Table of Contents

Acknowledgement ----------------------- Error! Bookmark not defined. List of Acronyms --------------------------------------------------------------- 4 List of Tables ------------------------------------------------------------------- 5 Executive Summary ----------------------------------------------------------- 6 CHAPTER 1 -------------------------------------------------------------------- 8 INTRODUCTION ------------------------------------------------------------- 8 Introduction to Chapter ----------------------------------------------------- 8 1.1 Background of the Study ---------------------------------------------- 8 1.2 Purpose ------------------------------------------------------------------- 8 1.3 Limitation ---------------------------------------------------------------- 9 1.4 Objectives ---------------------------------------------------------------- 9 1.5 Methodology ------------------------------------------------------------ 9 1.6 Scheme of the Report ------------------------------------------------ 10 Summary of Chapter ------------------------------------------------------ 11 CHAPTER 2 ------------------------------------------------------------------ 12 REVIEW OF ORGANIZATION ------------------------------------------ 12 Introduction to Chapter --------------------------------------------------- 12 2.1 Definition of Bank ---------------------------------------------------- 12 2.2 History of MCB Bank ------------------------------------------------ 16 2.3 Vision Statement ------------------------------------------------------ 18 2.4 Mission Statement ---------------------------------------------------- 18 2.5 Values of MCB Bank ------------------------------------------------ 19 2.6 MCBs Performance Overview ------------------------------------- 21 2.7 Nature of the Organization ------------------------------------------ 22 2.8 Management and Departments Of MCB Bank ------------------- 23

2.9 Main Departments and Their Jobs---------------------------------- 24 2.10 Divisions of MCB Bank -------------------------------------------- 31 Summary of the Chapter ------------------------------------------------- 32

CHAPTER 3 ------------------------------------------------------------------ 33 PRODUCTS AND SERVICES OF MCB Bank ------------------------- 33 Introduction to Chapter --------------------------------------------------- 33 3.1 MCB Salary Club ----------------------------------------------------- 33 3.2 Current Account------------------------------------------------------- 33 3.3 Savings Account ------------------------------------------------------ 34 3.4 MCB Advisory Services --------------------------------------------- 34 3.5 MCB Islamic Banking ----------------------------------------------- 34 3.6 MCB Agri Products -------------------------------------------------- 35 3.7 MCB Home Remittance --------------------------------------------- 35 3.8 MCB Corporate Financing ------------------------------------------ 35 3.9 MCB Channel Financing -------------------------------------------- 35 3.10 MCB Local Correspondent Banking ----------------------------- 36 3.11 MCB Rupee Traveler Cheque ------------------------------------- 36 3.12 MCB Investment Services ----------------------------------------- 36 3.13 MCB Visa Credit Card --------------------------------------------- 37 3.14 Mahnama Khushali Scheme --------------------------------------- 37 3.15 MCB Khushali Bachat Account ----------------------------------- 38 3.16 MCB Investment services ------------------------------------------ 38 3.17 Capital Growth Certificate Scheme ------------------------------- 38 3.18 Fund Management Scheme ---------------------------------------- 38 3.19 Consultancy Services ----------------------------------------------- 39 3.20 Self Supporting Scheme -------------------------------------------- 39 3.21 MCB Mobile Banking ---------------------------------------------- 39 3.22 MCB Car 4 U -------------------------------------------------------- 40 3.23 MCB Master Card --------------------------------------------------- 40

3.24 MCB Smart Card ---------------------------------------------------- 41 3.25 Remit Express-------------------------------------------------------- 41 3.26 MCB Pyara Ghar ---------------------------------------------------- 42 3.27 MCB Virtual --------------------------------------------------------- 42 Summary of the Chapter ------------------------------------------------- 43 CHAPTER 4 ------------------------------------------------------------------ 44 ANALYSIS OF MCB Bank ------------------------------------------------ 44 Introduction to Chapter --------------------------------------------------- 44 4.1 Ratio Analysis --------------------------------------------------------- 44 4.2 Financial Ratio of MCB Bank -------------------------------------- 46 4.3 SWOT ANALYSIS -------------------------------------------------- 54 4.4 PEST Analysis -------------------------------------------------------- 56 Summary of the Chapter ------------------------------------------------- 58 CHAPTER 5 ------------------------------------------------------------------ 59 FINDING AND RECOMMENDATIONS ------------------------------- 59 Introduction to chapter ---------------------------------------------------- 59 5.1 Findings ---------------------------------------------------------------- 59 5.2 Recommendations: --------------------------------------------------- 62 Summary of the chapter -------------------------------------------------- 64

List of Acronyms
ATM FED WHT TDR CDR PBA BBA PLS TD AOF AMO KYC SSC GBO LC Automatic Teller Machine Federal Excise Duty with Holding Tax Term Deposit Receipts Call Deposit Receipts Personal Banking Advisor Basic Banking Account Profit and Loss A/C Term Deposit Account opening Foam Account maintenance officer Know your customers Specimen Signature card General banking officer Letter of credit

List of Tables
Table No Table no 2.1 Table no 4.1 Table no 4.2 Table no 4.3 Table no 4.4 Table no 4.5 Table no 4.6 Table no 4.7 Table name Board of Directors Assets turnover ratio Current ratio Debt to equity ratio Interest earned ratio Net profit margin ratio Debt to total assets ratio Return on equity ratio Page No 25 48 49 50 51 52 53 54

Executive Summary
MCB Bank Limited (Formerly Muslim Commercial Bank Limited) has a solid foundation of over 60 years in Pakistan, with a network of over 1165 branches, over 850 of which are Automated Branches, over MCB 690 ATMs in 41 cities nationwide and a network of over 12 banks on the MNET ATM Switch. MCB Bank operations continued to be streamlined with focus on rationalization of expenses, re-alignment of back-end processing to increase productivity, enhancement of customer service standards, process efficiency and controls. The Bank has taken the lead in introducing the innovative concept of centralizing Trade Services in the country by providing centralized foreign trade services to branches with a view to improve efficiency, expertise and reduce delivery cost. During the course of internship I learned about different functions performed by Remittances, Advances, account opening and Customer Service Office department and bank as a whole. I also learned banks correspondence with their customers and within branches. I learned about documentation requirements and record keeping for different activities and processes, especially the documentation requirement for different kinds of financing facilities. MCB Bank offers different products and services to its customers .The main types of accounts are the current and savings accounts, the loan schemes offers by MCB Bank are also much attractive with less Markup rates and also with easy terms and conditions. Besides these MCB Bank offers different types of services to their customers just like MCB home remittance, MCB rupee traveller cheque etc.

Some of the finding or problems of MCB Bank Limited are given bellow: Report Findings are as follows: Asset turnover ratio has been increased from 2010 to 2012 High trend of debt to equity shows that the firm is relying on debt They are utilizing their resources very well Communication gap between different levels of management

Some of the recommendations are: MCB Bank introduce easy and cheap way for home remittance. MCB Bank should introduce Islamic banking for agricultural sector. MCB Bank should keep enough cash in order to meet daily customer demand. They should tale more deposits and less borrowing. Shift from Interest based income to Fee-based Income

CHAPTER 1 INTRODUCTION
Introduction to Chapter
In this chapter general introduction of the report is discussed, which includes background of the study , scope of the study .More over the chapter tells regarding the purpose of study foe which I conducted the study ,methodology of study that how data was acquired ,and at the end scheme of study is discussed.

1.1 Background of the Study

Internship training program during Bachelor in Business administration Program is necessary for the partial fulfillment of the completion of Degree of bachelor in Business Administration. It is necessary for me to complete an internship session of about 8 weeks in some manufacturing or service industry relevant to my area of interest and specialization. So, I choose the Banking field because I have the interest in this sector because my study background is related with this sector.

1.2 Purpose
Internship is the capstone experience that provides me with hands-on, real-world experience in a work setting. Ideally, internship will enable interns to: (a) Integrate and use my knowledge and skills from the classroom. (b) Discover where further competence is needed. (c) Take steps to gain that competence under educational supervision. (d) Become better acquainted with the types of work settings in which such competence can be applied.

1.3 Limitation
The study is done with the sole purpose of doing the best work but there were certain limitation faced during the internship period. The most important limitation from which the study suffers are: The non-availability of information in a manner required for analysis and the secrecy of the bank. Time and space constraint.

1.4 Objectives
I worked as an internee in MCB Bank Ashraf Road branch Peshawar. The main objectives to study in MCB Bank were: To get some experience in working with well reputed organization. To gain knowledge about the professional environment of the bank. To know about the technology utilized in the banks. To deal and manage with the situation of stress.

1.5 Methodology
There are mainly two methods that are used for the collection of data. Primary Data Observation of functions of Branch operations on the spot. Observation of different processes of Branch on the spot.

