous rise in Staff Salary: As part of Human of resource

Management apart from lack of other employees benefit funds, nothing is done to

enhance the staff salary to be used as basic motivational factors in an effort to cut

down the administrative cost by the management.

Prevailing Bias and Prejudice: Senior Junior Consideration may result in tussle in

future. Therefore it is extremely necessary to develop such amicable environment

that builds up harmony.

4.3 OPPORTUNITIES

Leasing sector is growing in Pakistan for the last two to three years which provides

opportunity to MCB to go ahead in this area as well.

MCB is providing Consumer Finances at comparatively lower rates which paves a

way to grab more customers


49/58

Financing to small/medium cottage industries will definitely increase its advances

and profitability as well.

Islamic Trading Based Banking can enhance the business of the bank.

Targeting of Hundi/Hawalla through networking and IT potential of MCB.

Profitability is expected to strengthen despite decline in interest rate. The drop in

interest rates is expected to spur the private sector credit growth in an effort to kick-

start the dormant economy serving as impetus for productivity activity in economy;

which is likely to compensate for lower interest margins that result from less than

proportionate drop in deposit rates.

Banking sector fundamentals improving; on the back of economic stabilization,

improved monetary and foreign exchange reserves management by the central bank

and drive against loan defaulters.

MCB with its large branch network and hence huge, diversified clientele is

placed to benefit from lower NPLs, a new dynamic and cost conscious

management, and greater credit demand on the back of governments conscious

initiative towards a deflationary monetary policy.

Only Operationally efficient banks will benefit from Low Interest Rates: The

declining interest rate environment would lower MCBs cost of equity (COE), thus

having a positive impact on its ROIE COE spread, which in turn allows

MCB to show growth in value creation.

More Focus on consumer banking activities.

Strong earning momentum expected in future, through focus on loan book growth,

efficient utilization of idle cash and declining NPL.

Deposit expected to grow in future: The Governments decision to lower interest

rates has challenged the banking sector, including MCB, on the deposit

mobilization front. At the same, however, MCBs large branch network coupled

with its excellent market standing compared with other banks offering similar

returns on deposits is expected to retain even bolster its deposit base in future at

the expense of less efficient public Sector competitors.


50/58

4.4 THREATS

Other private commercial bank with sound profitability is also a threat to MCB e.g.

UBL, Alfalah, HBL etc.

For the last of many years, Pakistan is facing economic and political instability

which is a big threat.

Afghan war and Iraq war has a deep effect on the economy of Pakistan, which may

affect MCB.

Foreign banks are flourishing in field of consumer financing.

People dont prefer banking culture. They mostly prefer cash transactions.

MCB since 1996 is performing well in all most every department at national level

particularly. However if there is some competition that MCB may expect to face

come from the four nationalized commercial banks, which compete with the MCB

in terms of deposit mobilization at retail level.

Other banks working on the same phenomena seeking for proficient and efficient

staff is expected to enamor qualified and experienced employees of organization by

offering some brilliant incentives in the form of high salary and other benevolent

funds and this thing may also attract existing efficient staff of MCB. To some

extent they seem to be effective in their efforts.


51/58

CHAPTER-5 FINDINGS AND RECOMMENDATIONS

Recommendations are based on the previous sections of a report and are

suggestions that the analyst feels are required to be implemented in order to improve

further the standing and position of the firm in the financial world. These are thus based on

the findings and shortcomings noted in an organization while working with it and then

writing on it. Opinions of various capable individuals are sought who through their real life

experiences and deep insight are better able to judge whether the course of action adopted

by the organization is going to prove fruitful or does it require further improvement in the

form of changes in its strategies.

Following are the findings and recommendations for various Departments that were felt are

required while consulting the staff members of MADINA TAWON Branch.

