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.
Internship Report On MCB 1
Internship Report On MCB 2
Pre-requisite of BBA (Hons) study is to undergo internship. I got the
opportunity to join the MCB Peshawar Chowk Yadgar branch for the said propose
for a period of 10 weeks.
Practical involvement was a great experience as interaction both with
experienced executive and clients cemented the base of knowledge I have been
acquiring in classroom.
This internship report includes the material about MCB and different
departments along with their working procedure.
For the completion of this project I meet various persons of these
As for my knowledge and hard work is concerned, this report will provide a good
in sight of MCB.
Internship Report On MCB 3
LIST OF ACRONYMS
MCB Muslim Commercial Bank
SBP State Bank of Pakistan
EBIT Earning Before Interest and Taxes
DD Demand Draft
TT Telephonic Transfer
MT Mail Transfer
RTC Rupee Traveler Cheque
SEVP Senior Executive Vice President
AVP Assistant Vice President
SVP Senior Vice President
VP Vice President
GM General Manager
HO Head Office
OGI Officer Grade 1.
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TABLE OF CONTENTS
1.1 BRIEF HISTORY 01
1.2 BANKING IN PAKISTAN 01
1.3 NATIONALIZATION 02
1.4 PRIVATIZATION 02
1.5 AN OVERVIEW OF MCB 03
1.6 OBJECTIVES OF MCB 03
1.7 STRATEGIES TO ACHIEVE OBJECTIVES OF THE BANK 04
1.8 MCB VISION & MISSION 05
CHAPTER-2 DIVISIONS\ DEPARTMENTS OF
2.0 DIVISIONS OF MCB 06
2.1 HUMAN RESOURCE DIVISION 06
2.2 GENERAL SERVICE DIVISION 06
2.3 BUSINESS DEVELOPMENT & MARKETING DIVISION 06
2.4 FINANCE & TREASURY DIVISION 07
2.5 INDUSTRIAL CREDIT DIVISION 07
2.6 INTERNATIONAL DIVISION 07
2.7 CENTRAL ACCOUNT DIVISION 07
2.8 AUDITS AND INSPECTION DIVISION 08
2.9 ELECTRONIC AND DATA PROCESSING DIVISION 08
2.10 LEGAL AFFAIRS DIVISION 08
2.11 ISLAMIC BANKING DIVISION 08
2.12 TRAINING DIVISION 09
2.13 CREDIT MANAGEMENT DIVISION 09
2.14 DEPARTMENTS OF MCB 09
2.15 CASH DEPARTMENT 10
2.16 CLEARING AND COLLECTION DEPARTMENT 12
2.17 INLAND REMITTANCES 14
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CHAPTER-3 FINANCIAL ANALYSIS
3.1 PURPOSE OF FINANCIAL STATEMENT ANALYSIS 16
3.2 LIMITATIONS OF FINANCIAL STATEMENTS 17
3.3 TOOLS OF FINANCIAL STATEMENT ANALYSIS 17
3.4 BALANCE SHEET ANALYSIS 21
3.5 FORMULAE FOR THE CALCULATION OF THE RATIOS 32
3.6 RATIOS ANALYSIS 34
3.7 INTERPRETATION 35
3.8 LIQUIDITY AND CREDIT RISK MEASUREMENT 35
3.9 PROFITABILITY MEASUREMENT 37
CHAPTER#4 SWOT ANALYSES
4.1 STRENGTHS 41
4.2 WEAKNESS 42
4.3 OPPORTUNITIES 44
4.4 THREATS 45
CHAPTER-5 FINDINGS AND RECOMMENDATIONS
5.1 DEPOSITS DEPARTMENT 46
5.2 REMITTANCES DEPARTMENT 47
5.3 CASH DEPARTMENT 48
5.4 BILLS AND CLEARING DEPARTMENT 49
5.5 ADVANCES DEPARTMENT 50
5.6 FOREIGN EXCHANGE DEPARTMENT 51
5.7 OTHER FINDINGS AND RECOMMENDATIONS 51
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CHAPTER-1 HISTORY OF BANKING
1.1 BRIEF HISTORY
Consensus on the origination of word “Bank” is not yet reached at. Some
author’s opinion is that this word is derived from the words “Bancus” or
“Banque”, which mean a bench and they further relate banking business inception
to Jews in Lombardy. Other authorities state that the word “Bank” is derived form
the German word “Back” which means “Joint Stock fund” and later on due to
German occupation of Italy, this word was Italianated into “Bank. Authors quote
Babylonians (few quotes Chinese) who developed banking system as early as
A banker is described as a person transacting the business of accepting for the
purpose of lending or investment of deposits of money from the public, repayable
on demand or otherwise and withdraw-able by cheque, draft order and includes
any post office savings bank.
1.2 BANKING IN PAKISTAN:
Banking started in Pakistan after the bold and emergent decision of
formulation of SBP on July 30, 1948. Thereafter this sector has witnessed
enormous growth. In 1974 banks were nationalized, in the hope that new era of
growth could be achieved through it.
However the process is reverse since 1991, up till now MCB, ABL, and UBL
have been privatized and HBL is in the process of its privatization.
On 14th August 1947, 487 branches of different banks were operating in Pakistan.
By 30th June, 1948, 292 branches winded up their business in Pakistan and the
remaining 195 branches restricted their banking operations to a minimum level.
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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.
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.
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.
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1.5 AN OVERVIEW OF MCB
The MCB was established one month before the independence in June
1947 first head quarter in Calcutta and after independence it was shifted from
Calcutta to Dhaka and afterward its Head quarter was shifted from Dhaka to
Karachi in 1948.
Among the other 22 scheduled banks with 3525 branches network nationalized on
01st January, 1947through the nationalization of Banks Act, 1974 under the
nationalization policy of the Government. MCB was also nationalized and at that
time of nationalization Premier Bank was merged in M.C.B LTD in 1974.
After the failure of the communism, it was realized though the world the idea of
nationalization was not correct and has no any positive effects on economy. This
idea developed especially in 1980 decade under which in sub-continent of Asia its
importance was also realized. In Pakistan Privatization and de-regulation policy
was started in 1998 under this policy the first unit privatized was M.C.B, with a
view to stable the economy and to reduce the burden on national exchequer of
other sick units.