Secondary Data Internet is very helpful for me to study more about banking sector of Pakistan. Different type of booklets of the Bank. Annual reports Journals Newspapers

1.6 Scheme of the Report

My internship report consists of five chapters which are: Chapter 1 Chapter 1 is introduction to report which encompasses the background of the study. It also looks into the purpose, scope, limitation, objectives, methodology and scheme of the study. Chapter 2 Chapter 2 is review of the organization which consist of brief introduction of overall banking sector, the banking sector in Pakistan. This chapter further elaborate about the history of MCB Bank and their overall functions across the country and also brief introduction about the management and hierarchal structure of MCB bank. Chapter 3 Chapter 3 consists of different products and services offered by MCB bank. The different types of accounts offered by MCB bank, the different types of loan schemes offered the credit cards and master cards etc.

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Chapter 4 Chapter 4 consists of the analysis of MCB bank which contains the SWOT analysis their strength, weaknesses, opportunities and threats, and also the financial analysis of MCB bank through different types of ratio analysis like the current ratio, debt to equity ratio and so on. Chapter 5 Chapter 5 consists of the findings through the different types of analysis based and then according to these findings I have given the concerned

Summary of Chapter
It is sufficed to say that this chapter is about the background, and importantly the purpose of the study which is that to learn about the banking work and also to analyze the financial position of the organization. Similarly this chapter also tells regarding the methodology of the study that what the source of data is. Now in the coming chapter the history and importance of banking is discussed ,this chapter also includes the history of banking in Pakistan.it further elaborates about the historical background of MCB bank, their overall performance and their present status .It will also discuss about the management and about different departments of MCB bank.

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CHAPTER 2 REVIEW OF ORGANIZATION

Introduction to Chapter
First chapter was about the introduction of the report. This chapter consists of brief introduction of overall banking sector, the banking sector in Pakistan. This chapter further elaborate about the history of MCB Bank and their overall functions across the country and also brief introduction about the management and hierarchal structure of MCB Bank.

2.1 Definition of Bank

Bank is derived from Bancus or Banque it is Italian word. History of Banking is traced to 2000 B.C in Greece. Priests and goldsmiths acted as financial agents by keeping money and valuables of people in temples in strong safes. Thus the first stage in the development of modern banking thus was accepting of deposits of cash from those who had surplus money with them. Different authors define the term bank in different terms some are: According to Sir John Paget No one and no body corporate and otherwise can be a banker who does not (i) take deposit accounts (ii) take current accounts (iii) issue and pay Cheques drawn upon himself (iv) collect Cheques crossed and uncrossed for his customer (Siddiqui 2004).

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According to Timothy j. Gallagher 2003 Commercial banks are the financial institutions that exist primarily to lend money to businesses, banks also lends to individual , government and other entities but the bulk of their profit comes from businesses 2.1.1 Importance of banking Banks play very important role in the economic life of a nation. The growth of the economy is dependent upon the soundness of its banking system. Although banks so not create new wealth but borrow, exchange and consume. These make generation of wealth. In this way they become most effective partners in the development of that country. To encourage the habit of saving and to mobilize these savings is its basic purpose. Banks deposit surplus from the public and then advances the surpluses in the form of loans to the industrialists, agriculturists, businessmen and unemployed people under different schemes so that they setup their own business. Thus banks help in capital formation. If there are no banks, then there would be concentration of wealth in few hands great portion of wealth of a country would be idle. In the fewer developing countries rate of saving is very low and due to this rate of investment and rate of growth is very low. Banks provide transfer of payment facility, which is cheaper, quicker and safe. Many difficulties in the international payment have been overcome and volume of transactions has been increased. These facilities are very much helpful for the development of trade and commerce.

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2.1.2 Overall Respective Sector In Pakistan Banking is one of the most sensitive businesses all over the world. Banks play very important role in the economy of a country and Pakistan is no exemption. Banks are custodian to the assets of the general masses. The banking sector plays a significant role in a contemporary world of money and economy. It influences and facilitates many different but integrated economic activities like resources mobilization, poverty elimination, production and

distribution of public finance 2.1.3 History of Banking in Pakistan At the time of independence, commercial banking facilities were provided fairly well here. There were 487 offices of schedule banks in the territories now constituting Pakistan. An Expert committee was appointed. The committee recommended that the reserves bank of India should continue their function in Pakistan until 30 September. 1948, and Pakistan would take over the management of public debt and exchange control from reserve bank of India on April 1948 and that Indian notes would continue to be legal tender in Pakistan until 30 September 1948. Moreover the banks including those having their registered office in Pakistan transferred them to India in order to bring a collapse of a new state. By 30 June 1948 the number of the offices of scheduled banks in Pakistan declined from 487 to only 195.In order to make necessary arrangement for the assumption of control and expert committee was appointed to recommend necessary steps, including the required legislation to establish a central bank for Pakistan. The governor-general of Pakistan Quaid-i-Azam Muhammad Ali Jinnah inaugurated the State Bank of Pakistan order was promulgated on May 12, 1948. The first Pakistani notes were issued in October 1948 in the State Bank of Pakistan withdrew the reserves Bank of India notes of

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the value of Rs. 125.02 crores with the help the Pakistan notes ( Faheem, 2010). On 1st January, 1974 all Pakistani banks were nationalized through Nationalization Act 1974. Under this law all Pakistani Banks become a public property. All small banks were merged in bigger banks to create five major Pakistani banks. These banks were to control by Pakistani Banking Council. There are still controversies about this act of Govt. as whether it contributed in success of failure of banks. However the major changes after Nationalization were as follows: Working of banks was extended to under-developed areas. Market expansion for credit and deposits. Decrease in service level of bank officers. Decrease in profitability as well.

In 1990 the govt. decided to denationalize all the nationalized institutions. Same was also suggested in banking sector. For this purpose, amendments were made to Nationalization Act 1974 and two nationalized banks were privatized. Along with this a permission to open banks in private sector was also granted. The rules regarding establishment of new banks and for incoming foreign banks were also relaxed. The two privatized banks are: MCB Bank taken up by a private group in April, 1991 & ABL taken up by its own employees in September, 1991. After these changes a large number of private and foreign banks started their operation in Pakistan (Faheem, 2010) Now, Pakistan has a well-developed banking system, which consists of a wide variety of institutions ranging from a central bank to commercial banks and to specialized agencies to cater for special requirements of specific sectors. The country started without any worthwhile banking network in 1947 but witnessed phenomenal

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growth in the first two decades. By 1970, it had acquired a flourishing banking sector.

2.2 History of MCB Bank

MCB Bank Limited formerly known as Muslim Commercial Bank Limited was incorporated by the Adam Jee Group on July 9, 1947 in Kolkata in Bengal, under the Indian Companies Act, VII of 1913 as a limited company`. But due to changing scenario of the region, the certificate of incorporation was issued on 17 August, 1948 with a delay of almost 1 year; the certificate was issued at Chittagong. The first Head office of the company was established at Dacca and Mr. G.M. Adam Jee was appointed its first chairman. It was incorporated with an authorized capital of Rs. 15 million. The Bank transferred its registered/Head office from Dhaka to Karachi on August 23, 1956 through a special Resolution (MCB bank, 2012). The bank was established with a view to provide banking facilities to the business community of the South Asia. The bank was nationalized in 1974 during the government of Zulfiqar Ali Bhutto. This was the first bank to be privatized in 1991 and the bank was purchased by a consortium of Pakistani corporate groups led by Nishat Group. MCB is Pakistans fourth largest bank by assets having an asset base of 770,283 million, and the largest by market capitalization having a market capitalization of PKRS 192,950 million. The Bank has a customer base of approximately 4 million and a nationwide distribution network of 1,165 branches, including 22 Islamic banking branches, and over 690 ATMs, in a market with a population of 160 million (MCB bank, 2012). In 2008 the head office of MCB was shifted from Karachi to Lahore in a newly constructed building, namely MCB House located at Sharia Ghous-ul-Azam, commonly known as Jail Road. (MCB bank, 2012).

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2.2.1 Nationalization In January 1974, the government of Pakistan nationalized MCB following the banks (Nationalization) Act 1974, subsequently, in June 1974, Premier Bank limited merged with MCB. 2.2.2 Privatization A wave of economic reforms swept Pakistan in the late 1990s introducing the need for privatization of state owned banks and companies in April 1991, MCB because Pakistans first privatized Bank, the government of Pakistan transferred the management of the Bank to Nishat Group group of leading industrialists of the country by selling 26% shares of the Bank. With a view to broaden equity holding the government sold 25% of the paid up capital to the general public. In terms of agreement between the government of Pakistan and the Nishat Group additional 24% shares have been purchased by the group making their holding 50%. 2.2.3 After Privatization Ten years after privatization, MCB is now in a consolidation stage designed to lock in the gains made in recent years and prepare the groundwork for future growth. The bank has restructured its asset portfolio and rationalized the cost structure in order to remain a low cost producer. After privatization, the growth in every department of the bank has been observed. Following are some key developments: Launching of different deposit schemes to increase saving level. Increased participation on foreign trade. Betterment of branches and staff service level.

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Introduction of Rupee Traveler Cheques & Photo Credit Card for the first time in Pakistan.

