MCB,

A Commercial Bank’s Study

Prepared for

MGT411 Project

Prepared by

Rizwan ul Haq

Student of MBA, Virtual University

User ID: mc070401171

January 2009

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Executive Summary

This report is a study on the operation and working of MCB Pakistan, one of the highest

ranking banks operating in Pakistan. Various aspects of the bank including its products,

services, financial Services, consumer Banking, corporate Banking and profitability have

been studied.

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Table of Content

Sr. No. Topic Page

1. Introduction 4

2. |Bank History 5

3. Organizational Structure 7

4. Organizational Environment 10

5. Products and Services offered 11

6. Credit Cards 11

7. Home Loans-Pyara Ghar 11

8. Car Loans-Car4U 12

9. Other Products and Services 14

10. Type of Accounts 19

11. Procedure of Clearance in Banking 22

12. Annual Report Analysis 23

13. Central Bank’s Role 24

14. Comments 27

15. Bibliography 28

16. Appendix

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Introduction

MCB Bank Ltd is one of the largest banks in Pakistan. It is one of the most creditable names

in the private banking and capital market sector of the country. Its headquarters are situated

in Karachi and Head Office at Lahore. Originally called Muslim Commercial Bank Limited,

it was established by the Adamjee Group just a month before the establishment of Pakistan in

July 1947 under the Indian Companies Act, VII of 1913 as a limited company. The mission

was to provide banking facilities to business community of the subcontinent. Nationalized in

1974 duing Zulfiqar Ali Bhutto’s regime, it was the first bank to be privatized back in 1991.

Nishat Group, a prestigious business group with a diversified portfolio, holds the majority of

stakes in the bank. Mian Mohammad Mansha, the winner of Sitar-e-Imitiaz, a prestigious

civil award, is the current Chairman of MCB.

Financial Statements for the 2007 places MCB amongst the largest bank in terms of market

capitalization (US$4.1 billion) and fourth largest bank, asset-wise (US$ 6.7 billion). It has a

customer base of 4 million served through 1026 country-wide branches which include 8

Islamic banking branches.

It has recently been named as the best bank in Asia by Euromoney.

VISION & MISSION

Vision Statement

Challenging and Changing the Way you Bank.

Mission Statement

MCB Bank’s team of committed professionals is dedicated to maintaining long term

customer relationships through outstanding service and convenience.

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Bank History

The financial reports of MCB for th year 2007 reported a profit after tax of PKR16.4 billion

(US$270 million) and a return on average equity of 38% and a net interest margin of 8.08%.

The Bank’s asset quality is strong with a gross NPL ratio of 4.7% and provision coverage of

100%.

Last fifteen years have seen MCB concentrating on growth through improving service

quality, investment in technology and people, utilizing its extensive branch network,

developing a large and stable deposit base and managing its non-performing loans via

improved risk management processes.

Muslim Commercial Bank Limited was renamed in 2005 to MCB Bank Limited (MCB). The

objective was to explore international markets as they were facing resistance specially from

Western Countries to avail license. The head office of MCB was shifted to Lahore in 2008 in

a newly constructed building, namely MCB House, located at Sharea Ghous-ul-Azam

(formerly known as Jail Road) from Karachi.

MCB's headquarters are located at MCB Tower in Karachi which serves as the, and is also

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

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

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

depositary receipts.

In May 2008 Malaysian bank, Maybank and MCB sponsors Nishat Group signed an

agreement, whereby Maybank will acquire up to 20% of the ordinary shares in MCB from

Nishat Group. The acquisition is in-line with Maybank’s strategy, as Malaysia’s financial

services leader in the region, to build its presence in key growth markets across the region. It

also paves the way for MCB, one of Pakistan’s premier financial services groups, to engage

Maybank as its exclusive foreign commercial bank strategic partner.

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

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

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

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

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

preceding the date of this announcement.

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

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

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

increase its stake to 20%.

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

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

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

scheduled to be on March 27, 2009.

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

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

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

experience in these segments coupled with MCB’s brand and broad distribution network,

Maybank and MCB believe that significant revenue synergies can be attained. Both Maybank

and MCB are also expected to benefit from increased business ties and trade flows between

Pakistan and Malaysia.

