MCB Internship Repor Compelet

University of Sargodha

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

functions. This basic motivator that stressed me to join any bank for Internship Training.

Moreover, the experience and practice learned during this tenure also prove very helpful and

facilitating in the forthcoming professional life.

This report is the result of 6 week Internship in Muslim Commercial bank, Fatimah Jinnah

Road Branch Sargodha. The motive behind selecting this bank is that it is one of the Top 10

Asia, Bank‘s. The fact remains that Muslim Commercial bank, posses an excel/cut and historical

importance being the most senior and leading in terms fluids and services to Pakistan at all ages

of life.

I had with the strong belief that this report will guide and facilitate the readers to understand the

functioning of banking system and more importantly have good knowledge about Muslim

Commercial bank. My utmost efforts to elaborate this report wit, material read, listened and

observed. Yet, I feel that this period was not long enough to learn and understand the complex

and widespread functioning of banking sector.

I am really thankful to the entire staff members of the aforesaid branch for the friendly and

cooperative behavior during my internship.

Muhammad Nasir Khan

MBA (Finance)

Roll No. 34


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First of all I would like to thanks to Allah on this occasion.

I also want to show my gratitude to my loving parents and humble teachers who make me able to be at this position.

I also thankful to all the staff members at MCB Fatimah Jinnah Road Branch

especially Mr. Muhammad Farooq Ali Khan (Manager).


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I dedicate whole of my education along with my life to my beloved parents and respected teachers, who were always kind to me.

May God Bless Them (Aamin). Muhammad Nasir Khan


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TABLE OF CONTENT

Sr. No. Title Page No. 1 Preface 1 2 Acknowledgement 2 3 Dedication 3 4 Table of Content 4 5 Executive Summery 6 6 History of Organization 7 7 History of MCB 10 8 Vision 12 9 Mission 12

10 Organization Structure 13 11 Core Values 14 12 Awards of MCB 15 13 Product and Services of MCB 17 14 Commercial Banking 17 15 Loan Products 18 16 Corporate Banking 20 17 Online services 20 18 Islamic Banking 22 19 Main Departments 23 20 General Banking Department 23 21 Advance/ Load Department 27 22 Exchange Department 27 23 Work as an internee 30 24 Analysis 32 25 SWOT analysis 32 26 Financial Analysis 34 27 Balance Sheet (From 2007-2009) 34 28 Profit & Loss Account (From 2007-2009) 35 29 Common size Analysis 36 29 Vertical Analysis of Balance Sheet 36 30 Vertical Analysis of Income Statement 37 31 Comments on Vertical Analysis 37 32 Horizontal Analysis of Balance Sheet 39 33 Horizontal Analysis of Income Statement 39 34 Comments on Horizontal Analysis 40 36 Ratio Analysis 41 37 Current Ratio 41 38 Quick Ratio 42 39 Working Capital 44


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40 Cash Ratio 45 40 Debt to Equity Ratio 46 41 Debt Ratio 47 42 Return on Investment 48 43 Interest Coverage Ratio 49 44 Return on Assets 50 45 Income/Expense Ratio 51 46 Earning Per Share 52 47 Price/Earning Ratio 53 48 Dividend Payout Ratio 54 49 Dividend Yield Ratio 55 50 Comments on Ratio Analysis 56 51 Conclusion 58 52 Recommendation 59


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EXECUTIVE SUMMARY

MCB Bank Limited (Formerly Muslim Commercial Bank Limited) has a solid

foundation in Pakistan, with a network of over 1081 branches, with 9397 permanent employees

over 900 of which are Automated Branches, over 495 MCB ATMs in 55 cities nationwide and a

network of over 12 banks on the MNET ATM Switch.

MCB's operations continued to be streamlined with focus on rationalization of expenses,

re-alignment of back-end processing to increase productivity, enhancement of customer service

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

innovative concept of centralizing Trade Services in the country by providing centralized foreign

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

During my internship in MCB I worked in different department like general banking

department and learned the procedure of cheque at counter, payment of cheque and issuance of

Demand Draft also worked in the account department and Clearing Department and Customer

Service Office department and I successfully completed all the task/duties that were assigned to

me.

During the course of internship I learned about different functions performed by

Remittances, Advances, Foreign Exchange and Customer Service Office department and bank as

a whole. I also learned bank’s correspondence with their customers and within branches. I

learned about documentation requirements and record keeping for different activities and

processes, especially the documentation requirement for different kinds of financing facilities.


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HISTORY OF BANKING IN PAKISTAN

At the time of independence, commercial banking facilities were provided fairly well

here. There were 487 offices of schedule banks in the territories now constituting Pakistan. An

Expert committee was appointed. The committee recommended that the reserves bank of India

should continue their function in Pakistan until 30 September. 1948, and Pakistan would take

over the management of public debt and exchange control from reserve bank of India on April

1948 and that Indian notes would continue to be legal tender in Pakistan until 30 September

1948. Moreover the banks including those having their registered office in Pakistan transferred

them to India in order to bring a collapse of a new state. By 30 June 1948 the number of the

offices of scheduled banks in Pakistan declined from 487 to only 195.In order to make necessary

arrangement for the assumption of control and expert committee was appointed to recommend

necessary steps, including the required legislation to establish a central bank for Pakistan. The

governor-general of Pakistan Quaid-i-Azam Muhammad Ali Jinnah inaugurated the State Bank

of Pakistan order was promulgated on May 12, 1948. The first Pakistani notes were issued in

October 1948 in the State Bank of Pakistan withdrew the reserves Bank of India notes of the

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

On 1st January, 1947 all Pakistani banks were nationalized through Nationalization Act

1974. Under this law all Pakistani Banks become a pubic property. All small banks were merged

in bigger banks to create five major Pakistani banks. These banks were to control by Pakistani

Banking Council. There are still controversies about this act of Govt. as whether it contributed in

success of failure of banks. However the major changes after Nationalization were as follows:

Working of banks was extended to under-developed areas.

Market expansion for credit and deposits.

Decrease in service level of bank officers.

Decrease in profitability as well.

In 1990 the govt. decided to denationalize all the nationalized institutions. Same was also

suggested in banking sector. For this purpose, amendments were made to Nationalization Act

1974 and two nationalized banks were privatized. Along with this a permission to open banks in

private sector was also granted. The rules regarding establishment of new banks and for

incoming foreign banks were also relaxed. The two privatized banks are: MCB taken up by a


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

these changes a large number of private and foreign banks started their operation in Pakistan

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

institutions ranging from a central bank to commercial banks and to specialized agencies to cater

for special requirements of specific sectors. The country started without any worthwhile banking

network in 1947 but witnessed phenomenal growth in the first two decades. By 1970, it had

acquired a flourishing banking sector.

Pakistan's banking sector has remained remarkably strong and resilient during the world

financial crisis in 2008–09, a feature which has served to attract a substantial amount of FDI in

the sector. Stress tests conducted on June 2008 data indicate that the large banks are relatively

robust, with the medium and small-sized banks positioning themselves in niche markets.

Banking sector turned profitable in 2002. Their profits continued to rise for the next five years

and peaked to Rs 84.1 ($1.1 billion) billion in 2006.

During the fiscal year of 2008-2009, total assets of all the scheduled banks increased by Rs

574.7 billion. Total assets grew by 6.4 percent from Rs 8861 billion in June 2008 to Rs 9436

billion in June 2009. During the fiscal year of 2008-09, there was also an increase of Rs 248

billion in the net advances of the scheduled banks. Net advances grew by 8.67 percent from Rs

2873 billion in June 2008 to Rs 3128 billion in June 2009.

Commercial Banks: The banks in any country speeded over with an objective to get the excessive money Form the

public in the form of deposits and providing finance to the investors. These Banks are in the

ground for profit earning motive and in competition with each other. These banks are providing

the basic services to the customers in the form of deposits, Advances, remittances and others.


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Classification of Commercial Banks:

Mode of Classification Types of Banks A.

