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Start in the name of Allah, the one who controls our destiny. Start
in ALLAH name, whose promise will never fail us. Start with
ALLAH guidance, that which will never mislead me. Start with
his help, that which will always suffice you.
__________________________________________________________________
__________________________________________________________________
PREFACE
Shoaib Akhtar
__________________________________________________________________
LIST OF ACRONYMS
MCB Muslim Commercial Bank
SBP
Demand Draft
TT
Telephonic Transfer
MT
Mail Transfer
SVP
VP
Vice President
GM
General Manager
HO
Head Office
OGI
Officer Grade 1.
__________________________________________________________________
TABLE OF CONTENTS
CHAPTER-1
HISTORY
BRIEF
CHAPTER-2
MCB
03
03
04
05
DIVISIONS\ DEPARTMENTS OF
01
01
02
06
06
06
06
07
07
07
07
08
08
08
08
09
09
09
10
12
14
__________________________________________________________________
CHAPTER-3
FINANCIAL ANALYSIS
CHAPTER#4
SWOT ANALYSES
4.1 STRENGTHS
4.2 WEAKNESS
4.3 OPPORTUNITIES
4.4 THREATS
CHAPTER-5
16
17
17
21
32
34
35
35
37
41
42
44
45
46
47
48
49
50
51
51
BIBLIOGRAPHY
54
__________________________________________________________________
CHAPTER-1
HISTORY OF BANKING
__________________________________________________________________
The only bank, which shifted its head office from Bombay to Karachi, was the
Habib Bank Limited. MCB with the assistance of Quaid-e-Azam Mohammad Ali
Jinnah, started operation in July 9, 1947 with an Authorized capital of Rs.3 crores.
Indo-Pak subcontinent, the Bank moved to Dhaka from where it commenced its
business in August 1948. And in 1956 the bank shifted its head office to Karachi,
where it is still working.
In 1948 Ms. Ispahanani and Mr. Abdul Hameed Adamjee purchased the bank. At
that time the bank showed a historical performance and profit.
1.3 NATIONALIZATION
In 1974 the government felt a harsh need of nationalization of banks and
financial institution and the nationalization act was introduced. Under this act,
MCB was the first bank, which was nationalized. In the same year Premier Bank
was merged with MCB and it started work as a government bank this
nationalization affected the bank badly.
1.4 PRIVATIZATION
All the financial institutions and banks did not show good performance
after nationalization, and again the government felt a big need to privatize these
banks. In 1991 the bank was privatized again. The government of Pakistan
transferred the management of the bank to National group, one of the leading
groups in the field of business. They were sold 25% shares. Now this group has
50% of the total shares. Government has 25% shares and general public also has
the same shares.
__________________________________________________________________
__________________________________________________________________
Charged on those advances with the depositors. Beside above-mentioned
objectives the Bank serves the society by facilitating them in the shape of
advances to industries, agriculturists etc. it also provides employment to people; it
help in developing economy of the country. It also provides facilities in doing
business with other countries.
Special preference was given to MBA's and then to the experienced staff
of BCCI. Ultimately the 1st batch of MBA's was hired in July 1992. The
management was aware of the fact that if you offer peanuts, you will find only
monkeys, therefore they offered attractive packages and thus was able to succeed
in skimming cream of the market.
B) A comprehensive six months theoretical program was devised at MCB Staff
Colleges, located at Karachi and Lahore for providing some reasonable
knowledge to the newly hired qualified staff. The stated theoretical training
program was supplemented by the practical branch training.
10
__________________________________________________________________
3. Compatible Package
After privatization the staff salaries have been revised three times. The first time
was 35%, the second was 32%, and the last one was 20%.
4. Excellent Working Environment
5. Modernization of Branches
6. Launching of New Products
7. Decentralization of Authority
8. Effective Reward Punishment Policy.
Mission Statement
MCB Banks team of committed professionals is dedicated to maintaining long
term customer relationships through outstanding service and convenience.
11
CHAPTER-2
Consideration on complaints.
Utility bills collections.
Hajj arrangements.
New and innovative policies.
