Internship report on MCB BAnk 2010.doc

INTERNSHIP REPORT ON MCB BANK LIMITED

IN THE NAME OF ALLAH, THE BENEFICENT, THE MERCIFUL

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DEDICATION

I dedicate my internship report of MCB Bank Limited to my

Respectable parents

And

Honorable teachers

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ACKNOWLEDGEMENT

By the Grace of Almighty, the most Merciful, the most Beneficial, I'm today

submitting my internship report, at the end of my first pragmatic experience

and I'm glad to have it with MCB, where you come first, only if you're the

customer. Thirst of learning is inside you, and whatever the environment, if

you're willing to learn, you do. At MCB, I had a new, challenging, yet a perfect

environment to learn. My parents' prayers and their teachings were always with

me and hereby I will like to take this opportunity to show my gratitude to all

those who made my internship an adventurous outwit.

.

Ghulam Farid

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PREFACE

Banking sector owes a pivotal importance in the economy of any country

through its vibrant functions. This is the deep seated motivator that geared up

me to join any bank for internship. Moreover, the practice and familiarity

learned during this tenure would also attest very helpful and alleviating in the

awaiting proficient life.

This report is an upshot of my internship in United Bank Limited, Main Branch

Pattoki. MCB Bank Limited posses an imperative importance in the banking

sector of Pakistan. It always remains the center of hustles in business activities.

It always endows with great covenant of rally round in terms of funds and

services at all epochs of its dynamism.

Although, a derisory period of my internship is not enough to learn the complex

operations of MCB Bank Limited yet I made industrious efforts to converse

them comprehensively in this report. Particularly, I have remunerated more

accents on study of distinguishing features and services of MCB Bank Limited.

I have made maximum venture to elaborate this report with the material read,

listened and observed.

I have strong belief that this report will guide and ease the readers to

understand the operations of banking system and more prominently have good

knowledge about MCB Bank Limited, one of the most trusty and leading banks

in Pakistan.

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Chapter – 1

INTRODUCTION

Chapter – 1

INTRODUCTION


INTRODUCTION

The study is about the general operations and management of MCB bank

Limited Main Branch pattoki.

Every student of BBA (Hons.) has to under to an internship program of Eight

weeks in any organization to get exposure the real time business environment

and to know what sort of changes information technology brings in

management activities. The Real purpose of this internship program is to

provide an opportunity to the students to see the practical applications and

approach of their background professions studies

The report is a reflection on my experience when I was internee in MCB bank

Ltd.

OBJECTIVE OF STUDYING THE ORGANIZATION

Following are the main objectives of selecting MCB Bank Limited for studying.

To observe the finance system of the bank, to know how banks

support the economy of the country.

To implement theoretical knowledge in practical field.

To understand the management system of the bank which consists

of experienced professionals of the bank.

Want to scrutinize newly and highly integrated computerized system

for doing banking transactions.

To know banks activities i.e. its services and products.

The bank is certainly one of the leading banks in Pakistan, the reason

being I selected it for Internship and learning purpos

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HISTORY OF THE MCB BANK LIMITED

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

Muslims having strong financial capacity were thinking to invest in this sector

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

known as MCB. This was the third Muslim bank in the subcontinent.

HISTORY

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

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

certificate of incorporation was issued on 17th August, 1948 with a delay of

almost 1 year; the certificate was issued at Chitagong. The first Head office of

the company was established at Dacca and Mr. G.M. Adamjee was appointed

its first chairman. It was incorporated with an authorized capital of Rs. 15

million.

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

August 23rd, 1956 through a special resolution, now recently the Head office of

MCB has been transferred to Islamabad in July, 1999 and now Head office is

termed as Principle Office.

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

had 506 branches and deposits amounting to Rs. 1,640 million. Although. MCB

has a reputation of a conservative bank but nationalization also left its effects

on this institute as well and by end of year 1991 in which it was privatized the

total number of branches were 1.287 and deposits amounting to as high as Rs.

35,029 million.

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Vision Statement

CHALLENGING AND CHANGING THE WAY YOU BANK

Mission Statement

To become the preferred provider of quality financial services in our

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

work

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Our Core Values

CUSTOMER FOCUS

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

we interact with him/her. We must ensure that we do everything to meet and

exceed the customers expectations with perfect to times, accuracy & quality

services.

EMPLOYEE RESPECT & DIGNITY

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

constructive feedback for their development. We celebrate diversity and seek

suggestions from all employees for improvement. We ensure that responsibility

& fairness in all our decision-making.

TEAM BASED APPROACH

QUEST FOR QUALITY

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

always seek ways for exceeding expectations of customers & colleagues. We

also ensure that we do things right, first time every time.

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.

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GOOD CORPORATE CITIZENSHIP

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

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

positive role for the betterment of the community at large.

NATURE OF THE ORGANIZATION

MCB is in it’s over 50 years of operation. It has a network of over 1026

branches all over the country with business establishments in Sri Lanka and

Bahrain. The branch break-up province wise is

Punjab (57%)

Sindh (21%)

NWFP (19%)

Baluchistan (3%) respectively

Over 750 of which are automated branches, Over 197 MCB ATMs in 35 cities

nationwide and a network of Over 12 banks on the MNET ATM switch.

In 2005 the total No. of Employees are 9,377 and No. of Accounts are

4,248,399.

In (2005, 2004, 2003, and 2001) MCB has received the Euro money award for

the 4th time in the last 5 years. MCB won the "Best Bank in Pakistan".

In 2000 and 2007 win the award of “Best Domestic Bank.” In 2004, 2005 also

has win Asia Money awards for being "The Best Domestic Commercial Bank

in Pakistan.

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Business volume of Muslim Commercial Bank:

Rupees in million 2003 2004 2005 2006 2007

Profits

Operating profit 6,656 6,746 13,830 20,069 20,856

Profit before taxation 3,612 4,057 13,018 18,500 21,308

Profit after taxation 2,230 2,431 8,922 12,142 15,266

Balance sheet

Shareholders fund 11,108 14,552 23,307 40,844 55,120

Deposits from customers 211,511 221,069 229,345 257,461 292,098

Investments 128,276 67,194 69,481 63,486 113,089

Advances to customers 97,200 137,317 180,322 198,239 229,732

Total assets 272,323 259,173 298,776 342,108 410,485

Information per ordinary shares

Earnings (Rs) 7.28 7.21 21.36 23.40 24.30

Cash dividend (Rs) 1.25 1.50 1.50 2.00 2.50

Dividend payout ratio (%) 37.80 34.65 19.22 32.61 51.45

Net asset value at the year end(Rs) 36.24 43.16 55.64 74.76 87.73

Market value at the year end (Rs) 51.40 58.70 167.80 246.10 399.95

Capital adequacy ratio (%) 0.00 9.64 12.54 18.65 17.88

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NUMBER OF EMPLOYEES

MCB bank since its incorporation has the more potential bank not only for its

customers but also for its employees. MCB bank offering great working

opportunities for all the people who are interested to do job in MCB bank and

with passage of time employees is increasing as its business volume is

increasing because MCB bank provide enhanced career opportunities with

dynamic work employees are motivated with higher salaries according to their

education and experience level currently round about 9946 employees are

working in MCB bank including contractual and permanent staff

Total numbers of employees = 9946

STAFF OF THE BRANCH CONSISTS OF 13 MEMBERS

DESIGNATION NO OF EMPLOYEES

Branch Manager 01 Grade I

Operation Manager 01 Grade I

Customer Service Officer 01

Credit Manager 01 Grade III

General Banking Officer 02 Grade III

Cashier 01 Grade III

Cash Officer 01

System Administrator 01

Gun Man 02

Peons 02

PRODUCTS AND SERVICES12


MCB ATM Services

(a) MCB ATM Card

MCB ATM Network is the largest and most advanced of its kind in the

country, and is part of MCB's continuing efforts to provide customers with

convenience that suits all requirements most. MCB ATM has operated

globally.

Card Categories

MCB ATM Regular Card

The MCB ATM Regular Card allows withdrawal of up to Rs. 10,000 per day

and a maximum of 3 withdrawals per day per card.

MCB ATM Gold Card

The MCB ATM Gold Card allows withdrawal up to Rs. 25,000 per day and

a maximum of 6 withdrawals per day per card. The cardholder has to make

at least two transactions to withdraw the full amount of Rs. 25,000

BILL PAYMENTS:

MCB easy bill pay offers unmatched convenience to pay utility and mobile

phone bills or re-charge prepaid mobile phone accounts.

MCB is the only bank that offers coustomers, 3 convenient options of making

bill payments to PTCL, SSGC, KESC, Mobilink, and Ufone. MCB Smart Card

or MCB ATM Card Holder can easily pay their bills or re-charge their prepaid

mobile phone account.

ACCOUNTS

Saving Account

MCB’s Rupee Savings account is the most convenient way to manage savings.

Its basic features are:

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Low average balance required

Profit is paid on customers account on a half yearly basis

Cash deposit and withdrawal facility at hundreds of MCB

branches across Pakistan (conditions apply)

Withdraw cash through Pakistan’s largest ATM network.

