INTERNSHIP REPORT ON MCB Bank Ltd.

(Specialization in Banking & Finance)

Submitted to The Chairman Department of Business Administration

Submitted by
NAME: Mohammad Faisal

Roll No: AH522620 Registration #: 10-PST-04540 Address: Muhalla Baba Roaday Shah, Fateh Garh, Sialkot

Mob NO: 03338718630

ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD

1

ACKNOWLEDGEMENT
All praises and thanks to Almighty Allah. The lord and creator of this universe, whose power and glory all good things are accomplished. He is also the most merciful, who bestowed on us the potential, ability and an opportunity to work on this report. I am really pleased here to acknowledge the sheer efforts and extreme of numerous people, those who have provided me their relentless service in the completion of my report of MCB BANK LIMITED. I am highly obliged to my respectable coordinator Mr. Yasir Khalid (Branch Manager of Ghuinke Branch) and state my gratitude for his valued guidance and support to understand the working in bank during my Internship. Mr.Yasir really helped me a lot to gain practical knowledge about general banking and foreign trade. I am thankful to all my tutors and class fallows and especially Prof. Mr.Khalid Farooq whose help, guidance, stimulating, suggestions and encouragement helped me all the time in class. I would like to pay my special thanks to my colleague / friends Miss. Sania Akbar and Faakhir Junaid in assisting me in completing my assignment. I pay my gratitude to my superiors Mr.Shahid Tayyab HR Officer MCB Regional Office Sialkot for moral encouragement and boosted my aspiration of accomplishing my task with added vigor and enthusiasm. I can not miss this opportunity to pay Compliments to all the employees of MCB Bank Limited for providing me their invaluable support during the period of my Internship and during Completion of my MCB report.

CONTENTS
1. TITLE PAGE 2. COPY OF EXPERIENCE LETTER 3. ACKNOWLEDGEMENT 4. EXECUTIVE SUMMARY 5. OBJECTIVES OF STUDYING MCB BANK LTD. 6. OVERVIEW OF THE ORGANIZATION 6.1. Nature of the organization 6.2. Business volume in term of revenues, deposits, advances, and investments 6.3. Number of employees by giving designation 6.4. Product lines 7. ORGANIZATION STRUCTURE 7.1. Describe the structure of overall of organization 7.2. Describe the structure of branch 7.3. Review of the various departments of the branch in terms of their functions and responsibilities 8. STRUCTURE AND FUNCTIONS OF THE ACCOUNTS\FINANCE 8.1. Finance and accounting operations 8.2. The role of financial manager 8.3. Use of electronic data in decision making 8.4. Sources of funds statement 8.5. Generation of funds statement 8.6. Allocation of funds statement 9. CRITICAL ANALYSIS AND PRACTICAL STUDYING 9.1. Practical and theoretical studying 10. FINANCIAL ANALYSIS 10.1. 10.2. 10.3. 10.4. Balance sheet in single table form Income statement in a single table form Ratio analysis Horizontal analysis of Balance sheet 3

10.5. 10.6. 10.7. 11.1. 12.1.

Horizontal analysis of Income statement Vertical analysis of Balance sheet Vertical analysis of Income statement Organizational analysis with reference to the industries. Managements vision\strategy for the future

11. ORGANIZATIONAL ANALYSIS 12. FUTURE PROSPECTS OF ORGANIZATION

13. SHORT-FALLS\WEAKNESS OF THE ORGANIZATION

14. CONCLUSIONS 15. RECOMENDATIONS 16. REFERENCES 17. ANNEXES

__________________________________

4- Executive summary
I am recommended by the university for the report to gain practical knowledge and to aware with organizational environment. For this purpose I joined MCB BANK LIMITED. MCB is the largest bank of the country. MCB Bank started Operations in 1947 and in a short span of time proves as market leader and competitor. In my report I have discusses the introduction, history, goals and objectives mission, corporate profile branch network of the bank. In the report I have discussed about the conventional banking which contain its history, origin modes deposits financing, and investments After that the discussion is about bank which contains Conventional division history branches modes of financing adopted by bank, its competitors and products. A complete detail of the work done by me during the practical work for report in bank related to different departments including with documents. After discussing the practical work, I have calculated the financial position of the bank through ratios with their conclusion and also I have fid out business process analysis of MCB BANK has been discuses. In the business process analysis detail procedurals has been discussed regarding different departments and products. I have also mentioned my duties, accomplishments, and knowledge which I have gain during my internship. At the end of this report I have given suggestion and recommendation where I observe pitfalls and drawbacks in MCB BANK LIMITED along with the conclusion.

5- Objectives of studying MCB Bank

The internship is an essential part of MBA (Banking & Finance) degree program because through this training students come to know the real difference between theory and practice and they also introduced to the outside business world. An important requirement of this training program is to compile a report about the activities of that organization in which student has done the internship. I have done my practice period (Different Departments) in MCB BANK LIMITED Ghuike Sialkot. This practice provided me great opportunity to equip myself with knowledge, techniques, application and tools used in an organization. I have tried to choose suitable words to lighter the subject of this report. Because words are the symbols used to express ideas. An important requirement of this report is that it should be comprehensive and written in good style; I have tried my best to make the style of this report as good, as possible, because style in writing as in other walks of Life is a quietly peculiar to the individual, as not to people write alike. Background, training, experience and the way a person thinks determine it. I hope this report will help in understanding various aspects and features of MCB BANK LIMITED and will be equally important for commerce student.

6-OVERVIEW OF THE ORGANIZIATIONS

HISTORY
MCB is one of the leading banks of Pakistan with a deposit base of 367 billions and total assets of around Rs. 509 billion. Incorporated in 1947, MCB soon earned the reputation of a solid and conservative financial institution managed by expatriate executives in 1974; MCB was nationalized along with all other private sector banks. The bank has a customer base approximately 4 million and a nationwide distribution network of 1081 branches, including 11 Islamic banking branches, and 6 overseas branches network and over 495 ATMs, in a market with a population of 60 million. 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.

Banks Performance Review

During the year 2009 the Bank continued to make strong progress in spite of the difficult market conditions. Revenues grew strongly and considerable advancement has been achieved in expanding our asset base. In addition to close focus on P&L and liquidity situation in 2009, the Bank continued to invest in human resources, enhancing customer segments and products portfolios and further strengthening our controls and credit risk management. A number of strategic actions have been taken to ensure that we are well positioned for the future and are able to excel in the years to come. The Bank has reviewed its governance structures and has further strengthened the roles of the Board, management and staff to ensure strict compliance to good governance. In 2009 MCB was given the award as the Best Domestic Bank in Pakistan by Asia money. This was a significant milestone for the Bank and reaffirms the efforts and vision of the management to position MCB at par with the best international banks.

6.1 NATURE OF THE ORGANIZIATION

MCB was incorporated by the Adamjee Group on July 9, 1947.The bank with a view to provide banking facilities to the business community of the south Asia. The bank was nationalized in 1974.Then in 1991 it was the first bank to be privatized and 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 US$ 6.02 billion, and the largest by market capitalization having a market capitalization of US$ 1.8 billion. The bank has customer base of approximately 4 million and a network of 1081 branches, including 8 Islamic banking branches, local branches, and business establishments in SiriLanka. The Principle activities of MCB are to provide commercial banking and other financial services.MCB provides financial solutions to major segments of its customer base, namely retail and corporate. The bank offers personal banking, cash management, retail loans, financing, asset management, investment banking, Islamic banking and other services which include deposits, saving/current account, international remittance and cards. MCB is making every effort to meet the upcoming challenges through strategic planning and making best use of the resources at its command. The bank is increasing resourse mobiliziation through regular deposits campaigns and accelerating the process of recovery of outstanding advances and non asset products for satisfying the personal needs of the customers.

6.2 BUSINESS VOLUME

(Rupees in thousand)

Particular

2005

2006

2007

2008

2009

Total Income Total Assets Total Liabilities Investments

9,171,372 298,776,79 7 275,469,03 4

17,164,824 343,177,94 9 300,992,83 0

20,808,390 410,485,51 7 355,365,84 2 113,089,26

20,526,669 443,615,90 4 385,179,85 0

24,710,953

509,223,727

439,483,714

69,481,487 229,345,17

64,450,761 257,185,11 0 198,236,68 2

1 292,098,06 6 218,960,59 8

96,256,874 330,274,15 5 262,510,47 0

167,134,465

Deposits Advances

8 180,322,75 3

367,604,711 253,249,407

Ref: MCB Financial Reports from 2005 to 2009

COMMENTS
The above table show the business volume of MCB which show increasing trend in income, Total assets, total liabilities, and deposits from 2005 to 2009.Investments of MCB in 2006 is decrease and 2007 is increased as compared to 2005 and then decrease in 2008 and increase in 2009 as compare to previouse four year.The advances trend in 2005 to 2008 is increasing trend and 2009 is decrease as compare to 2008. 9

6.3 NUMBER OF EMPLOYEES BY GIVING CADRE (DESIGNATION) VISE BREAK UP

MCB has total number of employees 10488 as per the information available in the financial statement for the year 2009. According to financial statement for the year 2009, the following are the employees by giving cadre (designation).

BOARD OF DIRECTORS NAME OF DIRECTORS

Mian Muhammad Mansha S.M.Muneer M.U.A Usmani Tariq Rafi Shahzad Saleem Dr. Muhammad Yaqub Mian Raza Mansha Mian Umar Mansha Dato, Muhammad Hussain Abdul Farid Bin Ilayas Aftab Ahmed Khan Muhammad Ali Zeb

DESIGNATION
Chairman(NON Executive Director) Vice chairman(NON Executive Director) President (Chief Exuctive officer,Exuvtive Director) (NON Executive Director) (NON Executive Director) (NON Executive Director) (NON Executive Director) (NON Executive Director) (NON Executive Director) (NON Executive Director) (NON Executive Director) (NON Executive Director)

Audit committee
Tariq Rafi-chairman Dr. Muhammad Yaqub-Member Dato, Muhammad Hussain-Member Aftab Ahmed Khan-Member Muhammad Ali ZebMember Malik Abdul Waheed (NON Executive Director) (NON Executive Director) (NON Executive Director) (NON Executive Director) (NON Executive Director) (Advisor to the Chairman)

Human Resources Committee

1. Mian Muhammad Mansha 2. Dr.Muhammad Yaqub 3. Mian Raza Mansha 10 (Chairman) (Member) (Member)

4. Mr. Shahzad Saleem

(Member)

Chief Financial Officer

Salman Zafar Saddiqui

Company Secretary
Abdul S.Sami

Legal Advisor
Khalid Anwar& Co. (Advocate &Lgal Consultants)

Head Of HR.Department
Ahmed Kareem

Registered Office
MCB Building,F-6/G-6, Jinnah Avenue Islamabad

Principle Office
MCB 15 Main Gulberg, Lahore UAN :( 042) 111-000-111 PABX :( 042)36041998-9 Website: www.mcb.com.pk E-Mail:info@mcb.com.pk

Registrars and share registration office

M/S THK Associates (pvt) Ltd. State Life Building No.3, Dr.Ziauddin Ahmed Road, Karachi

6.4 PRODUCT LINES

Products and Services
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The MCB President is pleased to announce in report 2009 that MCB Bank Ltd. In 2009 delivered a profit after before tax of Rs. 23.2 Billion registering a growth of 6% over 2008. The growth is directly to an increase of 14% in our CASA deposits, 21% in revenues and a tight control to our expense base enabling to retain our position as one of the most profitable banks in the country. In 2009, we also delivered superior return on equity of 27.4% and our assets crossed the Rs. 500 billion mark. The performance is all the more remarkable keeping in view the economic & political challenges faced by the country during the past year end miscreant created issues that MCB specifically grapple with for a large part of the year. Our fundamental belief is that a financial services company can only succeed if it needs its customers needs. If we can understand our customers financial objectives and offer them the right products and services so that they can be financially successful, then MCB Bank will continue to build on its leadership position and provide requisite returns to its shareholders. During 2009, we took several initiatives that brought us even closer to our customers. With the launch of MCB privilege, we became the first local bank to offer a dedicated proposition for the affluent segment; to meet the growth and protection need of our customers, we introduce Banc assurance and Investment Products in many of our branches; to enhance transactional convenience for our customers, and we became the first Pakistani Bank to launch Mobile Banking. These coupled with several other initiatives enable us to continue on the path of growing our customer base and profitability. Last year, to expand our reach and customer proposition, we also reached and agreement with RBS Pakistan to acquire their business. Unfortunately, the deal did not go through, but we continue to invest organically to further strengthen our businesses. For MCB, this is just the beginning and we are committed to taking the Bank to the next levels of success.

Key features of multi-pronged plans are as follows:

MCB want to be viewed as the leader in transactional convenience. To get top market share, MCB will continue to invest in alternate channel payment capabilities 12

and services as well as getting a large share of transaction driven businesses like remittances, cash management, payroll and trade. MCB will continue to invest in branches to make them more sales and service oriented. Through introduction of new sales and service model, strengthened transaction processing and leading financial products menu, MCB aspire to achieve the ambition. In addition to core focus on mass, mid market and corporate segments, MCB will continue down the path of further segmenting customer need and developing focus customer proposition, practically in Privilege, Islamic and SME. No organization can deliver without investing in its employees. In order to deliver growth targets, MCB will further strengthen reserve of talent and leadership powered by a strong performance culture and training.

MCB adopt all business lines in the market in order to achieve organization goals and objectives.
MCB Online Banking MCB MNET MCB Cash Management MCB Channel Financing MCB Local Rupee Drawing Arrangements MCB Home Remittance MCB Corporate Financing MCB Project and Structure Financing Syndicated Loans And Debt Capital Market MCB Equity Capital Raising

BANK ASSURANCE

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MCB Bank assurance has a financial plan that fits all needs by fulfilling loved ones dreams.

