MCB - Internship Report (Sahni'z Approach)

UNIVERSITY OF SARGODHA

Department of Commerce

The Internship Report of Ali Raza Sahni (20 – R/08) submitted to

Department of Commerce, UOS under the kind supervision of

Professor Haroon Hussain

MCB Bank Ltd Liaquate Market Branch

Sargodha

Phone # 048 – 3724485

Attached Photocopy of Internship Letter Issued by Branch Manager

Internship Report MCB Bank Ltd.

A Practice by Ali Raza Sahni

(20 – R/08) B.Com (HONS) VII Semester

APPROVAL SHEET

To Whom It May Concern

I Prof. Haroon Hussain (Lecturer) as the Internship Supervisor of Ali

Raza Sahni, S/O Rasheed Ali Asghar Sahni, Student ID: BCOF08M020

recommended that this report be according to official pattern issued by

Department of Commerce, UOS Sargodha. This interpretation is original

by nature and has least factor of plagiarism.

Wish you best of luck

Haroon Hussain

____________________________

Lecturer

Department of Commerce Date # Sept 26, 2011

Checked By:

Malik Muhammad Hayat

_______________________________

Chairman

Department of Commerce Date # ________________




PREFACE

Vibrancy and variety lend a growth in the colors of life, which make it so fascinating

that one may desire to live and enjoy it forever. The flux of time helps human being

learns and to manage the assigned tasks and achieve their cherished goals. The main

purpose of internship is to make bridge between theoretical approach and practical

approach.

The internship program is requirement of UOS, Sargodha at levels to understand the

practice of life in real manner. The Department of Commerce is very conscious about

the future challenges of students in the practical life. The B.Com (HONS) program

consists of not only study of bookish material but it is also combination of bookish as

well as practical and extracurricular activities which help in sharpen the skills.

I was fortunate that MCB had given me chance of internship in their working branch

where I spent 6 useful weeks in having an insight in the banking operation. This is my

internship report as the result of my internship training in MCB Bank Ltd. It has

enabled me to understand the practical scenario and sharpen our decision making

power and utilizing the resources in an effective manner, so that our resources

generate maximum profit.

In this report I tried to my best to highlight the important aspects of the banking

practice of MCB explaining the concepts and some techniques as well. I have put all

of my best efforts and tried my level best to give maximum knowledge. I hope these

papers will provides the true and reality based interpretation of the MCB Bank Ltd. I

do not except that all the readers are agreeing with my approach but no one deny these

facts.

Ali Raza Sahni

Roll No # 20 – R/08

B.Com (HONS) – VII / Regular




BEST REGARDS TO

MY PARENTS & TEACHERS

WHO LOVE, AFFECTION & PRAYERS HAVE

BEEN A SOURCE OF INSPIRATION AND

ENCOURAGEMENT FOR ME…!




Acknowledgement

In the name of Allah Almighty who gave me ability and strength to complete my

internship program as requirement of my academic career. I owe considerable debt to

large number of persons who either directly or indirectly helped me during various

phases of internship. It was a new experience, exciting but challenging and indeed

guidance rather frequently which was afford very generously.

I am very thankful to my Internship Supervisor and kind teacher, Mr. Haroon

Hussain who guides me in very beautiful & nice way. The supervision of Sir Haroon

has provided me a lot of experience to get the view of banking sector.

My special thanks to Sir Mutee – Ur – Rahman, Sir Zahid Ali Akbar, Sir Mohsin

Altaf, Miss Imrana Asad & all other honorable teachers who share their experience &

knowledge with me to complete this report in very efficient manner.

In last, I am fully respectful for those friends and relatives who provide me encourage

to completing this interpretation approach.

Ali Raza Sahni

Internee

ID: [email protected] Date: Sept 16, 2011

mailto:[email protected]




Content

Unit Content Name Page No:

01 Executive Summary 01

02 Industry Analysis 02

03 Organizational Overview 09

04 MCB Offerings 12

05 Competitors 14

06 Organizational Structure 16

07 Departmental Introduction 20

08 Work Done by Internee (Me) 30

09 Financial Analysis 40

10 SWOT Analysis 60

11 Conclusion 62

12 Recommendations 63

13 Glossary 64

14 References 69

15 Feedbacks 71

Internship Report Unit # 01 MCB Bank Ltd.

A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 1 ~

Unit # 01

Executive Summary

By the Grace of Allah Almighty, I have successfully completed my six weeks

internship as per requirement of B.Com (HONS) course. I was appointed as Internee

at MCB Bank Ltd, Regional Branch, Liaquat Market, Sargodha, under the instructions

of MCB Regional Office, Sargodha. I feel myself lucky to have worked with such a

cooperative, dedicated, result oriented team. They all helped me in every kind of task.

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 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.

At the end I would conclude that the internship has helped me a lot in different areas

of banking and other concern areas of my study. I also learned that how work in tough

situation which would help mw in long way. And it wouldn’t be possible without the

assistance of the team with whom I had spent 6 weeks.



Unit # 02

Industry Introduction

What is Bank?

There are various views about the origin of the

word “bank”. One view is that it is derived

from an Italian word “banque” which means a

bench. The other point of view is that it has

originated from the German word, “banc”

which means a joint stock firm.

According to Saeed Nasir (2010), a bank is a

financial institution which deals with the money and credit. It is organized on the joint

stock company system primarily for the earning of profit. These banks accepts

deposits from individuals, firms and companies at lower rate of interest and gives at

the higher rate of interest to those who need them. The difference between the terms

at which borrows and those at which it lends forms the source of its profit. In last, a

bank thus is s profit earning institution.

According to the Ian Crowther (1995),

“A bank is s firm which collects money from those who have it spare, it lends

money to those who require it”

According to Mr. Parking (1965),

“A bank is a firm that takes deposits from households and firms and makes

loans to other households and firms”

According to the Banking Companies Ordinance, 1962,

“The Banking means the accepting, for the purpose of lending or investment,

of deposits of money from the public, repayable on demand or otherwise, and

withdraw able by cheque, draft, order”



And,

“The Banking Company means any company which transacts the business of

banking in Pakistan and includes their branches and subsidiaries functioning o

outside Pakistan of banking companies incorporated in Pakistan”

According to Dr. Herbert L. Hart (1992),

“A banker is one of the ordinary course of his business receives money which

he repays by honoring cheques of persons from whom or on whose accounts he

received it”

According to the G. W. Gilbert (1868),

“A banker is a dealer in capital or more properly a dealer in money. He is an

intermediate party between the borrower and lender. He borrows from one party and

lends to other party”

Evolution of Banking

The word “Bank” is said to have been derived from the words Bancus or Banque.

This history of banking is traced to as early as 2000 B.C. The priests in Greece used

to keep money and valuables of the people in temples. These priests thus acted as

financial agents. The origin of banking is also traced to early goldsmiths. They used to

keep strong safes for storing the money and valuables of the people. The persons who

have surplus money found in safe and convenient of deposit their valuables with

them. The first stage in the development of modern banking, thus, was the accepting

of deposits of cash from those persons who had surplus money with them (Hoggson,

1926).

The goldsmiths used to issue receipts for the money deposited with them. These

receipts began to pass from hand to hand in settlement of transactions because people

had confidence in the integrity and solvency of goldsmiths. When it was found that

these receipts were fully accepted in payment of debts; then the receipts were drawn

in such a way that it entitled any holder to claim the specified amount of money from

goldsmiths.



A depositor who us to make the payments may now get the money in cash from

goldsmiths or pay over the receipt to the creditor. These receipts were the earlier bank

notes. The second stage in the development of banking thus was the issue of the bank

notes. The goldsmiths soon discovered that all the people who have deposited money

with them do not come to withdraw their funds in cash. They found that only a few

persons presented the receipts for encashment during a given period of time. They

also found that most of the money deposited with them was laying idle (Srinivas,

1915).

At the same time, they also predict that they were being constantly requested for loan

on goods security. They thought it profitable to lend at least some of the money

deposited with them to the needy persons. This proved quite a profitable business for

the goldsmiths. They instead of charging safe keeping charges from the depositors

began to give them interest on the money deposited with them. This was the third

stage in the development of banking (Goldthwaite, 1995).

In beginning of the banking sector, the concept about central bank was not build.

There were few of banks on local or zone levels with their own currency and polices.

These financial institutes were the pioneer of banking system in the history of

mankind. In 1578, the conference in Geneva, Switzerland, the economists of

developed countries took the decision against the metallic or commodity money and

introduces the fiat money in their economies (Matyszak, 2007).

The first bank whose considered, as first true central bank was “Bank of Amsterdam”

established in 1609. This bank was created by Scottish businessman William Paterson

to help the government of England in the situation of war (Grossman, 2010).

In 1661, the “Riks Bank of Sweden” was established as a joint stock bank to lend the

government funds and to act as a clearing house for commerce. And in 1694, the

“Bank of England” was chartered to raise the taxes and borrowing finance to war

zone, which was created in the Austria, England, France & the Netherland (Grossman,

2010).

The “Banque de France” was created in 1800 by Napoleon Bonaparte, after the deep

recession and hyperinflation in the French Revolutionary period. With the passage of

time, the concept of Federal Reserve System in the central bank was emerged in the



twentieth century. According to this concept, the currency is defined in terms of a

fixed weight of gold. The central bank held a large gold reserve to ensure that their

notes could be converted into gold any time. So, by this concept central bank is a

primarily consolidate who have ability to issue various instruments which are

commonly used as currency for the public and provide the financial stability to the

economy (Grossman, 2010).

After the World War I, there was complete and complicated confusion was created in

the currency and exchange markets. This happened due to the issuance of large

withdrawals from the banks as loans to pay for the war expenses. At that time, there

was no any institution that supervises to the banks and also serves as the fiscal agent

for the governments (Cameron, 1967).

Banking – In Central India

Banking in Indian Central India was originated in the last decades of the 18th century.

The first banks were “The General Bank of India” which started in 1786, and “Bank

of Hindustan”, which started in 1790; both are now defunct. The oldest bank in

existence in India is the “Reserve Bank of India”, which originated in the “Bank of

Calcutta” in June 1806, which almost immediately became the “Bank of Bengal”.

This was one of the three presidency banks, the other two being the “Bank of

Bombay” and the “Bank of Madras”, all three of which were established under

charters from the British East India Company. For many years the Presidency banks

acted as quasi-central banks, as did their successors. The three banks merged in 1921

to form the “Imperial Bank of India”, which, upon India's independence, became the

State Bank of India (Parinda.com, 2010).

The central banks are the innovation of the

early twentieth century. The Reserve Bank of

India was the first central bank of the Sub-

continent. The Reserve Bank of India (RBI)

was established on April 1, 1935, according to

the provision of Reserve Bank of Indian Act, 1934 by The Great Britain (The Hindu,

2008).



The head office of the RBI was initially established in Kolkata but was permanently

moved to Mumbai in 1937. The RBI was established on the recommendation of the

“Hilton Young Commission” for the Central India by British Empire. This

commission submitted their report in the year 1926 to Legislative Assembly of

England (The Hindu, 2008).

The functions and focus to establishment of this bank in Central India was to change

the economic environment in this British Control Territory. Following were the basic

constituted to establish this reserve bank as:

To regulate the issue of bank notes

To maintain the reserves to secure the monetary stability

To operate the credit and currency system

We know that, Burma (Myanmar) was no more in Indian Union from 1937 but the

RBI continued their act as the central bank for Burma up to April, 1947. And, after

the partition of Central India, the RBI also served as the central bank of Pakistan up to

June 1948 (Parinda.com, 2010).

Banking – In Pakistan

We know that before the independence August 1947,

the RBI was the central bank for Pak istan’s Economy

under the “Monetary System & Reserve Bank Order

1947”. The immediate and foremost task for the

Pakistan’s Government was to establish a central bank

for the issuances of independent currency, independent

banking system and regulate the economic activities in

the positive manners (RBI – Annual Report, 1947).

