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INTERNSHIP REPORT ON MCB BANK LIMITED

IN THE NAME OF ALLAH, THE BENEFICENT, THE MERCIFUL

INTERNSHIP REPORT ON MCB BANK LIMITED

DEDICATION
I dedicate my internship report of MCB Bank Limited to my

Respectable parents
And

Honorable teachers

INTERNSHIP REPORT ON MCB BANK LIMITED

ACKNOWLEDGEMENT
By the Grace of Almighty, the most Merciful, the most Beneficial, I'm today submitting my internship report, at the end of my first pragmatic experience and I'm glad to have it with MCB, where you come first, only if you're the customer. Thirst of learning is inside you, and whatever the environment, if you're willing to learn, you do. At MCB, I had a new, challenging, yet a perfect environment to learn. My parents' prayers and their teachings were always with me and hereby I will like to take this opportunity to show my gratitude to all those who made my internship an adventurous outwit. .

Ghulam Farid

INTERNSHIP REPORT ON MCB BANK LIMITED

PREFACE
Banking sector owes a pivotal importance in the economy of any country through its vibrant functions. This is the deep seated motivator that geared up me to join any bank for internship. Moreover, the practice and familiarity learned during this tenure would also attest very helpful and alleviating in the awaiting proficient life. This report is an upshot of my internship in United Bank Limited, Main Branch Pattoki. MCB Bank Limited posses an imperative importance in the banking sector of Pakistan. It always remains the center of hustles in business activities. It always endows with great covenant of rally round in terms of funds and services at all epochs of its dynamism. Although, a derisory period of my internship is not enough to learn the complex operations of MCB Bank Limited yet I made industrious efforts to converse them comprehensively in this report. Particularly, I have remunerated more accents on study of distinguishing features and services of MCB Bank Limited. I have made maximum venture to elaborate this report with the material read, listened and observed. I have strong belief that this report will guide and ease the readers to understand the operations of banking system and more prominently have good knowledge about MCB Bank Limited, one of the most trusty and leading banks in Pakistan.

INTERNSHIP REPORT ON MCB BANK LIMITED

Chapter 1

INTRODUCTION

INTERNSHIP REPORT ON MCB BANK LIMITED

INTRODUCTION

The study is about the general operations and management of MCB bank Limited Main Branch pattoki. Every student of BBA (Hons.) has to under to an internship program of Eight weeks in any organization to get exposure the real time business environment and to know what sort of changes information technology brings in management activities. The Real purpose of this internship program is to provide an opportunity to the students to see the practical applications and approach of their background professions studies The report is a reflection on my experience when I was internee in MCB bank Ltd.
OBJECTIVE OF STUDYING THE ORGANIZATION
Following are the main objectives of selecting MCB Bank Limited for studying.

To observe the finance system of the bank, to know how banks support the economy of the country. To implement theoretical knowledge in practical field.

To understand the management system of the bank which consists of experienced professionals of the bank. Want to scrutinize newly and highly integrated computerized system for doing banking transactions. To know banks activities i.e. its services and products.

The bank is certainly one of the leading banks in Pakistan, the reason being I selected it for Internship and learning purpos

INTERNSHIP REPORT ON MCB BANK LIMITED

HISTORY OF THE MCB BANK LIMITED

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 as well. This was the idea which paved the way for setting up MCB Bank Ltd known as MCB. This was the third Muslim bank in the subcontinent.

HISTORY 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 certificate was issued at Chitagong. The first Head office of the company was established at Dacca and Mr. G.M. Adamjee was appointed its first chairman. It was incorporated with an authorized capital of Rs. 15 million. 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 reputation 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 1.287 and deposits amounting to as high as Rs. 35,029 million.

INTERNSHIP REPORT ON MCB BANK LIMITED

Vision Statement

CHALLENGING AND CHANGING THE WAY YOU BANK

Mission Statement

To become the preferred provider of quality financial services in our country with the profitability and responsibility and to be best place to work

INTERNSHIP REPORT ON MCB BANK LIMITED

Our Core Values

CUSTOMER FOCUS We treat each of our customer equality & as the most important person while we interact with him/her. We must ensure that we do everything to meet and exceed the customers expectations with perfect to times, accuracy & quality services. EMPLOYEE RESPECT & DIGNITY We treat each of our employees with fairness, which includes giving constructive feedback for their development. We celebrate diversity and seek suggestions from all employees for improvement. We ensure that responsibility & fairness in all our decision-making. TEAM BASED APPROACH We work towards achievement of our vision & mission as a combines group. We encourage inter & intra-departmental communications. We treat our colleagues as our internal customers & ensure that the requirements of internal customer focus are always met.

QUEST FOR QUALITY We ensure that each moment of our time is spent on value adding activity. We always seek ways for exceeding expectations of customers & colleagues. We also ensure that we do things right, first time every time.

INTERNSHIP REPORT ON MCB BANK LIMITED GOOD CORPORATE CITIZENSHIP We ensure that we contribute our due share to the Govt. we realize that we have a responsibility to the society in which we operate & we seek ways of playing a positive role for the betterment of the community at large. NATURE OF THE ORGANIZATION MCB is in its over 50 years of operation. It has a network of over 1026 branches all over the country with business establishments in Sri Lanka and Bahrain. The branch break-up province wise is Punjab (57%) Sindh (21%) NWFP (19%) Baluchistan (3%) respectively

Over 750 of which are automated branches, Over 197 MCB ATMs in 35 cities nationwide and a network of Over 12 banks on the MNET ATM switch. In 2005 the total No. of Employees are 9,377 and No. of Accounts are 4,248,399. In (2005, 2004, 2003, and 2001) MCB has received the Euro money award for the 4th time in the last 5 years. MCB won the "Best Bank in Pakistan". In 2000 and 2007 win the award of Best Domestic Bank. In 2004, 2005 also has win Asia Money awards for being "The Best Domestic Commercial Bank in Pakistan.

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INTERNSHIP REPORT ON MCB BANK LIMITED

Business volume of Muslim Commercial Bank: Rupees in million Profits Operating profit Profit before taxation Profit after taxation 6,656 3,612 2,230 6,746 4,057 2,431 13,830 13,018 8,922 20,069 18,500 12,142 20,856 21,308 15,266 2003 2004 2005 2006 2007

Balance sheet Shareholders fund Deposits from customers Investments Advances to customers Total assets 11,108 211,511 128,276 97,200 272,323 14,552 221,069 67,194 137,317 259,173 23,307 229,345 69,481 180,322 298,776 40,844 257,461 63,486 198,239 342,108 55,120 292,098 113,089 229,732 410,485

Information per ordinary shares Earnings (Rs) Cash dividend (Rs) Dividend payout ratio (%) 7.28 1.25 37.80 7.21 1.50 34.65 43.16 58.70 21.36 1.50 19.22 55.64 167.80 23.40 2.00 32.61 74.76 246.10 24.30 2.50 51.45 87.73 399.95

Net asset value at the year end(Rs) 36.24 Market value at the year end (Rs) 51.40

Capital adequacy ratio (%)

0.00

9.64

12.54

18.65

17.88

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INTERNSHIP REPORT ON MCB BANK LIMITED NUMBER OF EMPLOYEES MCB bank since its incorporation has the more potential bank not only for its customers but also for its employees. MCB bank offering great working opportunities for all the people who are interested to do job in MCB bank and with passage of time employees is increasing as its business volume is increasing because MCB bank provide enhanced career opportunities with dynamic work employees are motivated with higher salaries according to their education and experience level currently round about 9946 employees are working in MCB bank including contractual and permanent staff Total numbers of employees = 9946

STAFF OF THE BRANCH CONSISTS OF 13 MEMBERS

DESIGNATION Branch Manager Operation Manager Customer Service Officer Credit Manager General Banking Officer Cashier Cash Officer System Administrator Gun Man Peons PRODUCTS AND SERVICES

NO OF EMPLOYEES 01 Grade I 01 Grade I 01 01 Grade III 02 Grade III 01 Grade III 01 01 02 02

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INTERNSHIP REPORT ON MCB BANK LIMITED

MCB ATM Services (a) MCB ATM Card MCB ATM Network is the largest and most advanced of its kind in the country, and is part of MCB's continuing efforts to provide customers with convenience that suits all requirements most. MCB ATM has operated globally. Card Categories MCB ATM Regular Card The MCB ATM Regular Card allows withdrawal of up to Rs. 10,000 per day and a maximum of 3 withdrawals per day per card. MCB ATM Gold Card The MCB ATM Gold Card allows withdrawal up to Rs. 25,000 per day and a maximum of 6 withdrawals per day per card. The cardholder has to make at least two transactions to withdraw the full amount of Rs. 25,000 BILL PAYMENTS: MCB easy bill pay offers unmatched convenience to pay utility and mobile phone bills or re-charge prepaid mobile phone accounts. MCB is the only bank that offers coustomers, 3 convenient options of making bill payments to PTCL, SSGC, KESC, Mobilink, and Ufone. MCB Smart Card or MCB ATM Card Holder can easily pay their bills or re-charge their prepaid mobile phone account. ACCOUNTS Saving Account MCBs Rupee Savings account is the most convenient way to manage savings. Its basic features are: Low average balance required 13

INTERNSHIP REPORT ON MCB BANK LIMITED

Profit is paid on customers account on a half yearly basis Cash deposit and withdrawal facility at hundreds of MCB branches across Pakistan (conditions apply)

Withdraw cash through Pakistans largest ATM network. Customer can use an account to pay bills 24 hours a day, 7 days a week through Virtual Banking

Current Account MCBs Rupee Savings account is the most convenient way to manage savings. Its features are given as below: Low average balance is required. Unlimited free of cost transaction facility at concern branch. Profit is paid on account on a half yearly basis. Term Deposit A MCB term deposit scheme is also valuable to suit customers requirement. Customer can avail on choice of 01 month, 3 months, 1 year, 2 years, 3 years, 4 years, and 05 years term deposit. Its benefit includes half yearly profit payment. Customer can avail credit facility up to 75% of total deposit. Basic Banking Account In compliance with the directives of State Bank of Pakistan via BDP Circular No. 30, issued on November 29, 2005, the Basic Banking Account has been launched with effect from February 27, 2006. This product has been introduced to facilitate the low income group as well as the existing account holders who wish to convert their regular savings or current account into Basic Banking Account.