1- Flexi life 2- Life Partner 3- Edu care 4- Dream Wedding 5- Capital Sure

MCB Advisory Services

MCB Islamic Banking MCB Agri Products MCB Privilege Current Account

Saving Account

Term Deposit MCB Salary Club MCB Investment Services MCB Visa Credit Card MCB Car4U MCB Internet Finance MCB Smart Card MCB Rupee Travelers Cheque MCB ATMs MCB Mobile ATM MCB Lockers
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 MCB SMS Banking MCB Full Day Banking

MCB Banc assurance

MCB Call Centre MCB Mobile MCB Virtual Banking

7-ORGANIZIATIONAL STRUCTURE 7.1 Organization Structure Of MCB>

1-Head Office:
Head office is situated at MCB Tower chundrigarh road, Karachi.Head office is the main controlling unit of the bank. Head office is basically the instructor to all the regional and branch offices. The key responsibilities and authorities of Head office are:

Responsibilities:
Hiring of Personnel Generation of working instructions Implementing the regulations of State Bank Of Pakistan Preparation of Financial results Allocation of budgets

Authorities
Head office has power to fire any employee because of any reason Head office publishers the financial statements Has authority to accept or reject any proposal from regional offices, branch offices and other banks.

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2- Bussiness/Group Heads
Business heads are below to board of directors.The business heads are headed by one of the directors.The business heads have human resource division, audit division, business strategy and development division, risk management and portfolio review division, finance division, IT division,forex division.

Responsibilities:
The business heads are responsibility to Give suggestions to board of directors for decision making. Forward the decisions to circle offices.

Authorities
To take up the branch for audit To question any branch manager, regional heads etc.

3-Circle Office
Circle offices are directly answerable to the MCB business heads. There are 17 circle offices of MCB all over the country.

Responsibilities:
To issue circulars to regional and branch offices. The circle office is responsible to check the operations of Regional Offices as well as Branch Offices. They are responsible get the decisions implemented. They can call meetings of regional managers and branch managers to implement any change.

Authorities:
Circle Office can question any branch any time. Circle Office can call meeting of any department of the branch. They can visit the branch anytime and order the audit team to take up.

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4- Regional Offices:
Regional offices come directly under the command of Circle offices.44 regional offices of MCB are operational all over Pakistan. The cases of branch offices go to the related regional offices at first and passed to higher authorities if required. Otherwise Regional Offices have authority to handle certain level of cases on their own. The authorities and responsibilities are.

Responsibilities:
It is a communication channel between Head Office and Branch offices. It is responsibilities of regional office to handle the cases of branches. Regional Office has to pay attention to both ends Branches and Circle Office and Head office. They have keep check on the operations of branches, They have to visit each branch on monthly basis.

Authorities:
Regional office have authority to the appoint staff. Regional office can transfer the employees from branch to another. They have power to ask for the updates of the operations of the day.

5- Branch Offices:
The branches are directly answerable to the Regional offices. Total numbers of branches working all over the Pakistan are more than 1082.The responsibilities and authorities of branches are:

Responsibilities:
Branches are responsible to report Head Office and Regional office on daily weekly quarterly reports and when ever required. Branches have responsibilities to follow the instruction given by the Head office. Branches have to go with the regulations of SBP as ordered by the Head office. Branches have to meet their given targets. They are responsible to satisfy their customers to build up the image of the Bank. 17

Authorities:
The branch managers are authorized to sanction loans to a certain limit. They are authorized to make the expenses on renovation of branches to an authorized limit. They have to keep a keen eye on the subordinates. They have to struggle to increase the deposit base of the branch. They have to report the appraisal of the employees. Organogram (I) is attached as annexure

7.2 The Organizational Structure of the Branch

I have carried out job experience during the prepare of internship report from MCB, Kashmir Road Branch, and Sialkot.The organizational structure of the branch is listed below:-

1) Mr. Yasir Khalid

( Manager of the branch)

2) Miss Sania Akbar

(Manager Operations)

3) Mr. Yousaf Gill

(Teller services Supervisor)

4) Mr. Ghulam Dastgeer

(Customer services officer) Organogram (II) is attached as annexure

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7.3 REVIEW THE VARIOUSE DEPARTMENT OF THE ORGANIZIATIONS

The MCB has various departments that are working under the command of their directors, chairman of departments, group heads, and regional heads. The following is the review of the various departments of the overall organization in terms of their functions and responsibilities:

1- Human Resource department:

MCB is focused on appointing a devoted and hardworking staff.MCB has been investing in developing this valuable resourse through need training and career growth development. Staff is the core strength of the organization. The human resource department is headed by Mian Muhammad Mansha.The core functions of the HR Department are as follows: To ensure employee satisfaction and development of their skills. To improve productivity that help to achieve the organizational goals. Organizational development and training. Staff welfare and staff loans. Workforce management..

2- Audit Department
MCB possess its own independent and self-regulating audit committee. The audit committee evaluates the efficiency and effectiveness of internal controls of branches, regional offices, and circle offices by conducting audits on an on-going basis. Audit department is responsible for the inspection of financial affairs. It also keeps a check over the irregularities in different branches. This department is led by Mr.Tariq Rafi.The main functions of committee are as under: Internal audit & inspection Monitoring and reviewing the organizational process. Check the effectiveness & clarity of the operations Plays assurance role in risk management and control. Administration Reviewing credits risks 19

Reviewing marketing & liquidity risk.

3-CREDIT MANGEMENT DEPARTMENT

The credit management Department 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 about the loan. This department is headed by Mr.Shehzad Saleem.The functions of this department are: . Credit management service and coordination, administration. Credit monitoring Business Loans Consumer loans Agriculture loans Mortgage loans etc

4-INFORMATION TECHNOLOGY DEPARTMENT:

Banking system has become a mechanized industry today.I.T. Supports improve the customer services and reduce cost at the same time. Information Management provides all the information to the top management. Information technology Group focuses on enhancing the stability of the current infrastructure. This division monitors the information system of all branches and is playing a very important role in computerization of MCB. This department is headed by Mr.Sarmad Amin.The main functions of this department are: To check the IT controls. To check online banking system To ensure the processes of the branches.

5- Agriculture Department:
Agriculture department deals with the loans and development of agriculture sector. It has the responsibility to manage all the affaires related to agriculture sector. This division 20

works for the development of agriculture in the country.MCB gives top priority to small & medium size farmers so that they could be protected from the exploitation of private money lenders.

6- ISLAMIC BANKING GROUP:

Dr.Muhammad Zubair Usmani, working as Sharia advisor in Islamic Banking division. The main functions of this department are: 1-Deposit Accounts 2-Fund Based Facilities: Ijarah Mudarbah Diminishing Musharika Equipment.

7- Foreign Trades & Exchange Operations Division (FOREX) Department:

This division is responsible for managing foreign currency reserves for day-to-day requirements of the bank. It frames all the rules and regulations regarding foreign exchange and opening of L/C in the light of prudential regulations of SBP. For the international business transaction the bank utilize the services of its foreign exchange department. This services which Foreign exchange Department of the bank offer is the parallel banking with general banking, an additional function of important and export business controlled by State Bank of Pakistan.

8-OPERATIONS DEPARTMENT
Operations Group continued to focus on centralization of processes and business continuity internal control division is strengthened and led the bank wise efforts for compliance to the internal control network.MCB is transforming its branches to give a modern look and convenience to its customers. A number of branches have been shifted to prominent and spacious locations.MCB offers extended working hours to its customers. It offers full working day on Saturday and re-opens in Friday after JUMA PRAYER break. 21

The working in operation departments are following 1-General Banking:

Cash Department of MCB Bank Limited deals in cheques posting, paying and receiving the cash, transfer of cheques and clearing. Withdrawal Department: In this department I was working as a cashier receives the cheque for the withdrawal of cash, firstly check its date, amount (in figures and words) signature and checks that it is of MCB Bank Limited Sialkot branch or of any other branch. If it is of MCB Bank Limited and of same branch with right date then I received the cheque holder to give me a token that he got form front of the Withdrawal Department. I took two signs on the back of cheque holder, if a cheque is more or equal 100,000 then I also received a photocopy of ID and attached with the cheque. The cheque holder takes his cheque and waiting for cash procedure. The teller took account number into computer to verify the signatures from SS card which is already scanned and fed in computer. Then the amount is checked in the account. If the amount is available in the account then the officer passes the cheque and debits the account with the same amount and credit cash is credited. After all these procedures, he clears The cheque and posts the stamp on it of transfer and the cashier makes the payment to the customer. But if the cheque has any of the following characteristic the cheque is returned to the customer:

Process of payment
Cheque is presented at token counter 22 Cheque is recorded & token # is allotted

Cashier counts the amount & payment is made

Cancellation officer cancels cheque

Two signatures on back of the cheque by customer

Posting is made

If the date is of 6 months back If some future date is written on it If the signatures do not match with SS card If the amount written on the cheque is not available in the account If the amount in the figures is different from the amount in words If any cutting is made on the cheque
If CNID copy is not attached with the cheque if amount is more than 100,000.

2-Deposit Department:
If the depositors want to deposit any amount in their own account or any other account then firstly he has to fill the pay-in-slip. Being a token a depositor my is responsibility to get token of receipts at the front of Cash Counter then he went to the Verification Accoutre he told about his account number, amount, and write token number on the back of the pay-in-slip after the depositor had to make the payment to cashier which after receiving the cash signs the slip and then transfers it to the officer who transfers it in the account of that account holder with the same amount and transfer stamp is posted on it and signed on pay-in-slip and then is returned to depositor.

Process of deposits
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Fill- up deposit slip

Deposited on Receipt Customer

Cashier counts the amounts and fulfills other requirement

Cashier counts the amount and fulfills other requirements

3-ATM/Debit Card:
Automated Teller Machine Card is a debit card, and cash withdrawal transaction is performed with its use and no credit facility is provided. On the basis of ATM card, no credit facility is provided to the customers. By using ATM, customer can withdraw money. It is a plastic money card issued on account. Debit Card is used for withdrawing money from ATM machine, for shopping at Merchants or POS (Point of Sale), funds transfer from one account to another account, for payment of utility bills, check balance, payment of credit card dues, etc.

Daily Cash Withdrawal Limit:

Min Rs. 500 Max Rs. 25,000 within 24hrs ATM Card Charges: 1st time Issuance charges Rs. 500 Annual charges Rs. 500
Card Replacement charges Rs. 500

4-Credit Card:
It is s a clean finance. Its a loan facility from the bank to its client. The client can borrow loan up to specific limit. This limit depends upon the average balance in the account and monthly income of the client. One of the

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requirements to issuing credit card is that the applicant should be an account holder of the bank. These credit cards are accepted worldwide.

Types of Credit Cards

Master Card (issued by MCB Bank) Visa Card Master Card

Payment plans

Classic Gold
Platinum

Rs. 2,000 Rs. 4,000

Rs. 5,000

Rs. 10,000 to Rs. 150,000 Rs. 150,000 to Rs. 500,000

Rs. 500,000 to Rs. 2,000,000

Documents Required for Credit Card Application form for credit card Proof of income Last six months account statement

Facilities of Credit Card

Best rewards points World wide acceptance Cash advance facility Balance transfer facility 24 hrs customer services Supplementary cards Lost or stolen card Credit protection 25

Low service charges Complementary lounges at airport Flexible credit plan at 0% Stress free travelling Discount and promotion.

5-Lockers:
MCB Bank also offers the facility of lockers to its customers to offer them security. The way of securing valuables of customer the bank has facility of lockers. In fact locker is a secured steel box with duplicate keys to put the valuables in it for security purpose. It is always operated in the presence of owner and bank authority and also locked in the same way. Types of lockers: Small(180) Medium(90) Large(42) 06 inch x 2 feet 12 inch x 2 feet 02 feet x 2 feet

Requirements for issuance of lockers: Owner of locker should be an account holder Locker issuance form. Copy of CNIC Signatures

6-Issuance of Cheque Book:

When a customer fulfilled the bank requirements then he has right to withdraw his cash during the banking hours. For this purpose, account holder needs a medium of exchange between his payments and bank that is Cheque Book. If a new account holder, he wants to cheque book he fulfils the form as the same when an account holder wants to get ATM Card. If an account holder and his cheque Book is fully used and he wants to get a new Cheque Book then he fulfilled following conditions: Requisitioned of account Cheque Book 25, 50,100 leaves 26

Recording of Issuance of Cheque Book register Bank charges Authorization of letter in presence of account holder and ID of receiver person

7-Opening an Account:
A man wants to open a new Account in MCB Bank Limited. He has to direct to Account Opening Officer and say I want to open a new Account in MCB Bank Limited. Account Opening Officer is the duty to tell all deposits product that MCB Bank Limited offered to the customer. MCB Bank offers different types of deposit schemes: Current Account (Current Deposit) CD: Initial deposit Zakat deduction Low balance charges Profit Rs. 5,000 No No No

Saving Account (Profit and Loss Sharing) PLS: Initial deposit Zakat deduction Low balance charges Profit Rs. 5,000 Yes Rs. 50(per month) Yes (after 6 months)

Salary Account (Basic Banking Account) BBA: Initial deposit Zakat deduction Low balance charges Profit Rs. 1,000 No No No

Call Deposit Receipts/Fixed Deposit (CDR):

27

It is a onetime transaction account, same as current account. CDR accounts are mostly used in Ramadan to protect money in the account from Zakat deduction. CDR is also issued by the government contractors to take government contract or to participate in the bidding. Walking client Regular client Rs. 300 Nil

Foreign Currency Account:

Euro US Dollar Pound Sterling Yen

500 $500 500 500

If amount less than 50, $50, 50and 50 in Foreign Account then 2, $2, 2 and 2 are charged respectively.

Documents required for Individual Account are:

Account opening form Specimen Signature SS card Copy of CNIC Verify (Verification by Nadara)
Letter of thanks by the bank for verification of address

Vernacular Form in case of Urdu signatures Two Passport Size photographs in case of Urdu signatures

Documents required for Proprietorship Account are: Account opening form. Certified copy of NIC. Declaration of Proprietorship concern on Firms letter Head. SS card duly signed. NTN (National Tax Number). 28

Verify (Verification by Nadara). Letter of thanks by the bank for verification of address. Vernacular Form.

