Internship Report on MCB Bank Ltd.

UMAR KHALIL MBA Finance REG:2007AG240

Internship Report on MCB Bank Ltd. Dijkot Road Branch (1202) Faisalabad. Submitted By: Umar Khalil

Submitted To:

Sir Yasin Zia Registration # 2007ag240

MBA Regular, Section C 2

Dedication & Acknowledgements I dedicate this internship report to my parents & my friend. Because of their prayers and encouragement I have been able to complete this report. Praise is to Allah, the most Gracious and Merciful, who blessed me with the knowle dge and wisdom and enabled me to overcome this task. Heartiest gratitude to my parents wit hout their continuous encouragement and love I could not have accomplished this task. I am very grateful to Mr. Amir Adnan in charge placement centre for their continuo us help, support and time during the entire course of my internship. I am also very gratefu l to all the staff members at MCB Dijkot Road Branch, Faisalabad especially Mr. Saleem and Mr. Waheed, & Mr. Shahid for their guidance and encouragement. 3

Executive Summary MCB Bank Limited (Formerly Muslim Commercial Bank Limited) has a solid foundation of over 50 years in Pakistan, with a network of over 900 branches, over 750 of which are Automated Branches, over 222 MCB ATMs in 41 cities nationwide and a network of ove r 12 banks on the MNET ATM Switch. MCB's operations continued to be streamlined with focus on rationalization of expe nses, re alignment of backend 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 b y providing centralized foreign trade services to branches with a view to improve efficiency, expertise and reduce delivery cost. During my internship in MCB I worked in Operations, Advances, Foreign Exchange and Customer Service Office department and I successfully completed all the task/duties that were assigned to me. During the course of internship I learned about different functions performed by Operations, Advances, Foreign Exchange and Customer Service Office department and bank as a whole. I also learned banks correspondence with their customers and within b ranches. I learned about documentation requirements and record keeping for different activi ties and processes, especially the documentation requirement for different kinds of financing facilities. 4

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Content History and introduction Vision and mission Principal of performance Objective Awards Corporate information Management Hierarchy Branch network Introduction to my branch Business operation and services Products Financials Ratio analysis Swot analysis Competitive strategy Work done by me Recommendations conclusion Page No 71 5 06 11 12 13 14 15 18 20 22 23 24 38 47 52 56 59 61 69

History & Introduction 6

HISTORY OF BANKING The word Bank is said to have been derived from the words Bancus or Banque or Bank. This history of banking is traced to as early as 2000 B.C. The priests in Greece u sed to keep money and valuables of the people in temples. These priests thus acted as financia l agents. The origin of banking is also traced to early goldsmiths. They used to keep strong safes fro storing the money and valuables of the people. The persons who had surplus money f ound it 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. The goldsmiths used to issue for the money deposited with them. These receipts beg an to pass form 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 e ntitled any holder to claim the specified amount of money form goldsmiths. A depositor who is to make the payments may now get the money in cash form goldsmiths or pay over the re ceipt to the creditor. These receipts were the earlier bank notes. The second stage in the development of banking thus was the issue of bank notes. The goldsmiths soon discovered that all the people who had deposited money with th em do not come to withdraw their funds in cash. They found that only a few persons prese nted the receipts for encashment during a given period of time. They also found that most of the money deposited with them was lying idle. 7

MCB BANK LTD. (HISTORICAL BACKGROUND) Before separation of Indo Pak, the need for more Muslim banks was felt. And Muslims having strong financial capacity were thinking to invest in this sector a s well. This was the idea, which paved the way for setting up MCB Bank Ltd known as MCB. This w as the third Muslim bank in the subcontinent. MCB is one of the leading banks of Pakistan with a deposit base of about Rs. 230 billion and total assets of around Rs.300 billion. Incorporated in 1947, MCB soon earned the reputation of a solid and conservative financial institution managed by expatriate executives. In 1974, MCB was nationalized along with all other private sector ban ks. This led to deterioration in the quality of the Banks loan portfolio and service quality. Eventually, MCB was privatized in 1991. This bank was incorporated under companies act 1913 on 9th July 1947 (just before partition) at Calcutta. But due to changing scenario of the region, the certificate of incorporation was issued on 17th August 1948 with a delay of almost 1 year; the ce rtificate was issued at Chit gong. The first Head office of the company was established at D haka and Mr. G.M. Adamjee was appointed first chairman. It was incorporated with an authorized capital of Rs. 15 million. After some time the registered office of the company was shifted to Karachi on August 23rd, 1956 through a special resolution, now recently the Head office of MCB has been transferred to Islamabad in July, 1999 and now Head office is termed as Principle Office. This institute was nationalized with other on January 1st, 1974. At that time it had 506 branches and deposits amounting to Rs. 1,640 million. Although. MCB has a repu tation of a conservative bank but nationalization also left its effects on this institute as well and by end of year 1991 in which it was privatized the total number of branches were 1.28 7 and deposits amounting to as high as Rs. 35,029 million. Between January 1974 and March 1991, it remained in the public sector as a Nationalized Commercial Bank for a period of over 17 years. It was privatized on April 8, 1991. The privatization of Muslim Commercial Bank marked the beginning of the privatization era in Pakistan, as MCB was the first public sector enterprise to be privatized. This large and highly successful privatization event represented a quantum leap towards deregulating the economy, more so as MCB was the largest private commercial bank in Pakistan. When privatization policy was announced in 1990, MCB was the first to be privatized upon recommendations of World Bank and IMF. The reason for this choice was the bet ter profitability condition of the organization and less risky credit portfolio which made it a 8

good choice for investors. On April 8th, 1991, the management control was handed o ver to National Group (the highest bidders). Initially only 26% of shares were sold to pr ivate sector at Rs. 56 per share. The bank remained in the private sector until January 1974. The challenge to make this venture a success was multifaceted and the Nation Grou p was conscious of the great responsibility it had accepted. The Group constituted a man agement team which had the managerial experience and expertise required for meeting such challenge i.e. reviving a business enterprises which had been under state control for nearly two decades. Fortunate for the bank and its valued customer, the new management comprised of wellknown professional leaders in business and banking industry. The bank continues to benefit from their vast and varied experience in both domestic and international trade, finance and industry. Details of these achievements are described in ensuing parag raph. Progress since privatization The post privatization leaders brought about qualitative changes in all shapes of management to reinvigorate the bank for meeting the challenges posed by pressures generated by free market forces. MCB remained conscious of the serious economic challenges Pakistan had been facing, and its marketing thrust has been directed at improving and enlarging its trade finance service capabilities. The resultant siza ble increase in the banks share of foreign trade business of both national and multinational corporations has been very encouraging. Besides this commendable success, the bank has also pioneered marketing of a much wider variety if saving and investment products, and has also setup investment banking and portfolio management services. The aim of these efforts is to speed up mobilization of savings for channeling them into ever expanding investment needs of a deregulated economy. After privatization, the growth in every department of the bank has been observed. Following are some key developments: Launching of different on foreign trade. Increased participation of foreign service level. Betterment of branches and staff service level. Introduction of Rupee Traveler Cheques & Photo Credit Card for the first time in Pakistan. 5) Extended use of information technology, which is evident from the fact that there are 768 fully automated braches, 243 online branches (integrated networking), 151 ATMS in 27 cities nation wide and a M.C.B continuously innovate new product. During the last fifteen years, the Bank has concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive bran ch network, developing a large and stable deposit base and managing its nonperforming loans via improved risk management processes. 9 1) 2) 3) 4)

Training & Development The Bank has a highly developed training systems, which includes three staff colleges at Karachi, Lahore and Islamabad providing internal training at all levels of the Bank in order to continually improve efficiency, banking skills and customer service. Cognizant of the specific training needs of its staff, the Bank has bee n nominating its staff in courses offered by reputable domestic as well as overseas training instit utions. Investment in new technology Banking in Pakistan is becoming an increasingly more sophisticated fi nancial service industry than it has ever been in the past. Customer Services expectations have gone up considerably, and to meet these expectations, technology has been acquired a pivot al role. Provision of prompt and efficient customer services is becoming virtually impossib le without a quantum leap in replacing old technology inherited from the pre privatization era. There is an increased reliance on computerized operations in branch offices to augment their capability in routine record keeping, convenience in information ret rieval and streamlining customer services. Before privatization MCB had only 60 computerized branches. Today, 942 branches (400 online & 542 offline) are computerizes. This shows the commitment of the bank towards the efficiency and customer satisfaction and adapting to new realities. The Bank has recently purchased new customer centric global banking software called SYMBOLS. It will be installed soon and will start functioning in 2004. To provide 24 hours cash facility to its customers, the bank has so far 214 branches with automated Teller Machines (ATMs) in 34 cities including Karachi, Hyderabad, Nawabshah, Larkana Sukkur, Quetta, R.Y.khan, Sadiqabad, Bahawalpur, Multan, Sahiwal, Lahore, Wazirabad, Kamoki, Faislabaad, Sargodha, Gujrat, Gujrawala, Sialkot, Jehlum, Rawalpindi, Islamabad, wah, Haripur, Abbattabad, peshawaer, Nnushera, Murree and S wat. The Debit or Smart Card has also been added to the list of MCB products to further facilities the customers. MCB is also the host of MNET with 76 ATMs of 17 members making a to tal network of 290 ATMs. From April 2004, two switches MNET and 1 Link have established a joint network of over 670 ATMs in Pakistan. The Bank also started replacing conventional telex messaging system for funds transfer, L/C opening etc. by connecting online with the world wide Interbank Financial Telecommunication Network (SWIFT) So far, MCB has 54 branches using SWIFT. Besides substantial saving in cost, the use of this fast and secure communication technology has enabled the Bank to provide quick and efficient service to its customers. 10

