Subject: International financial mangament

Presented to: Sir Taimoor

Presented by:
Group Members Roll Numbers
Muhammad Akram 12052054-032
Muhammad Zeeshan 12052054-033
Sana Javaid 12052054-045
Sehrish Khalid 12052054-062

Semester 4nd (M.com)
Section ( T )





MCB Bank previously known as Muslim Commercial Bank, today is one of the enormous banks of
Pakistan, was established in 1947.

As it was 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. This led to deterioration
in the quality of the Banks loan portfolio and service quality. Eventually, MCB was privatized in
1991.

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, developinga
large and stable deposit base and managing its non-performing loans via improved risk management
processes.

The strength and stability of MCB Bank Limited is evident through the credit rating assigned by
JCR-VIS Credit Rating Company Limited of AA (Double A) for long to medium term and A-1 (A
one) for short term.



MCB Bank Limited is a full service institution offering consumer, corporate and investment banking
facilities to its customers. The banks widespread and growing network of branches in the four
provinces of the country and abroad, together with its corporate offices in major cities, provides
efficient services in an effective manner.
MCB Bank has attained its goodwill and fame rapidly in local financial market and around the
globe, the 9 to 5 full day banking and banks 24 hours online banking services gives it an edge over
other banks, while its fastest ATM network facility encompassing more than 34 cities around the
country provides customers such convenience that they expect from the bank. All branches of the
bank are located at vintage points covering a large segment of population and business houses MCB
is one of the leading banks of Pakistan with a deposit base of about Rs. 280 billion and Total assets
of around Rs.300 billion.
MCB Bank Limited (Formerly Muslim Commercial Bank Limited) has a solid foundation of over
50 years in Pakistan, with a network of over 900 branches, over 750 of which are Automated
Branches, over 222 MCB ATMs in 41 cities nationwide and a network of over 12 banks on the
MNET ATM Switch, which as a combination is considered to be the core competence of MCB.
MCB has become the only bank to receive the Euromoney award for the fourth time in the last five
years. MCB won the "Best Bank in Pakistan" in 2005, 2004, 2003, 2001, and in 2000 the "Best
Domestic Bank in Pakistan" awards. In addition, MCB also has the distinction of winning the Asia
Money 2005 & 2004 awards for being "The Best Domestic Commercial Bank in Pakistan".


Challenging and Changing the Way you Bank


To maintain long term customer relationships through outstanding service and convenience





Trust:
MCB is the trustee of public funds and serve with integrity & commitment. Ethical behavior is
importance for them. They adopt full compliance with internal and external policies & procedures,
operating within the legal framework.
Customer Focus:
MCB continuously seek to exceed their customers expectations, forging and maintaining long term
relationships.
Innovation:
MCB strives to be the market leaders in innovative products and services offering customized
financial solutions with flawless execution.
Teamwork:
The diversity of their people is their strength. They inspire and challenge each other working
together to achieve synergy.
Achievement:
Their people are their most valuable asset. They are committed to a result oriented culture. MCB
goals are clear and merit is the only criterion for reward.
Social Responsibility:
As responsible citizens MCB contributes to the social welfare of the community they live
in.


(5.3.1)ORGANIZATIONAL HIERARCHY Chart




























ORGANI ZATI ONAL STRUCTURE
As MCB is a banking company listed in stock exchange therefore it follows all the legalities which
are imposed by concerned statutes Mr. Muhammad Mansha is chairman & chief executive of the
company with a team of 10 directors and 1 vice chairman to help in the business control and strategy
making for the company.
Operational Management of the bank is being handled by a team of 10 professionals. This team is
also headed by Mr. Muhammad Mansha. The different operational departments are Consumer
Banking & IT div; Financial & Inter branch div; Banking operations div; HR & Legal div; financial
control & Audit div; Credit management div; Commercial Banking div; Corporate Banking div;
Treasury management & FX Group and lastly Special Assets Management (SAM) Group.
For effective handling of branches, it has been categorized into three segments with different people
handling each category. These categories are:
a) Corporate Banking
Manager
Cash Department
In charge (Qayyum)
Lockers Department
(Naveed)
Cash Officer
(Wahab)
Cash Officer
(Iftikhar)
Cash Officer
(Ejaz)
Operational Department

(Sajjid)

.

3 Guards 2 Office Boys
KPO
General Ledger
(Suleman Butt)
KPO
Saving Account
(Yasin Butt)
Clearing
(Bukhari)
Unskilled Workers KPO
Checking Officer
(Zulfiqar Butt)
Remittance
(Amir)

CSO
Ayesha
Rasool
b) Commercial Banking
c) Consumer Banking

A) CORPORATE BANKING:
These are branches which have an exposure of over Rs. 100 million. Usually includes multinational
& public sector companies.

B) COMMERCIAL BANKING;
The branches which has a credit exposure of less than Rs. 100 million but having a credit portfolio
of more than Rs. 20 million (excluding staff loans)
Usually branches in large markets and commercial areas come under this category.

C) CONSUMER BANKING
These are the branches which have exposure up to Rs. 20 million and these include all the branches
which are neither corporate nor commercial branches.
Recently the organizational structure was re-designed as follows:
1.Province wise branches
2.Corporate Consumer Commercial
3.20 branches 637 branches 383 branches
Offices or field offices

OR
Main Offices
Offices means the Head office which is situated in MCB House located at Fruit Mendi
Branch. Field offices mean the Branches. MCB has the forth largest domestic branch network in
Pakistan. The bank has a network of over 1000 branches in Pakistan and 6 branches worldwide in 6
countries.