Rubber Stamp. Next of Kin. Account Opening Request on Firms letter Head. Two Passport Size Photographs In Case of Urdu Signatures. Additional documents required for a Limited Company Account is:

Copy of Passport of all directors. Certificate of incorporation. Certificate to commence business (for public limited companies). Up to date Memorandum and articles of Association. Resolution of the Board passed under company seal to open Account.
List of Directors and Authorized Signatories on Firms Letter Head.

Closing an Account
If a customer wants to close account he will give undersigned application in bank. The signature of applicant will be verified. The customer will submit unused Cheques book in the bank and remaining balance in applicants account will be paid to account holder. Account closure charges are Rs. 100. Bank can also close account of customer due to misuse.

Foreign Trade
Foreign Trade Department deals in foreign currency and foreign exchange.

Foreign Currency: In foreign currency accounts there are foreign currency accounts, withdrawal, deposits, and remittances. It has three categories: Foreign Remittances: The proceedings of foreign remittances are just like the local remittances. The only exception is that transactions takes place in foreign currency. 29

Nostro Account Account of any bank with foreign banks is called Nostro Account. Vostro Account Account of foreign banks with our banks is called Vostro Account. Foreign Exchange In foreign Exchange MCB Bank Limited provides two types of

services: Travel Related Services which includes: Traveller Cheques Foreign Demand Draft (FDD) Foreign Telegraphic Transfer (FTT)

Trade Related Services includes:

Export
Import

Export
Export means transfer of goods and services from home country to foreign country. Modes of payment that are used in case of Export are: Advance payment Open Account Letter of Credit (L/C) Collection

Letter Of Credit (L/C):

Letter of Credit is a written undertaking of opening bank on behalf of the applicant to the beneficiary for a specified amount against the submission of shipping documents complying with the letter of credit terms. L/C is always opened by the applicant through the bank which is called L/C opening bank. In L/C applicant is importer and beneficiary is exporter. Other parties that are involved are: Negotiating Bank Is the bank which makes payments to beneficiary or exporters. It will be in the country of exporter Advising Bank Is the bank which transfers L/C documents to the exporter. 30

Reimbursing Bank Is the bank that makes the payment of L/C. It can be opening bank or any other bank with which L/C opening bank has arrangements.

Importer will send L/C to advising bank and advising bank will give it to exporter. Exporter after shipment of good will handover shipping documents to L/C issuing bank and will receive payment from issuing bank if not then by negotiating bank. UCP Uniform Custom and practice defines rules for documentary credit L/C.

Types of L/C:

Restricted/ Unrestricted* Irrevocable/ Revocable* Sight/ Usance* Confirmed/ Unconfirmed*

L/C by Negotiating Bank*

L/C by Payment* L/C by Acceptance* L/C by Deferred Payment* Red Clause L/C / Green Clause L/C Transferable L/C* Back to back L/C Revolving L/C Stand by L/C

* are those type of L/C that are mostly used.

E Form
Foreign Trade department a number of forms are issued and received in support of export shipments. E Form is one of the major documents out of all the documents. Its a valuable document and is issued on the request of the customer with proper record. E Form is an Export Form and is a legal document necessary for the purpose of Export. It 31

has a special registration number that is recognized all over the world. If E Form is issued by MCB Bank Original (To be submitted to the custom/ post office). Duplicate( To be submitted to the exporter bank) Triplicate (To be submitted to the bank SBP) Quadruplicate.( To be submitted to the exporter)

Import:
Import means transfer of goods and services from foreign country to home country. Four mode of payment are used for import. Advance Payment Open Account Collection Letter of Credit

Commercial Finance:
This type of finance is for commercial businesses. It is of two types:
SME (Small Medium Enterprises) Financing - SMEs are classified according to the

instructions of SBP. According to SBP small medium enterprises possess the following characteristics: Their sales are less than 300 million Assets excluding land and building are less than 100 million for Trader and 50 million for Manufacturer. Employees are less than 50 for Trader and 250 for Manufacturer.

Corporate Financing All enterprises other than SMEs are Corporate. So they require

corporate financing.

Consumer Finance
This type of financing is used to raise/upgrade the people's living standards. The types include: Personal Finance 32

Business finance Mortgage finance Smart Finance

Credit card Finance

Agriculture Finance:
This type of financing is extended for agriculturists. It includes the following: Ever Green Finance Tractor Finance Farm Transport Finance Dairy Finance

8.1 FINANCE & ACCOUNTING OPERATIONS:

Accounts Department:
MCB maintains its own Account department at every branch, which is responsible to record and process each &every business transactions taking place during the working day. The record is maintained at Branch, main Branch and Head Offices. All the operations of this department are performed by online Banking System. The system of accounts MCB Bank Limited is totally centralized. All the records and transactions are transferred to the main Branch and then finance department at the day end. The main duties of accounts department are as under: To maintain proper books of accounts. To compile the accounting information, provided by the regional managers and circle offices and to make consolidated positions. To consistently apply the appropriate accounting policies. 33

 To monitor the system of internal control if it is running sounds in design and being effectively implemented and monitored throughout the year.

FINANCE DEPARTMENT:
The finance department consolidates the positions of the branch at the day end in the shape of assets, Liabilities, Revenues, and expenses. The position of accounts is daily sent to the finance department of Head office which consolidates all these Statements of affaires bank in a respective manner. Then the position is sent to State Bank of Pakistan (SBP).And the SBP publishes the consolidated statement of banks in business news paper on weekly basis. The main functions of accounting and finance department is to maintain smooth liquidity of bank by arranging funds from SBP and other banks if needed. This Department is also responsible for making physical investment on the behalf of the bank in Government and corporate securities.

Activity Checking
Daily Transactions Checked

Fixed Assets
Maintenances of fixed assets register Deprecation Charged

Voucher Sort
All types Of Vouchers Receipts Cheque Inter Bank

Branch Maintenance
Construction of branch accounts Reconcile branch accounts with head office 34

Reporting to branch manager

Daily Transactions Report Sorting

Provided reports concerned officer Prepare on demand reports as per mangers requirements Daily report sorting as per funding and liquidity needs Ensure that control are followed to record transactions to prevent mistakes

All Kinds of Expenses Occurred in Branch

Entertainment Utility Fuel Courier Staff Salaries

Weekly Report
Assets & Liabilities Mark-up Deposits Sector-wise

Branch Budget
Human Resource Operating Capital Assets Basic Figure Import Export Profit

Reconciliation
35

 State Bank of Pakistan Treasure Branch Head Office

Other Banks Organogram (III) is attached as annexure

36

8.2- THE ROLE OF FINANCIAL MANAGERS

Financial Manager is the Manager of financial resources how the best to find and use investments and financing opportunities in an ever-changing and increasing complex environment

Financial Manager Function

A Financial Manager usually handles following roles regarding in-terms of financial institutions, cash management and credit management. A Financial Manager handles these roles:

Financial Institutions Functions

Accounts operating facilitate Financing facilitate Meet liquidities

Cash Management
Cash generated through deposits Borrowing from Commercial Banks Borrowing from State Bank of Pakistan Cash generated through funds

Credit Management
Assets and liabilities management Loan criteria Followed by SBP Availability of funds Interest calculations Inter banks management Verifications of property against loans

37

8.3- USE OF ELECTRONIC DATA IN DECISION MAKING:

Everyone in an organization makes decisions, but decision making is particularly important in the top level management. Decision making is part of all five managerial functions: Planning Organizing Staffing Leading Controlling Managers regularly use their electronic data in decision making as well as reporting mechanism to their following institutions: Treasure Branch Head-office Centralized-unit State Bank of Pakistan Credit Bureau Commission SOFTWARE USED MCB BANK LIMITED uses software as named SYMBOL SYSTEM. EOC Branch Teller(BT) Verisys ATM Card Requisition Cheque Book Requisition International Remittances

38

MANAGEMENTS REPORTS:
MCB BANK prepares following reports like: Branch Budget
Human resource budget Operating budget Capital assets budget Basic figure Import Export Profit

Departmental Report
These reports prepares periodical as well as weekly. Assets & liabilities Mark-up Deposits Sector wise breakup

Reconciliation Report
State Bank of Pakistan Head offices Treasure branch Other banks

Branch Reporting
High Value Accounts opening report Utilities Bill Collection ATM Transaction General Ledger 39

8.4 SOURCES OF FUNDS

Like other financial institutions, MCB has two types of sources of funds, which are as under:

1-DEPOSITS &OTHER ACCOUNTS:

Fixed Deposits Savings Deposits Current Deposits Margin Deposit

Deposits &Other Accounts

Rupees in Thousands---000------

Particulars Customers
Fixed Deposits Saving Deposits Current Accounts-non remuneration Margin Accounts Others

2005
13,296,121 137,067,31 1 74,331,042

2006
33,297,203 136,872,38 4 81,658,304

2007
32,202,230 151,555,71 8 95,966,877

2008
61,680,332 150,927,93 8 105,403,39 3

2009
62,651,531 173,797,078 123,898,324

2,568,306 41,396 227,304,17 6

2,447,944 4,336 254,280,17 1

2,589,309 4,288 282,318,42 2

3,137,343 563 321,149,56 9

2,910,655 767 363,258,355

FINANCIAL INSTITUTIONS Remuneration Deposits

Non-Remuneration Deposits

183,338 1,857,664 2,041,002 229,345,17 8

249,506 2,932,161 3,181,667 257,461,83 8 40

9,233,602 546,042 9,779,644 292,098,06 6

5,197,969 3,926,526 9,124,495 330,274,15 5

2,258,295 2,088,061 4,346,356 367,604,711

Ref: MCB Annual Reports Comments:

Deposits are considered to be life blood of the banks. Deposits are main source of funds for the banks. The total amount of the deposits consists of division of amount of current, saving, fixed deposits, deposits of other institutes. The top management always focuses on developing and implementing new policies and strategies to maximize the deposits. Deposits are the most major source of funds. The deposits from customers are increased to 363,258,355,000 in year 2009 from 227,304,176,000 in 2005, showing the rise of 60%.The percentage of rise is very usual, not very exceptional. The average rise in this section is always been around 11% to 13%. The total deposits have increased to 367,604,711,000 in year 2009 from 229,345,178,000 in 2005.The total deposits in these five years is of 60%. There has been constant rise in total deposits, which is around 13% in the time span of years.

2-Institutional Borrowing:
Borrowing from state Bank Borrowing from Financial intuitions Federal reserve Borrowing

Rupees in thousands----000---PARTICULAR S SECURED

Borrowing from SBP: Export Refinance Scheme Long term financing Locally manufactured machinery Long term financing-Export oriented Projects Scheme 41
1,970,562 2,313,030 2,473,077 2,100,751 2,018,330 4,980,519 6,727,670 5,593,462 9,217,004 8,829,527 80,220 -

2005

2006

2007

2008

2009

Gross borrowings from SBP Borrowings from other financial institutions: Repurchase agreement borrowings

6,951,081

9,040,700

8,066,539

11,317,75 5

10,928,07 7

2,932,817 2,932,600

452,398

19,473,04 9
26,424,130

11,263,92 9
23,237,446

26,931,34 2
37,930,481

6,325,021

31,606,33 1

Gross
Agent balances Call borrowings Over Drawn Nostro

17,642,776

42,986,806

UNSECURED
494,007 459,365 953,372 27,377,502 89,003 617,027 706,030 23,943,476 976,350 500,000 1,476,350 39,406,831 4,418,990 602,074 5,021,064 22,663,840 1,146,092 529,190 1,675,282 44,662,088

Gross
Total Borrowings

Ref:MCB Annual Report Comments:

Borrowings are another source of income for bank. The borrowing can from State Bank of Pakistan (SBP) and other financial institutions. Section of borrowing consists of two segments, i.e secured and unsecured. Borrowing from SBP and other financial institutions fall in secured section. The call borrowing and over drawn nostro accounts fall in un secured borrowings. Borrowings under export refinance scheme the main item of secured borrowings. The borrowings under export refinance rise from 4,980,519,000 in 2005 to 8,829,527,000 in 2009.The percentage rise in span of five years is 77%.There seems to be ups and downs in this period, from 2005 to 2009.In 2009 we can see the fall of 4% and 17% in 2007,a rise of 85% in 2008 and again rise in 2006. The unsecured borrowings consist of call borrowings, overdrawn nostro accounts, and agent balances. There has been an increasing trend over last five years. There is seen a significant rise in call borrowings, i.e. from Rs.459, 365,000 in 2005 to 1,146,092,000 in 2009.There is a significant increase of 149% in last five years. In 2009 there is fall of 74%, in 2008 rise of 352%, in 2007 a rise of 997%, and fall of 80% in 2006. 42

With the passage of time the bank realized the more need of finance to the bank. With the increasing scale of banking sector and customers, the financing needs of the bank also increased.

8.5 GENERATION OF FUNDS

MCB generally generates funds from operational activities. The main sources of funds from operations are: 1. Markup on advances 2. From Investments 3. Bank charges from customers on providing different services.

1-Markup on advances.
Rupees in Thousands000--Particulars 2005 2006 2007 2008 Interest /Markup Earned on Loans And Advances To: Customers 12,086,305 19,144,743 21,952,387 29,869,943 Financial 284,972 86,455 141,613 1,805 Institions Total 12,371,277 19,231,198 22,094,000 29,871,748 2009 36,212,097 36,212,097

Ref: MCB Annual Report

Comments:
The interest from loans and advances has turned 3 folds in five years. There was an up rise of 55%,79%,141%,193% in years 2006,2007,2008,2009 as compared to year2005.Most of the rise depends on the mark up/interest earned on loans and advances to customers. There is an overall increase of 200% in this section. Whereas the mark up income from financial institutions has decreased with the passage of time.