This division generally looks after the credit policy of bank .It also maintains and
approves the advances and loans. It sets the rate of interest over the loan for specific
period. It usually receives applications from intending borrowers and submits the same
application to higher authority for approval.
The main function of this department is Payment and receipt. It collects and pays
money to the customers, on behalf of their account, through cheques or any other
negotiable instruments.
There are three main functions of the cash department:
Payment
Clearing
Receipts
2.15.1 Payment
The cash department issues payments on request. The checks are received by the
department and after their clearance cash is issued to the check-holder.
The payment deals with that customer who withdraws money through cheques or any
other negotiable instruments. The cashier keeps the record of all payments in the register
book. At the end the payment and receipt cashier checks the balance and count the cash.
They verify that both register cash and the cash in hand are balance.
2.15.2 Clearing
Another main aspect is the clearance of checks. It includes verification of proper
date, amount, endorsements, such as issue stamp, clearing stamp and back-side stamp,
and signature. After proper verification of checks the payments are issued. At the
issuance of cash the cash is debited in the clients account.
2.15.3 Receipts
It is responsible for taking cash deposits from its clients who want to store or
invest their surplus reserves. In the receipt section, the cashier receives money from the
customers on behalf of any individual or the company. Most of the receipt goes through
the accounts of the MCB.The cash receipts are done in two forms:
Collection of money from customers in their accounts
Collection of utility bills
Clearing implies a system by which banks exchange cheques and other negotiable
instruments drawn on each other within a specified area and thereby secure payment for
their clients through the clearinghouse at specified time in an efficient way.
The major operations of clearing departments are related to the check verification. This is
divided as follows:
Transfer of checks
Clearing of checks
Clearing department handles check related issues. It handles the checks of different other
banks such as Allied Bank, NBP etc. At the time of cash deposits, different checks from
other banks also come to MCB for deposits. This is the job of clearing department to sort
out checks of each bank. Then the net balance for each bank is calculated and adjusted.
The procedures for check transfer and clearance are as follows:
Gives check
MCB Bank
X account Dr
Y account -- Cr
It also deals with the checks of other banks. Suppose an NBP account-holder
gives a crosscheck for MCB. Similarly, MCB account-holders give check to people
having accounts in other banks; these all banks need to clear their overall balances with
each other. The clearing department does this.
Clearing checks
MCB
Account-holder
X
NBP
Account-holder
Cross check
NBP Bank
MCB Deposited
The clearing department makes different envelops for different checks of each bank. It
then sends these envelops to the clearinghouse. In the clearinghouse, representatives of
different banks take the balances of all the checks and the balances are cleared. Now
National Institution of Facilitation Technology (NIFT) takes the job of clearinghouse. It
not only separates balances for each bank but also for each branch. The clearing
department of MCB separates checks of each bank in different envelops and sends it to
NIFT. After NIFT sends the checks to other banks, they send an OK report to NIFT which
sends that report back to MCB. This ensures that all checks are safely deposited in the
respective banks.
the country, the first thing he had to do is to fill an application form. In which he states
that I want to transfer the money from this bank to that bank by mail. If the customer is
the account holder of the bank, it will debit his account and the concerned officer will fill
the six different forms to make the transfer complete. The five forms used for this
purpose are listed below:
After issuing the DD, the remittance department sends credit advice to the branch to
which the DD is sent, when the responsible branch receives the DD from the originating
branch, they credit it, and when the DD comes for clearing they debit the account.
Up to 10,000 is 15%
From 10,000 to 100,000 is 11%
CHAPTER-3
FINANCIAL ANALYSIS
Financial statement is any written report that purports to show the financial
condition of an organization. It may include balance sheet, income statement, cash flow
statement, and a report of changes in net worth.
For stakeholders of a business, analysis of the financial statements is the primary way to
critically examine its financial position, in order to seek answers to varying queries.
2.
Stability of the business is measured by its ability to meet interest and principle payment
requirements on outstanding debt and also its ability to pay dividends to its stockholders
regularly.
Profitability is measured by the success of a business in maintaining and increasing the
owners equity. The nature and amount of earning as well as their regularity and trend are
all significant in this appraisal.
