INTERNSHIP REPORT

Organization Name: MCB Bank Limited

Specialization: MBA – Banking & Finance

Submitted To: Chairman, Dept of Business Administration

Submitted By: Sajida Noureen

Roll # W-582332
Reg # 07PCR0012
Mob. # 0321-5588764
House # 22-A, St # 4, Yousaf Colony,
Chaklala Scheme-III, Rawalpindi.

DEPARTMENT OF BUSINESS ADMINISTRATION

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF

THE DEGREE OF MASTERS IN BUSINESS ADMINISTRATION

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IN THE NAME OF ALLAH THE MOST BENIFICENT
AND THE MOST MERCIFULL

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 ACKNOWLEDGEMENT

As I complete my internship report, I would like to thanks, but before I mention these
specific people, my thanks goes first and foremost to Allah Almighty Whose worth can
not be described by speakers, Whose bounties can not be counted by calculators and
Whose claim (to obedience) can not be satisfied by those who attempt to do so, Whom
the height of intellectual courage can not appreciate, and the diving of understanding can
not reach: He for Whose description no limit has been laid down, no time is ordained and
no duration is fixed and Whose blessings enabled me to complete this dissertation
successfully. I pay my tribute to Holy Prophet Mohammad (S.A.A.W) Whose life is
perfect model for the whole humanity. During the preparation of this report, many people
were involved in helping me extract the information.

In addition, the completion of this report would not have been possible without the
support and contribution of Ms. Ayesha Zafar, Mr. Ahsan Sohail, Mr.Shahzad Khan, Mr.
Muhammad Abdullah, Mr. Mudasar Jamshed, Mr. Zeshan Yawar, Mr. Kamran Mumtaz,
Mr.Munir Hussain at MCB Bank Rawalpindi City branch where I have completed my
internship session.

I would also like to thank my family who encouraged me through out the whole
internship process and have encouraged me to join MCB Bank for my internship.

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 EXECUTIVE SUMMARY

The world has entered into a new era so has banking. The modern customer wants
excellent service and newer cost effective products at his/her fingertips. With a mission to
meet customer’s expectations and a vision to be the Bank of first choice in the region,
MCB Bank has come a long way. MCB Bank with a good balance sheet, an efficient cost
structure and a well-established brand name, continues to play an essential role in serving
the needs of customers and entire banking industry. The bank offers a selection of
products, services and opportunities for a better more secure future for its customers,
shareholders and employees.

To conclude, it may be said that MCB Bank is a good service bank with wide nation wide
network. It addresses future challenges and progress towards the achievement of its
vision of being providing the complete range of financial products to all segments under
one roof. Yet efforts are being made to achieve new levels of excellence. MCB Bank has
a distinct edge over the others, which allows it to cater to the needs of large corporate as
well as smaller businesses and individuals.

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 List of Contents

5. Executive Summary----------------------------------------------1 6.
Objectives of studying of the organization------------------2
7. Overview of the organization-----------------------------2
7.1 Brief history of the organization----------------------3
7.2 Nature of the organization-----------------------------3
7.3 Business volume----------------------------------------4
7.4 Number of employees----------------------------------5
7.5 Product lines---------------------------------------------5
8. Organizational Structure---------------------------------13
8.1 Structure of overall organization--------------------13
8.2 Organization structure of the branch---------------15
8.3 Review of the various departments-----------------16
9. Structure and Functions of the Accounts/Finance
Department-----------18
9.1 Structure of the Accounts----------------------------18
9.2 Finance and Accounting operations----------------20
9.3 Role of Financial Managers-------------------------22
9.4 Use of electronic data---------------------------------24
9.5 Sources of funds---------------------------------------25
9.6 Generation of funds-----------------------------------27
9.7 Allocation of funds------------------------------------29

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10. Critical Analysis of the Theoretical Concepts------32

11. Financial Analysis----------------------------------------33

11.1 Latest Five years of Balance Sheet----------------35
11.2 Latest Five years of Income Statement-----------36
11.3 Ratio Analysis----------------------------------------37
11.4 Horizontal Analysis of Balance Sheet------------48
11.5 Horizontal Analysis of Income Statement--------50
11.6 Vertical Analysis of Balance Sheet----------------52
11.7 Vertical Analysis of Income Statement------------55
11.8 Organizational analysis------------------------------57
11.9 Future prospects--------------------------------------59

12. Short-falls/Weaknesses of the Organization--------60

13. Conclusions------------------------------------------------63

14. Recommendations----------------------------------------64

15. References--------------------------------------------------65

16. Annexes-----------------------------------------------------66

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 OBJECTIVES OF STUDYING THE ORGANIZATION

This report comprehensively analyses the over all operations of MCB Bank Ltd. The
main purpose of this internship session is requirement of the AIOU for the completion of
MBA degree. Internship gives us exposure to the world by meeting and dealing with the
different kinds of people everyday, which have given me boost to my confidence and
experience.

The study is carried out to:

• Requirement of the AIOU for the completion of MBA degree.

• To get the Practical exposure to the career that they intend to pursue.
• Experience the challenges that might face in future.
• Enhance the report writing skills.
• To Excel my career in Banking Industry

Focus of the Study

This report focuses on the functions and operations of MCB Bank Ltd. It covers the
following:

• General Banking Operation

• Credit Operation
• Foreign Trade Operation

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 7. OVERVIEW OF THE ORGANIZATION
MCB BANK LIMITED

(Good banking getting better)

7.1) History of MCB Bank LTD

As discussed earlier the banking sector of Indo-Pakistan was in the hands of foreign
banks. The oldest amongst which were the Chartered Bank and Grindlays Bank, both
established in 1883. In 1919, the first and the largest Indian bank started its operations.
Unfortunately, Muslims of the sub-continent were kept away from the financial
institutions and had no role to play in the economy. How ever on July 9, 1947 Muslim
Commercial Bank was established with an authorized capital of There Hundred Million
Rupees. This bank was the first Muslim bank operating in the subcontinent and on the
strong desire of the founder of Pakistan and the then leader of Muslim League, it was
headquartered in Calcutta. After the independence of Pakistan Muslim Commercial Bank
had to shift it’s headquarter from Calcutta to Dhaka in August 1948 and later on to
Karachi in August 1956.

Nationalization of the MCB Bank Ltd

In 1974 the government felt a harsh need of nationalization of banks and financial
institution for the better channeling of the resources of the country. As a result the
nationalization act was introduced. Muslim Commercial Bank Ltd was also nationalized
under the banks (Nationalization) act, 1947, promulgated on January 1, 1947. The
government decided to keep 5 national banks operating and merged all weaker banks into

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the stronger ones. As a result, Premier Bank was merged into Muslim Commercial Bank
in 1973.

Privatization of MCB Bank Ltd

The Nationalization of bank and the financial institution was not fruitful at all. And the
banking operation and the financial structure of the country fell prey to the corrupt
political and bureaucratic pressures. Therefore, the government soon soon became
conscious about this down fall and decided to privatized the commercial banks under the
Banks (Nationalization) (Second Amendment) Ordinance 1991.Muslim Commercial
bank was also no exception and was privatized under the above mentioned amendment.
Twenty six (26%) percent of the shares of the bank was sold to a leading business group
by the state bank of Pakistan. Subsequently, the Bank’s Management was transferred to
the new owners of the bank. Today, this group owns about 50% of the shares of the bank
where as the general public and the state bank of Pakistan holds 25% shares each. After
Privatization, the bank has achieved a remarkable repute in the banking industry of the
country. Today the banking has the largest branch network of total of 947 branches (that
included 942 domestic branches and 5 overseas branches). The bank is also listed on the
stock exchange of the country with its shares well traded in the open market. It is also the
first and only Pakistani Bank listed on the London Stock Exchange.
MCB Bank LTD Today

Today MCB bank Ltd has the largest branch network of the country, having about 947
branches in total out of which 942 are operating domestically and 5 of them are operating
abroad.
The banking operations of MCB Bank Ltd are categorized into 3 main heads.
They are as follows:
• Commercial Banking
• Corporate Banking
• Islamic Banking

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All these heads are controlled by the principal Office of the bank situated at Karachi. All
the transactions are routed through the principal office.
All the Commercial banking branches of MCB Bank are under two main offices other
than the principal office, i.e. the Karachi Office and the Lahore Office. The Karachi
Office of MCB controls the operations of the commercial branches in Sindh and
Baluchistan, whereas the Lahore office is concerned with the operations of the
commercial banking branches in NWFP and Punjab. There are 8 circle offices operating
under each of the main offices i.e. the Karachi Office and Lahore Office.
The Karachi office has the following Circles (with a total of 365 Branches) under its
jurisdiction:

• Karachi Central (17 Branches)

• Karachi East (48 Branches)
• Karachi West (42 Branches)
• Hyderabad (50 Branches )
• Sukkur (50 Branches)
• Bahawalpur (50 Branches)
• Multan (75 Branches)
• Quetta (33 Branches)

The Lahore office has the following Circles (with a total of Branches) under its
jurisdiction.