2-Investments
Rupees in ---000----

Particulars
Federal Government Securities

2005
57,102,73 2

2006
46,953,34 6

2007
97,046,745

2008
86,197,63 8

2009
152,915,750

Investment by Segments

43

Overseas Government Securities

Provincial Government Securities Subsidiaries Associated Undertakings

118 1,064,452 5,478,732 65,470 4,549,439

118 1,364,432 6,304,832 161,602 7,388,495

118 1,384,432 7,973,033 1,662,063 161,602 2,983,387

1,391,816 118 1,384,432 8,721,736 661,909 161,602 2,681,421

3,387,148 118 1,384,826 7,485,455 442,981 161,602 3,082,491

Fully paid up ordinary shares/Certificates/Units

Units of open ended mutual funds Fully paid preference share: Term finance certificate/Debentures/Bonds/an d participation Term certificates

Other Investments:
Investment at revalued amountsnet of provisions

1,655,480 69,481,48 7

967,980 63,486,31 6

605,253 113,089,26 1

5,253 96,256,87 4

83 167,134,465

Ref: MCB Annual Reports

Comments:
Here are the rise and fall of the figures of investment in different years. These fluctuations depend on the condition of stock market to a large extent, which in turn depends on economic and political instability in our country. There has been a download investment in securities in year 2008.All the major banks are affected of this decline in investments. The major of investment is federal Government Securities. The overall increase in last five years is 168%.But there was a dip of 11% in 2008 from the figures of 2007.The stock market cash is considered to be the reason of decline in investment in the period of 2008. Another major component of securities invest are Term Finance Certificates, Debentures, Bonds and participation Term Certificates. The lowest figures of this category are of 2008.There has been an overall decrease of 32% from 2005 to 2009. The total increase in investment from 2005 to 2009 is 146%.which illustrates good state of the Bank. But in 2008 there was a fall of 11% total investment. The economic & political insecurity and the worldwide market downfall are considered to be the cause of these fluctuations.

3-Bank Charges for Services to customers: Rupees in---000--44

Particulars
brokerage income

2005

2006
2,311,235 811,801 692,010 605,865 -

2007
2,634,610 632,300 693,408 1,500,865 (13,105)

2008
2,866,729 617,554 727,564 740,429 (103,198)

2009
3,331,856 459,741 341,402 773,768 -

Fee, commission and 2,448,950

Dividend income 480,344 Income from dealing 531,455 in foreign currencies Gain on sale of 866,895 Securities -net
Unrealized (loss)/gain on revaluation classified as held for trading

851

Other income

Total

1,084,576 5,413,071

570,505 4,991,416

563,213 6,011,291

942,362 5,791,440

736,118 5,642,885

Ref: MCB Annual Reports Comments:

Another source of generation of funds for the bank is the charges on the services being provided to customers .The figure was at its highest in year 2007 with an increase of 12% as weighed against year 2005, in between these years the figure was at its lowest with decrease of 7.8%.comparing the first and the last years of the considered time span there was an increase of 4.2%in year 2009. The biggest contributor to this segment are Fee,Commision & Brokerage income and it shows the an overall rise of 36%.Next comes the category of Other income which was at its top in year 2005,then had a dip of 47% and 48% in year 2006 and 2007 respectively. The income from dealing in Foreign Currency was at its peak in year 2008 and at its lowest in year2009.

8.6 ALLOCATION OF FUNDS:

MCB generates funds from many sources and allocates these funds in different types of financing activities. These Allocations of funds are under firm policies and guideline of the MCB Bank Limited And State Bank of Pakistan. The following are the allocation of these funds: 1. Lending to Financial Institutions 2. Advances

1-LENDING TO FINANCIAL INSTITUTIONS:

45

Rupees in Thousands----000----Particulars Call money lending Repurchase agreement lending Total 2005 8,650,000 1,348,828 9,998,828 2006 9,050,000 12,031,800 21,081,800 2007 1,051,37 2 1,051,37 2 2008 1,700,000 2,400,079 4,100,079 2009 3,000,000 3,000,000

Ref: MCB Annual Reports Comments:

Here is a downfall of call money lending of 65% in last five years. In 2005 the figure was 8, 65,000,000 and in year 2009 it is 3,000,000,000.There is no sequence of rise and fall of the figures during the episode of five years. In 2009 there is a rise of 76% from the figures of 2008, and at the same time steep fall of 88% in neither 2007.Neither it is a regular upwards trend nor constant downward trend.

2-ADVANCES NET:
Rupees in---000-----

Particulars

2005

2006

2007
208,587,014 6,989,947 215,576,961

2008
252,387,594 8,910,253 261,297,847

2009
247,718,210 7,788,234 255,506,444

Loan,cash,credits,RunningFinance etc. In Pakistan 174,625,23 189,472,03 Outside Pakistan 2 3,755,036 178,380,26 4 5,172,803 194,644,83

8 7 Net Investment in finance Lease: In Pakistan 3,897,184 6,082,806 Outside Pakistan 93,330 85,865 46

6,904,309 67,710

5,358,475 90,733

3,867,943 65,492

3,990,514 6,168,671 6,972,109 Bills discounted & Purchased (Excluding Treasury Bills) Payable in Pakistan 2,386,952 1,761,803 2,949,228 Payable outside 3,381,943 4,272,188 4,234,574 Pakistan Advance -Gross 5,768,895 188,139,67 6,033,991 206,847,49 9 (5,953,234) (2,277,467) (373,823) (7,326,953) (2,749,815) (688,665) 7,183,802 229,732,872

5,449,208 2,364,211 4,111,059 6,475,270 273,222,325

3,933,435 4,519,520 5,762,777 10,282,297 269,722,176

7 Provision against advances Specific Provision (5,534,376) General Provision (2,098,053) General Provision (180,554) against consumer loans General Provision for potential lease losses (7,816,924) Advances-net of 180,322,75 (3,941)

(9,895,889) (273,222) (533,693)

(15,678,345) (269,722) (494,434)

(3,820)

(6,841)

(9,051)

(30,268)

(8,608,344) 198,239,15 5

(10,772,274 ) 218,960,598

(10,711,855 ) 262,510,470

(16,472,769) 253,249,407

provision 3 Ref: MCB Financial Reports

Comments:
The advances have become the necessity of most the business these days. The money given away in advances has increased from 2005 to 2008,but a slight fall in 2009.The overall increase in advances net of provision through the duration of last of five years is 40%.

The Loan, cash credits, Running Finance figures increase in a regular way in whole period from 2005 to 2009.The overall progress is of 43% in this section. The provision for advances is observed in 2009 as compared to 2008. The bank reviews its loan portfolio to assess the amount of non performing advances and provisions required there against on the regular basis. While assessing this requirement various factors including the delinquency in the account, financial position of the 47

borrowers and the requirements of the prudential regulations are considered. The amount of general provision is determined in accordance with the relevant regulations and the managements judgement.

9-CRITICAL ANALYSIS OF THEORETICAL AND PRACTICAL CONCEPTS:

According to my point of view, the financial department of the MCB Bank Limited has compiled with all the material requirements of the Code of Corporate Government. Proper accounting system as prescribed by State Bank of Pakistan (SBP) is followed to record, classify, and summarize accounting data and information in confirmatory to Banking Companies Ordinance 1962 and International Accounting Standards as applicable in Pakistan. The critical analysis of the theoretical concepts relating to my practical experience is as under: The Keen staff accounts department of MCB Bank maintains proper books of accounts on daily basis.

48

 The top management of MCB Bank made it obligatory to exercise appropriate accounting policies in the preparation of financial statements and accounting estimates are based on reasonable and prudent judgement. The top management MC Bank made it essential to follow Prudential Regulation of SBP properly and carefully followed. There is no significant doubt about companys ability to continue as a going concern. The annual reports of MCB Bank clearly present key operating and financial data. MCB Bank follows the International Financial Standard, as applicable in Pakistan while preparing the financial statements. The MCB Bank offers online funds transfer facility is limited to certain prominent branches.

The MCB Bank is expanding its ATM network and connectively to further expand bank to reach the customers.

The MCB Bank provides proper training to the staff of all departments at their training centre at Lahore. It helps the staff to learn new technologies, to understand new regulations and update their Knowledge, which affects the overall performance of the Bank.

MCB Bank trains newly hired personal before joining the job, for two months at the training centre at Lahore.

49

 MCB Bank is also looking into other I.T products for better services.

The new centralized system of MCB Bank is not so fine as gets hanged.

The Branch system of MCB Bank often gets offline causing problem to staff as well as customers.

MCB Bank branches do not have enough employees .Many places are vacant to be filled.

MCB Bank is keen to hire fresh graduates to give chance to the new generation. This gives a boost to the Banks performance. And its image.

10-FINANCIAL ANALYSIS: 10.1 BALANCE SHEET:

MCB Bank Limited Five Years Balance Sheet For The Year Ended December 31, 2005 to 2009
Rupees in Thousands---000---

PARTICULARS ASSETS
Cash and balance

2005
23,665,549

2006
32,465,976 50

2007
39,683,883

2008
39,631,172

2009
38,774,871

with treasury banks Balance with other banks Lending to financial institutions Investments Advances Operating

1,469,333 9,998,828 69,481,487 180,322,75

6,649,659 21,081,800 64,450,761 198,236,68 2 9,073,276 174,886 11,044,909 343,177,94 9 7,089,679 23,943,476 257,185,11 0

3,807,519 1,051,372 113,089,26 1 218,960,59 8 16,024,123 17,868,761 410,485,51 7 10,479,058 39,406,831 292,098,06 6

4,043,100 4,100,079 96,256,874 262,510,47 0 17,263,733 19,810,476 443,615,90 4 10,551,468 22,663,840 330,274,15 5

6,009,993 3,000,000 167,134,465 253,249,407 18,014,896 23,040,095 509,223,727

3 Fixed 8,182,454 191,967 5,464,426 298,776,79 7

assets Deferred tax assets Other assets TOTAL ASSETS

Liabilities
Bills payable
Borrowing from Financial institutions

8,536,674 27,377,502 229,345,17 8

8,201,090 44,662,088 367,604,711

Deposits &other accounts

51

Sub-ordinate loans Liabilities against assets subject to finance lease Deferred tax liabilities net Other Liabilities GROSS LIABILITIES

1,598,080 -

1,597,440 -

479,232 -

8,611,600 275,469,034

11,177,125 300,992,830 42,185,119 5,463,276 24,662,498 6,278,593 36,404,367 5,780,752

1,180,162 11,722,493 355,365,842 55,119,675 6,282,768 34,000,638 5,130,750 45,414,156 9,705,519

437,137 21,253,250 385,179,850 58,436,054 6,282,768 36,768,765 9,193,332 52,244,865 6,191,189

3,196,743 15,819,082 439,483,714 69,740,013 6,911,045 38,385,760 15,779,127 61,075,932 8,664,081

NET ASSETS 23,307,763 Represented by

Share capital Reserve Un-appropriated profit Total equity Surplus on revaluation of assets net of tax Total Liabilities& Shareholders equity 23,307,763 298,776,797 4,265,327 13,408,005 210,662 17,883,994 5,423,769

42,185,119 343,177,949

55,119,675 410,485,517

58,436,054 443,615,904

69,740,013 509,223,727

REF: MCB ANNUAL REPORTS

10.2 INCOME STATEMENT

MCB Bank Limited
52

Five Years Income Statement For The Year Ended December 31,2005 TO 2009
Rupees in

PARTICULARS 2005
Markup/Return/Interest earned Markup/Return/Interest expensed Net markup/Interest income Provision for Diminution in the value of investmentnet Provision against loans &advances -net Bad Debts Written off directly Net markup/interest income after provisions Fee, commission and brokerage income Dividend income 480,344 2,448,950 1,144,355 13,830,409 1,184 1,242,153 (2,781,468 ) 14,974,764 (98,982) 17,756,232

2006
25,778,061

2007
31,786,595

2008
40,043,824

2009
51,616,007

(4,525,359 ) 21,252,702 121,197

(7,865,533 ) 23,921,062 105,269

(11,560,740 ) 28,483,084 2,683,994

(15,841,463)

35,774,544 1,484,218

1,014,540

2,959,583

1,335,127

5,796,527

47,000 1,182,737 20,069,965

199 3,065,051 20,856,011

4,019,121 24,463,963

41,576 7,322,321 28,452,223

2,311,235

2,634,610

2,866,729

3,331,856

811,801 632,300 ----000----

617,554

459,741

Income from dealing in foreign currencies Gain on sale of securities-net

531,455 866,895

692,010 605,865

693,408 1,500,865

727,564 740,429

341,402 773,768

53

Unrealized(loss)/gain on revaluation of investments classified as held for trading Other income Total Non-Markup/interest income

851

(13,105)

(103,198)

1,084,576 5,413,071 19,243,480

570,505 4,991,416 25,061,381

563,213 6,011,291 26,867,302

942,362 5,791,440 30,255,403

736,118 5,642,885 34,095,108

NON-MARK-UP/INTEREST EXPENSE
Administrative expenses Other Provisions-net Other charges Total non markup/interest expenses Extra ordinary/unusual items Profit Before Taxation Taxation -current -Prior year -Deferred 13,018,487 4,611,359 (149,763) (365,524) 4,096,072 8,922,415 18,500,670 5,701,443 593,497 63,332 6,358,272 12,142,398 21,308,035 6,442,356 894,590 6,042,473 15,265,562 21,867,566 7,341,257 16,533 6,492,966 15,374,600 23,154,945 7,703,305 (2,232,226) 2,188,569 7,659,648 15,459,297 6,459,490 (72,740) 178,841 6,565,591 6,482,592 11,411 66,708 6,560,711 5,022,416 (3,743) 540,594 5,559,267 7,456,878 10,120 830,839 8,387,837 10,107,189 142,824 690,150 10,940,163

340,598

(1,294,473) (864,824)

Profit After Taxation

Un-appropriated profit brought

165,208

4,990,260

5,530,973

5,130,750

9,193,332

forward Transfer from surplus 83,749 on revaluation of

32,166

11,855

21,319

22,324

54

fixed assets net of taxes 248,957 Profit Available for 9,171,372 Appropriation Basic Diluted 21.36 Earnings per shareAfter tax 5,022,426 5,542,828 5,152,069 17,164,824 20,808,390 20,526,669 23.4 24.3 24.47 9,215,656 24,710,953 22.42

REF: MCB ANNUAL REPORTS

10.3 FINANCIAL RATIO ANALYSIS

Current Ratio:
Current Ratio is an instrument of measuring companys capacity to pay short-term obligations with its short-term assets. Current Ratio is computed by dividing current asset

55

with current liabilities. The higher the current ratio, the more capable the company is of paying its obligations. Formula:

Current Ratio

Current Assets____ Current Liabilities Rupees in----

0000----

Particulars
Current assets Current Liabilities

2005
284,937,95 0 266,857,43 4

2006
322,884,87 8 289,815,70 5

2007
376,592,63 3 342,463,18 7

2008
406,541,69 5 363,489,46 3

2009
468,168,736 420,467,889

Current Ratio 1.07 Comments:

1.11

1.10

1.12

1.11

The Current ratio shows the Banks ability to pay its current liabilities with current assets. The current ratio was at its best in year 2008, as the ratio was 1.12.This interprets that the bank is fully able to pay its liability by its assets. In year 2005 the ratio was 1.07 then climbed to 1.11 in year 2006.then again a decline in year 2007.then come the period of highest value in year 2008.the ratios in year 2009 and 2006 were same at 1.11.The ratio fall because of decrease in difference between liabilities and assets. The fluctuations depend on the difference between the assets and liabilities. The current ratio remained above I which interprets banks strong financial positions.