5.1 DEPOSITS DEPARTMENT

The comparative analyses reveal that MCB has the lowest share of Deposits out of

the total in the market. Since deposits are the lifeblood of a bank, it should attract more

customers and expand its deposit base in the following manner

5.1.1 Simplification of procedures


52/58

The procedure of opening an account should be simplified. The account opening

form should be self-explanatory and include translations in Urdu for those customers who

are not well read, since the fact cannot be ignored that many people do not have a good

understanding of English.

5.1.2 No Duplication of activities

Once the account opening form is filled there should be no reason to submit a

written application for opening an account, since it not only is a wasteful and time

consuming exercise on the part of the customer but also makes filing lengthy.

5.1.3 Incentives for depositors

Those who deposit large amounts of money or are old customers of the bank should

be given free credit lines upto a certain limit. Besides, financial advice should be provided

to customers in case there is a change in the market trend before they seek for it.

5.1.4 Integrated marketing approach

All the officers in Deposits Department should be involved in marketing and not

just opening accounts and maintaining their records. This can be done through improving

their personnel relations skills and applying the Uni-Service concept of visiting the

potential customers at their offices and homes.

9.1.5 Performance appraisal

MCB should follow the performance evaluation policy strictly and award those

who bring in deposits and help it increase its market share. Unfortunately, this has been

stated in the banks policy but is not being implemented.

5.2 REMITTANCES DEPARTMENT

The Remittances Department at the Branch is divided into Inland Remittances and

Foreign Remittances.


53/58

Both these are dealt by separate officers and involve using specific stationary and

procedures. The following recommendations are made for this very important Department

of the bank

5.2.1 Organizing the department

The Department is spread over the entire bank with no specific person or desk for

the purpose. Usually drafts and telegraphic transfers are made in the cash counter that

results in hassle for the other customers. A senior officer detached from the other officers

Performing inland remittance transactions handles the foreign remittances. It would be

better for them to sit together so that they can benefit from his experience and know how.

5.2.2 Centralized money gram services

The customers receiving funds from abroad have to wait quite long in order to get

their money as the branch sends the application form through fax to the City Branch from

where it is confirmed whether the amount has been credited to the MADINA TOWN

Branch or not. This confirmation takes long at times and there is always a fear of the bank

losing its goodwill in case of lengthy delays. The service should thus be decentralized and

the Hub Branch having the authority of directly confirming the amount.

5.3 CASH DEPARTMENT

The following recommendations are made for the Cash Department.

5.3.1 Expansion of the cash counter

The Cash Department at the Branch needs special attention in the sense that the

cash counter is small and becomes crowded when there are more than five to six customers

to attend. Customers purchase drafts and other instruments from the very same counter

where utility bills are collected and cash is deposited and withdrawn. Hence, if a new


54/58

counter cannot be built due to certain limitations the utility bills should be collected

through a window so that the regular customers do not face any problems.

5.3.2 Extended timings for cashIn order for the bank to progress and compete with the others in the market, it

should extend the time for accepting and withdrawing cash. The customers face great

hardship especially when they come from far off places and find that the cash counter is

closed for the daily transactions.

5.4 BILLS AND CLEARING DEPARTMENT

The following suggestions are made for this Department keeping in view the

problems noted in it.

5.4.1 Career development

It has been noted that the officers taking bills for clearing do not involve themselves

much with the other operations of the bank and thus remain on the very same post and seatthroughout their banking career. This is against the modern day policies of organizations

giving their employees conducive, rewarding and equal opportunities of prospering and

growing with it. Thus, the Human Resource Department at the Head Office should prepare

a plan that shows the future growth potential of the employees based on their job

performance and evaluation and make it known to all.

5.4.2 Job rotationThere should be job rotation of employees especially in this department as it was

felt that the employees here know quite less as compared to the others. This will enhance

their capabilities and help them break the monotony making them find their work more

interesting.


55/58

5.4.3 Personality nourishment

The clearing officer has less to do with the operations of the bank and thus does not

sit at a front desk of the branch. As a result, he becomes usually casual and relaxed

About his apparel. This leaves a bad impression of the bank when he leaves the premises.