In 1990 this bank was announced for Privatization on the grounds that 51% shares
would be for general public out of which 26% shares would be offered to a
particular party, which will take administration of bank and lead by Mian
Mohammad Mansha who was the first chairman of MCB LTD.
Now out of 10% shares only 14.90% shares are being held by State Bank of
Pakistan and all other being held by individuals, directors and joint Stock
Companies etc (Annual Report of M.C.B).
1.6 OBJECTIVES OF MCB
The main objectives of MCB are to earn Profit by investing the money of
depositors, who can’t utilize that money for getting required return. So the bank
invests that money in the shape of advances and shares, the return or interest
Internship Report On MCB 9
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.
1.7 STRATEGIES TO ACHIEVE OBJECTIVES OF THE BANK
MCB Limited is a business entity and all its activities are directed towards
the prime objectives, which is profit. But the only difference is that it sells
intangible products i.e. the services.
Now in order to achieve this important goal, the management has evolved
multidimensional policies. Especially after privatization of the bank on April
1991, a very enlightened management took the charge of MCB Limited. Mr.
Hussain Lawai the renowned and experienced banker assumed the office of the
Chief Executive i.e. the President of the MCB.
Major aspects concentrating are the following:
1. Effective use of electronic media
2. Enlighten Personnel Policies
Mainly the whole program was based on the following points.
A) 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.
3. Compatible Package
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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.
1.8 MCB VISION & MISSION
Challenging and Changing the Way you Bank.
MCB Bank’s team of committed professionals is dedicated to maintaining long
term customer relationships through outstanding service and convenience.
Internship Report On MCB 11
CHAPTER-2 DIVISIONS /DEPARTMENTS OF MCB
2.0 DIVISIONS OF MCB
Following are the main divisions established in the head office taking the
responsibility of their respective functions under the guidance and instructions of their
2.1 Human resource division
All matters related to staff as pension, provident fund medical
allowances, recruitment policy and other staff matters are dealt here.
2.2 GENERAL SERVICE DIVISION
This division has been created to look after and maintain bank’s properties. The
function of this division is explained as under:
Purchase or lease branches premises.
Purchase/sale of furniture, fittings, banks vehicles etc.
Proper maintenance of banks assets.
Looking after communication system.
2.3 BUSINESS DEVELOPMENT & MARKETING DIVISION
This division is established for the promotion of the business of the bank
and sets the deposit targets and then makes the schemes to achieve those targets. The
functions of this division are categorized as under:
Branches opening/closing shifting.
Shares floatation/government deposits.
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Consideration on complaints.
Utility bills collections.
New and innovative policies.
2.4 FINANCE & TREASURY DIVISION
Finance and treasury division deals with following functions:
Inward and outward remittances are recorded. Surplus funds are utilized (to purchase the
shares of other companies). Balance sheet of the bank is prepared. Public sector advances
are released. The safe custody of the securities is maintained. Declaration of the rates of
return on PLS Account.
2.5 INDUSTRIAL CREDIT DIVISION
Industrial credit division was established in 1983 with the object of providing
loans for different industrial projects and to assist in economic Development of the
country and also to invest money for the purpose of earning profit.
2.6 INTERNATIONAL DIVISION
International division deals with the supervision of the foreign exchange function
of branches. It solves the problems of the branches regarding international trade.
2.7 CENTRAL ACCOUNT DIVISION
The central accounts division is categorized by the functions as under:
Payment section (purchases and procurement and fringes benefits to executives).
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Zakat and Usher section.
2.8 AUDITS AND INSPECTION DIVISION
Inspection division is established so as to detect any fraud forgery in the branches
and sudden visits to branches to keep them alert and attentive during banking hours.This
department is working for the improvement of auditing system and continuously
searching the best possible means of inspection for effective auditing. MCB uses the both
methods i.e. internal audit and external Audit.
2.9 ELECTRONIC AND DATA PROCESSING DIVISION
The function of this division is to record the business of the bank with computer
programming, and taking all the transactions and dealings of the bank recorded for the
2.10 LEGAL AFFAIRS DIVISION
This division deals in following matters:
Handling on property documents sent to them by various circles and
head office i.e. loan documents etc.
Follow up, recovery cases and cases of fraud against employee. The
cases against bank are dealt too.
Give opinion on various accounts i.e. partnership, deceased and pension
accounts. It gives opinions on all-important legal matters.
2.11 ISLAMIC BANKING DIVISION
It is established with the aim of introducing the Islamic Banking at
branches in different cities.
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2.12 TRAINING DIVISION
The training division is established, so as to train the newly employed
staff and the promoted staff to keep them efficient on service. At Presented their two
training centers providing facilities to new employees in the country which are situated in
Karachi and Lahore.
2.13 CREDIT MANAGEMENT DIVISION
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.
2.14 DEPARTMENTS OF MCB
MCB is one of the largest private banks of Pakistan. It offers a well-organized
structure of specialized services distributed among its various departments. This
departmental segregation provides MCB with more proper and professional approach and
efficient means of performing each service. Departmentalization makes the services more
proficient and specialized procedures for every job are used.
At each branch level the duties are divided into seven departments. There is a chief
manager at the top level of each branch. He is responsible for the overall performance
and working of his branch. The authority is then divided into two heads at the next level.
There is a credit manager who handles the credit department operations of the branch.
The other one is the operations manager who is responsible for all the rest of the
departments. Each branch is divided into the following departments:
Clearing and collection department
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Foreign exchange department
The functions of each department and their operations are explained as follows:
2.15 CASH DEPARTMENT
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
There are three main functions of the cash department:
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.
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.
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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
2.15.4 Collection of money from the customer in their accounts
The cash is received from the customers in their accounts. At the time of cash
receipt, the client’s accounts are credited.
Every account holder deposit money in his account, they deposit the money through the
bank receive voucher, which is of specific nature i.e. it may be PLS, current or MBKS
etc. So the cashier deposits the money that is received. He keeps in record the voucher
no, amounts, a/c no etc and then presents to the computer department for posting.