Customer can use an account to pay bills 24 hours a day, 7 days

a week through Virtual Banking

Current Account

MCB’s Rupee Savings account is the most convenient way to manage savings. Its features are given as below:

Low average balance is required. Unlimited free of cost transaction

facility at concern branch. Profit is paid on account on a half yearly

basis.

Term Deposit

A MCB term deposit scheme is also valuable to suit customer’s requirement.

Customer can avail on choice of 01 month, 3 months, 1 year, 2 years, 3 years, 4

years, and 05 years term deposit. Its benefit includes half yearly profit payment.

Customer can avail credit facility up to 75% of total deposit.

Basic Banking Account

In compliance with the directives of State Bank of Pakistan via BDP Circular

No. 30, issued on November 29, 2005, the Basic Banking Account has been

launched with effect from February 27, 2006. This product has been introduced

to facilitate the low income group as well as the existing account holders who

wish to convert their regular savings or current account into Basic Banking

Account.

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The Basic Banking Account is a current account and can be opened with a

minimum initial deposit of Rs. 1000/- only. Account holders will be allowed 2

deposit transactions (either cash or through clearing) and 2 withdrawals (cash

or clearing)

each month. All customer-initiated transactions over and above this limit will be

charged a transaction fee.

Foreign Currency Accounts

This account offers very attractive returns on Foreign Currency investment.

Customer can open a foreign currency Savings account in any of the four

currencies i.e. US Dollar, UK Pound Sterling, and Euro. Its features are as

below:

Unlimited transaction facility.

Low balance requirement.

Profit credited to account on a half yearly basis.

Account holder can avail a credit facility up to 75% of the total

deposit value.

A foreign currency account can be opened at any of MCB foreign exchange

dealing branches.

SMART CARD / DEBIT CARDS

By using of this product customer can manage expenses. MCB is the only bank

to introduce a debit card that gives the option to choose from domestic and

international cards for local and global usage respectively.

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MCB VISA:

It provides the conventional credit card services in a manner that is superior in

comparison. MCB Visa is the most secure, affordable and rewarding credit

card. MCB Visa is accepted at all ATMs across Pakistan as well as at 27

million acceptance locations worldwide.

TRAVELER’S CHEQUES

MCB Rupee Traveler's Cheques were first introduced in 1993 as safe cash for

traveling and travel related purposes. The product has been extremely popular

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

LOANS

Term Loans:

An individual can gain and benefit the most through MCB Consumer Banking.

MCB provide friendly, efficient and attentive personalized banking services - a

unique banking relationship experienced by each MCB client.

Working Capital Loans:

Based on the customer’s specific needs, the Corporate Bank offers a number of

different working capital financing facilities including Running Finance, Cash

Finance, Export Refinance, Pre-shipment and Post- shipment etc. Tailor- made

solutions are developed keeping in view the unique requirements of your

business.

FINANCING

Trade Finance

MCB corporate banking provides a finance services that include an entire range

of import and export activities including issuing Letters of Credit(L/Cs), 16


purchasing export documents, providing guarantees and other support services.

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INVESTMENT BANKING

MCB’s Investment Banking Team has emerged as a leading player in

Pakistan's Investment Banking arena. The Team handles advisory, corporate

finance and capital markets related transactions. Within these areas, the team

has developed expertise in:

Private Placements

Debt/Equity Underwriting Term Finance Certificates

Loan Syndication

Arrangement of Non- Fund Facilities Mergers and Acquisitions

Corporate Advisory

MCB VIRTUAL BANKING

MCB Virtual Internet is to manage and control customer’s banking and

finances – when they want to, where they want to. MCB’s Virtual Internet

Banking facility is

Simple

Secure Free of cost.

Individual Users/ Corporate Users

MCB Virtual Banking - is a safe and convenient way to manage and control

banking and finances. This service meets customer’s both (individual’s and

corporate) essential banking needs.

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Chapter – 2

INTRODUCTION TO ORGANIZATIONAL

STRUCTURE

Chapter – 2

INTRODUCTION TO ORGANIZATIONAL

STRUCTURE

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ORGANIZATIONAL STRUCTURE

MCB relies on strong, lasting relationship with its customers and on its

reputation for stability and security for its continued process. MCB extends its

philosophy to its technology strategy but not perusing technology for

technology's sake. However, MCB learns from the mistakes of others

especially in "consumer banking". We let others get in first, take the hit, and

find out the flows. Said MCB officials - and has installed efficient and effective

system for processing and delivering information. Some directors are the

personnel of the MCB Bank and others are successful business person and

executives of other major organization. Nineteen members are included in

board of directors.

2.2 MAIN OFFICE DEPARTMENTS (HEAD OFFICE)

The head office is operationally in charge of central affairs including the

delegation of powers and authority to the regional head quarters throughout the

country. All the senior management team works in the Head office of MCB

bank is situated in Karachi. And it’s all branches, regional offices, corporate

branches and overseas branches and online branches and representative offices

work according to rules and regulation set by the head office.

Following are the departments that are working at head office:

Administration

Credit Management

Investment Banking

Human Resource

Information Technology

Corporate Planning & Budgeting

Finance & Treasury

International Division

Inspection & Audit

Law Division

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MANAGEMENT COMMITTEE

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Board of Directors

Mian Mohammad Mansha Chairman

S.M. Muneer Vice Chairman

Mohammad Aftab Manzoor President & Chief Executive

Tariq Rafi Director

Sheikh Mukhtar Ahmed Director

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Mohammad Arshad Director

Shahzad Saleem Director

Mian Umer Mansha Director

Sarmad Amin Director

Audit Committee

Mian Mohammad Mansha Chairman

Shaikh Mukhtar Ahmed Member

Shahzad Saleem Member

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Chief Financial Officer

Ali Amin

Company Secretary

Tameez-ul-haque

Auditor

A.F.Ferguson & co

Chartered accountants

M.Yousuf Adil Saleem & co

Chartered accountants

Legal Advisor

Chartered accountants mandiwalla & zafar

Advocates & legal consultants

Shariah Advisor

Dr. Muhammad Zubair Usmani

Registered Office

MCB building, F-6/G-6

Jinnah Avenue, Islamabad

Principle Office

Adamjee house 2nd floor

I.I chudrigar road Karachi

Registrar and Share Registration Office

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THK associates (pvt) Ltd.

Shares department, ground floor sheikh sultan trust building no 2, Beaumont road

KarachI

ORGANIZATIONAL HIERARCHY OF MCB

PRESIDENT

EXECUTIVE VICE PRESIDENT

SENIOR EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

OFFICERS GRADE

I II III

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

CASHIER

ASSISTANTS

PEONS

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Chapter – 3

INTRODUCTION TO THE DEPARTEMENTS

Chapter – 3

INTRODUCTION TO THE DEPARTEMENTS

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FIELDS OF ACTIVITIES

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

this purpose different banks provide different services to the people in different

forms. The MCB Bank is a commercial bank, in modern time commercial banks

play a very important role and their functions are manifold. The main functions

and services which MCB Bank Limited provides to different peoples are as

follows.

1) Open Different accounts for different peoples

2) Accepting various types of deposits

3) Accepting various types of deposits

4) Granting loans & advances

5) Undertaking of agency services and also general utility functions, few of

those are as under

Collecting cheques and bill of exchange for the customers.

Collecting interest due, dividend, pensions and other sum due to

customers.

Transfer of money from place to place.

Acting an executor, trustee or attorney for the customers. ‘Providing

safe custody and facilities to keep jewellery, documents or securities.

Issuing of travelers cheques and letters of credit to give credit

facilities to travel.

Accepting bills of exchange on behalf of customers.

Purchasing shares for the customers.

Undertaking foreign exchange business.

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Furnishing trade information and tendering advice to customers.

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

different departments. These departments handle different jobs so that division of

work is there for improvement of functions and also it is easy to control the

situation. The general division in a branch is as follows:

1. Cash department

2. Deposit department

3. Advances & credit department

4. Remittance department

5. Foreign exchange department

6. Technology department (new addition in order to cop with the

growing needs of day to day technology requirements)

CASH DEPARTMENT

The following books are maintained in the Cash Department:

Receiving Cash Book

Paying Cash Book

Token Book

Scroll Book

Cash Balance Book

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

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

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

payment, it is entered in the token book and token is issued to the customer. The

token clerk and the Cashier make entries in the paying book and payment is made

to payee. At the close of day, the Token Book and Paying Cashier Book are

balanced.

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

balance book and drawn closing balance of cash.

Opening Balance + Receipts - Payments = closing Balance.

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

mostly frauds are made in this department, therefore, extra care is taken in this

department and nobody is allowed to enter or leave the area freely. Mostly, cash

area is grilled and its door is under supervision of the head of that department. All

the books maintained in this department are checked by an officer.

DEPOSIT DEPARTMENT

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

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

of borrowing lending forms their spread or gross profit. Therefore we can rightly

state that deposits are the blood of the bank which causes the body of an

institution to get to work. These deposits are liability of the bank so from point of

view of bank we can refer to them as liabilities.

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

privatization there is a sharp incline in over all deposits of the bank. The increase

in deposits is also a cause of increase on total number of accounts; bank has

progressed in both aspects.