2.2.4 Overall Organization and Functions of MCB Bank Limited MCB bank is one of the leading banks of Pakistan with a deposit base of about Rs. 280 billion and total assets of around Rs. 770,283 million Incorporated in 1947, MCB soon earned the reputation of a solid and conservative financial institution managed by expatriate executives. In 1974, MCB bank was nationalized along with all other private sector banks. The Bank has a customer base of approximately 4 million, a nationwide distribution network of over 1,165 branches and over 690 ATMs in the market. During the last fifteen years, the Bank has concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stable deposit base. (MCB bank, 2012).

2.3 Vision Statement

To be the leading financial services provider, partnering with our customers for a more prosperous and secure future. (MCB bank, 2012).

2.4 Mission Statement

We are a team of committed professionals, providing innovative and efficient financial solutions to create and nurture long-term relationships with our customers. In doing so, we ensure that our shareholders can invest with confidence in us. (MCB bank, 2012). Providing innovative Efficient financial solutions Long-term relationships with our customers Shareholders invest with confidence

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2.5 Values of MCB Bank

Integrity We are the trustees of public funds and serve our community with integrity. We believe in being the best at always doing the right thing. We deliver on our responsibilities and commitments to our customers as well as our colleagues. Respect We respect our customers values, beliefs, culture and history. We value the equality of gender and diversity of experience and education that our employees bring with them. We create an environment where each individual is enabled to succeed. Excellence We take personal responsibility for our role as leaders in the pursuit of excellence. We are a performance driven, result oriented organization where merit is the only criterion for reward. Customer Centricity Our customers are at the heart of everything we do. We thrive on the challenge of understanding their needs and aspirations, both realized and unrealized. We make every effort to exceed customer expectations through superior services and solutions. Innovation We encourage and reward people who challenge the status quo and think beyond the boundaries of the conventional. Our teams work together for the smooth and efficient implementation of ideas and initiatives.

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Employee Respect & Dignity We treat each of our employees with fairness, which includes giving We constructive celebrate feedback diversity for and their seek

development.

suggestions from all employees for improvement. We ensure that responsibility & fairness in all our decisionmaking. Team Based Approach We work towards achievement of our vision & mission as a combines group. We encourage inter & intradepartmental communications. We treat our colleagues as our internal customers & ensure that the requirements of internal customer focus are always met. Quest For Quality We ensure that each moment of our time is spent on value adding activity. We always seek ways for exceeding expectations of customers & colleagues. We also ensure that we do things right, first time every time (MCB Bank, 2012).

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2.6 MCB Banks Performance Overview

MCB is Pakistans fourth largest bank by assets having an asset base of 770,283 million as at December , 2012, and the largest by market capitalization having a market capitalization recorded at USD 1.2 billion at year end 2012 which was comparatively lower than USD 1.8 billion the year before, mainly on account of lower market value. The Bank has a customer base of approximately 4 million and a nationwide distribution network of 1,165 branches including 22 Islamic banking branches (December 31, 2011) within Pakistan and 8) branches outside the country (December 31, 2011 including the Karachi Export Processing Zone Branch), , and over 650 ATMs in 110 cities, in a market with a population of over 190 million. In 2011, MCB reported a profit after tax of PKR 19.4 billion (appx.USD 205 million) and generated a return on average equity of 26.23% and a return on assets of 3.18% (2010: 3.13%). The Banks asset quality is strong with a gross NPL ratio of 8.64%. During the last two decades, the Bank has concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stable deposit base and managing its non-performing loans via improved risk management processes .MCB Bank has 1165 branches (December 31, 2011) including local branches, and business establishments in Sri Lanka and Bahrain including newly established Rep. Office in Dubai, UAE. The Bank has also formed a private company in Hong Kong (fully owned subsidiary of MCB) in partnership with Standard Chartered Bank, handling trade transactions of select countries in the Asia-Pacific region. MCB has been successful in turning around its operations since its privatization and is moving forward to set high performance standards with the continuous support

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of its customers and leadership in banking technology. To further strengthen its financial services base, MCB has also incorporated an Asset Management Company in the year 2005 known as MCB Asset Management Company. MCB has also incorporated a leasing company in Azerbaijan in 2009. (MCB bank, 2012). Awards: Year 2012 The Asset Triple A: Best Domestic Bank - Pakistan Euro money: Best Bank in Pakistan NFEH: CSR Business Excellence Award Best Media Coverage ICAP and ICMAP: 2nd Best Corporate Report Award 2011- Banking Sector World Finance: Best Commercial Bank Pakistan Pakistan Centre for Philanthropy: PCP Corporate Philanthropy Award (MCB bank, 2012).

2.7 Nature of the Organization

MCB Bank Limited is a banking company incorporated in Pakistan and is engaged in Commercial banking and related services. The Banks ordinary shares are listed on all the stock Exchanges in Pakistan. MCB Bank Limited is a Pakistan-based Public limited company. The Bank operates in four business segments: 1 Corporate finance 2 Trading and sales 3 Retail and consumer banking

4 Commercial banking

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2.7.1 Corporate Finance Corporate finance includes underwriting, securitization, investment banking, syndications; initial public offerings (IPO) related activities (excluding investments) and secondary private placements. 2.7.2 Trading & Sales Trading & sales segment includes fixed income, equity, foreign exchange commodities, lendings to financial institutions and brokerage debt. 2.7.3 Retail & Consumer Banking Retail & consumer banking includes retail lending and deposits, banking services, private lending and deposits, banking services and retail offered to its retail customers and small and medium enterprises. 2.7.4 Commercial Banking Commercial banking segment includes project finance, export finance, trade finance, leasing, lending, guarantees and bills of exchange relating to its corporate customers.

2.8 Management and Departments of MCB Bank

2.8.1 Organization Structure As MCB Bank is a banking company listed in stock exchange therefore it follows all the legalities, which are imposed by concerned statutes. MR. Mian Mohammed Mansha is chairman & chief executive of the company with a team of 10 directors and 1 vice chairman to help in the business control and strategy making for the company. A team of 10 professionals is handling operational management of the bank. MR. Mian Mohammed Mansha also heads this team.

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Table 2.1 Board of directors 1. Mian Mohammad Mansha 2. S. M. Muneer 3. Tariq Rafi 4. Shahzad Saleem 5. Sarmad Amin 6. Mian Raza Mansha 7. Aftab Ahmad Khan 8. Mian Umer Mansha 9. Dato' Seri Ismail Shahudin 10. Datuk Abdul Farid 11. Ahmad Alman Aslam Source MCB bank 2012 Chairman Vice Chairman Director Director Director Director Director Director Director Director Director

2.9 Main Departments and Their Jobs

There are three main departments in any branch of MCB Bank General banking Foreign exchange Advances/credit

2.9.1 General Banking General banking deals with following services: 2.9.1.1 Remittance It is transfer of funds. Funds can be transferred in shape of pay orders, demand draft, mail telegram and telegraph transfer. Payments of fees of different organizations, fulfillment of tenders, and collection of

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funds are the main functions of remittance. Maximum part of general banking depends on this department. 2.9.1.2 Issuance Of Different Kinds Of Remittance: Pay Order Pay order is the property of person/company that has to take the benefit of the amount being pay ordered by the concerned person. Pay orders are made for the payment of fees, tender or issued for the payments of dealings. These are required for the proof of payments made between the bank and the customer in the favor of beneficiary. These are noted in printed block letters and yearly serial numbers are issued from computerized system. 2.9.1.3 Demand Draft Demand drafts are made for the beneficiary for payments, funds etc, these are made for outstation branches of the concerned banks. An advice is also made for the confirmation of the draft send. These are also approved and safe way of sending amount to the beneficiary. These are also noted by computerized system and a serial number is issued from the computer system. Mail Transfer Mail Transfer is made with in the city for transfer of amount. An advice is also made for the confirmation of the draft send. These are also approved and safe way of sending amount to the beneficiary. These are also noted by computerized system and a serial number is issued from the computer system. Payment Of Pay-Order And Demand Draft Pay-Order and Demand Draft both could be paid in shape of physical payment of cash and in case transfer of amounts; the amount could be

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transferred in the beneficiary account. In case of physical payment authorized signature of beneficiary are taken for the proof of amount being paid to him and in case of transferring of amount authorized signature of the beneficiary are checked and verified for reducing risks. Cancellation of Pay-Order and Demand Draft Any type of Pay-Order / Demand Draft is cancelled by the permission and instructions made by the beneficiary. The customer could only cancel the pay order/ demand draft as the verified signatures of beneficiary are present on the advice. 2.9.1.4 Vouchers Vouchers are made for records and they should be completed in all respects, the amount, date, its head, particulars, amount in words, authorized signatures and contra advice or voucher should be present. Vouchers are advice either debit or credit slips. They are contra of each other. If any voucher of debit is passed its contra credit voucher should also be passed for the balancing of accounts, their respective sheets. 2.9.1.5 Inward Clearing It depends on those checks that are cleared inter branch and with in the city. As the concerned branch receive any type of clearing check first of all physical checking is taken place. For clearing procedure there should be two days margin. These cheques have their vouchers and the amount of the cheque and voucher should be identical. Than these cheques are stamped and noted on receiving sheet as well as feed in to the computerized system. 2.9.1.6 Outward Clearing It depends on those cheques that are cleared outside the city. For outward clearing cheques are send because the home branch has their