2.15.5 Collection of utilities bills
MCB also offers the facility of payment of utility bills. The customer can deposit
electricity, gas, and telephone bills through the bank. The bills are received, stamped and
kept in record. Then it is posted in the corresponding accounts of the bank in which the
money is deposited.
It also provides this convenience to private companies as well. Private companies also
deposit their bills in the MCB accounts, which are similarly received, kept in record and
deposited in the corresponding accounts.
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2.16 CLEARING AND COLLECTION DEPARTMENT
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:
2.16.1 TRANSFER OF CHECKS
It deals within the inter-bank transfer of checks. Suppose a person X gives a
check of MCB to another person Y who also has an account in MCB, the clearing
department will handle it. The clearing department simply debits one account and credits
the other one.
Gives check MCB Bank X account – Dr
X Y Y account -- Cr
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2.16.2 CLEARING OF CHECKS
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.
Cross check NBP Bank
X Y 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.
2.16.3 BILLS COLLECTION
The bills collection is the key department in each branch. The objective of this
department is to receive the cheques of different bank of different area. Often the cheque
is drawn to the clients of another bank or account holder of the MCB and similarly the
customer of another bank draw cheque to MCB account. In both cases the cheque is
cleared, endorsement conformed, or takes the disbursed
Internship Report On MCB 19
Guarantee. And then deposit to the corresponding department or banks or whatever the
case may be.
Shortly the bills are divided in the following two main categories.
Local bills collection (LBC)
Country bills collection (CC)
2.17 INLAND REMITTANCES
This means transfer of funds from one branch to another within the country
through following banking instruments
Demand Drafts (DDs)
Telegraphic / Telex Transfers (TTs) / Fax Press
Mail Transfers (MTs)
When a customer requests the bank to transfer his money from this bank to any other
bank or the branch of some other bank in the city, outside the city or outside 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
2.17.1 Demand Draft (DD):
Demand draft is another way of transfer of money from one bank to another bank.
Unlike pay order, a form is required to be filled for the issuance of the demand draft in
which necessary particulars about the beneficiary and the sender are given. The sender
deposits the amount of DD plus commission and other charges on the bank counter, from
where he is given a receipt and in accordance with this receipt he is issues a demand
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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%
From 100,000 to 500,000 is 0.5%
In addition to above charge a fixed excise duty of Rs. 2 per draft.
2.17.2 Telegraphic Transfer (TT):
With the changing requirements of customers, MCB has introduced a faster mode
of transfer of money. Like DD the sender is required to apply through a form in which he
will give all the necessary details about the sender and the beneficiary. The sender
deposits the amount of DD plus commission and other charges on the bank counter, from
where he is given a receipt, the remittance officials send a telegram to the concerned
branch and they make payment to the customer. Vouchers are sent by ordinary mail to
keep the record. On TT, no excise duty is charged only commission and telegram charges
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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.
Publication of financial statements is a statutory requirement for corporations chiefly
addressed to stakeholders outside the business, albeit they serve the management for
internal control in many ways. The fact that the audit carried out to uncover any material
irregularity, is based on sample of items, leaves some room for incredulity. The Financial
Statements of a bank particularly need great care in analysis, as the nature and scope of
assets and liabilities differs from that of manufacturing concerns. For example
verification and valuation of plant and machinery, stock and tools etc. is grounded on
some basic sources as contrary to verification and valuation of deposits, advances, and
3.1 PURPOSE OF FINANCIAL STATEMENT ANALYSIS
Analysis is generally directed towards delving into three broad aspects of a
business, which are the driving forces behind the stakeholders’ decisions. These are:
1. Solvency of the business.
2. Stability of the business and
Profitability of the business.
The solvency of a business means its ability to meet its liabilities as it mature. The
solvency of the business is analyzed by the means of financial statements presently and
also in any future adverse business condition.
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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
Profitability is measured by the success of a business in maintaining and increasing the
owner’s equity. The nature and amount of earning as well as their regularity and trend are
all significant in this appraisal.
3.2 LIMITATIONS OF FINANCIAL STATEMENTS
Financial statements are based on historical cost convention. They do not portray
the real or market value of the items on the face financial statements.
The credibility of financial statements is confined to the audit carried out, and most audit
evidence is persuasive rather than conclusive.
Financial statements do not disclose any significant future events or contingencies.
Financial statements do not compare the actual figures with any standards set.
Qualitative information about the business is not found in financial statements.
And finally the company management often is under heavy pressure to report rising
earnings, accounting policies may be tailored towards this objective.
3.3 TOOLS OF FINANCIAL STATEMENT ANALYSIS
3.3.1 Rupee and percentage changes
In this method the rupee amount of change from year to year and the change in
percentage are determined.
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3.3.2 Trend percentages
In this method, the changes in financial statement items form a base year to
following years are determined to show the extent and direction of change.
3.3.3 Component percentages
Component percentages are calculated to indicate the relative size of each item
included in total. For example, each item on balance sheet is expressed as a percentage of
3.3.4 Ratio analysis
Analysis of relationship of different aspects of financial statements.
Comparative Balance Sheet
For the years ended Dec. 31, 2009 – 2010.