Quick Ratio:
Quick ratio is an indicator of a companys short-term liquidity. The quick ratio evaluates an organizations ability to cover its short-term obligations with its most liquid assets. The higher the quick ratio points to the healthier the position of the organization.

56

Formula:

Quick Ratio = Current assets-Inventories

Current Liabilities Rupees in---000---

Particulars
Current Assets Inventories Current Liabilities

2005
284,937,95 0 69,481,487 266,857,43 4

2006
322,884,87 8 64,450,761 289,815,70 5

2007
376,592,63 3 113,089,26 1 342,463,18 7

2008
406,541,69 5 96,256,874 363,489,46 3

2009
468,168,736 167,134,465 420,467,889

Quick Ratio Comments:

0.81

0.89

0.77

0.85

0.72

The banks highest quick ratio was 0.89 in year 2006.The ratio was at 0.81 and 0.89 in year 2005 and 2006 respectively. Then there was big decline to 0.77 in year 2007.This fall was caused by a massive increase in inventories that year. The ratio again went up to 0.85 in year 2008 and once more a decline to 0.72in year 2009.The decrease in ratio is caused by the decrease in difference between denominations and numerators. The high ratios interpret sound financial condition of the bank.

Basic Earning Power Ratio:

The basic earning power ratio balances the earnings apart from the influence of taxes or financial leverage, to the assets of the company. This consent to more direct comparison of similar firms that use diverse financing strategies or have varied tax situations .It is a ratio that illustrates the basic profitability of assets and its valuable in contrasting the firms with unlike degree of leverage.

Formula:
Basic Earning Power Ratio = EBIT_______ Total Assets

Rupees in---000----

Particular s

2005

2006
57

2007

2008

2009

EBIT Total Assets Basic Earning Power Ratio Comments:

13,018,487 298,776,79 7 0.04

18,500,670 343,177,94 9 0.05

21,308,035 410,485,51 7 0.05

21,867,566 443,615,90 4 0.05

23,154,945 509,223,72 7 0.05

The basic earning power ratio compares the earning power of the bank, so the higher the ratio better will be the financial condition of the bank and better will be the banks image. In year 2005 the ratio was at 0.04 and after that it remained constant at 0.05 in year 2006,2007,2008,2009.

Cash Ratio
The cash ratio works out the instant amount of cash reimburse short term debt. It is a ratio of a companys total cash equivalents to its current liabilities. The cash ratio is most commonly used as a measure of company liquidity. It determines when, and how quickly, the company would be to pay off its short-term arrears. Formula: Cash Ratio = Cash &cash equivalents X 100 Current Liabilities Rupees in----0000---2008 2009 43,674,272 21,867,567 200% 44,784,864 23,154,946 193%

Particulars

2005

2006 39,042,99 3 18,500,67 1 211%

2007 43,491,402 21,308,036 204%

Cash & Cash 25,134,882 equivalents Current 13,018,487 Liabilities Cash Ratio 193%

Comments:
In year 2005, the cash ratio demonstrated the 193%.The percentage climbed up in next year to 211%, which shows a good increase in a year. In a year 2007 and 2008 the cash ratio dropped to 204% and then 200% respectively. In year 2009 it further decline to 193%. The highest percentage interprets the strong financial position of the bank. The cash was at its highest in year 2006 and the lowest in 2005 and 2009.The increased

58

because of huge increase in cash & cash equivalent as compared to the increase of current liabilities.

Profit Expense Ratio:

This ratio indicates that a bank is more efficient and makes higher profits with a given expense which is a very flourishing signal. A bank having elevated percentage of this ratio may experience more profitability. It advocates that spending within the limits always makes feel good for any financial institutions.

Formula:
Profit Expense Ratio = Profits_______ X 100 Expense Rupees---in---thousands

Particulars
Profits Expenses Profit Expense Ratio

2005
8,922,415 9,347,059 95%

2006

2007

2008

2009

12,142,398 15,265,562 16,667,757 13,424,800 73% 114%

15,374,600 15,459,297 19,948,577 26,781,626 77% 58%

Comments:
The above calculation clearly shows that profit expense ratio indicates that overall five years the MCB has decreasing trend for this ratio. The ratio goes up to 73% in 2006 from 95% in 2005; this is because of large increase in expenses as compared to profits. Then a huge rise is observed in year 2007 as the ratio climbed to 114%, the reason behind this is increase in profits and decline in expenses. The ratio again falls to 77% then 58% in year 2008 and 2009 respectively.

Assets to Equity Ratio

The assets /equity ratio is a gauge to ascertain the overall financial strength of an organiziation.In real meaning, the purpose of the asset/equity ratios is to find out the worth of the assets of the organization.

Formula:
Assets to Equity = Ratio 59 Total Assets________ Shareholders equity

Rupees in---000----

Particular s
Total Assets Shareholder s Equity Assets to Equity Ratio

2005
298,776,79 7 17,883,994 16.71

2006
343,177,94 9 36,404,367 9.43

2007
410,485,51 7 45,414,159 9.04

2008
443,615,90 4 52,244,865 8.49

2009
509,223,72 7 61,075,932 8.34

Comments:
As the higher ratios are not considered to be healthy sign for the bank, the decreasing trend is good for banks image. In year 2005, the ratio is 16.71, and then it falls to 9.43 and then 9.04 in year 2006 and 2007 respectively. The ratio further declined in next two years to 8.49 and 8.34 in year 2008 and 2009. High asset/equity ratio causes the return on borrowed capital exceed the cost of that capital. Low asset/equity ratio can indicate a strong firm that needs no debt. So the decline in asset equity ratio is an indication of firm financial condition for the bank.

Interest Coverage Ratio:

Interest Coverage ratio determines how easily a bank can pay interest on outstanding debt. The interest coverage ratio is a measure of the number of times a company could make the interest payments on its debt with its earnings and taxes, also known as EBIT. Formula: Interest Coverage Ratio = EBIT ___________ Interest Expenses

Rupees-----000-----

Particulars
EBIT Interest Expenses Interest Coverage Ratio

2005
2,781,468 4.68

2006
4,525,359 4.09

2007
21,308,035 7,865,533 2.71

2008
21,867,56 6 11,560,74 0 1.89

2009
23,154,945 15,841,463 1.46

13,018,487 18,500,670

60

Comments:
The interest coverage is showing a decreasing trend with the passage of time. That tells that banks ability to expense over its debts is not up to the mark. The higher ratio indicates the bank is generating sufficient revenues to satisfy interest expenses. In year 2005 the ratio is 4.68, which is the highest interest coverage ratio as compared to the other considered years. In 2006 there was decline to 4.09, and huge fall in 2007 to 2.71.In 2008 and 2009 the ratio is fell to 1.89 and 1.46 respectively. As the ratio goes below 1.5 a uncertain situation is created. The decrease is caused as the expenses shoot up but there is margin increase in banks earning.

Debt/Equity Ratio:
Debt to equity ratio shows that to what extent bank is relying on the external debts for financing. Debt to Equity ratio is equal to debt divided by share holders equity.A lower Debt to equity ratio is a good sign for a Bank. Any number above 1 show that the company relies on external debt for financing some of its assets. If the number equals 1.it implies that the assets are fully financed by the share holders. Formula: Debt/Equity Ratio = Total Debts_______________ Total Share holders Equity Rupees in ----000---Particulars 2005 2006 2007 2008 2009 Total Debts 27,377,50 23,943,476 39,406,831 22,663,840 44,662,088 2 Total Equity 17,883,99 36,404,367 45,414,156 52,244,865 61,075,932 4 Debt/Equity 1.53 0.66 0.87 0.43 0.73 Ratio

Comments:
In2005, the ratio is 1.53 which means bank is relying on external debts for financing its assets. The banks reliance on external financing is a matter of consideration for the creditors. Then there is a decrease to year 2008, which is a healthy sign for the banks financial position. The ratios are 0.66, 0.87 and 0.43 in year 2006, 2007, 2008 respectively. Then there is an increase in year 2009 as the ratio climbs to 0.73.The lowest ratio is in year 2008.The lowest the ratio, the higher level of the banks financing that is being provided by share holders. 61

Total Debt Ratio:

A ratio that indicates what proportion of debts a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the company has more debt than assets. Meanwhile, a debt ratio of less than I indicate that a company has more assets than debts.

Formula:
Total Debt Ratio = Total Debts_____ Total Assets Rupees in ----000----

Particulars
Total Debts Total Assets Total Debt Ratio

2005
275,469,03 4 298,776,79 7 0.92

2006
300,992,83 0 343,177,94 9 0.88

2007
355,365,84 2 410,485,51 7 0.87

2008

2009

385,179,85 439,483,714 0 443,615,90 509,223,727 4 0.87 0.86

Comments:
Debt ratio represents the reliance on debt ratio to finance the assets. The debt ratios of MCB Bank are showing a decreasing trend. This represents a good sign the bank. The ratio was high at 0.92 in 2005 and decline a bit in 2006 at 0.88.the debt ratio remains constant 0.87 in year 2007 and 2008.The figure 0.87 means that 87%of assets are being financed by debts and the remaining 13% comes from share holders equity. In 2009, the ratio further falls to 0.86, which indicates a healthy signal for banks financial conditions. The higher the debt ratio the greater the financial risk, the lower this ratio, the lower the financial risk.

Fixed Asset Turnover Ratio:

The fixed asset turnover ratio measures a banks ability to generate net sales from fixedasset investment. It is calculated by dividing the net sales to fixed assets higher fixedasset turnover ratio shows that the fixed assets have been consumed properly to generate revenues.

Formula:
Fixed Assets Turnover Ratio = Net Sales_________ Fixed Assets Rupees in ---000----

Particulars

2005

2006
62

2007

2008

2009

Net Sales Fixed Assets Fixed Assets Turnover Ratio

20,537,700 30,303,420 8,182,454 9,073,276 2.51 3.34

39,652,128 51,604,564 67,457,470 16,024,123 17,263,733 18,014,896 2.47 2.99 3.74

Comments:
Starting from 2005, bank was very good at utilizing its fixed assets to generate revenue. In 2005, bank is generating 2.51 times of revenue from the investment made in fixed assets this year. There is has been an increase in 2006 and ratio goes to 3.34, which is good rise showing the stability in Banks revenue on investment. Then comes a decline in year 2007, the ratio is falls to 2.47.The ratio is not poor but the decrease is has to be considered. In year 2008 and 2009 the ratio rises 2.99 and 3.74. The highest ratio is in year 2009.The higher ratio is in year 2009.The higher ratio conveys that the bank is generating good revenues according to fixed assets.

Total Assets Turnover Ratio:

The total assets ratio simply compares the turnover with the assets used to generate that turnover. It measures a firms efficiency at using its assets in generating sales or revenuethe higher the number the better .If total asset ratio is low it means that the total assets of the business are not providing adequate revenue.

Formula:
Total Assets Turnover Ratio = Net Sales____ Total Assets Rupees in----000----

Particulars
Net Sales Total Assets Total Assets Turnover Ratio

2005
20,537,700 298,776,79 7 0.07

2006
30,303,420 343,177,94 9 0.09

2007
39,652,128 410,485,51 7 0.10

2008
51,604,564 443,615,90 4 0.12

2009
67,457,470 509,223,727 0.13

Comments:
The total asset turnover ratio is showing an increase during this span of years. It initiated with 0.07 times in 2005 to 0.13 times in 2009.In 2005 0.07 times of the total assets are being used for generating profits for MCB.Since then it is experiencing good rise all the 63

way to 2009.In 2006 and 2007 the ratio increased to 0.09 and 0.10 respectively. The rising trend is due to a large increase in net sales but marginal increase in banks total assets. Then a further in coming years is observed. In year 2008 and 2009 the figures are 0.12 and 0.13 times of total assets. The rise in the total asset turnover ratio expenses that business is providing healthier turnover.

Earning Per Share (EPS):

Earning per share an indicator of banks profitability.EPS is calculated by dividing the annual earnings after tax by total outstanding shares. It signifies the growth rate of companies, earnings on a per share basis. The higher figures of earnings would indicate that the bank would be more trust worthy.

Formula:
Earning Per Share (EPS) = Earning After Tax_______ Total outstanding shares

Rupees in----000-----

Particulars
Earnings After tax Total Shares Outstanding Earnings per share(EPS)

2005
8,922,415 426,533 20.92

2006
12,142,398 546,328 22.23

2007
15,265,562 628,277 24.30

2008
15,374,600 628,277 24.47

2009
15,459,297 691,105 22.37

Comments:
The earning per share has increased from 2005 to 2008.In year 2005 the earning per share were 20.92 that rise in year 2006 to 22.23.In 2007 Earning per share further goes up to 24.30.An increase in Earnings per share is considered a healthy financial condition of a bank. In 2008 it touches the highest point among the considered period of five years and that is 24.47.EPS tells that how much profit was generated on a per share basis. In year 2009 a decline in Earnings per share is observed, this decline is not a good sign for the banks financial position. In year 2007 and 2008 the shares outstanding remained same but the earnings after tax increased with great margin and the earnings after tax did not increase with the same ratio, which resulted in decrease of Earnings per share figure. 64

Loans to Deposits Ratio:

Loans to deposit ratio is the amount of a banks loans divided by the amount of its deposits. A higher loan deposit ratio indicates that a bank takes more financial stress by making excessive loan. Therefore lower loan deposit ratio is always favourable to higher loan deposit ratio. So higher the ratio, the more the bank is relying on borrowed funds, which are generally more costly than most types of deposits.