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TYPES OF DEPOSITS

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

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

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

1) Time deposits / liabilities

2) Demand deposits / liabilities

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

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

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

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

addition of different

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

transaction, basis for calculation of profit, deductions, additional benefits,

eligibility for different groups.

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

them are as follows:

CURRENT ACCOUNT

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

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

if he likes. There is also no restriction of amount to be deposited or withdrawn.

However, there is requirement of minimum balance maintenance of Rs. 1000/-.

Usually this type of account is opened by the businessmen. No profit is paid by

the bank and no service charges are deducted by the bank on current deposits

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account. These types of deposits are also exempt from compulsory deduction of

Zakat.

PLS ACCOUNT

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

type of account is opened with a minimum deposit of Rs. 1000/-. Under this

scheme deposits can be made only up to a-costing amount and withdrawals are

allowed twice a week or 8 times a month. If a big amount is required a seven days

notice is required before the withdrawal. The profit is paid on these accounts on

the minimum balance during a month for the whole of

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

government.

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KHUSHALI BACHAT ACCOUNT

This is an advance form of PLS saving a/c, in this type of account. The minimum

balance requirement for this type is Rs. 2500/-. There is also restriction on the

number of withdrawals as well, i.e. up to 4 times in a calendar month. For

maintaining this extra balance the customer gets the benefits of profit calculation

on daily product basis and also free service of standing instructions of paying

utility bills and HBFC installments. All other rules of saving account are

applicable.

PLS 365 GOLD

This is a special type of saving account in which customer maintains a minimum

balance of Rs. 300,000- and in turn he gets the benefits of daily profit calculations

and also there is no restriction on the maximum number of withdrawals as was

there in the case of KBA. There is also another advantage of this scheme that if

balance on a particular day falls below the minimum balance then only the

product of that day is ignored whereas in KBA, if balance falls below the

minimum limit then all the products for that month are ignored on in other words

no profit is paid for that month.

Khaunm Bachat Scheme

This is a type of term deposit, in this type of deposit an account is deposited and

monthly payments of Rs. 1000/- are made by the account holder in this account

for a minimum of 10 years. After

the expiry of term, he receives his funds along with profit for the tenor. The

distinctive feature of this product is that profit is calculated on monthly basis and

charged to account on end of each half /ear. Then profit is also calculated on that

amount of profit which is credited to the customer's account. So we can say that

in this type of account there is a concept of accumulated profits on profit. This 32


ends in getting a heavy return for the depositor at the end of tenor for his small

savings. This product was actually introduced to promote saving habits in the

people. Zakat and withholding taxes are deducted as per rules only at the time of

maturity while making payment to the customer.

Term Deposits Receipts

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

ranging from 1 month to 5 years or more. These are in the form of receipts and

profit on these receipts is paid biannually. These receipts are encashable after

expiry of the period for which they were issued. Different profit rates are applied

to different type of TDRs.

Under this deposit scheme, a deposit is received from the depositor under the

condition that he will intimate the bank before a certain period in case of

withdrawals.

FUNCTIONS OF DEPOSIT DEPARTMENT

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

Department handles the account opening, profit payment and accounting of all

types of deposit schemes.

Account Opening

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

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

customer is of a contractual one and all the conditions applicable to this contract

act are also applicable.

Profit payment & calculation

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

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

are calculated separately and added till the end of 6 month period. Then the sum

total of these products is multiplied with the respective profit rates which are 33


issued by the Head Office at the end of each half yearly closing. The profit

provisions for each type of deposits are also calculated on monthly basis by the

same department in order to calculate the net profit or loss position of the branch.

Accounting Entries

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

department. However, in small and medium size branches, the accountant

performs the book keeping duties for all kinds of ledgers.

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CLEARING DEPARTMENT

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

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

through the bankers clearing house.

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

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

the collecting banker runs certain risks in receipt of their ownership the law has

provided certain protections to the banks.

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

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

crossed cheque can only be paid to a banker, who collects it for a customer in

good faith and without negligence.

Types of Cheques

Transfer cheques: are those cheques, which are collected and

paid by the same branch of bank.

Transfer delivery cheques: are those cheques, which are

collected and paid by two different branches of the same bank

situated in the same city.

Clearing cheques: are those cheques, which are drawn on the

branches of some other bank of the same city or of the same area,

which is covered by a particular clearing house.

Collection cheques: are those cheques, which are drawn on the

branches of either the same bank or of another bank, but those

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branches, are not in the same city or they are not the members of

clearing house.

Functions of Clearing Department

To accept Transfer, Transfer delivery, clearing and collection cheques

from the customers of the branch and to arrange for their collection.

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

collection to any other branch on MCB or any other members or sub

member of the local clearing house.

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

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

the local clearing house

Receiving and scrutinizing the cheques and other deposit instruments, and

the pay-in-slip at the counter.

Fixing the stamps.

Scrutiny and receipt by the authorized officer.

Returning the counter file to the depositor.

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

Separating the cheque into transfer, transfer delivery, and clearing

cheques.

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CLEARING PROCESS (FLOW CHART)

Cheque with slip given

Cheque along with slip checked, signed & received by officer

The same day not honored cheques are returned to Main Branch

The day after tomorrow the banks are informed about dishonored cheques

Provisional entries for returned cheques are debited again in both computer & daybooks

Party is informed about returned cheques through Phone or personal contact

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

(If there is any availability)

Slip is asked & filled

Entries in daybooks are made

Entries checked & verified by another officer after banking hours by officer

Cheques collected at the day end by Main Branch’s Officials

Cheques are sent to respective banks next day after posting in computer by

Main Branch

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ADVANCES DEPARTMENT

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

giving full attention towards this aspect and it is also obvious from the growing

portfolio of advances and from very low delinquency rate. The credit portfolio of

this institution is in a very much better shape than other financial institutions of

Pakistan and the credit goes to the management and the staff who are concerned

about the quantity and quality as well.

Loans

Cash Credits

Overdraft

LOANS

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

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

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

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

granted against security of gold documents.

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

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

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LOAN AGAINST GOLD

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

estimates the value of Gold or Gold ornaments through an agent (Gold smith) and

keeps a margin of 40 to 50 percent. After the opening the gold loan account a

token is given to the borrower, which is a bank receipt.

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

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

receipt for the gold ornament taken in the demand loan ledger. This receipts states

that he ornaments returned are complete and in order. Part delivery of ornaments

is given against part payment of a loan but care is taken that the ornaments still in

banks possession fully covers the balance of the loan outstanding. The interest

gold loan is to be applied with quarterly.

LOAN AGAINST PLEDGE OF STOCKS

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

mind:

Stock pledged must be readily saleable

Products should be readily saleable

Advance should be within the borrows means

39


REQUIREMENTS OF LOAN

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

of the client:

Credibility

Feasibility Report

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

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

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

enables the bank to judge the likely return of the business.

CASH CREDIT

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

bank. Customer is granted a loan up to a certain limit, sanctioned by the head

office, from which he can draw when he requires and interest is charged on the

amount actually utilized by the customer. In order to avoid the danger of idle

fund, the bank charges a certain rate of interest, even if the customer does not

withdraw any amount. The rate charged by the bank on cash credit in 46 paisa

per thousand on daily basis.

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

follows:

ADVANCE AGAINST PLEDGE OF STOCKS

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

taken, from the certain products or stock,

40


but the actual pledge is created when the stock or finished products are placed

under the bank's lock or the document of title is duly endorsed to the bank by the

borrower.

HYPOTHECATION OF STOCKS

The difference between pledge and hypothecation is that under a pledge the

borrower's goods are placed in the bank's possession under own lock, whereas,

under a hypothecation, they remain in the possession of the borrower or guarantor

and are merely charged to the bank under documents signed by them. Even

though the documents empower the bank to take possession of the goods

hypothecated, but it is possible that the borrower may actually resist any attempt.

MORTGAGE OF PROPERTY

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

security or alternatively as unauthorized security.

REMITTANCE DEPARTMENT

Remittance department performs following functions:

Mail Transfer (MT)

Telegraphic Transfer (TT)

Demand Drafts (DD)

MAIL TRANSFER (MT)

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

41


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

same bank or any other bank. Customer fills the form given by bank. If the

customer has an account with that amount as mentioned in the application form

then concerned officer will undertake the following procedure to make the mail

transfer complete.

1. Branch Mail transfer form

2. Receiving Branch Register copy

3. Issuing branch register Copy

4. beneficiary advice

5. advice to customer

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

will have to deposit the amount which he wants to transfer under Mail. Then the

above said procedure will be done.

TELEGRAPHIC TRANSFER (TT)

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

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

which on receiving it immediately makes the payment to the customer and

afterwards the voucher are sent to that bank by ordinary mail.

DEMAND DRAFT (DD)

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

cash with him personally. The idea behind is to avoid the risk and burden of

currency notes in huge quantity. Demand draft can easily be handled whatever

amount it has and the money can easily be taken from the bank when it is

presented. In fact, the bank persuades the customer to transfer money by drafts

and avoid the risk of frauds involves in MT and T.T. Draft is only issued when

the bank knows customer and bank has the confidence in him

42


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

form. Then the concerned officer fills the following forms:

1. Customer’s advice

2. Customer’s debit form

3. Register copy

4. Cover Advice

FOREIGN DEMAND DRAFT

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

bank issues FDD to the bank of another country. It requires foreign exchange and

it involves seven forms, which are to be filled.