Amount Percent Amount Percent
Case hand Balance with treasury banks 21,259,900 11.37% 17,867,991 7.60%
Balance with other banks 8,025,689 1.62% 2,154,190 .92%
Lending to financial institutions 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%
Internship Report On MCB 24
Other asset 11,400,906 6.09% 8,883,163 3.78%
Operating fixed assets 3,659,646 1.99% 3,825,045 1.63%
Deferred tax assets 220500 .12% – –
Total Assets 187053515 100% 235138567 100%
Bills Payable 8,097,178 4.33% 6,2661,957 2.66%
Borrowing from financial inst. 8946624 4.78% 21,987,824 9.35%
Deposits and other accounts 14544451 82.62% 182,705,716 77.70%
Subordinate loans – – 1,600,000 ..68%
Liabilities against assets
Subject to finance lease – – – –
Other liabilities 8k,578,240 4.56% 9045634 3.85%
Differed tax liabilities – – 1838545 .78%
Total Liabilities plus stockholder’s equity 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%
Surpens on revaluation of asset 1900962 1.02% 5384934 2.29%
6887022 3.68% 11698891 4.98%
Total liabilities and Share holder’s equity 187053515 100% 235138567 100%
Internship Report On MCB 25
2008 2009 2010 2009 over 2009 over
Bill payables 7,803,443 8097178 6261957 22.66% 3.76%
Borrowing from financial 5,856,198 8946624 21987824 145.76% 52.77%
Deposit and other accounts 135,990147 154544451 182705716 18.22% 13.64%
Subordinated loans – – 1600000 – –
Liabilities against assets subject to Nil – – – –
Other liabilities 8,43,8,055 8,578,240 9,045,634 5.44% 1.66%
Deferred tax liabilities Nil – 1,838,545 – –
Total liabilities 158,087,843 180166493 223439676 24.01% 13.96%
Net assets 5592743 887022 11698891 69.86% 23.14%
Share capital 2,202,855 2,423,140 2,665,455 10% 9.99%
Reserves 2,277,630 2,278,980 3,026,517 32.80% 86%
Unappropriated profit C/F 3,185 2,83,940 6,21,985 119.05% 8814.91%
Surplus on revaluation of assets 1,109,073 1,900,962 5,384,934 183.27% 71.40%
Share holder’s equity 5,592,743 6,887,022 11,698,891 69.86% 23.14%
Internship Report On MCB 26
BALANCE SHEET ANALYSIS
(Rs. In “000”)
2008 2009 2010 2009 over 2009 over
Cash and balance with treasury 12,571,424 21,259,900 17,867,991 –15.95% 69.11%
Balances with other banks 4,757,413 3,025,689 2,154,190 –28.80% –36.40%
Lending to financial institution 10,852,094 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%
Operating fixed assets 3,604,356 3,659,646 3,825,045 4.51% 1.53%
Deferred tax assets 2,55,780 2,20,500 – –100% –13.79%
Total Assets 174,715,063 187,055,394 235,138,567 25.70% 7.06%
3.4 BALANCE SHEET ANALYSIS
The analysis of balance sheet is an effort to evaluate the financial strength of the
business at a given date.
Internship Report On MCB 27
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.
3.4.2 Cash and balances with treasury banks
This head of balance sheet experienced a phenomenal (base year 2010) decrease
of around 55% as compared to 28% decrease in the last year. Further breaking down the
information, we come to know that major portion of these funds i.e. around 13 billions
Rupees are lying with State Bank of Pakistan mostly in local currency current deposits.
This is a statutory practice by commercial banks to deposit extra amount of cash with
State Bank of Pakistan. Branches deposit their extra cash with head office, which
subsequently deposits this amount with central bank wallets, if not utilized by the Bank in
the mean time.
Cash and Balances with Treasury Banks are around 8% of the total assets, indicating that
cash balances are not fully utilized.
3.4.3 Balances with other banks
The amount standing at around 3 billion of Rupees has decreased by 29% (as
compared to previous year). The account is chiefly held with foreign banks both in form
of current account and deposit account. The account is .92% of total assets, which is a
satisfactory indication. The account is utilized for import and export transactions with
foreign banks. The balances with other banks in normal circumstances carry an interest
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rate of “between” 0% to 6.55%, so the amounts in these accounts do not generate much
revenue directly, but the services funded by these accounts have some worth. The
Reduction in this account can be associated with watchful economic activity because of
depending international recessionary trends.
3.4.4 Lending to financial institution
Lending to financial institution has increased by 119% as compared to 42.5%
increase in last year. Lending to Financial Institutions has two fragments:
Call Money Lending.
Repurchase Agreement Lending.
Call Money Lending has increased from Rs. 6 billion to 13.14 billion, while Repurchase
Agreement Lending has increased from Rs. 4.7 billion to Rs. 10.293 billion. Repurchase
Agreement (RPs) is an arrangement where the MCB purchases Govt. Securities from
borrower Financial Institutions (FIs) with the end to resell to FIs at a prescribed price on
a stated date. The effective interest rate is given by the difference between the purchase
price and the sale price. The maturity of RPs is generally very short, from three to 14
days, and some times overnight. The RPs are auctioned by SBP almost daily. Repurchase
Agreement Lending by MCB is fully secured against Market Treasury Bills, Pakistan
Investment Bonds, and Federal Investment Bonds, thus eliminating any risk.
So lending to financial institutions are highly liquid and very secure, reaffirming the
Bank’s conservative policy of credit.
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
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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:
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.
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
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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
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.
3.4.7 Other assets
Other assets decreased by 22% from previous year, as compared to an increase by
21% in the previous year. The major portion of this item comprises of taxation and
income/markup accrued on advances and investments. No explanation could be found
regarding the amount of taxation, which is Rs. 5 billion of worth. This amount may
include advance taxes paid and tax rebates and refunds.
3.4.8 Liabilities and shareholders’ equity
Deposits and Other Accounts
A profound increase in deposits is the main cause of increase in Balance Sheet
footings. Deposits and other accounts were at Rs. 182 billion, increased by 18% from
previous year. According to component balance sheet deposits are 78% of balance sheet
total. For a banking concern it is a norm to have such a composition of balance sheet.
Most of the deposits i.e. 93.4% are held by customers in local currency. Deposits in local
Internship Report On MCB 31
currency have increased move as contrary to the slight increase in foreign currency
deposits during previous years. Major portion of deposits comprises of saving deposits
i.e. 60% of total deposits. Fixed deposits are 15% and current accounts are 23% of total
Deposits. It is important to note that deposits increased despite a decrease in PLS rates.
The major increase has been evidenced in saving deposits, which can be attributed to
targeted sales of products like ATM, and some attractive saving schemes.
3.4.9 Borrowings from financial institutions
Borrowing from financial institutions has increased by 145% as compared to an
increase of 52% in the last year. Further segmentation reveals that the major increase
happened in repurchase agreement borrowings i.e. around Rs. 8 billions. The account is
basically a contra account of repurchase agreement lending and the amounts in these
accounts fluctuate very rapidly. Borrowings from State Bank of Pakistan under the head
of export refinance was the second major account to undergo the increase of around Rs..3
billions. This account is used for extending the export finance to customers, as giving the
right to SBP to recover outstanding amount from the Bank by directly debiting current
account maintained by the Bank with the SBP. The increase reveals high demand for
export refinance by customers due to higher activity in foreign trade.