2010
Amount
Percent Amount
Percent
21,259,900
11.37%
17,867,991
7.60%
8,025,689
1.62%
2,154,190
.92%
15470519
8.27%
33874620
14.61%
Investments (net)
55,432,235
29.63%
89609821
38.11%
Advances (net)
76584120
40.94%
78,923,737
33.28%
Other asset
11,400,906
6.09%
8,883,163
3.78%
3,659,646
1.99%
3,825,045
1.63%
220500
.12%
Total Assets
187053515
100%
235138567
100%
Bills Payable
8,097,178
4.33%
6,2661,957
2.66%
8946624
4.78%
21,987,824
9.35%
14544451
82.62%
182,705,716
77.70%
Subordinate loans
1,600,000
..68%
Other liabilities
8k,578,240
4.56%
9045634
3.85%
1838545
.78%
Assets
Liabilities
18066493
96.32%
223439676
95.02%
Share capital
2423140
1.30%
2665455
1.13%
Reserves
2278980
1.22%
3026517
1.29%
Unappropriated profit
283940
.15%
621985
.26%
1900962
1.02%
5384934
2.29%
6887022
3.68%
11698891
4.98%
187053515
100%
235138567
100%
2008
2009
2010
2010
22.66%
3.76%
Liabilities
Bill payables
Borrowing
from
7,803,443
8097178
6261957
financial 5,856,198
8946624
institutions
Deposit and other accounts
13.64%
Subordinated loans
1600000
finance lease
Other liabilities
8,43,8,055
1.66%
Nil
Total liabilities
13.96%
Net assets
5592743
887022
23.14%
Share capital
2,202,855
9.99%
Reserves
2,277,630
86%
3,185
2,83,940
1,838,545
11698891 69.86%
Represented by:
6,21,985
119.05% 8814.91%
(net)
Share holders equity
5,592,743
23.14%
2009
2010
2010
Assets
Cash and balance with treasury 12,571,424
21,259,900
17,867,991
15.95% 69.11%
3,025,689
2,154,190
28.80% 36.40%
15,470,519
33,874,620
118.96% 42.56%
Investment (net)
43,110,947
55,432,235
89,609,821
61.65%
28.58%
Advances (net)
86,359,139
76,585,999
78,923,737
3.05%
11.32%
Other asset
13,203,910
11,400,096
8,883,163
22.08% 13.66%
3,604,356
3,659,646
3,825,045
4.51%
1.53%
2,55,780
2,20,500
100%
13.79%
Total Assets
banks
Balances with other banks
4,757,413
7.06%
3.4.1 Assets
Total assets increased by 25.70% during 2009 over 2010, primarily based on
deposit growth. Increase in balance sheet volume is a healthy trend apparently, but it
needs further investigation. The balance sheet figures are reported on the day, books are
closed. These figures are not based on averages; neither financial statement discloses
changes during the year. Specific transactions may be carried out on the day to show
favorable balances. For instance on the day of closing of accounts, paying off bills
payable will improve the working capital or current ratio. In the following paragraphs
assets have been analyzed segments wise.
3.4.5 Investments
Investments at the face of balance sheet amounted to around Rs. 89.609 billion.
Investments increased by 81% as compared to a increase of 28% in the last year.
Commercial banks investments essentially include government debt securities, to
minimize credit risk. In Pakistan the capital and money markets have not matured enough
to generate funds for projects. The investments has been categorized by four classes:
Available-for-sale Securities.
Held-to-maturity Securities.
Subsidiaries.
Associated Undertakings.
Almost 85% of the investments are held in available-for-sale securities, which shows the
strong liquidity position of the Bank. These securities include Market Treasury Bills,
Federal Investment Bonds, Pakistan Investment Bonds, Listed TFCs, Shares in Listed
Companies etc., which are generally, considered very safe mode of investment. Among
these securities T-Bills are highly liquid. Interest rate carried by these securities is not
very high but the main concern is the liquidity sought for prudent banking Securities
given as collateral has evidenced a sharp decrease of around Rs. 7 billion, which can be
ascribed toward decline in Borrowings from Financial Institutions. There is no out of
usual provision for diminution in the value of investments, which indicate the overall
stability in the money market.