FINANCIAL ANALYSIS:


1. Liquidity Ratios:
2. Operating profit ratio
3. Return on investment
4. Assets utilization ratio
5. Market measure ratio
6. Price to earning ratio


1.Liquidity Ratios:
A class of financial metrics that is used to determine a company's ability to pay off its short-terms
debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the
company possesses to cover short-term debts



Current ratio:
A liquidity ratio that measures a company's ability to pay short-term obligations.
Current Ratio = Current Assets Current Liabilities

year 2008 2009 2010
Current asset

284,937,950

321,850,264
376,592,633

Current liabilities
266,857,434

290,092,433
342,463,187

Current ratio
106.80%

111.00%
110.00%


Quick Ratio:
The quick ratio, also known as the acid-test ratio, is a liquidity ratio that is more refined and more
stringent than the current ratio. Instead of using current assets in the numerator, the quick ratio uses
a figure that focuses on the most liquid assets. The main asset left out is inventory, which can be
hard to liquidate at market value in a timely fashion. The quick ratio is more conservative than the
current ratio and focuses on cash, short-term investments and accounts receivable. The formula is as
follows:
Quick Ratio = (Cash & Equivalents + Short-Term Investments + Accounts Receivable) Current
Liabilities


year 2008 2009 2010
Current
assets

284,937,950

321,850,264

376,592,633

Inventories

69,481,487

63,486,316

113,089,261

Current
liabilities

266,857,434

290,092,433 342,463,187

Quick
ratios

80.743%

89.063%

76.943%


Quick ratio


Analysis of thequick ratio:


Inventories are considered as current assets so they are included in current ratio

calculation. Inventories are less liquid. Normally it is not easily converted into cash

on short notice. In 2006 quick ratio is better than other years it show that bank can

easily recover its liabilities on short notice.


3. Working capital:


Working capital is the difference between current assets and current liabilities.

Working capital is often considered a measure of liquidity by it self. This ratio

shows the amount of liquidity.


Working capital is used to check liquidity of the organization.


Working capital=current asset-current liability
Working capital
year 2008 2009 2010
Current
asset

284,937,950

321,850,264

376,592,633

Current
liabilities

266,857,434

290,092,433

342,463,187

Working
capital

18,080,516

31,757,831

34,129,446



Analysis of theworking capital:


Working capital is better in 2007, which is 34,129,446 .it means that assets are

utilized more economically in 2007 as compared to 2003, 2004, 2005 and 2006.



Times interest earned:
Times interest earned (TI E) or interest coverage ratio is a measure of a company's ability to honor
its debt payments. It may be calculated as either EBIT or EBITDA divided by the total interest
payable.

Time interest earned= EBIT / interest charges
Interest Coverage Ratio:
A ratio used to determine how easily a company can pay interest on outstanding debt. The interest
coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of
one period by the company's interest expenses of the same period:


Interest Coverage Ratio


Interest coverage ratio shows the ability of a firm to cover up its interest charges on

the income before interest and taxes. The ratio is obtained through dividing earning

before interest and taxes (EBIT) of the bank by its interest expenses.


EBIT divided by interest expense

Interest coverage ratio=EBIT/Interest expense




Interest coverage ratio

year 2008 2009 2010
EBIT 13,018,487 18,500,670 21,308,035
Interest
expense
2,781,468 4,525,359 7,865,533

Interest
coverage
468.04%
408.82%

270.90%
ratio
Analysis of theinterest coverage ratio:

Coverage ratio shows the number of the times a firm can recover or meet particular

financial obligations. The interest coverage ratio, which is also called the time

interest earned ratio, measure the coverage of the firm s interest expense.2005 is the

best comparative better coverage of its interest and fixed charged obligations. After

2005, 2006 is better than other three but 2003 is worst than all.


Operating profit:
Operating profit is a measure of income that tells investors how much of revenue will eventually
become profit for a company.
Operating profit takes into account the costs of producing the product or services that are unrelated
to the direct production of the product or services, such as overhead and administrative expenses. It
is calculated by dividing your operating profit (OP) by your net sales (NS) and multiplying the
quotient by 100:
Operating profit = Operating Profit/Net Sales x 100
operating Profit Margin Ratio

operating Profit X 100
Net sale
It is measure of the firm profitability of sale after taking account of all expense and income taxes.

Table no. 4.5 (Rs in Millions)
2010 2011 2012
Operating profit 16873 19425 20941
Sales 467613 544231 641652
operating profit margin 3.60% 3.56% 3.26%
Net Profit Margin for .2010, 2011, 2012
Source: Internees Analysis

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

Gross profit Margin:
Gross margin tells you about the profitability of your goods and services. It tells you how much it
costs you to produce the product. It is calculated by dividing your gross profit (GP) by your net sales
(NS) and multiplying the quotient by 100:
Gross Margin = Gross Profit/Net Sales x 100
GROSS PROFIT MARGIN
This ratio tells us the profit of the firm relative to sales after deducting the cost of producing
the goods or in other words an indication of the total margin available to cover operating expenses
and yield a profit.

FORMULA

Gross Profit
Gross Profit Margin = X 100
Net Sales
FIVE YEARS INCOM TO ASSETS OF THE MCB BANK

Years Description Results
2008 21867566/30255403 72.3
2007 21308035/27304238 78.1
2006 18500670/25061381 73.8
2005 13018487/19243480 67.6
2004 4057716/10979521 36.9


Net profit margin





year 2006 2007 2008 2009 2010
Net profit

8922415 12142398 15265562 15374600 15495297

total
revenue/income

23509901 30769477 38234822 45835264 57258892
Net profit
margin
37.95%

39.49%

39.93%

33.54%

27.06%






NET PROFIT MARGIN
The net profit margin is a measure through which the firms profitability is measured. It tells about
the firms net income per dollar of sales.