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INTERNSHIP REPORT ON MCB BANK LIMITED The Basic Banking Account is a current account and can be opened with a minimum initial deposit of Rs. 1000/- only. Account holders will be allowed 2 deposit transactions (either cash or through clearing) and 2 withdrawals (cash or clearing) each month. All customer-initiated transactions over and above this limit will be charged a transaction fee. Foreign Currency Accounts This account offers very attractive returns on Foreign Currency investment. Customer can open a foreign currency Savings account in any of the four currencies i.e. US Dollar, UK Pound Sterling, and Euro. Its features are as below: Unlimited transaction facility. Low balance requirement. Profit credited to account on a half yearly basis. Account holder can avail a credit facility up to 75% of the total deposit value. A foreign currency account can be opened at any of MCB foreign exchange dealing branches. SMART CARD / DEBIT CARDS By using of this product customer can manage expenses. 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.

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INTERNSHIP REPORT ON MCB BANK LIMITED

MCB VISA: It provides the conventional credit card services in a manner that is superior in comparison. MCB Visa is the most secure, affordable and rewarding credit card. MCB Visa is accepted at all ATMs across Pakistan as well as at 27 million acceptance locations worldwide. TRAVELERS CHEQUES MCB Rupee Traveler's Cheques were first introduced in 1993 as safe cash for traveling and travel related purposes. The product has been extremely popular and is preferred over cash by customers while traveling and in all walks of life. LOANS Term Loans: An individual can gain and benefit the most through MCB Consumer Banking. MCB provide friendly, efficient and attentive personalized banking services - a unique banking relationship experienced by each MCB client. 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 Finance, Export Refinance, Pre-shipment and Post- shipment etc. Tailor- made solutions are developed keeping in view the unique requirements of your business. FINANCING Trade Finance MCB corporate banking provides a finance services that include an entire range of import and export activities including issuing Letters of Credit(L/Cs), 16

INTERNSHIP REPORT ON MCB BANK LIMITED purchasing export documents, providing guarantees and other support services.

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INTERNSHIP REPORT ON MCB BANK LIMITED INVESTMENT BANKING MCBs Investment Banking Team has emerged as a leading player in Pakistan's Investment Banking arena. The Team handles advisory, corporate finance and capital markets related transactions. Within these areas, the team has developed expertise in: Private Placements Debt/Equity Underwriting Term Finance Certificates Loan Syndication Arrangement of Non- Fund Facilities Mergers and Acquisitions Corporate Advisory

MCB VIRTUAL BANKING MCB Virtual Internet is to manage and control customers banking and finances when they want to, where they want to. MCBs Virtual Internet Banking facility is Simple Secure Free of cost.

Individual Users/ Corporate Users MCB Virtual Banking - is a safe and convenient way to manage and control banking and finances. This service meets customers both (individuals and corporate) essential banking needs. 18

INTERNSHIP REPORT ON MCB BANK LIMITED

Chapter 2

INTRODUCTION TO ORGANIZATIONAL STRUCTURE

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INTERNSHIP REPORT ON MCB BANK LIMITED

ORGANIZATIONAL STRUCTURE MCB relies on strong, lasting relationship with its customers and on its reputation for stability and security for its continued process. MCB extends its philosophy to its technology strategy but not perusing technology for technology's sake. However, MCB learns from the mistakes of others especially in "consumer banking". We let others get in first, take the hit, and find out the flows. Said MCB officials - and has installed efficient and effective system for processing and delivering information. Some directors are the personnel of the MCB Bank and others are successful business person and executives of other major organization. Nineteen members are included in board of directors. 2.2 MAIN OFFICE DEPARTMENTS (HEAD OFFICE)

The head office is operationally in charge of central affairs including the delegation of powers and authority to the regional head quarters throughout the country. All the senior management team works in the Head office of MCB bank is situated in Karachi. And its all branches, regional offices, corporate branches and overseas branches and online branches and representative offices work according to rules and regulation set by the head office. Following are the departments that are working at head office: Administration Credit Management Investment Banking Human Resource Information Technology Corporate Planning & Budgeting Finance & Treasury International Division Inspection & Audit Law Division 20

INTERNSHIP REPORT ON MCB BANK LIMITED

MANAGEMENT COMMITTEE

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INTERNSHIP REPORT ON MCB BANK LIMITED

Board of Directors

Mian Mohammad Mansha

Chairman

S.M. Muneer Vice Chairman

Mohammad Aftab Manzoor President & Chief Executive

Tariq Rafi

Director

Sheikh Mukhtar Ahmed

Director

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INTERNSHIP REPORT ON MCB BANK LIMITED

Mohammad Arshad

Director

Shahzad Saleem

Director

Mian Umer Mansha

Director

Sarmad Amin Audit Committee Mian Mohammad Mansha Shaikh Mukhtar Ahmed Shahzad Saleem

Director

Chairman Member Member

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INTERNSHIP REPORT ON MCB BANK LIMITED Chief Financial Officer Ali Amin

Company Secretary Tameez-ul-haque

Auditor A.F.Ferguson & co Chartered accountants M.Yousuf Adil Saleem & co Chartered accountants

Legal Advisor Chartered accountants mandiwalla & zafar Advocates & legal consultants Shariah Advisor Dr. Muhammad Zubair Usmani

Registered Office MCB building, F-6/G-6 Jinnah Avenue, Islamabad Principle Office Adamjee house 2nd floor I.I chudrigar road Karachi

Registrar and Share Registration Office 24

INTERNSHIP REPORT ON MCB BANK LIMITED

THK associates (pvt) Ltd. Shares department, ground floor sheikh sultan trust building no 2, Beaumont road KarachI ORGANIZATIONAL HIERARCHY OF MCB

PRESIDENT

SENIOR EXECUTIVE VICE PRESIDENT

EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

OFFICERS GRADE I II III

ASSISTANTS

CASHIER

PEONS

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INTERNSHIP REPORT ON MCB BANK LIMITED

Chapter 3

INTRODUCTION TO THE DEPARTEMENTS

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INTERNSHIP REPORT ON MCB BANK LIMITED

FIELDS OF ACTIVITIES

The purpose of banks is to provide some services to the general public. And for this purpose different banks provide different services to the people in different forms. The MCB Bank is a commercial bank, in modern time commercial banks play a very important role and their functions are manifold. The main functions and services which MCB Bank Limited provides to different peoples are as follows.

1) Open Different accounts for different peoples 2) Accepting various types of deposits 3) Accepting various types of deposits 4) Granting loans & advances 5) Undertaking of agency services and also general utility functions, few of those are as under Collecting cheques and bill of exchange for the customers. Collecting interest due, dividend, pensions and other sum due to customers. Transfer of money from place to place. Acting an executor, trustee or attorney for the customers. Providing safe custody and facilities to keep jewellery, documents or securities. 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. 27

INTERNSHIP REPORT ON MCB BANK LIMITED

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 there for improvement of functions and also it is easy to control the situation. The general division in a branch is as follows: 1. Cash department 2. Deposit department 3. Advances & credit department 4. Remittance department 5. Foreign exchange department 6. Technology department (new addition in order to cop with the growing needs of day to day technology requirements)

CASH DEPARTMENT

The following books are maintained in the Cash Department: Receiving Cash Book Paying Cash Book Token Book Scroll Book Cash Balance Book

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.

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INTERNSHIP REPORT ON MCB BANK LIMITED 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 clerk and the Cashier make entries in the paying book and payment is made to payee. At the close of day, the Token Book and Paying 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 department 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 from one person and lend to another, the difference between the rate of borrowing lending forms their spread or gross profit. Therefore we can rightly state that deposits 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 its 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.

TYPES OF DEPOSITS 29

INTERNSHIP REPORT ON MCB BANK LIMITED Deposits can be segregated on two bases, one is the duration in which there funds are expected to be with the bank and second is the cost of getting these funds. So divide deposits in two classes according to duration of deposits i.e.

1) 2)

Time deposits / liabilities Demand deposits / liabilities

And on the basis of the cost to acquire these funds, a deposit can be classified as any one of following four, High Cost Medium Cost, Low Cost No Cost.

Banks has different kinds of deposit schemes in order to induce deposits. These schemes are a mixture of the above mentioned two types of deposits with an addition of different

services & requirements such as minimum balance' requirement, mode of transaction, basis for calculation of profit, deductions, additional benefits, eligibility for different groups. In the similar fashion, MCB has a large variety of deposit schemes and some of them are as follows:

CURRENT ACCOUNT In this type of accounts the client is allowed to deposit or withdraw money as and when he likes. He may, thus, deposits or withdraws money several times in a day if he likes. There is also no restriction of amount to be deposited or withdrawn. However, there is requirement of minimum balance maintenance of Rs. 1000/-. Usually this type of account is opened by the businessmen. No profit is paid by the bank and no service charges are deducted by the bank on current deposits account. These types of deposits are also exempt from compulsory deduction of Zakat. 30

INTERNSHIP REPORT ON MCB BANK LIMITED

PLS ACCOUNT This type of account is for those persons who want to make small savings'. This type of account is opened with a minimum deposit of Rs. 1000/-. Under this scheme deposits can be made only up to a-costing amount and withdrawals are allowed twice a week or 8 times a month. If a big amount is required a seven days notice is required before the withdrawal. The profit is paid on these accounts on the minimum balance during a month for the whole of

that month. Zakat & other withholding taxes are deducted as per rules of the government.