VISION Our vision is to be a leading financial institution and have largest network with a niche in areas where we have a competitive advantage With complete banking solutions. Our focus i s on improving performance in each of our businesses to achieve consistent and superior for our h ighly valued customers and shareholders. 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. Business MCB is in its over 50 years of operation. It has a network of over 900 branches all over the country with business establishments in Sri Lanka and Bahrain. The branch breakup province wise is Punjab (57%), Sindh (21%), NWFP (19%) and Baluchistan (3%) respectively. 11

Principles of Performance Customer Focus Over the years MCB has developed strong relationships with its customers by understanding their needs and treating them with respect, dignity and importance. The driving force behind its commitment and services is its focus on customers, ensuring that it not only meets, but exceeds their expectations. Quest for Quality MCB strives to achieve excellence by ensuring that every moment of our time is spent in adding value, making sure that we do things right, first time, and every time. With this quest for quality, MCB has always taken initiatives in bringing banking into a new arena; from cash to the convenience of plastic; from branch banking to internet banking and from facetoface customer interaction to online accessibility. Employees Respect MCB encourages diversity and treat each of our employees with fairness. MCB gives constructive feedback for their continuous development and seek suggestions from all employees for further improvement. The bank ensures that quality performance is acknowledged and rewarded and exercise utmost responsibility in decisionmaking with regards to our employees. Team Based Approach MCB believes in achieving its Mission and Vision by working together as a combined group. MCB treats its employees as its internal customers and ensure that the requirements of internal customer focus are always met. Equipped with indepth product knowledge, and recognizing the strengths in each individual, the bank strives for optimumresults from our coworkers and bringing out peak performances by working towards common goals and objectives in today's dynamic banking environment. Good Corporate Citizenship MCB seeks to continuously improve the quality of life in our communities. The bank realizes that it has a responsibility to the society in which it operates and it seeks ways of playing a positive role for the betterment of the community at large for a progressive environment, better living and a brighter future. 12

OBJECTIVES OF MCB The following are the objectives of MCB Bank Limited. CREATING AND MANAGING VALUES. The first objective of MCB Bank limited is to create and manage the values, which is one of the back bone of the objective of any well organized and managed organizati on. HUMAN CAPITAL The second objective of MCB Bank is to take care of the Human capital, which is a necessary thing for the development and prosperity of any well established organiz ation. BEST PLACE TO WORK. The third objective of MCB Bank Limited is to make it a place, which is much feasi ble and comfortable for employees of the bank. The MCB always conscious in developing such place where employees of the bank feel easiness. Technology The forth objective of MCB Bank Limited is to bring new and latest technology in t he operations of the bank. AT MCB, technology has a direct relation with your needs; it is a means for creating value and convenience for the customer. Over the last few years MCB has invested heavily into strengthening its technology backbone. Today it is leadi ng the way in banking technology and setting new standards for the banking industry; penetrat ing into the local market, listening to the needs of the people and educating them of simpl e financial products and services that create both value and convenience. MCBs strength lies in providing a technological base at the grass roots level of the society with a challenge to educate and assimilate such systems across vast cultural and economic backgrounds. With over 768 automated branches, 243 online branches, over 151 MCB ATMs in 27 cities nationwide and a network of over 16 banks on the MNET ATM switch, MCB continuously innovates new products and services that harness technology for the customers ben efit. Branch Network Branch network has been divided into two business segments namely Corporate & Re tail. The consumer products are offered by both segments. The segmentation is aimed at providing customized service. MCB branch network is enclosed. There are five overseas branches in the network, which are as follow: Colombo, Sri Lanka Pettah, Sri Lanka Maradana, Sri Lanka Manama, Bahrain 13

AWARDS MCB Bank has won many awards, which is a clear proof of its good performance. It h as won Euromoney awards and Asia Money awards. Euromoney Awards Best Bank In Pakistan Award 2006 Best Bank In Pakistan Award 2005 Best Bank In Pakistan Award 2004 Best Bank In Pakistan Award 2003 Euromoney Award 2003 for the "Best Bank in Pakistan". Best Bank In Pakistan Award 2001 Best Domestic Bank Award 2000 Asia Money Awards The Best Domestic Commercial Bank Award 2005 The Best Domestic Commercial Bank Award 2004 14

Corporate 15

Information

ORGANIZATIONAL STRUCTURE As MCB is a banking company listed in stock exchange therefore it follows all the legalities which are imposed by concerned statutes Mr. 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. Operational Management of the bank is being handled by a team of 10 professionals. This team is also headed by Mr. Muhammad Mansha. The different operational departments are Consumer Banking & IT div; Financial & Inter branch di v; Credit management div; Commercial Banking div; Corporate Banking div; Treasury management & FX Group and lastly Special Assets Management (SAM) Group. For effective handling of branches, it has categorized into three segments with different people handling each category, These categories are: a) b) c) A) Corporate Banking Commercial Banking Consumer Banking CORPORATE BANKING: These are branches which have an exposure of over Rs. 100 million. Usually include s multinational & public sector companies. B) COMMERCIAL BANKING; The branches 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. C) 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. 16

Recently the organizational structure was redesigned as follows: Province wise branches NUMBER OF BRANCHES IN DIFFERENT LOCALITIES Corporate Consumer Commercial 20 branches 637 branches 383 branches Punjab 632 Sindh 123 Nwfp 34 19 Blochistan 1040 4 1 Azad Kashmir 1045 Domestic Overseas EPZ Total

232

Furthermore, the bank has some proposals under consideration to open more branches in some European countries and as well as in Japan & China 17

Management of The Organization & Corporate Information Board of Directors Mian Mohammad Mansha Chairman S.M.Muneer Vice Chairman Tariq Rafi Mohammad Arshad Shahzad Saleem Sarmad Amin Mian Umer Mansha Aftab Ahmad Khan Atif Yaseen Mohammad Aftab Manzoor President & Chief Executive Advisor Raza Mansha Audit Committee Mian Mohammad Mansha Chairman Mian Umer Mansha Member Aftab Ahmad Khan Member Chief Financial Officer Ali Munir Company Secretary Tahir Hassan Qureshi Auditors A.F.Ferguson & Co. Chartered Accountants Riaz Ahmed & Co. Chartered Accountants

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Legal Advisors Registered Office MCB Building, F6 / G6, Jinnah Avenue, Islamabad. Principal Office MCB Tower I.I. Chundrigar Road, Karachi. Registrar's and Share Registration Office THK Associated (Pvt.) Ltd. Shares Department, Ground Floor, Modern Motors House Beaumont Road, Karachi. Mandiwalla & Zafar Advocates & Legal Consultants

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Hierarchy of Management SEVP ESEVP SVP VP Cashier Clerical Staff

AVP

GRADE1

GRADE2

GRADE3

ASSISTANT

Nonclerical staff

Messenger Technical Staff Dispatch Rider

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Hierarchy at MCB Branch Network PRESIDENT SENIOR EXECUTIVE VICE PRESIDENT EXECUTIVE VICE PRESIDENT SENIOR VICE PRESIDENT VICE PRESIDENT ASSISTANT VICE PRESIDENT OFFICERS GRADE I II III ASSISTANTS CASHIER PEONS 21

BRANCH NETWORK The following is the Branch Network of MCB Bank Limited. Sector wise position of circle, Consumer Sector 810 Branches Area Head South 180 Branches Branches

Area Head Centre 360 Area Head North

370 Branches

Commercial Sector 210 Branches Area Head Area Head Area Head Area Head Karachi South 40 Branches

45 Branches 70 Branches

Central Punjab North

54 Branches

Corporate Sector 20 Branches South North Karachi Islamabad 9 Branches 3 Branches

Main Karachi

1 Branch 7 Branches

Central Lahore

Overseas Branches Total Branches 4 1045 22

INFORMATION ABOUT MY BRANCH I did my internship in MCB Bank Limited Dijkot Road, Faisalabad. Some important information about my branch, which I observed, is as follows: MANAGEMENT OF THE BRANCH BRANCH MANAGER OPERATIONAL MANAGER ADVANCES INCHARGE HEAD CASHIER ID CASHIER L PEON SECURITY GUARD MR. AMIR ADNAN MUHAMMAD SALEEM ATHAR ABBAS MR. SULTAN ALI SHAH MR. MUZZAMMA MR. ADIL M. SHAHID RASOOL