But due to innumerable complex problems, it was

decide that the RBI would continue to act as the central bank and currency authority

for the Pakistan till September, 1948 (RBI – Annual Report, 1947). The main

provisions of “The Monetary System & Reserve Bank Order 1947” were as:



The RBI would be the sole note issuing authority in Pakistan

The Indian Notes will remain legal tender in both

Pakistan & India until 30 September 1948.

The RBI would transfer the assets of equal value to

Pakistani notes to the Pakistan’s Government after the

date of 30th September, 1948.

The Pakistan’s Government would also issue coins in

the country after the 30th September, 1948. The coins

issued by the Indian’s Government would remains legal

tender in Pakistan for at least one year from the date id

issue of Pakistani coins.

The RBI would perform the full functions of “Central Bank of Pakistan” up to

September 23th, 1948.

Immediately after the independence, the newly born state was faced with a serious

banking situation due to the migration of 6.5 Million people. The RBI showed

reluctance in solving the banking crisis in Pakistan. It rather created further

difficulties by refusing to give Rs. 550 Million which was the share cash balance of

Pakistan (SBP – Annual Report, 1955).

Therefore, it is decided to establish own currency regulating authority & policymaker

institute. For this purpose Governor General Quaid-e-Azam Muhammad Ali Jinnah

issued order for the establishment of State Bank of Pakistan on July 1st, 1948. The

RBI relieved of its functions & orders in the favor of Pakistan from the first of July,

1948 (SBP – Annual Report, 1955).

Under the State Bank of Pakistan Order 1948 issued by Quaid-e-Azam Muhammad

Ali Jinnah, the state bank of Pakistan was charged with the duty to "regulate the issue

of bank notes and keeping of reserves with a view to securing monetary stability in

Pakistan and generally to operate the currency and credit system of the country to its

advantage".



The Governor General of Pakistan Barrister Quaid-e-Azam Muhammad Ali Jinnah,

while inaugurating the State Bank of Pakistan on July 1, 1948, said:

“The bank symbolized the sovereignty of our people in the financial sphere.

The Western Economic System has created many problems for humanity. The

Western Economic System would not help us in setting up a workable economic

order. We should evolve an economic system based on Islamic concept of justice

and equality”

On December 30, 1948, the British Government's commission distributed the RBI’s

reserves between Pakistan and India with the ratio of 30% and 70% for Pakistan &

India, respectively. The loss of Rs. 230 millions which incurred in the transition to

independence were taken from Pakistan (SBP – Annual Report, 1955).



Unit # 03

Organization Overview

Corporate Profiles

Name: MCB Bank Ltd.

Type: Public Limited

Industry: Banking & Capital Marketing

Founded In: 1947

Headquarter: Islamabad

Principle Office: Karachi

Key People: Maintenance Muhammad Mansha (Chairman)

Offerings: Commercial, Corporate & Consumer Banking

Revenues: More than Rs. 36.84 Billion (PKR)

Net Income: More than Rs. 16.8 Billion (PKR)

Total Assets: More than Rs. 567.6 Billion (PKR)

Locations: 41 Different Cities (In Pakistan)

Branches: 1,130 (In Pakistan)

Customers: 4.5 Million (In Pakistan)

ATM: More than 600 (in Pakistan)

(Source: Wikipedia.com)


A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 10

~

MCB – Building Pakistan

Corporate History

The Adamjee Group incorporated MCB Bank Limited on July 9,

1947, under the Indian Companies Act, VII of 1913 as a limited

company. The bank was established with a view to provide

banking facilities to the business community of the South Asia.

The bank was nationalized in 1974 during the government of

Zulfikar Ali Bhutto (ZAB). This was the first bank to be

privatized in 1991 and the bank was purchased by a consortium of Pakistani corporate

groups led by Nishat Group. As of June 2008, the Nishat Group owns a majority

stake in the bank. The president of the bank is M.U.A Usmani.

Founded in 1948, Nishat Group is one of the leading

and most diversified business groups in Pakistan.

The group has strong presence in the most important

business sectors of the country such as banking,

textile, cement and insurance.

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 has become the only bank to receive the Euro money award for the fourth time

in the last five years. MCB won the "Best Bank in Pakistan" in 2005, 2004, 2003,

2001, and in 2000 the "Best Domestic Bank in Pakistan" awards. In addition, MCB

also has the distinction of winning the Asia Money 2005 & 2004 awards for being

"The Best Domestic Commercial Bank in Pakistan".



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Ten years after privatization, MCB is now in a consolidation stage designed to lock in

the gains made in recent years and prepare the groundwork for future growth. The

bank has restructured its asset portfolio and rationalized the cost structure in order to

remain a low cost producer.

MCB now focuses on three core businesses namely Corporate, Commercial and

Consumer Banking. Corporate clientele includes public sector companies as well as

large local and multinational concerns. MCB is also catering to the growing middle

class by providing new asset and liability products. MCB looks with confidence at

year 2005 and beyond, making strides towards fulfillment of its mission, "to become

the preferred provider of quality financial services in the country with profitability

and responsibility and to be the best place to work".

(Source: History of MCB, from Wikipedia.com)

Mission Statement

“To become the preferred provider of quality financial services in the country with

profitability and responsibility and to be the best place to work”

Business Philosophy

MCB Bank knows the best to deal with its customers and thus has a customer oriented

philosophy. The MCB philosophy in their words is described below –

“For us, you are not just a set of numbers; you are a valued customer whom

we know by name. This helps us serve you exactly the way you want us to – that’s the

difference! We offer effective solutions derived from our personal knowledge of all

your banking requirements which are met when we meet you…by name.”



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Unit # 04

MCB Offerings

Current Account

Savings Account

Term Deposit

MCB Online Banking

MCB M – NET

MCB Cash Management

MCB Channel Financing

MCB Home Remittance

MCB Corporate Financing

MCB Project & Structured Finance

MCB Syndicated Loans & Debt Capital Markets

MCB Quasi Equity / Hybrid Instruments

MCB Equity Capital Raising

MCB Advisory Services

MCB Islamic Banking

MCB Agri Products

MCB Privilege

MCB Salary Club

MCB Investment Services

MCB Visa Credit Card

MCB Car 4 U

MCB Instant Finance

MCB Smart Card

MCB Rupee Travelers Cheque



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MCB ATMs

MCB Mobile ATM

MCB Lockers

MCB SMS Banking

MCB Full-Day Banking

MCB Bancassurance

MCB Call Centre

MCB Mobile

MCB Virtual Banking

(Source: MCB Website, www.mcb.com.pk)



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Unit # 05

Competitors for MCB

Competition is a contest between individuals, groups, animals, etc. for territory, a

niche, or a location of resources. It arises whenever two or more parties strive for a

goal which cannot be shared. Competition occurs naturally between living organisms

which co – exist in the same environment. For example, animals compete over water

supplies, food, mates, and other biological resources. Humans compete for water,

food, and mates, though when these needs are met deep rivalries often arise over the

pursuit of wealth, prestige, and fame. Business is often associated with competition as

most companies are in competition with at least one other firm over the same group of

customers (Stigler, 1987).

The list of Banks and Financial Developments Institutions in Pakistan which are

working in Pakistan as secluded banks of SBP are the competitors for the MCB Bank

Ltd. as,

Public Sector Commercial Banks

a) First Women Bank Ltd.

b) National Bank of Pakistan

c) The Bank of Khyber

d) The Bank of Punjab

Specialized Scheduled Banks

a) The Punjab Provincial Co-operative Bank

b) SME Bank Limited

c) Zarai Taraqiati Bank Limited

Private Local Banks

a) Allied Bank Limited

b) Askari Bank Limited

c) Bank Al-Falah Limited



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d) Bank Al-Habib Limited

e) My Bank Limited

f) Crescent Commercial Bank Limited

g) NIB Bank Limited

h) Faysal Bank Limited

i) Habib Bank Limited

j) KASB Bank Limited

k) Meezan Bank Limited

l) Atlas Bank Limited

m) Saudi Pak Commercial Bank Limited

n) Soneri Bank Limited

o) United Bank Limited

p) Arif Habib Bank Limited

q) Dubai Islamic Bank Pakistan Limited

r) Bank Islami Pakistan Limited

s) Royal Bank of Scotland

t) Habib Metropolitan Bank Limited

u) JS Bank Limited

v) Standard Chartered Bank (Pakistan) Limited

w) Emirates Global Islamic Bank

x) Dawood Islamic Bank Limited

Micro Finance Banks

a) Khushhali Bank

b) Network Micro Finance Bank Limited

c) The First Micro Finance Bank Limited

d) Rozgar Micro Finance Bank Limited

e) Tameer Micro Finance Bank Limited

f) Pak Oman Micro Finance Bank Limited

(Source: State Bank of Pakistan website, www.sbp.com.pk)



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Unit # 06

Organizational Structure

An organization is not a haphazard collection of people, but a meaningful

combination of groups and individuals working together purposefully to meet the

goals of the organization. The organizational structure is the formal configuration

between individuals and groups with respect to the allocation of tasks, responsibilities

and authorities within the organization. The connection between various clusters of

functions of which an organization is composed can be represented in the form of a

diagram is known as an organizational chart. Although we suspect that this particular

revelation is unique, its particular organizational charts reveal a great deal about the

organization. They provide a guide to an organization’s structure, indicating the

formal reporting relationships between individuals at different organizational levels

(Greenberg, 2004).

President

Group heads

Divisions and field

Circle offices

Regional offices

Branch offices

Hierarchy Chart – MCB

As MCB is a banking company listed in stock exchange therefore it follows all the

legalities which are imposed by concerned statutes Mr. Mian Muhammad Mansha is

chairman & chief executive of the company with a team of 10 directors and 1 vice

chairman to help in the business control and strategy making for the company. A team

of 10 professionals is handling operational Management of the bank. Mr. Muhammad

Mansha also heads this team. The different operational departments are Consumer

Banking & IT div; Financial & Inter branch div; Banking operations div; HR & Legal

div; financial control & Audit div; Credit management div; Commercial Banking div;

Corporate Banking div; Treasury management & FX Group and lastly Special Assets

Management (SAM) Group.



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For effective handling of branches, it has been categorized into three segments with

different people handling each category. These categories are:

Corporate Banking

Commercial Banking

Consumer Banking



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CORPORATE BANKING

These are branches, which have an exposure of over Rs. 100 million. Usually includes

multinational & public sector companies.

COMMERCIAL BANKING

The branch which has a credit exposure of less than Rs. 100 million but having a

credit portfolio of more than Rs. 20 million (excluding staff loans) .Usually branches

in large markets and commercial areas come under this category.

CONSUMER BANKING

These are the branches, which have exposure up to Rs. 20 million, and these include

all the branches, which are neither corporate nor commercial branches.

Recently the organizational structure was re-designed as follows:

Board of Directors

Chairman Mian Muhammad Mansha

Vice Chairman S.M. Muneer

President & Chief Executives Tariq Rafi

Shahzad Saleem

Sarmad Ameen

Mian Umar Mansha

Aftab Ahmed Khan

Atif Yaseen

Dr. Muhammad Yaqub

Muhammad Aftab Manzoor

Advisor Raza Mansha



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Audit Committee

Chairman Dr. Muhammad Yaqub

Members Tariq Rafi

Mian Umar Mansha

Aftab Ahmed Khan

Chief Financial Officer Ali Muneer

Company Secretary Tahir Hussain Qureshi

Auditor’s Firms

Chartered Accountants KPMG Taseer Hadi & Co.

Chartered Accountants Riaz Ahmed & Co.