3.4.10 Bills payable
Bills payable decreased by around 22% as compared to 4% in crease in the last
year. it shows an improved working capital of the business. Bank is able to pay its short
term liabilities at time.
3.4.11 Share capital
The amount of share capital was at Rs. 2.6 billion, with increase of 10% from
previous year. The only reason for the increase in share capital is the issue of Rs. 220
million worth of bonus shares during the year.
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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 year’s figure of Rs. 2.27 billion.
While in the year 2008, we had seen an increase of .1% in the bank’s reserves.
3.4.13 Unappropriated profit
The Unappropriated profit for the year 2009 registered a increase of 119.05%
compared to last year’s remarkable increase of 815%. That is, profit for last year was Rs.
284 million whereas for the year 2010 it was Rs. 621 million.
3.4.14 Surplus on revaluation of assets
The bank showed a surplus of Rs. 53 billion at the end of the year, after the
revaluation of its assets; an increase of 183% over last year’s figures. The fixed assets of
the bank showed a increase of Rs. 165.3 million while the securities held by it registered
a significant increase of Rs. 4.8 billion in their value.
The revaluation of assets was carried out by Iqbal Nanjee & Co., Valuation and
Engineering Consultants on the basis of their professional assessment of the market
3.4.15 Shareholder’s’ equity
Shareholders’ equity at the end of the year 2009 was Rs. 11.6 billion showing an
increase of 69% over last year’s figure of Rs. 6.9 billion. This can be attributed to the
higher profits, the issuance of bonus shares, and the surplus declared on revaluation of
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For the years ended Dec. 31, 2008 – 2010.
2010 2009 %2009 over
Markup/return/interest earned 15,385,869 17,033,225 –9.67%
Markup/return/interest expended 6,074,682 7,544,897 –9.67%
Net markup/interest income 9,311,187 9,488,328 –1.86%
Provision for diminution in the valve of invest – 62064 –100%
Provision against non performing loans and – 1704308 –100%
Provision for potential to lease losses 512 636 –19.49%
Bad debts written off directly 721105 448999 60.60%
Total provisions 721,617 2,216,007 –67.43%
Net markup/interest income after provisions 8589570 7272321 18.11%
Fee, commission and brokerage income 907071 868637 4.42%
Dividend income 297748 243994 22.03%
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Income from dealing in foreign currencies 503593 687854 –26.78%
Other income 881746 400140 120. 35%
Total non-markup/interest inc. 2,590,158 2,200,625 17.70%
11,179,728 9,472,946 18.01%
Non markup/interest exp.
Administrative exp. 8077395 7331623 10.17%
Other provisions – 40,000 –100%
Other charges 1313 147 793.19%
Total non-markup/interest exp. 8078708 7,371,770 9.58%
Extra ordinary and exceptional items – – –
Profit before taxation 3,101,020 2,101,176 47.58%
Taxation current for the year 1,531,551 957,720 59.91%
For prior years – – –
Deferred (169125) 35280 579.37%
1362,426 993,000 37.20%
Profit after taxation 1,738,594 1,108,176 56.88%
Unappropriated profit b/f transfer from surplus on 283940 3185 8814.9%
revaluation of fixed assets
Prior years 194751 – –
Current years (net of tax) 60916 – –
539607 3185 16842.13%
Profit available for appropriation 2278201 1,111,361 104.99%
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For the years ended Dec. 31, 2009 – 2010.
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%
Net markup/interest income 9311187 83.29% 9488328 100.16%
Provision for diminution in the valve of – – 62064 .65%
Provision against non-performing earns and – – 1,704,308 17.99%
Provision for potential lease losses 512 .0004% 636 0006%
Bad debts written off directly 721105 6.45% 448999 4.74%
Total provisions 721617 6.45% 2216007 23.39%
Net markup/interest income after provisions 8589570 76.83% 7272321 76.77%
Fee, commission and brokerage income 907071 8.11% 868637 9.17%
Dividend income 297748 2.66% 243994 2.57%
Income from dealing in foreign currencies 503593 4.50% 687854 7.26%
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Other income 881746 7.89% 400140 4.22%
Total non-markup/interest income 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%
Total non-markup/interest exp. 8078708 72.26% 7371770 77.82%
Extra-ordinary and exceptional item – – – –
Profit before taxation 3,101,020 27.74% 2,101,176 22.18%
Taxation for current year 1531551 13.70% 957720 10.11%
For prior years – – – –
Deferred (169125) (1.51%) 35280 .37%
Total taxation 1,362,426 12.19% 993,000 10.48%
Profit after taxation 1,738,594 15.55% 1,108,176 11.70%
Unappropriated profit b/f 283940 2.54% 3185 .03%
Transfer from surplus on revaluation of fixed
Prior year 194751 1.74% – –
Current year-net of tax. 60916 .54% – –
539607 4.83% 3185 .03%
Profit available for appropriation 2,278,301 20.38% 1,111,361 11.73%
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3.5 FORMULAE FOR THE CALCULATION OF THE RATIOS
i) Current Ratio =
Current Liabilitie s
Cash (actual) and with trea sury bank
ii) Cash Ratio =
Total external liabilitie s
iii) Debt Ratio =
Total external liabilitie s
iv) Debt Equity Ratio =
total equity (internal liabilitie s)
v) Lendings – Deposit Ratio =
Total investment s (net)
vi) Investment Deposit Ratio =
Total advances (net)
vii) Advances – Deposit Ratio =
Net mark - up/interest income
viii) Gross Profit Margin =
mark - up/interest/return earned
Total profit before taxation
ix) net profit margin before tax =
mark - up/return/interest earned
Net profit after taxa tion
x) Net profit margin after tax =
mark - up/return/interest earned
Total revenue (mark - up/interest earned)
xi) Asset turnover ratio =
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Total profit before taxation
xii) Return on assets =
Net income - preferred dividend
xiii) Earnings per share =
no. of common share outstanding
xiv) Operating expense-total expense ratio =
Operating exp ense
xv) Operating expense – total revenue ratio =
Operating exp ense
xvi) Operating expense – total assets ratio =
total asets ratio
xvii) operating expense total deposit ratio =
Total deposit ratio
Face, price per share
xviii) price earning ratio =
earnings per share
xix) dividend yield =
total shares outstanding
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3.6 RATIOS ANALYSIS
Liquidity and credit risk measurement
2008 2009 2010
Current ratio .98 1.00 .63
Cash ratio .08 .12 .03
Debt ratio .97 .96 .95
Debt – equity ratio 30 26 19
Lending deposit ratio .04 .10 .18
Investment deposit ratio .27 .36 .49
Advances deposit ratio .63 .49 .43
Gross profit margin .49 .56 .60
Net profit margin before tax .09 .12 .20
Net profit margin after tax .05 .07 .11
Asset turnover ratio .08 .09 .06
Return on assets .76% 1.12% 1.32%
Return on equity .13 .16 .19
Earning per share 3.03 4.57 6.52
Operating expense total expenses ratio .53 .49 .57
Operating expense total revenue ratio .59 .43 .52
Operating expense total assets ratio 5.10% 3.94% 3.43%
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Operating expense total deposit ratio .06 .05 .04
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.