INTERIOR STRUCTURE The branch is located at Dijkot Road, Faisalabad. The following departments are situated at this branch: 1. Consumer Financing Department 2. Credit Department 3. Accounts Department 4. Cash Department 5. Customer Service Department 6. Postage & Dispatch Department 23

Business Operations 24

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Services

Banking Sector Overview Pakistans banking and finance sector grew by over 21 percent from July 2004 Marc h 2005 amid the eight percent expansion in the services sector in Pakistan. Financial sector in Pakistan is going through a fastpaced transition as new groups were buying out foreign banks operations in Pakistan. The number of listed banks is also increasing. While the income from core banking activity has increasing due to higher business volume, earnings are also expected to improve due to ventures into consumer finance, housing finance and enhanced lending to the agriculture sector. In just four years the banking industry has expanded tremendously and now there ar e more than two dozen commercial and investment banks operating in the country. Commercial banks in the private sector had performed well since their inception, registering overall growth in the deposit base and profits. The banks also managed to maintain a healt hy credit portfolio. Foreign banks have a strong presence in all major cities and are targeting high net worth individuals and blue chip companies. Their strategy is quite successful as they account for about 34 percent of total sector profits, despite having only 15 percent of deposi ts and 16 percent of advances. MCBs Performance Overview The first half of 2005 was very promising for MCB, as the bank has achieved pre ta x profits of Rs. 4.2 billion, compared with Rs. 2.2 billion for the same period in 2004. Pro fit after tax has more than doubled compared to the corresponding period for 2004 and exceeds Rs . 3 billion highest ever profit in the history of MCB. This translates into earning per shares of Rs. 7.43. Advance and deposit increased to Rs. 156 billion and Rs. 241 billion reflecting a growth of 14% and 10% respectively. Additionally the banks assets expanded by 16% during th e half year ended 2005 and crossed Rs. 300 billion marks. Banks equity (capital and reserves) increased by 41% during the half year, which was due to the issue of right shares and retained earnings. Increase in equity would improve the lending limit and would provide the opportunity for significant growth of the bank s balance sheet. This would also help to meet the capital requirement under Basel Accord II, which will be effective from 2007. Based on continuing growth and consistently outstanding performance, MCB has once again received the Euromoney Award 2005 for the Best Bank in Pakistan. MCB has become the only bank to receive the Euromoney Award for Excellence for the fifth time in last six years. In addition, Asia Money has also declared MCB as The Best Domestic Commercial Ban k in Pakistan for the year 2005. 25

Fields of MCB Activities The purpose of banks is to provide some services to the general public. And for these purpose different banks provide different services bank, in modern time commercial banks play a very important role and their functions are manifold. The main functions an d services which MCB BANK Limited provides to different peoples are as follows. 1) 2) 3) 4) 5) Open Different accounts for different peoples Accepting various types of deposits Accepting various types of deposits Granting loans & advances Undertaking of agency services and also general utility functions, few of those are as under: a) Collecting cheques and bill of exchange for the cuntomers. b) Collecting interest due, dividend, pensions and other sum due to customers. c) Transfer of money from place of place. d) Acting an executor, trustee or attorney for the customers. Providing safe custody and facilities to keep jewellery, documents or securities. e) f) g) h) i) For proper functioning of branches and the over all bank has been divided in different departments. These departments handle different jobs so that division of work is t here for improvement of functions and also it is easy to control the situation. The general division in a branch is as follows: 1) 2) 3) 4) 5) Cash department Deposit department Advance & credit department Foreign exchange department Technology department (new addition in order to cop with the growing needs of day to day technology requirements.) Issuing of travelers cheques and letters of credit to give credit facilities to travel. Accepting bills of exchange on behalf of customers. Purchasing shares for the customers. Undertaking foreign exchange business. Furnishing trade information and tendering advice to customers. Cash Department The following books are maintained in the Cash Department: Receiving Cash Book 26 Paying Cash Book Cash Balance Book 1. 2. 3.

When cash is received in counter, it is entered in the Scroll Book and Receiving Cashier Book. At the close of the day, these are balanced with each other. When the cheque or any negotiable instrument is presented at counter for payment, it is entered in the token book and token is issued to the customer. The token cle rk and the Cashier make entries in the paying book and payment Cashier Book are balanced. The consolidated figure of receipt and payment of cash is entered in the cash balance book and drawn closing balance of cash. Opening Balance + Receipts Payments = closing Balance. This is very important department because cash is the most liquid asset and mostly frauds are made in this department, therefore, extra care is taken in this depart ment and nobody is allowed to enter or leave the area freely. Mostly, cash area is grilled and its door is under supervision of the head of that department. All the books maintained in this department are checked by an officer. Deposit Department Bank deals in money and they are merely mobilizing funds within the economy. They borrow form one person and lend to another, the difference between the rate of bor rowing lending forms their spread or gross profit. Therefore we can rightly state that de posits are the blood of the bank, which causes the body of an institution to get to work. These deposits are liability of the bank so from point of view of bank we can refer to them as liabilities. The total deposits of MCB are growing since is inauguration but after privatization there is a sharp incline in over all deposits of the bank. The increase in deposits is also a cause of increase on total number of accounts; bank has progressed in both aspects . Account Opening: Account opening is an agreement in which customer offers his funds and bank accepts these funds, therefore the nature of relation between a banker and custome r is of a contractual one and all the conditions applicable to this contract act are also ap plicable. Procedure for Opening: Procedure for opening of account is as follows: A person, who wants to open any kind of account, has to fill in a printed form whi ch is provided by the bank, free of cost. Separate account opening forms are used fo r different types of accounts. Bank usually requires that new depositor must be introduced by some one. An introducer can be any person known to the bank but preferably it should be a custo mer of the bank. However, the manager can open the account by his own introduction. 27

If the manager is satisfied, it will obtain the full signature of the customer on the form and specimen signature card, makes the first deposit, and issues the cheque b ooks. The following are given to the customer: Payinslip is the proof of deposit. For every payment which is. To be deposited in the bank, the payin slip is to be filled up. The object acknowledgment for receipt of money to be credited this account. Cheque Book contains a number of cheques. It enables a customer to make withdrawal from this account or make payment of various parties by issue of cheque . Pass Book is a copy of the customers account as appears in the books of the bank. Balance is recorded in this book by the Clerk. Clearing Department Every banker acts both as paying as well as a collecting banker, It is however an important function of crossed cheques. A large part of this work is carried out th rough the bankers clearing house. A clearing house is a place where representative of all banks of the city get toge ther and settle the receipts and payment of cheques drawn on each other. As the collect ing banker runs certain risks in receipt of their ownership the law has provided certain protections t the banks. The Negotiable Instrument Act, 1881, lays down hat drawer or holder of a cheque or draft may cross the instrument generally or specially. It further lies down that a crossed cheque can only be paid to a banker, who collects it for a customer in good faith and without negligence. Advances Department Advances are the most important source of earning for the banks. MCB is also givin g full attention towards this aspect and it is also obvious from the growing portfolio of advances and from very low delinquency rate. The credit portfolio of this institut ion is in a very much better shape than other financial institutions of Pakistan and the cre dit goes to the management and the staff who are concerned about the quantity and quality a s well. 1) 2) 3) Loans Cash Credits Overdraft. 1) Loans: Loans are monetary assistance be a financial institution to a business, individual etc. The loans are granted by the bank in lump sum, so these types called fixed or dema nd loans. Interest is charged on the whole amount of a fixed loan. The borrower withdraws whole the amount of loan. is normally granted against security of gold documents. 28 This type of loan

In case of demand loans against gold or documents, a demand promissory note for the amount of loan is taken from the borrower loans are granted under; A) Loan Against Gold: Under this type of loan, which is granted to the borrower the Head Cashier estimat es the value of Gold or Gold ornaments through an agent (Gold smith) and keeps a marg in of 40 to 50 percent. After the opening the gold loan account a token is given to the borrower, which is a bank receipt. On repayment of loan, the gold or ornaments held as security for it, together with the demand promissory note duly discharged is returned to the borrower and his re ceipt for the gold ornament taken in the demand loan ledger. This receipts states that he or naments returned are complete and in order. Part delivery of ornaments is given against part payment of a loan but care is taken that the ornaments still in banks possession f ully covers the balance of the loan outstanding. The interest gold loan is to be applied with quarterly. B) Loan Against Pledged of Stock: In case of advancing such types of loans, the following precautions are dept in th e mind: i) ii) iii) Requirement for Loan: For granting loan to any party or individual, the bank checks following particular s of the client: 1) 2) By Credibility, bank Judges the credibility of the client by his past bank record, CBI report etc. it is very important in making decision about giving him loan. Feasibility report is on the running or proposed business of the client. The report enables the bank to judge the likely return of the business. 2) Cash Credit Credibility Feasibility Report Stock pledged must be readily saleable Products should be readily saleable Advance should be within the borrows means Consider such cash account is opened in the name of the customer who borrows from the bank. Customer is granted a loan up to a certain limit, sanctioned by the head off ice, from which he can draw when he requires and interest is charged on the amount actually utilized by the customer. In order to avoid the danger of idle fund, the bank charges a cer tain rate of interest by the bank on cash credit in 46 paisa per thousand on daily basis. 29