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INTERNSHIP REPORT ON MCB BANK LIMITED

KHUSHALI BACHAT ACCOUNT This is an advance form of PLS saving a/c, in this type of account. The minimum balance requirement for this type is Rs. 2500/-. There is also restriction on the number of withdrawals as well, i.e. up to 4 times in a calendar month. For maintaining this extra balance the customer gets the benefits of profit calculation on daily product basis and also free service of standing instructions of paying utility bills and HBFC installments. All other rules of saving account are applicable.

PLS 365 GOLD This is a special type of saving account in which customer maintains a minimum balance of Rs. 300,000- and in turn he gets the benefits of daily profit calculations and also there is no restriction on the maximum number of withdrawals as was there in the case of KBA. There is also another advantage of this scheme that if balance on a particular day falls below the minimum balance then only the product of that day is ignored whereas in KBA, if balance falls below the minimum limit then all the products for that month are ignored on in other words no profit is paid for that month.

Khaunm Bachat Scheme This is a type of term deposit, in this type of deposit an account is deposited and monthly payments of Rs. 1000/- are made by the account holder in this account for a minimum of 10 years. After

the expiry of term, he receives his funds along with profit for the tenor. The distinctive feature of this product is that profit is calculated on monthly basis and charged to account on end of each half /ear. Then profit is also calculated on that amount of profit which is credited to the customer's account. So we can say that in this type of account there is a concept of accumulated profits on profit. This ends in 32

INTERNSHIP REPORT ON MCB BANK LIMITED getting a heavy return for the depositor at the end of tenor for his small savings. This product was actually introduced to promote saving habits in the people. Zakat and withholding taxes are deducted as per rules only at the time of maturity while making payment to the customer.

Term Deposits Receipts This is a type of term deposit in which a receipt is issued for varying tenors ranging from 1 month to 5 years or more. These are in the form of receipts and profit on these receipts is paid biannually. These receipts are encashable after expiry of the period for which they were issued. Different profit rates are applied to different type of TDRs. Under this deposit scheme, a deposit is received from the depositor under the condition that he will intimate the bank before a certain period in case of withdrawals.

FUNCTIONS OF DEPOSIT DEPARTMENT This was a brief review of different types of deposit schemes. The Deposit Department handles the account opening, profit payment and accounting of all types of deposit schemes. 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 customer is of a contractual one and all the conditions applicable to this contract act are also applicable. Profit payment & calculation Profit payment & calculation is done in accordance with the rules of each type of deposit scheme-by the deposit department. The products for each deposit scheme are calculated separately and added till the end of 6 month period. Then the sum total of these products is multiplied with the respective profit rates which are issued 33

INTERNSHIP REPORT ON MCB BANK LIMITED by the Head Office at the end of each half yearly closing. The profit provisions for each type of deposits are also calculated on monthly basis by the same department in order to calculate the net profit or loss position of the branch. Accounting Entries

Accounting entries are also made in the respective books of account by this department. However, in small and medium size branches, the accountant performs the book keeping duties for all kinds of ledgers.

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INTERNSHIP REPORT ON MCB BANK LIMITED

CLEARING DEPARTMENT

Every banker acts both as a 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 through the bankers clearing house. A clearing house is a place where representative of all banks of the city get together and settle the receipts and payment of cheques drawn on each other. As the collecting banker runs certain risks in receipt of their ownership the law has provided certain protections to 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. Types of Cheques Transfer cheques: are those cheques, which are collected and paid by the same branch of bank. Transfer delivery cheques: are those cheques, which are collected and paid by two different branches of the same bank situated in the same city. Clearing cheques: are those cheques, which are drawn on the branches of some other bank of the same city or of the same area, which is covered by a particular clearing house. Collection cheques: are those cheques, which are drawn on the branches of either the same bank or of another bank, but those 35

INTERNSHIP REPORT ON MCB BANK LIMITED branches, are not in the same city or they are not the members of clearing house.

Functions of Clearing Department

To accept Transfer, Transfer delivery, clearing and collection cheques from the customers of the branch and to arrange for their collection.

To arrange the payment of cheques drawn on the branch and given for collection to any other branch on MCB or any other members or sub member of the local clearing house.

To collect amount of cheques drawn on members, sub-member of local clearing house, sent for collection by MCB Branches, not represented at the local clearing house

Receiving and scrutinizing the cheques and other deposit instruments, and the pay-in-slip at the counter.

Fixing the stamps. Scrutiny and receipt by the authorized officer. Returning the counter file to the depositor. Certificate and confirmation by the officer in charge of the department. , Separating the cheque into transfer, transfer delivery, and clearing cheques.

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INTERNSHIP REPORT ON MCB BANK LIMITED

CLEARING PROCESS (FLOW CHART)


Cheque with slip given Slip is asked & filled

Cheque along with slip checked, signed & received by officer

Entries in daybooks are made Entries checked & verified by another officer after banking hours by officer Cheques collected at the day end by Main Branchs Officials Cheques are sent to respective banks next day after posting in computer by Main Branch

The same day not honored cheques are returned to Main Branch

The day after tomorrow the banks are informed about dishonored cheques

Provisional entries for returned cheques are debited again in both computer & daybooks Party is informed about returned cheques through Phone or personal contact

Cheques are mailed through TCS in case of no personal contact the same day (If there is any availability)

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INTERNSHIP REPORT ON MCB BANK LIMITED

ADVANCES DEPARTMENT

Advances are the most important source of earning for the banks. MCB is also giving 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 institution is in a very much better shape than other financial institutions of Pakistan and the credit goes to the management and the staff who are concerned about the quantity and quality as well.

Loans Cash Credits Overdraft LOANS

Loans are monetary assistance by a financial institution to a business, individual etc. The loans are granted by the bank in lump sum, so these types called fixed or demand loans. Interest is charged on the whole amount of a fixed loan. The borrower withdraws whole the amount of loan. This type of loan is normally granted against security of gold documents. 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;

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INTERNSHIP REPORT ON MCB BANK LIMITED

LOAN AGAINST GOLD Under this type of loan, which is granted to the borrower the Head Cashier estimates the value of Gold or Gold ornaments through an agent (Gold smith) and keeps a margin 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 receipt for the gold ornament taken in the demand loan ledger. This receipts states that he ornaments 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 fully covers the balance of the loan outstanding. The interest gold loan is to be applied with quarterly.

LOAN AGAINST PLEDGE OF STOCKS In case of advancing such types of loans, the following precautions are kept in the mind:

Stock pledged must be readily saleable Products should be readily saleable Advance should be within the borrows means

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INTERNSHIP REPORT ON MCB BANK LIMITED

REQUIREMENTS OF LOAN For granting loan to any party or individual, the bank checks following particulars of the client: Credibility Feasibility Report

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.

CASH CREDIT 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 office, 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 certain rate of interest, even if the customer does not withdraw any amount. The rate charged by the bank on cash credit in 46 paisa per thousand on daily basis. The credit is usually given against the securities of goods or merchandize as follows:

ADVANCE AGAINST PLEDGE OF STOCKS When cash is granted against the pledge of stock or product, cash credit form is taken, from the certain products or stock,

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INTERNSHIP REPORT ON MCB BANK LIMITED but the actual pledge is created when the stock or finished products are placed under the bank's lock or the document of title is duly endorsed to the bank by the borrower.

HYPOTHECATION OF STOCKS The difference between pledge and hypothecation is that under a pledge the borrower's goods are placed in the bank's possession under own lock, whereas, under a hypothecation, they remain in the possession of the borrower or guarantor and are merely charged to the bank under documents signed by them. Even though the documents empower the bank to take possession of the goods hypothecated, but it is possible that the borrower may actually resist any attempt.

MORTGAGE OF PROPERTY Title deeds of immovable property are accepted by the bank only as collateral security or alternatively as unauthorized security.

REMITTANCE DEPARTMENT

Remittance department performs following functions: Mail Transfer (MT)

Telegraphic Transfer (TT) Demand Drafts (DD)

MAIL TRANSFER (MT)

When a customer requests the bank to transfer his money from one branch of bank 41

INTERNSHIP REPORT ON MCB BANK LIMITED to another branch of the same bank or from one city to another city to the same bank or any other bank. Customer fills the form given by bank. If the customer has an account with that amount as mentioned in the application form then concerned officer will undertake the following procedure to make the mail transfer complete. 1. Branch Mail transfer form 2. Receiving Branch Register copy 3. Issuing branch register Copy 4. beneficiary advice 5. advice to customer In case where the customer is not account holder of the bank then the customer will have to deposit the amount which he wants to transfer under Mail. Then the above said procedure will be done.