FORMULA

Net Profit
Net Profit Margin = X 100
Net Sales

Years Description Results
2008 15374600/30255403 50.8
2007 15265562/27304238 55.9
2006 12142398/25061381 48.4
2005 8922415/19243480 46.4
2004 2431531/10979521 22.2




INTERPRETATION
Net profit margin of MCB has shown a fluctuating trend in the year 2007 it was 3.57% but in the
year 2008 it was increased to 5.60% and again slightly dropped to 4.60 in the year 2009. This means
that through the selling price has increased the other expenses of the bank like operating, general
administration or selling expenses has shown a slight decrease.

100
come Revenue/In Total
Profit Net
Margin Profit Net
Earnings Per Share EPS:
The portion of a company's profit allocated to each outstanding share of common stock. Earnings
per share serves as an indicator of a company's profitability.

This ratio determines the amount of income that has been earned on each share

outstanding. Net profit after tax divided by total numbers of shares outstanding gives

the amount earned on each share.




Net profit after tax divided by total number of shares outstanding

Earning per share=Net profit after tax/ Total no of shares Calculated as:


When calculating, it is more accurate to use a weighted average number of shares outstanding over
the reporting term, because the number of shares outstanding can change over time. However, data
sources sometimes simplify the calculation by using the number of shares outstanding at the end of
the period.

Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding
in the outstanding shares number.



Year 2006 2007 2008 2009 2010
Profit after
tax
2,230,145 2,431,532 8,922,415
12,142,398

15,265,562
Total
number of
shares
306,527 337,180 426,532 546,327 628,227
Earning per
share
7.28 7.21
21.00

22.23
24.30




Analysis of theearning per share:

Earning per share mostly depends upon return on investment means ratio of profit

generated. Earning per share is better in 2007 because in this year return on

investment was also satisfied. 2003 and 2004 were unsatisfied as earning per share.

BOOK VALUE PER SHARE: A measure used by owners of common shares in a firm to
determine the level of safety associated with each individual share after all debts are paid
accordingly.

Formula:





Book Value per share = common equity
Shares outstanding


year 2007 2006 2005 2004 2003
Common
equity
78915003 69180011 61075932 52244865 47338167
Share
outstanding
8362965 7602150 7602150 6911045 6282768
Book value
per share
9.44% 9.1% 8.30% 7.56% 7.53%



Return on investment ratio

3.Return on Investment:
A performance measure used to evaluate the efficiency of an investment or to compare the
efficiency of a number of different investments. To calculate ROI, the benefit (return) of an
investment is divided by the cost of the investment; the result is expressed as a percentage or a
ratio. Return On Investment:


Return on investment measure the ratio of profit generated in relation to the total

assets employed. Net profit after tax divided by total assets gives the return on

investment.


Return on investment is an indicator of how profitable a company is. By using this

ratio annually, we compare business' performance to industry's norms.

Net profit after tax divided by Total assets

Return on investment= Net profit after tax/Total assets



Return on investment

year 2006 2007 2008 2009 2010
Profit after
tax
2,230,145 2,431,532 8,922,415 12,142,398 15,265,562
Total assets 272,323,619 259,173,808 298,776,797

342,108,243 410,485,517
Return on
Investment
0.82% 0.94% 2.99% 3.55% 3.72%










The return on investment formula:


Analysis of thereturn on investment ratio

Profitability ratios focus on the profit generating performance of the firm. These

ratios measure how effectively the firm is generating its profit. They reflect its

performance, its risk ness and the effect of leverage. Muslim commercial bank was

heavily financed in 2007 that financing was used in investment thats why return on

investment is high in 2005 as compare to the other years.

Return on Equity:
Return on equity measures how much a company makes for each dollar that investors put into it.
You calculate it by taking the net income earned (NI) by the amount of money invested by
shareholders (SI) and multiplying the quotient by 100:
Return on Equity = Net Income/Shareholder Investment x 100
Return on equity is another summary measure of overall banks performance. It can

be calculated by dividing the net profit by the owner equity. This ratio tells us the

earning power on shareholders book value investment and is frequently used in

comparing two or more firms in any industry. A high return one quite often reflects

the firms acceptance of strong investment opportunities and effective expense

management.















year 2006 2007 2008 2009 2010
Profit after
tax
2,230,145 2,431,532 8,922,415 12,142,398 15,265,562

Sharesholders
equity
3,065,273 3,371,800 4,265,327 5,463,276 6,282,768
Return on
Equity
72.76%

72.11%

209.18%

222.25%

242.98%




Return on equity is an indicator of how profitable a company is. Use this ratio

annually to compare your business' performance to your industry's norms. In year

2007, MCB has a strong investment opportunities which reflects a high return, after

this 2006 and 2005 also depicts a high return, whereas, 2003 and 2004 are not

satisfied.

Return on Assets:
This metric measures how effectively the company produces income from its assets. You calculate it
by dividing net income (NI) for the current year by the value of all the company's assets (A) and
multiplying the quotient by 100:
Return on Assets = Net Income/Assets x 100
Return on asstes

FIVE YEAR EWTURN ON ASSETS (ROA) OF THE MCB BANK



ROA tells customer what earning was generated from invested capital (assets). ROA for public
companies can vary substationaly and will be highly dependent on the industry. Some investors add
Years Description Result
2004 2431532 / 259173808 0.0094
2005 8922415 / 298780780 0.0298
2006 12142398 / 342108243 0.0355
2007 15265562 / 410485517 0.0372
2008 15374600 / 443615904 0.0346
interest expense back into net income when performing this calculation because they like to use
operating returns before cost of borrowing. The ROA figure gives investors an idea of how
effectively the company is converting money it has to invest into net income. The higher the ROA
number, the better, because the company is earning more money on less investment.