Legal Advisors Mandviwalla & Zafar

Advocaes & Legal Consultants

(Source: Annual Report, 2010 – MCB)



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Unit # 07

Departments in MCB

Operations Department

Clearing Department

Remittance Department

Cash Department

Advances Department

Accounts Department

Technology Department

Operations Department

Accounts

Current Account

PLS Saving A/C

Khushali Bachat Account (KBA)

Saving 365 A/C

Basic Banking A/C (BBA)

Current Account

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

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

likes. There is also no restriction of amount to be deposited or withdrawn. However,

there is requirement of minimum balance maintenance of Rs. 1000/-. Usually this type

of account is opened by the businessmen. No profit is paid by the bank and no service

charges are deducted by the bank on current deposits account. These types of deposits

are also exempt from compulsory deduction of Zakat.



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PLC Saving A/C

This account was started in 1980s after the issuing of banking ordinance in 1980 by

Zia Government to develop Islamic banking in Pakistan. In this case customer would

be responsible for bearing profit as well as loss. The bank would be within its rights

to make investment of credit balances in the PLS saving accounts in any manner at its

sole discretion and to make use of the fund to the best of its judgment in the banking

business under the PLS system. For withdrawal of larger amount, 7 days notice in

writing is required to be given.

Minimum balance is Rs.500/=

Not more than eight withdrawals in a year allowed

More than Rs.15000/= are not allowed to draw

Seven day notice is required for big withdrawal

Zakat deducted on @ 2.5%

Profit calculated on monthly basis

Profit paid on annually basis

Saving 365 A/C

This account is newly developed of MCB and it provides flexibility of saving account

to business people. Profit on deposits will be payable on daily product basis on

balance of RS. 500,000/- and above. However, if balance in the account falls below

RS. 500,000/- on any day, the product will be ignored. There will be no restriction on

withdrawal from the account. Zakat and withholding Tax is also applicable o n the

account opened under this scheme.

Minimum balance is Rs.500,000/=

Below minimum balance, profit calculation ignored

Profit calculated on daily basis

Profit paid on annually basis

10% Withholding Tax on minimum balance

Zakat deducted on @ 2.5%



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Khushali Bachat A/C

Saving type account

Rate of return is 8% per annum

Profit calculated on daily basis

Profit paid on half yearly basis

Utility bills can be debited through this a/c

No charges will be debited for utility payments

Basic Banking A/C

Introduced specially for salaried persons.

Minimum balance is Rs.1000/=

No service charges.

Only two transactions allowed, in one month.

For more than two transactions Rs.35/- per transaction.

Single natured A/C

Clearing Department

The word clearing has been derived from the word “clear” and is defined as,

“A system by which banks exchange cheques and other negotiable instruments

drawn on each other within a specific area and thereby secure payment for their

clients through the Clearing House at specified time in an efficient way”

It is a place where cheques are presented, collected from bank branch. It is one of the

services provided by NIFT to other commercial banks. NIFT acts as a clearinghouse.

NIFT:

NIFT stands for National Institutional Facilitation Technologies. Clearing House of

SBP has shifted a tiresome part of its work to a private institution named NIFT. NIFT

collects cheques, demand drafts, Pay orders, Travelers Cheques, etc. from all the

branches of different banks within city through its carriers and send them to the

branches on which these are drawn for clearing. After the branches approve the

instruments drawn on them, NIFT prepares a sheet for each branch showing the



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number for instruments and amount in its favor and drawn on it and sends it to each

branch. A similar sheet for each bank is also sent to clearing house of SBP where

accounts of banks are settled in the same manner.

Remittance Department

Remittance is transfer of funds from one place to another or from one person to

another. It is an important service provided by banks to customers as well as non-

customers. Since it is not a free service it is a source of income for the bank.

Four parties involved in remittance: -

Remitter, Remittee, Issuing Bank, Paying Bank

Remitter

One who initiates, or requests for a remittance. The bank charges him a commission

for this service. He may or may not be the branch’s customer.

Remittee

A Remittee is also called the beneficiary, or the payee. The person in whose name the

remittance is made. A Remittee is also the one who receive the payment.

Issuing Bank

The bank that sends or affects the remittance, through demand drafts, telegraphic

transfers, or mail transfers.

Paying Bank

Paying Bank also knows as the drawee branch. The branch from where the instrument

is drawn.

Types of Remittance

Remittance is classified into following four types

Inward remittance, instruments received for payment

Outward remittance, issuing instrument to the responding branch.



~

Inland remittance, within same country.

Foreign remittance, from one country to another country.

INSTRUMENTS USED IN REMITTANCE:

Demand Draft (DD)

Telegraphic Transfer (TT)

Pay Order (PO)

Call Deposit Receipt (CDR)

Rupees Traveler Cheque (RTC)

Cash Department

The cash department is the most important department of the bank. In cash

department both deposits and withdrawals go side by side. This department deals with

cash deposits and payments.

The following books are maintained in the Cash Department:

Cash Receipt Book

Cash Payment Book

Cash Balance Book

This department is involved in two activities: Cash Deposits, Cash Payments.

Cash Receipt Book

The cashier is responsible to receive both the paying- in-slip and cash from the

depositor. For depositing the cash into customer’s accounts, there is need to fill in the

paying- in-slip giving the related details of the transaction. The cashier check the

necessary details provided in the paying- in-slip and accounts the cash and tallies with

the amount declared in the slip then cashier fills in the “Cash voucher received

Record Sheet” and assigns a voucher no. to both the transaction being made in the

sheet and the slip. The 2nd cashier posts the transaction entries in computer ledger.

After posting these entries, computer display before posting balance and after posting.

Cashier assigns the stamp “POSTED” on the voucher to show voucher transaction

entries are posted.



~

Cash Payment Book

The only instrument that can be used to withdraw an amount from an account is the

Cheque book. No payments are made by another instrument. When cheque is valid in

all respects, the cashier enters the necessary inputs in the computer and posts the entry

so that account balance is updated. When cashier posts these entries, computer

automatically display the balance before posting the transaction amount, balance after

posting.

The cashier at the same time maintains the “Cash Voucher Received Record Sheet”.

Then inspects the signature of the customer, cancellation mark of checking officer and

stamp of “POSTED” is placed on cheque before he hands over the cash to customer.

Cash Balance Book

At the end of the working day cashier is responsible to maintain the cash balance

book. The cash book contains the date, opening balance, detail of cash payment and

received in figures. The consolidated figure of receipt and payment of cash is entered

in the cash book and the closing balance of cash is drawn from that i.e.

Opening Balance of Cash + Receipts - Payments = Closing Balance

Advances Department

Different banks provide loan facility to general public, companies etc. but MCB

provides two types of loans that are as under:

Fund Base Loans

Non Fund Base Loans

FUND BASE LOANS:

In this type of loans cash is directly involved. Bank provides loans in shape of cash.

Bank gives credit or limit facility to customers that needed it. In fund based loans

there are two further classifications:



~

Long Term Loans:

Lease facility for car

For Machinery

For Fixed Assets

Short Term Loans:

Running Finance (R/F)

Cash Finance (C/F)

Running Finance

The MCB provides overdraft facility to the customers for the working capital

requirement. These are the loans which are given to those customers whose b usiness

runs throughout the year or continuously. Its duration is one year and it is for running

business.

In advances there are two securities one is known primary security and other is

secondary or collateral security. Hypothecation of stock is the primary security and

mortgage is the secondary or collateral security.

Securities for Fund based Loans

Hypothecation of Stock

Mortgage

Pledge

Hypothecation of Stock

In hypothecation of stock the possession of goods and the title remains in the favor of

customer. Without the permission of the bank the customer can't sell the stock. It is

the restriction of the bank that in god own there should be stock according to the

instructions of bank every time. The drawback of this is that there is no check and

balance of stock from the bank. The customer can easily sell his stock.



~

Mortgage

The bank can mortgage the immovable property like land, building etc as a security.

In mortgage the possession remains to customer and title of goods remains to bank.

Pledge

In this, bank requires the moveable property of the customer as a security like stock,

vehicle etc. possession of goods remains to customer and title in the favor of bank.

The bank hires a muqaddam (Guard) and the key of store where the stock is pledged

is in the security of bank. When customer wants to sell the stock then he pays the

amount equivalent to stock which he wants to sell. After receiving amount bank

releases his stock for the same amount

Non – Fund Based Loans

In non fund based loans cash is not directly involved but bank gives guarantee

on the behalf of customer. Bank works as a third party and known as Guarantor. Bank

provides a security to customer when he needs and someone requires from the

customer.

Accounts Department

The most important aspect in record keeping of a bank is its accounting system. The

basic purpose for maintaining an accounting system is to ensure consistency in record

keeping and accounts. The basic requirement for any accounting system is that it

should be in accordance with the GAAP i.e. Generally Accepted Accounting

Principles. There are two choices available to an organization for an accounting

system.

Main Functions of Accounts Department

The major function of this department is keeping the record maintenance of each and

every transaction and prepares reports about the amount of deposits and advances and

sent to Head office or State Bank of Pakistan on monthly, quarterly and yearly basis.



~

Following activities are carried out in Accounts Department.

Budgets and budget review form

Income & expenditures.

Reports and Reconciliation.

Activity checking.

Depreciation & Maintenance of fixed assets provision

Maintenance & depreciation of fixed assets

Technology Department

It includes;

Mobile Banking

Phone Banking

Online Banking

ATM

Mobile Banking

It has been launched recently during my internship. It helps in getting accounts details

and making transactions using mobiles.

Phone Banking

"MCB Phone Banking” is available to all customers on a countrywide basis.

Customers can dial 111-000-622(without any city code/prefix) from their respective

cities

Customers enjoy 24x7 Round the Clock Phone Banking Services. MCB is the first

bank in Pakistan to offer Centralized connectivity.

Online Banking

MCB now offers the facility of online banking to its customers through its country

wide network of branches. Customers can use the ATMs or the banking counters of

any branch for day-to-day banking needs, irrespective of branch where they maintain

their accounts.



~

There are now more than 250 branches linked through this system and they can

transact with each other directly using computer systems and the software named

“SYMBOLS” at their own branches.

Automated Teller Machine (ATM)

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

transact in one's account without intervention of humans. These

machines are basically used for taking cash, confirming balances and

requesting statements / cheque books. MCB has the largest ATM

network in the country at the moment with almost one ATM at each

online branch and also ATM terminals at International Airports covering 27 cities of

Pakistan

Green Cards are ordinary cards with a maximum withdrawal facility of Rs. 10,000/-

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

Gold Cards are special cars with maximum withdrawal limit of Rs. 25000/- in a day.

These cards are issued to the persons having more than Rs. 500000/- as their average

balance. International Cards are issued in collaboration with Cirrus and are useable all

over the world with maximum withdrawal facility according to the standards of

Cirrus.