TELEGRAPHIC TRANSFER (TT) This type of transfer is simple. After filling the application form the concerning officer shall fill the telegraphic transfer form. Then it is sent to the required bank which on receiving it immediately makes the payment to the customer and afterwards the voucher are sent to that bank by ordinary mail. DEMAND DRAFT (DD)

Demand draft is just like cheques and issued when the customer wants to take cash with him personally. The idea behind is to avoid the risk and burden of currency notes in huge quantity. Demand draft can easily be handled whatever amount it has and the money can easily be taken from the bank when it is presented. In fact, the bank persuades the customer to transfer money by drafts and avoid the risk of frauds involves in MT and T.T. Draft is only issued when the bank knows customer and bank has the confidence in him 42

INTERNSHIP REPORT ON MCB BANK LIMITED In case of transfer of money by drafts, the customer has to fill an application form. Then the concerned officer fills the following forms: 1. Customers advice 2. Customers debit form 3. Register copy 4. Cover Advice

FOREIGN DEMAND DRAFT Foreign Demand Draft is just like demand draft. The only difference is that a bank issues FDD to the bank of another country. It requires foreign exchange and it involves seven forms, which are to be filled. Bank Charges (July-December 2006) S. # 1 2 3 Item Telegram on TT Postage on MT Cancellation of DD/Pay order Rate Actual-MinimumRs.75 Actual-MinimumRs.50 Rs.50 far Account holder Rs.100 far non Account holder 4 5 6 Issuance of Cheque Book Account closing Cost Issuance of duplicate Draft Rs. 3 per leaf Rs.250 for LCY Rs.200 far Account holder Rs.250 far non Account holder 7 8 Issuance of duplicate FDD Issuance of duplicate Pay order Rs.300 Rs.100 far Account holder Rs.150 far non Account holder 9 10 Issuance of RTC Stop payment charges Rs.5 per piece Rs.150 43

INTERNSHIP REPORT ON MCB BANK LIMITED

11 12

Issuance of fresh statement Issuance of duplicate statement

Rs.25 Rs 50

TECHNOLOGY DEPARTMENT

Technological advancements are also affecting the banking industry. The foreign banks have a competitive edge over all local banks in their technologies' advancements and automated systems. Local banks have also realized the gravity oil this situation and are striving 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 Pakistan and out of these more than 300 branches are fully computerized Almost all .the branches 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 provide service to ad 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 using computer systems at their own branches. Now customers do not have to wait long for their transactions and can operate their account through all the online branches.

ATM NETWORK

44

INTERNSHIP REPORT ON MCB BANK LIMITED ATM stands for Automatic Teller Machine. This machine is used to transact in one's account without intervention of humans. These machines are basically used for taking cash, confirming balances and requesting statements / cheque books.

MCB has the largest ATM network in the country at the moment with almost one ATM at each online branch and also ATM terminals at International Airports. This network covers more than the 27 cities of Pakistan including the provincial capitals and large commercial cities of the country. ATMs are operated through a card issued to the valued customers and by application of Personal Identification Number (PIN number). A person can withdraw from any machine across Pakistan with having an account in only one branch of MCB. This was only possible with the help of online system. In this system all the machines are linked to central banking host at IRM division Karachi through either satellite or telephone controller. This system identifies the card holder and his PIN Number. Now MCB has also entered into a contract with Cirrus which is a subsidiary of MasterCard. This contract will enable an ATM card holder to use his account even when he is out of country at all the ATMs where Cirrus logo is displayed. Green Cards are ordinary cards with a maximum withdrawal facility of Rs. 10,000/- in a day. The annual fee for this card is Rs. 300/- only. Gold Cards are special cars with maximum withdrawal limit of Rs. 25000/- in a day. These cards are issued to the persons having more than Rs. 500000/- as their average balance. International Cards are issued in collaboration with Cirrus and are useable all over the world with maximum withdrawal facility according to the standards of Cirrus.

INFORMATION ABOUT MY BRANCH 45

INTERNSHIP REPORT ON MCB BANK LIMITED

I did my internship in MCB Bank Limited Pattoki Branch. Some important information about my branch which I observed is as follows:

MANAGEMENT OF THE BRANCH

Branch Manager Operational Manager Accountant Credit Manager Forex Manager Chief Cashier Cashier Billing Cashier CSO

Ch. Sabir Hussain Muhammad Munir Fozan ul Qamer Farruk Afrooz Majid Iqbal Khursheed Ahmed Muhammad Usman Miss Farwa Asif Miss Sumera

OTHER GENERAL INFORMATION OF THE BRANCH 46

INTERNSHIP REPORT ON MCB BANK LIMITED

Deposits

The total deposits of this about to 322.734 million. In deposit there is increasing trend.

Deposits
25

20

Amount in Million

15

10

0 2003 2004 Years 2005

47

INTERNSHIP REPORT ON MCB BANK LIMITED

Profit Total remittance of this branch is 2157.319 million in 2005.there is also incrasing CASH Month DEBIT CREDIT TRANFER DEBIT CREDIT Total

January 2521 2303 2140 1967 8911 February 2209 2268 1835 1725 8037 March 2753 2508 2141 2395 9797 April 3079 2569 1982 2040 9670 May 3433 2726 1944 2018 10121 June 2813 2578 1962 1972 9325 July 3555 2229 2021 2123 9928 August 3784 2123 1928 2030 9865 September 4134 2114 2078 2135 10461 October 4923 1980 2337 2350 11590 November 6427 1968 2871 2720 13986 December 2808 2312 2992 2925 14037 trend in profit from 2003 to 2005 because of higher mark up rate charged on the finances. No. of vouchers 48

INTERNSHIP REPORT ON MCB BANK LIMITED The vouchers which are transacted in this branch in 2005 are as follows: Financing & Advances Mainly, the short term financing such as cash finance, running finance, Demand finance, ERF II, FAFB, FBP are being dealt here.

Number of accounts Accounts in this branch of MCB are as follows: Current account Total numbers of current accounts are 1236. PLS account Total numbers of profit and loss accounts are 3950. Khushali bachat account: These are about to 301 accounts Basic Banking Account (Newly Introduced by SBP for salaried person) There are about to 19 accounts. Foreign Currency Accounts: There are about to 60 accounts. MCB 365 Gold Account There are about to 101 accounts.

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INTERNSHIP REPORT ON MCB BANK LIMITED

ACCOUNT OPENING DEPARTMENT

Account opening and closing is the function of accounts departments. Banks customers may be individuals (Single or Joint), firms (partnership/proprietorship),

F Associations Educational Institutions or Local Bodies. I R BASICS TO OPEN AN ACCOUNT S During the span of mine internship in MCB, I learned and observed a lot of about T
Autonomous corporations, Limited Companies, Charitable establishment of a contractual relationship between the banker and the customer. By opening an account at a bank a person becomes a customer of a bank. Further

Institutions,

the opening of an account. Basically I think that the opening of an account is the

T I am going to express the basic requirements and steps involved in the opening of W an account. O
INTRODUCTION AND PRELIMINARY INVESTIGATION

W whether or not the person who is going to open the account is a desirable customer E or not. Then MCB determine the prospective customers integrity, respectability, occupation and the nature of business by the introductory references given at the E time of account opening. Negligence in this informal preliminary investigation may K result in serious consequences not only for the banker concerned directly but also for other bankers and the general public who may be affected indirectly. S
Before opening an account MCB as like the other banks in Pakistan ascertain In order to further strengthen and streamline this process, the Federal Ombudsman of Pakistan, vide his ruling on complaint No. II/31/5186, has directed the banks to retain with the account opening form a Photostat copy each of the National Identity 50

INTERNSHIP REPORT ON MCB BANK LIMITED Cards of the person desiring to open an account as well as that of the introducer. As per these directions, the concerned Branch Managers are required to obtain the original National Identity Cards along with their Photostat copies and then return the original after attesting the authenticity of the retained copy.

Preliminary investigation is necessary because of the following reasons: Avoid Frauds: In this regard I learned that if a banker does not make the necessary inquiries mentioned above he may enable dishonest persons to possess cheque books for fraudulent purposes. If any such person happens to be an undercharged bankrupt, the banker might be placed in an awkward position for having allowed such a person to open and open a bank account.

Safeguard against unintended overdrafts: Sometimes due to a mistake an account may be given an overdraft, For instance, the ledger keeper, misreading the balance of an account honors a cheque for an amount larger than the balance. Similarly a credit entry belonging to a customer may be made by mistake in another customers account. In such situations the excess amount withdrawn by the customer can only be realized if the customer is a respectable person.

Inquiries about clients: Being a banker I think MCB has a business obligation to respond to inquiries from other banks etc. about his customers financial position. Though the banker gives only a general ideal about the financial standing of his customer, it should nevertheless have the necessary information available with him.

51

INTERNSHIP REPORT ON MCB BANK LIMITED

Specimen Signature When an account is opened with MCB customer provides to the bank a specimen of the form of signature which would appear on all his cheques to express his authority for the payment of cheques drawn on his banker. This specimen is taken generally on a card specially designed for this purpose, and rule for the customers, full name, and account number are entered on it. If the bank has reasons to doubt the genuineness of a signature, he should either get it confirmed for his satisfaction or return the cheque with the remark Signature differs. If the signature of the customer is forged the banker cannot escape his liability because he has actually acted on his customers mandate.

HOW TO OPEN AN ACCOUNT (GENERAL)

Before opening an account in MCB I observed that the following points must be considered in this regard. Another account holder of the bank should properly introduce the new customer. The account holder should sign the account opening form in the presence of bank officer and the signature is duly verified. A copy of identity Card is required by Bank. Against submission of the Banks prescribed application form, duly introduced in the manner provided and on supplying such document, as may be required and account may be opened. The Bank reserves to itself the right to refuse to open and account without assigning any reason. Each account shall be allotted a distinct number that is to be quoted in all correspondence with the bank relation to the account. 52

INTERNSHIP REPORT ON MCB BANK LIMITED Minimum amount for opening and continued maintenance of various types of accounts is as follows: Rs. Saving Current Term Deposit 500 1000 500

The bank reserves the right to change the above mentioned minimum balance requirement at any time without any notice.

PROCEDURE TO OPEN AN ACCOUNT

According to my practice in MCB, when a customer wants to open an account, the bank officer gives him an application form. All information, which is necessary to be known by the bank, are requirements of the application form. Form also requires the essential documents to be attached by the customer. Basically following information is required to open an account with MCB.