Bank Charges (July-December 2006)

S. # Item Rate

1 Telegram on TT Actual-MinimumRs.75

2 Postage on MT Actual-MinimumRs.50

3 Cancellation of DD/Pay order Rs.50 far Account holder

Rs.100 far non Account

holder

4 Issuance of Cheque Book Rs. 3 per leaf

5 Account closing Cost Rs.250 for LCY

6 Issuance of duplicate Draft Rs.200 far Account holder


holder

7 Issuance of duplicate FDD Rs.300

8 Issuance of duplicate Pay order Rs.100 far Account holder


43


holder

9 Issuance of RTC Rs.5 per piece

10 Stop payment charges Rs.150

11 Issuance of fresh statement Rs.25

12 Issuance of duplicate statement Rs 50

TECHNOLOGY DEPARTMENT

Technological advancements are also affecting the banking industry. The foreign

banks have a competitive edge over all local banks in their technologies'

advancements and automated systems. Local banks have also realized the gravity

oil this situation and are striving to add computerized systems to their branches

MCB is ahead of all other local banks in this field and now it is in a position to

even compete with foreign banks. There are more than 1045 branches of MCB all

over Pakistan and out of these more than 300 branches are fully computerized

Almost all .the branches of big cities are computerized; therefore, the need for a

technology department at each branch is growing. Now a day, a computer

division is working in each city to provide service to ad the branches of that area.

MCB has also introduced the now concept of online banking. There are now

more than 250 branches linked through this system and they can transact with

each other directly using computer systems at their own branches. Now customers

do not have to wait long for their transactions and can operate their account

through all the online branches.

44


ATM NETWORK

ATM stands for Automatic Teller Machine. This machine is used to transact in

one's account without intervention of humans. These machines are basically used

for taking cash, confirming balances and requesting statements / cheque books.

MCB has the largest ATM network in the country at the moment with almost one

ATM at each online branch and also ATM terminals at International Airports.

This network covers more than the 27 cities of Pakistan including the provincial

capitals and large commercial cities of the country.

ATMs are operated through a card issued to the valued customers and by

application of Personal Identification Number (PIN number). A person can

withdraw from any machine across Pakistan with having an account in only one

branch of MCB. This was only possible with the help of online system. In this

system all the machines are linked to central banking host at IRM division

Karachi through either satellite or telephone controller. This system identifies the

card holder and his PIN Number.

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

MasterCard. This contract will enable an ATM card holder to use his account

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

Green Cards are ordinary cards with a maximum withdrawal facility of

Rs. 10,000/- in a day. The annual fee for this card is Rs. 300/- only.

Gold Cards are special cars with maximum withdrawal limit of Rs.

25000/- in a day. These cards are issued to the persons having more than Rs.

500000/- as their average balance.

45


International Cards are issued in collaboration with Cirrus and are

useable all over the world with maximum withdrawal facility according to the

standards of Cirrus.

INFORMATION ABOUT MY BRANCH

I did my internship in MCB Bank Limited Pattoki Branch. Some important

information about my branch which I observed is as follows:

MANAGEMENT OF THE BRANCH

Branch Manager Ch. Sabir Hussain

Operational Manager Muhammad Munir

Accountant Fozan ul Qamer

Credit Manager Farruk Afrooz

Forex Manager Majid Iqbal

Chief Cashier Khursheed Ahmed

Cashier Muhammad Usman

Billing Cashier Miss Farwa Asif

46


CSO Miss Sumera

OTHER GENERAL INFORMATION OF THE BRANCH

Deposits

The total deposits of this about to 322.734 million. In deposit there is increasing

trend.

Deposits

0

5

10

15

20

25

2003 2004 2005

Years

Am

ou

nt

in M

illio

n

47


Profit

CASH TRANFER

Month DEBIT CREDIT DEBIT CREDIT Total

January 2521 2303 2140 1967 8911

February 2209 2268 1835 1725 8037

March 2753 2508 2141 2395 9797

April 3079 2569 1982 2040 9670

May 3433 2726 1944 2018 10121

June 2813 2578 1962 1972 9325

July 3555 2229 2021 2123 9928

48


August 3784 2123 1928 2030 9865

September 4134 2114 2078 2135 10461

October 4923 1980 2337 2350 11590

November 6427 1968 2871 2720 13986

December 2808 2312 2992 2925 14037

Total remittance of this branch is 2157.319 million in 2005.there is also incrasing

trend in profit from 2003 to 2005 because of higher mark up rate charged on the

finances.

No. of vouchers

The vouchers which are transacted in this branch in 2005 are as follows:

Financing & Advances

Mainly, the short term financing such as cash finance, running finance, Demand

finance,

ERF II, FAFB, FBP are being dealt here.

Number of accounts

Accounts in this branch of MCB are as follows:

Current account

Total numbers of current accounts are 1236.

PLS account

Total numbers of profit and loss accounts are 3950.

Khushali bachat account:

These are about to 301 accounts

49


Basic Banking Account (Newly Introduced by SBP for salaried person)

There are about to 19 accounts.

Foreign Currency Accounts:


MCB 365 Gold Account


50

FIRST

TWO

WEEKS


ACCOUNT OPENING DEPARTMENT

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

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

Autonomous corporations, Limited Companies, Charitable Institutions,

Associations Educational Institutions or Local Bodies.

BASICS TO OPEN AN ACCOUNT

During the span of mine internship in MCB, I learned and observed a lot of about

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

establishment of a contractual relationship between the banker and the customer.

By opening an account at a bank a person becomes a ‘customer’ of a bank.

Further I am going to express the basic requirements and steps involved in the

opening of an account.

INTRODUCTION AND PRELIMINARY INVESTIGATION

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

whether or not the person who is going to open the account is a desirable

customer or not. Then MCB determine the prospective customer’s integrity,

respectability, occupation and the nature of business by the introductory

references given at the time of account opening. Negligence in this informal

preliminary investigation may result in serious consequences not only for the

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

may be affected indirectly.

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

Ombudsman of Pakistan, vide his ruling on complaint No. II/31/5186, has

51


directed the banks to retain with the account opening form a Photostat copy each

of the National Identity Cards of the person desiring to open an account as well as

that of the introducer. As per these directions, the concerned Branch Managers

are required to obtain the original National Identity Cards along with their

Photostat copies and then return the original after attesting the authenticity of the

retained copy.

Preliminary investigation is necessary because of the following reasons:

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

necessary inquiries mentioned above he may enable dishonest persons to possess

cheque books for fraudulent purposes. If any such person happens to be an

undercharged bankrupt, the banker might be placed in an awkward position for

having allowed such a person to open and open a bank account.

Safeguard against unintended overdrafts: Sometimes due to a mistake an

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

the balance of an account honors a cheque for an amount larger than the balance.

Similarly a credit entry belonging to a customer may be made by mistake in

another customer’s account. In such situations the excess amount withdrawn by

the customer can only be realized if the customer is a respectable person.

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

to respond to inquiries from other banks etc. about his customer’s financial

position. Though the banker gives only a general ideal about the financial

standing of his customer, it should nevertheless have the necessary information

available with him.

52


Specimen Signature

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

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

authority for the payment of cheques drawn on his banker. This specimen is taken

generally on a card specially designed for this purpose, and rule for the

customers, full name, and account number are entered on it.

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

get it confirmed for his satisfaction or return the cheque with the remark

‘Signature differs’. If the signature of the customer is forged the banker cannot

escape his liability because he has actually acted on his customer’s mandate.

HOW TO OPEN AN ACCOUNT (GENERAL)

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

considered in this regard.

Another account holder of the bank should properly introduce the new

customer.

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

of bank officer and the signature is duly verified.

A copy of identity Card is required by Bank.

Against submission of the Bank’s prescribed application form, duly

introduced in the manner provided and on supplying such document, as

may be required and account may be opened. The Bank reserves to itself

the right to refuse to open and account without assigning any reason.

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

correspondence with the bank relation to the account.

53


Minimum amount for opening and continued maintenance of various

types of accounts is as follows:

Rs.

Saving 500

Current 500

Term Deposit 1000

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

requirement at any time without any notice.

PROCEDURE TO OPEN AN ACCOUNT

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

the bank officer gives him an application form. All information, which is

necessary to be known by the bank, are requirements of the application form.

Form also requires the essential documents to be attached by the customer.

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

Title of Account

Full Name of Applicant

Occupation

Address

Telephone No.

Currency of account

Nature of Business

Introducer’s Name, Address & Signatures54


Special instruction regarding the account

Initial Amount of the Deposit

Signature of the applicant

DOCUMENTS TO BE ATTACHED

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

should attach the following documents with your application form which are

different for different categories.

SOLE PROPRIETOR’S ACCOUNT

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

business registration certificate number.

PRIVATE / JOINT ACCOUTS

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

JOINT STOCK COMPANY

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

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

documents

Certified true copy of the Memorandum and Articles of Association of the

company.