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accounts but checks are of other banks. Contras of these cheques are vouchers that are recorded in the home branch. 2.9.1.7 Issuance of Cheque Books Any account holder that has opened the account he/she could credit his/her account and for this purpose there should be a cheque book, so he/she could be able to credit the needed amount whatever he/she wishes. For the issuance of the cheque book a person is advised to fill a requisite slip with his/her full names and the account number with two verified signatures. These signatures are checked and then another requisite slip prepared by the bank staff send to the NIFT, and it issues the printed cheque books after completion of the procedure in two or three days. Account holder can take it by singing on the issuance register or if the absence of the account holder another person could also take the cheque book only if he/she has authorized signature of the account holder. When the cheque books are issued they are feed in the computer system from the requisite slip so when the cheques are given for the credit/transfer of amount they could checked. In this way neither the cheques could be repeated nor could the invalid cheques be claimed. 2.9.1.8 Issuance of ATM Cards Head office issues ATM (Auto Teller Machine) cards with their PIN (Personal Identification Number) codes and when the customer claims for their ATM card they are checked from the list that is also issued from the head office, and the claim is checked from the list and if the name is found than the cards are issued by taking a signature and their PIN codes are given to them by taking signatures on their ATM card forms. The ATM card has been activated by the number provided at or with the specific card.

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2.9.2 Foreign Exchange 2.9.2.1 Lcs Establishment Any company can provide its documents containing e-form, bill of lading, short shipment notice in case of short shipment, packaging list etc. the information provided from the documents is recorded in the LC establishment portion or section in the computer. Payment or Retirement When the transactions have been completed then approved documents from the concerned bank are sent to the home bank for the payment or retirement of the LC. These transactions have recorded in the payment or retirement section of the computer. 2.9.2.2 Foreign Currency Deposits The Foreign Currency Deposit relates with the foreign currency accounts, cash deposit or credit and foreign remittances. Foreign Remittances In this we received the messages through SWIFT for foreign remittances, which we record in their respective accounts, if these are relates with Pak rupees than it was transferred in Pak rupees with the latest rate and if this relates to the foreign currency than it is dealt with accordingly. The amount has been credited to the respective account and the head office has been debited against it. After crediting the amount to the respective account. All the subsequent entries have been made in the registers and also in the computer record as the system now have been upgraded on computers. As we are reporting daily to the head office, so an annexure has been maintained and faxed to the head office.

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2.9.3 Advances / Credit This department deals with the approval of different kinds of loans to different business entities. The loans, which are being approved by the department, are kept with some securities such as bonds, properties and any other type of asset, which is equally valuable or more than this as a guarantee. Every branch has its own limit, if the amount of loans is within the limit of the branch then it is being approved by the branch but if the amount of loan is exceeding the limit then it has to make it approved by the head office. In this case the branch stored all the required papers and sent them to the head office for necessary action. If the head office approved the loan then mostly the period contains a year. And if the party requires more loan than after a year the loan has been re-approved required that they should have the limit. In case if the head office do not approve the loans then the return letter came back with the reasons of not approval of loan and if the reasons have been made approved by the concerned party then it could be sent again for approval. This whole process is recorded in the back remain with the bank until the party has not refunded all the amount of loan and bank has the authority to liquidate those assets for preventing it from loss. Types Of Advances MCB Bank provides advances, which are of two types. These are as following: 1. Fund Based Advances 2. Non Fund Based Advances Fund Based Advances Funds are given to customer according to their requirement against securities. These loans are given specially to traders, business, small industrial units, including cottage industries, agriculturists, thus

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ensuring an equitable distribution of bank credit among various sectors of the countrys economy. There are following types of advances, which are given to customer on fund basis. 1) Industrial loan 2) Commercial loan 3) Agricultural loan 2.9.3.1 Industrial Loan Loans are given to industrial units including cottage industries up to or less than RS. 20 million. Loans and advances shall not exceed amount specified by marginal restriction on the type of securities offered. Industrial loans are granted to the manufacturing section of the economy including finance for fixed investments and working capital requirements of small industries. 2.9.3.2 Commercial Loan Total principal amount of loans to a single enterprise/borrower shall not exceed RS. 0.5 million. Maximum maturity is 3 years, depending upon the nature and type of advances, decided upon case to case basis. 2.9.3.3 Agricultural Loan Bank provides the agriculture advances in order to enhance and support the agriculture sector of the country. Banks Agriculture division deals with the agriculture advances (MCB Bank, 2012).

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2.10 Divisions of MCB Bank

2.10.1 Agriculture Division Agriculture division deals with the loans and development of agriculture sector. It has the responsibility to manage all the affairs related to agriculture sector. This division works for the development of agriculture in the country. 2.10.2 Audit Division Audit Division is responsible for the inspection of financial affairs. It also keeps a check over the irregularities in different branches. They are delegated enough authority from the Board of Directors so that it works without pressure. It appoints the audit teams and all the irregularities pointed out are reported to this division. 2.10.3 Business Development And Marketing Division This division works under the Head Office (H.O). Its main concern is to develop the business of the bank related to the introduction of new products. Changes in the existing schemes in favor of the bank and customer is also the responsibility of this division. 2.10.4 Central Accounts Division Central Accounts Division takes care of the accounts of branches and records all inter branch transactions and transaction of branches with HO. Calculation of profit on the account of branches maintained with HO is also the responsibility of this division. 2.10.5 Corporate Affairs Division Corporate affairs division deals with the affairs related to public limited companies. It includes financing of large and specialized corporations projects. In short it manages the corporate financing. It

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also directly controls all those branches, which are designed as corporate branches. 2.10.6 Credit Management Division This division has the duty to make and alter the credit rules and regulations in accordance with the prudential rules and regulations formed by SBP. It deals with all credit proposals submitted by advances department of different branches and designs their limit of loans. This division also carries out marketing activities. 2.10.7 Finance and Treasury Division It manages all the assets of MCB Bank. Management of income tax and central excise duty is the function of this division. The most important function is to announce the profit rates on different schemes from time to time. Source: MCB Bank Ltd (2012)

Summary of the Chapter

In the nutshell the chapter includes the definition of bank and the importance of banking in a country economy. It further elaborates about the history of banking in Pakistan, how the banking emerged their pre nationalization and post nationalization era, and also a brief history of MCB bank is given. This chapter briefly explains about the management of MCB bank and also about the different departments of MCB bank .In the next chapter different .In the next chapter different products and services that are offered by MCB bank are discussed briefly. (MCB bank, 2012).

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CHAPTER 3 PRODUCTS AND SERVICES OF MCB BANK

Introduction to Chapter
In the previous chapter a brief introduction/history and different types of MCB departments are discussed this chapter consists of different products and services offered by MCB bank. The different types of accounts offered by MCB bank, the different types of loan schemes offered the credit cards and master cards etc.

3.1 MCB Salary Club

A payroll solution designed to make life easy; it simplifies all the monthly payroll related banking needs of employers and opens the door to a world of special offers for employees. Salary Club provides the convenience of having an extensive range of financial services available to employees at their place of work.

3.2 Current Account

MCB Bank offers a variety of current accounts to cater the everyday transactional needs of various customers. These accounts ensure ease and freedom to bank from any of the 1100+ branches across the country. The different accounts include: the Basic Banking Account that has no minimum balance requirement; Business Account offering free online transactions, Demand Drafts, Pay Orders and lots more to meet the day-to-day business requirements; Current Life Account that offers the security of life insurance free of cost; and for all others, the conventional Current Account.

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3.3 Savings Account

MCB Bank offers a wide array of savings products that suit short-term growth and transactional needs. Our savings accounts offer attractive profit rates as well as flexibility to transact. Savings Extra is targeted for customers having Rs. 5 million + deposit and 365 Gold offers profit rates on daily balances with no minimum balance requirements. In addition, two unique products, i.e. Smart Savings and Savings Maximizer, are special saving accounts run solely via debit cards and other remote banking channels, offering a very competitive rate to both high and low-end savers

3.4 MCB Advisory Services

Financial and Capital Raising Advisory provides our clients with financial advisory services, commercial structuring support and access to capital resources to help companies successfully finance their business/project.

3.5 MCB Islamic Banking

MCB-Islamic Banking Group provides Shariah-compliant products and services both on the liability and asset sides to various customers of all demographic segments to cater a wide range of Working Capital, Capital Expenditures, Trade Business and Consumer requirements. In addition to existing Shariah-compliant IB products, Islamic Banking Group also provides customized solutions to its valued customers for execution of complex financial transactions. Furthermore, Islamic Banking Group also provides Shariah advisory services in structuring of various syndicated transactions for its valued customers. To facilitate its valued clients, MCB-Islamic Banking has also increased outreach of its dedicated Islamic Banking branches to the tune of 27 in 14 cities across the country.