Classification on the basis of Function i. Central Bank

ii. Commercial Bank

iii. Exchange Bank

iv. Saving Bank

v. Agricultural Bank

vi. Industrial Bank

B. Classification on the basis of Owner

ship

i. Public Sector Bank

ii. Private Sector Bank

iii. Cooperative Bank

C. Classification on the Basis of Domicile i. Domestic Bank

ii. Foreign Bank

D. Classification on the Basis of

Registration

i. Scheduled Bank

ii. Non-Scheduled Bank

E. Other Banks i. Charted Bank

ii. Investment Bank

iii. Mortgage Bank

Functions of Commercial Bank:

1. Borrowing money from the customer in the shape of Term deposits ( PLS saving current deposits

and Notice deposits).

2. Lending of money to borrowers in shape of finances, short-term finances, and long-term finances

under various names such as Demand Finance, Small Finance, and Cash Finance.

3. Agency services. 4. Remittance of money

5. Foreign exchange business, foreign currency deposits. LCS, Imports and exports etc.


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BRIEF HISTORY OF MCB: MCB Bank Limited formerly known as Muslim Commercial Bank Limited was

incorporated by the Adamjee Group on July 9, 1947 in Kolkata in Bengal, under the Indian

Companies Act, VII of 1913 as a limited company. But due to changing scenario of the region,

the certificate of incorporation was issued on 17 August, 1948 with a delay of almost 1 year; the

certificate was issued at Chittagong. The first Head office of the company was established at

Dacca and Mr. G.M. Adamjee was appointed its first chairman. It was incorporated with

an authorized capital of Rs. 15 million. The Bank transferred its registered/Head office from

Dhaka to Karachi on August 23, 1956 through a special Resolution.

NATIOINALIZATION: In January 1974, the government of Pakistan nationalized MCB following the banks

(Nationalization) Act 1974, subsequently, in June 1974, Premier Bank limited merged with

MCB.

PRIVATIZATION: A wave of economic reforms swept Pakistan in the late 1990’s introducing the need for

privatization of state owned banks and companies in April 1991, MCB because Pakistan’s first

privatized Bank, the government of Pakistan transferred the management of the Bank to Nishat

Group– group of leading industrialists of the country by selling 26% shares of the Bank. With a

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

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

additional 24% shares have been purchased by the group making their holding 50%. As of June

2008, the Nishat Group owns a majority stake in the bank. 25% was retained by the government.

Now it is fully privatized.

Mian Mohammad Mansha is the Chairman of the group (and also MCB) and has

played instrumental role in its success. In recognition of Mr. Mansha’s contribution, the

Government of Pakistan has conferred him with "Sitara-e-Imtiaz", one of the most prestigious

civil awards of the country.

MCB is Pakistan’s fourth largest bank by assets having an asset base of US$6.7 billion,

and the largest by market capitalization having a market capitalization of US$4.1 billion. The


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Bank has a customer base of approximately 4 million and a nationwide distribution network of

1,026 branches, including 8 Islamic banking branches, and over 300 ATMs, in a market with a

population of 160 million.

PRESENT STATUS

Over the years Muslim Commercial bank fostered strong bonds with its customers. MCB

understands them; their needs. They feel comfortable with MCB; its their bank; it responds to

them; listens to them; partners with them; grows with them. That is why it is one of the leading

commercial banks of the country, providing a wide range of modem banking services. At

present, the banking network consists of over 1000 branches along with – controlling offices

known as Area Head offices and Regional Head offices. These controlling offices are responsible

for the smooth operation of the bank on National & international levels. The entire financial and

operational objectives are achieved with the Human Resources strength over 12000 employees.

The bank is known as the major credit provider, best place of working and paymaster in the

financial (money market) of the country. Over the past few years, MCB's profits have been hit by

the need to increase provisions coverage and restructuring costs associated with the downsizing

of the workforce and branch network, whilst there is some need to boost provisions, these

charges (necessary to bring the bank back into shape) are largely over. It has also slowly

received permission from the SBP to shut down a number of unprofitable branches.

In 1999 EURO MONEY recognized MCB as the best domestic bank in Pakistan. The banking

sector has been worst hit by the external account crisis that engulfed the country following the

nuclear tests. Due to the nature of banks as a medium for debt transactions the country's technical

default and subsequent rating downgrade impacted them the most. Those core concerns are still

not fully alleviated in the view of the investors. The closest that investors have come to positive

expectations regarding external account sustainability and a possible re-rating was back in the

fourth quarter of the year 1999, and this led to MCB climbing to Pakistani rupees 56 per share.

Resumption of the IMF funding and a possible rescheduling of bilateral debt will positively

impact the banking sector and especially MCB.

State Bank of Pakistan continued the process of Banking Reforms, which included strengthen of

Prudential Regulations and focus on recovery of defaulted loans. In 1999 return on Government


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Savings Scheme and Treasury Bills was reduced, which led to a lowering of lending rates,

resulting in erosion of margins for banks but it is likely to give a boost to economic activity.

MCB Rupee travelers Cheques continued to maintain their leadership position in the industry

and sales registered a 45% growth over last year. MCB successfully introduced the Rs.100, 000

denomination cheque countrywide and introduced RTC dialup tele-verification facility from

Lahore city as well.

Mainly there are three types of Banking in MCB. These are:

The Vision of MCB is

“To be the leading financial services provider, partnering with our customers for a

more prosperous and secure future.”

The Mission Statement of MCB is

“We are a team of committed professionals, providing innovative and efficient

financial solutions to create and nurture long-term relationships with our customers. In

doing so, we ensure that our shareholders can invest with confidence in us.”


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ORGANIZATIONAL STRUCTURE


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Core Values

INTEGRITY

We are the trustees of public funds and serve our community with integrity. We believe

in being the best at always doing the right thing. We deliver on our responsibilities and

commitments to our customers as well as our colleagues.

RESPECT

We respect our customer’s values, beliefs, culture and history. We value the equality of

gender and diversity of experience and education that our employees bring with them.

We create an environment where each individual is enabled to succeed.

EXCELLENCE

We take personal responsibility for our role as leaders in the pursuit of excellence. We

are a performance driven, result oriented organization where merit is the only criterion

for reward.

CUSTOMER CENTRICITY

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

understanding their needs and aspirations, both realized and unrealized. We make every

effort to exceed customer expectations through superior services and solutions.

INNOVATION

We encourage and reward people who challenge the status quo and think beyond the

boundaries of the conventional. Our teams work together for the smooth and efficient

implementation of ideas and initiatives.


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Awards of MCB:

MCB has become the only bank to receive the Euromoney award for the seventh time and

Asiamoney award for fifth time in the last ten years.

MCB won “Best Bank in Asia” award in 2008. MCB also won the "Best Bank in

Pakistan".

Best Bank award 2008





MCB also won the

Best Domestic Bank in Pakistan awards 2000

In addition, MCB also has the distinction of winning the “Asia Money” awards for being "The

Best Domestic Commercial Bank in Pakistan".

Best Domestic Commercial Bank award 2005

Best Domestic Commercial Bank award 2004


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PRINCIPLES OF PERFORMANE Customer Focus:

Over the years MCB has developed strong relationships with its customers by understanding

their needs and treating them with respect, dignity and importance. The driving force behind its

commitment and services is its focus on customers, ensuring that it not only meets, but exceeds

their expectations.

Quest for Quality:

MCB strives to achieve excellence by ensuring that every moment of our time is spent in adding

value, making sure that we do things right, first time, and every time. With this quest for quality,

MCB has always taken initiatives in bringing banking into a new arena; from cash to the

convenience of plastic; from branch banking to internet banking and from face-to-face customer

interaction to online accessibility.

Employees Respect:

MCB encourages diversity and treat each of our employees with fairness. MCB gives

constructive feedback for their continuous development and seek suggestions from all employees

for further improvement. The bank ensures that quality performance is acknowledged and

rewarded and exercise utmost responsibility in decision-making with regards to our employees.

Team Based Approach:

MCB believes in achieving its Mission and Vision by working together as a combined group.