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

committee / governing body regarding conduct of the account.

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

55


Certified true copy of the certificate of incorporation or registration.

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

public limited companies).

Balance Sheet

I.D. Card copy of each director

Original is also enclosed for inspection and return

List of persons authorized to operate the account.

Power of Attorney in favor of the person opening account.

PARTNERSHIP FIRM ACCOUNT

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

this case is as follows:

Full Names

Address

Specimen of signatures of the partners

Certified true copy of partnership deed

Registration No. if the Partnership is registered

SOCIETIES / CLUBS AND ASSOCIATIONS ACCOUNT

MCB is authorized to open the accounts of the societies/clubs and associations,

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

education, recreational activities and charitable purposes etc. some of these

institution are registered under the Societies Registration Act, 1866, and are

issued a certificate of registration after they have been found fit for registration.

56


ISSUANCE OF CHEQUE BOOK

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

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

the customer only when all the required documents are checked. A cheque book

contains ten, twenty five, fifty or hundred leaves. The cheque book also carries a

requisition slip for the issuance of the new cheque book. This slip is duly filled

and singed by the customer. The signature of the customer is verified by the bank

and new cheque book is issued to the customer and serial numbers of the cheque

are duly entered in the book of the bank. Along with the signature, person should

also write his full name & address.

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

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

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

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

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

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

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

which the cheque book is issued and the number of leaves are also recorded in

this register when the cheque book issued an entry is passed in the cheque book

issue register.

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

has to fill the Form No. 216-B to obtain a new cheque book.

57

THIRD

WEEK


UTILITY BILLS COLLECTION

I worked in the utility bills collection department as the MCB collects utility bills

on behalf of WAPDA, Sui Gas Companies, and Pakistan Telecommunication

Corporation Limited by putting the stamp on the utility bills “Paid”, Date of

payment, Signature of the officer receiving the utility bills. After receiving utility

bills a list is made on the form which is called Bills scroll form. One copy of the

scroll is with the bank for evidence whereas the original copy with the receipt of

the bills is sent to the billing department of the respective corporation. The bank

charge commission on the bills.

58

FORTH

WEEK


CASH MANAGEMENT

The most important department of MCB which deals in money (receiving

deposits at lower rates and lend them out at higher rates of interest). This

department also called as Chest Department and manager of it is called Cash

Manager or Chest Manager. In those branches where this department is not

separately existed, the branch manager performs the duties of the Chest Manager.

The excess cash (More than its insured limit by the insurance company) of the

branches of the region is collected by the main branch. The main branch is also

bound to send its excess cash (more than its insured limit) to the State Bank of

Pakistan. No branch can have cash its safe more than its insurance at any time at

the time of closing cash, if it is so the manager will be responsible (not the

insurance company) whether or not he informed to the regional office (exception

to the limit which is insured for the day).

New Notes and Prize Bonds are also part and parcel of the Cash Management.

Keys of the Safe lockers are with the three authorized persons each one of them is

responsible for cash as at the time of closing the cash the officers including Cash

officer presented and lock the safe after counting and scrutinize the cash. The

cash officer maintain its daily cash book with specification of notes (Bonds are

also recorded in the books in

relation with cash) and other vouchers, after being satisfied the manager

authenticates the books and vouchers regarding cash with stamp and signature. at

59

LAST

TWO

WEEKS


the end I would like to conclude that the cash management is being done in the

MCB very effectively.

ADVANCES DEPARTMENT

On my first day of Internship, Manager gives me some advice and told me the

ways to success. He told me that if some one wants to get success in banking

career then he must have the knowledge of the one major department of the bank.

I.e. Advances. So from very first day I was interested to work in advances

department and at my request bank offer me opportunity to work in this

department last two weeks

Bank adopts the following procedure in order to grant a loan. A customer

applies for a loan to the manager, who says him to give details of his property.

The details of the proposal and the photocopies of the document to the title of

property are sent to the legal advisor of bank. The legal advisor gives his legal

opinion upon the documents. The branch manager, in the light of the opinion

received from the legal advisor, discusses the proposal with the advancing

manager whether to give or not the loan to the applicant. If manager allows

granting the loan all the documents along with request letter are sent to regional

office for approval. In the regional office the proposal is analyzed and if the

office is satisfied a consent letter prepared which is signed by the regional

controller credit. This letter is sent to the branch manager. After receiving it the

manager finance reviews the consent letter, and prepares a DAC (Disbursement

Authorization Certificate). DAC can be made only for people who have a bank

account.

The following documentation is made for loan.

An application or request letter for loan by the customer

60


Legal opinion of the legal advisor of the bank (for the title deeds)

Consent letter from the regional office

Vetting Certificate (includes consent No., Facility whether fund based or

no-fund based, addresses etc.)

Valuation of property any consultant or any panel of consultants approved

by State Bank of Pakistan

Original title deed or sale deed

Affidavit

General power of attorney (made by advocate for the person/owner taking

loan for the company)

Mortgage deed

Mutation document made

Verification of the property by the bank from the competent authority

Hypothecation of stock certificate (Running is to be given against 75%

margin of stock)

IB-25R Letter of hypothecation (duly signed by the party)

IB-12 , DP Note/Promissory Note (Bank prepared itself, duly signed by

the party, revenue stamps of Rs. 100 put on it)

IB-6R Agreement of finance mark up (Contract with party for taking mark

up on quarterly basis)

IB-24 (used for title deed)

IB-29 (used for guarantee from party)

IB-26 (used for pledge of stock, margin is different for different goods)

No. IB-28 (used for lien) etc.

61


After that Loan is sanctioned to the party fulfilling all the terms and conditions

for the purpose. The procedure given above is for both short and long term loans.

The thing which is most important here is that the banks first keeps in mind and

analyzes according to the rules prudential regulations of the State Bank of

Pakistan.

Following finances in which Pattoki Branch is dealing.

Running Finance

Cash Finance (Against Pledge of Stocks of wheat & rice)

Demand Finance (against Lien On DSC’s)

Tractor Finance

Foreign Bills Purchased

Finance Against Foreign Bills

Export Refinance I

Export Refinance II

The exposure of Pattoki Branch is more than 500 Million.

I have learnt about the documentation required for the financing. Major focus on

the financing is depending on the account turnover and collateral offered.

While financing to the fresh client the credit proposal of the client is elevated to

the higher office. The bank’s official get the applications form the customer and

prepare the case for getting approval for the higher office.

SECURITIES HELD AGAINST FINANCING

FOR RUNNING FINANCE

Hypothecation of Stocks (50% Margin)

Collateral security (house, land, factory etc..)

62


FOR CASH FINANCE

Pledge of stocks (20 to 25% Margin)

Collateral security (house, land, factory etc..)

FOR DEMAND FINANCE

Lien over Defense Savings Certificate

Lien over Deposits (TDR)

Lien over Foreign Currency deposits

FOR TRACTOR FINANCING

Joint ownership of the Tractor

Collateral security (Agri land)

FOR EXPORT REFINANCE PART I

Lien over export bills drawn under firms order or contracts

Collateral security (house, land, factory etc...)

FOR EXPORT REFINANCE PART II

Hyp & Pledge of Stocks

Lien over EE statement


FOR FOREIGN BILLS PURCHASED

Lien over export bills drawn under LCs

63



FOR FINANCE AGAINST FOREIGN BILLS

Lien over export bills drawn under firm order and contracts


FOR BANK GUARANTEE

Cash Margin (As Per Approval of Finance)

64


Chapter – 4

FINANCIAL ANALYSIS

Chapter – 4

FINANCIAL ANALYSIS

65


66


BALANCE SHEET

4.2 FINANCIAL ANALYSIS:

BALANCE SHEET

Financial StatementMuslim Commercial Bank LimitedBalance SheetAs on 31st December

2003 2004 2005 2006 2007

Assets(Rupees '000)

Cash and balances24,053,669 23,833,253 23,665,549 32,465,976 39,683,883with treasury banks

Balances with other1,302,592 5,708,323 1,469,333 6,577,017 3,807,519banks

Lending to financial10,430,450 10,965,297 9,998,828 21,081,800 1,051,372intuitions

Investments 128,276,842 67,194,971 69,481,487 63,486,316 113,089,261Advances 97,200,179 137,317,773 180,322,753 198,239,155 218,960,598Operating fixed assets 4,582,823 7,999,821 8,182,454 9,054,156 16,024,123Deferred tax assets - - 191,967 172,373 -Other assets 6,477,064 6,154,370 5,464,426 11,031,450 17,868,761

Liabilities272,323,619 259,173,808 298,776,797 342,108,243 410,485,517

Bills payable 8,396,320 7,566,684 8,536,674 7,089,679 10,479,058Borrowings 32,627,951 7,590,864 27,377,502 23,943,476 39,406,831Deposits and Other

211,511,393 221,069,158 229,345,178 257,461,838 292,098,066accountsSub-ordinated loans 1,599,360 1,598,720 1,598,080 1,597,440 479,232Liabilities against assets - - - - -subject to finance leaseDeffered tax