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3.6 MCB Agri Products

MCB is committed to the farming community to support their national objectives of self-sufficiency and food security to the people of Pakistan. Dedicated and specialized staff, supervised by the Agri Credit Division, is posted in lending branches to cater for strong business relationships and facilitation. The banks extensive branch network in all the provinces and diversified product range extends our reach of agri credit facilities to encompass both crop and non-crop sectors.

3.7 MCB Home Remittance

MCB Home Remittances offers unmatched services for overseas Pakistanis to send money home FAST and FREE at no cost across Pakistan through MCBs large network of over 1100 branches. Money can be sent FREE & INSTANT through our international send agents like MoneyGram, Xpress Money and many others. We also offer facility to Overseas Pakistanis to open accounts in their home country through our Motherland account. This is designed to allow transferring of funds to your family & loved ones through your own personal account back home.

3.8 MCB Corporate Financing

MCB Corporate Financing provides access to diversified financing options, including working capital loans, term loans, trade finance services and investment banking

3.9 MCB Channel Financing

MCB Channel financing provides working capital facilities to dealers and vendors of selected companies under a structured product programme. This product enables our customers dealers to leverage

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themselves and increase their business capacity with their respective business partners.

3.10 MCB Local Correspondent Banking

Transaction Banking Department at MCB Bank provides Local Rupee Drawing Arrangement, a product for small banks and financial institutions to use our vast branch network platform to make payments in areas where their own branch network does not exist, thus extending their reach nationwide.

3.11 MCB Rupee Traveler Cheque

MCB Rupee Travelers Cheques are as good as cash, in fact better. Better because with Rupee Travelers Cheques you have the power to purchase and a feeling of security that should you lose them, you will get a refund. MCB Rupee Travelers Cheques are accepted at major shops, travel agents, hotels, business establishments and MCB Bank branches all over Pakistan. You don't have to be an MCB Bank account holder to buy the Rupee Traveler Cheques. Anybody can purchase them. It's a safe and convenient way to conduct everyday business. At a time when thefts and robberies are on the increase, you are better off carrying Travelers Cheques rather than money.

3.12 MCB Investment Services

Investment Services operate with the aim to help you make the most of your wealth with investment opportunities that match your unique financial aspirations. MCB Bank Investment Services offers

distribution of mutual funds managed by the leading fund managers of Pakistan. We can suggest the products most suited for your needs, or work with you to create a personalized solution completely focused on your expectations of the capital markets.

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3.13 MCB Visa Credit Card

MCB offers a complete suite of Classic, Gold and Platinum Visa Credit Cards focusing on providing superior services, travel privileges and shopping pleasures. It also offers comprehensive insurance and instalment plans, reward points and SMS alerts that give a different feel to the world of credit cards. These unique features include irevolve, which makes variable mark-up rates available to customers allowing them to repay at affordable rates

3.14 Mahnama Khushali Scheme

A 5- year fixed Deposit Scheme, targeted to persons with small savings who would desire a regular monthly return on their investment. Salient Features Minimum amount of investment shall be Rs.0.010m and the maximum amount of investment would be Rs. 1.000m. Khushali Certificates can be purchased by individuals (singly or jointly) or by the Proprietorship/Partnership concerns or Companies, etc. in their name The Khushali Certificate will be of five years maturity. The interim rate of profit offered will be minimum 1% per month. If the profit declared by the bank is higher, additional profit will be paid. Zakat will be deducted wherever applicable on yearly basis whether you will be receiving your profit or in cashing your certificates. As per Government Directions, tax on the profit / return is to be deducted by MCB branches at the time of payment.

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3.15 MCB Khushali Bachat Account

Salient Features 8% rate of return per annum. Returns calculated on daily. Average balance and paid half yearly. Introduced first time in Pakistan. The facility of helping account holders pays utility bills (electricity, telephone and gas) through their account. No queues. No delays

3.16 MCB Investment services

Investment Services operate with the aim to help you make the most of your wealth with investment opportunities that match your unique financial aspirations. MCB Investment Services offers distribution of mutual funds managed by the leading fund managers of Pakistan. We can suggest the products most suited for your needs, or work with you to create a personalized solution completely focused on your expectations of the capital markets.

3.17 Capital Growth Certificate Scheme

For long term depositors under which the amount deposited almost double at the end of 5 years. For the scheme, the minimum amount of deposits is Rs. 10000 while there is no maximum limit. In case of premature encashment of the certificate, the depositor will profit at the same rates as that of PL Saving Account.

3.18 Fund Management Scheme

This scheme is offered to corporate and customers and aimed at providing better rate of return up to 15% per annum. One of the

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objectives of the scheme is to develop secondary market for Government Securities.

3.19 Consultancy Services

In the process of privatization of public sector units, prospective buyers need professional assistance and MCB Bank, with its expertise, offer to them specialize service for valuation of the market value of the industrial unit, preparing bid documents and arranging finance for the purchase of the unit.

3.20 Self Supporting Scheme

For the benefits of genuine worker/borrowers who are poor and needy and for small entrepreneur the bank as evolved a self-supporting scheme: maximum amount of loan Rs.25000 and minimum Rs.5000 per individual. Loan will be totally free of mark-up. Fax Press This product was first of its kind introduced by using modem technology of The Fax Machine. It facilitates speedy transfer of funds within Pakistan. The service guarantees transfer of from one city to another, within an hour.

3.21 MCB Mobile Banking

At the forefront of technological excellence, MCB Bank proudly introduces MCB Mobile Banking. The convenience of accessing account balance information and mini statements whenever want or wherever may need them, with comfort and peace of mind. MCB Mobile Banking service is available to all MCB ATM cardholders, 24 hours - 365 days.

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3.22 MCB Car 4 U

MCB car 4 u auto finance is a power move that gets you not only a car of your own choice but leads you best in life. It is affordable with competitive markup, flexible conditioning and easy processing and above all no hidden cost.

3.23 MCB Master Card

Since the beginning of time, people have tried to find more convenient ways to pay, from gold to paper money and checks. Today, money is moving away from distinct hard currencies and towards universal payment products that transcend national borders, time zones, and, with the Internet, even physical space. Plastic or "virtual" money, credit, debit, and electronic cash products, inevitably will displace cash and checks as the money of the future. MasterCard International has expanded globally in more locations in the world than any other card. The card was introduced by MCB Bank Limited in 1995 and now offers card members over 15 million outlets in 232 countries.

Photo security- The first bank in Pakistan to introduce the enhanced feature of photograph on the card limiting fraud in case of card loss.

Welcomed at over 3, 000 outlets in Pakistan. Provides up-to 45 days Free Credit. Joining and Annual Fees to suit you. 24 Hour Customer Services- Call 111-700-700 and you can get information from our customer services representatives

On new card application or have your queries resolved anytime of the day.

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Cash Advance Facilities Available in Pakistan and worldwide with a network of over 1,000 branches and a team of dedicated professionals, MCB is Pakistans largest private sector commercial bank.

Our Consumer Banking provides customers with innovative saving schemes, products and services. Our ATM network is the largest in Pakistan and our Pak Rupee Travelers Cheques are market leaders. We were the first to introduce the photo card with the introduction of the MasterCard. When it comes to banking practices, you can depend on us. Weve been around for over fifty years.

3.24 MCB Smart Card

MCB now brings you MCB Smartcard a secure and convenient instrument of payment with unmatched functionalities. It provides 24hour direct access to your bank account. The convenience and flexibility of MCB Smartcard will help live a smarter life. It not only helps you manage your expenses, but also avoids undue interest on your day to day credit card transactions. Your balance is always within your reach and you spend accordingly. MCB bank is the only bank to introduce a debit card that gives the option to choose from domestic and international card for local and global usage respectively

3.25 Remit Express

The fastest way of getting your money across to Pakistan. Remit Express offers low cost remittance from U.A.E. and Saudi Arabia. Your relatives, friends or business associates receive drafts within 72 hours. MCB Remit Express has been specifically designed to meet the needs of the expatriate Pakistani community residing in the Gulf countries.

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3.26 MCB Pyara Ghar

MCB gives dream home at the lowest and best possible mark-up rates. You can choose either one of our two mark-up rate options- fixed or variable. Early repayment option tailor-made to allow making partial prepayments at dates that suit. Who Can Apply Anyone who fulfills the following criteria is eligible to apply: Pakistani national residing in the city and area where the product is launched. 25 years old or above when you apply and under 60 at the time of maturity of the applied financing period. Salaried person, self-employed professional or a businessman with a verifiable monthly income stream. Net take -Home income not less than Rs. 25,000 per month. Have 5 years or more of business or professional experience. Employed with the present employer for 2 years with a total employment history of 5 years. Home Purchase Home Renovation Home Construction Tenure 3 years to 15 years 2 years to 5 years 3 years to 15 years

3.27 MCB Virtual

MCB Virtual provides the continence of banking on internet. Whether at office or home or traveling. Log on at www.mcb.com.pk and enjoy 24 hours access of all your accounts for the largest array of service. (MCB bank, 2012).