• Lahore East (57 Branches)

• Lahore West (69 Branches)
• Faisalabad (55 Branches)
• Gujaranwala (80 Branches)
• Islamabad (83 Branches)
• Peshawar (64 Branches)
• Abbottabad (75 Branches)

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Interest Free Banking system is the significant feature of an Islamic society, in Pakistan
the emergence of Islamic banking and financial system is very recent. MCB Bank has
also taken an initiative to provide interest free banking to its customers. There are
altogether 5 branches of Islamic Banking One each in Karachi, Lahore, Multan,
Hyderabad and Faisalabad. MCB Bank Ltd has also gone international having five
branches overseas.

Awards and Achievements of MCB Bank Ltd

MCB Bank Ltd has come a long way since its commencement of its operations. Today it
is the only Pakistani bank has been recognized both by the east and the west. The
management of the bank claims that the trust of their customers and commitment of their
team (employees) is the driving force behind their success.
The following are the list of awards that the bank has achieved:
• “Euro money Award” Best Bank in Pakistan Award 2006-2001
• Best Domestic Bank Award 2000
• “Asian Money Award” The best Domestic Commercial bank Award 2005-2004

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7.2) Nature of the Organization
MCB is the 4th largest commercial bank in Pakistan
on most measures, offering a suite of wholesale and retail banking products and services
though its distribution network. We are initiating coverage on the stock with a BUY
rating premised on:

Leading Deposit Franchise

MCB is the market leader in terms of low cost, demand and savings deposits. Low
cost deposits are 93% of MCB’s deposit base vs. 69% for sector, underpins MCB’s
funding cost advantage.

Head start on Internal Restructuring and Reform

Privatized in 1991, MCB has already addressed many of the restructuring issues
its peers now face. This should assist in MCB gaining market share.
Re-launch of Consumer Finance Business

MCB should recover lost ground in consumer finance as leverages its IT, brand
and distribution power.

Management Team

Most of MCB’s senior management team has had work experience at global
banks and have a strong execution track record.

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Mission Statement
We are a team of committed professionals, providing innovative
and efficient financial solutions to create and nurture long-term relationships with our
customers. In doing so, we ensure that our shareholders can invest with confidence in us.

Vision Statement
To be the leading financial services provider, partnering with our customers for a
more prosperous and secure future.

CORE VALUES

• INTEGRITY
We are the trustees of public funds and serve our community with integrity. We believe
in being the best at always doing the right thing. We deliver on our responsibilities and
commitments to our customers as well as our colleagues.

• RESPECT

We respect our customer’s values, beliefs, culture and history. We value the equality of
gender and diversity of experience and education that our employees bring with them.
We create an environment where each individual is enabled to succeed.

• EXCELLENCE

We take personal responsibility for our role as leaders in the pursuit of excellence. We
are a performance driven, result oriented organization where merit is the only criterion
for reward.

• CUSTOMER CENTRICITY

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Our customers are at the heart of everything we do. We thrive on the challenge of
understanding their needs and aspirations, both realized and unrealized. We make every
effort to exceed customer expectations through superior services and solutions.

• INNOVATION
We encourage and reward people who challenge the status quo and think beyond
the boundaries of the conventional. Our teams work together for the smooth and
efficient implementation of ideas and initiatives.
7.3) Business Volume
MCB is one of the leading banks of Pakistan with a deposit
base of Rs. 368 Billion and total assets over Rs.500 Billion. MCB is the 2nd largest
commercial bank in Pakistan in terms of Industry Assets & Deposits, 3rd largest in terms
of the number of branches and largest in terms of ATMs at year-end 2006 — MCB’s
market share of assets and deposits is slightly over 10% for both. MCB is a full service,
nationwide bank, providing commercial banking (retail, SME and wholesale), investment
banking (treasury) and Islamic banking products and services that are permitted under
SBP prudential guidelines. The bank also has five foreign branches. MCB owns and
operates one of the two switches in Pakistan, and distributes general insurance products
and services sourced from its majority owned insurance subsidiary, Adamjee (largest
general insurance company in Pakistan).
Muslim Commercial Bank operates 994 branches with 22 circles, 50 zones throughout
the country including one export processing zone and 05 foreign branches.
MARKET POSITIONING
Market share of assets and deposits — MCB is the 4th largest bank in the sector having nearly 8% market
share of total assets and deposits.

Market Share of Assets

Allied Askari
Al-Falah 4%
5%
7% Others
MCB
36%
8%

United
10%
Habib National
14% 16%

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 Market Share of Deposits

Allied Askari
4% Remaining 28
Al-Falah 6%
Banks
8%
MCB 33%
8%

United
15% National
Habib
16%
10%

Market share of consumer credit — MCB has a low market share of the consumer market compared to its
peers (5%). However, we expect this to increase as MCB has been relaunching its consumer credit side.

NIMs:
MCB has one of the highest Net Interest Margins in the sector, due to its ability
to maintain low funding costs. We expect margins to be maintained, with higher yielding
consumer loans offsetting pricing pressures in other segments of the loan book as well as
rising funding costs.

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Cost efficiency:
MCB’s cost/income ratio is one of the lowest among its peers with similar sized
branch networks owing to its restructuring efforts over the past few years, and a near
trebling of income in 2005.

Profitability:
MCB has one of the highest profitability in the banking sector on account of high
Net interest margins.

7.4) Number of employees

Total number of employees 11,011 are working in MCB &
their Cadre (designation) vise break up on 30-06-2010 is as under:-

S.No. Cadre (Designation) No. of

Employees
1. President 01
2. SEVP 06
3. EVP2 10
4. EVP1 07
5. SVP 60
6. VP 350
7. AVP 1,500
8. OG-I 1,198
9. OG-II 2,800
10. OG-III 3,500
11. Cashier/Clerical Staff 1,579
Total: 11,011

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7.5) Product Line
BANKING PRODUCTS & SERVICES

Banking Products & Services

Online Services Accounts Loans Cards

ATMs Khushali Bachat Business Sarmaya Smart Card / Debit Card
Mobile Banking Pak Rupee Accounts Pyara Ghar MCB Visa
Call Center Saving Accounts Car4U
Bill Payments Basic Banking
Virtual Banking Foreign Accounts

Traveler's Cheque Remittance Branches & ATMs MNET Switch

Rupee Traveler's Overseas Remittance ATMs Locator MNET Switch
Gift Cheques Online Branches
Branch Network

An Islamic Banking Unit has been formed in the last quarter of the calendar year
2001. This unit is reviewing various Islamic product and service options with a view to
roll out products and services once internal and external regulatory aspects are firmed up.
The Islamic Banking unit has extended the first Morabaha facility, Sharia compliant and
duly approved by the Sharia advisors. This facility is expected to pave the path for the
future of Islamic Banking in MCB Bank. MCB now has four Islamic Banking Branches
at Karachi, Lahore, Multan and Hyerabad respectively.

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ONLINE SERVICES

ATM SMART/DEBIT CARDS

ATM cards are provided for easy withdrawals from ATM machines. MCB has
largest ATM network of more than 250 ATMi machines all over Pakistan. Other than
MCB ATM machines customers can withdraw from other ATM machines as well
because all the banks are connected through 1Link. This smart / debit card is essential for
using other facilities such as mobile banking, virtual banking, funds transfer, Utility bills
payment, mobile phones bill payments etc.