~

Unit # 08

Work Done by Internee (Me)

The duties that I performed and the thing I learned each day are given as follows:

June 27, 2011 (Monday)

Learning Session about MCB Bank Ltd

June 28, 2011 (Tuesday)

Learning Session about Banking Operations

June 29, 2011 (Wednesday)

Learning Session about MCB Liaquat Branch Operations

June 30, 2011 (Thursday)

On Leave due to Death of Relative

July 1, 2011 (Friday)

Official Bank Holiday

July 2, 2011 (Saturday)

On Leave due to Death of Relative

July 4, 2011 (Monday)

Test Session about Basic Operations

July 5, 2011 (Tuesday)

Learn about basic operations of remittance department

Learn about entries and vouchers for Incoming TT (Telegraphic Transfer)

Made vouchers and entries for Incoming TT

Observed other operations e.g. PO (Pay Order), DD (Demand Draft)



~

July 6, 2011 (Wednesday)

Learn bank charges for PO, DD, TT & MT

Learn about entries and vouchers for Outgoing TT (Telegraphic Transfer)

Made few Outgoing TT

Learn & Made Inter – Branch Credit Advices

July 7, 2011 (Thursday)

Learn about the payment against

PO & DD

Learn about the issuance of PO

Made entries against the TT and

MT in the Day Book

Made Incoming and Outgoing TT

Made Inter – Branch Credit Advices against the checks


Made Debit vouchers against the TT, PO & DD charges

Made Credit vouchers (contra) against the TT, PO & DD charges


Made Inter-Branch Credit Advices against the checks

Made entries in the Day Book


Learn about Incoming & Outgoing TT Entries in the Daily Voucher Record

Sheet

Learn about to make DD and PO


Made Credit vouchers (contra) against the TT, PO & DD charges




~


Learn basics of Remittance Software System

Made DD and PO entries in the Daily Voucher Record Sheet

Made Inter-Branch Credit Advices entries in the Daily Voucher Record Sheet





Learn about different Stamps on the PO

Learn and made entries and vouchers against Incoming MT





Learn and recorded the entries against Incoming MT




Issued Credit Advices against DD


Learn PO and DD issuance in detail

Made the entries against Intercity Received Checks




Got more information about Remittance Software System

Learn how to make cancellation entries in the Remittance Software System in

case of any discrepancy




~




Learn how to cancel a DD


Made vouchers for incoming MT

Made Inter-Branch Credit Advices

against the checks

Issued Credit Advices against DD


Learn how to make entries against the incoming TT for which the

beneficiary’s account in some other bank





Was moved to Credits, got basic information about different operations of

Credits department

Learn about Running Finance against the Saving Certificates also called

Instant Finance

Studied few pages of Credit Manual

Studied a Instant Finance Case

Learn about the entries against Monthly Installment for Car Financing

Made Daily Voucher Sheet


Learn basic types of financing

Read Running Finance in detail from manual

Studied a Running Finance Case

Made Vouchers



~



Learn about the different documents required for Credit Investigation

Learn about the documents required for Running Finance

Learn the Concepts of Demand and Cash Finance

Made Vouchers



Studied Export Refinancing from Manual

Made voucher for partial Adjustment of CF (Cash Finance)

Filled ‘’Credit Proposal cum Sanction Advice MCB Instant Financing, BBFS

(Borrower Basic Fact Sheet) and Application for Finance for renewal of 3

cases of CF.

Made Lease Statement



Studied Documentation/Collateral Guidelines

Made ‘’Disbursement Status-Leasing” Statement

Made CF Vouchers

Made Voucher Sheet


On Leave


Made entries for monthly mark up against RF (Running Finance)

Studied other types of Export Financing e.g. FAFB (Finance Against Foreign

Bills), FBP (Foreign Bills Purchased)

Studied ‘’Sanction Advice” & ‘’Approval for Financing”

Made Voucher and Voucher Sheet



~

Studied a Credit Report


On Leave


Learned “General Documentation” for financing

Learned about FIM(Finance against Imported Merchandise)



Learned documentation requirement for each type of financing

Made Vouchers



On Leave

August 1, 2011 (Monday)

On Leave

August 2, 2011 (Tuesday)

On Leave

August 3, 2011 (Wednesday)

On Leave

August 4, 2011 (Thursday)

On Leave

August 5, 2011 (Friday)

On Leave



~

August 6, 2011 (Saturday)

On Leave


Learning Session about previous working






Made monthly entry in the ‘Mark-up Recovery Register’

Made ‘Letter to Auditor’

Made Vouchers



Learned about L/C documents

Learned basics of Foreign Exchange operations

Made Voucher Sheet


Learned about different L/C related terms and definitions

Learned about Payment against Foreign Currency Checks

Learned about Foreign Inward Telegraphic Transfer

Made Voucher Sheet


Made vouchers for Foreign Currency Cash withdrawal

Made vouchers for FITT (Foreign Inward Telegraphic Transfer)

Made Voucher Sheet



~


Learned about bank charges against L/C

Learned diff. types of SWIFT messages

Made Vouchers



Worked as CSO (Customer Service Officer) because CSO was on leave and

performed the following activities:

Attended phone calls

Attended customer inquiries

Received ATM forms

Received and entered daily DAK

Issued ATM cards

Issued balance Certificates and Bank Statements

Made charges vouchers for TT/DD/PO


Worked as CSO (Customer Service Officer)


Worked as CSO (Customer Service Officer)


Studied few chapters of Foreign Exchange Manual

Learned about diff. types of L/Cs

Learned about diff. parties involved in L/C

Learned about Payment modes for L/C

Made Vouchers




~


Worked on the seat of A/C Opening/Check Collection/Lockers because the Madam

on this seat was on leave, so learned and performed the following activities:

Opened three accounts

Issued check books

Received ‘Check Book Issuance Requisition’


Opened new accounts

Issued check books


Made CCs (Check Collection)

Made Vouchers

August 24 2011 (Wednesday)

Opened new accounts

Issued check books


Made CCs

Made Vouchers


Opened new accounts

Issued check books


Made CCs


Opened new accounts

Issued check books


Made Vouchers



~


Sorted Foreign Currency Signature Verification Cards

Opened new accounts

Issued check books


Made CCs (Check Collection)

Made Electricity Bills Vouchers


Opened new accounts

Issued check books


Made CCs(Check Collection)

Made SUI GAS Bills Vouchers

Made Telephone Bills Vouchers

Made Electricity Bills Vouchers



~

Unit # 09

Financial Analysis

Finance is the most important aspect of the business regardless

to their qualified product or service. Without it the startup &

survival of the business is impossible. The invention,

discovery & execution of idea into practical are not as so much

important as the Finance is important to commercialize

anything. According to the Howard & Upton,

“Finance may be defined as that administrative area or set of administrative

functions in an organization which relate to the objectives as satisfactory as possible”

The financial statements are the principle means of reporting the financial condition

and results of operations of a business entity. These statements are means to an end of

helping stakeholders in the decision making proper analysis of these statements helps

a lot. Financial statement analysis helps in determining the financial conditions at any

particular point in time and effectiveness of operations of a firm during a specific

period.

All the stakeholders of business are interested in the analysis of financial statements.

But the focus of interest of all is not the same. For example, creditors and credit

reporting agencies are interested in finding out the credit worthiness of the firm to

which they have extended credit or intend to extend credit. Short – term creditors are

interested in the long – run cash flow which the firm can generate over the long period

of time. Investors are interested in the firm’s ability to sustain profitability over a

period of time. Government agencies analyze the financial data for tax purposes. The

internal users of financial statement like management also analyze the financial data

for planning and control.



~

Finan

cial P

ositi

on St

atem

ent

2010

2009

2008

2007

2006

2005

(Rs.

In Mi

llions

)(R

s. In

Millio

ns)

(Rs.

In Mi

llions

)(R

s. In

Millio

ns)

(Rs.

In Mi

llions

)(R

s. In

Millio

ns)

Autho

rized

Capit

al10

,000

10,00

010

,000

10,00

06,5

006,5

00

Paid

- up -

Capit

al7,6

026,9

116,2

836,2

835,4

634,2

65

Rese

rves

40,16

338

,386

36,76

934

,001

24,66

29,0

55

Unap

propia

ted Pr

ofit

21,41

615

,779

9,193

5,131

5,531

4,990

Share

shold

er's E

quity

69,18

161

,076

52,24

545

,414

35,65

718

,311

Surpl

us on

Reva

luatio

n of A

ssets

- Net

of Ta

x10

,024

8,664

6,191

9,706

5,188

5,424

Net A

ssets

79,20

469

,740

58,43

655

,120

40,84

423

,734

Total

Asse

ts56

7,553

509,2

2444

3,616

410,4

8634

2,108

298,7

81

Earni

ng As

sets

494,6

0544

4,188

380,1

8734

3,173

292,6

3926

0,948

Gros

s Adv

ance

s27

4,144

269,7

2227

2,847

229,7

3320

6,848

188,1

40

Adva

nces

- Net

of Pro

vision

s25

4,552

253,2

4926

2,135

218,9

6119

8,239

180,3

23

Non -

Perfo

rming

Loan

s (NP

Ls)

24,54

423

,239

18,26

910

,725

8,571

8,396

Inves

tmen

ts 21

3,061

167,1

3496

,632

113,0

8963

,486

69,48

1

Total

Liab

ilities

48

8,349

439,4

8438

5,180

355,3

6630

1,264

275,0

46

Depo

sits &

othe

r Acc

ounts

431,3

7236

7,605

330,1

8229

2,098

257,4

6222

9,342

Curre

nt &

Savin

g Dep

osits

(CAS

A)35

1,298

304,9

5326

8,501

259,8

9622

4,165

216,0

46

Borro

wing

s25

,685

44,66

222

,664

39,40

723

,943

27,37

8

Intere

st be

aring

Liab

ilities

30

5,902

283,3

6924

0,470

232,3

9819

4,363

177,9

24

Conti

ngen

cies &

Comm

itmen

ts 13

6,246

119,9

2226

6,251

213,3

1716

0,843

80,42

7

Financial Highlights



~

Income Statement

2010 2009 2008 2007 2006 2005

Profits (Rs. In Millions) (Rs. In Millions) (Rs. In Millions) (Rs. In Millions) (Rs. In Millions) (Rs. In Millions)

Markup / Return Earned 54,821 51,616 40,044 31,787 25,778 17,756

Markup / Return Expensed 17,988 15,837 11,561 7,866 4,525 2,781

Fund based Income 36,834 35,779 28,483 23,921 21,253 14,975

Fee, Commission, Brokerage & FX Income 5,310 4,409 4,537 4,328 3,573 4,406

Dividend & Capital Funds 956 1,234 1,255 2,120 1,418 1,348

Total Income 43,099 41,422 34,275 30,369 26,244 20,728

Operating Expenses 13,160 10,801 8,365 6,000 6,549 6,638

Operating Profit before Tax & Provision 29,938 30,620 25,910 24,369 19,695 14,090

Provisions write - off 3,685 7,465 4,042 3,061 1,194 1,072

Profit before Tax 26,253 23,155 21,868 21,308 18,501 13,018

Profit after Tax 16,873 15,495 15,375 15,266 12,142 8,922

Cash Dividends 8,743 7,602 7,225 7,854 3,960 1,715

Bonus Shares 760 691 628 - 819 853

The evaluation of levels and trends in the financial statements percentage over time

affords the analyst insight into the underlying improvements or deterioration in

financial condition and performance. Through a good portion of this insight is

revealed in the analysis of financial ratios, a broader understanding of the trends is

possible when the analysis is extended to include the foregoing considerations (Horne,

2003).

MCB has been a pioneer among the banks in Pakistan,

particularly in introducing a number of innovative

banking products and services. For the first time in the

history of Pakistan, these multifarious products mostly

in the shape of saving schemes have been introduced by

MCB with brand names. This has set the trend and

many other banks, both local and foreign, have since followed in MCB’s footsteps, by

launching new products and services, on similar lines. These products and services

urge to investors to rise up the market share of the MCB.