Title of Account Full Name of Applicant Occupation Address Telephone No. Currency of account Nature of Business 53

INTERNSHIP REPORT ON MCB BANK LIMITED Introducers Name, Address & Signatures Special instruction regarding the account Initial Amount of the Deposit Signature of the applicant

DOCUMENTS TO BE ATTACHED Further I learned that if you wanted to open an account with MCB then you should attach the following documents with your application form which are different for different categories. SOLE PROPRIETORS ACCOUNT In order to open an account with MCB Sole Proprietors have to submit their business registration certificate number. PRIVATE / JOINT ACCOUTS For individual or private or joint accounts National Identity Card is required. JOINT STOCK COMPANY

Before an account of a Public Limited Company is opened MCB must ask the person authorized to do so to submit the certified copies or the following documents Certified true copy of the Memorandum and Articles of Association of the company. Certified true copy of the resolution of the board of directors / managing committee / governing body regarding conduct of the account. 54

INTERNSHIP REPORT ON MCB BANK LIMITED Certified list containing names and signatures of the directors / office bearers.

Certified true copy of the certificate of incorporation or registration. Certified true copy of the certificate of commencement of business (in case of public limited companies).

Balance Sheet I.D. Card copy of each director Original is also enclosed for inspection and return List of persons authorized to operate the account. Power of Attorney in favor of the person opening account.

PARTNERSHIP FIRM ACCOUNT Information which is required to be submitted to MCB by a partnership firm in this case is as follows: Full Names Address Specimen of signatures of the partners Certified true copy of partnership deed Registration No. if the Partnership is registered

SOCIETIES / CLUBS AND ASSOCIATIONS ACCOUNT MCB is authorized to open the accounts of the societies/clubs and associations, These are non-trading organizations, formed for the promotion of culture, science, education, recreational activities and charitable purposes etc. some of these 55

INTERNSHIP REPORT ON MCB BANK LIMITED institution are registered under the Societies Registration Act, 1866, and are issued a certificate of registration after they have been found fit for registration.

ISSUANCE OF CHEQUE BOOK When a customer opens an account with the bank, he is provided with cheque book for withdrawals from account. However, the first cheque book is given to the customer only when all the required documents are checked. A cheque book contains ten, twenty five, fifty or hundred leaves. The cheque book also carries a requisition slip for the issuance of the new cheque book. This slip is duly filled and singed by the customer. The signature of the customer is verified by the bank and new cheque book is issued to the customer and serial numbers of the cheque are duly entered in the book of the bank. Along with the signature, person should also write his full name & address. Usually only one cheque book is issued at a time, however big concerns who need a number of cheque books at a time, may ask the bank to stock as number of cheque books in their name and to point their name on these cheque books. Bank debits the clients account for excise duty of Rs.2.50/- per cheque and keeps the cheque book ready for the customer, as on his advice. The officer keeps and maintains the cheque book register Cheque book inventory and cheque books issued are recorded in this register. The account number for which the cheque book is issued and the number of leaves are also recorded in this register when the cheque book issued an entry is passed in the cheque book issue register. In case of loss of cheque book or requisition slip on cheque book the customer has to fill the Form No. 216-B to obtain a new cheque book.

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INTERNSHIP REPORT ON MCB BANK LIMITED

UTILITY BILLS COLLECTION

I worked in the utility bills collection department as the MCB collects utility bills on behalf of WAPDA, Sui Gas Companies, and Pakistan Telecommunication

T payment, Signature of the officer receiving the utility bills. After receiving utility H bills a list is made on the form which is called Bills scroll form. One copy of the scroll is with the bank for evidence whereas the original copy with the receipt of I the bills is sent to the billing department of the respective corporation. The bank R charge commission on the bills. D W E E K

Corporation Limited by putting the stamp on the utility bills Paid, Date of

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INTERNSHIP REPORT ON MCB BANK LIMITED

CASH MANAGEMENT

The most important department of MCB which deals in money (receiving deposits

F O Manager. In those branches where this department is not separately existed, the branch manager performs the duties of the Chest Manager. R T The excess cash (More than its insured limit by the insurance company) of the H branches of the region is collected by the main branch. The main branch is also
at lower rates and lend them out at higher rates of interest). This department also called as Chest Department and manager of it is called Cash Manager or Chest bound to send its excess cash (more than its insured limit) to the State Bank of

W E insurance company) whether or not he informed to the regional office (exception to the limit which is insured for the day). E K
Pakistan. No branch can have cash its safe more than its insurance at any time at the time of closing cash, if it is so the manager will be responsible (not the New Notes and Prize Bonds are also part and parcel of the Cash Management. Keys of the Safe lockers are with the three authorized persons each one of them is responsible for cash as at the time of closing the cash the officers including Cash officer presented and lock the safe after counting and scrutinize the cash. The cash officer maintain its daily cash book with specification of notes (Bonds are also recorded in the books in relation with cash) and other vouchers, after being satisfied the manager authenticates the books and vouchers regarding cash with stamp and signature. at

58

INTERNSHIP REPORT ON MCB BANK LIMITED the end I would like to conclude that the cash management is being done in the MCB very effectively.

ADVANCES DEPARTMENT

On my first day of Internship, Manager gives me some advice and told me the ways to success. He told me that if some one wants to get success in banking career then

L Advances. So from very first day I was interested to work in advances department A and at my request bank offer me opportunity to work in this department last two S weeks Bank adopts the following procedure in order to grant T a loan. A customer applies
he must have the knowledge of the one major department of the bank. I.e. for a loan to the manager, who says him to give details of his property. The details

T documents. The branch manager, in the light of the opinion received from the legal W advisor, discusses the proposal with the advancing manager whether to give or not O
of the proposal and the photocopies of the document to the title of property are sent the loan to the applicant. If manager allows granting the loan all the documents along with request letter are sent to regional office for approval. In the regional

to the legal advisor of bank. The legal advisor gives his legal opinion upon the

W which is signed by the regional controller credit. This letter is sent to the branch E manager. After receiving it the manager finance reviews the consent letter, and prepares a DAC (Disbursement Authorization Certificate). DAC can be made only E for people who have a bank account. K The following documentation is made for loan. S
office the proposal is analyzed and if the office is satisfied a consent letter prepared An application or request letter for loan by the customer

59

INTERNSHIP REPORT ON MCB BANK LIMITED Legal opinion of the legal advisor of the bank (for the title deeds) Consent letter from the regional office Vetting Certificate (includes consent No., Facility whether fund based or no-fund based, addresses etc.) Valuation of property any consultant or any panel of consultants approved by State Bank of Pakistan Original title deed or sale deed Affidavit General power of attorney (made by advocate for the person/owner taking loan for the company) Mortgage deed Mutation document made Verification of the property by the bank from the competent authority Hypothecation of stock certificate (Running is to be given against 75% margin of stock) IB-25R Letter of hypothecation (duly signed by the party) IB-12 , DP Note/Promissory Note (Bank prepared itself, duly signed by the party, revenue stamps of Rs. 100 put on it) IB-6R Agreement of finance mark up (Contract with party for taking mark up on quarterly basis) IB-24 (used for title deed)

IB-29 (used for guarantee from party) IB-26 (used for pledge of stock, margin is different for different goods) No. IB-28 (used for lien) etc. 60

INTERNSHIP REPORT ON MCB BANK LIMITED

After that Loan is sanctioned to the party fulfilling all the terms and conditions for the purpose. The procedure given above is for both short and long term loans. The thing which is most important here is that the banks first keeps in mind and analyzes according to the rules prudential regulations of the State Bank of Pakistan.

Following finances in which Pattoki Branch is dealing. Running Finance Cash Finance (Against Pledge of Stocks of wheat & rice) Demand Finance (against Lien On DSCs) Tractor Finance Foreign Bills Purchased Finance Against Foreign Bills Export Refinance I Export Refinance II

The exposure of Pattoki Branch is more than 500 Million.

I have learnt about the documentation required for the financing. Major focus on the financing is depending on the account turnover and collateral offered. While financing to the fresh client the credit proposal of the client is elevated to the higher office. The banks official get the applications form the customer and prepare the case for getting approval for the higher office. SECURITIES HELD AGAINST FINANCING FOR RUNNING FINANCE Hypothecation of Stocks (50% Margin) Collateral security (house, land, factory etc..) 61

INTERNSHIP REPORT ON MCB BANK LIMITED

FOR CASH FINANCE Pledge of stocks (20 to 25% Margin) Collateral security (house, land, factory etc..)

FOR DEMAND FINANCE Lien over Defense Savings Certificate Lien over Deposits (TDR) Lien over Foreign Currency deposits

FOR TRACTOR FINANCING Joint ownership of the Tractor Collateral security (Agri land)

FOR EXPORT REFINANCE PART I Lien over export bills drawn under firms order or contracts Collateral security (house, land, factory etc...)

FOR EXPORT REFINANCE PART II Hyp & Pledge of Stocks Lien over EE statement Collateral security (house, land, factory etc...)

FOR FOREIGN BILLS PURCHASED 62

INTERNSHIP REPORT ON MCB BANK LIMITED Lien over export bills drawn under LCs Collateral security (house, land, factory etc...)

FOR FINANCE AGAINST FOREIGN BILLS Lien over export bills drawn under firm order and contracts Collateral security (house, land, factory etc...)