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Summary of the Chapter

It is suffice to say that this chapter elaborate about the different products and services offered by MCB bank .just like the different types of accounts their minimum balance, their procedure and criteria and their silent features .This chapter further discussed the different types of loans offered by MCB bank, their markup rate ,their advance payment and criteria etc. further this chapter includes about the different schemes offered by MCB for home and car etc. This chapter also includes about the different types of credit cards offered by MCB bank .In the proceeding chapter I have done the analysis of MCB bank through different methods just like financial analysis ,SWOT analysis and pest analysis

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CHAPTER 4 ANALYSIS OF MCB BANK

Introduction to Chapter
In the previous chapter different types of products and services offered by MCB bank are briefly discussed. This chapter consists of the analysis of MCB bank which contains the SWOT analysis their strength, weaknesses, opportunities and threats, and also the financial analysis of MCB bank through different types of ratio analysis like the current ratio, debt to equity ratio tec. This chapter further elaborates about the PEST analysis of MCB bank.

4.1 Ratio Analysis

An index that relates two accounting numbers and is obtained by dividing one number by other Gallagher 2003 Ratio Analysis is an important and age-old technique of financial analysis. It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of business. It provides data from inter firm comparison. They also reveal strong firms and weak firms, over- valued and undervalued firms. Ratio analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in decision about their efficiency of otherwise in the past and likely performance in future. Ratios also help in Investment decisions in the investors and lending decisions in the case of bankers etc. Following are the main types of ratios that I am going to calculate in this report to compare and highlight the financial performance of MCB in 2010, 2011 and 2012.

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The various stakeholders of business are all interested in the analysis of financial statements. But the focus of interest of all is not the same. For example creditors and credit reporting agencies are interested in finding out the credit worthiness of the firm to which they have extended credit or intend to extend credit. Short term creditors are interested in the short term liquidity of the business and long term creditors are interested in the long run cash flow which the firm can generate over the long period of time. Investors are interested in the firms ability to sustain profitability over a period of time. Government agencies analyze financial data for tax purposes. The internal users of financial statement like management also analyze financial data for planning and control. The financial data of MCB is analyzed in the two following ways: 1. Time Series Analysis. 2. Ratio Analysis Index and common size analyses are used to measure a firms performance over time in relation to itself. Such analysis is called time series analysis.

4.1.1 Common Size Analysis

Common size analysis is an analysis of financial statements where total assets divide all balance sheet items and all income statement items are divided by net sales or revenues. Common size statements can be extremely helpful to highlight changes over time in the financial performance and financial condition of a company. However, growth or decline in various items of balance sheet and income statement cannot be detected from the common size percentage only changes in the data relative to a total for a particular date or period can be determined. A statement item that has increased in rupee amount will

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show a decrease percentage if the total has increased at a greater rate than the individual item or vice versa. .

4.2 Financial Ratio of MCB BANK

A financial ratio is an index that relates two accounting numbers and is obtained by dividing one number by the other. Gallagher 2003 One may ponder that why there is a need to mingle with these ratios and not take the actual figures straightforwardly. Among various reasons one cogent reason can be put forward that ratios help in comparison. When ratio analysts are to compare the internal performance of the organization in relation to time, only ratios are the viable option for them. Similarly, comparison with the other competitors in the same industry can only be carried out with the help of financial ratios. The number of financial ratios the might be created is virtually limitless. But there are certain basic ratios that are frequently used, these ratios are as:

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4.2.1 Assets Turnover Ratio Net sale (advances + investment) Total Assets This shows revenues generated per rupee investment in total assets. This ratio is calculated by dividing net sales (advances and investment) by total assets.

Table no. 4.1 2010 Sales Total assets ATR 467613 567553 0.82

(Rs in Millions) 2011 544231.74 631225.3 0.862 2012 641652.21 742160.53 0.87 approx.

Assets turnover ratio for, 2010, 2011 and 2012 Source: Internees Analysis

Interpretation
This shows revenue generated per rupee investment in total assets. The Ratio increased from 2010 to 2012.The graph shows a high increase from 2010 to 2011as 0.82 to 0.862 and then grows slowly to 2012. So we can interpret that MCB is effectively utilizes its resources.

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4.2.2 Current Ratio Current Assets Current Liabilities Its shows the firms ability to meet its short term obligations. The higher the ratio, the greater is the companys ability to meet its short term obligation as the come due. Current ratio is calculated by dividing current assets by current liabilities Table no. 4.2 (Rs in Millions) 2010 Current assets Current liabilities Current ratio 546607 483415 1.12 2011 631225.3 558135.855 1.130 2012 742160.532 655006.1 1.133

Current Ratios for 2010, 2011, 2012 Source: Internees Analysis

Interpretation
Current Ratio of MCB for the last three years shows an increasing trend. In the year 2010 it was 1.12 and then it increased to 1.130 in the year 2011 mainly due to an increase in current assets of the bank. But in the year 2012 it just increased from 1.130 to 1.134. .This rise in the current ratio of MCB shows the defensive approach of MCB towards working capital. This surely improves profitability as the percentage of current assets.

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4.2.3 Debt To Equity Ratio

Total Debt Shareholder Equity The Ratio shows extend to which the firm is financed by debt. Table no. 4.3 (Rs in Millions) 2010 Total debt Shareholder equity Debt Ratio 488349 79204 6.16 2011 564431 88802 6.35 2012 664148 101751 6.52

Debt to Equity Ratio for .2010, 2011, 2012 Source: Internees Analysis

Interpretation
MCBs High ward trend of Debt to Equity ratio shows that the bank is relying in debt financing for the purpose of expansion of businesses and investments. The ratio of 2012 as compared to 2010 has increased.

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4.2.4 Interest Earned Ratio:

Earnings before interest & Taxes Interest Expense This ratio shows that number of time a company can cover or meet its financial charges or obligation.

Table no. 4.4 2010 EBIT Interest expense Interest earned ratio 26254 17988 1.45

(Rs in Millions) 2011 31,483.179 23,620.274 1.33 2012 32,053.744 27,500.019 1.16

Coverage Ratios for 2010, 2011, 2012 Source: Internees Analysis

Interpretation
The interest coverage ratio of MCB serves as one measure of the firms ability to meet interest payments and thus avoid bankruptcy. In general the higher the ratio, the greater the likelihood that the company cover its interest payment without difficulty. The interest coverage ratio of MCB has shown a decrease over the period of three years. In the year 2012, the ratio is 1.16 which show that the income in 2012 cover only 1.16 times the interest expense.

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4.2.5 Net Profit Margin Ratio

Net Profit after Taxes Net sale

X 100

It is measure of the firm profitability of sale after taking account of all expense and income taxes.

Table no. 4.5

(Rs in Millions) 2010 2011 19425 544231 3.56% 2012 20941 641652 3.26%

Net profit after tax Sales Net profit margin

16873 467613 3.60%

Net Profit Margin for .2010, 2011, 2012 Source: Internees Analysis

Interpretation
Net profit margin of MCB has shown a fluctuating trend in the year 2010 it was 3.60% but in the year 2011 it was decreased to 3.56% and again slightly dropped to 3.26% in the year 2012. This means that through the selling price has increased the other expenses of the bank like operating, general administration or selling expenses has shown a slight decrease.

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4.2.6 Debt to Total Asset Ratio

Total Debt Total Assets Debt ratio shows the fraction of the companys assets that is financed by debt. The ratio is derived by dividing a firms total debt by its total assets.

Table no. 4.6

(Rs in Millions) 2010 2011 564431 653233 0.864 2012 664148 765899 0.867

Total debt Total assets Debt Ratio

488349 567553 0.860

Debt to total Asset Ratio for the year2010, 2011, 2012. Source: Internees Analysis

Interpretation
This ratio highlights the relative importance of debt financing to the firm by showing the percentage of the firms assets that is supported by debt financing. Here in our case of MCB this ratio is decreasing from last three years, the higher the debt-to-total assets ratio greater the financial risk, the lower this ratio the lower the financial risk. So we can interpret that MCB is taking continuous steps to lower its debt financing and thus lower its risks.

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4.2.7 Return On Equity Ratio

Net Profit

X 100

Total Equity

This ratio shows that residual profit as a proportion of the bank value of common shareholder equity.

Table no. 4.7

(Rs in Millions) 2010 2011 19425 88802 21.90% 2012 20941 101751 20.60%

Net profit after tax Shareholder equity ROE

16873 79204 21.30%

Return On Equity for 2010, 2011, 2012 Source: Internees Analysis

Interpretation
The ROE of MCB has shown a mix trend. In the year 2010 the ROI is 21.30% but increased in the year 2011 to 21.90% but in 2012 it comes to 20.60%. This decrease in ROE is due to un improvement in Net Profit Margin.