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Organizational Structure of bank

Board of Directors

Mian Mohammad Mansha Chairman S.M.Muneer Vice Chairman Tariq Rafi Member Shahzad Saleem Member Sarmad Amin Member Dr. Muhammad Yaqub Member Mian Raza Mansha Member Dato' Mohammad Hussein Member Aftab Ahmad Khan Member Atif Bajwa President / CEO

Audit Committee

Tariq Rafi Chairman   Dr. Muhammad Yaqub Member   Mian Raza Mansha Member   Dato' Mohammad Hussein Member   Aftab Ahmad Khan Member

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Human Resources Committee

Mian Mohammad Mansha Chairman   Dr. Muhammad Yaqub Member   Mian Raza Mansha Member   Shahzad Saleemn Member   President Member

   Risk Management and Portfolio Review Committee

Shahzad Saleem Chairman

Tariq Rafi Member

Sarmad Amin Member

Mian Raza Mansha Member

Aftab Ahmad Khan Member

Business Strategy and Development Committee

Mian Mohammad Mansha Chairman   S. M. Muneer Member   Shahzad Saleem Member   Mian Raza Mansha Member   Dr. Muhammad Yaqub Member   Dato' Mohammad Hussein Member   President Member

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Chief Financial Officer

Ali Munir

Principal Office

MCB 15 Main Gulberg, Lahore

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Organizational Environment

 MCB has an organizational culture conductive for growth and confidence. Following are the

guiding principals for its officers and crew members.

Trust

We are the trustees of public funds and serve with integrity & commitment. Ethical behavior

is of critical importance to us. We adopt full compliance with internal and external policies

and procedures, operating within the legal framework

Customer Focus

We continuously seek to exceed our customer’s expectations, forging and maintaining long

term relationships.

Innovation

We strive to be the market leaders in innovative products and services offering customized

financial solutions with flawless execution

Teamwork

The diversity of our people is our strength. We inspire and challenge each other – working

together to achieve synergy

Achievement

Our people are our most valuable asset. We are committed to a result oriented culture. Our

goals are clear and merit is the only criterion for reward

Social Responsibility

As responsible citizens we contribute to the social welfare of the community we live in

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PRODUCTS AND SERVICES OFFERED

Credit cards

MCB Visa is not just another card in your wallet. It not only provides the

conventional credit card services in a manner that is superior in comparison, but goes

an extra mile.

Makes MCB Visa the most affordable credit card in your wallet.

MCB VISA offers you a wide range of products that will cater to your diversified

taste perfectly.

Intelligent Reward Monitoring and Redemption System.

Buy now and pay off latter in easy and affordable monthly installments!

Saving you from the hassel of making multiple payments on your various credit

cards.

You need cash and want to pay back in installments. Just Dail for iit!

Life is too precious to be spoitt by unforeseen events and misphas.

How About a credit card that acts like hard cash

Now Experience peace of mind of having a credit card free from fraud or misuse!

Home Loans: Pyara Ghar

The salient features of Home Loans titled as “Pyara Ghar” are:

AFFORDABLE

Lower mark up rates

Financing upto 80% of the value of your house/flat

Options to club income to avail higher financing limits

Equal monthly installments

SPEED

Fast and hassle free processing of application

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EASE

Doorstep service and assistance from our dedicated sales staff to fill and submit application

along with documents.

AVAILABILITY

Available in all major cities i.e. Karachi, Lahore, Faisalabad, Rawalpindi and Islamabad

EXISTING CUSTOMERS

Get discounts, if you are already a customer of a similar facility at any other bank

Living in your own home was never this easy. So why wait? Apply for MCB Pyara Ghar

today!

For further details, please contact your nearest MCB branch, our call center 111-000-MCB

(622).Our sales staff will be available at your doorstep to assist you in getting the Car 4 You.

Car Loans: Car4U

The main features of car loan, Car4U, are:

1. FLEXIBLE

Option for financing or leasing

Financing tenures from 1 to 7 years

Option for new as well as used cars

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Options for local as well as imported cars

Financing upto Rs. 20 lacs

Option for early payment

Option for replacement loan

Option for first year insurance financing

Minimum documents required (1 copy of CNIC and 2 photographs)

2. AFFORDABLE

Lower mark up rates

Lower insurance rates

Only upto 15% down payments

3. SPEED

Fast and hassle free processing of application

Priority delivery on different vehicles

4. SPECIAL BENEFITS

Option to pay your first installment after 3 months

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Pay your down payment after your loan is approved

5. AVAILABILITY

Currently available in the following cities:

Karachi, Lahore, Faisalabad, Rawalpindi, Islamabad, Quetta, Multan,

Peshawar, Hyderabad, Sialkot, Gujranwala, Sargodha, Mirpur (AJK),

Jehlum, Gujrat, Sahiwal, Rahim Yar Khan, Okara, Bhawalpur, Sukkur,

Mianwali, Abbottabad and Mardan.