Among the securities held-to-maturity, half of the lot include TFCs, Debentures, Bonds,
PTCs, which carry as high as 18% interest rate.
The new entry in subsidiaries was introduction of MNET Services (Pvt) Ltd. it is the
second technological initiative in a row, after the successful operation of ATM network.
Investment in associated undertakings remained unchanged.
3.4.6 Advances
The total amount of advances stood at Rs. 79 billion. Advances increased 3.05%
from previous year, as compared to a decrease of 11% in the same in
The previous year. The increase can be attributed to two major factors. One was the
increase in demand for credit from the manufacturing and export clients due to the
situation prevailing after offer the govt. good economic policies (increase in foreign
exchange reserves). And second was the higher steadiness demand for seasonal financing
due to speed in the sugar season and steadiness in cotton prices leading to a speed in the
purchase of cotton. Short-term advances are less than Long-term advances by Rs. 50
billion. We can predict the high pace of long-term development projects from this piece
of statistics.
If we look at the component balance sheet analysis, it reveals that net advances are
around 33% of total assets, while the same were around 41% of total assets in the
previous year. At the same time lending to financial institutions and investments has
increased as a proportion of total assets. The bank further needs to lower the mark-up
rate, broaden their deposit base, and a bit relaxation in conservative credit policy.
3.4.12 Reserves
The reserves of the bank registered an increase of only 32% in the year 2009with
the year-end figure of Rs. 3 billion compared to last years figure of Rs. 2.27 billion.
While in the year 2008, we had seen an increase of .1% in the banks reserves.
The Unappropriated profit for the year 2009 registered a increase of 119.05%
compared to last years remarkable increase of 815%. That is, profit for last year was Rs.
284 million whereas for the year 2010 it was Rs. 621 million.
MCB
Income statement
For the years ended Dec. 31, 2008 2010.
(Rupees 000)
2010
2009
%2009 over
2010
Markup/return/interest earned
15,385,869
17,033,225
9.67%
Markup/return/interest expended
6,074,682
7,544,897
9.67%
9,311,187
9,488,328
1.86%
62064
100%
1704308
100%
Provisions
Provision for diminution in the valve of invest
Provision
against
non
performing
loans
and
advances
Provision for potential to lease losses
512
636
19.49%
721105
448999
60.60%
Total provisions
721,617
2,216,007
67.43%
8589570
7272321
18.11%
907071
868637
4.42%
Dividend income
297748
243994
22.03%
503593
687854
26.78%
Other income
881746
400140
120. 35%
2,590,158
2,200,625
17.70%
11,179,728
9,472,946
18.01%
Administrative exp.
8077395
7331623
10.17%
Other provisions
40,000
100%
Other charges
1313
147
793.19%
8078708
7,371,770
9.58%
3,101,020
2,101,176
47.58%
1,531,551
957,720
59.91%
Non-markup/interest income
Deferred
(169125)
35280
579.37%
1362,426
993,000
37.20%
1,738,594
1,108,176
56.88%
3185
8814.9%
194751
60916
539607
3185
16842.13%
2278201
1,111,361
104.99%
MCB
Income statement
For the years ended Dec. 31, 2009 2010.