707,306 269,499 - - 1,180,162liabilitiesOther liabilities 6,372,596 6,525,999 8,611,600 11,171,496 11,722,493

261,214,926 244,620,924 275,469,034 301,263,929 355,365,842

Net assets 11,108,693 14,552,884 23,307,763 40,844,314 55,119,675Represented by:Share capital 3,065,273 3,371,800 4,265,327 5,463,276 6,282,768Reserves 4,379,255 5,661,553 13,408,005 24,662,426 34,000,638Unappropriateed

281,636 165,208 210,662 5,530,973 5,130,750profit

Surplus on7,726,164 9,198,561 17,883,994 35,656,675 45,414,156

3,382,529 5,354,323 5,423,769 5,187,639 9,705,519revaluation of assets11,108,693 14,552,884 23,307,763 40,844,314 55,119,675

67


PROFIT & LOSS ACCOUNT

PROFIT AND LOSS

Financial StatementMuslim Commercial Bank LimitedProfit and Loss AccountAs on 31st December

2003 2004 2005 2006 2007(Rupees '000)

Markup/ return/ interest earned 10,369,994 9,083,863 17,756,232 25,778,061 31,786,595Mark up/ return/ interest expense 2,932,693 2,057,640 2,781,468 4,525,359 7,865,533Net mark up/ interest income 7,437,301 7,026,223 14,974,764 21,252,702 23,921,062

- Provision for dimininution in (150,000) (172,876) (98,982) 121,197 105,269the value of investment

- Provision against loans and705,787 442,595 1,242,153 1,014,540 2,959,583advances

- Provision for potential lease 862 1,200 - - -losses

- Bad debts written off directly 224,432 8,771 1,184 47,000 199781,081 279,690 1,144,355 1,182,737 3,065,051

Total non mark up interest 4,531,811 4,232,988 5,413,071 4,991,416 6,011,291income

Non mark up/interest expense11,188,031 10,979,521 19,243,480 25,061,381 26,867,302

- Administrative expenses 6,587,369 7,244,200 6,459,490 6,482,592 5,022,416- Restructuring expenses 878,704 - - - -- Other proposition/write off 50,000 149,593 (72,740) 11,411 (3,743)-Other charges 59,034 41,864 178,841 66,708 540,594

Total non mark up/ interest7,575,107 7,435,657 6,565,591 6,560,711 5,559,267expense

Extra ordinary/unusual items - 513,852 340,598 - -Profit before taxation 3,612,924 4,057,716 13,018,487 18,500,670 21,308,035

Taxation-Current year 1,212,579 1,555,764 4,611,359 5,701,443 6,442,356-Prior years - - (149,763) 593,497 (1,294,473)-Defferd 170,200 70,420 (365,524) 63,332 894,590

Profit after taxation1,382,779 1,626,184 4,096,072 6,358,272 6,042,4732,230,145 2,431,532 8,922,415 12,142,398 15,265,562

Unappropriate profit brought621,985 195,966 165,208 4,990,260 5,530,973forward

Transfer from surplus on 25,012 25,839 83,749 32,166 11,855revaluation of fixed assets

Profit available for

646,997 221,805 248,957 5,022,426 5,542,828

2,877,142 2,653,337 9,171,372 17,164,824 20,808,390appropriationBasic/diluted earning per share 7.28 7.21 21.36 23.40 24.30

68

Current Ratio

98.00%

100.00%

102.00%

104.00%

106.00%

108.00%

110.00%

112.00%

2003 2004 2005 2006 2007

Current Ratio


RATIOS ANALYSIS

Liquidity Ratios

1. Current Ratio:

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

cover its current liabilities.

Current ratio=current asset/ current liabilities

Current Ratio

Years 2003 2004 2005 2006 2007

Percentage 102.81% 103.02% 106.80% 111.00% 110.00%

Analysis of current ratios of MCB:

Current ratio shows a firm’s ability to cover its current liabilities with its current

assets. It is obtained by dividing current assets of the firm by its current liabilities.

Current ratio does not show the true picture of the organization. Sometimes it

shows that organization has ability to pay its obligations but its profitability ratio

tells that it has not ability to pay its obligation.

69


2. Quick ratios:

Quick ratio shows a firm’s ability to meets it current liabilities with its current assets

excluding inventories and prepaid expenses, which are least liquid portion of the

current assets. Since banks don’t have any sorts of inventories, therefore only

prepaid expenses are subtracted from the current assets of the bank.

Quick ratio= current assets-inventories/current liabilities

Years 2003 2004 2005 2006 2007

Percentage 52.33% 74.77% 80.74% 89.06% 76.94

100

2007

908070605040302010

02003 2004 2005 2006

70

Cash ratio

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

2003 2004 2005 2006 2007

Cash ratio


Cash and cash equality/total assets

Cash and equality are the most liquid assets. The cash ratio shows the

proportion of the assets held in the most liquid possible form.

It is used to check the liquidity of the organization.

Years 2003 2004 2005 2006 2007

Percentage 9.31% 11.40% 8.41% 11.41% 10.60%

Analysis of cash ratios of MCB:

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

ratios. Cash ratio is more important liquidity ratio. In 2003 cash ratio was 9.31%, it

increased very quickly in 2004 by 11.40%, but in 2005 it declined by 2.99. 2006

was the best year as it shows 11.41% ratio, In 2007, it declined by 10.60%.

In short working capital and cash ratio are more realistic and more important ratios, which

describe the true picture of any organization. In MCB 2006 is the year in

71


which the liquidity ratios are shown better than other years. So 2006 is mentioned

a good year of the Muslim Commercial Bank.

Leverage Ratios:Leverage ratios of a firm show the extent to which a firm finances its operation

from the outside sources and money. The leverage can be determined from

analysis of owner equity in business, total liabilities, current and long-term

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

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

finance its activities and assets by liabilities.

5. Debt-To-Total-Assets Ratio

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

the margin of protection available for the creditors.

Debt ratio

Debt ratio=Total debt/ Total assets

Debt ratio

Years 2003 2004 2005 2006 2007

Percentage 95.92% 94.38% 92.20% 88.06% 86.57%

Debt ratio

80.00%

85.00%

90.00%

95.00%

100.00%

2003 2004 2005 2006 2007

Debt ratio

72

Debt to equity ratio

0

20

40

60

80

100

2003 2004 2005 2006 2007



Analysis of leverage ratio:

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

amount of the debt a firm uses has both positive and negative effects. The more

debt the more it is that the firm will have trouble meeting its obligations. Thus

the more debts higher profitability of the financial distress and even

bankruptcy. Further more the chance of the financial distress and debt

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

Muslim Commercial bank, year 2003 was heavily financed because debt was

the major source of financing in 2003. Debt also had lower transaction cost.

But better year was 2007 because Muslim Commercial Bank in this year was

not heavily financed and had not trouble to pay its obligations.

6. Debt-To-Equity Ratio:

Debt-to-Equity ratio shows the extent to which debt financing is used

relative to equity financing. Debt equity is calculated by dividing total

liabilities of the bank by the total owner equity.

Total debt divided by shareholders equity

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


Years 2003 2004 2005 2006 2007

Percentage 85.22 72.55 64.58 55.14 56.56

73


Analysis of the Debt to equity ratio:

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

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

the firm s shareholders .In 2006 risk for the share holders was very low as compared

to the other years decrease debt to equity ratio was very small on the contrast risk

was very high in 2003 because of heavy financing

74

Interest coverage ratio

0.00%

100.00%

200.00%

300.00%

400.00%

500.00%

2003 2004 2005 2006 2007



8 Interest Coverage Ratio:

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

income before interest and taxes. The ratio is obtained through dividing earning before

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

EBIT divided by interest expense

Interest coverage ratio=EBIT/Interest expense


Years 2003 2004 2005 2006 2007

Percentage 107.85% 197.20% 468.04% 408.82% 270.90%

Analysis of the interest coverage ratio:

Coverage ratio shows the number of the times a firm can recover or meet particular

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

earned ratio, measure the coverage of the firm s interest expense.2005 is the best

comparative better coverage of its interest and fixed charged obligations. After 2005,

2006 is better than other three but 2003 is worst than all.

University of the Education, Okara Campus 75

Cost to sales ratio

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2003 2004 2005 2006 2007

Cost to sales ratio


Profitability Analysis:

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

and those showing profitability in relation to investment. Together, these ratios

indicate the bank’s overall effectiveness of operation. It creates a relationship

between income statement and balance sheet of the firm. Following are the some

typical profitability ratios used to analyze the profits of firms.

9. Cost To Sales Ratio:

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

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

up expense incurred. The ratio is obtained by dividing cost of sales by net sales. The

following table shows the cost of sales of MCB over five years of operations.

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

Cost to sales ratio

Years 2003 2004 2005 2006 2007

Percentage 28.28% 22.65% 15.66% 17.56% 24.74%


0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

2003 2004 2005 2006 2007

Return on investment

Series2


Cost to sales ratio shows the cost incurred in generating the sales of the bank. In 2003

the cost to generate the sales is higher with respect to other financial years. After 2003,

2007 had also higher cost. Year 2005 is best one for MCB but 2003 is worst than all.