6. EXISTING CUSTOMERS

Get 1% discount if you are already our customer for Personal Loan, ‘Pyara Ghar’ or

‘Business Sarmaya’. If you are our branch customer, you can avail this facility anywhere in

Pakistan.

OTHER PRODUCTS AND SERVICES

MCB Business Sarmaya

Running finance facility, to use as and when you want.

Financing upto Rs. 20 million

Pay back when you want

Only monthly mark-up payment

Lower mark up and that too only on utilized amount.

Option to club income to avail higher financing limits.

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Loans up to 70% of the value of your house / flat.

Fast and hassle free processing of application after completion of your documents.

Doorstep service and assistance from our dedicated sales staff to fill and submit

application along with documents.

Access your Business Sarmaya account through our vast ATM and branch network

anywhere in Pakistan.

Available in all major cities i.e. Karachi, Lahore, Faisalabad, Rawalpindi and

Islamabad.

Personal Loan

Speedy loan approval

No guarantor / security / collateral required

Borrow up to Rs.1,000,000/-

1-5 year tenures

Partial and full adjustments allowed anytime during the tenure

Optional insurance

Equal monthly installments

Lower interest rates

Higher loan limits

Doorstep service and assistance from our dedicated sales staff to fill and submit

application along with documents

SPECIAL BENEFIT:

Loan amount can be renewed anytime after 6 months

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Cards

Smart Card/Debit Card

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.

MCB Visa

Already discussed at the start of the article.

TRAVELER'S CHEQUES

RTC Features

MCB Bank has been at the forefront of providing it’s customers with new and innovative products and financial instruments that are safe, secure and profitable.

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 travelling and in all walks of life.

Gift CHEQUES

MCB Gift Cheques, eliminates guesswork in trying to find out the perfect Gift for any occasion birthdays, wedding, graduation and religious festivals.

Gift Cheque is beautifully packed in a Gold / Silver envelope with a personalized Gift Card designed to suit all occasions. They are safer than cash, because they can be replaced if lost or stolen. They are also available at all TCS Express Centres round the clock.

Remittance

You can remit funds from any country to Pakistan through Swift System. Please provide the

following Swift Code to your bank in your country.

Online Services

ATM Service

Card Categories

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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

Mobile Banking

At the forefront of technological excellence, MCB proudly introduces MCB

MOBILE BANKING. The convenience of accessing your account balance

information and mini statements whenever you want or wherever you may need them,

with comfort and peace of mind.

Call Center

The state of the art MCB call center is the right choice to keep you in step with your ever hectic schedule by providing you services relating to your account and Smart card at any point in time.

Bill Payment

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

phone bills or re-charge your prepaid mobile phone accounts anywhere, anytime with

security and peace of mind.

MCB is the only bank that offers you 3 convenient options of making bill payments

to PTCL, SSGC, SNGPL, KESC, Instaphone, Mobilink, Paktel and Ufone. So, save

your precious time by avoiding long queues and pay your bills through MCB Easy

Bill Pay.

MNET

MNET enables all the member banks to share their electronic networks. Which means

customers of member banks can use MNET as well as 1-Link ATMs Nationwide.

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MNET member banks ATM machines accept cards issued by MCB Bank Ltd,

Citibank, Standard Chartered, HSBC, My Bank, Bank of Punjab, Prime Commercial

Bank, Saudi Pak Bank Limited, Habib Metropolitan Bank, KASB, JS Bank, Deutsche

Bank, SME Bank, Arif Habib Rupali Bank and First Women Bank. MNET customers

can use over 600,000 ATMs worldwide that carry the logo and shop at over 5 million

outlets that carry the logo.