3.8 LIQUIDITY AND CREDIT RISK MEASUREMENT
3.8.1 Current ratio
It is used to determine the short-term debt-paying ability of the business. The ratio
is computed by dividing total current assets by total current liabilities. The higher the
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.
3.8.2 Cash ratio
The cash ratio determines the position of the business to pay its liabilities with the
cash in hand. The cash ratio of MCB for year 2010 is .03 which means that only 3% of
liabilities can be paid through cash in hand. At first glance, this ratio may show a very
Internship Report On MCB 41
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.
3.8.3 Debt ratio
Debt ratio is a measure of creditors’ long-term risk. The ratio is a percentage of
total liabilities of total assets. If there are more liabilities in proportion to assets, creditor
will hesitate to lend the money, as the chances of payback will shrink. So the lower the
debt ratio, the safer the position of creditor. The debt ratio of MCB for the year is .95,
almost the same over previous years. The debt ratio for a bank over 0.90 is considered
normal. It also suggests that proprietors finance only 5% of total assets.
3.8.4 Debt-equity ratio
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.
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3.8.5 Landings deposit ratio
This ratio shows the relationship between the total lendings of bank to its total
deposits. For the year 2009, this ratio was 18%, which means that the bank has utilized
18% of the deposits for lending purposes. Comparing it to the 10% ratio for previous year
we see positive change regarding the profitability.
3.8.6 Investment deposit ratio
Taking the investment of bank as percentage of deposit we see that its 49% of
deposit for year 2009. While for previous year it was 36% only which clearly indicates
that the management of the bank is focusing more on the better and productive
investment prospective during the year.
3.8.7 Advances deposit ratio
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.
3.9 PROFITABILITY MEASUREMENT
3.9.1 Gross profit margin
Gross profit margin for the year was 60%. Profit margin has improved over the
years, which indicates the attractive profitability of the Bank. The major reason for
increase in profit margin is the greater proportionate increase in interest/return earned and
comparatively lower proportionate increase in the interest/return expensed. It is possible
only because of better asset portfolio. Further analysis reveals that the Bank made
possible attracting large deposits despite of low PLS and mark-up rates, in turn more
Internship Report On MCB 43
Funds were available for investment at less cost. On the other hand the Bank made huge
profits on comparatively less amount of advances
3.9.2 Net profit margin before tax
A considerable improvement in net profit margin before tax affirms better internal
control by management over administrative expenses. The main reason for control over
administrative expenses is the postponement of increase of increase in salaries.
3.9.3 Net profit margin after tax
Net profit margin after tax is .11, which means that 11% of total revenue is left for
stockholders’ equity, while equity is just 5% of total assets. Being more profitable during
the year, company issued an interim dividend of Rs. 2.5 per share, Rs. 1.25 per share
more than for previous year.
3.9.4 Assets turnover ratio
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%.
3.9.5 Return on assets
The ratio is calculated by taking the net income as a percentage of total assets.
The ratio was 1.12% for previous year, but suddenly jumped to 1.32% in current year.
More return on less advances, comparatively less interest paid on deposits, and better
control of administrative expenses are the facts on which the improvement in this ratio is
Internship Report On MCB 44
3.9.6 Return on equity
The ratio is calculated by dividing the net income after taxation left for
appropriation by total equity. It recounts the return, equity holders get after interest and
operating expenses are paid. Although the whole left is not distributed among
shareholders, but improves the equity composition. The ratio of MCB has improved
Considerably over last few years. Currently ratio stands at .19, which means that business
is earning 19% of the equity for shareholders. In banking business, which is
overwhelmingly debt extensive, such a return is very profitable.
3.9.7 Earning per share
The ratio is calculated by dividing the net income less preferred dividend by
number of shares outstanding. The ratio for MCB is 6.52, which means the share at par
value of Rs. 10 is earning Rs. 6.52.
3.9.8 Operating expense total expense ratio
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.
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3.9.9 Operating expense total revenue ratio
This ratio shows the operating expense as %age of total revenue. This percentage
was 52% for 2009 while it was 43% for 2008. The huge increase in short term and long
term investments (the result is the positive effects of which will appear in the years
ahead) in responsible for increase in this ratio.
3.9.10 Operating expense total assets ratio
This ratio is showing a decreasing steadily through the years. For 2003 this ratio
was 5.10%, for 2008, 3.94% and for 2009 it is 3.43%. The steady decrease in operating
expense in a positive indication for the bank but management should be careful that it
should not be at the expense of de-motivation in delaying increases in salaries and fringe
benefits over the years.
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CHAPTER#4 SWOT ANALYSIS
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
cover almost every part of Pakistan.
The bank enjoys competitive advantage over other banks in Pakistan.
The bank enjoys competitive profitability in the industry.
MCB has captured majority of potential customers in Pakistan.
MCB has the accounts of big organizations like OGDCL, PTCL, EFU,
MCB is Successive and Market oriented.
MCB investing huge sums on HR development and training.
Customer default rate is lower as compared to other banks.
MCB has the largest ATM network in the country.
Meeting the challenges of latest Technology by introducing Smart card
remit express, mobile banking etc.