MCB treats its employees as its internal customers and ensure that the requirements of internal

customer focus are always met. Equipped with in-depth product knowledge, and recognizing the

strengths in each individual, the bank strives for optimum-results from our co-workers and

bringing out peak performances by working towards common goals and objectives in today's

dynamic banking environment.


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Good Corporate Citizenship:

MCB seeks to continuously improve the quality of life in our communities. The bank realizes

that it has a responsibility to the society in which it operates and it seeks ways of playing a

positive role for the betterment of the community at large for a progressive environment, better

living and a brighter future.

PRODUCTS AND SERVIES Commercial Banking

Deposit Accounts:

Basic Banking Account: A simple account to produce the habit of saving for beginners like students. The account

can be opened with only Rs. 1000, no minimum balance required, no any monthly or annual

charges applicable on this account, two deposits and two withdrawals can be made in a month.

Also you can avail the facility of MCB ATM card and MCB smart card.

Pak Rupee Current Account: MCB’s Pak Rupee Current Account offers you the convenience of unlimited withdrawals

i.e. access to your funds whenever you want without any notice. There is no limit on the number

of transactions you make in a day plus you can avail finance facility up to 75% of the total

deposit.

In addition, you have access to a countrywide ATM network convenient cash accessibility 24

hours a day. The facility also provides you with unlimited daily transactions with a limit on

maximum withdrawal amount through the ATM machines

Pak Rupee Savings Account:

MCB’s Pak Rupee Savings Account offers you attractive returns on your Pak Rupee

investment with a minimum balance of Rs. 10,000.

In addition, you have access to a countrywide ATM network convenient cash accessibility 24

hours a day. The facility also provides you with unlimited daily transactions with a limit on

maximum withdrawal amount through the ATM machines. You can also use MCB Smart card

and Locker Facility at economical charges.


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Pak Rupee Term Deposit: MCB Pak Rupee Term Deposit gives a higher rate of return. It gives you choice of 1

month, 3 months, 6 months, 1 year, 2 years, 3 years, 4 years and 5 year term deposits.

Saving 365 The MCB Saving 365 calculates profits on a daily product basis and gives you the

facility of unlimited withdrawals.

Foreign Currency Savings Account: MCB’s Foreign Currency Savings Account offers you attractive returns on your Foreign

Currency investment. You can invest in any of the four currencies i.e. US Dollar, UK Pound

Sterling, Japanor Euro Your foreign currency account is exempted from Zakat and withholding

tax.

Foreign Currency Current Account: MCB’s Foreign Currency Current Account offers you the convenience of unlimited

withdrawals i.e. access to your funds whenever you want without any notice. There is no limit on

the number of transactions you make in a day.

MCB Foreign Currency Term Deposit: MCB Foreign Currency Term Deposit gives a higher rate of return. It gives the choice of

1 month, 3 months, 6 months, 1 year, 2 years, 3 years, 4 years and 5 year term deposits.

Smart Dollar Account: The Dollar Khushali Account, a Dollar based account was introduced in 1993 at selected

MCB Bank branches. Today, you can open a Smart Dollar Account at over 200 branches in

Pakistan with a minimum amount of USD 10,000.

Business Account: With MCB Business Account you can avail higher number of free transactions with

higher balance. The account can be opened with Rs. 50,000. You can make free Deposits and

Withdrawals from all nation-wide branches.

LOAN PRODUCTS

MCB Business Sarmaya: “MCB Business Sarmaya” is the best Running Finance facility against your residential

property which empowers you to manage your business dealings better. So act today and get


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MCB Business Sarmaya and thus improve your business, avail lucrative opportunities and

expand your business, with absolute satisfaction of cash flows.

MCB Car 4u: Life is like a chess board. You plan your career options. You analyze your business

moves. But when you really want to improve your life, you make a power move. MCB CAR4U

Auto Finance is the power move that assists you in more ways than you ever imagined. It is

affordable, with lowest mark up 16%, flexible conditions, easy processing and above all, no

hidden costs.

MCB Pyara Ghar: Some destinations require a long wait. Like waiting for a home of your own. But with

MCB Pyara Ghar it is now easy to step into your home and start living a real life.

MCB Pyara Ghar is an ideal Home Finance from your own bank that lets you Purchase,

Renovate or Construct your home the way you have always wanted. Having your own home was

never so easy.

Easy Personal Loan: MCB Easy Personal Loan provides you with the financial advantage to do things you've

always wanted to but never had the sufficient funds for. Take that much-needed holiday. Buy a

car. Refurnish your house. Purchase a new TV. Finance a better education for your children.

MCB Master Card: Since the beginning of time, people have tried to find more convenient ways to pay, from

gold to paper money and checks. Today, money is moving away from distinct hard currencies

and towards universal payment products that transcend national borders, time zones, and, with

the Internet, even physical space. Plastic or "virtual" money, credit, debit, and electronic cash

products, inevitably will replace cash and checks as the money of the future.

MCB Rupee Traveler's Checks:

MCB Rupee Traveler's Checks 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


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by customers while traveling and in all walks of life. MCB Rupee Traveler's Checks- The safest

way to carry Cash.

CORPORATE BANKING

Cash Management Services: MCB’s network of over 1700 branches in Pakistan enables it to collect and disburse

payments efficiently with its cash management services. This also enables it to offer you a choice

of paper based or electronic fund transfer solutions including collection amounts, cross branch

on-line transactions etc.

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.

Term Loans: MCB offers Short to Medium Term Finance to meet capital expenditure and short term

working capital requirements of our customers. The loans are structured on the basis of

underlying project characteristics and cash flows of the business.

Trade Finance Services: Under Corporate Banking MCB offers trade finance services that include an entire range

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

documents, providing guarantees and other support services.

ONLINE SERVICES MCB ATM SERVICES

With a solid foundation of over 50 years in Pakistan, with more than 750 automated

branches, 269 online branches, over 222 MCB ATMs in 41 cities nationwide and a network of

over 12 banks on the MNET ATM switch, MCB is positioned at the forefront of the banking

industry in Pakistan. This success has been possible because of a never-ending drive to achieve

higher levels of excellence, constantly striving to raise the level of performance.


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MCB 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.

MCB Call Center: Keeping up with banking services can be tedious but not with MCB Bank, where phone

service is at your fingertips. Just dial our Call Centre from the comfort of your home or office or

wherever you happen to be. It offers basic banking services for your convenience, eliminating

the need for you to make unwanted trips to your branch.

MCB Smart Card: MCB now brings you MCB SmartCard -a secure and convenient instrument of payment

with unmatched functionalities. It provides 24-hour direct access to your bank account.

The convenience and flexibility of MCB SmartCard will help you live a smarter life. It not only

helps you manage your expenses, but also eliminates undue interest on your day to day credit

card transactions. Your balance is always within your reach and you spend accordingly.

MCB Debit Card: Now MCB brings a secure, convenient and quick payment facility that enables you to do

purchasing by using your existing MCB ATM / MCB Smart Card as a DEBIT CARD.

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 simple and secure. And it is free of cost. With MCB Virtual Internet Banking

you can access any of the banking services, 24 hours a day, 7 days a week and throughout the

year.

MCB Virtual Internet Banking offers a wide range of online services which makes your banking

accessible anytime and from anywhere.

Detailed Account Summary of all listed accounts.


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Mini-statements of each of the listed accounts showing recent transaction history for that

account(s).

Statement-by-Period of each of the listed accounts, based on the period specified.

Immediate or Scheduled Transfer of Funds between your own accounts, as well as to

third-party accounts setup as beneficiaries, maintaining accounts with MCB.

Scheduling of ‘One-Time’ as well as ‘Recurring’ Funds Transfers.

Payment of utility bills for registered Utility Companies.

Immediate or Scheduled Bills Payment. Scheduling of ‘One-Time’ as well as ‘Recurring’

bill payments. Option for ‘Full’ or ‘Partial’ payment based on the payment conditions

specified by a particular Utility Company.