FOR BANK GUARANTEE Cash Margin (As Per Approval of Finance)

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INTERNSHIP REPORT ON MCB BANK LIMITED

Chapter 4

FINANCIAL ANALYSIS

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INTERNSHIP REPORT ON MCB BANK LIMITED

65

INTERNSHIP REPORT ON MCB BANK LIMITED

BALANCE SHEET

4.2

FINANCIAL ANALYSIS:

BALANCE SHEET
Financial Statement

Muslim Commercial Bank Limited Balance Sheet As on 31st December 2003


A ssets
(Rupees '000)

2004

2005

2006

2007

Cash and balances with treasury banks Balances with other banks Lending to financial intuitions Investments Advances Operating fixed assets Deferred tax assets Other assets

24,053,669 1,302,592 10,430,450 128,276,842 97,200,179 4,582,823 6,477,064 272,323,619

23,833,253 5,708,323 10,965,297 67,194,971 137,317,773 7,999,821 6,154,370 259,173,808 7,566,684 7,590,864 221,069,158 1,598,720 269,499 6,525,999 244,620,924 14,552,884 3,371,800 5,661,553 165,208 9,198,561 5,354,323 14,552,884

23,665,549 1,469,333 9,998,828 69,481,487 180,322,753 8,182,454 191,967 5,464,426 298,776,797 8,536,674 27,377,502 229,345,178 1,598,080 8,611,600 275,469,034 23,307,763 4,265,327 13,408,005 210,662 17,883,994 5,423,769 23,307,763

32,465,976 6,577,017 21,081,800 63,486,316 198,239,155 9,054,156 172,373 11,031,450 342,108,243 7,089,679 23,943,476 257,461,838 1,597,440 11,171,496 301,263,929 40,844,314 5,463,276 24,662,426 5,530,973 35,656,675 5,187,639 40,844,314

39,683,883 3,807,519 1,051,372 113,089,261 218,960,598 16,024,123 17,868,761 410,485,517 10,479,058 39,406,831 292,098,066 479,232 1,180,162 11,722,493 355,365,842 55,119,675 6,282,768 34,000,638 5,130,750 45,414,156 9,705,519 55,119,675

Liabilities Bills payable 8,396,320 Borrowings 32,627,951 Deposits and Other 211,511,393 accounts Sub-ordinated loans 1,599,360 Liabilities against assetssubject to finance lease Deffered tax 707,306 liabilities Other liabilities 6,372,596 261,214,926 Net assets Represented by: Share capital Reserves Unappropriateed profit Surplus on revaluation of assets 11,108,693 3,065,273 4,379,255 281,636 7,726,164 3,382,529 11,108,693

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INTERNSHIP REPORT ON MCB BANK LIMITED

PROFIT & LOSS ACCOUNT

PROFIT AND LOSS


Financial Statement Muslim Commercial Bank Limited Profit and Loss Account As on 31st December 2003 2004 (Rupees '000)
Markup/ return/ interest earned 10,369,994 Mark up/ return/ interest expense 2,932,693 Net mark up/ interest income 7,437,301 - Provision for dimininution in (150,000) - Provision against loans and 705,787 advances - Provision for potential lease 862 losses - Bad debts written off directly 224,432 781,081
the value of investment

2005
17,756,232 2,781,468 14,974,764 (98,982) 1,242,153 1,184 1,144,355

2006
25,778,061 4,525,359 21,252,702 121,197 1,014,540 47,000 1,182,737

2007
31,786,595 7,865,533 23,921,062 105,269 2,959,583 199 3,065,051

9,083,863 2,057,640 7,026,223 (172,876) 442,595 1,200 8,771 279,690

Total non mark up interest4,531,811


income

4,232,988 10,979,521 7,244,200 149,593 41,864 7,435,657 513,852 4,057,716 1,555,764 70,420 1,626,184 2,431,532 195,966 25,839 221,805 2,653,337 7.21

5,413,071 19,243,480 6,459,490 (72,740) 178,841 6,565,591 340,598 13,018,487 4,611,359 (149,763) (365,524) 4,096,072 8,922,415 165,208 83,749 248,957 9,171,372 21.36

4,991,416 25,061,381 6,482,592 11,411 66,708 6,560,711 18,500,670 5,701,443 593,497 63,332 6,358,272 12,142,398 4,990,260 32,166 5,022,426 17,164,824 23.40

6,011,291 26,867,302 5,022,416 (3,743) 540,594 5,559,267 21,308,035 6,442,356 (1,294,473) 894,590 6,042,473 15,265,562 5,530,973 11,855 5,542,828 20,808,390 24.30

Non mark up/interest expense - Administrative expenses - Restructuring expenses - Other proposition/write off -O ther charges Total non mark up/ interest expense Extra ordinary/unusual items Profit before taxation Taxation-Current year -Prior years -Defferd Profit after taxation Unappropriate profit forward Transfer Profit
revaluation of fixed assets

11,188,031 6,587,369 878,704 50,000 59,034 7,575,107 3,612,924 1,212,579 170,200 1,382,779 2,230,145

brought

621,985

from

surplus

on 25,012 646,997 for 2,877,142

appropriation

available

Basic/diluted earning per share7.28

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INTERNSHIP REPORT ON MCB BANK LIMITED

RATIOS ANALYSIS
Liquidity Ratios
1.

Current Ratio:

The current ratio measures the number of items of the firm s current assets cover its current liabilities. Current ratio=current asset/ current liabilities

Current Ratio Years 2003 2004 103.02% 2005 106.80% 2006 111.00% 2007 110.00% Percentage 102.81%

Current Ratio
112.00% 110.00% 108.00% 106.00% 104.00% 102.00% 100.00% 98.00% 2003 2004 2005 2006 2007 Current Ratio

Analysis of current ratios of MCB: Current ratio shows a firms ability to cover its current liabilities with its current assets. It is obtained by dividing current assets of the firm by its current liabilities. Current ratio does not show the true picture of the organization. Sometimes it shows that organization has ability to pay its obligations but its profitability ratio tells that it has not ability to pay its obligation. 68

INTERNSHIP REPORT ON MCB BANK LIMITED

2.

Quick ratios:

Quick ratio shows a firms ability to meets it current liabilities with its current assets excluding inventories and prepaid expenses, which are least liquid portion of the current assets. Since banks dont have any sorts of inventories, therefore only prepaid expenses are subtracted from the current assets of the bank.

Quick ratio= current assets-inventories/current liabilities Years 2003 2004 74.77% 2005 80.74% 2006 89.06% 2007 76.94

Percentage 52.33%

100 90 80 70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007

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INTERNSHIP REPORT ON MCB BANK LIMITED

Cash and cash equality/total assets Cash and equality are the most liquid assets. The cash ratio shows the proportion of the assets held in the most liquid possible form. It is used to check the liquidity of the organization.

Years

2003

2004 11.40%

2005 8.41%

2006 11.41%

2007 10.60%

Percentage 9.31%

Cash ratio 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2003 2004 2005 2006 2007 Cash ratio

Analysis of cash ratios of MCB:


Higher cash ratio also shows the higher rate of satisfaction like other liquidity ratios. Cash ratio is more important liquidity ratio. In 2003 cash ratio was 9.31%, it increased very quickly in 2004 by 11.40%, but in 2005 it declined by 2.99. 2006 was the best year as it shows 11.41% ratio, In 2007, it declined by 10.60%.
In short working capital and cash ratio are more realistic and more important ratios, which describe the true picture of any organization. In MCB 2006 is the year in

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INTERNSHIP REPORT ON MCB BANK LIMITED

which the liquidity ratios are shown better than other years. So 2006 is mentioned a good year of the Muslim Commercial Bank. Leverage Ratios: Leverage ratios of a firm show the extent to which a firm finances its operation from the outside sources and money. The leverage can be determined from analysis of owner equity in business, total liabilities, current and long-term liabilities, longterm assets and total assets of the business. Following are the common leverage ratios to show the degree of leverage the bank is using to finance its activities and assets by liabilities. 5. Debt-To-Total-Assets Ratio

It shows that how much assets have been financed by liabilities and it also shows the margin of protection available for the creditors. Debt ratio Debt ratio=Total debt/ Total assets

Debt ratio Years 2003 2004 94.38% 2005 92.20% 2006 88.06% 2007 86.57% Percentage 95.92%

Debt ratio 100.00% 95.00% 90.00% 85.00% 80.00% 2003 2004 2005 2006 2007 Debt ratio

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Analysis of leverage ratio:

Financial leverage is the extent to which a firm is financed with debt. The amount of the debt a firm uses has both positive and negative effects. The more debt the more it is that the firm will have trouble meeting its obligations. Thus the more debts higher profitability of the financial distress and even bankruptcy. Further more the chance of the financial distress and debt obligation generally may create conflicts of interest among the stakeholders. In Muslim Commercial bank, year 2003 was heavily financed because debt was the major source of financing in 2003. Debt also had lower transaction cost. But better year was 2007 because Muslim Commercial Bank in this year was not heavily financed and had not trouble to pay its obligations.

6.

Debt-To-Equity Ratio:

Debt-to-Equity ratio shows the extent to which debt financing is used relative to equity financing. Debt equity is calculated by dividing total liabilities of the bank by the total owner equity.
Total debt divided by shareholders equity
Debt to equity ratio=Total debt / shareholders equity or Debt ratio/1-

Debt ratio
Debt to equity ratio Years 2003 2004 72.55 2005 64.58
Debt to equity ratio 100 80 60 40 20 0 2003 2004 2005 2006 2007 Debt to equity ratio

2006 55.14

2007 56.56

Percentage 85.22

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Analysis of the Debt to equity ratio:


The debt equity ratio is a simple rearranged of the debt ratio. Debt equity ratio shows how the firms stockholder bears the risk of the firm. Greater the debt greater risk for the firm s shareholders .In 2006 risk for the share holders was very low as compared to the other years decrease debt to equity ratio was very small on the contrast risk was very high in 2003 because of heavy financing

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8 Interest Coverage Ratio:


Interest coverage ratio shows the ability of a firm to cover up its interest charges on the income before interest and taxes. The ratio is obtained through dividing earning before interest and taxes (EBIT) of the bank by its interest expenses. EBIT divided by interest expense
Interest coverage ratio=EBIT/Interest expense

Interest coverage ratio Years 2003 2004 197.20% 2005 468.04% 2006 408.82% 2007 270.90% Percentage 107.85%

Interest coverage ratio 500.00% 400.00% 300.00% 200.00% 100.00% 0.00% 2003 2004 2005 2006 2007 Interest coverage ratio

Analysis of the interest coverage ratio:

Coverage ratio shows the number of the times a firm can recover or meet particular financial obligations. The interest coverage ratio, which is also called the time interest earned ratio, measure the coverage of the firm s interest expense.2005 is the best comparative better coverage of its interest and fixed charged obligations. After 2005, 2006 is better than other three but 2003 is worst than all.