~

Financial Position Statement

Rs. M % Rs. M % Rs. M % Rs. M % Rs. M % Rs. M %

Assets

Cash and Balances with Treasury Banks 45,407 17% 38,775 -2% 39,631 -1% 39,684 22% 32,466 37% 23,666 -1%

Balances with other Banks 1,479 -75% 6,010 49% 4,043 6% 3,808 -42% 6,577 348% 1,466 -74%

Lendings to Financial Institutions 4,402 47% 3,000 -27% 4,100 290% 1,051 -95% 21,082 111% 9,999 -9%

Investments 213,061 27% 167,134 73% 96,632 -15% 113,089 78% 63,486 -9% 69,481 3%

Advances 254,552 1% 253,249 -3% 262,135 20% 218,961 10% 198,239 10% 180,323 31%

Operating Fixed Assets 20,947 16% 18,015 4% 17,264 8% 16,024 77% 9,054 11% 8,182 2%

Deferred Fixed Assets - - - - - - - -100% 172 -10% 192 100%

Other Assets 27,705 20% 23,040 16% 19,810 11% 17,869 62% 11,031 102% 5,472 -11%

567,553 11% 509,224 15% 443,616 8% 410,486 20% 342,108 15% 298,781 15%

Liabilities

Bills Payable 10,266 25% 8,201 -22% 10,551 1% 10,479 48% 7,090 -17% 8,537 13%

Borrowings 25,684 -42% 44,662 97% 22,664 -42% 39,407 65% 23,943 -13% 27,378 261%

Depsoits 431,372 17% 367,605 11% 330,182 13% 292,098 13% 257,462 12% 229,342 4%

Sub - Ordinated Loan - - - - - -100% 479 -70% 1,597 -0.04% 1,598 -0.04%

Deferred Tax Liabilities 4,934 54% 3,197 631% 437 -63% 1,180 100% - - - -100%

Other Liabilities 16,092 2% 15,819 -26% 21,346 82% 11,722 5% 11,171 30% 8,192 32%

488,348 11% 439,484 14% 385,180 8% 355,366 18% 301,264 9% 275,047 12%

Net Assets

Represented By:

Share Capital 7,602 10% 6,911 10% 6,283 0% 6,283 15% 5,463 28% 4,265 27%

Reserves 40,163 5% 38,386 4% 63,769 8% 34,001 38% 24,662 84% 13,834 137%

Inappropiated Profits 21,415 36% 15,779 72% 9,193 79% 5,131 -7% 5,531 2526% 211 28.00%

Surplus on Revaluation of Assets - Net of Tax 10,024 16% 8,664 40% 6,191 -36% 9,706 87% 5,188 -4% 5,424 1%

79,204 14% 69,740 19% 58,436 6% 55,120 35% 40,844 75% 23,734 63%

2010 2009 2008 2007 2006 2005

Profit & Loss Account


Markup Earned 54,821 6% 51,616 29% 40,044 26% 31,787 23% 25,778 45% 17,756 95%

Markup Expensed (17,988) 14% (15,837) 37% (11,561) 47% (7,866) 74% (4,525) 63% (2,781) 35%

Net Markup Income 36,834 3% 35,779 26% 28,483 19% 23,921 13% 21,253 42% 14,975 113%

Provisons & Write off (3,685) -51% (7,465) 85% (4,042) 32% (3,061) 156% (1,194) 11% (1,072) 150%

Net Markup Income after Provsions 33,149 17% 28,314 16% 24,441 17% 20,860 4% 20,059 44% 13,903 111%

Non - Markup Expenses 6,265 11% 5,643 -3% 5,791 -10% 6,448 29% 4,991 -13% 5,754 21%

Profit before Tax 13,160 22% 10,801 29% (8,365) 39% (6,000) -8% (6,549) -1% (6,638) -9%

Taxation 26,253 13% 23,155 6% 21,868 3% 21,308 15% 18,501 42% 13,018 221%

Profit after Taxation (9,380) 22% (7,660) 18% (6,493) 7% (6,042) -5% (6,358) 55% (4,096) 152%

16,873 9% 15,495 1% 15,375 1% 15,266 26% 12,142 36% 8,922 267%

20052010 2009 2008 2007 2006

Horizontal Analysis



~

Cash is increased in 2007 but decrease in 2008; 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. There is decreasing trend in

balance with other banks which is a negative sign. 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 case advance to

customers very low in 2007 but increase in 2008.

It means that MCB is running very well.

MCB is in a position that it is earning more and more profit with passage of time.

Then bank can purchase more and more fixed assets, and it is bank is doing. Assets of

the banks are increasing day by day by purchasing the assets. More assets mean that

bank has more capacity to pay off its liabilities. There is increasing trend in field of

fixed assets. It is due to purchase of new assets. Other assets have a decreasing trend

which is not a positive sign. Decrease in assets decrease the worth of organization

liabilities

There is increasing trend in dep osits and other accounts which shows the credibility

of the bank. Borrowing is decreasing in 2008 but there is increasing trend in the year

2007. 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 Muslim Commercial Bank doing the same thing for increasing its profits.

Bills payable increase in 2008 but decrease in 2007 negative sign. Other liability has

an increasing trend not good because increase in liability decreases the liquidity

position of the bank. Share capital increase that shows the creditability of bank.



~

The Muslim Commercial Bank Limited is increasing its reserves and Un-appropriated

profit in order to increase its lending power, which is good sign, because according to

the prudential regulations of State Bank of Pakistan, a bank can lend money (per party

exposure) equal to the 30% of its assigned capital plus reserves.

Interest income increase in 2008 will great proposition which is favorable. It means

that interest received by the bank is increasing with the passage of time. It is 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.

In foreign currency dealing and dividend there is huge increasing trend which shows

the investment of bank in healthy organization. Other income decrease in 2008 but

this increase mean positive situation.

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

rate. Adam and diminution and provision against non performing loan decreasing

turned that is favorable. Bad debts increased with huge amount not positive sign.

Profit before taxation has increased with greater proportion. Tax increases which are

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



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Financial Position Statement


Assets

Cash and Balances with Treasury Banks 45,407 8% 38,775 8% 39,631 9% 39,684 10% 32,466 9% 23,666 8%

Balances with other Banks 1,479 0% 6,010 1% 4,043 1% 3,808 1% 6,577 2% 1,466 0.50%

Lendings to Financial Institutions 4,402 1% 3,000 1% 4,100 1% 1,051 0.30% 21,082 6% 9,999 3%

Investments 213,061 38% 167,134 33% 96,632 22% 113,089 28% 63,486 19% 69,481 23%

Advances 254,552 45% 253,249 50% 262,135 59% 218,961 53% 198,239 58% 180,323 60%

Operating Fixed Assets 20,947 4% 18,015 4% 17,264 4% 16,024 4% 9,054 3% 8,182 3%

Deferred Fixed Assets - - - - - - - - 172 0% 192 0%

Other Assets 27,705 5% 23,040 5% 19,810 4% 17,869 4% 11,031 3% 5,472 2%

567,553 100% 509,224 100% 443,616 100% 410,486 100% 342,108 100% 298,781 100%

Liabilities

Bills Payable 10,266 2% 8,201 2% 10,551 2% 10,479 3% 7,090 2% 8,537 3%

Borrowings 25,684 5% 44,662 9% 22,664 5% 39,407 10% 23,943 7% 27,378 9%

Depsoits 431,372 76% 367,605 72% 330,182 74% 292,098 71% 257,462 75% 229,342 77%

Sub - Ordinated Loan - - - - - - 479 0.10% 1,597 0% 1,598 1%

Deferred Tax Liabilities 4,934 1% 3,197 1% 437 0% 1,180 0.30% - - - -

Other Liabilities 16,092 3% 15,819 3% 21,346 5% 11,722 3% 11,171 3% 8,192 3%

488,348 86% 439,484 86% 385,180 87% 355,366 87% 301,264 88% 275,047 92%

Net Assets

Represented By:

Share Capital 7,602 1% 6,911 1% 6,283 1% 6,283 2% 5,463 2% 4,265 1%

Reserves 40,163 7% 38,386 8% 63,769 8% 34,001 8% 24,662 7% 13,834 5%

Inappropiated Profits 21,415 4% 15,779 3% 9,193 2% 5,131 1% 5,531 2% 211 0.10%

Surplus on Revaluation of Assets - Net of Tax 10,024 2% 8,664 2% 6,191 1% 9,706 2% 5,188 2% 5,424 2%

79,204 14% 69,740 14% 58,436 13% 55,120 13% 40,844 12% 23,734 8%

2010 2009 2008 2007 2006 2005

Profit & Loss Account


Markup Earned 54,821 90% 51,616 90% 40,044 87% 31,787 84% 25,778 84% 17,756 76%

Markup Expensed (17,988) -29% (15,837) -28% (11,561) -25% (7,866) -21% (4,525) -15% (2,781) -12%

Net Markup Income 36,834 60% 35,779 62% 28,483 62% 23,921 63% 21,253 69% 14,975 64%

Provisons & Write off (3,685) -6% (7,465) -13% (4,042) -9% (3,061) -8% (1,194) -4% (1,072) -5%

Net Markup Income after Provsions 33,149 54% 28,314 49% 24,441 53% 20,860 55% 20,059 65% 13,903 59%

Non - Markup Expenses 6,265 10% 5,643 10% 5,791 13% 6,448 17% 4,991 16% 5,754 24%

Profit before Tax 13,160 -22% 10,801 -19% (8,365) -18% (6,000) -16% (6,549) -21% (6,638) -28%

Taxation 26,253 43% 23,155 40% 21,868 48% 21,308 56% 18,501 60% 13,018 55%

Profit after Taxation (9,380) -15% (7,660) -13% (6,493) -14% (6,042) -16% (6,358) -21% (4,096) -17%

16,873 28% 15,495 27% 15,375 34% 15,266 40% 12,142 39% 8,922 38%

20052010 2009 2008 2007 2006

Vertical Analysis



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Interest earned decrease which is negative 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 increasing which is

good and favorable signs.

Divided income increased but it is very

small other income increase with great

proportion good sign. Return on deposit

decrease good sign because it increases

the profit. Administration expenses are

increased but no alarming rate. Position

against non performing loan us zero

which show bank have good customer.

All provision is zero that sows the good credit policy. Bad debt and other charges

increased but the situation is not alarming. Profit increased. Tax is increased but it is

interrelated with profit.

From the above-mentioned analysis following are my Result about the Operations of

branches of MCB for the year 2008, MCB’s income by operations has been increased

by 122.19% than 2007.

Company’s Total Assets in Pakistan has been increased by 130% than 2007. Deficit

has been decreased by 104 % in comparison with year 2007. Due to financial crisis in

the world investment activities are slowed down in year 2008 and they are decreased

by 152% than year 2007. Due to its sound financial policies MCB’s borrowing from

financial institutions has been decreased by 95 % than year 2007.



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Significance of Ratios

Ratio analysis is an important and 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.

Great care is needed while calculating meaningful ratios and in interpreting them.

Although there are several ratios, which an analyst can employ yet the type of ratios

he would, use entirely depends on the purpose for which the analysis is done i.e., a

creditor would keep him abreast about the ability of a concern to cover up its current

obligations and so would care about current and liquid ratios, Turnover of receivables,

coverage of interest by the level of earnings etc.

Advantages of Ratios Technique

It helps to give comprehensive financial statements in evaluating aspects of any

undertaking in respect of financial health, operations efficiency and profitability. It

gives a chance of inter- firm-comparison to measure efficiency and helps management

to resort to some remedial measures. It provides a good help in decision making for

investors and the financial institutions.