DuPont Analysis:
A method of performance measurement that was started by the DuPont Corporation in the 1920s.
With this method, assets are measured at their gross book value rather than at net book value in
order to produce a higher return on equity (ROE). It is also known as "DuPont identity".

DuPont analysis tells us that ROE is affected by three things:
- Operating efficiency, which is measured by profit margin
- Asset use efficiency, which is measured by total asset turnover
- Financial leverage, which is measured by the equity multiplier

ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity Multiplier
(Assets/Equity)
Assets utilization ratio:
Sale to cash
Receivables Turnover Ratio:
An accounting measure used to quantify a firm's effectiveness in extending credit as well as
collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm
uses its assets.

Formula:

Sale to receivable ratio

An accounting measure used to quantify a firm's effectiveness in extending credit as well as
collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a
firm uses its assets.

Formula:


Some companies' reports will only show sales - this can affect the ratio depending on the size
of cash sales.


year 2007 2008 2009
Net credit
sale

18297143 18625332

Average
account
receivables

10965297 10965297
Account
receivable
turnover
1.79

1.67





Fixed-Asset Turnover Ratio:
A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's
ability to generate net sales from fixed-asset investments - specifically property, plant and
equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company
has been more effective in using the investment in fixed assets to generate revenues.

The fixed-asset turnover ratio is calculated as:











year 2008 2009 2010
Profit
after tax
15374600 15495297 16873175
Fixed
asstes
17263733 18014896 20947540
Fixed
asstes
turnover
0.86 0.86 0.81


















6.Market Ratios:
When a stock analyst wants to understand how other investors value a company, they look at market
ratios. These measures all have one factor in common; they're evaluating the current market price of
a share of common stock versus an indicator of the company's ability to generate profits or assets
held by the company.
Price to Earnings
Also known as the P/E ratio, this first metric tells the analyst the cost to acquire $1.00 of the
company's earnings. For example, if a company is reporting $1.00 in annual earnings and the
stock's current market price is $20.00, then the price to earnings ratio is 20.0.
Formula
Price to Earnings = Market Value per Share / Annual Earnings per Share

1-P/E ratio

Price earning ratio=Market price per share/ earning per shar

year 2006 2007 2008 2009 2010
Market
price per
share
51.40 58.70 167.80 246.10 399.95
Earning
per share
7.28 7.21 21.36 23.40 24.30
P/E ratio 706.04% 814.15% 785.58% 1,051.71% 1,645.88%


Analysis of theprice-earning ratio:

Price earning ratio of MCB bank is high in 2007 as compared to the other years.

Because the market price per share is high in 2007. Because in this year MCB

generate an excellent profit. 2006 is also good but 2003 is worst all of them.



Price to Book or Market to Book
This next metric can be calculated two ways, both with the same result. The measure is used to
understand the price, or market value, of a company relative to its worth (assets). For example, if a
company's market capitalization was $10B and its assets were equal to $10B, its market to book
would be 1.0.
Formula
Price to Book = Market Price per Share / Book Value per Share
Where:
Book Value per Share = (Total Shareholder Equity - Preferred Equity) / Common Shares
Outstanding
Alternatively:
Market to Book = Total Market Capitalization / Total Book Value
Where:
Total Book Value = Total Shareholder Equity - Preferred Equity

Price to book value

Market value per share
Book value per share






year 2008 2009 2010
Market price
per share
125.81 219.68 228.54
Book value per
share
7.56 8.03 9.1
Market book
ratio
16.64% 27.36% 22.51%

Dividend Yield
While dividend payments are extremely important to some shareholders, they are of secondary
consideration for others. Some investors seek a regular stream of income from a stock, while others
invest with the hope of securing capital gains. The dividend yield allows the analyst to quickly
compare the merits of these alternative investment opportunities.
Formula
Dividend Yield (%) = (Market Price per Share / Dividends per Share) x 100
Dividend payout ratio



year 2007 2008 2009
Dividend
per common
stock
13.67 13.20 11.36
Dulited
earning per
share
24.30 24.47 22.42
Dividend
payout ratio
52.26% 53.94% 50.67%


Earnings Yield:
The earnings yield is the ratio of a company's last twelve months (LTM) of earnings per share
(EPS) to its stock price. It is the inverse of the price-to-earnings (P/E) ratio.

Earnings Yield = LTM EPS / Stock Price
Earning yield:

Earning yield=Earning per share/Market price per share






year 2006 2007 2008 2009 2010
Earning per
share
7.28 7.21 21.36 23.40 24.30
Market
price per
share
51.40 58.70 167.80 246.10 399.95
Earning
Yeild
14.16% 12.28% 12.73% 9.51% 6.08%






Balances with other banks:
There is gradual increase in balances with other banks. MCB bank limited has

maintained two types of accounts, current and fixed within the Pakistan and

outside the Pakistan.

Lending to thefinancial institutions:
Lending to the financial institution decreased in 2005 because in this period

MCB Bank it self need of financing. There were again decrease in 2007.

Lending to the financial institution include call money landings, repurchase

agreement lending and purchase under resale agreement of listed equity security,

trade related deals.

Advances:
Index size/horizontal analysis is showing that advances are increasing every year

because of increase in deposits.

Other assets:
Other assets are increasing in year 2006 and 2007. Other assets include income

/mark up accrued in local currency, in foreign currency, advances, deposits,

advance taxation, suspense accounts, stationery and stamps, dividend receivable,

Operating fixed assets:
Operating fixed assets like others are also increasing because every year capital

work in progress increased. Property and equipment of MCB Bank are also

increasing every year.