Formula:
Loans to Deposit Ratio = Loans_______ Deposits Rupees in ------000---

Particulars
Loans Deposits Loans Deposits Ratio

2005
180,322,75 3 229,345,17 8 to 79%

2006
198,236,68 2 257,185,11 0 77%

2007
218,960,59 8 292,098,06 6 75%

2008
262,510,47 0 330,274,15 5 79%

2009
253,249,407 367,604,711 69%

Comments:
From 2005 to 2007 the ratio has decreased, which is a favourable sign. In 2005 the ratio was 79% its a big percentage but it does indicate any positive sign. In 2006 there was a decrease of 2% and ratio falls to 77%.then again fall of 2%in 2007 and figure be fell to 75%.In 2008,a sudden rise in the ratio as it goes to 75% again. And a fall of 10% in 2009 and the ratio reaches to 69%.The deposits are increasing with a good margin during the period of five years, especially in 2008 and2009.Portionof loans did not increased with the same margin. In year 2005 and 2008 bank made more loans so the percentage of this year is high.

Return on Asset Ratio:

Return on asset ratio (ROA) is an indicator of how profitable a company is relative to its total assets .ROA gives an idea as to how efficiently the assets are being utilized to generate earnings.ROA is calculated by dividing a earning after tax by total assets of the 65

company, which is presented as a percentage to as return on investment (ROI).In short ROA exhibits what earnings were generated from invested capital (assets).

Formula:
Return on Assets (ROA) = Earnings after Tax__ X 100 Total Assets Rupees in ---000---

Particulars
Earning After Tax Total Assets Return on Assets(ROA)

2005
8,922,415 298,776,79 7 3%

2006
12,142,398 343,177,94 9 4%

2007
15,265,562 410,485,51 7 4%

2008
15,374,600 443,615,90 4 3%

2009
15,459,297 509,223,727 3%

Comments:
Above table illustrates the return on asset of MCB.This ratio has increasing trend for next two years and then a fall in percentage for the further two years.In year 2006 and 2007, this ratio is higher with respect to the year 2005, 2008 and 2009.Higher ratio is healthy sign and it means that bank is getting more return on less investment.The profit increase by very low ratio and at the same time the assets increase with higher rate as compared to profit. Because of this the ROA is decreasing.It was 4% 2006 and 2007, and 3% in 2005, 2008 and 2009.

Return on Equity Ratio:

Return on equity ratio is basically a comparison between profits of a company to the total amount of shareholder equity. It is the amount of net income returned as a percentage of share holder equity. Return on equity measures banks profitability by revealing how much profit it generates with the money share holders have invested. The ROE is an effective ratio to compare the profitability of a company to that of other in the same industry. Formula: Return on Equity (ROA) = Earnings After Tax________ Total Shareholders equity 66

Particulars Earning After Tax Total Shareholders equity Return on equity

2005 8,922,415 17,883,994 50%

2006 12,142,398 36,404,367 33%

Rupees in---000----2007 2008 2009 15,265,562 15,374,600 15,459,297 45,414,156 52,244,865 61,075,932 34% 29% 25%

Comments:
The above table is showing that MCB return to equity ratio is facing a decreasing trend over the time of last five years. As the ratio in year 2005 shows 50% and decrease to 25% in year 2009 .in 2009 the percentage befell to half of the 2005.This decrease may be due to the emergence of more competitors, and customers may be divided among the other Bank, which results in low percentage Of customer attraction towards MCB and new offers and products. Apart from all these, the most of out put generating year was 2005, and the year with lowest return is 2009 during the considered last five years. The reason of decreased in ROE is the low rate increase in earnings of tax particularly in 2007, 2008 and 2009.

Gross Spread Ratio ;

Gross Spread Ratio described the percentage of net Mark-up income over the gross Mark-up income. The increase in ratio is a good indication for Banks condition. Formula: Gross Spread Ratio = Net Mark-Up Income Gross Mark-up Income

Rupees in ----000--Particulars Net Mark-Up Income Gross Mark-Up Income Gross Spread Ratio 2005 14,974,764 17,756,232 84% 2006 21,252,702 25,778,061 82% 2007 23,921,062 31,786,595 75% 2008 28,483,084 40,043,824 71% 2009 35,774,544 51,616,007 69%

67

Comments:
In span of last five years, the gross spread ratio is continuously decreasing. The gross spread ratio was at the top in 2005 as compared to other years, which was 84 %. This ratio decreased to 82% in 2006 and than 75% in 2007. In 2007 the fall was of 7% as compared to previous year, which is quite high percentage. The gross spread further decline in 2008 and 2009 to 71% and than 69% respectively. This reveals a continuously decreasing profitability for the Bank in last five years.

10.4 FIVE YEARS HORIZONTAL ANALYSIS OF BALANCE SHEET MCB BANK LTD. HORIZONTAL ANALYSIS OF FIVE YEARS BALANCE SHEET FROM 2005 TO 2009 PARTICULARS ASSETS
Cash and balance with treasury banks Balance with other banks Lending to financial institutions Investments Advances Operating Fixed assets Deferred tax assets Other assets INCREASE (DECREASE) IN % AGE 100% 137.19% 167.69% 167.46% 163.85% 100% 100% 100% 100% 100% 100% 100% 452.56% 210.84% 92.76% 109.93% 110.89% 91.10% 202.12% 68 259.13% 10.51% 162.76% 121.43% 195.84% 327.00% 275.17% 41.01% 138.54% 145.58% 210.98% 362.54% 409.03% 30.00% 240.55% 140.44% 220.16% 421.64%

2005

2006

2007

2008

2009

TOTAL ASSETS

100% 100% 100% 100% 100% -

114.86% 83.05% 87.46% 112.14% 99.96% -

137.39% 122.75% 143.94% 127.36% 29.99% -

148.48% 123.60% 82.78% 144.01% -

170.44% 96.07% 163.13% 160.28% -

Liabilities
Bills payable
Borrowing from Financial institutions

Deposits &other accounts Sub-ordinate loans Liabilities against assets subject to finance lease Deferred tax liabilities net Other Liabilities TOTAL LIABILITIES

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

129.79% 109.27% 180.99% 128.09% 183.94% 2980.41% 203.56% 106.58% 180.99% 114.86%

100% 136.12% 129.00% 236.49% 147.30% 253.58% 2435.54% 253.94% 178.94% 236.49% 137.39%

37.04% 246.80% 139.83% 250.71% 147.30% 274.23% 4364.02% 292.13% 114.15% 250.71% 148.48%

270.87% 183.70% 159.54% 299.21% 162.03% 286.29% 7490.26% 341.51% 159.74% 299.21% 170.44%

NET ASSETS Represented by

Share capital Reserve Un-appropriated profit Total equity Surplus on revaluation of assets net of tax Total Liabilities& Shareholders equity

Comments: Total assets:

Total assets of MCB Bank have increased from 2005 to 2009. In year 2006 there was an increase of 14% in total assets of the bank. This increase is mainly due to increase in balance with other banks in form of current and deposits accounts which is increased by 352% from base year 2005.The other reason of increase in total assets is due to increase in local and foreign currency cash and balance with treasury banks in hand. This increase is 37%.This year bank lends more money to financial institutions as rise of 110% is observed in these lending, in which the repurchase agreement lending is the main element. Advances are also increased by 9.9% in form of loans, cash credits and running finance. Other assets are also increased by 102%.

69

In year 2007, a total asset increased by 37% as compared to 2005.This is because of 159% increase in cash and balance with other banks including the balances with the banks inside and outside Pakistan. Fixed assets increased by 95% in 2007 as compared to 2005.This boost is because Of major increase in property & equipment. Cash and balance with treasury banks increased by 67%.The other assets increased by 227%.The increase of 62% is observed in investments. In year 2008 the total assets increased by 48%.which shows increase of 11% and 34% as compared to 2007 and 2006 respectively. The increase of this year is because of: The major increased element of total assets of 2008 is other assets. Other assets increased by 262%, which is because of accrued income /mark-up on advances and investment in local currency and advances, deposits, advance rent and other prepayments. The balances with other banks show an upwards trend by 175% as compared to 2005, it shows an increase of 16% from the percentage of 2007. Year 2009 also was the year when bank had the increasing trend over its total assets as they raised to 70%, the highest growth of total assets in last 5 years.Cash and balances with the treasury bank and balances with other banks increased by 63% and 309% respectively. Cash and balances with treasury banks increased due to in hand foreign currency and foreign currency deposit accounts with SBP.The reason of rise in balances with other banks is out Pakistan current and deposit accounts. This year lending decrease and they remain 30% only. This can considerable be because of fall of mark up rate which ranges from 12.355 to 12.70% per annum and last year it was 15.75% to 21% per annum.This year investments increased by 140% it is the highest percentage portion during the period of five years. The federal government securities, overseas government securities and Term finance Certificates (TFC, s), debentures, bonds and Participation term Certificates (PTC, s) are major portion of the investment section. The credit of increase in investment goes to the above mention securities.

TOTAL LIABILITY:
Taking 2005 as a base year: In year 2006, the increase in total liability is 9%.the deposit and other accounts rise by 12% as compared to 2005.The fixed deposits and non-remunerative deposits of financial institutions are the main item causing the up rise in deposit and other accounts. The 70

borrowings are upto 87%, as that of 2005.It shows a fall of 13% in borrowings. Exports finance and borrowings from other financial institutions are the main components. The bills payable remained up to 83% of figures of year 2005, which indicates a fall of 17%.These bills are payable inside and outside Pakistan. The increase is due to increase in other liabilities, which is 29%,change in other liabilities is dependent on mark up payable in local and foreign currency, accrued expenses, and unclaimed dividends the percentage of sub-ordinate loans remains 99.9%. In year 2007, increase in total liability is 29% as weighed against base year 2005.This increase is 18% more than last year. This increase is due to: The borrowings increased by 43% as measured up against the base year. The bank borrowed more money in this year with respect to local currency and secured borrowing from the SBP. In year 2008, total liabilities have increased up to 39%.bills payable have increased by 23% consisting of increase in payables inside Pakistan. The percentages of borrowings remain 82%, which indicates fall of 18% as compared to base year 2005, and fall of 42% if compared to last year. This fall of percentage is due to an evident decrease in local currency borrowing. Now analysing the liabilities of year 2009,there was an increase of 59% as matched up with the base year 2005.bills payable with respect local and foreign currency are at 96% showing the fall of 4%.it is due to the drop in figure of bills payable in local currency. Borrowings increased by 63%as weighed against base year 2005.

TOTAL SHARE CAPITAL (OWNER, S EQUITY):

Taking 2005 as a base year: In year 2006, total share capital increase by 80% as compared to 2005.this equity increases due to 28805 increases in UN appropriate profit, 83% increase in reserves and 28% increase in share capital. The surplus on revaluation of assets increase by 6%.In 2007 the share capital increases by

71

47%, experiences 153% rise in reserves and 2335% rise in un-appropriate profit. There were 78 increases in the surplus on revaluation of assets. Total increase in equity this year is 136%. In 2008 the total change inequity was 150% as compared to base year 2005.if compared to last year the increase is 15%.this years rise is due to 4264% increase in un appropriate profit.174% increase in reserves, reserves increased because of increased in general and statutory reserves. Share capital increased by 47%.The surplus on revaluation of assets rise by 14%. Analysing 2009, the rise in equity is 199% as compared to the base year .the share capital increased by 62%.Reserve experiences the rise of 186% with respect to general statutory reserves .the increase in un-appropriate profit is 7390%.The surplus on revaluation of assets by 59%.this increase in surplus on revaluation of assets due to securities.

10.5 FIVE YEARS HORIZONTAL ANALYSIS OF INCOME STATEMENT

MCB BANK LIMITED HORIZONTAL ANALYSIS OF FIVE YEAR PROFIT AND LOSS ACCOUNT FROM 2005 TO 2009

72

PARTICULARS

2005

2006

2007

2008

2009

INCREASE (DECREASE)IN% AGE

Mark-up/Return/Interest earned Mark-up/Return/Interest expensed Net mark-up/Interest income Provision for Diminution in the value of investment-net Provision against loans &advances -net Bad Debts Written off directly 100% Net mark-up/interest income after provisions 103.35% 267.84% 351.21% 639.86%
100% 81.68% 238.26% 107.48% 466.65%

100% 100% 100% 100%

145.18% 162.70% 141.92% 122.44%

179.02% 282.78% 159.74% 106.35%

225.52% 415.63% 190.21% 2711.60%

290.69% 569.54% 238.90% 1499.48%

100%

3969.59%

16.81%

3511.49%

100% 145.11% 150.80% 176.89% 205.72%

NONMARK-UP /INTEREST INCOME

Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities-net Unrealized(loss)/gain on revaluation of investments classified as held for trading Other income Total Non-Markup/interest income 100% 100% 52.60% 92.21% 51.93% 111.05% 86.89% 106.99% 67.87% 104.25% 100% 100% 100% 100% 169.00% 130.21% 69.89% 131.63% 130.47% 173.13% (1539.95% ) 128.56% 136.90% 85.41% (12126.7% ) 95.71% 64.24% 89.26% 100% 94.38% 107.58% 117.06% 136.05%

100% 130.23% 139.62% 157.22% Non-Mark-up/Interest Expense

Administrative expenses Other Provisions-net Other charges Total non mark100% 100% 100% 100% 100.36% 15.69% 37.30% 99.93% 73 77.75% (5.15%) 302.28% 84.67% 116.83% 13.91% 464.57% 127.75%

177.18%
156.47% 196.35% 385.90% 166.63%

up/interest expenses Extra ordinary/unusual items Profit Before Taxation Taxation -current -Prior year -Deferred

100%

100% 142.11% 163.68%

100% 100% 100% 100% 100% 123.64% 396.29% 17.33% 155.23% 136.09% 3020.59% 139.71% (864.35%) 244.74% 147.52% 171.09% 3347.88%

167.97%
159.20% (577.46%) 4.52% 158.52% 172.31% 3105.63%

177.86%
167.05% (1490.51%) 598.75% 187.00% 173.26% 5564.70%

Profit After Taxation

Un-appropriated profit 100% brought forward Transfer from surplus 100% on revaluation of fixed assets net of taxes 100% Profit Available for 100% Appropriation

38.41%

14.16%

25.46%

26.66%

2017.39%

2226.42%

2069.46%

3701.71%

187.16% 226.88% 223.81% 269.44%

Comments:
I compare all years figures with 2005 as a base year.