 MCB Virtual Banking

MCB Virtual banking allows easy access to account through internet. One can check
his balance, statement, can order cheque books, can easily transfer funds from own
account to another by maintaining beneficiary accounts.

 Mobile Banking

Another exciting facility for MCBs customers is mobile banking. All the account holders
having ATM cards can easily get mobile banking facility by which they can easily check
their balance and mini statements at any time free of cost.

 MCB Call Centre

MCB Call centre is another innovative service allowed by MCB to its customers. One
can ask his queries on toll free help lines easily, can register their complaints, can obtain
information about MCB product and services and can activate their mobile and virtual
banking services any time.

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  BILL PAYMENTS FEATURES

ALLOWS CUSTOMER TO:

⇒ Pay their bills 24 hours a day 7 days a week.

⇒ Make total payments of up to Rs. 20,000 per day.
⇒ Carry out up to 10 transactions per day per card.
⇒ Make either full or partial payments. Full payment is required for PTCL only.
⇒ Customer can recharge his pre-paid account for Ufone, Instaphone and Paktel
as per their fixed slabs.
⇒ Can pay as a registered or non-registered user. Registration will help
customer avoid the time delay in entering details each time customer carry
out a transaction.
MCB's Partners in

PTCL
SSGC
IESCO
PAKTEL
INSTAPHONE
MOBILINK
UFONE

 DEPOSIT ACCOUNT
MCB offers different kinds of deposit account some of them are:

 Khushali Bachat Account

For individuals and households having lower average balance requirement
with higher profit rates as compare to PLS accounts. Unlimited free of cost
deposit and withdrawal facility on the counter and through ATM.

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 Pak Rupee Saving Account
For all kinds of individuals having lower average balance requirement
Profit is paid on half yearly basis. Unlimited free of cost deposit and withdrawal
facility on the counter and through ATM.

 Pak Rupee Current Account

Current account is basically for business persons with no profit and no
zakat deduction. Unlimited free of cost deposit and withdrawal facility on the
counter and through ATM.

 Pak Rupee Term Deposit

Term deposit / fixed deposits are also called Time Deposits as they are
non cheking deposits. It can be encashed after the maturity of the certificate. Term
deposits are available in different denomination at different rates.

 Saving 365 ( Min. deposit requirement Rs.300,000)

Pls accounts having minimum deposit requirement Rs.300,000 with higher
profit rates with all the qualities of Saving accounts.

 Basic Banking Account (Open with Rs.1000/-, recently introduced)

BBA accounts are recently launched, basically for those who don’t
maintain average balance requirement. This type of account can easily be open
through 1000/- rupees with no balance requirement and no service charges
deduction. Only 2 deposit and 2 withdrawals are allowed during the month.

 Foreign Currency-Saving Accounts

MCB’s Foreign Currency Savings Account offers attractive returns on
Foreign Currency investment. Open a foreign currency Savings account in any of

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 the four currencies i.e. US Dollar, UK Pound Sterling, and Euro. Unlimited
transaction facility. Low balance requirement. Profit credited to customer’s
account on a half yearly basis. Customer can avail a credit facility up to 75% of
the total deposit value. A foreign currency account can be opened at any of our
foreign exchange dealing branches.

 Foreign Currency-Current Accounts

MCB’s Foreign Currency Current Account offers the convenience of
unlimited withdrawals there is no limit on the number of transactions customer
make in a day. Open a foreign currency Current account in any of the four
currencies i.e. US Dollar, UK Pound Sterling, and Euro. Unlimited transaction
facility. Customer can avail a credit facility up to 75% of the total deposit value. A
foreign currency account can be opened at any of our foreign exchange dealing
branches.

 LOANS:
MCB offers different kinds of loan products some of them are :

 Biz Sarmaya

Running Finance facility for business person against mortgage of

residential property for business purpose only. Maximum upto 20.000 M only.

 Pyara Ghar

For Home renovation, reconstruction, and purchase against the mortgage

of residential property.

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  Car 4 u (Car Leasing)

For all sorts of individuals with flexible installments package, different

tenures and competitive financing rates. Lower processing fee and quick approval.

 Smart Card/Debit Cards

MCB now brings MCB SmartCard -a secure and convenient instrument of

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

The convenience and flexibility of MCB SmartCard will help customer live a smarter
life. It not only helps to manage expenses, but also eliminates undue interest on day-to-
day credit card transactions.

MCB is the only bank to introduce a debit card that gives the option to choose from
domestic and international cards for local and global usage respectively. Customer can
avail the following functionalities on MCB SmartCard.

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  MCB Visa Card
MCB Visa is not just another card in wallet. It not only provides the
conventional credit card services in a manner that is superior in comparison, but goes an
extra mile.

 I-REVOLVE
Makes MCB Visa the most affordable credit card in wallet.


I-SECURE
Now Experience peace of mind of having a credit card free from fraud or
misuse!

 I-PARTY
Intelligent Reward Monitoring and Redemption System.

 I-PLAN
Buy now and pay off latter in easy and affordable monthly installments!

 I-SWITCH
Saving customer from the hassle of making multiple payments on
various credit cards.

 I-DIAL
Customer needs cash and want to pay back in installments. Just Dial for it!
 I-INSURE

Life is too precious to be spoilt by unforeseen events and mishaps.

 I-CASH

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 How About a credit card that acts like hard cash.

 Rupee Travelers Cheques

Muslim Commercial Bank has been at the forefront of providing its customers
with new and innovative products and financial instruments that are safe, secure and
profitable. MCB Rupee Travelers Cheques were first introduced in 1993 as a safe way to
pay for high valued purchases. The product has been extremely popular and is used by
consumers in all walks of life-for business dealings.

MCB RTCs are the safest way to carry cash as they can easily use as cash substitute and
can easily buy and sell from MCBs designated branches for purchase and sale of RTc. In
case of loss or theft it can easily refunded. Previously they were available in 1000, 10000,
25000, 50000 and 100,000 Rupees denomination but now they are available in only 1000,
5000 and 10,000 Rupees denomination as beyond that is restricted by State Bank.

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

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

 Remittance

Fast, secure and easy-to-use, MCB's Remittance Services is an efficient way to transfer
money overseas.

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Customer can remit funds from any country to Pakistan through Swift System. Please
provide the following Swift Code to bank in customer’s country.

Swift Code: MUCBPKKA

 MNET

MNET enables all the member banks to share their electronic networks. Which means
customers of member banks can use MNET as well as 1-Link ATMs Nationwide. MNET
member banks ATM machines accept cards issued by MCB Bank Ltd, Citibank, Standard
Chartered, HSBC, My Bank, Bank of Punjab, Prime Commercial Bank, Saudi Pak Bank
Limited, Habib Metropolitan Bank, KASB, JS Bank, Deutsche Bank, SME Bank, Arif
Habib Rupali Bank and First Women Bank. MNET customers can use over 600,000

ATMs worldwide that carry the logo and shop at over 5 million outlets that carry the

logo.

M-Net Switch ATMs are present in all the major cities of the country. They are available
in the hilliest and northern areas of the country such as Murree, Abbottabad and Swat etc
thus providing convenience of accessing 24 hours cash to the customers across the
country.

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 8. ORGANIZATIONAL STRUCTURE

8.1) Structure of overall Organization

CHAIRMAN

VICE
CHAIRMAN

ADVISORY AUDIT
EXECUTTIVE
COMMITTE COMMITTE
COMMITTEE
E E

EXECUTIVE
INCHARGE

ASST.
EXECUTIVE
INCHARGE

REGIONAL
MANAGER

BRANCH
MANAGER

OPERATION
MANAGER

GBO
OFFICERS
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8.2) Organization Structure of the Branch

Branch Structure
Store Room Strong Room

Advances Lockers Dept. Utility Dept.

Remittances Dept. Clearing Dept.

Branch
Manager ACCOUNTANT

Computer
General Ledger
Operator

Foreign Trade

FCY Payments Receipts Others

Exports
Accounts

Imports
Customer Cash Counters
Service Desk

Customers

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8.3) Review of the various Departments

Functions and responsibilities of Departments

1) BUSINESS DEVELOPMENT
The Business Development Department is responsible for
advertising and direct mail, promotional programs, product brochures, brand
development programs, market research initiatives, marketing database management and
product development activities

2) Audit
Headed by the Chief Internal Auditor, the function has one Department.