GENERAL BANKING DEPARTMENT Clearing a. b. c. d. Receiving the instruments deposited by customers Posting the amount of instruments in credit of customers account If cheque returns from the concerned bank, the customer account is debited. Crossing stamp is put on the instrument and slip given to customer on receipt of the instrument. Clearing stamp and payee account credited are put on the instrument and the voucher. As we know that, one of the basic economic functions of commercial banks is to receive deposits and to honor cheques drawn upon them. So, cheque is a most commonly used instrument for making payments by account holder. Along with the cheques, there are some other negotiable instruments like PO, DD, TC, PS, CDR etc. (discussed in the next part) that are used for making payments and are drawn upon a bank. The question arises that how these cheques & other negotiable instruments drawn on one bank are deposited in other banks and money is transferred from one b ank to another. Clearing House has provided this facility. Clearing house facilitates different banks, on one city, to get their cheques drawn upon other banks to be cleared. Cheques lodged in clearing constitute two types of clearing: Outward Clearing Inward Clearing Lodgement of Cheques In Outward Clearing When cheques, TCs and other negotiable instruments drawn upon their banks like MC B, ABN AMRO of the same city (as Lahore) is presented in MCBBANK LIMITED Ltd. To deposit them in the respective payees accounts, these instruments are lodged in outward c learing (o/w clg) of MCCBANK LIMITED. Clearing Stamp: After the cheques have been crossed specially, clearing stamp is put on the cheques and other instruments, with the following days date, as these cheques should have to be presented in their concerned drawee banks on the subsequent day. Endorsement Stamp: The word endorsement is derived from Latin word indorsum which means on the bac k. Ordinarily, it means anything written or printed upon the back of an instrument. So, at the end, the cheques are endorsed in full (endorsed specially) by putting t he stamp with words describing Payees account Credit5ed in BAL Circular road, Lahor e. 30

After putting these three stamps on cheques & other negotiable. Instruments, they are sent to NIFT (National Institutional Facilitation Authority) with Add List. NIFT after segregating the cheques of different banks delivers them to their concerned banks, which constitute the inward clearing for those drawee banks. Accounting Procedure: After lodgment of all cheques in outward clearing, Payees accounts are credited by the amount of their vouchers. Drawee banks will debit the drawers accounts in their inward clearing (discussed later). As main branch Lhr. Of BAL deals with other banks through interbank accounts and we deal with our main branch. So, we (BAL Circular road) debit our main Br. Account, maintained with us, by the total amount of outward clearing and an IBDA (inter branch debit advise) with a debit voucher is sent to main branch Lhr. Local Clearing Main branch Payees Account Debit Credit Return In Outward Clearing: Some of the cheques lodged in o/q clearing are dishonored by the concerned branches due to some deficiencies and returned back through NIFT. This process is carried out under main branchs governance. Either, these cheques are again lodged in outward clearing or returned to customer s by canceling banks all stamps, based on the reasons. Now, the accounting entries opposite to first are passed i.e. Payees accounts are debited & main branchs account is credited. Inward Clearing Cheque and other negotiable instruments (PO, DD, PS, CDR etc.) drawn on MCBBANK LIMITED Circular Road, sent by other banks, constitute the inward clearing of BAL. After having all the stamps and dates of cheques confirmed, the concerned drawer s accounts are debited (in BAL Circular Road) and main branchs account is credited by the total amount. DEBIT Drawers Accounts CREDIT Local Clearing Main branch 31

Credit Department In the credit department, the loans are issued only on the commercial basis, means the loans are given to companies, partnerships and the sole proprietorships. The loans are issued against some securities and on a markup specified by the policies of State Bank of Pakistan. The branch has to send the reports about all types of customers and loans to the head office. The branch can not take a decision to issue the loan to any client without prior agreement from the head office. The branch can only recommend to grant or not to grant the credit to any client. The decision of the head office in case of any issue is final. The branch hires the services of different credit information service providers to evaluate the financial position and the expected repaybility of the client. The branch by itself prepares an eligibility score sheet to recommend to grant or not to grant the credit to a particular customer. Types of Credit At The Bank Bank provides different credit facilities to its customers, in form of short term credit. Following are the credit facilities that the customers usually avail to meet their requirements. Overdraft This is the most common form of bank lending. In overdraft facility, a customer is allowed to withdraw on his account in excess of the balance that the borrowing customer has in credit. So, when a customer withdraws in excess of his balance, an overdraft occurs (balance becomes in debit). Overdraft facility can be availed for a certain limit called OD limit and is used to meet the seasonal requirements of cash.

Letter Of Credit Letter of credit, whether sight or usance, is a non fund based facility provided to the customers. L/C described elaborately in trade finance has already been

section. Securities for Advances No doubt, the advancing of credit involves a great risk for the bank. Therefore, to cover this risk, the bank keeps different tangible and nontangible securities, before sanctioning the credit facility to a customer. The bankers prefer such securities that carry less risk of depreciation due to market fluctuations an d are easily saleable, even under changing market conditions. Common securities against banker advances are as under: 32

Pledge Pledge is the actual delivery of the movable & tangible property to the lender, as a security for a credit. In a pledge, the possession of movable assets is with bank but the ownership remains with the client. Pledge is against shortterm finances and is considered to be the best security for the bank. The commodities that are pledged include generally, raw material, consumables, finished good and i n Certain Cases Work In Process (WIP). Trade Finance Department Though I did not work in the trade finance department, but I had got the knowledge about the international trade and the banking procedures for the handling of internation al trade finance. Import Operations Valid city markets have usual importance regarding import operation and are considered as business and commercial hub of imports in Lahore. MCB Bank Limited C ircular Road Lahore for being situated in such an area has great (2nd largest in BAL) volume of foreign trade, especially imports. The process of imports starts with the establishment of letter of credit. Before g oing into the details of this process. I have tried to described the letter of credit (L/C) and its basic aspects. Letter of Credit International trade involves numerous factors such as payment for imports in the exporters country; shipment of goods within the limitations prescribed and difficulties of enforcing legal rights in the foreign country etc. Therefore, to overcome these im pediments a system has been enforced, this system is represented by Letter of Credit. The letter of credit is today the foremost way of financing international trade. In simple words, a letter of credit (L/C) can be defined as: A banks written undertaking given to the exporter for payment of a certain sum o f money on behalf of the importer provided the exporter tenders to the bank, or its overseas agents, the specified document within a specified period in accordance with the terms of the undertaking. There are four basic parties involved in an L/C: 1) 2) 3) 4) Other parties involved in L/C procession will be discussed in subsequent sections. 33 Importer Issuing Bank Exporter (Beneficiary) Beneficiarys Bank

Export OPERATIONS During the two weeks in trade finance department, I was much desirous to know that how the export transactions are carried out through bank, along with the impo rts. The export transactions in BAL Circular Road were not of such extensive nature as impo rts due that specific area. So the processing of a normal export transaction has been disc ussed. Conditions for Exporter: Like an importer, there are certain conditions that a person must fulfill to becom e an exporter. 1) The person must be an account holder of BAL. 2) No one can export any commodity until and unless he/she is a Pakistani and has a valid export registration with the EPB. 3) The person must process a valid membership certificate of Trade Organization, licensed and recognized by Federal Government like a Chamber of Commerce (e.g. Lahore Chamber of Commerce). 4) The person must possess a valid NTN (National Tax No.) certificate. 5) A person cannot export any good unless he files a Form E (E stands for exports) wi th his application to the bank. The form E must be filled in writing and all specific ations stipulated on the form, must be met. 6) The person must have the Sales Tax Registration Certificate. Technology Department Technological advancements are also affecting the banking industry. The foreign ba nks have a competitive edge over all local banks in their technologies advancements and au tomated systems. Local banks have also realized the gravity oil this situation and are str iving to add computerized systems to their branches. MCB is ahead of all other local banks in this field and now it is in a position to even compete with foreign banks. There are more than 1045 branches of MCB all over Paki stan and out of these more than 300 branches are fully computerized Almost all the bran ches of big cities are computerized; therefore, the need for a technology department at each branch is growing. Now a day, a computer division is working in each city to provi de service to add the branches of that area. MCB has also introduced the now concept of online banking. There are now more than 250 branches linked through this system and they can transact with each other directly 34

using computer systems at their own branches. Now customers do not have to wait lo ng for their transactions and can operate their account through all the online branches. ATM Network: ATM stands for Automatic Teller Machine. This machine is used to transact in ones account without intervention of humans. These machines are basically used for taking cash, confirming balances and requesting statements/Cheque books. MCB Marketing Mix Products / Services