YEAR 2006:
In this year profit increased by 87.16% as compared to the base year 2005.this increase is due to: Mark-up/interest earned are increased by 45% as compared to 2005, which is the consequence of increase in interest earned from loans and advances. The loans and advances figure increased three times as compared to base year.Net mark-up /interest income after provision is increased by 45% in 2006 to 92% .This falls is because of decrease in fee, commission and brokerage income by 6%, gain on sale of securities decreased by 30%, and decrease in other income by 47%.The other income decreased because in net profit from sale of fixed assets. The profit before taxation increased by 42%s compared to year 2005.The profit after taxation increased by 36%.The unappropriated profit brought forward from last year increased by 2929%.The transfers 74

from surplus on revaluation of fixed assets are decreased by 62%.All these factors combined to cause the 87% increase in profit.

YEAR 2007:
In year 2007 profit increased by 126.88% as weighed against base year 2005.The increase in profit is 121% of compared to year 2006.This increase is due to: Mark-up/interest earned are increased by 79%.There has been an increase of 123% in this head if compared to the years figures. Because bank earned more mark-up/return/interest on Investment and on loans and advances. These in turn caused an increase of 59.74% in net mark/return/interest income. On the other hand expenses over mark-up/return/interest also increased by 182% which includes the major portion of expenses on deposits and securities sold under resale agreement. In year 2007, banks provisions against loans and advances increased by 182% and the provision for bad debts decreased by 83% and remained up to 16.82% as compared to year 2005.This year MCBs net mark-up/interest income after provisions increase by 50% as measured against year 2005.

YEAR 2008:
In year 2008, profit increased by 123.81% as compared to base year 2005.There has been a fall of 1% and rise of 20% if compared to year 2007 and 2006 respectively. This increase is result of: This year net mark-up/return/interest income enhances to 90%, this increase depends on increase in mark-up/return /interest earned. In year 2008, bank gain specifically on loans to customers and investment in securities. The net change in 2008 in markup/return/interest earned was 26% from 2007.Expences expended to 315.63% in as weighed against 2005.The bank decided to increase all types of provisions this year which caused the total of provision to reach 251% of 2005.Provision against non loans and advances, provision for diminution in value of investments increased by 7% and 2711% respectively. This year profits before taxation increased by 68% and taxation to 58%.The total profit after taxation increased by 72% as compared to year 2005.Un-apprpriated profit brought forward increased by 3006%.The above discussed items clearly describe the reasons of increase in profit of this year .

YEAR 2009 :
75

In the year 2009, MCB Banks profit increase to 169%.This is a significant rise caused by: This year MCB net mark-up income after the subtraction of mark-up/return/interest income has climbed up to 138% as compared to base year 2005.if compared to previous year the increase is 126%.this percentage depends on 190% and 469% increase in markup/return/interest earned and mark-up /return/interest expensed respectively. This years total earnings in term of non up/interest income rose to 4.25% as compared to base year. This year fee, commission and brokerage charges increased to 36%, dividend income decreased by 5% to 95%, income from foreign currency decrease to 64%, the gain on sale of securities decreased to 89% and other income decreased to 67.87%.The increase of 66.63% in total non mark-up/interest expense is observed. This year profit before taxation touched the highest of last five years to 78% as compared to year 2005.The highest value of taxation is in year 2009, which is 87% profit after taxation increased to 73% rise from year 2005.This year total un-appropriated profit brought forward boosts to 5465% from its base year. The profit available for appropriation was at the highest point during the span of five years and the above given lines explain the reason of this increase.

10.6 FIVE YEARS VERTICAL ANALYSIS OF BALANCE SHEET

MCB BANK LIMITED VERTICAL ANALYSIS OF FIVE YEARS BALANCE SHEET FROM 2005 TO 2009 PARTICULARS ASSETS
Cash and balance with treasury banks Balance with other banks Lending to financial institutions Investments 7.92% 0.49% 3.35% 23.26% 9.46% 1.94% 6.14% 18.78% 76 9.67% 0.93% 0.26% 27.55% 8.93% 0.91% 0.92% 21.70% 7.61% 1.18% 0.59% 32.82%

2005

2006

2007

2008

2009

INCREASE (DECREASE) IN %AGE

Advances Operating Fixed assets Deferred tax assets Other assets TOTAL ASSETS

60.35% 2.74% 0.06% 1.83% 100% 2.86% 9.16% 76.76% 0.53% -

57.76% 2.64% 0.05% 3.22% 100% 2.07% 6.98% 74.94% 0.47% -

53.34% 3.90% 4.35% 100% 2.55% 9.60% 71.16% 0.12% 0.29%

59.18% 3.89% 4.47% 100% 2.38% 5.11% 74.45% 0.10%

49.73% 3.54% 4.52% 100% 1.61% 8.77% 72.19% 0.63%

Liabilities
Bills payable
Borrowing from Financial institutions

Deposits &other accounts Sub-ordinate loans Liabilities against assets subject to finance lease Deferred tax liabilities net Other Liabilities

Total Liabilities Represented by

Share capital Reserve Un-appropriated profit Total equity Surplus on revaluation of assets net of tax Total Liabilities& Shareholders equity

2.88% 92.20% 1.43% 4.49% 0.07% 5.98% 1.82%

3.26% 87.71% 1.59% 7.19% 1.83% 10.61% 1.68%

2.86% 86.57% 1.53% 8.28% 1.25% 11.07% 2.36%

4.79% 86.83% 1.42% 8.29% 2.07% 11.77% 1.40%

3.11% 86.30% 1.36% 7.54% 3.10% 12% 1.70%

7.80% 100%

12.29% 100%

13.43% 100%

13.17% 100%

13.70% 100%

Comments:
To analyze the balance sheet vertically, the assets as well as liabilities are expressed as 100% and each item in these categories is expressed as a percentage of the respective total. Companies figure from 2005 to 2009.

TOTAL ASSETS:
In 2005, cash and balances with treasury bank were 7.9% of total assets. Considering total assets 100% this years balance with other banks was 0.49% of total assets. Lending to financial institutions comprise of 3% of total assets. Investments show that they are 23% of total assets.Significiently advances are more than half of the total assets as the 77

advances figure is 60% of the assets.Deffered tax assets comprise the least part of total assets, being only 0.06% of total assets. Operating fixed assets and other assets are 2.74% and 1.83% respectively. In year 2006, the percentage of cash and balances with treasury banks to total assets is 9.46%.which shows an increase from the percentage of last year, as the last years percentage was 7.92%.which is cause by increase in in-hand foreign and local currency. Balances with other banks were 1.94% of total assets this year. There was increase from the percentage of previous year. The reason of the increase is the rise in current and deposit account outside Pakistan. Balances with other banks outside Pakistan in deposit account carry rates ranging from 5.31% to 6.11% per annum(2005:4.5% to 4.7% per annum).this years percentage of lending to financial institution show rise from the previous year as this year the lending is 6.14% of total assets.Invesment for the year are decreased to 18.78% of total assets. In year 2007, cash and balances with treasury bank show a slight rise from previous year by being 9.67% of total assets .Balances with other banks reduces to 0.93% of total assets. The lending to financial institutions show steep dip as compared to previous years percentages. The lending of financial institution was only 0.26% of the total assets. This show bank has lent very small amount to the institution this year. Analyzing in 2008, the cash and balances with treasury banks were 8.93% of total assets. We can see a drop in this head of assets if compared to 2007.But still high from the percentage of 2005,balances with other banks were 0.93% if weighed against total assets. The lending to financial institutions rise again a bit as they were 0.92% of total assets. The bank lent more in from of local currency this year. But the figure is still far below if compared to 2005 and 2006.The investments were 21.70% of total amount of the assets. The investments are dropped because of less money invested in federal Government securities this year.MCB has again offered good percentage of short and long term advances this year. By looking into the figure of 2009, I found: the cash and balances with treasury banks decreased to 7.61% of total assets. The reason behind this was the decrease in balance with SBP and other foreign central banks. Balances with other bank rose to 1.18% of total asset, because of current and deposit accounts outside Pakistan. This year bank 78

again lowered its lending to financial institutions and the percentage remained 0.59%.of total assets. The investments are 32.82%of sum of assets. The loans, cash credits, running finances and net investment in financial lease reduced. The operating fixed assets and other assets remain at 3.54% and 4.52% respectively.

LIABILITIES:
Taking total liabilities and share holders equity as 100%. In year 2005, the total liabilities are 92.20% of total liabilities and share holders equity. Bills payable are 2.86% and the borrowings are 9.16% of the total liabilities and share holders equity as this year bank borrows considerable portion of its borrowing from SBP under the export re-finance scheme. This year Bank borrows more in terms of local currency. Deposits were showing greater percentage as the deposits only were 76.6% of total liabilities and share holders equity. Subordinated loans comprise of small portion of 0.53% of the total. Other liabilities consisting of markup payable in local and foreign currency were 2.88% of total liabilities and share holders equity. Analyzing the percentage of 2006, total liabilities are 87.71% of total liabilities and share holders equity. Bills which are payable by the bank this year were 2.07% of the total liability which is showing a decrease from the previous year. This year borrowing decreased by about 2.18% from previous year. The bank borrowed 6.98% of total liabilities and share holders equity. The percentage of deposits and other accounts are decreased a little, they consists of 74.94%of total liabilities and share holders equity. As I weigh the heads of year2007, against total liabilities and share holders equity. Total of liabilities were 86.75% of total liabilities and share holders equity, which means a decrease from previous years. The bills which are payable by the bank are almost same as that of 2006,showing minor increase from last year, they were 2.55% of total liabilities and share holders equity. The Sub-ordinated loans were 0.12% of small quantity and the 79

deferred tax liabilities are 0.29% of total. While the other liabilities with a minor decrease stand at 2.86%. In 2008, the total liabilities were 86.83% of total liabilities and share holders equity. This years bills payable and borrowings were 2.38% and 5.11% respectively. Borrowings show a sharp drop off. The deposits again increase to 74.45% of the total. The deposits head consists Of fixed, saving, current and other types of deposits accounts. The other liabilities increase to 4.79% and deferred tax liability decrease to 0.10% of total liabilities and share holders equity. The other liabilities consist of interest payable in local and foreign currency, accrued expanses, unclaimed dividend etc. The total liabilities in 2009 were 86.30% of total liabilities and share holders equity Bills payable by the bank this year were 1.61% which is decreasing a decline from the previous year. The borrowing from financial institutions increase to 8.77% which illustrates that bank has borrowed money this year. Borrowing of this year depends on export oriented project scheme, repurchase agreement borrowing, and borrowing from other financing facility. The deposits and other account drop to 72.19% of total liability and share holders equity. The percentage of deposits and other accounts remained stable i.e. it stayed above 70% of total liabilities and share holders equity throughout the period of last five years. The deferred tax liability was 0.63% and other liability remained at 3.11% of total liabilities and share holders equity.

SHARE CAPITAL:
In 2005, total equity was 5.99% and share capital was 1.43% of total liabilities and share holders equity.The total equity in 2006 rose to double of pervious year, the total equity was 10.61% and share capital was 1.59% of the total liabilities and share holders equity. Bank made changes in issued, subscribed and paid up capital. In 2007 the total equity increased to

80

11.06% and the share capital if compared with previous year, decreased to 1.53% of total liabilities and share holders equity. The bank made a special resolution and increase its Authorized Share Capital from6, 500 millions to 10,000 millions. In 2008 the share capital fall to 1.42% of total liabilities and share holders equity. Total equity was 11.78% of total. The authorized capital and issued, subscribed and paid up capital remain the same as the previous year. In 2009, the total equity rise to 11.99% and share capital decline to 1.36% of the total liabilities and share holders equity. Other items remain constant there was an increase in capital issued as bonus shares as compared to previous year.

RESERVES:
Overall in the time span of last five years, banks reserves show an increasing trend. The reserves were 4.49% and 7.19% of total liabilities and share holders equity in 2005 and 2006 respectively. In 2007 and 2008 it again increased to 8.28% and 8.29% respectively. In 2009 The reserves decline to 7.54% of total liabilities and share holders equity. The head of reserves consists of share premium, and statutory reserves etc.

Un-appropriated Profit:
With the passing time MCB, s un-appropriated profit show an upwards trend. It was 0.07% in 2005, but in 2006 bank keeps more profit as un-appropriated profit to pay its debts or for further investment as this years un-Appropriated profit was 1.83% of total liabilities and share holders equity. After that in 2006, these were 1.25% of total. In 2008, the figure increased to 2.07% in 2008, this percentage change as this year unappropriated profit was 3.10% of total liabilities and share holders equity.