(Rupees 000)
2010
2009
Amount
Percent Amount
Percent
Markup/return/interest earned
15,385,869
137.62% 17,033,225
179.80%
Markup/return/interest expend
6,074,682
54.34%
7,544,897
79.65%
9311187
83.29%
9488328
100.16%
62064
.65%
1,704,308
17.99%
512
.0004%
636
0006%
721105
6.45%
448999
4.74%
Total provisions
721617
6.45%
2216007
23.39%
8589570
76.83%
7272321
76.77%
Non-markup/interest income
Fee, commission and brokerage income
907071
8.11%
868637
9.17%
Dividend income
297748
2.66%
243994
2.57%
503593
4.50%
687854
7.26%
Other income
881746
7.89%
400140
4.22%
2,590,158
23.17%
2,200,625
23.23%
Total income
11,179,728
100%
9,472,946
100%
Administrative expenses
8077395
72.25%
7331623
77.39%
Other provisions
40,000
.42%
8078708
72.26%
7371770
77.82%
3,101,020
27.74%
2,101,176
22.18%
1531551
13.70%
957720
10.11%
Deferred
(169125)
(1.51%) 35280
.37%
Total taxation
1,362,426
12.19%
993,000
10.48%
1,738,594
15.55%
1,108,176
11.70%
283940
2.54%
3185
.03%
Prior year
194751
1.74%
60916
.54%
539607
4.83%
3185
.03%
2,278,301
20.38%
1,111,361
11.73%
Non-markup/interest expenses
Current Assets
Current Liabilities
i)
Current Ratio =
ii)
Cash Ratio =
iii)
Debt Ratio =
iv)
v)
vi)
vii)
viii)
ix)
x)
xi)
xii)
Return on assets =
xiii)
Operating expense
total expense
xiv)
xv)
xvi)
xvii)
Total dividend
2009
2010
Current ratio
.98
1.00
.63
Cash ratio
.08
.12
.03
Debt ratio
.97
.96
.95
30
26
19
.04
.10
.18
.27
.36
.49
.63
.49
.43
.49
.56
.60
.09
.12
.20
.05
.07
.11
.08
.09
.06
Return on assets
.76%
1.12%
1.32%
Return on equity
.13
.16
.19
3.03
4.57
6.52
.53
.49
.57
.59
.43
.52
5.10%
3.94%
3.43%
.06
.05
.04
Profitability measurement
3.7 INTERPRETATION
Ratio is a simple mathematical expression of the relationship of one item to
another. Ratios are particularly important in understanding financial statements because
they permit us to compare information from one financial statement with information
from another financial statement. There are some limitations to financial ratios. First
different firms use different accounting policies; secondly different businesses have
different volumes and different conditions.
current ratio, the more liquid the company appears to be. According to the ratio calculated
for MCB, the current assets are lower. Than the current liabilities. But there would be
enough liquid assets to pay the current liabilities. As the decreased has occurred only due
to the increase in deposits. The ratio is particularly an imperative for present deposit
holders and prospective deposit holders to base their decisions upon. In general, the
current ratio of the Bank is satisfactory with a nominal variation over years.
gloomy picture of the business. But it is noteworthy, that the banks are not allowed to
keep surplus of their cash with them, they have to deposit it with central bank. Moreover
the banks have to pay its depositors, which is not possible by keeping the cash in their
wallets. They have to invest it in some profitable ventures.
It shows the relationship of total liabilities and equity. Total liabilities are divided
by equity. If liabilities outnumber equity, the chances of paying off to the creditors
become less in case of liquidation. For stockholders the higher debt-equity ratio means
that they will be paid less return, as first the interest will be paid. But there is a positive
aspect too. If the return earned on the funds borrowed from creditors is adequately more
than the interest paid to the creditors on these funds, stockholders will be left with more
profits for appropriation.
The debt-equity ratio for MCB is 19, which means that liabilities are 19 times larger than
the equity. The ratio for previous years was 26, which enunciate that the equity has
increased for the year. The reasons for increase are the issue of bonus shares, increase in
interim dividend, and increase in un-appropriated profit.
Advances were 43% of the deposits for the year 2009 while this ratio was 49% for
previous year. Since the overall economic conditions were favorable and predictable (for
investment) the management had focused more on investments in year 2009.
Funds were available for investment at less cost. On the other hand the Bank made huge
profits on comparatively less amount of advances
The assets turnover ratio for MCB is .06, which means that assets generate
revenue of about 6% of the total assets. The ratio suggests that assets are adequately
productive. The ratio has faced little variations in previous years. In last year it was 9%.
This ratio is an indication of the percentage the operating expenses carry to total
expense. Increase in this ratio indicates that the total operating expense has increased in
relation to total expense which in turn can be used to find the positive or negative effect
on the income of the bank. For year 2009 this ratio was 57% while for previous year this
ratio was .49%. The difference (8%) is off settled by the same percentage. Increase in net
profit margin before tax.