Virtual Banking

MCB Virtual Internet Banking offers you the convenience to manage and control

your banking and finances – when you want to, where you want to. MCB’s Virtual

Internet Banking facility is

Islamic Banking

Islamic Banking Division was formed with effect from 1st January 2003, which in a short span of time, has developed sufficient expertise, necessary infrastructure, information technology, and manpower to run Islamic Banking Operation and offer Islamic Banking

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Type of Accounts

1) Basic Account

Open a Basic Account with as little as Rs.1000/- only.

No minimum balance maintenance requirement.

No monthly account maintenance charges.

Two free deposits per month (including cash and clearing).*

Two free withdrawals per month (including cash and clearing).*

Unlimited free withdrawal transactions through MCB's ATMs.

Use your MCB SmartCard to shop at thousands of merchants across Pakistan

Current Accoun

2) CURRENT ACCOUNT

Low minimum balance requirements.

Unlimited cash deposit and withdrawal facility at hundreds of branches nationwide.

Use your MCB SmartCard to shop at thousands of merchants across Pakistan.

Lockers and other affordable transactional facilities.

MCB ACCESS:

Branches, on your way

Hundreds of 9-5 full day banking branches (including Saturdays).

Network of over a thousand branches, and hundreds of online branches, at convenient locations.

3) SAVING ACCOUNT

Low monthly average balance requirements.

Profit paid into your account every six months.

Unlimited cash deposit and withdrawal facility at hundreds of branches nationwide.

Use your MCB SmartCard to shop at thousands of merchants across Pakistan.

Locker facility at economical rates.

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4) FOREIGN CURRENCY ACCOUNT

Open your account in US Dollar, UK Pound Sterling, or Euro.

Open for as little as US$ 500 or equivalent.

Unlimited transactions at your branch.

Free Foreign Currency cash deposit and withdrawal facility.

Rate of Return directly linked with international market.

Profit paid into your account every six months.

Foreign Remittances facility available.

Countrywide network of Foreign Currency Branches.

Cash withdrawal in PKR equivalent.

5) SMART DOLLAR ACCOUNT

USD Current, Savings and Term Deposit accounts.

Competitive profit rates.

Attractive incentives being offered, if you maintain the minimum amount of USD

10,000/- or above.*

* Free & Limited Service Charges:

Free Lockers (subject to availability).

Pak Rupee Account: without minimum balance requirement.

Free collection for crediting Foreign Currency Account.

Free Standing Instructions for Current Account.

Free Bank Statements.

Free SmartCard.

Discount (up to 50%) on processing of Personal Loans.

6) SMART DOLLAR ACCOUNT

USD Current, Savings and Term Deposit accounts.

Competitive profit rates.

Attractive incentives being offered, if you maintain the minimum amount of USD

10,000/- or above.*

* Free & Limited Service Charges:

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Free Lockers (subject to availability).

Pak Rupee Account: without minimum balance requirement.

Free collection for crediting Foreign Currency Account.

Free Standing Instructions for Current Account.

Free Bank Statements.

Free SmartCard.

Discount (up to 50%) on processing of Personal Loans.

MCB ACCESS:

7) SAVINGS 365 GOLD

The higher your balance, the higher your rate.

Profit calculated on daily basis.

Profit paid into your account every month.

Open your account with Rs. 500,000/- only.

Cash deposit and withdrawal facility at hundreds of branches nationwide.

8) SAVINGS XTRA

The higher your balance, the higher your profit.

Now avail attractive rates up to 8.5%.*

Profit calculated on monthly basis.

Profit paid into your account semi-annually.

No joining fee on Debit/ ATM Card.

50% Discount on Lockers.

Cash deposit and withdrawal facility at hundreds of branches nationwide.

Unlimited number of ATM withdrawal transactions.

3 Free withdrawal transactions through the branch every month.

9) SPECIAL RUPEE TERM

Multiple tenors from one month onwards.

Option of premature encashment.

Option for ATM debit card to access profit earned.

Option for automatic renewal of term deposits.

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10) BUSINESS ACCOUNT:

Higher the balance, the higher the number of free transactions.

Open a Business Account with Rs.50,000 only.

Unlimited free cash deposit and withdrawal facility at hundreds of branches nationwide.

FREE SERVICES

When you maintain average monthly balance of Rs.100,000 or above

Demand Drafts/Pay Orders.

Cancellation for Demand Drafts/Pay Orders.

Cheque Book.

International ATM Gold Card.