⇒ Internal Audit Department, headed by the Director, Audit.

⇒ The Department has two Divisions headed by Deputy/ Assistant Directors.
o Systems and Assurance Division
o Operations Division
Audit & Legal departments have been made to avoid illegal activities. Audit is a statutory
requirement for every department and so far a bank. Audit personnel perform their duties
so that fraud and error can be avoided. Many lawyers have been appointed by bank who
deals with court cases. Sometimes, when any employee is dismissing from service he
attends the court for restoration of service whereas the bank lawyers defend the case.

3) CASH DEPARTMENT
Deals with daily cash payments and receipts.
4) BRANCH OPERATIONS
Perform following functions:

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 ⇒ Account Opening
⇒ Handling of Lockers and
⇒ Day to day other operations of the branch.
5) REMITTANCES
Perform following functions
⇒ Issue Pay Order
⇒ Issue Demand Draft
⇒ Remit Express
⇒ Mail Transfer
⇒ Telegraphic Transfer
⇒ Online Transfer

6) CREDITS
The Advances department of the bank prepares proposals about the loans and
forwards it for approval to managers and head office. All, the advances are directly
controlled by credit management division of the head office. The responsibility of the
advances department in MCB includes:
⇒ Handling of all cases regarding loans (short term and long term both)
⇒ Forward the cases for approval and consideration to higher authorities
⇒ Estimates the borrowers requirements
⇒ To disburse the sanctioned loans
To calculate markup on loans

7) FOREIGN EXCHANGE
Foreign Exchange Department deals with the following
⇒ Opening of L/c & entertaining of L/c
⇒ Processing & Transmission of L/c
⇒ Handling of Foreign currency Accounts

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8) CREDIT RISK MANAGEMENT
The expansion of credit portfolio was done on a prudent basis & all
necessary measures were taken to ensure the quality of the new loans. The evaluation
system comprising of well designed credit appraisal procedures & a committee based
sanctioning & review mechanism was further strengthen for the purpose of insurance
safety in the lending activities

9) CORPORATE ISLAMIC BANKING

MCB has started Islamic Banking. Many types of loans are provided to
personnel according to shariah. MCB is also providing leasing facilities. In this regard,
they purchase machinery, equipments etc & the same is provided to lessee who needs it.
Agreement is made between lessor & lessee in which installment terms & conditions,
installment is fixed. After expiring of period, bank offers lessee to purchase this
machinery or equipment.

10) CREDIT ADMINISTRATION DIVISION

MCB has established a credit administration division to save any
fraud which can be made by clients. When any agreement is made between bank & client
the documents which relates to it is checked so that illegal agreement can be saved. It is
not the duty of bank to check the documents only at the time of agreement but this
process is remained till finalization of agreement.

11) FINANCIAL CONTROL DIVISION

This department is playing a very important role in MCB. To
maintain the budget is very important for every organization because without budgetary
position no organization can succeed. In this regard, financial control division allocates

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the budget to different branches according to their requirements and check & balance
throughout the year on the budget. The branches can not deviate the allocated budget.

12) TREASURY & FOREX

MCB Treasury & Forex department makes investment decision.
They purchase T-bill from Government & earn interest on them. It is a source of revenue
for bank. This investment is very safe because rate of interest is fixed on these Treasury
bills & no chance of loss is available.

13) SECURITY CELL

Security is very important for safety. Security personnel have been
appointed accordingly. Security Cell has been established to look after the matter of such
personnel.

14) UTILITY DEPARTMENT

Bank receives utility bills i.e (Electricity Bills, Sui-Gas bills) through
this department. The bank also offers evening banking services for receiving of utility bills
after regular working hours.

15) CLEARING DEPARTMENT

A clearing is the process whereby the amount of a cheque or draft
is transferred from the drawer’s bank to the payee’s bank. It may be defined as, “A
process by which bank exchange and settle for cheques, bills of exchange, drafts and
other banking instruments drawn against each other received by them for collection and
clearance from their customers.

16) COLLECTIONS

31
 Collections’ objective is to maintain the lowest level of delinquency and to
minimize credit losses on bank consumer loan and mortgage portfolios. Collection
representatives contact past due loan customers by mail and telephone in an effort to
workout repayment plans. When these efforts fail, they handle repossessions and
foreclosures to protect the bank’s interest.

17) MANAGEMENT SERVICES DEPARTMENT

Management services division is headed by VP, and is basically a
computer division. It has recently installed twenty four ATM’s at Islamabad/ Rawalpindi,
Lahore and Karachi. MSD has done important work on communication net-working also.

18) GENERAL SERVICE DIVISION

General Services is comprised of several smaller groups

responsible for the day-to-day functions of the bank. The Facilities Group is responsible
for the management and maintenance of all buildings owned by Eastern Bank. The
Purchasing Department is responsible for the procurement of office furniture, office
supplies, nameplates, and business cards. The Statement/Print Services Group is
responsible for the printing of all customer correspondence, including statements, notices,
and payment documents, and the preparation of these items for mailing.

19) HUMAN RESOURCES

The role of Human Resource Department in MCB is very

important. The recruitment of new employees is made through this department. First,
application are demanded through different ways i.e through National press for external
recruitment and a circulation for internal recruitment & after receiving their screening is
made for eligible candidates. After this process, eligible candidates are called for
test/interview. In this regard, various tests are made before appointment of new persons.
After recruitment training programs are also conducted by human resource department.

20) INFORMATION TECHNOLOGY

32
 Now, Banks have introduced online services. MCB is also
providing this service. Information technology department has provided WEB site to
provide information to their clients. As such when any body is required information
regarding loan or any other matter, he can collect information through Web Site without
go to bank. Bank has provided all the product & services at Web site which are required
to the clients.

21) ACCOUNT OPENING DEPARTMENT

As mentioned earlier the most important function of a bank
is taking deposits from their customers. A bank is the custodian of its customer’s money.
For opening an account with MCB bank Ltd, the customer has to fill up a simple account
opening from and submit it to the CRO (Customer Relation Officer) of the bank. In small
branches this duty is performed by the bank manager or operation manager.
As per requirement of the State Bank of Pakistan the customer are required to submit a
copy of CNIC along with the NADRA verification letter. This is to ensure that the CNIC
shown by the customer in the bank is clear from all discrepancies. In addition to this, the
prospective customer must be introduced to the manager or the CRO by an account
holder of the bank
The manager before opening the account has an informal interview with the customer in
order to get an idea about the integrity and character of the customer. Moreover it is
important for the manager to know the purpose of the customer for opening and account
and the business or job he earns his/her living from.
The manager after fully satisfying himself about the integrity of the customer sends the
application form to the computer section. Here the data of the form is entered into the
data base of the bank. After this a signature card is signed by the customer and is scanned
into the computer for future signature verification.
The last step of the procedure is the cheque book issuance after which the customer can
operate his/her account. A cheque book is issued to the customer after feeding the cheque
book number in the computer. Now, the account can be operated i.e. deposits and
withdrawals can be made.

33
9. STRUCTURE AND FUNCTION OF THE ACCOUNTS/FINANCE
DEPARTMENT

9.1 Structure of the Accounts

Number of employees working in the Accounts department. The bank

has around 4,480 employees in its Accounts department. It is headed by the AVP. The
cadre wise breakup is as under:-

SEVP = 02

SVP = 26

EVP1 = 04

EVP2 = 04

VP = 195

AVP = 719

OG-I = 698

OG-II = 873

OG-III = 1,280

Cashier/Clerical Staff = 679

Function of the Accounts Department:-

• Preparation of daily position for branch and Head Office information.

34
 • Management of statuary liquidity requirement.
• Checking of customer and general ledger.
• Expenditure and income booking.
• Maintenance of books and safe custody of records.
• Month end profit and loss declaration.
• Budget and performance evaluation.
• Preparation of month end/half yearly/yearly reports.
• Receipts of utility bills in regular working hours & in evening.
• To transfer money from one place to another place by mean of telegraphic
transfer, demand draft, instrument and modern banking remittance systems such
as, fax, travel cheque, tele-card facilities.