Due to trend setting and innovative banking, MCB Bank presents a range of quality products with revolutionary perks and convenience. MCB provides a wide range of products/ services to its customers, which can be compared with any foreign, or national bank in terms of quality and reliability. Here is an overview of different products and services formulated by MCB Bank Accounts Offered By MCB One of the basic function of a commercial bank is to receive deposits and to honou r cheques. Accounts offered by the banks for the deposits of customers constitute th e basis of their operations and develops the basic relationship between a banker and customer . The largest network of over 315 online branches in the country and growing. 1) ONLINE BANKING: Providing customers with 24 * 7 real time online transaction facilities. Full Day Banking: Enjoy the convenience of extended banking hours from 9 to 5, even on Saturdays, for satisfying your banking needs at all MCB Full Day Banking branches across the country where you are now served with a wide range of services throughout the day. MNET MCB has provided the nation's largest operating switch with the highest transaction volume in the form of MNET. MNet is basically MCBs Network for Electronic Transac tions; it is an electronic hub for ATM sharing plus other touch points. 35

MNET enables all the member banks (members of Muslim Commercial bank) to share their electronic networks. This means customers of all member banks can use each o ther's ATMs. ATM machines of MNET member banks accept cards issued by: MCB Bank Citibank Standard Chartered HSBC Bolan Bank Bank of Punjab Prime Commercial Bank Saudi Pak Bank Limited Habib Bank AG Zurich Metropolitan Bank Bank of Khyber American Express KASB My Bank Ltd NDLCIFIC Bank Ltd MNET customers can use over 600,000 ATMs worldwide that carry the Cirrus logo and shop at over 5 million outlets (POS) that carry the Maestro logo MCB ATM (24 Hour Cash): The nations largest network of over 210 ATMs and growing. Get 24hour convenience of cash withdrawal; ministatement, bill payment and funds transfer services. MNET: MNET is an electronic hub for ATM sharing plus other touch points. Members include 12 local financial institutions enjoying ATM sharing and bureau services. Pakistans largest operating switch with the highest transaction volume. Mcb Smart Card: MCB Smart Card a secure instrument of payment, offering Cash convenience. It provides 24 hour direct access to your bank account and unmatched functionalities. 36 Free

MCB Mobile: Banking at your fingertips. Dial in anytime regarding balance and mini statements.

to

get

information

Pyara Ghar MCB Pyara Ghar is an idea Home Finance product that lets you purchase, renovate or construct your home the way you have always wanted. Financing available is up to 2 0 years for amount up to Rs. 20 million. Islamic Banking Services MCB Islamic Banking provides Riba Free and Shariah Compliant solutions to various customer segments in a growing number of cities. With the help of Shariah specialists, lawyers and professional commercial bankers, we have the best solutions to cater t o your needs the Islamic way. MCB Lockers The best protection for your valuables. Lockers of different capacities are availa ble nationwide. 37

Products 38

Personal Banking Deposit Accounts Khushali Bachat Account Khushali Bachat Account, a Rupee savings account is one of MCB Banks most popular products. Due to the low initial deposit, the account can be opened by people from all walks of life and still avail the facility of daily product profit calculation. Mahana Khushali Bachat MCB Monthly Khushali Scheme provides you with a steady income every month. Just purchase a Monthly Khushali Certificate and you will enjoy a steady income of your total deposit every month. Pak Rupee Savings Account MCBs Pak Rupee Savings Account offers you attractive returns on your Pak Rupee investment. In addition, you have access to a countrywide ATM network convenient cash accessibility 24 hours a day. The facility also provides you with unlimited daily transactions with a limit on maximum withdrawal amount through the ATM machines. Pak Rupee Current Account MCBs Pak Rupee Current Account offers you the convenience of unlimited withdrawals i.e. access to your funds whenever you want without any notice. There is no limit on the number of transactions you make in a day plus you can avail finance facility up to 75% of the total deposit. In addition, you have access to a countrywide ATM network convenient cash accessibility 24 hours a day. The facility also provides you with unlimited daily transactions with a limit on maximum withdrawal amount through the ATM machines. 39

 Pak Rupee Term Deposit MCB Pak Rupee Term Deposit gives a higher rate of return. It gives you choice of 1 month, 3 months, 6 months, 1 year, 2 years, 3 years, 4 years and 5 year term deposits. Saving 365 The MCB Saving 365 calculates profits on a daily product basis and gives you the facility of unlimited withdrawals. Foreign Currency Savings Account Foreign Currency Savings Account MCBs Foreign Currency Savings Account offers you attractive returns on your Foreign Currency investment. You can invest in any of the four currencies i.e. US Dollar, UK Pound Sterling, Japanese Yen or Euro Your foreign currency account is exempted from Zakat and withholding tax Foreign Currency Current Account MCBs Foreign Currency Current Account offers you the convenience of unlimited withdrawals i.e. access to your funds whenever you want without any notice. There is no limit on the number of transactions you make in a day. MCB Foreign Currency Term Deposit MCB Foreign Currency Term Deposit gives a higher rate of return. It gives the choice of 1 month, 3 months, 6 months, 1 year, 2 years, 3 years, 4 years and 5 yea r term deposits. Dollar Khushali Account The Dollar Khushali Account, a Dollar based account was introduced in 1993 at selected MCB Bank branches. Today, you can open a Dollar Khushali Account at over 200 branches in Pakistan. 40

Loan Products MCB Business Sarmaya MCB Business Sarmaya is the best Running Finance facility against your residential property which empowers you to manage your business dealings better. So act today and get MCB Business Sarmaya and thus improve your business, avail lucrative opportunities and expand your business, with absolute satisfaction of ca sh flows. MCB Car4u Life is like a chess board. You plan your career options. You analyze your business moves. But when you really want to improve your life, you make a power move. MCB CAR4U Auto Finance is the power move that assists you in more ways than you ever imagined. It is affordable, with lowest mark up, flexible conditions, easy processing and above all, no hidden costs. MCB Pyara Ghar Some destinations require a long wait. Like waiting for a home of your own. But with MCB Pyara Ghar it is now easy to step into your home and start living a r eal life. MCB Pyara Ghar is an ideal Home Finance from your own bank that lets you Purchase, Renovate or Construct your home the way you have always wanted. Having your own home was never so easy Easy Personal Loan MCB Easy Personal Loan provides you with the financial advantage to do things you've always wanted to but never had the sufficient funds for. Take that much needed holiday. Buy a car. Refurnish your house. Purchase a new TV. Finance a better education for your children. MCB Master Card Since the beginning of time, people have tried to find more convenient ways to pay, from gold to paper money and cheques. Today, money is moving away from distinct hard currencies and towards universal payment products that transcend national borders, time zones, and, with the Internet, even physical space. Plastic or "virtual" money, credit, debit, and electronic cash products, inevitably will replace cash and cheques as the money of the future. 41

MCB Rupee Traveler's Cheques MCB Rupee Traveler's Cheques were first introduced in 1993 as safe cash for travel ing and travel related purposes. The product has been extremely popular and is preferred o ver cash by customers while traveling and in all walks of life. MCB Rupee Traveler's Cheques The safest way to Carry Cash 42

Corporate Banking Cash Management Services MCBs network of over 900 branches in Pakistan enables it to collect and disburse payments efficiently with its cash management services. This also enables it to of fer you a choice of paper based or electronic fund transfer solutions including collection amounts, cross branch on line transactions etc. Working Capital Loans Based on the customers specific needs, the Corporate Bank offers a number of different working capital financing facilities including Running Finance, Cash Fin ance, Export Refinance, Preshipment and Post shipment etc. Tailor made solutions are developed keeping in view the unique requirements of your business. Term Loans MCB offers Short to Medium Term Finance to meet capital expenditure and short term working capital requirements of our customers. The loans are structured on th e basis of underlying project characteristics and cash flows of the business. Trade Finance Services Under Corporate Banking MCB offers trade finance services that include an entire range of import and export activities including issuing Letters of Credit (L/Cs), purchasing export documents, providing guarantees and other support services. Online Services MCB ATM Services With a solid foundation of over 50 years in Pakistan, with more than 750 automated branches, 269 online branches, over 222 MCB ATMs in 41 cities nationwide and a ne twork of over 12 banks on the MNET ATM switch, MCB is positioned at the forefront of the banking industry in Pakistan. This success has been possible because of a never ending drive to achieve higher levels of excellence, constantly striving to raise the level of performance. MCB Mobile Banking At the forefront of technological excellence, MCB proudly introduces MCB MOBILE BANKING. The convenience of accessing your account balance information and mini statements whenever you want or wherever you may need them, with comfort and peace of mind. 43