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Profitability Analysis:
Profitability ratios are of two types those showing profitability in relation to sales and those showing profitability in relation to investment. Together, these ratios indicate the banks overall effectiveness of operation. It creates a relationship between income statement and balance sheet of the firm. Following are the some typical profitability ratios used to analyze the profits of firms. 9. Cost To Sales Ratio:

Cost to sales ratio determines the cost incurred in generating the sales of the bank. The net sales of banks are its interest/mark up earned while costs of sales are its interest/mark up expense incurred. The ratio is obtained by dividing cost of sales by net sales. The following table shows the cost of sales of MCB over five years of operations. Interest or mark up expensed divided by interest or mark up earned

Cost to sales ratio Years 2003 2004 22.65% 2005 15.66% 2006 17.56% 2007 24.74% Percentage 28.28%

Cost to sales ratio 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2003 2004 2005 2006 2007 Cost to sales ratio

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Cost to sales ratio shows the cost incurred in generating the sales of the bank. In 2003 the cost to generate the sales is higher with respect to other financial years. After 2003, 2007 had also higher cost. Year 2005 is best one for MCB but 2003 is worst than all.
10. Return On Investment:

Return on investment measure the ratio of profit generated in relation to the total assets employed. Net profit after tax divided by total assets gives the return on investment. Return on investment is an indicator of how profitable a company is. By using this ratio annually, we compare business' performance to industry's norms. Net profit after tax divided by Total assets Return on investment= Net profit after tax/Total assets
Return on investment Years 2003 2004 0.94% 2005 2.99% 2006 3.55% 2007 3.72% Percentage 0.82%

4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2003 2004 2005 2006 2007 Return on investment Series2

Analysis of the return on investment ratio


Profitability ratios focus on the profit generating performance of the firm. These ratios measure how effectively the firm is generating its profit. They reflect its performance, its risk ness and the effect of leverage. Muslim commercial bank was heavily financed in 2007 that financing was used in investment thats why return on investment is high in 2005 as compare to the other years.

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11.

Return On Equity:

Return on equity is another summary measure of overall banks performance. It can be calculated by dividing the net profit by the owner equity. This ratio tells us the earning power on shareholders book value investment and is frequently used in comparing two or more firms in any industry. A high return one quite often reflects the firms acceptance of strong investment opportunities and effective expense management.

Return on Equity Years 2003 2004 72.11% 2005 209.18% 2006 222.25% 2007 242.98% Percentage 72.76%

Return on equity 300.00% 250.00% 200.00% 150.00% 100.00% 50.00% 0.00% 2003 2004 2005 2006 2007 Return on equity

Analysis of Return on Equity of MCB: Return on equity is an indicator of how profitable a company is. Use this ratio annually to compare your business' performance to your industry's norms. In year 2007, MCB has a strong investment opportunities which reflects a high return, after this 2006 and 2005 also depicts a high return, whereas, 2003 and 2004 are not satisfied.

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12.

Market value ratios:

1-P/E ratio Price earning ratio=Market price per share/ earning per share

Price earning ratio Years 2003 2004 814.15% 2005 785.58% 2006 1051.71% 2007 1645.88% Percentage 706.04%

Price earning ratio 2000.00% 1500.00% 1000.00% 500.00% 0.00% 2003 2004 2005 2006 2007 Price earning ratio

Price earning ratio of MCB bank is high in 2007 as compared to the other years. Because the market price per share is high in 2007. Because in this year MCB generate an excellent profit. 2006 is also good but 2003 is worst all of them.

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13

Earning yield:

Earning yield=Earning per share/Market price per share

Earning yield Years 2003 2004 12.28% 2005 12.73% 2006 9.51% 2007 6.08% Percentage 14.16%

Earning yield 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2003 2004 2005 2006 2007

Earning yield

Analysis of the earning yield:


Earning yield of MCB bank is high in 2003 as compared to the other years. Because the market price per share and earning per share is low in 2003. Earning yield in 2004 and 2005 is also high. Earning yield is unsatisfied in 2007.

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14

Earning Per Share:

This ratio determines the amount of income that has been earned on each share outstanding. Net profit after tax divided by total numbers of shares outstanding gives the amount earned on each share.

Net profit after tax divided by total number of shares outstanding Earning per share=Net profit after tax/ Total no of shares

Earning per share Years 2003 2004 7.21 2005 21.00 2006 22.23 2007
24.30

Percentage 7.28

30 25 20 15 10 5 0 2003 2004 2005 2006 2007 Earning per share Series2

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Chapter 5

HORIZONTAL AND VERTICAL ANALYSIS

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In trend analysis we done two types of analysis, these are Horizontal Analysis It is conducted by setting consecutive balance sheet, income statement or statement of cash flow side-by-side and reviewing changes in individual categories on a year-to-year or multiyear basis. A comparison of statements over several years reveals direction, speed and extent of a trend(s). The horizontal financial statements analysis is done by restating amount of each item or group of items as a percentage.

Vertical Analysis Like horizontal analysis this can also done for balance sheet and income statement. Here we assign 100% value to any key item of balance sheet or income statement and then see portion of other items in this percentage.

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Particulars ASSETS Cash Balance with other banks Lending to financial institutions Investments_ net Advances net Operating fixed assets Other assets_net Deferred tax assets_net LIABILITIES Deposits and other accounts Borrowings from financial inst. Bills payable Other liabilities Deferred tax liabilities Sub ordinated loans Liabilities against assets NET ASSETS REPRESENTED BY Share capital Reserve Unappropriated profit Surplus on revaluation of assets

2002 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

2003 134% 60% 30% 143% 123% 120% 73% 0% 116% 116% 148% 134% 70% 38% 99.9% 0% 117% 94% 115% 145% 45% 122% 62% 94%

2004 133% 264% 32% 75% 174% 209% 69% 0% 110% 121% 35% 121% 72% 15% 99.9% 0% 109% 124% 126% 187% 26% 146% 99% 124%

2005 132% 68% 30% 78% 228% 214% 72% 191967% 127% 126% 125% 136% 95% 0% 99.8% 0% 123% 199% 160% 443% 34% 283% 101% 199%

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2002 250% 200% 150% 100% 50% 0% Total Assets Total Liabilities Equity 2003 2004 2005

The horizontal analysis of the balance sheet of the bank over all give the positive trend .The result of the balance sheet depict that there is a constant increasing trend in cash, total assets, total liability and equity. There is extraordinary high trend in 2005 in all factors of balance sheet as compare to 2002. The trend of cash is increasing to upward with 32%. The trend of Total asset is also increasing to upward with 27%, and the trend of total liabilities is also increasing with 23% to upward. Equity is increased by 99%.

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Particulars Mark-up/return/interest earned Mark-up/return/interest expensed Net mark-up/interest income Provision against non-performing loans and advances Provision for diminution in the value of investments Bad debts written off directly Provision for potential lease losses Net mark-up/interest income after provisions NON MARK-UP/INTEREST INCOME Fee commission and brokerage income Dividend income Income from dealing in foreign currencies Other income Gain on Investments Gain / Loss on trading in government securities Total non-mark-up/interest income NON MARK-UP/INTEREST EXPENSES Administrative expenses (Reversal) / Other provisions Other charges Total non-mark-up/interest expenses Compensation on delayed tax refund PROFIT BEFORE TAXATION Taxation current year Prior years Deferred PROFIT AFTER TAXATION Unappropriated profit brought forward Transferred from surplus on revaluation of fixed Assets Profit available for appropriation APPROPRIATIONS Transfer to Statutory reserve General reserve Capital reserve Reserve for issue of bonus shares Interim cash dividend Rs 1.75 per share Interim cash dividend Rs 1.50 per share

2002 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

2003 67% 48% 80% 705787% -150000% 31% 168% 108% 77% 115% 125% 66% 149% 532% 0% 175% 100% 87% 50000% 4496% 94% 0% 117% 79% 0% -101% 128% 219% 41% 126%

2004 59% 34% 75% 442575% -172876% 1.2% 234% 39% 79% 220% 127% 193% 116% 209% -11440% 163% 92% 96% 149593% 3189% 92% 513852% 130% 102% 0% -42% 140% 69% 42% 116%

2005 115% 46% 161% 1242153% -98982% 0.16% 0% 159% 161% 270% 161% 106% 217% 226% -851% 209% 172% 87% -72740% 13468% 81% 340596% 420% 301% -149763% 216% 513% 58% 137% 402% 256% 5500000% 0% 213% 97% 639799% 541% 34%

100% 128% 146% 100% 1000000% 800000% 100% 0% 0% 100% 77% 84% 100% 69% 51% 100% 383159% 50577% 100% 157% 156% University of the Education, Okara Campus Unappropriated profit carried forward 100% 45% 26% 87

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2002 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% Mark up Income

2003

2004

2005

Mark up Expense

Net mark up Net mark up after before provision provision

2002 600% 500% 400% 300% 200% 100% 0% Net Profit before tax

2003

2004

2005

Net Profit after tax

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According to horizontal analysis of profit and loss account there is increasing trend. In 2005 there is increase in all factors such as interest income interest income interest income after provision and profit before and after tax because the trust of people on banks is increasing day by day. The increase in profit in 2005 is almost 5 times as compare to 2002.