9.2 Finance and Accounting operations

As, it is very clear that finance and accounting are two different fields,
but a deep sight reveals that these two have something to do with each other. Finance
means the management of money or funds. The management means art of using the funds
and generating the funds. Whereas accounting means entries of the transactions,
calculations, preparations of statement and dealing with numerical figures. When
decisions are made in finance for using funds or getting funds by some means, this needs
some accounting like debit-credit entries, calculations etc. Finance department is more
sensitive and has more responsibilities on its shoulders. It is performing duties of
allocation of funds in the most appropriate and safe way. That is why, in advances
department two Officers are doing the job of lending and one is responsible for securities
held as collateral. Finance operations include getting more and more deposits, giving
loans and making investments to generate more funds, this what the objective of the
Finance department is.

Now coming towards the accounting operations, in the bank entire accounting system is
based on debit-credit mechanism. Whichever statement the accountant is preparing

35
whether cash report, daily scroll, general ledger or statement of accounts, it has three
columns Dr. Cr. And Balance. For debit or credit transactions, bank uses debit vouchers
or credit vouchers, for acceptance of money credit vouchers is used and for payment of
money debit vouchers are used. Accounting operations originate from an entry, which is
recorded on the books of account through a voucher. From voucher it is recorded on
“Receipts Register” or “Payments Register” then goes into “Scroll”. From where “Cash
report” is prepared. In the end it is the “General Ledger” that is prepared which should
always be balanced. Accounting operations also includes preparations of statement of
monthly expenditures, monthly statement of Profit/Loss, monthly statement of Liabilities,
weekly accounts schedule and statement of SBP Accounts etc.

9.3 Role of Financial Managers

Financial manager is concerned with acquisition financing and management

of assets with some overall goals in mind. The financial manager of MCB bank like all
other financial managers has responsibility to make decisions about three major areas that
are:
⇒ Investment Decision
⇒ Financing Decision
⇒ Asset Management Decision

INVESTMENT DECISION
The investment decision is the most important decision of the bank’s three
major decisions. Mr. Zubin, Chief Financial Officer of MCB bank begins with
determination of total amount of assets needed to be held by the bank. In 2006 total assets
are 305 bn and the amount, which is invested in different areas, is 285 bn.

FINANCING
The second major decision of any organization is financing decision. Financial
manager of MCB bank view dividend policy as an integral part of bank s financing

36
decision. Dividend payout ratio determines the amount of earning that can be retained in
the firm. Retained a greater amount of the current earnings in the firm means that the
fewer dollars will be available for current dividends payments. The value of dividends
paid to the shareholder must therefore be balanced against the opportunity cost of
retained earnings cost as means of equity financing. Financial manager know the
mechanics of short-term loans, entering into the long-term arrangement or negotiating a
sale of bond or stock.

ASSET MANAGEMENT DECISION

The third important decision of any organization is assets management
decision. Once the assets have been acquired and appropriate financing provided these
assets must still be managed efficiently. The financial manager is charged with varying
degrees of operating responsibility requires that the financial manager be more concerned
with management of current assets then with that of fixed assets. A large share of
responsibilities for management of fixed assets would reside with operating manager who
employs these assets.

9.4 Use of electronic data

Making crucial, timely, strategic decisions is a must to stay ahead in

today’s competitive environment. Work continues on the banks date warehouse, which is
being equipped for providing the management with accurate and up to date information
enabling them to make timely and prudent decisions.

The bank remains focused on using technology for improving customer services standard
and expanding the range of products being offered and other technology based solutions.

Banks strength in the area of information technology based services has always been an
edge in the competition and has been a source of considerable strength in the expansion

37
and the management of the customer base of the bank technology support provides an
alternate service delivery channels higher customer satisfaction levels.

During 2005 various technology initiatives were successfully implemented. MCB

dedicated customer call center was formally inaugurated during 2002.Its primary
objective is to provide one window service to our valued customer in terms of their
telephonic enquiries.

During 2006 MCB bank successfully launched mobile ATM solutions for banks valued
customers. Using wireless GPRS technology, these ATM on wheels can be placed at
strategic locations at peak times to server the customer needs.

9.5 Sources of funds

MCB sources of funds consists on its share capital,
Reserve, deposits; Liquid Assets and borrowing from financial institutions. The
composition of sources funds as on December 31, 2008 are as follows:

TOTAL COMPOSTION OF RESOURCES

As on December 31, 2009

(Rs./million)

2005 2006 2007 2008 2009

Share Capital 2,665 3,065 3,372 4,265 5,463
Reserves 3,026 4,379 5,661 9,054 24,662
Deposits 182,70 211,511 221,069 229,341 257,462
5
Liquid Assets 20,055 25,356 29,542 25,132 39,043
Borrowing from financial 21,987 32,627 7,590 27,378 23,943
institutions

38
In this regard, it is stated that like any other organization the foremost source of funds of
the MCB is shareholders equity. The nature of business of the bank is not different from
other organizations such as the bank procures deposits of money from one group of
people and lend the same to other group of people after keeping reserve for liquidity as
per SBP’s requirements. The bank earns markup on the lending money and pay profit to
their depositors after meeting their administrative and operating expenses. The funds
generated through deposits can also be put to other investment as well.
Therefore, in MCB too, the main source of funds which is used for investment is in the
shape of deposits and remittance business. These deposits are procured by the
officers/executives of the bank through marketing activities with the help and under the
guidance of the marketing department.
Apart from this, in certain situations where, there is urgent need of funds, the
management of the bank can resort to borrowing from other banks.

9.6 Generation of funds

MCB generate funds through Interest earned, Dividend
Income, Fee, Commission & Brokerage Income, Income from dealing in foreign
currencies, Gain on sale of securities & Other Income etc. The five year figure of said
items is tabulated below:-

2005 2006 2007 2008 2009

Interest earned 6,311 7,437 7,026 14,974 21,252
Dividend Income 0.297 0.373 0.379 0.480 0.811
Fee, Commission & Brokerage
0.907 1,042 1,992 2,448 2,311
Income
Income from dealing in foreign
0.503 0.332 0.493 0.531 0.692
currencies
Gain on sale of securities 0.383 2,041 0.804 0.866 0.606
Other Income 0.498 0.743 0.576 1,425 0.570

In this regard, it is stated that the bank generates funds from deposits, which are received
from customers at low interest rate, & the same are given as loans to the customer at
more interest rate. Hence, difference between receipt of interest & payment of interest is

39
earning of the bank. Non-interest income is also increased the revenue wherein fee,
commission & brokerage, Gain on sale of securities, Dividend income & other income
As regards to fee, they give services to their clientage wherein ATM, Utility bills,
opening of L/C, bank guarantee & Offering trust services etc. Bank services are being
increased with the passage of time and earning is increasing accordingly. In bank offering
trust services, they manage the financial affairs & property of individuals & business
firms in return for a fee. Bank purchase different securities & gain profit on re-sale of
these securities. They purchase common stock of different companies & earn dividend
which rise its income & fund generate accordingly.

9.7 Allocation of funds

MCB allocates its available resources in the shape of
advances under different heads and schemes, investment in government securities,
operating fixed assets etc. Major figure for five years of allocation of funds as on
December-31, 2008 is tabulated below:-

2005 2006 2007 2008 2009

Loan 78,923 97,200 137,317 180,322 198,239
Investments 89,577 128,277 67,195 69,481 63,486
Operating Fixed Assets 3,825 4,582 7,999 8,183 9,054

As per State Bank of Pakistan’s regulations all the banks have to keep 20% of their
deposits in liquid form 5% of which must be in the shape of cash with SBP and 15% in
the shape of Government Securities, FIBs and Treasury Bills. Apart from this 20% of the
profit after tax is taken to statutory reserve until the amount of the reserve reaches the
level of the capital of the bank. Thereafter 10% of profit is to be taken to statutory
reserve. The bank procure deposits from one group of people & lend the same to other
group of people after keeping reserve for liquidity, investment etc as per SBP
requirements. Bank receives deposits at low interest rate & pay loan at more interest rate.
It is a source of income therefore bank allocates funds for giving loans to their clientage.