 MCB Call Center Keeping up with banking services can be tedious but not with MCB Bank, where phone service is at your fingertips. Just dial our Call Centre from the comfort of your home or office or wherever you happen to be. It offers basic banking services for your convenience, eliminating the need for you to make unwanted trips to your branch. MCB Smart Card MCB now brings you MCB SmartCard a secure and convenient instrument of payment wi th unmatched functionalities. It provides 24 hour direct access to your bank account. The convenience and flexibility of MCB SmartCard will help you live a smarter life. It not only helps you manage your expenses, but also eliminates undue interest on your da y to day credit card transactions. Your balance is always within your reach and you spend accordingly. MCB Debit Card Now MCB brings a secure, convenient and quick payment facility that enables you to do purchasing by using your existing MCB ATM / MCB Smart Card as a DEBIT CARD. Virtual Banking MCB Virtual Internet Banking offers you the convenience to manage and control your banking and finances when you want to, where you want to. MCBs Virtual Internet Banking facility is simple and secure. And its free of cost. With MCB Virtual Inte rnet Banking you can access any of the banking services, 24 hours a day, 7 days a week and thro ughout the year. MCB Virtual Internet Banking offers a wide range of online services which makes yo ur banking accessible anytime and from anywhere. Detailed Account Summary of all listed accounts. Mini statements of each of the listed accounts showing recent transaction history for that account(s). Statementby Period of each of the listed accounts, based on the period specified. Immediate or Scheduled Transfer of Funds between your own accounts, as well as to thirdparty accounts setup as beneficiaries, maintaining accounts with MCB. Scheduling of One Time as well as Recurring Funds Transfers. Payment of utility bills for registered Utility Companies. Immediate or Scheduled Bills Payment. Scheduling of OneTime as well as Recurring bill payments. Option for Full or Partial payment based on the payment conditions specified by a particular Utility Company. 44

Bulk Salary Transfer for Corporate Customers, to facilitate them in paying salary to the corporate employees, who maintain accounts with MCB. Bulk Funds Transfer for Corporate Customers. Cheque Book Request for any of your listed accounts. Payment/Transfer Alerts for reminding, in advance, prior to the processing of specified payments and transfers. Personal Alerts for reminding of prespecified events and occasions. 45

Islamic Banking Deposit Schemes For customers who are looking for a deposit opportunity where they can purse their funds and reap halal returns on it, we offer the following products: o Al Makhraj Saving Account o AlMakhraj Ianat Account o AlMakhraj Term Deposit Fund Based Facilities Ijarah Products MCBs Islamic Ijarah, analogous to the English term 'leasing, is based on the Ij arah wa Iqtina concept which means the sale of the asset to the lessee after the Ijara h has matured. Under this scheme, MCB will be the owner of the asset, and the customer (lessee) will be given the asset to use for a certain period of time in r eturn for monthly rental payments. MCB will give a separate unilateral undertaking that it will offer to sell the asset to the customer (lessee) at the maturity of the Ijarah agreement at a price that may be equal to the security deposit amount, hence the term Wa Iqtina. Types of Ijarah o Car Ijarah o Equipment Ijarah 46

Financial of MCB 47

Balance Sheet As at December 31, 2008 cash and balances with treasury banks balances with other banks lendings to financial institutions investmentnet advancesnet operating fixed assets deferred tax assetsnet other assetsnet Liabilities Bills payable borrowings deposits and other accounts sub ordinate loan liabilities against assets subject to finance lease deferred tax liabilitiesnet other liabilities Net assets Represented by: Share capital Reserves Unappropraited profit Surplus on revaluation pf assetsnet of tax 2006 2007 39683883 3807519 1051372 113089261 218960598 16024123 0 17868761 410485517 10479058 39406831 292098066 479232 0 1180162 11722493 355365842 55119675 6282768 34000638 5130750 45414156 9705519 55119675 2008 Rupee's in 000 39631172 4043100 4100079 96256874 262510470 17263733 0 19810476 443615904 32465976 6577017 21081800 63486316 198239155 9054156 172373 11031450 342108243 7089679 23943476 257461838 1597440 0 0 11171496 301263929 40844314 10551468 22663840 330274155 0 0 437137 21253250 385179850 58436054 5463276 24662426 5530973 35656675 5187639 40844314 6282768 36768765 9193332 52244865 6191189 58436054 48

Profit and Loss Account For the year ended December31, 2008. Mark up/ return / interest earned Markup/ return / interest expensed Net mark up/ interest income Provision for diminution in the value of investmentsnet Provision against loans and advancesnet Bad debts written off directly Net markup/ interest income after provision Non markup/ interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securitiesnet Unrealized loss on revaluation of investments classified as held for trading Other incomenet Total nonmark up/ interest income Nonmarkup/ interest expense Administrative expenses Other provisions/ (reversal)net Other charges Total nonmark up/ interest expense Extra ordinary/ unusual item Profit before Taxation Taxation Current year Prior years Deferred Profit after Taxation Unappropriated profit brought forward Transfer from surplus on revaluation of fixed assetsnet of tax Profit available for appropriation Basic and diluted earnings per share after tax 2006 25778061 4525359 21252702 121197 1014540 47000 1182737 20069965 2311235 811801 692010 605865 570505 4991416 25061381 6482592 11411 66708 6560711 0 18500670 5701443 593497 63332 6358272 12142398 4990260 32166 2007 31786595 7865533 23921062 105269 2959583 199 3065051 20856011 2634610 632300 693408 1500865 13105 1000149 6448227 27304238 5426116 3743 573830 5996203 0 21308035 6442356 1294473 894590 6042473 15265562 5530973 11855 2008 40043824 11560740 28483084 2683994 1335127 0 4019121 24463963 2866729 617554 727564 740429 103198 942362 5791440 30255403 7546878 10120 830839 8387837 0 21867566 7341257 864824 16533 6492966 15374600 5130750 21319 5022426 49 5542828 5152069 17164824 20808390 20526669 23.4 24.3 24.47

Balance Sheet Vertical Analysis Balance Sheet As at December 31, 2008 cash and balances with treasury banks balances with other banks landings to financial institutions investmentnet advancesnet operating fixed assets deferred tax assetsnet other assetsnet Liabilities Bills payable borrowings deposits and other accounts sub ordinted loan liabilities against assets subject to finance lease deferred tax liabilitiesnet other liabilities Net assets Represented by: Share capital Reserves Unappropraited profit Surplus on revaluation pf assetsnet of tax 2007 39683883 3807519 1051372 113089261 218960598 16024123 0 17868761 410485517 10479058 39406831 292098066 479232 0 1180162 11722493 355365842 55119675 6282768 34000638 5130750 45414156 9705519 55119675 2008 39631172 4043100 4100079 96256874 262510470 17263733 0 19810476 443615904 10551468 22663840 330274155 0 0 437137 21253250 385179850 58436054 6282768 36768765 9193332 52244865 6191189 58436054 2007 % 9.67 0.93 0.26 27.55 53.34 3.90 11.09 82.20 0.13 0.00 0.33 3.30 100.00 2008 % 8.93 0.91 0.92 21.70 59.18 3.89 5.88 85.75 0.00 0.00 0.11 5.52 100.00 50 0.00 0.00 4.35 4.47 100.00 100.00 2.95 2.74

Profit and Loss Account Vertical Analysis For the year ended December31, 2008. Markup/ return / interest earned Mark up/ return / interest expensed Net markup/ interest income Provision for diminution in the value of investments net Provision against loans and advancesnet Bad debts written off directly Net markup/ interest income after provision Non markup/ interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securitiesnet Unrealized loss on revaluation of investments classified as held for trading Other incomenet Total nonmark up/ interest income Nonmarkup/ interest expense Administrative expenses Other provisions/ (reversal)net Other charges Total nonmark up/ interest expense Extra ordinary/ unusual item Profit before Taxation Taxation Current year Prior years Deferred Profit after Taxation Unappropriated profit brought forward Transfer from surplus on revaluation of fixed assets net of tax Profit available for appropriation Basic and diluted earnings per share after tax 2007 31786595 7865533 23921062 105269 2959583 199 3065051 20856011 2634610 632300 693408 1500865 13105 1000149 6448227 27304238 5426116 3743 573830 5996203 0 21308035 6442356 1294473 894590 6042473 15265562 5530973 11855 5542828 20808390 24.3 2008 40043824 11560740 28483084 2866729 617554 727564 740429 2007 100 24.745 0.3312 6.7026 3.3342 0 61.093 49.499 10.663 12.563 12.785 49.087 0.0658 5.404 54.556 0 142.23 47.749 5.625 0.1075 2683994 103198 1335127 0 4019121 24463963

