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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.
1.2 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
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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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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.
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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).
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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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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).
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.
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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
2.9.1 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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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)
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themselves and increase their business capacity with their respective business partners.
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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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.
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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.
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show a decrease percentage if the total has increased at a greater rate than the individual item or vice versa. .
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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
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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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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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
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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X 100
It is measure of the firm profitability of sale after taking account of all expense and income taxes.
(Rs in Millions) 2010 2011 19425 544231 3.56% 2012 20941 641652 3.26%
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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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.
(Rs in Millions) 2010 2011 564431 653233 0.864 2012 664148 765899 0.867
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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Net Profit
X 100
Total Equity
This ratio shows that residual profit as a proportion of the bank value of common shareholder equity.
(Rs in Millions) 2010 2011 19425 88802 21.90% 2012 20941 101751 20.60%
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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4.3.2 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.
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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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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.
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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
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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
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
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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
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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
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Annexure 5:
0.82
2010
2011 YEARS
2012
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
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Annexure 7:
Annexure 8:
1.45
1.33 1.16
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Annexure 9:
Annexure 10:
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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%
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Annexure 12:
Principal Office
Overseas Branches
Baluchista n
1 Circle
25 Regions
2 Regions
710 Branches
262 Branches
38 Branches
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