40
10. CRITICAL ANALYSIS OF THE THEORETICAL CONCEPTS

Currently the Muslim Commercial Bank Limited is one of the leading banks
on the route of progress. The audited statements of bank reveal that bank has been
progressing without any hurdle. But financial constraints of the country had effected the
trend of the Muslim Commercial Bank Limited. The bank started its operation and went
on multiplying its resources with extra ordinary pace. The profit of the bank is being
increased every year. However, the bank is still in profits which are a positive sign that
the bank will achieve its goals.

11. FINANCIAL ANALYSIS

To make rational decisions in keeping with the objectives of the organization,

the financial manager must have certain analytical tools. The organization itself and
outside stakeholders, all undertake financial analysis. Financial analysis involves finding
answers to questions that are of interest to all above mentioned parties by employing
financial tools on the data available in the financial statements, supplementary financial
reports, as well as in the environment at large. The objective of financial analysis depends
on the specific interests of the party undertaking such analysis. A donor agency will
certainly interest in the consumption of funds awarded. An agency interested to share
some sort of social welfare or research project will like to examine whether the Bank has
some source to contribute its share for the project. Management employs financial
analysis for purposes of appraisal of Bank’s performance, risk management, working
capital management, credit management, funds management etc.

41
 11.1 Latest Five years of Balance Sheet
b. FINANCIAL HIGHLIGHTS- MCB BANK LTD BALANCE SHEET
(Rupee's 000)
Assets 2005 2006 2007 2008 2009
Cash and balances with treasury banks 23,665,549 32,465,976 39,683,883 39,631,172 38,774,871
Balances with other banks 1,466,045 6,577,017 3,807,519 4,043,100 6,009,993
Lending to financial institutions 9,998,828 21,081,800 1,051,372 4,100,079 3,000,000
Investments – net 69,481,487 63,486,316 113,089,261 96,631,874 167,134,465
Advances – net 180,322,753 198,239,155 218,960,598 262,135,470 253,249,407
Operating fixed assets 8,182,454 9,054,156 16,024,123 17,263,733 18,014,896
Deferred tax assets - net 191,967 172,373 - - -
Other assets – net 5,471,697 11,031,450 17,868,761 19,810,476 23,040,095
298,780,780 342,108,243 410,485,517 443,615,904 509,223,727
Liabilities
Bills payable 8,536,674 7,089,679 10,479,058 10,551,468 8,201,090
Borrowings 27,377,502 23,943,476 39,406,831 22,663,840 44,662,088
Deposits and other accounts 229,341,890 257,461,838 292,098,066 330,181,624 367,604,711
Sub-ordinate loan 1,598,080 1,597,440 479,232 - -
Liabilities against assets subject to finance lease - - - - -
Deferred tax liabilities - - 1,180,162 437,137 3,196,743
Other liabilities 8,192,338 11,171,496 11,722,493 21,345,781 15,819,082
275,046,484 301,263,929 355,365,842 385,179,850 439,483,714
Net assets 23,734,296 40,844,314 55,119,675 58,436,054 69,740,013
Represented by:
Share capital 4,265,327 5,463,276 6,282,768 6,282,768 6,911,045
Reserves 9,054,940 24,662,426 34,000,638 36,768,765 38,385,760
Unappropriated profit 4,990,260 5,530,973 5,130,750 9,193,332 15,779,127
18,310,527 35,656,675 45,414,156 52,244,865 61,075,932
Surplus on revaluation of assets - net 5,423,769 5,187,639 9,705,519 6,191,189 8,664,081
23,734,296 40,844,314 55,119,675 58,436,054 69,740,013

11.2 Latest Five years of Income Statement

FINANCIAL HIGHLIGHTS-MCB BANK LTD INCOME STATEMENT

42
 11.3 Ratio Analysis

2005 2006 2007 2008 2009

17,756,232 25,778,061 31,786,595 40,043,824 51,616,007
Mark-up / return / interest earned 2,781,468 4,525,359 7,865,533 11,560,740 15,841,463
Mark-up / return / interest expensed 14,974,764 21,252,702 23,921,062 28,483,084 35,774,544
Net mark-up / interest income
Provision / (reversal) provision for -98,928
diminution in the value of investments 121,197 105,269 2,683,994 1,484,218
Provision against loan and advances 1,242,153 1,014,540 2,959,583 1,335,127 5,796,527
Provision for potential lease losses - -
- - -
Bad debts written off directly 1,184 47,000 199 - 41,576
1,144,409 1,182,737 3,065,051 4,019,121 7,322,321
Net mark-up / interest income after 13,830,409 20,069,965 20,856,011 24,463,963 28,452,223
provisions
Non mark-up / interest income
Fee, commission & brokerage income 2,448,950 2,311,235 2,634,610 2,953,394 3,331,856
Dividend income 480,344 811,801 632,300 617,554 459,741
Income from dealing in foreign 531,455
currencies 692,010 693,408 727,564 341,402
Gain on sale of securities – net 866,112 605,865 1,500,865 740,429 773,768
Un-realized gain on revaluation of 1634 -
-
investments classified as held for trading -13,105 -103,198
Other income – net 1,425,174 570,505 563,213 855,697 736,118
5,753,669 4,991,416 6,011,291 5,791,440 5,642,885
Total non mark-up / interest income 19,584,078 25,061,381 26,867,302 30,255,403 34,095,108
Non mark-up / interest expense
Administrative expenses 6,459,490 6,482,592 5,022,416 7,546,878 10,107,189
Other provision / (reversal) -72,740 11,411 -3,743 23,135 142,824
Other charges 178,841 66,708 540,594 817,824 690,150
Total non mark-up / interest expense 6,565,591 6,560,711 5,559,267 8,387,837 10,940,163
Extra ordinary / un-usual item - - -
Profit before taxation 13,018,487 18,500,670 21,308,035 21,867,566 23,154,945
Taxation
Current year 4,611,359 5,701,443 6,442,356 7,341,257 7,703,305
Prior year -149,763 593,497 -1,294,473 -864,824 -2,232,226
Deferred -365,524 63,332 894,590 16,533 2,188,569

4,096,072 6,358,272 6,042,473 6,492,966 7,659,648

Profit after taxation 8,922,415 12,142,398 15,265,562 15,374,600 15,495,297
Unappropriate profit brought forward 502,388 4,990,260 5,530,973 5,130,750 9,193,332
Transfer from surplus on revaluation of
fixed asset 83,749 32,166 11,855 21,319 22,324
586,137 5,022,426 5,542,828 5,152,069 9,215,656
Profit available for appropriation 9,508,552 17,164,824 20,808,390 20,526,669 24,710,953

43
 No one ratio gives us sufficient information by which to judge the financial
condition and performance of the firm. Only when we analyze a group of rations, we
are able to make reasonable judgment. For our purpose the financial rations can be
grouped into following types:

LIQUIDITY RATIOS:

Liquidity rations are used to judge an organization’s ability to meet short-

term obligations. From them much insight can be obtained into the present cash
insolvency of the organization and its ability to remain solvent in the event of
adversities. Essentially, we wish to compare short-term obligations with the short-
term resources available to meet these. To make clearer understanding of the topic for
the purpose of financial analysis the data obtained from the financial statements of
MCB for the year 2005, 2006, 2007, 2008 and 2009 has been used and analyzed in
various calculations.

CURRENT RATIO:

Formula: Current Assets/Current Liabilities

2005 169,988,024.00/110,241,930.00 = 1.54
2006 202,189,281.00/110,378,429.00 = 1.83
2007 201,369,883.00/143,370,730.00 = 1.40
2008 251,103,902.00/137,526,170.00 = 1.83
2009 245,703,737.00/161,758,502.00 = 0.15

QUICK ACID RATIO:

44
 Formula: Current Assets less Inventories/Current Liabilities

It is used to measures ability to meet current debts with most-liquid (quick)

current assets. As in the banking business there are no countable inventories
especially related to business, hence quick acid ratio is not required.