10.07 FIVE YEARS VERTICAL ANALYSIS OF INCOME STATEMENT

MCB BANK LIMITED VERTICAL ANALYSIS OF FIVE YEAR
81

INCOME STATEMENT FOR THE YEAR ENDED 31, DECEMBER 2009 PARTICULARS
Mark-up/Return/Interest earned Mark-up/Return/Interest expensed Net mark-up/Interest income Provision for Diminution in the value of investment-net Provision against loans &advances -net Bad Debts Written off directly 4.94% Net mark-up/interest income after provisions 59.69% 3.84% 65.23% 8.11% 55.18% 8.77% 53.37% 12.79% 49.69% 0.01% 0.15% 0.00% 0.07% 5..36% 3.30% 7.83% 2.91% 10.12% 0.43% 0.39% 0.28% 5.86% 2.59% 64.63% 69.07% 63.29% 62.14% 62.48% 12.00% 14.71% 20.81% 25.22% 27.67%

2005
76.64%

2006
83.78%

2007
84.10%

2008
87.36%

2009
90.14%

NON MARK-UP/INTEREST INCOME

Fee,comm.& brokerage income

10.57% 2.07% 2.29% 3.74% 0.00%

7.51% 2.64% 2.25% 1.97% -

6.97% 1.67% 1.83% 3.97% 0.03%

6.25% 1.35% 1.59% 1.62% 0.23%

5.82% 0.80% 0.60% 1.35% -

Dividend income Income from dealing in foreign currencies Gain on sale of securitiesnet Unrealized(loss)/gain on revaluation of investments classified as held for trading Other income

4.68%

1.85%

1.49%

2.06%

1.29%

82

Total Non-Markup/interest income

23.36%

16.22%

15.90%

12.64%

9.86%

83.06% 81.45% 71.08% NON MARK-UP/ INTEREST EXPENSES

Administrative expenses Other Provisions-net Other charges Total non markup/interest expenses Extra ordinary/unusual items Profit Before Taxation Taxation -current -Prior year -Deferred 56.19% 19.90% 0.65% 1.58% 17.68% 38.51% 60.13% 18.53% 1.93% 0.21% 20.66% 39.46% 16.22% 0.10% 56.37% 17.04% 3.42% 2.37% 15.99% 40.39% 14.63% 0.03% 27.88% 0.31% 0.77% 28.34% 1.47% 21.07% 0.04% 0.22% 21.32% 13.29% 0.01% 1.43% 14.71% -

66.01%
16.47% 0.02% 1.81% 18.30% -

59.55%
17.65% 0.25% 1.21% 19.11% -

47.71% 16.02% 1.89% 0.04% 14.17% 33.54% 11.19% 0.05%

40.44% 13.45% 3.90% 3.82% 13.38% 27.00% 16.06% 0.04%

Profit After Taxation

Unappropriated profit 0.71% brought forward Transfer from surplus 0.36% on taxes 1.07% Profit available for 39.58% Appropriation Interest Income + 100% non interest income revaluation of fixed assets net of

16.32% 55.79% 100%

14.66% 55.05% 100%

11.24% 44.78% 100%

16.09% 43.16% 100%

Comments:

83

To vertically analyze the profit and loss statement we will compare all heads with the total income of the total income of the respective years total. Sum of net markup/interest income and non mark-up/interest income is taken as 100%. Profit available for appropriation have the increase in trend overall from 2005 to 2006.In 2006 the profit available for appropriation rose to 55.79% from 39.58% of 2005.It decreases afterwards to 55.05%,44.78% and 43.16% in year 2007,2008 and 2009 respectively. These ups and downs in profits are due to below mentioned reasons.

NET MARK-UP/INTEREST INCOME:

From 2005 to 2006 Net mark-up/interest income has increased from 64.63% to 69.07%.The reason behind this increase is the higher increase in interest earned than increase in interest expense. During this period the interest earned increased to 83.78% from 76.64% and the interest expense increased to 14.71% from 12% of total income. Then there is observed a decreasing trend up to year 2008. In year 2007 the percentage of interest earned has slight increase as that of year 2006 and the interest expense increased to 20.18% from 14.71%,which caused the fall of net markup/interest income to 63.29% of total of mark-up and non mark-up income. In year 2008, the net mark-up/interest income again decline. It was 62.14% of total income. This decrease is due to increase in expense, this year interest earned did not increase the way expense increased. The interest earned was 87.36% and interest expense was 25.22% of total. In year 2009, there was an increase of 0.34% as compared to previous years percentage. The mark-up earned increased to 90.14% and at the same time the interest expensed reach to 27.67% of total income. In 2009, provisions are 12.79% of income of MCB, whereas in previous year it was near to ground.

NON MARK-UP/INTEREST INCOME:

84

Non mark-up/interest income shows a decreasing trend in the time span of five years. As the non mark-up interest income in year 2005 was 23.36% and decreased to 16.22% in year 2006.Because in 2006 income in terms of fee, commission and brokerage was decreased as compared to 2005.As it was 15.90% of total income of 2007 and 2008,it downs to 12.64% of the respective years total income. And it also decreased afterwards in 2009.In 2009; it is 9.86% of the total income.

PROFIT BEFORE TAXATION:

Profit before taxation was at 56.19% in 2005, in 2006 this profit rose to 60.13% of total income. The interest expense is decreased in 2006 and another reason was that in 2005 there were 1.47% of extra ordinary /unusual items. In 2007, the expenses ratio is lowest as compared to other years but still a decline is seen in profit before taxation because total non mark-up interest income also decreased. A further decline in figure of 2008, the percentage was 47.17% of total income of that year. This is caused by an increased in expenses that touched 18.30% and fall in total non mark-up/interest income to 12.64% of total income. Profit before taxation comes down again in 2009 to 40.44% of total income.

85

11- ORGANIZIATIONAL ANALYSIS WITH REFERENCE TO THE INDUSTRIES

MCB BANK LIMITED. COMPETETOR ANALYSIS FROM 2005 TO 2009
Rupees ------- (in millions) -----MCB Bank Ltd. National Bank of Pakistan Ltd. Habib Bank Ltd. United Bank Ltd.

DESCRIPTION
Gross Profit Investment Advances Deposits Total Assets Mark-up Earned Profit before tax Profit after tax Borrowing fro financial institutions Cash & cash equivalents Total Liabilities No. of Branches No, of Employees References: www.mcb.com.pk www.nbp.com.pk www.habibbankltd.com

2009
35,775 167,134 253,249 367,605 509,224 51,616 23,155 15,459 44,662 44,785 439,484 1,026 10,488

2009
38,458 217,643 475,243 726,465 944,233 77,948 22,300 18,212 45,278 144,169 824,676 1,256 16,248

2009
41,663 209,421 432,284 653,452 820,981 74,751 19,486 12,299 48,122 109,088 741,886 1,450 14,572

2009
32,693 136,146 354,092 492,036 619,744 60,857 14,035 9,193 35,145 66,568 558,807 1,121 14,950

Comments:
As per above data, if we compare MCB with National Bank of Pakistan, Habib Bank of Limited and United Bank. We can evidently observe that National Bank is a big banking group as compared to MCB, HBL, and UBL.

86

First I will compare MCB with NBP.As on December 31,2009 the total deposits of NBP are 726,465 millions and MCB are 367,605 millions, which show that figures of NBP are double to the deposit figure of MCB.The total assets of NBP are 944,233 million and assets of MCB are 509,224 millions. Same is the condition of other figures. The branch network of NBP is a bit larger than MCB.NBP got a large work force as compared to MCB.The profit margin of NBP is also showing the higher figures than MCB. Now I weigh MCB against HBL.HBL is also a huge group of Banking. Total assets of HBL are 820,981 million and 509,224 millions of MCB.The deposits of HBL are 653,452 million and 367,605 of MCB.Profit, markup earned, investments are also higher than MCB.Branch network of HBL is larger than all of the above mentioned banks.HBL got higher no. of employees than of MCB. If position of UBL is matched up to MCB.MCB earns higher profits as compared to UBL according to financial statements given on December 31, 2009.The profits of MCB are near to double as that UBL.Same is the case with total assets, markup earned etc.All the figures above are self explanatory and revealing the whole financial position MCB and its competitors in market.

12-FUTURE PROSPECTS OF ORGANIZIATION:

MCB Bank Ltd.is a leading commercial bank of Pakistan. It is among the five largest banks of Pakistan these banks dominate the banking structure of Pakistan. In the previous year MCB has shown a growth. It is a first Pakistan organization which is listed on London Stock Exchange.MCB is rated as AA+ by PACRA in year 2009. 87

With the increase in asets, advances, investments and profitability in time span of last five years, the bank has achieved exceptional growth as compared to the market.MCB will be focused on Earning per share during the coming years to satisfy its share holders with higher return. MCB Bank Ltd.will continue with its program for upgrading and re-positioning its existing branches to provide better services an extended reach to the Banks esteemed clients. With enhance network and an elaborated product collection that provides both personal and business solution to MCB, s valued customers, MCB; s customer base continues to grow rapidly. MCB Is today a progressive, efficient, and customer focused organization. It has developed a wide range of consumer products, to enhance business and cater to the different segments of society. The economic crises all over the world had been affecting the all the other business including banking Sector. Banking sector is expected to continue facing strong challenges in this situation. Trade imbalance and global slowdown is affecting business volume and will have a negative impact on overall trade & fee based income. Macro economic and political instability, going forward, will continue to impact on growth and profitability of the banking sector. With SBP, s revised and enlarged requirements, the bank sector is expected to undergo yet another phase of consolidation and increasing compition.MCB will remain cautious against the varying state of affairs and endeavor to make further satisfactory progress. The Top Management of MCB, being very optimistic about the growth rate, believes that the bank is well positioned to take advantage of next economic upturn.

13-SHORT FALLS/WEAKNESSES OF THE ORGANIZIATION

Although, MCB is one of the most well-known commercial banks in Pakistan due to its growth rate and efficient services. But it has some short falls and weaknesses, which are as under:

88

MCB offers online transfer of funds facility to the customers, MCB needs to expand its ATM network and connectivity to The system of MCB gets hanged, whenever there is workload The employees are constantly rotated from one department to

but this facility is limited to prominent branches only. further expand banks reach to the customers. all over the branches. any department. MCB does not have enough employees in the branches leaving The employees are on temporary basis which causes insecurity Each and every decision is in hands of upper management the seats vacant, which causes problem for employees as well as customers. of job to the employee. sometimes. previous year. MCB does not have much international recognition. Percentage of mark-up as well as non mark-up expenses is The bank interest coverage ratio is decreasing and its ability to Ratios of non-performing loans are higher than prior years. Ratio of provision for non-performing loans increased to called centraliziation.Centraliziation becomes inefficient and time costly another, which is not a very good practice, as they do not get specialized in

10.12%, which indicates that bank is facing more non-performing loans than

higher as compared to proceeding years.

cover interest expense reduced.

14-CONCLUSIONS
89

What I concluded working in MCB Bank Ltd.is that MCB is very dependable bank for the clients. In addition to this, the management is efficient and customer focused. In this very competitive market, the bank is going in very right direction by introducing new products and services to facilitate respected customers. MCB is always associated with a number of awards. For instance, MCB has been awarded Euro money awards for The Best Bankin years 2000,2001,2002,2003,2004,2005,2006,2008 and Asia money awards The Best Domestic Bankin year 2004 and 2005. The assets, advances, investments and net profit has also shown an outstanding upward trend in these years.MCB offers quality products and services with online banking which enables its customers to operate their account while sitting at home. MCB has a keen internal control system. The chances of any fraudulent activity are rare. The internal audit works on very strict rules to keep check on the operations and overall performance of bank as well as employees. To summarize, MCB Bank is heading towards the right directions and processes necessary potential of further progress.MCB would be offering promising opportunities for customers as well as professionals.

15-RECOMMENDATIONS

90

The following are the recommendations for eliminating or minimizing the highlighted weaknesses and for the overall improvement of the organizations. MCB should be provide online funds transfer facility to the customers in every branch. MCB should be expand its ATM network and connectivity to further expand banks reach to the customers. MCB should be take steps to improve the systems and connectivity channels to deliver better services. The human resource department should be given a set of strategies to be followed and they should pay attention to their employees satisfaction. The human resource department should appoint new employees to fill up the vacant posts. The upper management should authorize certain decisions of branch level to branch manager and regional offices to make services swift. The contract terms between bank and the customer should be clarified, so there would be few chances of bad loans.

16-REFERENCES
91

All of the references and sources from where the data gathered for this report are mentioned herewith for your kind concern. WEB PORTALS: www.mcb.com.pk www.nbp.com.pk www.habibbankltd.com www.investowords.com www.sbp.com.pk

Books:
Practice & Law of Banking in Pakistan by Dr.Asrar H.Siddiqui. Principles of corporate finance by Brealey Myers Allens. Fundamentals of Financial management By James C.Van Horn & John M Wachwicsz,JR Investments by charles p.jones

Others:
Annual report of MCB Bank Limited for last five years

17-ANNEXES
92

Organogram (I) Organizational structure of MCB Head Office

Group Heads

Group Heads

Circle Offices

Circle Offices

Regional Offices

Regional Offices

Branch Offices

Branch Offices

Organogram (II)
93

The Organizational Structure of the Branch

BRANCH MANAGER Mr.Yasir Khalid

BRANCH OPERATION MANAGER

Miss Sania Akbar

CUSTOMER SERVICES SUPERVISOR Mr. Ghulam Dasstgeer

TELLER SERVICES SUPERVISOR Mr. Yousaf Gill

Ref: Provided by Mr. Yasir Khalid Branch Manager

Organogram (III)
94

STRUCTURE OF ACCOUNTS / FINANCE DEPARTMENT

CFO/Head Global Shared Services

TBA 1 Deputy CFO Financial ControlerGenesis&automation

Head-Investor Relations

Head of FinanceMiddle East

Financial ControllerAdvances &Overseas

TBA-4-Assistant Manager-Genesis Project

Manager Taxation

ManagerOverseas Accounts

Manager-Write off cell

Asst.Manager Overseas Accounts

Division Head/Financial Controller Manager FinanceCentral Accounts &Payments

Financial Controller Statutary

TBA-2 Financial Controller

Manager Finance Employee Funds

Senior Manager FinanceConsumer Manager Consumer Accounts TBA-3 Manager Consolidated Manager MIS&Budgeting Manager-HO Budgeting, BOD Reports&Bench Manager CAPX

Manager Central Payments Senior Manager Finance &SBP Reporting Manager-MISAgri&Micro Credit Manager-SBP Returns/Unclaimed Deposits Manager ALCO

Asst.Manager statutory Accounts

Asst.Manager of AMS
Asst.Manager Islamic Banking accounts

95