~

2010 2009 2008 2007 2006 2005

Dividend Ratios

Cash Dividend per Share 11.50 11.00 11.50 12.50 7.25 4.02

Bonus Shares Issued Dividend Yield Ratio (based on Cash Dividend) 10.00% 10.00% 10.00% 0.00% 15.00% 20.00%

dividend Payout Ratio 5.03% 5.01% 5.14% 3.13% 2.95% 2.40%

56.32% 53.52% 51.08% 51.45% 39.36% 28.78%

2010 2009 2008 2007 2006 2005

Share Information

Market Value per Sahre - Dec, 31 Rs. 228.54 219.68 125.81 399.95 246.10 167.80

- High During the Year Rs. 233.80 244.00 494.80 434.60 284.50 175.50

- Low During the Year Rs. 17.04 75.00 125.81 244.05 150.30 50.50

Market Capitalization 173,740 151,822 79,044 251,279 134,451 71,572

Price to Book Value (excl. Surplus on Rev. of Assets) Ratio Times 2.51 2.73 1.66 6.09 4.77 6.33

Price to Earning Ratio Times 10.30 10.78 5.66 18.11 14.01 13.00

2010 2009 2008 2007 2006 2005

Industry Share

Depsoits 8.42% 8.50% 8.55% 9.74% 8.58% 8.62%

Advances 7.85% 8.24% 8.63% 9.53% 8.58% 9.20%

Total Assets 8.37% 8.52% 8.51% 10.12% 8.43% 8.64%

Market Capitalization 24.10% 22.35% 18.59% 17.50% 16.22% 14.81%

2010 2009 2008 2007 2006 2005

Consolidated

Total Assets 570,482 511,742 445,286 412,901 343,178 299,712

Shareholders' Equity 71,228 63,120 54,121 47,338 36,404 18,660

Net Assets 81,999 72,313 60,132 57,547 42,185 24,673

Profit (before Tax) 26,510 23,349 21,887 22,526 18,931 13,341

Profit (after Tax) 16,874 15,665 15,323 16,442 12,541 9,214

Return on Assets 3.12% 3.27% 3.57% 4.35% 3.90% 3.30%

Return on Equity 25.11% 26.72% 30.21% 39.27% 45.55% 66.02%

Earnings per Sahre 22.20 20.61 20.16 21.63 16.50 12.12

Breakup Value per Share (excl. Surplus on Rev. of Assets) 93.69 83.03 71.19 62.27 47.89 24.55

Capital Adequacy Ratio 22.04% 19.10% 16.37% 16.69% 19.13% 12.79%

2010 2009 2008 2007 2006 2005

Per Branch

Gross Advances 242.18 249.51 257.40 223.91 208.10 197.63

Deposits 381.07 340.06 311.49 284.70 259.02 240.63

CASA 310.33 282.10 253.30 253.31 225.52 226.94

PBT 23.19 21.42 20.63 20.77 18.61 13.67

2010 2009 2008 2007 2006 2005

Non - Financial Information

Number of Branches 1,132 1,081 1,060 1,026 994 952

Number of Permanent Employees 9,479 9,397 10,160 9,721 9,011 9,377

ATMs 493 495 370 349 263 234



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It is observed that Current Ratio has decreasing trend this is because of sharp increase

in short-term loans, which is not positive sign. Quick ratio has mixed trend it

increases in years 2003, 2004 then slightly declining in 2005 & 06 then increases in

2007, it is observed that these fluctuations are occurring due to increase in investment

and increase in stock which is a positive sign.

It is observed that in Debt equity ratio bank has more equity to pay its debts in recent

years, which is positive sign. It is observed that debt of the bank is decreased against

total assets in recent years.

Interest coverage ratio shows

increasing trend this is because of

increase in EBIT. Now bank can

pay its interest expenses more

easily which is positive sign.

Net profit of the bank has also

increasing trend over the previous

last five years which is very

positive sign. Return on assets

depicts increasing trend it is due

to increase in net profit of the

bank, which is positive sign. Due to high net profits Return on equity is increasing

which is also a positive sign.

In Advances to total assets ratio it is observed that it has increasing trend which is

positive sign this is just because of increase in advances to general public and

government sector. Advances to deposits also have positive increasing trend because

advances are assets of the bank,

which are showing increasing,

trend against deposits. Deposits

to liabilities also have increasing

trend people deposited their

money more than in previous

years which shows public trust in

the bank which is also a positive

sign. Net profit to total advances

has also increasing trend over the

last five years which is also a

positive sing. It is observed that

net profit of the bank has sharp

increase than advances, which is

positive sign.



~

We take year 2003 as base year. It is observed that cash balance, lending to financial

institutions & investment of the bank has increasing trend this is due to increase in

deposits of the bank, which is positive sign. Bank’s advances also having increasing

trend, which is again a positive sign. Bank is paying its bills payable more easily than

before because of more equity and deposits which is a good sign. Borrowing has

sharply decreased in year 2006-07 due to more deposits.

We take year 2003 as base year. It

is observed that cash balance,

lending to financial institutions &

investment of the bank has

increasing trend this is due to

increase in deposits of the bank,

which is positive sign. Bank’s

advances also having increasing

trend, which is again a positive

sign. Bank is paying its bills payable more easily than before because of more equity

and deposits which is a good sign. Borrowing has sharply decreased in year 2006-07

due to more deposits which is good sign. Share capital and profits has sharp increase

over years because of increase in equity, which is a positive sign

It is observed that interest income of the bank has increasing trend due to more

advances, which is a positive sign. Fee income and brokerage of the bank has

increasing trend, which shows sound business of the bank it is positives sign. Share

profit has sharp increase over the years which is due to sale of bank share to general

public it shows public confidence on the bank which is also a positive sign.

Income of bank from dealing in foreign currencies is also having a sharp increase.

Administration expenses have increased in recent years, which are to control bank,

more efficiently than before. Taxation expense of the bank has also increasing trend

which is due to increase in profits which is a positive sign... Net profit of the bank has

sharp-increasing trend, which is due to increase in different kind of income of the

bank. Overall income statement of the bank depicts very sound position of the bank’s

profitability.

It is observed that cash balance, lending to financial institutions & investment of the

bank has increasing trend this is due to increase in deposits of the bank, which is

positive sign. Bank’s advances also having increasing trend, which is a positive sign.

Deposits of the bank have increased more than previous years, which shows public

trusts on the bank. Profit of the bank also showing a stable increase due to increase in

revenue and other income of the bank.

Vertical analysis shows much the same picture as in horizontal analysis. Interest

income and non- interest income of the bank has increasing trend, which shows sound

business of the bank. Income of bank from dealing in foreign currencies is also having



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a sharp increase. Administration expenses have increased in recent years, which are to

control bank, more efficiently than before. Taxation expense of the bank has also

increasing trend which is due to increase in profits which is a positive sign. Net profit

is consistently increasing, which is a positive sign for the sound working of the bank.

Dividend

The Board has recommended a final cash dividend @ 30% and bonus shares @ 10%

for the year ended December 31, 2010. This is in addition to 85% interim cash

dividends announced during the year. The effect of the recommendation is not

reflected in the above appropriations.

Profitability

MCB delivered a profit of Rs. 26.253B for the year ended December 31, 2010,

registering a strong growth of 13% over Rs. 23.155B reported for the year 2009.

Profit after tax of the Bank touched Rs. 16.873B, which is higher by 9% over the

previous year 2009.

The interest rates upward revision coupled with the other monetary pressures lead to a

rise in the cost of credit. Given the prudent stakes in appropriate mix of investments,

the Bank was able to maintain interest income, which registered a positive growth of

3% over 2009.

Major component of increase in profits remained interest income, representing 90% of

the total gross income, which rose by 6% from last year to Rs. 55B. The robust

upward flux in investments helped the strong increase in total interest earned

throughout the year. Return on investments was reported at Rs. 20B, growth of 46%

over 2009, with major portion earned on Treasury Bills of Rs. 18.4B in 2010.

Interest expense increased by 14% and was

reported at Rs. 18B. Cost of deposits rose to

Rs. 16B, with a sharp rise of 14% from

2009. Cost on short term borrowings, at Rs.

902M increased by 16% from 2009.

The focus of the Bank has grown into

venues of income covering value added

services along with core banking business.

As a result, non interest income has been on

the rising trend posting an increase of 11% on a yearly basis in 2010 to Rs. 6B.

Fee, commission and brokerage continued to be the major portion of the total non

fund based income, with an increase of 19% over 2009 with major contributions from

commission earned on banc assurance, remittances and trade business. With reference

to the operating expenditure block, the cost cutting methodologies adopted by the



~

management have kept the increase under control despite the soaring inflation rates

applicable throughout the financial year, 2010. Effective planning and budgeting

policies implemented across bank have greatly pacified the growth rate in

administrative expenses, restricting the same to 9.7% over 2009 (excluding the impact

of PF reversal).

Advances

Given the current weak economic conditions, worsened by the catastrophic floods, the

advances of the Bank witnessed decrease in the earlier quarters of 2010; however, the

off take of advances in the last quarter of 2010 resulted in the year end number to be

reported at Rs. 274B, 2% higher than the segments to this growth are Corporate and

Commercial which added a combined increase of Rs. 9.2B in the current year with

respective increase of 3% and 9% over 2009.

With reference to the industry

specific concentration, increase was

observed in transport, storage and

communication sector, followed by

textile and retail sectors. The Bank’s

exposure in the power and

pharmaceuticals sectors decreased by

4% and 15% respectively, over 2009.

Lending to the private sector also saw

an increase of 3% in 2010, as

opposed to the 11% annual decrease

registered in 2009. Simultaneously,

public sector advance decreased by 1% from 2009 as opposed to a major increase of

32% last year.

The year 2010 saw a continuous rising trend in the industry non-performing loans

(NPLs) in the domestic banking sector. The mid-year floods further devastated the

situation as the exposure to agriculture and SME brought a sharp hit to the lenders.

MCB Bank Limited on the other hand, managed to coop well with the situation and

registered a growth of 6% over 2009.

Given the controlled increase in NPLs, the Bank followed an aggressive approach in

highlighting borrowers with weak /deteriorating basic financial fundamentals and

taking subjective classification charge on such exposures.

The NPL concentration of 85% in the loss category specif ies the adequacy of the

specific provision held by the Bank as provision coverage ratio of the Bank increased

from 70.9% as at December 31, 2009 to 79.8% as at December 31, 2010.



~

Apart from specific provision and general provision against consumer portfolio, as

required by prudential regulations, the Bank is carrying an unencumbered general

provision of Rs. 274M as at December 31, 2010.

Investments

The investments representing 38% of the total

asset base (2009: 33percentage), increased by

27% from December 2009. Approximately 91%

of the gross investment is concentrated in risk

free government securities with T-Bills

increasing by 32% or Rs. 46B over 2009.

Deposits

On the liability side, the deposit base of the bank witnessed consistent growth

throughout the financial year 2010 and was reported at Rs. 431B as at December 31,

2010. This consistent increase translates into an annual percentage increase of 17%

over 2009 with current deposits increasing by 17%, savings deposits by 14% and

fixed deposits registering a growth of 28% over December 31, 2009. The CASA base

of the Bank constituted 81% of the total deposit base and the prime reason for a lower

cost of deposit.

Market Share and Performance

The consistent growth in profitability of the Bank indicated through interim results

enabled the Bank to capture a considerable share in the market. The local equity

markets depicted relative stability during 2010, resulting in a highest market

capitalization over the last two years.

The equity share of the Bank traded at approximately 2.5X book value throughout the

year and closed at Rs. 228.5 at December 31, 2010, 4% higher than the closing share

price of Rs. 219.7 recorded last year. As a result, the market capitalization of the Bank

was reported at Rs. 174B, being the second highest in the last six years (2007: Rs.

251B).

As a result of significant growth in profit numbers, the earning per share (EPS) of the

Bank was reported at Rs. 22.20 for the year end 2010 as compared to Rs. 20.38 in

2009. This combined with the improved share price led to a P/E (Price to Earnings)

ratio of 10.30.

The book value of the Bank was reported at Rs. 91 increasing from Rs. 80.3 as at

December 31, 2009. The return on equity of the Bank was reported at 25.9% (2009:

27.3%), with ROA reported at 3.13% (2009: 3.25%).



~

Contribution towards the national exchequer and the economy of the

country

MCB Bank Limited is one of the main contributors to the national exchequer. The

Bank paid Rs. 11,692.657M as income tax to Government treasury during 2010.

Furthermore, the Bank contributed over Rs. 6 Billion to the national exchequer as

withholding tax agent under different provisions of Income Tax Ordinance, 2001.

The Bank’s contribution to the national economy by way of value addition was Rs.

32.5B out of which Rs. 7.8B and Rs. 9.5B were distributed to employees and

shareholders respectively.