11) Saving Xtra Account

KEY POINTS

The higher your balance, the higher your profit.

Now avail attractive rates up to 8.5%.

Profit calculated on monthly basis.

Profit paid into your account semi-annually.

No joining fee on Debit/ ATM Card.

3 Free withdrawal transactions through the branch every month.

12) CURRENT LIFE ACCOUNT

Open a Current Life Account with just Rs.1,000.

Free comprehensive life insurance coverage.*

No joining fees on Debit/ATM Card.

50% discount of Debit Card Annual Fee at the time of renewal.

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ANNUAL REPORT ANALYSIS

MCB’s financial statements as at September 30, 2008 are available at its website. The

study of the balance sheet shows the net assets balance of Rs. 59,160,064,000. As

compared to its previous balance sheet as on Dec 31, 2007, there is an increase in net

assets of Rs. 1,612,742,000. The amount coming from deposits and other accounts

increased. This shows the reliability of bank in the eyes of its old or new account

holders.

The income statement shows:

Net profit after tax Rs. 12,521,056,000

Earnings per Share for shareholders Rs. 19.93

The cash flow statement has the following salient features:

Net flow from operating activities Rs. 4,999,332,000

Net cash flow from investing activities Rs. 16,091,661,000

Net cash flow from financing activities Rs. (7,307,801,000)

Increase in cash and cash equivalents Rs. 57,604,410,000

Changes in owners’ equity Rs. 53,235,546,000

It is seen that the company’s cash flow from its operating activities is positive. This is a sign

of successful operation of the bank. Positive cash flow from investing activities indicates that

investment has been low this year. Rather, the bank has sold out some of its long-term assets

resulting in positive net cash flow. Financing activities has also been on the lower side. There

has been an outflow of cash in the area of financing which implies outflow of capital.

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CENTRAL BANK’S ROLE

MCB complies with all the rules and regulations set by Central Bank of Pakistan. Following information depicts the bank’s adherence to the needful.

Name & Address MCB Bank Limited  MCB 15 Main Gulberg, Lahore   

Legal FormPublic Limited Company. Listed on Karachi, Lahore & Islamabad Stock Exchanges in Pakistan.

  

Name of External Auditors

KPMG Taseer Hadi & Co  /                                             Riaz Ahmed & Co .                                                Chartered Accountans

  Name of Regulatory Body State Bank of Pakistan (Central Bank).  

Main Banking Commercial, Consumer, Corporate, Correspondent and Islamic Banking.

Categories of shareholders - as of December 31,2007.Pattern of Share Holding

Particulars Shareholding Percentage 

Directors, CEO and children 29,414,134 4.6817       

Associated Companies 49,601,842 7.8949    

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NIT & ICP 7,305 0.0011     

Banks, DFI & NBFI 3,941,990 0.6274     

Insurance Companies 39,538,161 6.2931      

Modarabas & Mutual Funds 2,153,414 0.3427 

Public Sector Cos. & Corp. 115,204,125 18.3365      

General Public (Local) 143,491,134 22.8388     

General Public (Foreign) 2,127,329 0.3385 Others 83,306,246 13.2594 

Foreign Companies 159,491,163 25.3854 

Company Total 628,276,843 100  Chairman

Mian Mohammad Mansha    

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President & CEO

Mr. Atif Aslam Bajwa      Banking License No. BCD (1) 17-66 dated 8th December 1966.  

Compliance Status Compliant with KYC and AML regulations

Chairman Mian Mohammad Mansha

Mr. Atif Aslam Bajwa

President & CEO

Banking License No. BCD (1) 17-66 dated 8th December 1966.

Compliance Status Compliant with KYC and AML regulations

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COMMENTS

This brief study on the operational, investment, and financial activities as well as the

profitability of MCB throws a light on the overall position of the bank. It can be seen that the

bank is performing efficiently and effectively catering to the varying financial and

investment needs of classes of people ranging from ordinary consumers to the business

moguls. It may be included among the few Pakistani Banks with large range and variety of

products and financial instrumens. The recently won "Euromoney” Award for the best bank

in Asia indicates that it has acquired a prestige in the international banking community. The

financial statements also indicate prospects for even further growth.

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Bibliography

MCB Website

Wiki Encyclopedia

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Appendix

MCB Bank’s Consolidated Condensed Balance Sheet as at September 2008.