A dress code should be implemented and observed by all the employees in order to build a

reputation of the bank.

5.5 ADVANCES DEPARTMENT

There were certain drawbacks in the application and processing for the loan

requests that were observed at the branch. The findings and the recommendations are asunder

5.5.1 Proper documentation

If valid documents are not obtained before sanctioning the loan limit, it becomes

irrecoverable in case of default by the borrower. It has been noted that at times the related

officers oblige the customer by letting him submit the documents later and approving the

limit by getting the Disbursement Authorization Certificate from the Credit Committee. It

proves to be very time and resource consuming afterwards tracing the borrower to bring

in the documents. Therefore, correct and complete documents should be attained before the

amount is sanctioned and no leniency shown in any case.

5.5.2 Computerized record

All the sanctioned cases should have record on the computer as it is easy to access

and does not involve the hassles of maintaining and retrieving large and old files. For this

purpose, training programs should be organized for the Relationship Managers to enable

them to have a basic computer know how. Through this, they would also be able to assess

the financial position of the prospective borrower in minutes by using related financial

software.


56/58

5.5.3 Verification of security

Physical verification of the security tendered is a must rather than to merely rely on

the documents. It had been noted that where the property to be hypothecated/

mortgaged lay in remote areas such as the Gadoon Industrial Estate regular physical visits

are avoided by the officers

5.6 FOREIGN EXCHANGE DEPARTMENT

There various shortcomings that were noted in this Department and hence the

following recommendations

5.6.1 Centralization of the Department

All foreign trade related transactions are routed to the Foreign Exchange

Department in Islamabad, which causes unnecessary delay to the customer. In case of haste

or pressure from the importer/ exporter or some other reason the documents sent to the

Forex Department are not complete or correct the case is sent back to the MADINA

TAWON P Branch and it takes yet longer to process it.

5.7 OTHER FINDINGS AND RECOMMENDATIONS

The following recommendations are for the bank as a whole

5.7.1 Establishment of marketing department at the hub branch

Nowadays no organization can survive in this tough competitive world without

having able to market itself and its products. Keeping this in mind a Marketing Department

should be introduced in all the Hub branches that would easily implement the marketing

policies of the Head Office.

5.7.2 Development of managerial leadership


57/58

Good managerial skills make positive contribution towards higher effective results.

MCB should focus on the effective utilization of its human resource by applying the

modern style of management. This can only be possible if political interferences are

discouraged especially when hiring and placing personnel and the recruitment policies are

changed to give preference to M.B.A. and M. Com. Students.

5.7.3 Tests for promotions

A sizeable portion of the officers at MCB is promoted without conducting any tests

and interviews. This results in undeserving people sitting on the managerial posts and

steering the organization away from its goals and objectives in the long run.

5.7.4 Training for credit management

Special trainings on credit management should be imparted to the staff dealing in

financing activities of the bank. This is very important in light of current loan default

scenario in the economy.

5.7.5 Delegation of powers

Delegating powers to the Department in-charges up to the greater possible extent

will most certainly reduce the workload on the managers and they would be able to

perform well by taking quick remedial actions where necessary. Besides, the spare time

will be spent dealing with matters of more important nature.

5.7.6 Research and development department

A Research and Development Department in MCB will help it to adopt new

procedures and modern techniques that will help the bank to compete with the others. An

R&DD should be maintained at all the Hub Branches that would define the target market

For the bank in that particular area and through its findings suggest measures to improve

the performance of branches there.


58/58

BIBLIOGRAPHY1. Annual Report of MCB 2010

2. Brochures/Leafletss

3. Accounts opening forms of MCB

4. Donnelley, Gibson, Ivanceivich (Fundamentals of Management)

5. Briefings by head of each division department & other officer of MCB

Documents

BENI Mcb Internship Report