10. Return On Investment:

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

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

Return on investment is an indicator of how profitable a company is. By using this

ratio annually, we compare business' performance to industry's norms.

Net profit after tax divided by Total assets

Return on investment= Net profit after tax/Total assets

Return on investment

Years 2003 2004 2005 2006 2007

Percentage 0.82% 0.94% 2.99% 3.55% 3.72%

Analysis of the return on investment ratio

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

measure how effectively the firm is generating its profit. They reflect its performance, its

risk ness and the effect of leverage. Muslim commercial bank was heavily financed in

2007 that financing was used in investment that’s why return on investment is high in

2005 as compare to the other years.


Return on equity

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

2003 2004 2005 2006 2007

Return on equity


11. Return On Equity:

Return on equity is another summary measure of overall bank’s performance. It can

be calculated by dividing the net profit by the owner equity. This ratio tells us the

earning power on shareholder’s book value investment and is frequently used in

comparing two or more firms in any industry. A high return one quite often reflects

the firm’s acceptance of strong investment opportunities and effective expense

management.

Return on Equity

Years 2003 2004 2005 2006 2007

Percentage 72.76% 72.11% 209.18% 222.25% 242.98%

Analysis of Return on Equity of MCB:

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

compare your business' performance to your industry's norms. In year 2007, MCB has a

strong investment opportunities’ which reflects a high return, after this 2006 and 2005

also depicts a high return, whereas, 2003 and 2004 are not satisfied.


Price earning ratio

0.00%

500.00%

1000.00%

1500.00%

2000.00%

2003 2004 2005 2006 2007

Price earning ratio


12. Market value ratios:

1-P/E ratio

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

Price earning ratio

Years 2003 2004 2005 2006 2007

Percentage 706.04% 814.15% 785.58% 1051.71% 1645.88%

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

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

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


Earning yield

0.00%2.00%4.00%6.00%8.00%

10.00%12.00%14.00%16.00%

2003 2004 2005 2006 2007

Earning yield


13 Earning yield:

Earning yield=Earning per share/Market price per share

Earning yield

Years 2003 2004 2005 2006 2007

Percentage 14.16% 12.28% 12.73% 9.51% 6.08%

Analysis of the earning yield:

Earning yield of MCB bank is high in 2003 as compared to the other years. Because the

market price per share and earning per share is low in 2003. Earning yield in 2004 and 2005

is also high. Earning yield is unsatisfied in 2007.


0

5

10

15

20

25

30

2003 2004 2005 2006 2007

Earning per share

Series2


14 Earning Per Share:

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

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

amount earned on each share.

Net profit after tax divided by total number of shares outstanding

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


Earning per share

Years 2003 2004 2005 2006 2007

Percentage 7.28 7.21 21.00 22.23 24.30



Chapter – 5

HORIZONTAL AND VERTICAL ANALYSIS

Chapter – 5

HORIZONTAL AND VERTICAL ANALYSIS


In trend analysis we done two types of analysis, these are

1. Horizontal Analysis

It is conducted by setting consecutive balance sheet, income statement or statement of

cash flow side-by-side and reviewing changes in individual categories on a year-to-year

or multiyear basis.

A comparison of statements over several years reveals direction, speed and extent of a

trend(s). The horizontal financial statements analysis is done by restating amount of each

item or group of items as a percentage.

2. Vertical Analysis

Like horizontal analysis this can also done for balance sheet and income statement. Here

we assign 100% value to any key item of balance sheet or income statement and then see

portion of other items in this percentage.





Particulars 2002 2003 2004 2005

ASSETS

Cash 100% 134% 133% 132%

Balance with other banks 100% 60% 264% 68%

Lending to financial institutions 100% 30% 32% 30%

Investments_ net 100% 143% 75% 78%

Advances – net 100% 123% 174% 228%

Operating fixed assets 100% 120% 209% 214%

Other assets_net 100% 73% 69% 72%

Deferred tax assets_net 100% 0% 0% 191967%

100% 116% 110% 127%

LIABILITIES

Deposits and other accounts 100% 116% 121% 126%

Borrowings from financial inst. 100% 148% 35% 125%

Bills payable 100% 134% 121% 136%

Other liabilities 100% 70% 72% 95%

Deferred tax liabilities 100% 38% 15% 0%

Sub ordinated loans 100% 99.9% 99.9% 99.8%

Liabilities against assets 100% 0% 0% 0%

100% 117% 109% 123%

NET ASSETS 100% 94% 124% 199%

REPRESENTED BY

Share capital 100% 115% 126% 160%

Reserve 100% 145% 187% 443%

Unappropriated profit 100% 45% 26% 34%

100% 122% 146% 283%

Surplus on revaluation of assets 100% 62% 99% 101%

100% 94% 124% 199%



0%

50%

100%

150%

200%

250%

Total Assets Total Liabilities Equity

2002 2003 2004 2005

The horizontal analysis of the balance sheet of the bank over all give the positive

trend .The result of the balance sheet depict that there is a constant increasing trend in

cash, total assets, total liability and equity. There is extraordinary high trend in 2005 in all

factors of balance sheet as compare to 2002.

The trend of cash is increasing to upward with 32%. The trend of Total asset is also

increasing to upward with 27%, and the trend of total liabilities is also increasing with

23% to upward. Equity is increased by 99%.





Particulars 2002 2003 2004 2005

Mark-up/return/interest earned 100% 67% 59% 115%

Mark-up/return/interest expensed 100% 48% 34% 46%

Net mark-up/interest income 100% 80% 75% 161%

Provision against non-performing loans and

advances

100% 705787% 442575% 1242153%

Provision for diminution in the value of investments 100% -150000% -172876% -98982%

Bad debts written off directly 100% 31% 1.2% 0.16%

Provision for potential lease losses 100% 168% 234% 0%

100% 108% 39% 159%

Net mark-up/interest income after provisions 100% 77% 79% 161%

NON MARK-UP/INTEREST INCOME

Fee commission and brokerage income 100% 115% 220% 270%

Dividend income 100% 125% 127% 161%

Income from dealing in foreign currencies 100% 66% 193% 106%

Other income 100% 149% 116% 217%

Gain on Investments 100% 532% 209% 226%

Gain / Loss on trading in government securities 100% 0% -11440% -851%

Total non-mark-up/interest income 100% 175% 163% 209%

100% 100% 92% 172%

NON MARK-UP/INTEREST EXPENSES

Administrative expenses 100% 87% 96% 87%

(Reversal) / Other provisions 100% 50000% 149593% -72740%

Other charges 100% 4496% 3189% 13468%

Total non-mark-up/interest expenses 100% 94% 92% 81%

Compensation on delayed tax refund 100% 0% 513852% 340596%

PROFIT BEFORE TAXATION 100% 117% 130% 420%

Taxation – current year 100% 79% 102% 301%

Prior years 100% 0% 0% -149763%

Deferred 100% -101% -42% 216%



PROFIT AFTER TAXATION 100% 128% 140% 513%

Unappropriated profit brought forward 100% 219% 69% 58%

Transferred from surplus on revaluation of fixed

Assets

100% 41% 42% 137%

Profit available for appropriation 100% 126% 116% 402%

APPROPRIATIONS

Transfer to

Statutory reserve 100% 128% 146% 256%

General reserve 100% 1000000% 800000% 5500000%

Capital reserve 100% 0% 0% 0%

Reserve for issue of bonus shares 100% 77% 84% 213%

Interim cash dividend Rs 1.75 per share 100% 69% 51% 97%

Interim cash dividend Rs 1.50 per share 100% 383159% 50577% 639799%

100% 157% 156% 541%

Unappropriated profit carried forward 100% 45% 26% 34%



0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Mark up Income Mark upExpense

Net mark upbefore provision

Net mark up afterprovision

2002 2003 2004 2005

0%

100%

200%

300%

400%

500%

600%

Net Profit before tax Net Profit after tax

2002 2003 2004 2005

According to horizontal analysis of profit and loss account there is increasing trend. In

2005 there is increase in all factors such as interest income interest income interest

income after provision and profit before and after tax because the trust of people on



banks is increasing day by day. The increase in profit in 2005 is almost 5 times as

compare to 2002.