Bulk Salary Transfer for Corporate Customers, to facilitate them in paying salary to the

corporate employees, who maintain accounts with MCB.

Bulk Funds Transfer for Corporate Customers.

Check Book Request for any of your listed accounts.

Payment/Transfer Alerts for reminding, in advance, prior to the processing of specified

payments and transfers.

Personal Alerts for reminding of pre-specified events and occasions.

ISLAMIC BANKING Deposit Schemes: For customers who are looking for a deposit opportunity where they can purse their funds and

reap halal returns on it, we offer the following products:

Al-Makhraj Saving Account

Al-Makhraj Ianat Account

Al-Makhraj Term Deposit

Fund Based Facilities

Ijarah Products

MCB’s Islamic Ijarah, analogous to the English term 'leasing’, is based on the ‘Ijarah wa

Iqtina’ concept which means the sale of the asset to the lessee after the Ijarah has matured. Under

this scheme, MCB will be the owner of the asset, and the customer (lessee) will be given the

asset to use for a certain period of time in return for monthly rental payments. MCB will give a

separate unilateral undertaking that it will offer to sell the asset to the customer (lessee) at the


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maturity of the Ijarah agreement at a price that may be equal to the security deposit amount,

hence the term ‘Wa Iqtina’.

Types of Ijarah:

1. Car Ijarah

2. Equipment Ijarah

MAIN DEPARTMENTS AND THEIR JOBS There are three main departments in any branch of MCB

GENERAL BANKING

FOREIGN EXCHANGE

ADVANCES/CREDIT

GENERAL BANKING General banking deals with following services:

REMITTANCE

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

telegram and telegraph transfer. Payments of fees of different organizations, fulfillment of

tenders, and collection of funds are the main functions of remittance. Maximum part of general

banking depends on this department.

Issuance of different kinds of remittance:

PAY ORDER

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

being pay ordered by the concerned person. Pay orders are made for the payment of fees, tender

or issued for the payments of dealings. These are required for the proof of payments made

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

letters and yearly serial numbers are issued from computerized system.

DEMAND DRAFT

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

outstation branches of the concerned banks. An advice is also made for the confirmation of the

draft send. These are also approved and safe way of sending amount to the beneficiary.


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

computer system.

MAIL TRANSFER

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

the confirmation of the draft send. These are also approved and safe way of sending amount to

the beneficiary. These are also noted by computerized system and a serial number is issued from

the computer system.

TELEGRAPHIC TRANSFER

Telegraph Transfer is telegram message for transferring the amount from one branch to

other branch. A message advice and a confirmation advice both are made with TT numbers that

are issued for TEST. TEST depends on two steps:

1. First TEST is on Day, Date and Code Number of branch.

2. Second TEST is on Currency, whether Pak rupees or foreign currency, amount and TT

number issued from manual registers and confirmed from computerized system.

PAYMENT OF PAY-ORDER AND DEMAND DRAFT

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

and in case transfer of amounts; the amount could be transferred in the beneficiary account. In

case of physical payment authorized signature of beneficiary are taken for the proof of amount

being paid to him and in case of transferring of amount authorized signature of the beneficiary

are checked and verified for reducing risks.

CANCELLATION OF PAY-ORDER AND DEMAND FRAFT

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

made by the beneficiary. The customer could only cancel the pay order/ demand draft as the

verified signatures of beneficiary are present on the advice.

VOUCHERS

Vouchers are made for records and they should be completed in all respects, the amount,

date, its head, particulars, amount in words, authorized signatures and contra advice or voucher

should be present. Vouchers are advice either debit or credit slips. They are contra of each other.


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If any voucher of debit is passed its contra credit voucher should also be passed for the balancing

of accounts, their respective sheets.

INWARD CLEARING

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

concerned branch receive any type of clearing check first of all physical checking is taken place.

For clearing procedure there should be two days margin. These cheques have their vouchers and

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

noted on receiving sheet as well as feed in to the computerized system.

OUTWARD CLEANING

It depends on those cheques that are cleared out side the city. For outward clearing

cheques are send because the home branch has there accounts but checks are of other banks.

Contras of these cheques are vouchers that are recorded in the home branch.

ISSUANCE OF CHEQUE BOOKS

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

for this purpose there should be a cheque book, so he/she could be able to credit the needed

amount whatever he/she wishes. For the issuance of the cheque book a person is advised to fill a

requisite slip with his/her full names and the account number with two verified signatures. These

signatures are checked and then another requisite slip prepared by the bank staff send to the

NIFT, and it issues the printed cheque books after completion of the procedure in two or three

days.

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

account holder another person could also take the cheque book only if he/she has authorized

signature of the account holder. When the cheque books are issued they are feed in the computer

system from the requisite slip so when the cheques are given for the credit/transfer of amount

they could checked. In this way neither the cheques could be repeated nor could the invalid

cheques be claimed.

ISSUANCE OF ATM CARDS

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

Identification Number) codes and when the customer claims for their ATM card they are

checked from the list that is also issued from the head office, and the claim is checked from the


26

list and if the name is found than the cards are issued by taking a signature and their PIN codes

are given to them by taking signatures on their ATM card forms. The ATM card has been

activated by the number provided at or with the specific card.

CANCELLATION OF ATM CARDS

The Cancellation of ATM Cards becomes necessary in the following conditions:

If folded or damaged

Stolen

PIN code missed or forgotten

Card captured by the machine and expired

If requested by the customer

The cancellation or inactivity of the card is being processed by the request or

instructions provided from the customer.

SHORT NOTICE TERM DEPOSIT

There are short times either for seven days or for thirty days and the profit is calculated

by the given percentage from the head office at the payment time. If the customer fails to

complete the duration of seven days or thirty days then no profit is given. If any amount is

outstanding, only in case of automatic continuity, then the profit is calculated for the whole

period by the rate given from the head office multiplying from the numbers of days divided by

the 365 for the one-day profit.

AMOUNT, RATE, NUMBER OF DAYS / 365 DAYS

Profit is calculated for the six months only for outstanding SND. Zakat is also deducted

but if Zakat deduction form is submitted to the bank, no Zakat will be deducted then, 10% with

holding tax is also deducted from the profit to calculate net profit.

CALL DEPOSIT

It is highly liquid instrument; it can be cashed at any time when needed. This instrument

bears no profit on it. It is mostly used for the purpose of tenders.


27

FOREIGN EXCHANGE

LC’S ESTABLISHMENT

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

notice in case of short shipment, packaging list etc. the information provided from the documents

is recorded in the LC establishment portion or section in the computer.

PAYMENT OR RETIREMENT

When the transactions have been completed then approved documents from the

concerned bank are sent to the home bank for the payment or retirement of the LC.

These transactions have recorded in the payment or retirement section of the computer.

FOREIGN CURRENCY DEPOSITS

The Foreign Currency Deposit relates with the foreign currency accounts, cash deposit or

credit and foreign remittances.

FOREIGN REMITTANCES

In this we received the messages through SWIFT for foreign remittances, which we

record in their respective accounts, if these are relates with Pak rupees than it was transferred in

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

accordingly. The amount has been credited to the respective account and the head office has been

debited against it. After crediting the amount to the respective account. All the subsequent entries

have been made in the registers and also in the computer record as the system now have been

upgraded on computers. As we are reporting daily to the head office, so an annexure has been

maintained and faxed to the head office.

ADVANCES / CREDIT

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

entities. The loans, which are being approved by the department, are kept with some securities

such as bonds, properties and any other type of asset, which is equally valuable or more than this

as a guarantee. Every branch has its own limit, if the amount of loans is with in the limit of the

branch then it is being approved by the branch but if the amount of loan is exceeding the limit

then it has to make it approved by the head office. In this case the branch stored all the required

papers and sent them to the head office for necessary action. If the head office approved the loan


28

then mostly the period contains a year. And if the party requires more loan than after a year the

loan has been re-approved required that they should have the limit. In case if the head office do

not approve the loans then the return letter came back with the reasons of not approval of loan

and if the reasons have been made approved by the concerned party then it could be sent again

for approval. This whole process is recorded in the back remain with the bank until the party has

not refunded all the amount of loan and bank has the authority to liquidate those assets for

preventing it from loss.