Credit Rating

The Pakistan Credit Rating Agency (PACRA)

maintained the long term credit rating of AA+

[double A plus] and short term credit rating of A1+

[A one plus] of the Bank, through its notification in

June 2010 (2009: Long term: AA+ [double A plus]

and Short term: A1+ [A one plus]).

The Economy of Pakistan

During the last three years, Pakistan has recorded an annual average growth of 3% in

GDP with the commodity producing sectors achieving an annual average growth of

1.9% only, which was lower than the estimated annual growth in population.

Consequently, supply shortages developed, which were accompanied by demand

pressures emanating mainly from an expansionary fiscal policy that relied

increasingly on borrowing from the State Bank of Pakistan and the banking system to

finance mainly unproductive government expenditure. Supply bottlenecks reinforced

by demand pressures led to a sharp rise in prices which increased by approximately

15% per year in the last three years.

The recurring borrowing requirements of the government and the pressure on the

budget deficit depicted the inability of the policies to meet the core objective of

curtailing inflation, and resulted in tiring impact being met through expansionary

monetary measures. However, to partly offset the expansionary impact of the fiscal

policy, the State Bank resorted to tightening of the credit policy for the private sector

and increased its policy rate several times putting upward pressure on lending rate of

banks.



~

With continuous injection of high powered money by government excessive

borrowing from the State Bank of Pakistan, the tightening of the monetary policy by

increasing policy rate had only limited effect on the overall expansion of liquidity

with the result that price pressures continued to mount.

The demand for credit from the loss making public sector corporations and financing

of interagency debt by borrowing from commercial banks added to expansion of

liquidity in the economy but credit squeeze for the private sector, which was already

being adversely affected by load shedding of electricity and gas combined with an

increase in their prices reflecting a rise in their world prices and reduction of subsidies

under an agreement with the IMF.

Containment of government borrowing from the banking system and improvement of

financial health of large public sector corporations is an essential prerequisite for the

State Bank of Pakistan to contain monetary expansion within safe limits, reduce price

pressures and to ease its policy rate to avoid further chocking off the private sector.

In spite of expansionary stance of the fiscal policy,

adverse effects of floods on domestic production, and

increasing price pressures the country was able to

maintain a healthy level of foreign exchange reserves

reflecting a rising trend in exports, a sharp increase in

remittances, availability of bilateral assistance and

disbursements from international financial organizations,

particularly the IMF under a Standby arrangement. The

difficult economic conditions face by the country has

had their adverse affect on the asset portfolio of the

banking system and nonperforming loans increased

under depressed market conditions.

In spite of it, the banking system remained generally insulated from the fall out effects

from the world recession and financial crisis, and it was able to maintain a healthy

trend in profitability, thanks to privatization of banks and banking reforms introduced

in the country since the nineties.



~

The disturbing trends in the economy can only be reversed by major structural

reforms undertaken under a well thought out and effectively implemented strategy to

put the fiscal house in order including containment of expenditure, higher revenue and

elimination of interagency debt through their sale or reforms and thereby limiting

domestic and foreign borrowing for budget financing, measures to contain inflation,

increase domestic saving rate, accelerate economic growth and expand access to

world markets of high value exports. It is a tall order of policy reforms but a dire need

of the country.

Notwithstanding the difficult economic situation of the country, MCB Bank continued

to make progress in its operations and achieve sound financial results. In the

subsequent sections of the report, a review of operations is followed by a d etailed

analysis of the financial results of the Bank along with narration of on major structural

reforms undertaken to strengthen the foundations of the Bank for future growth.

Corporate Banking Group

The aim of the Corporate Banking Group for 2010 was to buildup trade volumes and

ramp up fee income while maintaining a healthy risk asset portfolio in the current

economic conditions.

The Group successfully executed its strategy and managed to post an increase of 52%

in trade volumes and increased cash management & home remittances throughputs by

26% and 76% respectively, which contributed a significant increase of 22% increase

in fee income over the same period last year. The increase in trade, collections and

home remittances were, in great part, the result of leveraging in-house expertise,

strengthening client relationships while continuing to roll out new products and

offerings. Loan growth in 2010 remained subdued at 8% given the presence of

enhanced levels of systemic and borrower risks. The quality of the Group’s loan

portfolio continued to compare favorably to the industry as nonperforming loans, as a

percentage of total loans were around 2% only.

Moving forward, in 2011 the Group will continue to focus on Transaction Banking

products as revenue and volume drivers in a challenging environment while

maintaining the quality of the Bank’s risk assets will, as always, remain a key

imperative.

Commercial Banking Group

The group equipped with wide spectrum of banking products and service for large

local corporations, SME / Agriculture sector and retail customers made exceptional

progress in 2010. The extensive network of more than 1000 commercial branches

across Pakistan was further strengthened by record opening of 51 new commercial

branches (including 3 sub branches) in 2010. Commercial Branch Banking group



~

(CBBG) achieved the highest ever deposit growth of 17.75% with emphasis on

increase in low cost deposits.

CBBG achieved remarkable growth of 43% in trade volume which was used as a

catalyst for generating deposits and advances. Despite an ailing economy, adverse

macroeconomic indicators and worst floods of the century, CBBG closed 2010 with

the key performance indicators being positive. CBBG branches were first to become

operational after the massive devastation caused by the floods. The dedicated efforts

of commercial banking team ensured protection of all assets during flood crisis.

CBBG team extended support to masses as MCB Bank became exclusive bank for

donor agencies and MCB brand was advertised free of cost in electronic & print

medium. Commercial banking team took initiative of launching self help flood relief

efforts for employees that were affected by the flood and donations of Rs. 2.75

Million were distributed among staff members. In addition to these Maybank staff

also made generous contributions for the flood affected victims.

The year witnessed strengthening operations and credit structure to improve internal

controls and efficient systems. Special emphasis on providing quality customer

services throughout the year led to ATM uptime of 94% - 96% during Eid festivities.

Going forward in 2011, the focus would remain on recoveries along with increase in

advances. Continued emphases on deposits growth by offering new liability products

to tap new avenues of market segments would be a key strategy. Commercial banking

team would be focusing on enhancing revenue growth and profitability through cross

selling various financial products, strengthening internal controls operational

structure, capacity building, proficient customer services and optimizing branch

banking platform.

Consumer Banking Group

In 2010, the group focused on consolidating and broadening its menu of services

offered to the Bank’s individual customers. The ground breaking MCB Mobile

service went from strength to strength and established itself as the leading Bank- led

money transfer service in the country. The excellence of the service received

international recognition as well – with MCB winning the best Bank-led money

transfer service award at the Global MMT awards in Dubai in 2010. Remote Banking

will continue to be a game-changer in 2011 with the planned launch of Visa Debit

card and through the introduction of low cost, entry level banking products and

services.

The footprint of the Privilege Banking offering also grew in 2010, with a new

Privilege Center opening up in Multan, which is the first facility of its nature in the

city and will strengthen MCBs Bank’s penetration into the high net worth segment.

Critical fee based businesses like Bancassurance and Investment Services gained

momentum in 2010, and contributed significantly to the bottom line. MCB Bank is



~

now among the top 3 providers of Bancassurance in the country within 3 years of

launching the initiative and well-positioned to continue this momentum with the

support of tailor made products developed for the Bank’s customer base by well

reputed Insurance providers.

Given the state of the economy, 2010 also saw us following a conservative strategy in

Consumer Financing. The Bank had considerable success in stabilizing the lending

portfolios, and was able to contain credit losses as compared to previous years. At the

same time, the continued commitment to be an active long-term player in this market

was underlined with the launch of the Platinum credit card, which will, combined

with our Privilege Banking strategy, enable MCB Bank to make further inroads into

the high-net worth segment.

Islamic Banking Group

This has been a year of major achievements

for MCB Islamic Banking (MCB IB).

Targets were exceeded and growth was

observed in almost all areas of business.

MCB IB improved financial structuring

and has as a result became self sufficient

in generation of liabilities to fund its

earning assets. The group has increased

its network reach by opening 5 new

dedicated branches (including 2 sub

branches) in the year 2010 depicting a

step forward in its long term business focus. Strategic branch

relocations have also led to growth in the business.

Deposit generation targets were achieved and exceeded through restructuring of sales

model and improvement in dedicated branch network. Focus on trade business has

resulted in growth by 113% with respect to the previous year and has prepared

grounds for further growth in future. Volumes of new accounts opened grew by 55%,

highlighting the effective implementation of our sales strategy. In order to serve a

diversified set of customers, MCB IB added a new product of “Shariah Compliant

Bank Guarantee” to its product menu in 2010.

Going forward Islamic Banking group intends to establish enhanced network reach by

opening new branches. In the following year the Group will follow an aggressive

strategy to cater the trade based needs of the Bank’s valuable existing and potential

customers. This objective shall be achieved by development of new foreign and

inland trade based products. Marketing tools to create awareness of MCB Islamic

Banking shall be strategically used to position our products more effectively in the

market.



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Unit # 10

SWOT Analysis

Strengths

Following are the strengths of the MCB Bank.

One of the major strengths of MCB is that it has

very stable deposit base.

MCB is the largest private bank in Pakistan with

around 1000 branches, which cover almost every part of 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 etc.

MCB is a successive and market oriented bank.

MCB is investing huge sums on HR development and training.

Customer default rate is lower as compare 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.

Weakness

Decision making process is very slow.

It is not having greater number of branches abroad.

Though ATM network is largest in the country, still some potential areas do

not have the ATM.

MCB RTCs are usable only in Pakistan.

Some management positions do not work properly.

Low motivational level, non aggressive marketing.

Employees' dissatisfaction due to ill treatments and improper reward system.

Favoritism and nepotism in recruitment.

Opportunities

Opportunities exist in house mortgage products since the people are investing

most of their funds in the agriculture and construction sector.

The bank should form differentiated products for its overseas customers

already operating in all cities of Pakistan.

Customer relation officers with marketing knowledge should be hired at least

in the main branches for providing better services to customers.



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Threats

Increase in number of private banks in the country resulting into increased

competition in the consumer and commercial financing both.

The overall low investment, low interest rates and high liquidity are also a

threat for this large commercial bank.

Other private commercial banks with sound profitability are also a threat to

MCB Bank e.g. UBL, HBL, Bank Alfalfa etc.

PEST Analysis

Political

The political situations are very important for economy of the country. Due to

political instability the valuation of currency drop down the bank investment shrinks

and the rate of production decreases and that situation leads to increase in poverty and

low standards of living.

Economical

Economical situation are also very important for banking sector. Because when

interest rates are high then credit demands are low, so the rates of investments

decrease economy. When investments shrinks then business activity have comes to an

end. And from that the unemployment prevails in economy. On other hand when

interest rate are low then circulation of money, inflation rate, investments, and supply

increases, then price level also increase but purchasing power decrease.

Social

Socially when the productivity of bank increase then rate of production also increases

and per capita income and standard of living also increase, so it boosts up the

economy.

Technology

Technological advancements are very important to compete globally. From

technological advancement the work can easily be done, quality of service and

products improved. Customers are more satisfied and customer’s loyalty also

increased.



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Unit # 11

Conclusion

MCB is an effectively operating and profit making organization and carrying out its

activities under a specified system of procedure. The main regulatory body is State

Bank of Pakistan, which provides policy guidelines and ensures that the money

market operates on sound professional basis. While the head office specifies the

whole procedure of functions and operations. This procedure has been modernized

with the passage of time with a view to streamline the approach and underlying

procedure for effective overhauling of its own capabilities so as to bring them at par

with international practices.

The use of information technology in Pakistan is quite limited. An example of this is

the fact that Credit cards have been used very commonly abroad as a medium of

transaction, still it is not considered as a reliable mod of transaction. Acceptability of

credit card transaction in Pakistan is limited from the users' end because:

Cash is still the most comfortable mode on transaction, because of cultural dislike for

borrowing from the formal sector (issues of riba [interest] and easier access to

informal channels,) and also because of the presence high denomination currency

which could be carried easily. The fear of transaction information being made

available to the authorities giving rise to questions on sources on the income.