Liabilities:


Bills payable:
Bills payable is increasing in 2005 and 2006 with in the Pakistan.

Deposits and other accounts:
Deposits include current deposits, fixed deposits, saving deposits, special exporters

accounts remunerative accounts, deposit in local currency and deposit in foreign

currency are increasing every year. Te reason behind this is MCB Bank is offering

higher deposit s rates to its customer every year.






Liabilities against asset subject to financelease:
There was no liability against assets subject to finance lease.

Other liabilities:
Other liabilities consist of interest payable in local currency, interest payable in

foreign currencies unearned income commission, accrued expenses advance

payments, unclaimed dividend, proposed dividend, unrealized loss, branch

adjustment account, payable to defined contribution plan, payable against purchase

of listed shares, with holding taxes payable and other are increasing every year.

Sharecapital:
Share capital of MCB bank limited is increasing every year because profit is

increasing year by year.

Reserves:
Reserves for the contingencies have been created for risk assets comprising

advances and investment excluding government securities. The reserves have been

created as matter prudence, exclusive to provide sufficient cushion for any future

losses in the banks risk assets portfolio. Reserves of every five years are increasing.































Horizontal Analysis of Profit and Loss

Horizontal/ Index Analysis
Muslim Commercial Bank Limited
Profit and Loss Account
As on 31st December
2006 2007 2008 2009 2010
Markup/ return/ interest earned
Mark up/ return/ interest expense
100 88 171 249 307
100 70 95 154 268
Net mark up/ interest income
Provision for dimininution in the value
of investment
Provision against loans and advances
Provision for potential lease losses
Bad debts written off directly
100
94
115
63
139
4

36
201
66
176
-
1

147
286
(81)
144
-
21

151
322
(70)
419
-
-

392
Net mark up/interest income after
provisions
Non mark up/interest income
- Fee, commission and brokerage
- Dividend income
- Income from dealing in foreign
currencies
- Gain on investment
- Unrealized gain/ loss on
revaluation of investment
- Other income
Total non mark up interest income

Non mark up/interest expense
Administrative expenses
Restructuring expenses
Other proposition/write off
Other charges
Total non mark up/ interest expense
Share of profit from associated
undertaking
Extra ordinary/unusual items
Profit before taxation

100

100
100
100
100
-
100

100
100

100
100
100
100

-
-
100

101

191
102
149
39
-
77

93
98

110
-
299
71

98
-
-
112

208

235
129
160
42
-
146

119
172

98
-
(145)
303

87
-
-
360

302

222
218
209
30
-
77

110
224

98
-
23
113

87
-
-
512

313

253
170
209
74
-
76

133
240

76
-
(7)
916

73
-
-
590


Taxation-Current year
-Prior years
-Defferd
Share of tax of associated undertaking -
100 118

380
-
(215)
-

296

470
-
37
-

460

531
-
526
-

437
Profit after taxation

Unappropriate profit brought forward
Transfer from surplus on revaluation
of fixed assets

Profit available for appropriation

Basic/diluted earnings per share-
-

100
100

100

100

6.61
109

32
103

34

92

99
400

27
335

38

319

293
544

802
129

776

597

321
685

889
47

857

723

334




100
100
100
100


100
-
100
-


128
-
41
-




Horizontal/index analysis:


Mark up/return/I nterest earned:
It remains the constant in 2003 and 2004 because MCB Bank earn same interest on

loans and advances to customers. But it increased in 2005, 2006 and 2007.

Mark up /return/Interest expense:
Mark up /return/Interest are low in 2004 because of the low rates of deposits. One of

the biggest things, which made these figure of 2004 low, is a subordinated loan.

Other income:
There is gradual increase in other income in year 2005. The reason is rent on

property, gain on sale of non banking assets and bad debts are recovered.

Administration expenses:
With the passage of time as the profit of the bank is increasing Administration

expenses are also increasing. Which include salaries, allowances, rent, taxes,

insurance, electricity, legal and professional charges, brokerage and commission,

repair and maintenance, Advertising and publicity.

Other charges:
In 2006 there heavy amount of other charges imposed. Other charges are penalties

imposed by state bank of Pakistan.

Taxation:
Taxation system is linked with the profit of the bank that s why taxes increase with

the ratio of profit.





















4.4 VERTICAL ANALYSIS

Vertical Analysis Balance Sheet

Vertical/ common Size analysis
Muslim Commercial Bank Limited
Balance Sheet
As on 31st December


Assets
Cash and balances with treasury
banks
Balances with other banks
Lending to financial instutions
Investments
Advances
Operating fixed assets
Deffered tax assets
Other assets
2006



8.83

0.48
3.83
47.10
35.69
1.68
-
2.38
100
2007



9.20

2.20
4.23
25.93
52.98
3.09
-
2.37
100
2008 2009
(Rupees '000)


7.92

0.49
3.35
23.26
60.35
2.74
0.06
1.83
100 100
2010



9.67

0.93
0.26
27.55
53.34
3.90
-
4.35
100
Liabilities
Bills payable
Borrowings
Deposits and Other accounts
Sub-ordinated loans
Liabilities against assets subject to
finance lease
Deffered tax liabilities
Other liabilities
95.92

2.92
2.93
85.30
0.62
-

0.10
2.52

94.38

2.86
9.16
76.76
0.53
-

-
2.88

92.20

2.07
7.00
75.26
0.47
-

-
3.27

88.06

2.55
9.60
71.16
0.12
-

0.29
2.86

86.57

Net assets
Represented by:
Share capital
Reserves
Unappropriateed profit

Surplus on revaluation of assets
4.08

1.13
1.61
0.10
2.84
1.24
4.08
5.62

1.30
2.18
0.06
3.55
2.07
5.62
7.80

1.43
4.49
0.07
5.99
1.82
7.80
11.94

1.60
7.21
1.62
10.42
1.52
11.94
13.43

1.53
8.28
1.25
11.06
2.36
13.43


Vertical/common size analysis:


Cash and cash balances:
Cash and cash balances are increasing every year but in 2005 it decreases.