2008 100 28.87 1.7819 16.272 100 42.232 100 51

9.3108 0.0006 65.613 40.858 9.8058 10.753 23.276 0.2032 942362 15.51 5791440 100 30255403 7546878 35.545 10120 0.0245 830839 3.759 8387837 39.279 0 0 21867566 139.58 7341257 42.202 864824 8.4797 16533 5.8602 6492966 39.582 15374600 100 5130750 21319 5152069 20526669 24.47

Ratio Analysis Ratio Analysis is an important and ageold 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 o f changes in the financial conditions of the business. These provide data for interfirm comparison. The ratios highlight the factors associated with successful and unsuccessful firms, also reveal strong and weak fir ms. 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 and bad financial position of the business other things have also to be seen. Key Ratios 1. RETURN ON EQUITY 2007 = 2. RETURN ON ASSETS: = = 3.60% 4.60% 52 N.P.A.T * 100 = 29.42% N.P.A.T * 100 Shareholder equity Total Assets 2008 2008 2007

33.61%

3. EARNING PER SHARE: No. Of outstanding shares = 4. RETURN ON DEPOSIT: 2008 4.65 % 5.22 % 5. CASH/DEPOSIT RATIO: 2008 = =

N.P.A.T 2008

2007

24.47%

24.30 %

N.P.A.T * 100

Total Deposit 2007 Total Deposit = 11.99 % Interest Income = 2007

2007

Cash

13.58 % =

6. INTEREST INCOME/TOTAL INCOME RATIO: Total Income 2008 87.36 % 83.13 % 53

7. NET PROFIT MARGIN: 2008 2007 Profit Net Rs. 14,984,990.25

N.P.A.T * 100 = 33.54%

Total Income

= 39.92 % No. Of Branches 2007

8. AVERAGE PROFIT PER BRANCH: 2008 = Rs. 14,878,715.4 Gross income

9. OPERATING EXPENSE RATIO: 2008 = 2007 =

Non markup expense 27.72 % 21.96 %

10. TOTAL ASSET TURNOVER: Interest/markup earned*100 2008 = 54 9.02 % 7.74 %

Total asset

2007

11. RISK ASSETS TURNOVER: Net interest income after provision Risk assets 2008 = 65.98 % 2007 = 68.11% 12. ADVANCES TO TOTAL DEPOSITS: Total deposits 2008 2007 Advances = 79.48 %

= 74.96 %

13. DUE FROM BANK TO DUE FROM BANK: Borrowing from financial institution 2007 = 55 18.09 % 2.66 %

Landing to financial institution* 100 2008 =

Swot Analysis 56

SWOT ANALYSIS Strengths MCB is the first Pakistani privatized bank and because of its quality management, marketing, innovation in products and services. Owing to all such factors they have establish ed a good reputation in the banking market. The name of MCB makes you recall the highly coop erative and professional individuals ready to serve you with maximum zeal and zest. MCB have faster banking services that are making it more prominent in the banking industry especially in operations and Foreign exchange. The customer prefers this bank not only because of its faster speedy service rather due to reasonable service charges. MCB in Pakistan is the also in the list of highly automated banks like Emirates be cause of its modern style of banking through fully computerized control and twenty four hour ba nking. The joining of experienced people, advanced management, advance setup and facilities gave MCB an edge over its competitors. Weakness Staff is not sufficient Too much workload on one person Though innovation and technological products have been introduce not fully equipped with latest technology Innovative products New technology High customer satisfaction Best possible customer facilities Branches almost every where in Pakistan Fast and efficient system Has the potential to provide better services. The majority of people are not well aware about the products of MCB. Therefore it should advertise extensively especially RTC and Master Cards. 57

A behavior has been noted that bank tries to feel at ease with good looking, rich and educated people and the poor looking customers feel some bit strange in the enviro nment of the bank. The bank employees should try to accommodate behaviorally all type of customers. In MCB there is lack of specialized skill because of job rotation policy of human resource department. The bank should concentrate upon increasing its abilities on individua l service basis Mismanagement of time is another big mistake in MCB branches, the bank official ti me of closing is 5:30pm but due mismanagement of time allocation and work the staff is n ormally on their seats till 7:00 or 8:00 clock. Opportunities Can move far ahead from the competition because it has a lot of potential. If the branches are fully equipped with new technology. It can gain even more. Can become the leading exemplary bank of Pakistan. As on December 31, 1998, sixtyeight scheduled banks with 9,106 branches are opera ting in Pakistan. As on this date, total population of Pakistan is 140.03 million. Total number of personal accounts with all scheduled banks as on December 31,1997, are 28.98 million. If we consider the population statistics of working age group as on December 31,1997, it stands to the figure of 96.64 million. Thus we can say those 28% of working age pe ople of Pakistan are having accounts with banks while 72% are unbanked. The need of privatization has made people to switch to banks to satisfy their needs of lending and borrowing. This not only increases the deposits but also the credit bu siness. Threats Unstable economy Local competitors Non availability of sufficient staff in branch Change in government policies has affected the banking business. Still banks have to wait to get permission of state bank. The freezing of foreign currency accounts is a vital example of letting people not to trust on banks. The Competition has become severe by the entrants of so many banks, So to exis t one will have to prove himself in its services through excellent management and will have t o satisfy its shareholders. Otherwise he will be out the market. The decrease purchasing power of consumer in the current economic situation of the country affecting the business activity speed too much and the result is the low i nvestment from the investors in new projects can create problem for the bank because it is w orking a lot in trade. 58

MCBs Competitive Strategies To be competitive the Bank has further reinforced its position in the Consumer Banking arena by streamlining and relaunching the consumer financing products and introducing more convenience based solutions. With the relaunch of auto finance and house finance products, the Bank pushed the products with full thrust. The Bank has also launched a running finance facility against mortgage of property. Technology continued to play an important role in improving and expanding product offerings. The Bank introduced more IT based products to cater to the changing lifestyles and needs of the customers. MCB Virtual Internet Banking was launched with wide ranging banking solutions for the customers ranging from individual to corporate customers and it has become the most preferred Internet banking solution in the country. MCB also had the privilege of being the first Bank in Pakistan to launch the compr ehensive bill payment facility through its alternate delivery channels which include Intern et Banking, ATMs and MCB Call Centre, currently with six payment partners. Similarly, the Bank also took initiatives to increase the usage of debit facility. To provide timely and updated information, MCB has also provided a new look to its website which is user friendly and considerably easy to browse. The Islamic Banking initiative has been very successful in attracting new customer, both individuals and companies. Similarly, those relationships, which were confined only to current account facility, have grown into stronger business relationships. The branch network was expanded to Lahore and Multan during the last year and recently been extended to Hyderabad and Faisalabad. The Bank plans to further expand its Islamic Banking branch network to other metropolitan areas and also to introduce new sharia compliant banking solutions to a wider range of customers for satisfying their individual an d business needs. Some wide ranging new strategic initiatives were also taken up which will be important for the Bank in years to come. A private company has been formed in Hong Kong (fully o wned subsidiary of MCB) in partnership with Standard Chartered Bank, handling trade transactions of select countries in the AsiaPacific region. It is projected to earn US$ 1 million in its first year of operations. To increase its international presence, t he Bank will be opening its representative office in Dubai and entering into major strategic alliances with banks in the UAE/ especially for marketing our consumer banking products to non resident Pakistanis. Furthermore, feasibility is also being carried out for entering other international markets. MCB's operations continued to be streamlined with focus on rationalization of expe nses, re alignment of backend 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 b y providing centralized foreign trade services to branches with a view to improve efficiency, expertise and reduce delivery cost. 59

Management of Human Resources has been one of our core focus areas. MCB is committ ed towards attracting, retaining and motivating outstanding people. Challenge for MCB is to provide an environment in which employees can better realize their potential. The Bank introduced 'reward for performance' where high potential officers were identified and rewarded accordingly. In view of the competitive environment, the Bank is focusing on performance and introducing a more robust performance management system. MCB is al so strongly committed to training its staff at all levels. The Bank will also be implementing the full suite of the latest version of SYMBOLS Version 8. MCB Bank will run SYMBOLS eFinance modules to deliver personalized services to its customers over multiple delivery channels, while SYMBOLS Enterprise Operations Center will serve as its core banking transactionprocessing engine. By implementing SYMBOLS, MCB Bank aims to raise the level of its customer service and its time to market in new product offerings for its three core banking businesses in Corporate, Commercial and Consumer Banking retaining its market leadership as Pakistan's progressive Bank. 60