Over the last four years mainly as there result of aggressive marketing by the foreign

banks credit cards have been able to penetrate the middle and upper income salary

class to high degree which the business community is still uncomfortable with idea

given the second reason stated above. Foreign banks continue to dominate this

business segment with CITI bank and Standard Chartered leading with more than

hundred thousand card members each.



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Unit # 12

Recommendations

Following are my observation and suggestion to improve the efficiency for the

development of the bank:

Human Resource Department should be there in order to motivate and trained

the employees. I have noted some dissatisfaction among the employees due to

in efficient promoting system.

There is a criticism on the banking management that the salaries of the

employees are decreasing in every succeeding year. And I think this will shake

the confidence and working habit of the employees.

There should be proper advertising and marketing of those products, which are

quiet, new for customers.

Most of the bank employees, are sticking to one seat only with the result that

they become master of one particular job and lose their grip on other banking

operation. In my opinion all the employees should have regular job experience

all out- look towards banking. The promotion policy should be adjusted.

Refresher Courses for the staff are most important in any international

organization. Alt the employees should have these courses according to their

requirement. Foreign experts can also be called for this purpose.

Bank should give some more incentive to its employees in order to remove the

conflict between lower and higher officers and should try to improve the

working condition of the bank.

As such system should be designed that every employee who has some

problems with his officers can communicate it to the higher management and

some steps must be taken to improve that.



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Unit # 13

Glossary

AER – Annual earnings rate on an investment.

Annuity – A life insurance product which pays income over the course of a set

period. Deferred annuities allow assets to grow before the income is received and

immediate annuities (usually taken from a year after purchase) allow payments to

start from about a year after purchase.

APR – The annual percentage rate of interest, usually on a loan or mortgage,

usually displayed in brackets and representing the true cost of the loan or

mortgage as it shows any additional payments beyond the interest rate.

Bank Statements – This is a statement from the bank giving details of

transactions in the relevant account. It can be requested at any intervals required,

usually monthly.

Bear Market – A bear is somebody who believes that the market is falling and a

bear market is a falling market. See bull market for the opposite.

Bounced Cheque – when the bank has not enough funds in the relevant account

or the account holder requests that the cheque is bounced (under exceptional

circumstances) then the bank will return the cheque to the account holder. The

beneficiary of the cheque will have not been paid. This normally incurs a fee

from the bank.

Bonds – These are securities which pay interest at specified intervals and the

principle amount of the loan is paid at maturity.

Bull Market – A bull is somebody who believes that the market is rising and a

bull market is a rising market. See bear market for the opposite.

Cashback Mortgages – This is when the mortgage provider lends the money for

the mortgage and, in addition, a lump sum to pay for, for example, building work

to be carried out.

Central Clearing Time (in England and Wales) – This is the time that it takes

for the monies from a cheque to be taken out of the payee’s account and put into



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the payer’s account. This is three working days in England and Wales, as long as

the cheque was paid in before 16.30.

Certified Documents – These are photocopies of original documents that have

been signed by a professional i.e. a solicitor, accountant, teacher, doctor or bank

official. The professional also states, on the document, "original seen" since they

must be able to verify that these are genuine copies and therefore have to have

seen the original, they also date the document and put their full name, profession

and their address.

Charges – This is the money paid to the bank for services rendered. Charges

include overdraft fees, charges for bouncing cheques, interest on overdraft and

any charges that a business account might normally incur.

Charge Cards – Cards which can be used like a credit card but the charge has to

be paid off on the due date. They usually have a high limit or no limit.

Cheque Book – A small, bound booklet of cheques. A cheque is a piece of paper

produced by your bank with your account number, sort-code and cheque number

printed on it. The account number distinguishes your account from anyone elses,

the sort-code is your bank’s special code which distinguishes it from any other

bank. In times gone by, anything with the correct details and a verifiable

signature could act as a cheque. Even an elephant was once used!

Cheque Clearing – This is the process of getting the money from the cheque-

writer’s account into the cheque receiver’s account.

CHIP and PIN – A Chip is a small electronic insert placed into a cheque or

credit card. The PIN is a four digit personal identification number which is used

with the card by the card-holder.

Clearing Bank – This is a bank that can clear funds between banks. For general

purposes, this is any institution which we know of as a bank or as a provider of

banking services.

Contract Hire – This is a way of hiring an item of large capital value where the

maintenance is the responsibility of the company that hires out the item. A fixed

monthly figure is paid and the item can be sold, usually to an unconnected third

party.



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Credit Rating – This is the rating which an individual (or company) gets from the

credit industry. This is obtained by the individual’s credit history, the details of

which are available from specialist organisations (Equifax and Experian are the

two big operators in the U.K. www.equifax.co.uk and www.experian.co.uk).

Credit Scoring – This is the process of assessing an individual’s credit-

worthiness. The process involves taking information from an individual on an

application form (for example when applying for a store card) and weighting the

answers given. Certain responses will attract higher scores than others and the

total score will determine whether or nor the organization wants to do business

with the individual, or if they represent too high a credit risk.

Credit-Worthiness – This is the judgement of an organization which is assessing

whether or not to take a particular individual on as a customer. An individual

might be considered credit-worthy by one organisation but not by another. Much

depends on whether an organization is involved with high risk customers or not.

County Court Judgement – This is when a judge at a county or small claims

court finds against an individual and they have a county court judgement made

against them. This is recorded nationwide (and by the credit tracking

organizations Experian and Equifax) so anyone wanting to know the credit-

worthiness of an individual will know that the county court judgement exists.

Once it is paid off then the record remains but it is shown as being paid which

reduces the credit risk associated with the person with the county court

judgement.

Direct Debit – An amount of money taken from a bank account, set up by the

recipient and can vary in amount and exact time that it is taken from an account.

Mortgages are usually direct debits.

Endowment Mortgage – Interest only is paid over the term of this sort of

mortgage and the capital is repaid at the end of the term by using the monies from

an endowment policy.

Factoring – This is when a business sells its invoices to a specialist company or

bank which chases payment and pays a percentage of the invoice back to the



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original business. The business can then continue with its work and problems

from cash-flow are reduced by having money from unpaid invoices up-front.

Hire Purchase – When an item of large capital value is bought over time by

paying a deposit and fixing a period over which the loan will run (usually

between 12 and 60 months) and then paying fixed and equal repayments over this

period.

Identity Verification – This is often used by financial institutions to verify the

customer and usually takes the form of a pass-word and the answer to an obscure

personal question such as the customer’s mother’s maiden-name.

Interest – The amount paid or charged on money over time. If you borrow money

interest will be charged on the loan. It you invest money, interest will be paid

(where appropriate to the investment). Interest rates usually bear a close

relationship to the Bank of England’s base rate. It is expressed in percent.

Lease Purchase – This is an agreement made on an item of high capital outlay

(for example, a car) where the ownership is transferred to the person who is

leasing the item at the end of the contract, providing all the terms and conditions

of the purchase have been fulfilled.

Money Laundering – This is when money gained from crime is put into a bank

so that it can be accessed safely by the criminals and terrorists. It makes the

proceeds of illegal activities easier to get to.

Money Transfer – This is the movement of money from one account to another.

Money Transfer Abroad – This is the movement of money from one account to

another, the second being in a different country from the first.

Offsetting – This is when the credit balances in a current and savings account are

netted off against the account holders borrowings (typically a mortgage) so that

the rate paid on the borrowing is reduced as a result of the credit held in other

accounts, which reduces the amount that is being borrowed.

Overdraft – This is when a person has a minus figure in their account. It can be

authorized (agreed to in advance or retrospect) or unauthorized (where the bank

has not agreed to the overdraft either because the account holder represents too



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great a risk to lend to in this way or because the account holder has not asked for

an overdraft facility).

Payee – The person who receives a payment. This often applies to cheques. If

you receive a cheque you are the payee and the person or company who wrote the

cheque is the payer.

Payer – The person who makes a payment. This often applies to cheques. If you

write a cheque you are the payer and the recipient of the cheque is the payee.

PEP – Personal Equity Plans have been replaced by ISAs. Existing PEPs can be

retained but, since April 1999, no new ones can be opened.

Phishing – This is when a criminal uses the internet to try to fraudulently obtain

details of peoples accounts so that they can use these accounts themselves,

usually to take money out of.

Repayment Mortgage – This is a mortgage where the sum borrowed is paid off

by the end of the mortgage term. It involves monthly repayments which consist of

the interest on the loan plus some of the capital borrowed.

Security for Loans – Where large loans are required the lending institution often

needs to have a guarantee that the loan will be paid back. This takes the form of a

large item of capital outlay (typically a house) which is owned or partly owned

and the amount owned is at least equivalent to the loan required.

Standing Order – A regular payment made out of a current account which is of a

set amount and is originated by the account holder.



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Unit # 14

References

Graddy, B., Austin H. S. and William H. B. (1985). Commercial Banking and he

Financial Services Industry. Journal of banking, 3, 272-295.

Hara, M. and Wayne S. (1990). Deposit Insurance and Wealth Effects: The Value

of Being ‘Too Big to Fail’. Journal of Finance, 45(3), 114-157.

Hanif M Nadeem (2004), "Restructuring of financial section in Pakistan" journal

of the institute of bankers. Volume no 2.

Huertas, T. (1988). Can Banking and Commerce Mix? Cato Journal, 7, 743-769.

Moulton, H.G. (1918), The Commercial Banking and Capital Formation. Journal

of Political Economy, 5, 72-85.

Prudential regulations for corporate/commercial banking, State bank of Pakistan,

Banking policy department (2006), second edition: SBP

Annual reports of MCB Bank Ltd. (2004-2006).

Hoggson, N. F. (1926) Banking Through the Ages, New York, Dodd, Mead &

Company.

Goldthwaite, R. A. (1995) Banks, Places and Entrepreneurs in Renaissance

Florence, Aldershot, Hampshire, Great Britain, Variorum

Wagel, Srinivas (1915). Chinese currency and banking.

Matyszak, Philip (2007). Ancient Rome on Five Denarii a Day. New York:

Thames & Hudson, pp.144. ISBN 050005147X.

Dr. Herbert L. Hart – from Google Search Engine

G. W. Gilbert – from Google Search Engine

Ian Crowther, 1995 – from Google Search Engine

Banking Companies Ordinance, 1962,

Cameron, Rondo. Banking in the Early Stages of Industrialization: A S tudy in

Comparative Economic History (1967).

Grossman, Richard S. Unsettled Account: The Evolution of Banking in the

Industrialized World Since 1800 (Princeton University Press; 2010) 384 pages.

Considers how crises, bailouts, mergers, and regulations have shaped the history

of banking in Western Europe, the United States, Canada, Japan, and Australia.



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"ICICI personal loan customer commits suicide after alleged harassment by

recovery agents". Parinda.com. Retrieved 2010-07-28.

"Karnataka / Mysore News: ICICI Bank returns tractor to farmer’s mother".

Chennai, India: The Hindu, 2008-06-30. Retrieved 2010-07-28.

SBP – Annual Report, 1955

RBI – Annual Report, 1947

MCB – Annual Report, 2004 - 2010

George J. Stigler (1987). "Competition," The New Palgrave Dictionary of

Economics.

Wikipedia Search Engine (www.wikipedia,org)

Official web of MCB Bank Ltd. (www.mcb.com.pk)

Official web of State Bank of Pakistan (www.sbp.com.pk)

http://en.wikipedia.org/wiki/George_J._Stigler

http://en.wikipedia.org/wiki/The_New_Palgrave_Dictionary_of_Economics

http://en.wikipedia.org/wiki/The_New_Palgrave_Dictionary_of_Economics

http://www.wikipedia,org/

http://www.sbp.com.pk/



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