Laying foundation on sound basis; recently for this they met with the
ORACLE representative of South Asia, to purchase ORACLE software for their
banking system and transform its environment in such a way so as to come in line
with those of other international banks.
Internship Report On MCB 47
Establishment of TFC: Centralized import and export center of MCB in
one special circle taking this extensive burden from branches, whereas no other
bank has done this so far.
Maintaining an Excessive Earning Acceleration, this is expected to result
in substantial value enhancement for investors.
EUROMONEY Awards of Best Bank in Pakistan for best bank in
Pakistan, plus the accolade of best domestic band in Pakistan.
Extensive Management Restructuring to translate into bottom line
improvement for going forward. This includes induction of professionals in
strategic business areas, shedding surplus staff and shutting down loss making
low potential branches. From 1996 onwards some 350 Branches were closed
down & releasing staff of approx 4600 with golden handshake.
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
Striving for income: New Team after massive restructuring, is looking to
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.
Perhaps the only large bank in Pakistan to have a formal electronic
banking research cell that is exploring the technical requirements and market size
Potential of Internet Banking.
Decision making process is very slow.
It is not having greater no. of branches abroad.
Internship Report On MCB 48
Though ATM network is the largest in Pakistan, still some potential areas
don’t have the ATM.
MCB RTC is useable only in Pakistan.
Some management positrons needed are not professional.
Although most of the branches are computerized now, still some important
branches don’t have computers.
Low motivational level; non-aggressive marketing.
Employees’ dissatisfaction due to ill treatment and improper reward
Favoritism and Nepotism in recruitment.
Interest rate is very meager
Extensive Management Restructuring though beneficial has some negative
impacts on the existing performance of work. Such large scale restructuring
results in too much load on single person plus the fear of being fired from the job
at any moment.
Slight neglect as part of human resource management staff. Initially
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.
It is extremely condemnable that sometime a circular is kept clandestine
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
and employees get bored due to monotony.
No Conspicuous rise in Staff Salary: As part of Human of resource
Internship Report On MCB 49
Management apart from lack of other employees benefit funds, nothing is
done to enhance the staff salary to be used as basic motivational factors in an
effort to cut down the administrative cost by the management.
Prevailing Bias and Prejudice: Senior Junior Consideration may result in
tussle in future. Therefore it is extremely necessary to develop such amicable
environment that builds up harmony.
Leasing sector is growing in Pakistan for the last two to three years which
provides opportunity to MCB to go ahead in this area as well.
MCB is providing Consumer Finances at comparatively lower rates which
paves a way to grab more customers
Financing to small/medium cottage industries will definitely increase its
advances and profitability as well.
Islamic Trading Based Banking can enhance the business of the bank.
Targeting of Hundi/Hawalla through networking and IT potential of MCB.
Profitability is expected to strengthen despite decline in interest rate. The
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.
Banking sector fundamentals improving; on the back of economic
stabilization, improved monetary and foreign exchange reserves management by
the central bank and drive against loan defaulters.
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 government’s conscious
initiative towards a deflationary monetary policy.
Internship Report On MCB 50
Only Operationally efficient banks will benefit from Low Interest Rates:
The declining interest rate environment would lower MCB’s cost of equity
(COE), thus having a positive impact on its ROIE – COE spread, which in turn
MCB to show growth in value creation.
More Focus on consumer banking activities.
Strong earning momentum expected in future, through focus on loan book
growth, efficient utilization of idle cash and declining NPL.
Deposit expected to grow in future: The Government’s decision to lower
interest rates has challenged the banking sector, including MCB, on the deposit
mobilization front. At the same, however, MCB’s 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.
Other private commercial bank with sound profitability is also a threat to
MCB e.g. UBL, Alfalah, HBL etc.
For the last of many years, Pakistan is facing economic and political
instability which is a big threat.
Afghan war and Iraq war has a deep effect on the economy of Pakistan,
which may affect MCB.
Foreign banks are flourishing in field of consumer financing.
People don’t prefer banking culture. They mostly prefer cash transactions.
MCB since 1996 is performing well in all most every department at
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.
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Other banks working on the same phenomena seeking for proficient and
efficient staff is expected to enamor qualified and experienced employees of
organization by offering some brilliant incentives in the form of high salary and
other benevolent funds and this thing may also attract existing efficient staff of
MCB. To some extent they seem to be effective in their efforts.
Internship Report On MCB 52
CHAPTER-5 FINDINGS AND RECOMMENDATIONS
Recommendations are based on the previous sections of a report and are
suggestions that the analyst feels are required to be implemented in order to improve
further the standing and position of the firm in the financial world. These are thus based
on the findings and shortcomings noted in an organization while working with it and then
writing on it. Opinions of various capable individuals are sought who through their real
life experiences and deep insight are better able to judge whether the course of action
adopted by the organization is going to prove fruitful or does it require further
improvement in the form of changes in its strategies.
Following are the findings and recommendations for various Departments that were felt
are required while consulting the staff members of Chowk Yadgar Peshawar Branch.
5.1 DEPOSITS DEPARTMENT
The comparative analyses reveal that MCB has the lowest share of Deposits out
of the total in the market. Since deposits are the lifeblood of a bank, it should attract more
customers and expand its deposit base in the following manner
5.1.1 Simplification of procedures
The procedure of opening an account should be simplified. The account opening
form should be self-explanatory and include translations in Urdu for those customers who
are not well read, since the fact cannot be ignored that many people do not have a good
understanding of English.
5.1.2 No Duplication of activities
Once the account opening form is filled there should be no reason to submit a
written application for opening an account, since it not only is a wasteful and time
consuming exercise on the part of the customer but also makes filing lengthy.
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5.1.3 Incentives for depositors
Those who deposit large amounts of money or are old customers of the bank
should be given free credit lines upto a certain limit. Besides, financial advice should be
provided to customers in case there is a change in the market trend before they seek for it.
5.1.4 Integrated marketing approach
All the officers in Deposits Department should be involved in marketing and not
just opening accounts and maintaining their records. This can be done through improving
their personnel relations skills and applying the Uni-Service concept of visiting the
potential customers at their offices and homes.
9.1.5 Performance appraisal
MCB should follow the performance evaluation policy strictly and award those
who bring in deposits and help it increase its market share. Unfortunately, this has been
stated in the bank’s policy but is not being implemented.