Balances with other banks:
Balances are increased in 2004 and 2006 and heavily decreases in 2005 and 2007. The

reason behind the decrease of balances with other banks is advances and investment.





9.49

1.92
6.16
18.56
57.95
2.65
0.05
3.22


3.08
11.98
77.67
0.59
-

0.26
2.34




These two years MCB Bank used these funds in investment and advances rather then

keeping balances with other banks.

Lending to thefinancial institutions:
MCB Bank lending to the financial institutions was 3.83% after one year in 2004

increased by 1% and in 2005 decreased very quickly by 3.35% because repurchase

agreement landings was low in this year. It increased in 2006 but decline in 2007 that

is 0.23%. Lending to the financial institution was in 2006 (21,081,800) in 2007 figure

was (1,051,372). Because in 2007 there were no repurchase agreement lending and

call money lending is very low.

I nvestment:
MCB Bank 2003 investment are satisfied rather than other 4 years that was 47% of

total assets. It decreases in 2004, which was 26% of the total assets. The reason is less

funds are used as investment in fully paid up ordinary shares of listed companies and

unlisted term finance certificates in 2004. At that time period there were no investment

in government of Pakistan sukuk bonds. Little bit increase in investment was in 2005.

But in 2007 it will again increased up to 28%.

Advances:
In MCB Bank there were increase in advances year by year.

Operating fixed assets:
Operating fixed asset are increasing year by year but are same with total assets of 2%

to 3% throughout the year.

Other assets:
Ratio of the other assets remains the same in 2003 with 2004. Other assets increased in

2006 and 2007 because receivable from pension fund as well as income/ markup

accrued on advances are increased in these years.

Liabilities:


Bills payable:
In MCB Bank five year comparison of the bills payable declare that all five years ratio

are lies between 2.5%and 3.00% there are change or increase in bills payable every

year but the ratio is the same because of the comparison with the total assets.





Deposits with other accounts:
Deposits with the other accounts decreased in 2004 but simultaneously it increased up

to 2007 with the comparison of the total assets.

Subordinated loans:
The subordinated loans are decreased year by year as I 2007 it remain up to 0.125 of

total assets.

Liabilities against assets subject to thefinancelease:
There were no such liabilities.

Other liabilities:
Other liabilities remains the same throughout the five years. It does not mean that

other liabilities are not increasing year by year but are same with total assets of 3%

throughout the year.

Reserves:
Reserves of the MCB bank limited are increasing every year

Sharecapital:
In MCB bank limited share capital was same in 2003 and 2004. It increases gradually

in 2005, 2006, and 2007.

Surplus on revolution of assets:
Increased year by year.
























Vertical Analysis of Profit and Loss

Vertical/ common Size analysis
Muslim Commercial Bank Limited



Markup/ return/ interest earned
Mark up/ return/ interest expense
Profit and Loss Account
As on 31st Decembe
2006 2007 2008 2009 2010
(Rupees '000)
69.6 68.2 76.6 83.8 84.1
19.7 15.5 12.0 14.7 20.8
Net mark up/ interest income
Provision for dimininution in the
value of investment
Provision against loans and
advances
Provision for potential lease
losses
Bad debts written off directly

Net mark up/interest income
after provisions
Non mark up/interest income
- Fee, commission and
brokerage income
- Dividend income
- Income from dealing in
foreign currencies
- Gain on investment
- Unrealized gain/ loss on
revaluation of investment
- Other income
Total non mark up interest
income

Non mark up/interest expense
Administrative expenses
Restructuring expenses
Other proposition/write off
Other charges
Total non mark up/ interest
expense
Extra ordinary/unusual items
Profit before taxation
Taxation-Current year
-Prior years
-Defferd

Profit after taxation
Unappropriate profit brought
forward
Transfer from surplus on
revaluation of fixed assets

Profit available for
appropriation
49.9
(1.0)

4.7

0.0
1.5

5.2
44.7

7.0
2.5
2.2
13.7
-
5.0

30.4
75.1

44.2
5.9
0.3
0.4

50.8
-
24.2
8.1
-
1.1

9.3
15.0
4.2

0.2

4.3
19.3
52.8
(1.3)

3.3

0.0
0.1

2.1
50.7

15.0
2.8
3.7
6.0
(0.1)
4.3

31.8
82.4

54.4
-
1.1
0.3

55.8
3.9
30.5
11.7
-
0.5

12.2
18.3
1.5

0.2

1.7
19.9
64.6
(0.4)

5.4

-
0.0

4.9
59.7

10.6
2.1
2.3
3.7
0.0
4.7

23.4
83.1

27.9
-
(0.3)
0.8

28.3
1.5
56.2
19.9
(0.6)
(1.6)

17.7
38.5
0.7

0.4

1.1
39.6
69.1
0.4

3.3

-
0.2

3.8
65.2

7.5
2.6
2.2
2.0
-
1.9

16.2
81.4

21.1
-
0.0
0.2

21.3
-
60.1
18.5
1.9
0.2

20.7
39.5
16.2

0.1

16.3
55.8
63.3
0.3

7.8

-
0.0

8.1
55.2

7.0
1.7
1.8
4.0
(0.0)
1.5

15.9
71.1

13.3
-
(0.0)
1.4

14.7
-
56.4
17.0
(3.4)
2.4

16.0
40.4
14.6

0.0

14.7
55.1







Vertical analysis of the profit and loss account:


Mark up /return/interest expense:
There is decrease in 2004 2005 and 2006 in the mark up/return/interest expense

because return on deposits is very low due to the low rates on deposits. Return on

subordinated loans is satisfied that was the reason of the reason of decline in the return

on expense. Again increase in 2007 because rate on deposits increased in 2007.