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Particulars ASSETS Cash Balance with other banks Lending to financial institutions Investments_ net Advances net Operating fixed assets Other assets_net Deferred tax assets_net LIABILITIES Deposits and other accounts Borrowings from financial inst. Bills payable Other liabilities Deferred tax liabilities Sub ordinated loans Liabilities against assets NET ASSETS REPRESENTED BY Share capital Reserve Unappropriated profit Surplus on revaluation of assets

2002 100% 8% 0.92% 14% 38% 34% 1.08% 4% 0% 100% 100% 82% 10% 2.8% 4% 0.48% 0.72% 0% 100% 100% 23% 26% 5% 54% 46% 100%

2003 100% 9% 0.5% 3.8% 47% 36% 1.3% 2.4% 0% 100% 100% 81% 12.5% 3.2% 2.4% 0.3% 0.6% 0% 100% 100% 28% 29% 3% 70% 30% 100%

2004 100% 9% 2.2% 4% 26% 53% 2% 3.8% 0% 100% 100% 90% 3% 3% 2.6% 0.8% 0.6% 0% 100% 100% 23% 39% 1% 63% 37% 100%

2005 100% 8% 2.8% 3.3% 23% 60% 27% 0.4% 0% 100% 100% 83% 10% 3% 3.4% 0% 0.6% 0% 100% 100% 18% 58% 1% 77% 23% 100%

Assets
Cash and balances w ith treasury banks Deferred tax assets Operatig fixed assets Balances w ith other banks Lendings to financial institutions

Other assets

Investments

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Advances

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Liabilities against assets subject to finance lease

O ther liabilities

D eferred tax liabilities U nappropriated profit R eserves B payable ills B orrowings from financial institutions

S hare capital S ub-ordinated loans

D eposits and other accounts

INTERPRETATION In balance sheet of bank the most important item is earning assets. There are four earning assets. Bank has strong earning assets like advances investments and lending to financial institutions has major percentage in of assets of bank. In liability and equity analysis the Borrowings from financial institutions and deposits have major portion and reserve and share capital has major portion in equity

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Particulars Mark-up/return/interest earned Mark-up/return/interest expensed Net mark-up/interest income Provision against non-performing loans and advances Provision for diminution in the value of investments Bad debts written off directly Provision for potential lease losses Net mark-up/interest income after provisions

2002 100% 39% 61% 0% 0% 4.6% 0.003% 5% 56%

2003 100% 28% 72% -1.44% 7% 0.008% 2.2% 8% 64%

2004 100% 23% 77% -1% 5% 0.01% 0.09% 4% 72%

2005 100% 16% 84% -0.55% 7% 0% 0.006% 6% 78%

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Particulars NON MARK-UP/INTEREST INCOME Fee commission and brokerage income Dividend income Income from dealing in foreign currencies Other income Gain on Investments Gain / Loss on trading in government securities Total non-mark-up/interest income NON MARK-UP/INTEREST EXPENSES Administrative expenses (Reversal) / Other provisions Other charges Total non-mark-up/interest expenses

2002 100% 35% 11% 19% 15% 30% 0% 100% 100% 93% 6.5% 0.5% 100% INTERPRETATION

2003 100% 23% 8.2% 7.3% 45% 16.5% 0% 100% 100% 87% 12.4% 0.6% 100%

2004 100% 47% 9% 12% 14% 19% -1.1% 100%% 100% 97% 2% 1% 100%

2005 100% 45% 9% 10% 16% 19.9% 0.01% 100%% 100% 98% -1% 3% 100%

In vertical analysis of profit and loss account the interest expense has decreasing trend from 2002 to 2005 but in 2005 there little bit increase in net interest income but almost have same trend. According to this analysis fee, commission and brokerage income has some worth in our income statement its almost one fourth or one fifth of our interest income and it has increasing trend. The administrative expenses are also increasing from 2002 to 2005 but overall management is able to reduce expenses, so due to which there is continuous increase in profit before and after tax.

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Chapter 6

SWOT ANALYSIS

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SWOT ANALYSIS
The overall evaluation of an organizations strengths, weakness, opportunities & threats is called SWOT Analysis. It is a strategic planning tool used to evaluate the strengths, weakness, opportunities & threats and involves specifying the objective of the organization and identifying the internal and external factors that are favorable and unfavorable to achieving that objective. A SWOT analysis is designed to help an organization & provide you with information that helps in making decisions about your future. Before conducting a SWOT analysis, 1st you defining and agreeing upon an objective.The key steps in conducting a SWOT analysis include: 1. Brainstorming lists of strengths, weaknesses, opportunities & threats 2. Take the list of ideas and reduce them 3. Review each idea separately and discuss each of these ideas. 4. Remember that the ideas with SWOT analysis is to gain a Better Understanding of the any organizations strengths and weakness. 5. In final step, categorize those steps which are helpful for the org. such as strength in internal environment & opportunities in the external environment, while categorize those steps which are harmful for the org. such as weaknesses in the internal environment & threats in the external environment. We avoid & exploit these two factors.

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STRENGTH
Promoting Savings and Investments Not excellent but good faculties are given to employees. For maintaining the employees, the MCB Commercial Bank provides the facility of health, employee relations.etc All staff members are well mannered in communications, & the ethics. Abundance of manpower.(Permanent & contingent employees ) WEAKNESS Centralization Organization Structure Information system needed for cards may not be compatible with legacy systems. The big problem is liquidity risk which reflects the corporationss inability to rise funds. OPPORTUNITEIS Large market potential. Favorable demographic changes in society All the opportunities of the 21st century are to be availed in the information technology. Information technology is the future of this dynamic world. Therefore MCB should emphasize much on IT, especially on E-Banking. Bank can design a universal account like other foreign banks, to enhance online facilities. The bank is large & expanding day by day because customer accepts it. Its network expanded to 240 branches. The MCB Commercial Bank involves in creating public relations that will increase the profitability of the bank. Often, public relations are conducted through the media that is, newspapers, T.V, magazines, internet.etc thats attract a large number of customers.

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The MCB Commercial employees.

Bank can increase the extensive advertisements of new

products, services, vacancies, in order to increase customers & heir competent

THREATS MCB is facing a strong competition by its competitors, Business of all these Banks are growing at very high pace. Huge competition with local and foreign banks Rapid technological advancements have become challenge for MCB Bank Ltd.

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Chapter 7

CONCLUSIONS RECOMENDATIONS

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CONCLUSIONS The time spent for the project at MCB Bank Limited were no doubt a source of great Learning for me about many things particularly working of different departments in bank. This practical project does help me attain loads of knowledge about the predominant Functions performed by banking companies, but also impart a lot of training as regards the set of behavioral traits which distinguish a particular person from the rest of the lot in a Professional environment. MCB Bank is newly born financial institution. Yet it is backed by the powerful international investors. It is not hidden from anyone the banking sector of Pakistan experienced tremendous growth over the couple of years. It is expected the same trend will continue as the middle class is being empowered in the country and there are many areas where investments can be employed depending on the countrys political and economic situation. Despite there is a meltdown in the global economy and the foreign investment which is shifting away from Pakistan, there is still hope that in the near future not much people will loose the opportunity to reap the benefits from the banking sector with flourishing prospects. In the micro sense the bank organization is able to go further ahead and cross the further grounds of progress. Its merger with the PICIC, and its other asset management and insurance arms with a larger branch network plus great assets worth can be very profitable to it. The MCB Bank should try to finance its assets not with the liabilities but by the issuance of right shares. It should also try to reduce costs. The emphasis on consumer and SME financing should also be enhanced as these can be very profitable areas for the bank. As the Stare Bank is pursuing tight policies the MCB should keep itself always ready to deal with the squeezing policies.

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RECOMMENDATIONS
During my employment at MCB Bank Ltd I observed some areas that need attention for the management like:

Assessment of performance of employees:


There are no proper criteria for assessment of performance of employees and most of the time it is on the personal judgment of the manager who forward the assessment sheets of all employees to area office for their promotions.

Problem with information system:


MCB Bank Ltd information system is not very good and most of the time online transaction service of the Bank network is down, which occurs to be a big issue in smooth working, management really needs to work on it. No rotation of employees from department to department: There is not any rotation of employees within departments and cross departments. Therefore, the top management should immediately start thinking in terms of rotating the employees in various departments, as this alter work force into human capital.

Implementation of management policy:


MCB Bank Ltd Limited should develop a very serious management policy to attract multi MCB corporations as its clients. This action, if actualized, would not only prove to be highly profit generating, but it would also contribute a lot towards MCB Bank Ltds image building.

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Advertisements/marketing:
Bank needs to use more marketing channels to make public aware of its products and services. In the presence of intense competition MCB Bank Ltd has to realize the importance of marketing.

Distribution of work:
Management should distribute work equally among different employees. Some of the employees are overburdened while some sections are overstaffed.

Staff training & improvement in processes:


To keep staff well equipped and updated with enormous changes in current banking environment, training are an important part of survival. Especially for the customer service staff and phone banking department as they are at front end and need more efficient performance for having satisfied customers.

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References

1. 2. 3. 4. 5. 6. 7. 8. 9.

www.howstuffworks.com www.sbp.org.pk www.mcb.pk.com MCB information booklet. 30/06/2009 Schedule of bank charges and services. www.kse.com.pk MCB banks annual report. (2008) quarterly report of MCB bank ( march 31, 2009) www.wikipedia.com

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