WORK DONE BY ME 61

WORK DONE BY ME In the MCB Bank Limited I really enjoyed working with the staff of Dijkot Road and having a wish to be the employee of MCB. It was almost impossible to work in all the depart ments within that limited time. But on my request, the staff of the branch provided me the opportunity to work in the different departments for the sake of practical knowled ge. I feel highly indebted to work in there. During my internship training in the MCB as I early mentioned that I have worked in different departments & seats and learnt followings. UTILITY BILLS COLLECTION MCB Bank Limited collects utility bills on behalf of WAPDA, Sui Gas Companies, and Pakistan Telecommunication Corporation Limited by putting the stamp on the utility bills Paid, Date of payment, Signature of the officer receiving the utility bills. After recei ving utility bills a list is made on the form, which is called Bills scroll form. One copy of the scr oll is with the bank for evidence whereas the original copy with the receipt of bills is sent to the billing department of the respective corporation. The bank charge commission on the bills. OPENING NEW ACCOUNT BASICS During the span of my internship in MCB I learned and observed a lot of about the opening of an account. Basically I think that the opening of an account is the establishment of a contractual relationship between the banker and the customer. By opening an accoun t at a bank, a person becomes a customer of a bank. Further I am going to express the basic requirements and steps involved in the opening of an account. Learning as a Student Duties & Accomplishments During my internship in MCB I worked in Operations, Advances, Foreign Exchange and Customer Service Office department and I successfully completed all the task/duties that were assigned to me. The duties that I performed and the thing I learned each day are given as follows: July 15, 2005 Learned basic operations of remittance department Learned how to make 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 16, 2005 Learned bank charges for PO, DD, TT & MT (Mail Transfer) 62

 Learned how to make entries and vouchers for Outgoing TT(Telegraphic Transfer) Made few Outgoing TT Learned & Made Inter Branch Credit Advices against the checks received from outer city branches July 18, 2005 Learned about the payment against PO & DD received from other branches (usually the first activity in the remittance dept.) Learned how to issue a 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 July 19, 2005 Made Debit vouchers against the TT, PO & DD charges Made Credit vouchers (contra) against the TT, PO & DD charges Made Incoming and Outgoing TT Made Inter Branch Credit Advices against the checks Made entries in the Day Book July 20, 2005 Learned Incoming & Outgoing TT Entries in the Daily Voucher Record Sheet Learned how to make DD and PO Made Debit vouchers against the TT, PO & DD charges Made Credit vouchers (contra) against the TT, PO & DD charges Made Incoming and Outgoing TT July 21, 2005 Learned 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 Made Incoming and Outgoing TT Made Inter Branch Credit Advices against the checks Made entries in the Day Book July 22, 2005 Learned about different Stamps on the PO Learned and made entries and vouchers against Incoming MT Made Incoming and Outgoing TT Made Inter Branch Credit Advices against the checks Made entries in the Day Book July 25, 2005 Learned and recorded the entries against Incoming MT Made Incoming and Outgoing TT Made Inter Branch Credit Advices against the checks Made entries in the Day Book Issued Credit Advices against DD July 26, 2005 Learned PO and DD issuance in detail 63

 Made the entries against Intercity Received Checks Made Incoming and Outgoing TT Made InterBranch Credit Advices against the checks July 27, 2005 Got more information about Remittance Software System Learned how to make cancellation entries in the Remittance Software System in case of any discrepancy Made Debit vouchers against the TT, PO & DD charges Made Incoming and Outgoing TT Made Inter Branch Credit Advices against the checks July 28, 2005 Learned how to cancel a DD Made Incoming and Outgoing TT Made vouchers for incoming MT Made Inter Branch Credit Advices against the checks Issued Credit Advices against DD July 29, 2005 Learned how to make entries against the incoming TT for which the beneficiarys account in some other bank Made Incoming and Outgoing TT Made InterBranch Credit Advices against the checks Made entries in the Day Book July 30, 2005 Was moved to Credits, got basic information about different operations of Credits department Learned about Running Finance against the Saving Certificates also called Instant Finance Studied few pages of Credit Manual Studied a Instant Finance Case Learned about the entries against Monthly Installment for Car Financing Made Daily Voucher Sheet August 1, 2005 Learned basic types of financing Read Running Finance in detail from manual Studied a Running Finance Case Made Vouchers Made Daily Voucher Sheet August 2, 2005 Learned about the different documents required for Credit Investigation Learned about the documents required for Running Finance Learned the Concepts of Demand and Cash Finance Made Vouchers Made Daily Voucher Sheet August 3, 2005 64 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 Made Daily Voucher Sheet August 4, 2005 Studied Documentation/Collateral Guidelines Made Disbursement Status Leasing Statement Made CF Vouchers Made Voucher Sheet Made entries for monthly mark up against RF (Running Finance) August 5, 2005 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 August 8, 2005 Learned General Documentation for financing Learned about FIM(Finance against Imported Merchandise) Made Daily Voucher Sheet August 9, 2005 Learned documentation requirement for each type of financing Made Vouchers Made Daily Voucher Sheet August 10, 2005 Made monthly entry in the Markup Recovery Register Made Letter to Auditor Made Vouchers Made Daily Voucher Sheet August 11, 2005 Learned about L/C documents Learned basics of Foreign Exchange operations Made Voucher Sheet 65

August 12, 2005 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 August 13, 2005 Made vouchers for Foreign Currency Cash withdrawal Made vouchers for FITT(Foreign Inward Telegraphic Transfer) Made Voucher Sheet August 15, 2005 Learned about bank charges against L/C Learned diff. types of SWIFT messages Made Vouchers Made Daily Voucher Sheet August 16, 2005 Worked as CSO(Customer Service Officer) because CSO was on leave and performed the following activities: o Attended phone calls o Attended customer inquiries o Received ATM forms o Received and entered daily DAK o Issued ATM cards o Issued balance Certificates and Bank Statements o Made charges vouchers for TT/DD/PO August 17, 2005 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 Made Daily Voucher Sheet August 19, 2005 Worked on the seat of A/C Opening/Check Collection/Lockersbecause the Madam on this seat was on leave, so learned and performed the following activities: 66

o Opened three accounts o Issued check books o Received Check Book Issuance Requisition August 20, 2005 Opened new accounts Issued check books Received Check Book Issuance Requisition Made CCs(Check Collection) Made Vouchers August 22, 2005 Opened new accounts Issued check books Received Check Book Issuance Requisition Made CCs Made Vouchers August 23, 2005 Worked as CSO(Customer Service Officer) August 24, 2005 Opened new accounts Issued check books Received Check Book Issuance Requisition Made CCs August 25, 2005 Opened new accounts Issued check books Received Check Book Issuance Requisition Made Vouchers August 26, 2005 Sorted Foreign Currency Signature Verification Cards Opened new accounts Issued check books Received Check Book Issuance Requisition Made CCs(Check Collection) Made Electricity Bills Vouchers 67

August 27, 2005 Opened new accounts Issued check books Received Check Book Issuance Requisition Made CCs(Check Collection) Made SUI GAS Bills Vouchers Made Telephone Bills Vouchers Made Electricity Bills Vouchers 68

RECOMMENDATIONS 69

RECOMMENDATIONS From the Quantum of the profit and its financial data it can be easily judged that after privatization, MCB BANK is performing well. Its deposits are growing day by day and so its profitability. The controlling body is responsible for the productive performance of the Bank. I spent 8 weeks of my internship in MCB Dijkot Road. During these six weeks, I fe lt myself to be a part of MCB. Even, this was my first experience of working in a banking organ ization, but I learned a lot from this experience. Based on my experience & observation reg arding the operations and policies of MCB Bank, I have tried to stipulate some recommenda tions for further improvement. Enhanced Computer Network The bank should emphasize much on computer technology. Like other banks, MCB should enhance its online services. Bank, also should concentrate on Ebanking an d use of ATM. Moreover, bank should also emphasize on enhancing its website information. Training Facilities And Seminars Human resource constitutes the most valuable asset for an organization. To improve the professional skills and quality, MCB has started sixmonths comprehensive training program that is really a commendable step taken by MCB. Bank, apart from this prog ram, conduct some training programs for existing employees to improve their proficiency . Also, MCB Bank should arrange some seminars to make its visions and objectives, clear to every one. Equal Status Of Branches One major & alarming drawback that I observed in Dijkot Road, is the inferiority complex faced by some employees. MCB Dijkot Road, for being situated in business and commercial hub, has its unusual importance. But I observed some employees to be the victim of complex. So, to avoid such discrepancies, seminars should conduct to sig nify the importance of each branch. 70

CONCLUSION It is evident from this report and the financial statements of MCB that it is making progress by leaps and bounds. The profits of MCB have grown considerably during th e last few years and this trend is expected to continue into the future. Therefore we conclude that MCB has a very prosperous present and future, which assures the shareholders of wealth maximization. Side by side of it I think that if bank would be able to cover and control on the above mentioned recommendations then it would be in such a situation that will really lead it towards the road of prosperity, developm ent and integrity. And with the above mentioned sentences I think there is too fault of the customers and in order t\o make the proper working of the bank the customers shoul d also cooperate with the bank which will be really a good, ambitious and diligent condition for the bank. And then bank will be really in such a situation and posit ion to compete its competitors in the country as well as on international level. Websites http://www.mcb.com.pk 71