5.2 REMITTANCES DEPARTMENT
The Remittances Department at the Branch is divided into Inland Remittances and
Both these are dealt by separate officers and involve using specific stationary and
procedures. The following recommendations are made for this very important
Department of the bank
5.2.1 Organizing the department
The Department is spread over the entire bank with no specific person or desk for
the purpose. Usually drafts and telegraphic transfers are made in the cash counter that
results in hassle for the other customers. A senior officer detached from the other officers
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Performing inland remittance transactions handles the foreign remittances. It would be
better for them to sit together so that they can benefit from his experience and know how.
5.2.2 Centralized money gram services
The customers receiving funds from abroad have to wait quite long in order to get
their money as the branch sends the application form through fax to the City Branch from
where it is confirmed whether the amount has been credited to the Chowk Yadgar
Peshawar Branch or not. This confirmation takes long at times and there is always a fear
of the bank losing its goodwill in case of lengthy delays. The service should thus be
decentralized and the Hub Branch having the authority of directly confirming the amount.
5.3 CASH DEPARTMENT
The following recommendations are made for the Cash Department.
5.3.1 Expansion of the cash counter
The Cash Department at the Branch needs special attention in the sense that the
cash counter is small and becomes crowded when there are more than five to six
customers to attend. Customers purchase drafts and other instruments from the very same
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.
5.3.2 Extended timings for cash
In order for the bank to progress and compete with the others in the market, it
should extend the time for accepting and withdrawing cash. The customers face great
hardship especially when they come from far off places and find that the cash counter is
closed for the daily transactions.
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5.4 BILLS AND CLEARING DEPARTMENT
The following suggestions are made for this Department keeping in view the
problems noted in it.
5.4.1 Career development
It has been noted that the officers taking bills for clearing do not involve
themselves much with the other operations of the bank and thus remain on the very same
post and seat throughout their banking career. This is against the modern day policies of
organizations giving their employees conducive, rewarding and equal opportunities of
prospering and growing with it. Thus, the Human Resource Department at the Head
Office should prepare a plan that shows the future growth potential of the employees
based on their job performance and evaluation and make it known to all.
5.4.2 Job rotation
There should be job rotation of employees especially in this department as it was
felt that the employees here know quite less as compared to the others. This will enhance
their capabilities and help them break the monotony making them find their work more
5.4.3 Personality nourishment
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.
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5.5 ADVANCES DEPARTMENT
There were certain drawbacks in the application and processing for the loan
requests that were observed at the branch. The findings and the recommendations are as
5.5.1 Proper documentation
If valid documents are not obtained before sanctioning the loan limit, it becomes
irrecoverable in case of default by the borrower. It has been noted that at times the related
officers oblige the customer by letting him submit the documents later and approving the
limit by getting the Disbursement Authorization Certificate from the Credit Committee. It
proves to be very time and resource consuming afterwards tracing the borrower to bring
in the documents. Therefore, correct and complete documents should be attained before
the amount is sanctioned and no leniency shown in any case.
5.5.2 Computerized record
All the sanctioned cases should have record on the computer as it is easy to access
and does not involve the hassles of maintaining and retrieving large and old files. For this
purpose, training programs should be organized for the Relationship Managers to enable
them to have a basic computer know how. Through this, they would also be able to assess
the financial position of the prospective borrower in minutes by using related financial
5.5.3 Verification of security
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/
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mortgaged lay in remote areas such as the Gadoon Industrial Estate regular physical visits
are avoided by the officers
5.6 FOREIGN EXCHANGE DEPARTMENT
There various shortcomings that were noted in this Department and hence the
5.6.1 Centralization of the Department
All foreign trade related transactions are routed to the Foreign Exchange
Department in Islamabad, which causes unnecessary delay to the customer. In case of
haste or pressure from the importer/ exporter or some other reason the documents sent to
the Forex Department are not complete or correct the case is sent back to the Chowk
Yadgar Peshawar Branch and it takes yet longer to process it.
5.7 OTHER FINDINGS AND RECOMMENDATIONS
The following recommendations are for the bank as a whole
5.7.1 Establishment of marketing department at the hub branch
Nowadays no organization can survive in this tough competitive world without
having able to market itself and its products. Keeping this in mind a Marketing
Department should be introduced in all the Hub branches that would easily implement the
marketing policies of the Head Office.
5.7.2 Development of managerial leadership
Good managerial skills make positive contribution towards higher effective
results. MCB should focus on the effective utilization of its human resource by applying
the modern style of management. This can only be possible if political interferences are
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discouraged especially when hiring and placing personnel and the recruitment policies
are changed to give preference to M.B.A. and M. Com. Students.
5.7.3 Tests for promotions
A sizeable portion of the officers at MCB is promoted without conducting any
tests and interviews. This results in undeserving people sitting on the managerial posts
and steering the organization away from its goals and objectives in the long run.
5.7.4 Training for credit management
Special trainings on credit management should be imparted to the staff dealing in
financing activities of the bank. This is very important in light of current loan default
scenario in the economy.
5.7.5 Delegation of powers
Delegating powers to the Department in-charges up to the greater possible extent
will most certainly reduce the workload on the managers and they would be able to
perform well by taking quick remedial actions where necessary. Besides, the spare time
will be spent dealing with matters of more important nature.
5.7.6 Research and development department
A Research and Development Department in MCB will help it to adopt new
procedures and modern techniques that will help the bank to compete with the others. An
R&DD should be maintained at all the Hub Branches that would define the target market
For the bank in that particular area and through its findings suggest measures to improve
the performance of branches there.
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1. Siddiqui A.H. (1983 P.nos. 16-22) Practice & Law of banking in Pakistan.
2. Meenai S.A (1984) Money & Banking.
3. Prof. Dr. Khawaja Amjad Saeed (Financial Institution in Pakistan)
4. Koontz. (Management. 8" edition page: 8)
5. Annual Report of MCB 2010
6. Brochures/Leaflets (n.d)
7. Accounts opening forms of MCB.
8. Donnelley, Gibson, Ivanceivich (Fundamentals of Management)
Briefings by head of each division department & other officer of MCB
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