Administration expense:
Administration expenses are decreasing every year as approved pension fund as well

as post retirement benefits are low. Moreover, there were no self retrenchment costs.

Other charges:
Other charges include penalties imposed by the state bank of Pakistan that increased

every year. Its vertical ratio is 0 because amounts of the penalties imposed by the bank

are very small as comparison to the Interest/ income earned but in 2007 it will reach

up to 3.54%.

Taxation:
Taxes are increasing every year except of 2007 taxes, their ratio are lowered than 2006

because of taxes for the prior year .



































4.6 Future Prospects Of The Organization


Vision:

Challenging and Changing the Way you Bank.

Mission Statement


MCB Banks team of committed professionals is dedicated to maintaining long

term customer relationships through outstanding service and convenience.


Objectives:

To achieve sustained growth and profitability in all areas of business.

To build and sustain a high performance culture, with a
continuous improvement focus.
To develop a customer service oriented culture with special
emphasis on customer care and convenience.
To effectively manage and mitigate all kinds of risks inherent in the
banking business.
To maximize use of technology to ensure cost effective operations,
efficient management information system, enhanced delivery
capability and high service standards.
To manage the bank portfolio of the business to achieve strong
and sustainable shareholders return and to continuously build
shareholders value.
To explore new avenue for growth and
profitability. Strategic planning:
To comprehensive plan for future to ensure sustained growth
and profitability.
To facilitate alignment of the vision, mission, corporate objective and
with the business goals.
To provide strategic initiatives and solutions for projects, products,
policies and procedures.









To provide strategic solutions to mitigate weak areas and to counter threats

to profits.

To identify strategic initiatives and opportunities for profits.

To create and leverage strategic assets and capabilities for
competitive advantage.
For developing a forward-looking perspective, strategic planning driven by
quality research is essential. Strategic planning helps to set short, medium
and long term business plans in order to achieve the banks longer term goals,
objectives and vision. Strategic planning division headed by an
experienced economist has been established. It is mandated to conduct
economic research and present detailed sect oral analysis of Pakistan
economy. It will also make assessment of overall outlook for the banking
sector that should assist senior management in decision-making process.
Future prospects of the Muslim Commercial bank are to increase market
shares, mobilize resources, developed retail, agriculture and Islamic
banking, introduce fresh initiatives for corporate and investment
banking, capitalize on the new business opportunities and implement
various technology initiatives.
Muslim Commercial bank limited is continuously focused on building
long-term shareholders value, as primary objective. The strength of its brand
name, supported by strategic expansion and the depth of its customer
relationship, gives a strong foundation on which to build and continue
growth in the times ahead.

Future prospectus is to improve risk management, which considered being one of the

essentials for sustainable success in the business. Based on the risk management

guidelines issued by state bank of Pakistan; a risk management strategy has been

developed for accessing and mitigating/controlling risk.
















4.7 SHORTFALLS/ WEAKNESSES IN THE ORGANIZATION



Following are the shortfall/ weakness in the organization as per my opinion:



Manual Book-Keeping:
Although the bank has computerized accounting system but, still the bankers use to

make their entries in the accounting register.



Low Job Satisfaction:
Understanding and the effective management of the human resources is the most

difficult challenge faced not only by the bank but by all the organizations. Even

though the people have been sacrificed in the new organizational developments, it is

becoming clear that the true lasting competitive advantage comes through human

resources and how they are managed. MCB seems to not focusing on this highly

critical issue as the job satisfaction level of the employees working at MCB, was

quite low.



Lack Of Specialization:
This famous and useful concept given by Adam Smith in 1776 seems to be missing

in the bank. The employees are constantly rotated from one job to another job of

totally different characteristic in the view of giving them the know-how of the

working in all the departments. But I think this is not a very good tactics used by the

management. Otherwise the situation might be like this Jack of all and master of

none.



Centralization:
There is a high degree of centralization in the bank. Almost all the decision-making

is in the hands of the upper management. But centralization is effective up to a

certain level otherwise it becomes inefficient and at times costly too. I personally








observed that delay occurred in the operations of the employees only due to the fact

that they had not got any instructions from the head office.



Lack Of Training Facilities:
Presently there is no specific training program arranged for the new recruiters. They

have to learn based on their observations and also their mistakes. It takes a bit time

for the fresh one to learn the banking the result is huge amount of blunders, mistakes

etc. resulting in monetary and non-monetary losses for the bank. There is pressure

not only on the new learner but also on the person placed upon with this

responsibility.


High charges:

The schedules of charges indicate that the fees charged by the bank on the various

services it provides are extremely high. It may result in decrease in the number of its

exiting customers. Further more, this could be very alarming situation for the bank

in case some of the competitors grasped the opportunity and lowered its rates. The

result would be either the lost of market share or decrease in the charges resulting in

lowering the banks income.


Less attractive rate of return:

Commercial banks face considerable competition in attracting deposits from

individuals or small investors. In contrast, the Govt. of Pakistan national saving

scheme offers attractive rates of return (approx. 16 to 18 percent annually) on 10-15

year fixed accounts, which banks find difficult to match.


Stiff Competition:

MCB is currently facing strict competition from the foreign banks especially the

American who banks enjoy a good market position. Collectively U.S. banks hold

approximately 9 percent of all commercial banks' assets. At present, three American

banks are operating in Pakistan: American Express Bank; Bank of America and

Citibank.