CHAPTER#4
SWOT ANALYSIS
4.1 STRENGTHS
One of the major strengths of MCB is that it has very stable deposit base.
MCB is largest private bank in Pakistan with around 1000 branches, which
MCB has the accounts of big organizations like OGDCL, PTCL, EFU,
PTC etc.
Laying foundation on sound basis; recently for this they met with the
one special circle taking this extensive burden from branches, whereas no other
bank has done this so far.
Larger Market Share: MCB accounts for 10.4% of total assets, 10.0% of
deposits and 11% of loans in the banking system. So it has a clear edge over
smaller banks.
strive for greater operating income, as is evident from the figure (15) that since
1996 bank has been able to gain some net positive Profit After Tax amount
consistently and will be aiming to do so in near future.
banking research cell that is exploring the technical requirements and market size
Potential of Internet Banking.
4.2 WEAKNESS
Though ATM network is the largest in Pakistan, still some potential areas dont
have the ATM.
Although most of the branches are computerized now, still some important
system.
results in too much load on single person plus the fear of being fired from the job
at any moment.
employees were given a quota of 2 weeks vacation per year or its equivalent
amount in Rs. as a Recreational Activities have been withdrawn. Such program
was essential to keep the employees in high spirit giving that extra bit of time for
them to personal life.
and not disclose to the staff by the branch managers which is in line with their
needs due to some inexplicit ulterior motives.
Lack of Job Rotation: Job rotation has not been given due consideration
4.3 OPPORTUNITIES
Leasing sector is growing in Pakistan for the last two to three years which
Islamic Trading Based Banking can enhance the business of the bank.
drop in interest rates is expected to spur the private sector credit growth in an
effort to kick-start the dormant economy serving as impetus for productivity
activity in economy; which is likely to compensate for lower interest margins that
result from less than proportionate drop in deposit rates.
MCB with its large branch network and hence huge, diversified clientele
is placed to benefit from lower NPLs, a new dynamic and cost conscious
management, and greater credit demand on the back of governments conscious
initiative towards a deflationary monetary policy.
Only Operationally efficient banks will benefit from Low Interest Rates:
The declining interest rate environment would lower MCBs cost of equity
(COE), thus having a positive impact on its ROIE COE spread, which in turn
allows
interest rates has challenged the banking sector, including MCB, on the deposit
mobilization front. At the same, however, MCBs large branch network coupled
with its excellent market standing compared with other banks offering similar
returns on deposits is expected to retain even bolster its deposit base in future at
the expense of less efficient public Sector competitors.
4.4 THREATS
For the last of many years, Pakistan is facing economic and political
Afghan war and Iraq war has a deep effect on the economy of Pakistan,
People dont prefer banking culture. They mostly prefer cash transactions.
national level particularly. However if there is some competition that MCB may
expect to face come from the four nationalized commercial banks, which compete
with the MCB in terms of deposit mobilization at retail level.
Other banks working on the same phenomena seeking for proficient and
CHAPTER-5
counter where utility bills are collected and cash is deposited and withdrawn. Hence, if a
new counter cannot be built due to certain limitations the utility bills should be collected
through a window so that the regular customers do not face any problems.
The clearing officer has less to do with the operations of the bank and thus does
not sit at a front desk of the branch. As a result, he becomes usually casual and relaxed
about his apparel. This leaves a bad impression of the bank when he leaves the premises.
A dress code should be implemented and observed by all the employees in order to build
a reputation of the bank.
Physical verification of the security tendered is a must rather than to merely rely
on the documents. It had been noted that where the property to be hypothecated/
mortgaged lay in remote areas such as the Gadoon Industrial Estate regular physical visits
are avoided by the officers
BIBLIOGRAPHY
1.
Siddiqui A.H. (1983 P.nos. 16-22) Practice & Law of banking in Pakistan.
2.
3.
4.
5.
6.
Brochures/Leaflets (n.d)
7.
8.