Types of Advances MCB provides advances, which are of two types. These are as following:

Fund Based Advances

Non Fund Based Advances

1. Fund Based Advances

Funds are given to customer according to their requirement against securities.

These loan are given specially to traders, business, small industrial units, including cottage

industries, agriculturists, thus ensuring an equitable distribution of bank credit among various

sectors of the country’s economy.

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

1) Industrial loan

2) Commercial loan

3) Agricultural loan

Industrial Loan Loans are given to industrial units including cottage industries up to or less than RS. 20 million.

Loans and advances shall not exceed amount specified by marginal restriction on the type of

securities offered. Industrial loans are granted to the manufacturing section of the economy

including finance for fixed investments and working capital requirements of small industries.


29

Loan Period

Loans are allowed for a maximum period of 5 years including a maximum grace period of 1

year. In special case up to 10 years also, depending upon the merit of the case.

Commercial Loan Total principal amount of loans to a single enterprise/borrower shall not exceed RS. 0.5 million.

Maximum maturity is 3 years, depending upon the nature and type of advances, decided upon

case to case basis.

Mark-up

Both for commercial and industrial loan, mark-up will be charges as per existing rate, subject to

changes from time to time. Presently it is 0.51 RS per day per RS. 1000/-.

Mode of Repayment

Equal monthly, quarterly or half-yearly, repayment of principal and interest or as per term of

approval.

Securities and Margin

Loans can be made against any or more of the following securities mortgages of immovable

property (land and building), pledge of stocks, raw materials, and finished goods, hypothecation

of stocks, raw material, and finished goods, State bank of Pakistan guarantee.

Agricultural Loan

Bank provides the agriculture advances in order to enhance and support the agriculture sector of

the country. Bank’s Agriculture division deals with the agriculture advances. These advances are

of following types:

1) Farm Credit

2) Non Farm Credit

Farm Credit

These are the credits provided by the MCB or purchases of inputs for development of agriculture

sector. Following are two main Sub classes of Farm credit:


30

Production Finance

These are short term loans. These loans are provided to farmers for purchases of different types

of input, for example seeds, fertilizer, and pesticides.

WORK PERFORMED BY ME AS AN INTERNEE

I joined Muslim Commercial Bank, Fatimah Jinnah road Branch, Sargodha 26th June 2010. First

day I reached there at 9’O clock and reported to manager who introduced me about the

functioning of the branch and its staff. During these six weeks I worked in different sections of

the branch to learn the maximum practices of banking system.

GENERAL BANKING

First of all, I was asked to work in different sections of General Banking. Here I was attached

Mr. Ayaz Ahmad who has good command on this section. Here we dealt with new customers

who wanted to get information about the branch and will to deal with the branch. This is a very

interesting department because here we met people of different types and deal with them

accordingly.

In this section, I observed the following functions:

CHEQUE AT COUNTER.:

A cheque is presented on the counter with the two signatures of the bearer on the back of the

cheque. Operation’s manager verifies the following points:

The cheque number

Cheque Date

The cheque signature with the signature specimen card position in the officer signature

received at the time of opening the customer’s account in the presence of the officer

Cheque amount in figure and words

Branch stamp in the front of the cheque

Check the nature of cheque, bearer cheque, cross cheque etc.

CHEQUE PAYMENT PROCEDURE.

Receiving and scrutinizing the cheque

Fixing the stamp

Scripting and receipt by the authorized officer

ISSUANCE OF DEMAND DRAFT


31

A demand draft is provided to the client in whom he has to specify that on which bank it is

drawn. The amount both in words and figures is written on the demand draft.

DEPOSIT DEPARTMENT:

Deposit department deals with current, saving fixed accounts for a long period.

In current account the bank does not offer any interest you can deposit or withdraw any amount

during banking hours. In PLS account we can only withdraw up to Rs. 25OOO/ without notice if

you want to withdraw more than a notification must he given to the bank. In Fixed account

people normally of old age are more interested because they get a lump sum amount every month

as a markup or interest. These accounts are normally for two to five years.

CLEARING DEPARTMENT:

In clearing department we deal with cheques of our clients drawn on different banks. Here I also

watched the working of clearing house up to 12.00 pm all the branches send their cheques to

main branch. Where they stored and presented in the State Bank of Pakistan.


32

ANALYSIS

SWOT ANALYSIS

STRENGTHS MCB is Successive and Market oriented.

MCB investing huge sums on HR development and training.

Customer default rate is lower as compared to other banks.

MCB has the largest ATM network in the country.

Meeting the challenges of latest Technology by introducing Smart card remit express, mobile banking

etc.

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

MCB is largest private bank in Pakistan with around 1000 branches, which cover almost every part of

Pakistan.

The bank enjoys competitive advantage over other banks in Pakistan.

The bank enjoys competitive profitability in the industry.

MCB has captured majority of potential customers in Pakistan.

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

WEAKNESSES:

Low motivational level; non-aggressive marketing.

Employees’ dissatisfaction due to ill treatment and improper reward system.

Favoritism and Nepotism in recruitment.


33

Interest rate is very meager.

Decision making process is very slow.

It is not having greater no. of branches abroad.

Though ATM network is the largest in Pakistan, still some potential areas don’t have the ATM.

MCB RTC is useable only in Pakistan.

Some management positrons needed are not professional.

Although most of the branches are computerized now, still some important branches don’t have

computers.

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

MCB to go ahead in this area as well.

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

more customers

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

profitability as well.

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

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

Alfalah, HBL etc.

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

threat.

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

Foreign banks are flourishing in field of consumer financing.

People don’t prefer banking culture. They mostly prefer cash transactions


34

FINANCIAL ANALYSIS

Balance Sheet Of MCB (From 2007 to2009) (Rupee in ‘000)

2007 2008 2009 Assets Cash and balances with treasury banks

39,683,883 39,631,172 38,774,871

Balances with other banks 3,807,519 4,043,100 6,009,993 Lending to financial intuitions

1,051,372 4,100,079 3,000,000

Investments 113,089,261 96,631,874 167,134,465 Advances 218,960,598 262,135,470 253,249,407 Operating fixed assets 16,024,123 17,263,733 18,014,896 Deferred tax assets – – – Other assets 17,868,761 19,810,476 23,040,095 410,485,517 443,615,904 509,223,727 Liabilities Bills payable 10,479,058 10,551,468 8,201,090 Borrowings 39,406,831 22,663,840 44,662,088 Deposits and Other accounts 292,098,066 330,181,624 367,604,711 Sub-ordinate loans 479,232 – – Liabilities against assets subject to finance lease

- –

–

Deferred tax liabilities 1,180,162 437,137 3,196,743 Other liabilities 11,722,493 21,345,781 15,819,082 355,365,842 385,179,850 439,483,714 Net assets 55,119,675 58,436,054 69,740,013 Represented by: Share capital 6,282,768 6,282,768 6,911,045 Reserves 34,000,638 36,768,765 38,385,760 Unappropriateed profit 5,130,750 9,193,332 15,779,127 45,414,156 52,244,865 61,075,932 Surplus on revaluation of assets 9,705,519 6,191,189 21

8,664,081 55,119,675 58,436,054 69,740,013


35

Profit & Loss Account of MCB (From 2007-2009)

2007 2008 2009 Markup/ return/ interest earned 31,786,595 40,043,824 51,616,007 Mark up/ return/ interest expense 7,865,533 11,560,740 15,841,463 Net mark up/ interest income 23,921,062 28,483,084 35,774,544 - Provision for dimininution in the value of investment

105,269 2,683,994 1,484,218

- Provision against loans and advances 2,959,583 1,335,127 5,796,527 - Bad debts written off directly 199 – 41,576 3,065,051 4,019,121 7,322,321 Net mark up/interest income after provisions 20,856,011 24,463,963 28,452,223 Non mark up/interest income Fee, commission and brokerage income 2,634,610 2,953,394 3,331,856 Dividend income 632,300 617,554 459,741 Income from dealing in foreign currencies 693,408 727,564 341,402 Gain on investment 1,500,865 740,429 773,768 Unrealized loss on revaluation of investments classified as held for trading