CASH RATIO:
Formula: Cash/Current Liabilities
2005 23,665,549.00/110,241,930.00 = 0.21
2006 32,465,976.00/110,378,429.00 = 0.29
2007 39,683,883.00/143,370,730.00 = 0.28
2008 39,631,172.00/137,526,170 00 = 0.29
2009 38,774,871.00/161,758,502.00 = 0.24

PROFITABILITY RATIO:

NET PROFIT RATIO:

Formula: Profit after taxation/Sales

2005 8,922,415.00/23,509,901.00 = 37.95%
2006 12,142,398.00/30,769,477.00 = 39.46%
2007 15,265,562.00/37,797,886.00 = 40.39%
2008 15,374,600.00/45,835,264.00 = 33.54%
2009 15,495,297.00/57,258,892.00 = 27.06%

RETURN ON INVESTMENT:

45
 Formula: Net Profit after Tax/Investment
2005 8,922,415.00/69,481,487.00 = 12.84%
2006 12,142,398.00/63,486,316.00 = 19.13%
2007 15,265,562.00/113,089,261.00 = 13.50%
2008 15,374,600.00/96,631,874.00 = 15.91%
2009 15,495,297.00/167,134,465.00 = 9.27%

RETURN ON ASSET

Formula: Net Profit after Tax/Total Assets

2005 8,922,415.00/298,780,780.00 = 2.99%
2006 12,142,398.00/342,108,243.00 = 3.55%
2007 15,265,562.00/410,485,517.00 = 3.72%
2008 15,374,600.00/443,615,904.00 = 3.47%
2009 15,495,297.00/509,223,727.00 = 3.04%

RETURN ON EQUITY

Formula: Net Profit after Tax/Equity

2005 8,922,415.00/23,734,296.00 = 37.59%
2006 12,142,398.00/40,844,314.00 = 29.73%
2007 15,265,562.00/55,119,675.00 = 27.70%
2008 15,374,600.00/58,436,054.00 = 26.31%
2009 15,495,297.00/69,740,013.00 = 22.22%

LEVERAGE RATIO

46
DEBT EQUITY

Formula: Debit/Equity
2005 275,046,484.00/23,734,296.00 = 11.59
2006 301,263,929.00/40,844,314.00 = 7.38
2007 355,365,842.00/55,119,675.00 = 6.45
2008 439,483,714.00/58,436,054.00 = 7.52
2009 385,179,850.00/69,740,013.00 = 5.52

DEBT TO TOTAL ASSET

Formula: Debit/Equity
2005 275,046,484.00/298,780,780.00 = 0.92
2006 301,263,929.00/342,108,243.00 = 0.88
2007 355,365,842.00/410,485,517.00 = 0.87
2008 439,483,714.00/443,615,904.00 = 0.99
2009 385,179,850.00/509,223,727.00 = 0.76

OTHER BANKING RATIO

ADVANCES TO TOTAL ASSETS

Formula: Advances/Total Asset

2005 180,322,753.00/298,780,780.00 = 0.60
2006 198,239,155.00/342,108,243.00 = 0.58
2007 218,960,598.00/410,485,517.00 = 0.53
2008 262,135,470.00/443,615,904.00 = 0.59
2009 253,249,407.00/509,223,727.00 = 0.50

ADVANCES TO DEPOSITS

47
Formula: Advances/Deposit
2005 180,322,753.00/229,341,890.00 = 0.79
2006 198,239,155.00/257,461,838.00 = 0.77
2007 218,960,598.00/292,098,066.00 = 0.75
2008 262,135,470.00/330,181,624.00 = 0.79
2009 253,249,407.00/367,604,711.00 = 0.69

DEPOSIT TO LIABILITIES

Formula: Deposit/Liabilities
2005 229,341,890.00/275,046,484.00 = 0.83
2006 257,461,838.00/301,263,929.00 = 0.85
2007 292,098,066.00/355,365,842.00 = 0.82
2008 330,181,624.00/385,179,850.00 = 0.86
2009 367,604,711.00/439,483,714.00 = 0.84

NET PROFIT TO TOTAL ADVANCES

Formula: Net Profit after Tax/Total Advances

2005 8,922,415.00/180,322,753.00 = 0.05
2006 12,142,398.00/198,239,155.00 = 0.06
2007 15,265,562.00/218,960,598.00 = 0.07
2008 15,374,600.00/262,135,470.00 = 0.06
2009 15,495,297.00/253,249,407.00 = 0.06

EQUITY TO TOTAL ASSETS

48
Formula: Equity/Total Assets
2005 23,734,296.00/298,780,780.00 = 0.08
2006 40,844,314.00/342,108,243.00 = 0.12
2007 55,119,675.00/410,485,517.00 = 0.13
2008 58,436,054.00/443,615,904.00 = 0.13
2009 69,740,013.00/509,223,727.00 = 0.14

CURRENT ASSETS TO FIXED ASSETS

Formula: Current Assets/Fixed Assets

2005 169,988,024.00/8,182,454.00 = 5.79
2006 202,189,281.00/9,054,156.00 = 4.40
2007 201,369,883.00/16,024,123.00 = 4.52
2008 251,103,902.00/17,263,733.00 = 4.52
2009 245,703,737.00/18,014,896.00 = 4.52

FIXED ASSETS TO EQUITY

Formula: Fixed Assets/Equity

2005 8,182,454.00/23,734,296.00 = 0.34
2006 9,054,156.00/40,844,314.00 = 0.22
2007 16,024,123.00/55,119,675.00 = 0.29
2008 17,263,733.00/58,436,054.00 = 0.30
2009 18,014,896.00/69,740,013.00 = 0.26

Current Assets to Equity

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 Formula: Current Assets/Equity
2005 169,988,024.00/23,734,296.00 = 7.16
2006 202,189,281.00//40,844,314.00 = 4.95
2007 201,369,883.00/55,119,675.00 = 3.65
2008 251,103,902.00/58,436,054.00 = 4.30
2009 245,703,737.00/69,740,013.00 = 3.52

HORIZONTAL ANALYSIS

The development of data measuring changes taking place over a number of

periods is known as horizontal analysis.

VERTICAL ANALYSIS

An analysis of percentage financial statements where all balance sheet items are
divided by total assets and all income statement items are divided by net sales or
revenues.

11.8 Organizational analysis

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 Since the initiation of the government’s privatization process in 1991, four
commercial banks have been privatized wherein MCB, United Bank, Habib Bank and
Allied Bank. For the major part of their corporate lives, these banks have remained
government owned. Apart from MCB (privatized in 1991), the three remaining banks
have only been privatized in the last three years. These four banks together accounted for
38% of the banking sector assets as of December-2009. These banks have common
advantages low cost deposit base, extensive branch networks with deep penetration in
rural and urban areas, comfortably placed in terms of paid up capital requirement, and as
a consequence higher per individual borrower capacity. However, these benefits have
come at the expense of high operational cost, with some loss making branches
maintained. MCB has had a decade lead time over other banks to improve its operations,
with most of the other banks now concentrating the efforts on improving their branch
networks and enhancing operational efficiencies. The following are the four Banking
Sector Asset (Split):-

Name of Banks Total Assets % Share

Allied Bank, Ltd., 192,170 5.4%
Muslim Commercial Bank Ltd., 298,777 8.2%
United Bank Ltd., 347,049 9.8%
Habib Bank Ltd., 504,864 14.3%
Total four banks assets: 1,342,860 38%
Total banking sector assets as on 3,539,896
December-2009

11.9 Future prospects

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 With the agenda for financial sector reforms completed, there are greater
opportunities available for diversification of corporate business. The current
persistent macro-economic imbalances have adverse impact on our major line of
business- project financing; relatively high mark-up financing rates impede
identification of low-risk and high return projects. To a certain extent, the problem
of loan default is related to rather rapid trade liberalization measures undertaken in
recent years. These twin problems call forth for greater policy co-ordination
between the Government and banking institutions to restore profitability. In this
scenario, attempts to improve internal functioning of banking institutions can only
yield marginal impact on financial institutions, profitability.