Particulars 2002 2003 2004 2005



ASSETS 100% 100% 100% 100%

Cash 8% 9% 9% 8%

Balance with other banks 0.92% 0.5% 2.2% 2.8%

Lending to financial institutions 14% 3.8% 4% 3.3%

Investments_ net 38% 47% 26% 23%

Advances – net 34% 36% 53% 60%

Operating fixed assets 1.08% 1.3% 2% 27%

Other assets_net 4% 2.4% 3.8% 0.4%

Deferred tax assets_net 0% 0% 0% 0%

100% 100% 100% 100%

LIABILITIES 100% 100% 100% 100%

Deposits and other accounts 82% 81% 90% 83%

Borrowings from financial inst. 10% 12.5% 3% 10%

Bills payable 2.8% 3.2% 3% 3%

Other liabilities 4% 2.4% 2.6% 3.4%

Deferred tax liabilities 0.48% 0.3% 0.8% 0%

Sub ordinated loans 0.72% 0.6% 0.6% 0.6%

Liabilities against assets 0% 0% 0% 0%

100% 100% 100% 100%

NET ASSETS 100% 100% 100% 100%

REPRESENTED BY

Share capital 23% 28% 23% 18%

Reserve 26% 29% 39% 58%

Unappropriated profit 5% 3% 1% 1%

54% 70% 63% 77%

Surplus on revaluation of assets 46% 30% 37% 23%

100% 100% 100% 100%


Assets

Investments

Cash and balances w ith treasury banks

Operatig f ixed assets

Deferred tax assets

Other assets

Balances w ith other banks

Lendings to f inancial institutions

Advances


INTERPRETATION


Share capital

Reserves

Bills payable

Unappropriated profitOther liabilities

Deferred tax liabilitiesLiabilities against

assets subject to f inance lease

Sub-ordinated loans

Deposits and other accounts

Borrow ings from financial institutions


In balance sheet of bank the most important item is earning assets. There are four earning

assets. Bank has strong earning assets like advances investments and lending to financial

institutions has major percentage in of assets of bank. In liability and equity analysis the

Borrowings from financial institutions and deposits have major portion and reserve and

share capital has major portion in equity





Particulars 2002 2003 2004 2005

Mark-up/return/interest earned 100% 100% 100% 100%

Mark-up/return/interest expensed 39% 28% 23% 16%

Net mark-up/interest income 61% 72% 77% 84%

Provision against non-performing loans and

advances

0% -1.44% -1% -0.55%

Provision for diminution in the value of

investments

0% 7% 5% 7%

Bad debts written off directly 4.6% 0.008% 0.01% 0%

Provision for potential lease losses 0.003% 2.2% 0.09% 0.006%

5% 8% 4% 6%

Net mark-up/interest income after provisions 56% 64% 72% 78%

Particulars 2002 2003 2004 2005

NON MARK-UP/INTEREST INCOME 100% 100% 100% 100%



Fee commission and brokerage income 35% 23% 47% 45%

Dividend income 11% 8.2% 9% 9%

Income from dealing in foreign currencies 19% 7.3% 12% 10%

Other income 15% 45% 14% 16%

Gain on Investments 30% 16.5% 19% 19.9%

Gain / Loss on trading in government securities 0% 0% -1.1% 0.01%

Total non-mark-up/interest income 100% 100% 100%% 100%%

NON MARK-UP/INTEREST EXPENSES 100% 100% 100% 100%

Administrative expenses 93% 87% 97% 98%

(Reversal) / Other provisions 6.5% 12.4% 2% -1%

Other charges 0.5% 0.6% 1% 3%

Total non-mark-up/interest expenses 100% 100% 100% 100%

INTERPRETATION

In vertical analysis of profit and loss account the interest expense has decreasing trend

from 2002 to 2005 but in 2005 there little bit increase in net interest income but almost

have same trend. According to this analysis fee, commission and brokerage income has

some worth in our income statement its almost one fourth or one fifth of our interest

income and it has increasing trend.

The administrative expenses are also increasing from 2002 to 2005 but overall

management is able to reduce expenses, so due to which there is continuous increase in

profit before and after tax.



SWOT ANALYSIS University of the Education, Okara Campus 99

Chapter – 6

SWOT ANALYSIS

Chapter – 6

SWOT ANALYSIS


The overall evaluation of an organization’s strengths, weakness, opportunities & threats

is called SWOT Analysis. It is a strategic planning tool used to evaluate the strengths,

weakness, opportunities & threats and involves specifying the objective of the

organization and identifying the internal and external factors that are favorable and

unfavorable to achieving that objective. A SWOT analysis is designed to help an

organization & provide you with information that helps in making decisions about your

future. Before conducting a SWOT analysis, 1st you defining and agreeing upon an

objective.The key steps in conducting a SWOT analysis include:

1. Brainstorming lists of strengths, weaknesses, opportunities & threats

2. Take the list of ideas and reduce them

3. Review each idea separately and discuss each of these ideas.

4. Remember that the ideas with SWOT analysis is to gain a Better Understanding of the

any organization’s strengths and weakness.

5. In final step, categorize those steps which are helpful for the org. such as strength in

internal environment & opportunities in the external environment, while categorize

those steps which are harmful for the org. such as weaknesses in the internal

environment & threats in the external environment. We avoid & exploit these two

factors.


http://en.wikipedia.org/wiki/Strategic_planning#Elements


STRENGTH

Promoting Savings and Investments

Not excellent but good faculties are given to employees.

For maintaining the employees, the MCB Commercial Bank provides the

facility of health, employee relations….etc

All staff members are well mannered in communications, & the ethics.

Abundance of manpower.(Permanent & contingent employees )

WEAKNESS

Centralization Organization Structure

Information system needed for cards may not be compatible with legacy systems.

The big problem is liquidity risk which reflects the corporations’s inability to rise

funds.

OPPORTUNITEIS Large market potential.

Favorable demographic changes in society

All the opportunities of the 21st century are to be availed in the information

technology. Information technology is the future of this dynamic world. Therefore

MCB should emphasize much on IT, especially on E-Banking. Bank can design a

universal account like other foreign banks, to enhance online facilities.

The bank is large & expanding day by day because customer accepts it. Its

network expanded to 240 branches.

The MCB Commercial Bank involves in creating public relations that will

increase the profitability of the bank. Often, public relations are conducted

through the media that is, newspapers, T.V, magazines, internet….etc that’s

attract a large number of customers.



The MCB Commercial Bank can increase the extensive advertisements of new

products, services, vacancies, in order to increase customers & heir competent

employees.

THREATS

MCB is facing a strong competition by its competitors, Business of all these Banks

are growing at very high pace.

Huge competition with local and foreign banks

Rapid technological advancements have become challenge for MCB Bank Ltd.




Chapter –7

CONCLUSIONSRECOMENDATIONS

Chapter –7

CONCLUSIONSRECOMENDATIONS


CONCLUSIONS

The time spent for the project at MCB Bank Limited were no doubt a source of great

Learning for me about many things particularly working of different departments in bank.

This practical project does help me attain loads of knowledge about the predominant

Functions performed by banking companies, but also impart a lot of training as regards

the set of behavioral traits which distinguish a particular person from the rest of the lot in

a Professional environment.

MCB Bank is newly born financial institution. Yet it is backed by the powerful

international investors. It is not hidden from anyone the banking sector of Pakistan

experienced tremendous growth over the couple of years. It is expected the same trend

will continue as the middle class is being empowered in the country and there are many

areas where investments can be employed depending on the country’s political and

economic situation. Despite there is a meltdown in the global economy and the foreign

investment which is shifting away from Pakistan, there is still hope that in the near future

not much people will loose the opportunity to reap the benefits from the banking sector

with flourishing prospects. In the micro sense the bank organization is able to go further

ahead and cross the further grounds of progress. Its merger with the PICIC, and its other

asset management and insurance arms with a larger branch network plus great assets

worth can be very profitable to it. The MCB Bank should try to finance its assets not

with the liabilities but by the issuance of right shares. It should also try to reduce costs.

The emphasis on consumer and SME financing should also be enhanced as these can be

very profitable areas for the bank. As the Stare Bank is pursuing tight policies the MCB

should keep itself always ready to deal with the squeezing policies.



RECOMMENDATIONS

During my employment at MCB Bank Ltd I observed some areas that need attention for

the management like:

Assessment of performance of employees:

There are no proper criteria for assessment of performance of employees and most of the

time it is on the personal judgment of the manager who forward the assessment sheets of

all employees to area office for their promotions.

Problem with information system:

MCB Bank Ltd information system is not very good and most of the time online

transaction service of the Bank network is down, which occurs to be a big issue in

smooth working, management really needs to work on it.

No rotation of employees from department to department:

There is not any rotation of employees within departments and cross departments.

Therefore, the top management should immediately start thinking in terms of rotating the

employees in various departments, as this alter work force into human capital.

Implementation of management policy:

MCB Bank Ltd Limited should develop a very serious management policy to attract

multi MCB corporations as its clients. This action, if actualized, would not only prove to

be highly profit generating, but it would also contribute a lot towards MCB Bank Ltd’s

image building.



Advertisements/marketing:

Bank needs to use more marketing channels to make public aware of its products and

services. In the presence of intense competition MCB Bank Ltd has to realize the

importance of marketing.

Distribution of work:

Management should distribute work equally among different employees. Some of the

employees are overburdened while some sections are overstaffed.

Staff training & improvement in processes:

To keep staff well equipped and updated with enormous changes in current banking

environment, training are an important part of survival. Especially for the customer

service staff and phone banking department as they are at front end and need more

efficient performance for having satisfied customers.



References

1. www.howstuffworks.com

2. www.sbp.org.pk

3. www.mcb.pk.com

4. MCB information booklet. 30/06/2009

5. Schedule of bank charges and services.

6. www.kse.com.pk

7. MCB bank’s annual report. (2008)

8. quarterly report of MCB bank ( march 31, 2009)

9. www.wikipedia.com


http://www.Wikipedia.com/

http://www.sbp.org.pk/

http://www.Howstuffworks.com/



Documents

Internship report on MCB BAnk 2010.doc