(13,105) (103,198) –

Other income 563,213 855,697 736,118 Total non mark up interest income 6,011,291 5,791,440 5,642,885 Income after interest income 26,867,302 30,255,403 34,095,108 Non mark up/interest expense - Administrative expenses 5,022,416 7,546,878 10,107,189 - Other proposition/write off (3,743) 23,135 142,824 -Other charges 540,594 817,824 690,150 Total non mark up/ interest expense 5,559,267 8,387,837 10,940,163 Extra ordinary/unusual items – – – Profit before taxation 21,308,035 21,867,566 23,154,945 Taxation-Current year 6,442,356 7,341,257 7,703,305 -Prior years (1,294,473) (864,824) (2,232,226) -Defferd 894,590 16,533 2,188,569 6,042,473 6,492,966 7,659,648 Profit after taxation 15,265,562 15,374,600 15,495,297 Inappropriate profit brought forward 5,530,973 5,130,750 9,193,332 Transfer from surplus on revaluation of fixed assets 11,855 21,319 22,324


36

5,542,828 5,152,069 9,215,656 Profit available for appropriation 20,808,390 20,526,669 24,710,953 Basic/diluted earning per share 24.30 22.25 22.42

COMMON SIZE ANALYSIS

Vertical Analysis of Balance Sheet (From 2007 to 2009)

Analysis 2007 2008 2009 2007 2008 2009 Assets Cash and balances with treasury banks

39,683,883 39,631,172 38,774,871 10% 9% 8%

Balances with other banks

3,807,519 4,043,100 6,009,993 1% 1% 1%

Lending to financial intuitions

1,051,372 4,100,079 3,000,000 0% 1% 1%

Investments 113,089,261 96,631,874 167,134,465 28% 22% 33% Advances 218,960,598 262,135,470 253,249,407 53% 59% 50% Operating fixed assets 16,024,123 17,263,733 18,014,896 4% 4% 4% Deferred tax assets – – – – – – Other assets 17,868,761 19,810,476 23,040,095 4% 4% 5% 410,485,517 443,615,904 509,223,727 100% 100% 100% Liabilities Bills payable 10,479,058 10,551,468 8,201,090 3% 2% 2% Borrowings 39,406,831 22,663,840 44,662,088 10% 5% 9% Deposits and Other accounts

292,098,066 330,181,624 367,604,711 71% 74% 72%

Sub-ordinate loans 479,232 – – 0% – – Liabilities against assets subject to finance lease

– –

– – – –

Deferred tax liabilities 1,180,162 437,137 3,196,743 0% 0% 1% Other liabilities 11,722,493 21,345,781 15,819,082 3% 5% 3% 355,365,842 385,179,850 439,483,714 87% 87% 86% Net assets 55,119,675 58,436,054 69,740,013 13% 13% 14% Represented by: Share capital 6,282,768 6,282,768 6,911,045 2% 1% 1% Reserves 34,000,638 36,768,765 38,385,760 8% 8% 8% Unappropriateed profit 5,130,750 9,193,332 15,779,127 1% 2% 3% Surplus on revaluation of assets

9,705,519 6,191,189 8,664,081 2% 1% 2%

55,119,675 58,436,054 69,740,013 13% 13% 14%


37

Vertical Analysis of Income Statement (From 2007 to 2009)

Analysis

2007 2008 2009 2007 2008 2009 Markup/ return/ interest earned

31,786,595 40,043,824 51,616,007 84% 87% 90%

Mark up/ return/ interest expense

(7,865,533) (11,560,740) (15,841,463) -21% -25% -28%

Net mark up/ interest income

23,921,062 28,483,084 35,774,544 63% 62% 62%

Provision for bad debts

(3,061,308) (4,042,256) (7,465,145) -8% -9% -13%

Net mark up/ interest income after provision

20,859,754 24,440,828 28,309,399 55% 53% 49%

Total non mark up interest income

6,011,291 5,791,440 5,642,885 17% 13% 10%

Non mark up/interest expense

(5,563,010) (8,364,252) (10,797,339) -16% -18% -19%

Profit Before Taxation

21,308,035 21,868,016 23,154,945 56% 48% 40%

Taxation (6,042,473) (6,492,966) (7,659,648) -16 -14% -13% Profit after taxation 15,265,562 15,374,600 15,495,297 40% 34% 27%

COMMENTS

Vertical analysis of Balance Sheet:

Cash is constantly decreasing from year 2007 to 2009; it shows that the liquidity position of the

bank is going to be weak, so it is alarming sign for the bank. Therefore bank should take

necessary steps according to the position.

The with the other is constant form 2007 to 2009.

Increase in money at call and short notice, it means that customers of bank are very punctual in

making payments. Therefore it is good sign for the bank.

In the field of investment there is increasing trend with the passage of time. It is common term

of finance” more investment more return.

As we know that main source of profit of a bank is the difference between the percentages of

interest, Banks pay less rate of interest than receiving the interest from the customers. In this


38

case advance to customers are high in 2007 & 2008 but it decrease in 2002. It means that MCB

is not running very well.

LIABILITIES

There is increasing trend in deposits and other accounts which shows the credibility of the

bank.

Borrowing is decreasing in 2008 but there is increasing trend in the year 2009. Although it is

seeing that bank’s borrowing is increasing with the passage of time which is not a good sign but

there is a positive thing in this behalf, usually banks borrow money at that time when they

would have to give it for earning more profit, I think the MCB BANK LTD. doing the same thing

for increasing its profits.

Bills payable increase in 2008 & 2009 it is negative sign.

Vertical Analysis of Income Statement:

INCOME

Interest earned Increase which is a Positive sign.

As we know that banks provide many facilities other than money lending and borrowing. Banks

receive fee, commission etc. for these services. Therefore fee and commission income are

decreasing which is not a favorable signs.

EXPENSES

Return on deposit increase which decreases the profit.

Administration expenses are increased but no alarming rate.


39

Horzontal Analysis of Balance Sheet (From 2007 to 2009)

Analysis

2007 2008 2009 2007 2008 2009 Assets Cash and balances with treasury banks

39,683,883 39,631,172 38,774,871 100% 99.9% 98%

Balances with other banks

3,807,519 4,043,100 6,009,993 100% 106% 158%

Lending to financial intuitions

1,051,372 4,100,079 3,000,000 100% 390% 285%

Investments 113,089,261 96,631,874 167,134,465 100% 85% 148% Advances 218,960,598 262,135,470 253,249,407 100% 120% 116% Operating fixed assets 16,024,123 17,263,733 18,014,896 100% 108% 112% Deferred tax assets – – – – – – Other assets 17,868,761 19,810,476 23,040,095 100% 111% 129% 410,485,517 443,615,904 509,223,727 100% 108% 124% Liabilities Bills payable 10,479,058 10,551,468 8,201,090 100% 101% 78% Borrowings 39,406,831 22,663,840 44,662,088 100% 58% 113% Deposits and Other accounts

292,098,066 330,181,624 367,604,711 100% 113% 126%

Sub-ordinate loans 479,232 – – – – – Liabilities against assets subject to finance lease

– –

– – – –

Deferred tax liabilities 1,180,162 437,137 3,196,743 100% 37% 271% Other liabilities 11,722,493 21,345,781 15,819,082 100% 182% 135% 355,365,842 385,179,850 439,483,714 100% 108% 124% Net assets 55,119,675 58,436,054 69,740,013 100% 106% 127% Represented by: Share capital 6,282,768 6,282,768 6,911,045 100% 100% 110% Reserves 34,000,638 36,768,765 38,385,760 100% 108% 113% Unappropriateed profit 5,130,750 9,193,332 15,779,127 100% 179% 308% Surplus on revaluation of assets