Nevertheless, existing operations of the corporation are being re-aligned to meet

emerging challenges in the banking sector. The major focus of attention will be to
vigorously implement a number of measures, which leads to an improvement in the
resource position of the corporation. A number of competitive deposit schemes, targeted
to attract retail clientele, will be soon launched. The management plans to respond to
changing financial sector dynamics by further diversifying into off balance sheet and fee-
bases activities and business. The current emphasis on loan recovery efforts will
contribute to enlargement of resource position of the corporation. A scheme has been
recently introduced which links award of a specified percentage from the loan amount
recovered against classified advances and promotion of officers/executives who
undertook special loan recovery efforts. The management focus on loan recovery efforts
has already started to yield results. The initial results have given impetus to intensify loan
recovery measures and have also heightened expectations for better operating
performance during 2009.

The corporate commercial operations are planned for expansion by way of establishing
new sister concerns/joint ventures like a Utility Bank, Asset Management Corporation for
discounting of loans, and an Insurance company. The corporation also plans to establish a
management company, which will act as an investment advisor for floatation and
management of closed-end and open-end mutual funds.

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Efforts have been instituted to further improve management information system to
closely monitor critical areas of activities. It will be very useful for bank. With complex
factors impinging on our operations, the quality of human resources has assumed even
greater significance. The corporate personnel will be equipped with necessary skills to
help the corporation excel in performance and to regain its position in the financial
sectors.

A high degree of professionalism and sincerity of purpose was exhibited by both officers
and staff. Muslim Commercial Bank is the first bank in Pakistan to cross Rs. 21.252
million mark in deposits to become the largest financial institution of the country. Total
deposits of the bank rose to Rs.257.461 billion from Rs.229.341 billion in last year,
showing a growth of 12.26 %. According to my thinking, deposits will further increase in
future. Loan of longer tenure expecially in the area of project finance received attention
due emerging opportunities due to liberalization of economy and privatization of
commercial banks.

In the management of resources of the bank there was a qualitative and quantitative
improvement. In line with the new strategic objectives the bank has started to emphases
its role in area of investment banking and corporate sector. As a result of this, Muslim
Commercial Bank of Pakistan has initiated an ambitious and for sighted “Corporate
Culture Change Program”. This program has given the recommendations for
establishment of Corporate branches in all over Pakistan, establishing “Discount Services
Ltd”’ launching credit cards and restructuring the bank structure. By doing so MCB has
become highly activated and has felt the environment of fast competition in banking
sector due to privatization and establishment of new banks in private sector. It is quite
encouraging that the bank is well informed by economic changes in the country and made
himself well armed to cope with the tough competition. But from my point of view bank
should keep on adopting innovative changes in perpetual way. For Muslim Commercial
Bank of Pakistan, in my opinion it should also launch “Corporate Bonds” to generate the

53
funds as many banks are doing so in the world. Investors are attracted by MCB which is
the most reputed bank in Pakistan.

Muslim Commercial Bank is working satisfactorily, and also improving its performance
shown by the figures. It is not only helping Government activities but also well versed
with the corporate sector as well. Hence by viewing the operations and services of the
bank, it is quite clear that unlike other banks like Habib Bank of Pakistan, Muslim
Commercial Bank of Pakistan will be authorized bank performing an agency work of
State Bank of Pakistan.

12. Short-falls/Weaknesses of the Organization.

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12.1 – As mentioned earlier the bank is one of the biggest banks of Pakistan. Due to the
increase in the number of branches and the volume of the business the staff is really
short.

12.2 – MCB not able to mix its business, with heavy reliance currently on corporate
banking business.

12.3 _ High loan to deposit ratio, which will constrain loan growth to the pace of deposit
growth, or force the bank to seek higher cost debt financing.

12.4 - The banks enable the people to purchase goods on installments. This led to the
boost in the economy. But at the same time the people who purchased these goods are not
able to pay it back. So in this way it gives some negative effect on the economy.

12.5 - The banks policy of advances in recent years has loose control. The advances have
increased in bulk but the volume of interest earned has increased. For example in 2009
the interest earned was Rs. 14,974 million while in 2010 the value was Rs21,252 million
due to increase of advances.

12.6 - Bank is lacking in the international linkages for its clearances. It is bound to use
other media to facilitate its clientage.

12.7 - The bank operations could not performed efficiently & economically due to non-
availability of latest technology.

12.8 - The bank staff has been found as less satisfied with bank policies and the recent
retrenchment in the bank has created unrest and panic.
.
12.9 - The non-performing loans of MCB are more increased during 2009-2010, which is
of course a big stuck up amount. The more non-performing loans, the more money
become stuck up and resultantly; they not only lose their money but also interest on it.

55
12.10 - The bank activities were affected due to high level of competition. So, there is a
need to develop a plan to handle competitor's activities/attacks.

13. Conclusions
MCB is a leading commercial bank, a service industry. Customers and Employees
are the two arms of service industry. Satisfied employee will satisfy customers, so the
management of MCB Bank must take such initiatives to retain its employees for
maintaining & improving its goodwill through satisfied customers. (Because one satisfied
customer brings ten more customers).

Apart from the above shortfalls, the finance department is working very well. MCB
growth rate is good and it is providing excellent services in modern banking. The
standard of services & facilities is upto the mark and it is building its repute at national
level. The management of the bank is in safe hand. The bank has adopted a good strategy.
The management of the bank has given a new slogan to their employees & to the general
public as well, as “Your bank for the New Millennium”.

MCB is the 3rd largest commercial bank in Pakistan on most measures, offering a suite of
wholesale and retail banking products and services though its distribution network. The
bank should take benefits from its customers for the betterment of its service. The
customers may be given some rewards for their valuable ideas.

Overall performance of the bank is quite good and is working quite effectively and
efficiently but commitment, responsibility of job and hardworking always give positive
results.

14. Recommendations

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14.1- Due to the increase in the business of bank and increase workload the bank should
hire the competitive youngsters in the bank. The selection process should be more
transparent.

14.2 - MCB should emphasize on low cost debt financing.

14.3 - MCB should minimize the rate of risk on their advances by issuing secure loans to
people / industry, so that they can improve their credit rating as well.

14.4 - The management of MCB should review the advances policy & should avoid
extending the advances

14.5 - Muslim Commercial Bank should build up international linkage & should proceed
to provide services of clearinghouse and help in clientage in their multinational trades.

14.6 - Although the bank is providing best-computerized services to the clients but the
management should also watch the internal Electronic Data Processing system. Manual
work should be minimized

14.7 - The bank should introduce incentive programme for their employees, which will
increase their efficiency.

14.8 - MCB needs to give special attention to its non-performing loans. Because this
amount has to be written of from profit and loss accounts. Banks normally introduce new
defaulter schemes to get back at least their principal amount. The MCB authorities need
to formulate attractive remission policies in order to induce the defaulters to pay back
their dues.

14.9 - The bank should provide new modernize services for attracting the customers & in
return more fee can be earned

57
14.10 - In order to get their staff familiar with the latest banking trends all over the world,
MCB should introduce training programmes, new computer oriented courses, banking
seminars, etc. This would help a lot in improving their skills up to the latest worldly
standards.

15. References

BOOKS CONSULTED:

i. Fundamentals of Financial Management by Van C. Horne

ii. Financial Statement Analysis by Charles H. Gibson
iii. MCB’s Annual Report 2009
iv. MCB’s Annual Report 2008
v. MCB’s Annual Report 2007
vi. MCB’s Annual Report 2006
vii. MCB’s Annual Report 2005

WEBSITES:

i. www.mcb.com.pk

ii. www.sbp.org.pk

PERSONAL REFERENCE:

i. Mr. Sh Mujeeb ur Rehman (VP),

Manager, MCB Bank City Branch, Rawalpindi.
ii. Mr. Muhammad Anwar (AVP),
MCB Bank City Branch, Rawalpindi.
iii. Ms. Muhammad Abdullah (OG-I),
Credit Analyst, MCB Credit Hub, Islamabad.

16. Annexes

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Annexure - I

Store Room Strong Room

Lockers Utility
Advances Dept
Dept.
Branch
Remittances Clearing
Manage Dept. Dept.
r
Accountant

General Computer
Foreign Trade
Ledger Operator
Exports FCY Customer
Accounts Service Desk Payments Receipts Others
Imports
Cash Counters

59
Annexure - II

60
Annexure – III

BRANCH NETWORK

61
i