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4.3 SWOT ANALYSIS

SWOT is an acronym for organization, strengths, weaknesses, opportunities and threats. SWOT analysis consists of sizing up a firms internal strengths and weaknesses and its external opportunities and threats .It is a tool to get a quick overview of firms strategic situation. Kotler 2001 Following are the SWOT analysis of MCB of Pakistan. 4.3.1 Strengths i. MCB bank has the ability to cope with pressure of competition successfully. ii. iii. iv. v. vi. MCB RTCs (Rupee Traveler Cheques) are widely accepted Maximum rate of Debt Recovery. Maximum use of latest technology in banking that is Having the strongest Equity Base. MCB has the most developed (Information Technology) IT Division among the other banks in the country. vii. It adopted latest technology like online banking system and SWIFT technology. viii. Asset turnover Ratio is also increasing that shows that MCB is utilizing its resources effectively ix. Current ratio of MCB is increasing from the previous 3 years

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4.3.2 Weaknesses i. ii. Employees are lacking motivation. The borrowings has shown a tremendous increase from Rs.25685 Million to Rs.78951 Million in just 3 years which is not a good sign. Shows its relying on borrowings. iii. iv. v. vi. vii. Communication gap between different levels of management. Debt to Equity Ratio is increasing Lack of the branches in marketable areas.. MCB bank advances decrease bank of its high interest rate MCB bank deposit decrease because of inflation.

4.3.3 Opportunities i. By giving them attractive schemes. The bank can easily make a remarkable growth in the Mobile banking industry and also Remittance share it can increase which can increase its feebased income as trend is shifting towards that. ii. The bank can also take advantage of the potential hydal power of the province Now that the government has decided to build small dams in the province the bank can invest in this field .It will not only boost the agriculture sector in the country, but also provide a great source of electricity which is the basic requirement for development. iii. As a result of the different steps taken by the Government regarding the betterment of the economy, small borrowers are attracted to get the financing and start small businesses. So MCB has an opportunity to attract the customers

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4.3.4 Threats i. ii. iii. Global technological advancement. Weak Political and economic situation of the country. Reduction in the business activities in the country because of electricity shortage and terrorism. iv. Reduction the rate of saving in different segments of people this is because of inflation in the country. People prefer to hold property and gold in place of saving in the bank v. The political interference in the bank regarding the decision of loan and advances, promotion and appointment is a great threat for the bank in its long-term existence.

4.4 PEST Analysis

4.4.1 Political i. ii. Employment practices are expected to change. Unions, Associations are being allowed to work effectively which can affect the performance of the company both positively or negatively. iii. Political interference regarding policies is expected to increase as current government is in race of power gain. iv. Due to lack of confidence on government investor is reluctant so mobilization of funds is going to decrease. 4.4.2 Economical i. Inflation is very high which will decrease the demand as purchasing power is decreasing. ii. Staff cost is increasing as basic wage rate has increased and inflation has compelled to will compel to increase salaries. iii. Operating costs are increasing due to inflation.

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iv. v.

Interest rate is increasing so loan taking has decreased. Value of rupee is decreasing which is pressurizing the economy.

4.4.3 Social and Cultural i. Lack of experts is in our country regarding management hence innovative activities are slow and conventional methods are adopted. ii. Cultural strain to savings is the reason due to which investment remains low. iii. Declining work ethics is also our problem which is mainly due to poverty, lack of training. iv. Inadequate Accountability, lack of good governance and lack of good infrastructure helps creditor to cheat and heavy bad debts occur. Same situation is hoped to prevail. v. Inadequate Empowerment is also a usual problem in our organization as every person want to get more power hence there is less delegation of authority and decision making.

4.4.4 Technical i. ii. Shortage of electricity is a big problem, Employees of each organization need IT training and organization has this trend. MCB Bank will have to follow it.

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Summary of the Chapter

A s we know that financial analysis is the backbone of any finance students internship report so in this chapter I have done the financial analysis of MCB bank through different financial ratios just like the current ratio, debt to equity ratio ,asset turnover ratio, net profit margin ratio, gross profit margin ratio etc. so that to analyze the financial position of MCB bank and to judge their financial performance. This chapter further elaborates about the SWOT analysis of MCB bank and after this the PEST analysis of MCB bank is discussed on this chapter .In the next chapter the finding of this chapter are discussed and according to the finding I have given the concern recommendations.

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CHAPTER 5 FINDING AND RECOMMENDATIONS

Introduction to chapter
In the previous chapter analysis of MCB bank are done through different methods .this chapter consists of the findings through the different types of analysis based and then according to these findings I have given the concerned recommendations. From the quantum of the profit and its financial data it can easily judge the after privatization Muslim Commercial Bank is performing well. Its deposits are growing day-by-day and so its profitability. The controlling body is responsible for the productive performance of the bank. Following is my observations and suggestion to improve the efficiency for the development of the bank

5.1 Findings
First of all I will discuss some of the financial findings that I have find from the financial analysis. Asset turnover ratio has been increased from 2010 to 2012 i.e. from 0.82 to 0.87, this shows that MCB bank is effectively utilizing its resources. Current ratio of MCB increase from 2010 to 2012 i.e. from 1.12 to 1.34,this rise shows the defensive approach of MCB towards working capital. High trend of debt to equity shows that the firm is relying on debt for financing and for expansion for business operations.

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The decreasing trend of interest earned ratio shows that MCB Bank has low operating income to pay for its interest which shows insufficiency.

Net profit margin of MCB Bank shows a decreasing trend from 2010 to 2012 i.e. from 3.60% to 3.26% which means that MCB Bank net profit /dollar is decreased.

Debt to total asset ratio of MCB Bank shows a decreasing trend, if this ratio is high financial risk will be high, so MCB Bank is taking steps to lower its financial risks.

Besides the financial findings there are also some general findings from the SWOT and PEST analysis of MCB bank which are: MCB bank lakes employee motivation, employees are not properly motivated, so thats why their efficiencies are effected. Communication gap between different levels of management ,mean that there is no common communication channel through which the low level employees convey message to upper level management and vice versa MCB Bank has shown a remarkable growth in mobile banking from the time of launch 2007 to 2012.At the year end of 2007 there were only 57 thousand customers but in 2012 it increased to 253 thousands customers showing an increase of 15 percent approx. There in MCB Bank by asking the Branch Manager about the job rotation he told me that now there is a proper job rotation and an employee has to change his job place and duties after 3 year. The rules and regulations have been changed and the employees has not to remain on the same post for more than 3 years.

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There were all latest computers in the branch. The advance computers were increasing the efficiency of the branch and members because all the works were completed in proper time with no delay.

As the employee finishes his training he is induced in a specified field since he does not have knowledge about the specific job assigned to him thus he feel difficulty to perform his job. There is no special training given to the employees for motivating customers.

In the bank the officers come across many customers daily. Customers are the backbone of every bank and a pool for deposits because banks run on deposits and through that they make advances. So there is a direct relationship between customer satisfaction and deposits. Customer services and relationship of Branch members with them was satisfactory and MCB bank ltd is giving much focus on that.

Political unions are found in MCB Bank, which is I think a barrier to the effectiveness of the work.

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5.2 Recommendations:
5.2.1 Increase Deposits and decrease Borrowings If we look at the balance sheet of the financial years 2010 to 2012,the increase in deposits are relatively low to increase in the borrowings. MCB bank should develop strategy, employee policies and emphasize to increase the deposits reserves that will enable to reduce borrowings because its not a sign of healthy speculations 5.2.2 MCB Islamic Banking and Agri loans Growing concerns about interest and realization of people that interest cannot be made base of a healthy economy MCB Islamic Banking needs a research, which should be engaged in evaluating and interpreting the ways in which the bank can flourish more and more .MCB should also focus on Agri loans because Pakistan is an agricultural country and their lies an opportunity for MCB to make a share to this market despite of a strong competitor ZTBL.It can cope with this problem through its wide spread network of branches. 5.2.3 Shift from Interest based income to Fee-based Income MCB has basically Lending Branches and pooling branches. The Lending branches mainly has to deal with the borrowers as it makes advances and pooling branches are related to the deposits. In short they operate on the interest based income. But now the state bank of Pakistan has decreased the pool rate to 9% that is not enough to cover the expenses of employees and banks thus the bank should now focus on the Fee-based Income i.e. online Cheque book issuances, ATMs etc. 5.2.4 On-Line Banking MCB should start online banking throughout the country as they are the pioneers in it, still they do not have all the branches online. They should try to improve this area and to diminish the entire book keeping

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methods. Online banking is impossible without the modern IT technology. Also, in a branch having one computer, there is a lot of work to do with it, needs more and modern computers to handle the situations, along with the trained staff. MCB Bank is moving towards that and is using new and advanced software but still it has to make abrupt changes. 5.2.5 Bottom-top Communication The down ward communication is important but the upward communication is very important. The downward communication is efficient and strong but there is a lack of upward communication. The Management style is dictatorship as I observed by discussion of any problem or issue with the officers was treated as disrespect by higher authorities.so it should be improved. Flow of information, decisions and other instructions and policies in efficient and effective manner will enhance the overall productivity and image of the organization. 5.2.6 Sound Management of Return on Equity A strong ROE is a solid signal that management is doing a good job of generating returns for shareholders' investments. This value also slightly decreased in last three years. MCB Bank should invest in those projects which create maximum return in order to diversify risk. This is done by engaging both in markup and non-markup interest bearing activities. MCB Bank should introduce new products for maximizing return on equity. The bank should decrease their non-markup expense. 5.2.7 Emphasize on Non-markup Income The bank should increase its non-interest income like fees, commission or investment in foreign currencies. This is now a trend that bank is not only to accept deposit and advance loan but also provide other

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specialize services so MCB Bank can get maximum benefit from it in order to increase net profit margin. 5.2.8 Primary Focus on Return on Asset As from finding this value decrease gradually because of decrease in net profit margin so MCB Bank should focus on those area where maximum profit can be generated. The MCB Bank should increase its investment and advances. 5.2.9 Focus on Islamic Banking Growing concerns about interest and realization of people that interest cannot be made base of a healthy economy. Islamic banking is an emerging market with growth rate of about 10% so MCB Bank can get maximum benefit from it. MCB Bank Islamic Banking needs a research, which should be engaged in evaluating and interpreting the ways in which the bank can flourish more and more.