9,705,519 6,191,189 8,664,081 100% 64% 89%

55,119,675 58,436,054 69,740,013 100% 106% 127%


40

Horizontal Analysis of Income Statement (From 2007 to 2009)

Analysis

2007 2008 2009 2007 2008 2009 Markup/ return/ interest earned

31,786,595 40,043,824 51,616,007 100% 126% 162%

Mark up/ return/ interest expense

(7,865,533) (11,560,740) (15,841,463) 100% 147% 201%

Net mark up/ interest income

23,921,062 28,483,084 35,774,544 100% 119% 150%

Provision for bad debts

(3,061,308) (4,042,256) (7,465,145) 100% 132% 244%

Net mark up/ interest income after provision

20,859,754 24,440,828 28,309,399 100% 117% 136%

Total non mark up interest income

6,011,291 5,791,440 5,642,885 100% 96% 94%

Non mark up/interest expense

(5,563,010) (8,364,252) (10,797,339) 100% 150% 194%

Profit Before Taxation

21,308,035 21,868,016 23,154,945 100% 103% 109%

Taxation 6,042,473 6,492,966 7,659,648 100% 107% 127% Profit after taxation 15,265,562 15,374,600 15,495,297 100% 101% 102%

COMMENTS on HORIZONTAL ANALYSIS INCOME Interest income increase with great proportion with is favorable. It means that interest

received by the bank is increasing with the passage of time. It is not good for a banking company.

As we all know that banks provide many services for their customers and also act as a agent of the customer. The banks receive fee and commission after their services; it is a main source of bank to receive fee and commission from their customers. In case bank is taking more fees as compared to previous years. This is good for the bank.

EXPENSE Return on deposit decreases which shows good sign and it is due to decrease in return

rate. Admin and diminution and provision against non performing loan increasing turned

that is favorable.

Bad debts increased with huge amount not positive sign.


41

Profit before taxation has increased but not with greater proportion. Tax increases which

are not bad because it is interrelated with profit, if profit increased, tax also increase

RATIOS ANALYSIS

Ratio analysis is an important and age-old technique of financial analysis. Ratios are important and helpful in the reference that:

These simplify the comprehension of financial statement and tell the whole story of changes in the financial conditions of the business.

These provide data for inter-firm comparison. The ratios highlight the factors associated with successful and unsuccessful firms, also reveal strong and weak firms.

These help in planning and forecasting these can assist management in its basic functions of forecasting, planning, coordination and control.

These help in investment decision in case of investor and lending decision in case of Bankers etc. However, the ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business other things have also to be seen.

Ratio Analysis:

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

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

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

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

ending up in a difficult position.

Current ratio=current asset/ current liabilities

2007

Current asset 376,592,633

Current liabilities 342,463,187

Current ratio 1.10


42

2008 2009

Current Ratio

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.

109%

110%

111%

112%

2007 2008 2009

110%

112%

111%

Current Ratio

Current Ratio



Current ratio 1.12



Current ratio 1.11

Year 2007 2008 2009 Percentage 1.10 1.12 1.11


43

Quick Ratio = Cash + Account Receivable + Marketable Securities/Current Liabilities 2007

Cash + Account Receivable +Marketable Securities

263,503,372

Current Liabilities 342,463,187 Quick Ratio .77:1

2008


309,909,821


2009


301,034,271


Quick Ratio Year 2007 2008 2009 Ratio .77:1 .85:1 .72:1

0.65

0.7

0.75

0.8

0.85

0.9

2007 2008 2009

0.77

0.85

0.72

Quick Ratio

Quick Ratio


44

Working Capital:

Working capital is the difference between current assets and current liabilities. Working capital is often considered a measure of liquidity by it self. This ratio shows the amount of liquidity. Working capital is used to check liquidity of the organization.

Working Capital= Current Assets – Current Liabilities

2007

Current Assets 376,592,633 Current Liabilities 342,463,187 Working Capital 34,129,446

2008


2009


Working Capital: Year 2007 2008 2009 Ratio 34,129,446 43,144,763 47,700,847

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

2007 2008 2009

34,129,446

43,144,76347,700,847

Working Capital

Working Capital


45

Cash Ratio: Cash and equivalent 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

Cash Ratio= Cash Equivalents + Marketable Securities/Current Liabilities

2007

Cash Equivalent + Marketable Securities

43,491,402

Current Liabilities 342,463,187 Cash Ratio 0.13

2008


43,674,272

Current Liabilities 363,396,932 Working Capital 0.12

2009


44,784,864

Current Liabilities 420,467,889 Working Capital 0.11

Cash Ratio Year 2007 2008 2009 Ratio 0.13 0.12 0.11

0.1

0.11

0.12

0.13

2007 2008 2009

0.13

0.12

0.11

Cash Ratio

Cash Ratio


46

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.

Debt to equity ratio=Total Liabilities / shareholders equity 2007

Total Liabilities 355,365,842 Shareholder Equity 6,282,768 Debt to Equity Ratio 56.56%

2008

Total Liabilities 385,179,850 Shareholder Equity 6,282,768 Debt to Equity Ratio 61.30%

2009

Total Liabilities 439,483,714 Shareholder Equity 6,911,045 Debt to Equity Ratio 64%

Debt to Equity ratio Year 2007 2008 2009 Ratio 56.56% 61.30% 64%

52.00%54.00%56.00%58.00%60.00%62.00%64.00%66.00%

2007 2008 2009

56.56%

61.30%

64%

Debt to Equity Ratio

Debt to Equity Ratio


47

Debt 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: Total Liabilities / Total Assets

2007 Total Liabilities 355,365,842 Total Assets 410,485,517 Debt Ratio 87%

2008

Total Liabilities 385,179,850 Total Assets 443,615,904 Debt Ratio 87%

2009

Total Liabilities 439,483,714 Total Assets 509,223,727 Debt Ratio 86%

Debt ratio

Year 2007 2008 2009 Ratio 87% 87% 86%

86%

86%

87%

87%

88%

2007 2008 2009

87% 87%

86%

Debt Ratio

Debt Ratio


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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.

ROI= Net Profit after Tax/Average (Long-term Liabilities + Equity) 2007

Net Profit After Tax 15,265,562 Average(Long-term Liabilities + Equity)

52,572,491

Return On Investment 29% 2008


66,172,297

Return On Investment 23.23%

2009


77,059,770

Return On Investment 20% ROI

Year 2007 2008 2009 ROI 29% 23.23% 20%

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009

29%

23.23%20%

ROI

ROI


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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.

Interest coverage ratio=EBIT/Interest expense

2007

EBIT 21,308,035 Interest Expense 7,865,533 Interest coverage ratio 270%

2008


2009


Interest Coverage Ratio

Year 2007 2008 2009 Ratio 270% 189% 146%

0%

50%

100%

150%

200%

250%

300%

2007 2008 2009

270%

189%146%




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Return on assets: ROA= Net Profit After Tax/Average Total Assets

2007

Net Profit After Tax 15,265,562 Average Total Assets 376,296,880 Return On Assets 4.1%

2008


2009


ROA

Year 2007 2008 2009 ROI 4.1% 3.6% 3.3%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

2007 2008 2009

4.10%

3.60%3.30%

ROA

ROA


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Income/Expense Ratio

Income/Expense Ratio= Total Income/Operating Expense

2007 Total Income 29,932,353 Operating Expense 5,563,010 Income/Expense Ratio 5.3 times

2008

Total Income 34,274,524 Operating Expense 8,364,252 Income/Expense Ratio 4.10 Times

2009

Total Income 41,417,429 Operating Expense 10,797,339 Income/Expense Ratio 3.83 Times


Year 2007 2008 2009 Income/Expense Ratio 5.3 Times 4.1 Times 3.83 Times

0

1

2

3

4

5

6

2007 2008 2009

5.3

4.13.83




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Earning Per Share Earning Per Share=Net Income after Tax/Weighted Average Number of Common Share Outstanding

2007

Total Income After Tax 15,265,562,000 Weighted Average Number of Common Share Outstanding