94






Less Experienced Staff:


Owing to huge turnover of the employees, the no. of experienced and well trained

staff is very low. Majority of the staff working in the bank branches is quite young

and inexperienced. If the bank failed to bring down its high employees turnover,

then it would be lacking the most important resources of any organization i.e. the

experienced staff.








































95



CONCLUSION


The emerging banks of the private sector of Pakistan like MCB have proven to be

helpful in improving the overall economy of Pakistan. MCB has been declared 07

times Euromony award and Asia Money Award for the last five years, which is

a very big achievement for Pakistan. Muslim Commercial Bank is heading towards

the right direction and it possesses the necessary potential to improve in all of its

sectors. Thus Muslim Commercial Bank Limited is one of the best banks of

Pakistan.








































96



RECOMMENDATIONS


First of all, the management needs to overlook the major problems that the

organization is currently facing and then develop strategies to eradicate them.

Some of the suggestions that I would like to give at the end are:

MCB Bank can improve its Marketing strategies to acquire more promotion

and mass media publicity by the use of effective channels of promotions like

TV, Newspaper Advertisements. It can also improve its magazine

publication that it releases each month.

In order to compete in the ever-expanding market both
nationally and internationally, introducing new and efficient
products is one of its major requirements.
Centralized Structure that enables employee involvement needs
to be formed.
Better reward system is one of the most important requirements in
order to reduce the problem of Employee retention and
improve Employee motivation.
There is lack of proper and continuous training of employees that needs
to be solved.
Creation of enhanced performance appraisal
system. Proper use of stationary.
Implementation of enhanced Marketing
system. Job rotation for employees.
There should be more parking place outside the branch for the
convenience of clients.
There should be cold drinking water facility separately available at
each section.
Common room for working ladies is very much essential in each floor
so that they may offer prayers conveniently.
Canteen facility needs to be improved.





FUTURE PROSPECTS OF THE ORGANIZATION


The overall analysis shows that company is in good condition throughout the analysis year 2004
2008. The 2008 is the golden year for the company because in this year the company earns
maximum profit.


Earning per share is also increasing during these years for the stock holders and the persons
interested in MCB BANK investment. Future prospects of the organization are to get more and more
profit for its share holder by increasing revenue and operating profit by reducing its operating cost.


There are now a lot of new international banks in Pakistan. And there is a perfect completion among
all these banks which are operate in Pakistan.


It is more obvious worth-mentioning that MCB BANK is undergoing the strategic structural
changing in the sector of management, IT, Marketing and updating the R & D section which plays a
key role for taking long term value projects that are 5 to 15 years. This is the sole objective of the
MCB BANK.














5.2) WEAKNESSES OF THE ORGANIZATION


1. In finance department a few number of employees have not sufficient knowledge of
computer. So their performance can be increase by this training.


2. Data is not updated well in time, which creates problems for staff.


3. The lower scale employees of the Financial Department are not giving any training of the
modern tolls used in finance technology.


4. Finance related units/offices are not interconnected.


5. The different offices do not use the same format in financial transaction.


6. Persons working in finance department have not enough knowledge of computer.


7. There does not exist a planned program for their trading.


8. Lack of coordination between in different department.


9. There doesnt exist planned program for the loaning policies of employees.

10. Data is not fully updated.




5.3) SUGGESTIONS


My internship in MCB BANK Limited, I-8 Markaz Branch, Islamabad and quite a good experience
there for me because I gained a valuable knowledge and practical experience for my internship
training.

The management and employees are skillful and of high caliber. However, during my internship in
MCB Bank, I observed that the MCB Bank should the following measures with a view to improve
the efficiency and working quality.




SR.# Description

1 Strong and proper media campaign should be started in order to maximize the
business level. For this especially the electronic media used.

2 The duties hours must be properly followed. The working hours are from 9:00 am
to 5:00 pm. But the staff remains in the office till 7: pm.

3 All the departments should have appropriate staff members, so that the work burden
should be minimized.

4 Providing proper training to the employees that make possible to error free work
and tasks.

5 Employees should provide more and more facilities, such as handsome salaries,
advances, free education.

6 Different schemes and packages being offered especially on the special occasions.

7 Proper duties are assigned to the most suitable employees.

8 There must be job flexibility and job rotation.

9 There current performance of the bank is so good therefore the bank should declare
the bonus for the employees.

10 Just like other modern banks customer services department should be well
established and well arranged and there should be complaint cell in each branch of
the organization. It will help the management to improve the quality of services not
only at branch level but also at the upper level.


5.4) CONCLUSION

MCB is one of the most important names in the banking sector of the Pakistan. It is playing a vital
role in the economic growth of the country. It is important to note that business conducted,
investment made and the expenditure incurred in accordance with the objectives of the bank.
Overall performance of the bank is satisfactory but it still need and improvement because there is no
need of success. So its responsibility to regulate such activities, which can help the country to
further, move on the road of development.

On the basis of its large number of product and services offered and large branch network it has
unique presence even through competition is growing day by day. Management of MCB must
recognize these things and take the steps to improve its quality.

MCB has been growing through a comprehensive but complex and painful process of restructuring.
It is aimed at making this institution financially sound and forgoing it links firmly with the real
sector for promotion of savings, investment and growth. Although a complete turnaround is not
expected till the completion of reforms, sign of improvement are visible.

At the end, I can only pray that it gets more prosperity and help the government to boost the
development and the standard of living.





55




REFFRENCES

www.mcb.com.pk

Annual report of MCB bank

Staff of MCB Aabpara branch
Islamabad Business Record August
15,2008