Summary of the chapter

This chapter consists of the financial findings and then the SWOT and PEST analysis findings and then I have given the concern recommendations according to the findings just like MCB Bank online Banking, MCB Bank has to decrease its borrowings etc.

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Bibliography
Khan, F., 2010. Economy of Pakistan. Available at: <http://en.wikipedia.org/wiki/Economy_of_Pakistan> [Accessed 15th November 2013] Hussain, I., 2006. Pakistan banking sector. Available at: <http://ishrathusain.iba.edu.pk/speeches/WordDocs/Pakistan_Banking _Sector.doc.> [Accessed 20th December 2013] Van Horne, J.C., Wachowicz J. M., 2005. Fundamentals of Financial Management. 12th Ed. New Jersey: Prentice hall.. MCB Bank Limited, 2013.MCB Home. Available at: <https://www.mcb.com.pk/> [Accessed 11th November 2013]. MCB Bank. 2013. Annual report 2012. Available at: <https://www.mcb.com.pk/uploads/FCG/docs/MCB%20Annual%20R eport__2012.pdf> [Accessed 10th November 2013] Khan, M. H., 2004. Banking Industry Of Pakistan: Performances And Constrains. Available at: <http://www.scribd.com/doc/165116668/Banking-Industry-ofPakistan> [Accessed 29th November 2013] Robert E. Wright, Vincenzo Quadrini 2009. Money and Banking. New York: Flat World Knowledge. 15-30. Robert. F.M., .Williams, S.F. Haka, and Bettner, M.S., 1999. Accounting; the Basis for Business Decisions. 11th Ed, New York: Irwin McGraw-Hill. Sekaran, U. (2008). Research Methods for Business. 4th Ed. New York: John Wiley & Sons, Inc.

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Paget, S. J., 1904. Definition of Bank. Available at: http://notes4students.webs.com/apps/forums/topics/show/1246517 [Accessed 11th November 2013] Timothy j. G., Joseph D .2003. Analysis of financial statements. In: Financial management. 3rd Ed. New Jersey: Prentice hall. Khalil, U. 2009. Internship Report on MCB. Available at: <http://www.scribd.com/doc/24040789/MCB-Bank-Ltd> [Accessed 21th November 2013]

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Annexures
Annexure 1:
Organization Hierarchy of MCB Bank

Source: MCB Bank Ltd (2012)

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Annexure 2: Income Statement of MCB For the period ended 2010, 2011, and 2012
(Rs in million) Mark-up/return/interest earned Mark-up/return/interest expensed Net mark-up/ interest income Provision Provision for diminution in the value of invest Provision against loan and advances Bad debts written off directly Total Provision Net mark-up/interest income after provision Non-mark-up / interest income: Fee, commission & brokerage income Dividend income Income from dealing in foreign Currencies Gain on sale of securities-net Other income-net Total non-mark-up/interest income Non-mark-up / interest expenses Administrative expenses (reversal) other provision-net Other charges Total non-markup / interest expenses Profit before taxation Taxation-current year Taxation-prior years Taxation-deferred Subtotal Tax Profit after taxation 2010 54821 17988 36833 444 3101 52 3597 33236 2011 68,147 23,620 44,526 778.526 2,846.52 28.565 3,654 40,873 2012 68,356 27,500 40,856 (23.4) 481 21 478 40,378

4130 544 632.3 411.8 547.7 6285

5,117.2 1,003.272 921.262 735.639 334.8 8,112

5,934.5 1,197.7 822.9 824.6 373.89 9,153

12174 88.26 966.440 13249 26253 8027 1352 9380 16,874

15,585 514.65 1,402.38 17,502 31,483 9,724 1,038 1,296 12,058 19,425

17,065 (187.31) 599.974 17,478 32,054 9,601 117 1,396 11,113 20,941

Source: MCB Bank Ltd (2012

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Annexure 3:
Balance Sheet Of MCB 2010 Assets (Rs in million) Cash and balance with treasury banks Balance with other Banks Lending to institutions Investment Advances Other Assets-net Total current Assets Operating fixed assets Total Assets LIABILITIES Bills payable Borrowings Deposits and other accounts Sub-ordinate loan Other liabilities Total current liabilities Deferred tax liabilities-net Total liabilities NET ASSETS REPRESENTED BY Share capital Reserves Inappropriate profit Total Surplus on revaluation of assets Total Total Liabilities & Owner Equity 45407 1479 4402 213061 254552 27706 546607 20948 567555 10266 25685 431372 16092 483415 4934 488349 7602 40163 21416 69181 10023 79204 567553 2011 53123 2281 955 316652 227580 30635 631226 22008 653234 9467 39101 491189 18380 558136 6295 564431 8362 42186 28366 78916 9887 88803 653233 2012 57420 1192 1551 402069 239583 40345 742161 23738 765899 9896 78951 545061 21098 655006 9142 664148 9199 44253 34705 88157 13594 101751 765899

Source: MCB Bank Ltd (2012)

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Annexure 4:
Pattern of Share Holdings

Description Directors, CEO & Children Associated Companies NIT & ICP Banks, DFI & NBFI Insurance Companies Modarabas & Mutual Funds

Shareholding Percentage 98,928,007 197,310,846 486,497 3,175,647 60,756,081 1,153,092 10.7547 21.4501 0.0529 0.3452 6.6049 0.1254 2.9438 14.7284 0.2763 36.2995 6.4188 100.0000

Public Sector COS. & CORP. 27,079,155 General Public (Local) General Public (Foreign) Foreign Companies Others Company Total 135,480,447 2,541,784 333,904,991 59,043,576 919,860,123

Source: MCB Bank Ltd (2012)

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Annexure 5:

ASSET TOURNOVER RATIO

0.88 0.87 0.86 0.85 0.84 RATIOS 0.83 0.82 0.81 0.8 0.79 0.87 0.862

0.82

2010

2011 YEARS

2012

Source: Internees Analysis

Annexure :6

CURRENT RATIO
1.135 1.13 1.13 1.125 RATIOS 1.12 1.115 1.11 2010 2011 YEARS 2012 1.12 1.133

Source: Internees Analysis

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Annexure 7:

DEBT TO EQUITY RATIO

6.6 6.5 6.4 RATIOS 6.3 6.2 6.1 6 5.9 2010 2011 YEARS 2012 6.16 6.35 6.52

Source: Internees Analysis

Annexure 8:

INTEREST EARNED RATIO

1.6 1.4 1.2 1 RATIO 0.8 0.6 0.4 0.2 0 2010 2011 YEARS 2012

1.45

1.33 1.16

Source: Internees Analysis

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Annexure 9:

NET PROFIT MARGIN RATIO

3.70% 3.60% 3.50% 3.40% RATIO 3.30% 3.20% 3.10% 3.00% 2010 2011 YEARS 2012 3.26% 3.60% 3.56%

Source: Internees Analysis

Annexure 10:

DEBT TO TOTAL ASSET RATIO

0.868 0.866 0.864 RATIO 0.862 0.86 0.858 0.856 2010 2011 YEARS 2012 0.86 0.864 0.867

Source: Internees Analysis

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Annexure 11:

ROE
22.00% 21.50% 21.00% RATIOS 20.50% 20.00% 19.50% 2010 2011 YEARS 2012 21.30% 20.60% 21.90%

Source: Internees Analysis

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Branch Network Of MCB Bank Limited

Annexure 12:
Principal Office

Area Office North

Area Office South

Overseas Branches

Sindh Punjab NWFP

Baluchista n

5 Circles 2 Circles 10 Circles

1 Circle

25 Regions

7 Regions 12 Regions 199 Branches

2 Regions

710 Branches

262 Branches

38 Branches

Source: MCB Bank, (2012)

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