628,276,843

Earning Per Share Rs. 24.30 2008


628,276,843

Earning Per Share Rs. 24.47 2009


691,104,527

Earning Per Share Rs. 22.42 Earning Per Share

Year 2007 2008 2009 Earning Per Share Rs. 24.30 Rs. 24.47 Rs. 22.42

21

21.5

22

22.5

23

23.5

24

24.5

2007 2008 2009

24.324.47

22.42

Earning Per Share

Earning Per Share


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Price/Earning Ratio: Price/Earning Ratio=Market Price per Share/Diluted Earning Per share

2007 Market Price per Share 399.95 Diluted Earning Per share 24.30 Price/Earning Ratio 16.5 Times

2008

Market Price per Share 125.81 Diluted Earning Per share 22.25 Price/Earning Ratio 5.65 Times

2009

Market Price per Share 219.68 Diluted Earning Per share 22.42 Price/Earning Ratio 9.8 Times

Price/Earning Ratio

Year 2007 2008 2009 Earning Per Share 16.5 Times 5.65 Times 9.8 Times

0

5

10

15

20

2007 2008 2009

16.5

5.65

9.8

Price/Earning Ratio

Price/Earning Ratio


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Dividend Payout Ratio Dividend Payout Ratio= Dividend per Common Share/ Diluted Earning Per Share

2007 Dividend per Common Share 12.50 Diluted Earning Per share 24.30 Dividend Payout Ratio 51.44%

2008

Dividend per Common Share 11.50 Diluted Earning Per share 22.25 Dividend Payout Ratio 51.68%

2009

Dividend per Common Share 11.00 Diluted Earning Per share 22.42 Dividend Payout Ratio 49.06%

Dividend Payout

Year 2007 2008 2009 Earning Per Share 51.44% 51.68% 49.06%

47.00%

48.00%

49.00%

50.00%

51.00%

52.00%

2007 2008 2009

51.44% 51.68%

49.06%

Dividend Payout Ratio

Dividend Payout Ratio


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Dividend Yield Dividend Yield= Dividend per Common Share / Market Price per Common Share

2007 Dividend per Common Share 12.50 Market Price per Share 399.95 Dividend Yield 3.13%

2008

Dividend per Common Share 11.50 Market Price per Share 125.81 Dividend Yield 9.14%

2009

Dividend per Common Share 11.00 Market Price per Share 219.68 Dividend Yield 5%

Dividend Yield

Year 2007 2008 2009 Earning Per Share 3.13% 9.14% 5.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

2007 2008 2009

3.13%

9.14%

5.00%

Dividend Yield

Dividend Yield


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Comment on Ratio Analysis

1. Current Ratio: In MCB bank limited 2008s current ratio is strong than other two years. It shows

that this year’s liabilities could be recovered with its assets. After 2008, a bank has

maintained good current ratio in 2009

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

organization has ability to pay its obligations but its profitability ratio tells that it has not

ability to pay its obligation. But still it is very useful for the analysts especially for

the creditors.

2. Quick Ratio: Prepaid expenses are considered as current assets so they are included in current ratio

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

on short notice. In 2008 quick ratio is better than other years it show that bank can easily

recover its liabilities on short notice.

3. Working Capital: Working capital is better in 2009, which is 47,700,847. It means that are

assets utilized more economically in 2009 as compared to 2007, 2008.

4. Cash Ratio: Higher cash ratio also shows the higher rate of satisfaction like other liquidity

ratios. Cash ratio is more important liquidity ratio. Cash ratio is higher in 2007 as

compared to 2008 & 2009.

5. Debt Ratio: Financial leverage is the extent to which a firm is financed with debt.. In Muslim

Commercial bank, years 2007 & 2008 were financed with debt as compare to year 2009.

6. 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 2007 risk for the share holders was very low as compared to the

year 2009.


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7. Return on Investment: This ratio is more meaningful for share holders who are interested to know the profit

earned by the company because the dividend paid from available profit higher ratio

means factor of production fully utilized and good position. Here return on Investment is

higher in 2007 as compare to year 2008 & 2009.

8. 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. Year 2007 is

better in interest coverage ratio as compare to the other years.

9. Return on Assets: This ratio has a decreasing trend. It means the assets of the business are not fully utilized

in more and efficient way and also shows an unfavorable trend of the business. This ratio

of the bank was too low in the year 2009, as compare to other two years.

10. Interest to Expense Ratio: The interest to expense ratio is the profitability ratio. The more the good ratio means that

the business is running well. The Interest to expense ratio of the MCB is not good as

compare the year 2007, 2008.

11. Earning per Share: This ratio got really improved as it has gone with the increase in profit. Earning per share

is a good measure of profitability when compared with similar other business. Here

decreasing EPS, which will surely decrease share price. This ratio has the same trend as

the return on the assets.

12. Price earning Ratio: 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. 2009 is also good but 2008 is worst all of them.

13. Dividend Payout Ratio: The dividend payout ratio of the MCB is almost constant for the years 2007, 2008, 2009.


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14. Dividend Yield Ratio: The dividend yield ratio of the MCB is higher in 2007 because the share price was higher

in 2007. Dividend yield Ratio is good in 2009 and worst at all in year 2008.

CONCLUSION With Cooperation of all branch members, I have been able to learn and experience many new

things related to the banking sector and the banks workings. I am able to handle the public with

respect to many different workings on many different instances and also in account opening for

customers and can handle many other tasks as well.

Finally I concluded that MCB is a good organization for a person for his long term career

workings. Overall working and environment of the bank is very comfortable and the staff is very

helpful and respectful of each other and it still maintains a professional environment.

Management of the bank is very strong.

Employees of MCB Fatimah Jinnah Road branch, Sargodha work more than their working hours

and all the workings take place in a very friendly atmosphere that does not induce pressure on

the person working there. It also shows their loyalty and commitment to the organization. This

branch of MCB relatively small and has climbed its way up very quickly and all that only

because of the employee’s efforts and consideration for each other

Understanding and the effective management of the human resources is the most difficult

challenge faced not only by the bank but by all the organizations. Even though the people have

been sacrificed in the new organizational developments, it is becoming clear that the true lasting

competitive advantage comes through human resources and how they are managed. MCB seems

to not focusing on this highly critical issue as the job satisfaction level of the employees working

at MCB, was quite low.

The attitude of the bankers with all of their customers is not the same, they pay more attention

and good service to some of the customers and neglect a major portion of them. Some of the

customers approach to the bank officials and get their work done before others; it is not a good

practice


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There are so many customers who don’t know how to fill cheques, pay-in-slip, application form, etc. They waste a lot of time of the bank stall.

RECOMMENDATIONS After doing a deep study and witnessing everything that goes on in a branch, I would then like to

make the recommendations that;

First of all, the management needs to overlook the major problems that the organization is

currently facing and then develop strategies to eradicate them. Some of the suggestions that I

would like to give at the end are:

Promotion and Mass Media Publicity

MCB Bank can improve its Marketing strategies to acquire more promotion and mass media

publicity by the use of effective channels of promotions like TV, Newspaper Advertisements. It

can also improve its magazine publication that it releases each month.

Better Reward System

Better reward system is one of the most important requirements in order to reduce the problem of

Employee retention and improve Employee motivation.

Continuous Training Of Employees

There is lack of proper and continuous training of employees that needs to be solved.

Creation of enhanced performance appraisal system.

Proper use of stationary.

Implementation of enhanced Marketing system.

Salary Packages

Improvement should be made in the salary package of the employees as it is comparatively less

when compared to the other operating banks in Pakistan

Staff Member

In branch only two employees in cash counter and it must be increased to four person for proper

handling of cash because there is heavy load work.

SYMBOL SYSTEM

To make the SYMBOL system more efficient and make sure its connectivity all the time in order

to provides more convenience to customers.


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References:

Mr. Farooq Ali Khan (Manager Fatimah Jinnah Road Branch)

www.mcb.com.pk

www.wikipedia.org

www.scribd.com

www.google.com

Documents

MCB Internship Repor Compelet