Académique Documents
Professionnel Documents
Culture Documents
Client Organization:
MCB BANK Ltd
(01-120111-012)
Submitted to:
Research cell
Red-1,green-2,blue-3,orange-4,purple-5,yello16,grey-6,white-7,navy blue-9
DEDICATION
This project is dedicated to our beloved families and all our teachers who taught us
throughout our educational career.
Abstract:
The study is intended for the banking sector. Study specifically related with the
financial performance analysis of the MCB bank. How MCB established their setup.
How Bank reached at the peak position in the Banking industry of the Pakistan.
Where there financial Performance of the MCB bank is analyzed as well as the
SWOT analysis of the MCB bank is conducted under the umbrella and guidance of
the horizontal analysis as well as the different sector ratio analysis which gives us the
true picture and the position of MCB bank. Deposits are the life blood for any bank so
there is a need to enhance deposits for smoothly ongoing banking departments. Where
the problem was identified the recommendations are also established to overcome
such problems.
Table of Contents
1.
Executive summary:.............................................................................................
2.
3.
Organizational structure:....................................................................................
3.1)Organizational Chart:......................................................................................
3.2) Board of directors:..........................................................................................
3.3)Functions and responsibility of department:...................................................
4.
7.
Conclusion:.........................................................................................................
8.
RECOMMENDATIONS..........................................................................................
9.
Bibliography:......................................................................................................
10.Annexures:..........................................................................................................
1. EXECUTIVE SUMMARY
In the new competitive business era, private banking sector is getting more
competitive in Pakistan. In this sector the most used financial statements are the
balance sheet and profit and loss account where the balance sheet shows the financial
position and profit and loss account shows the net profit or net loss of a bank. Ratio
Analysis deals with these statements. Ratio analysis is the most popular trend to
evaluate a banks performance over years or with other companies in an industry. In
our report we cover the area of MCB bank financial statements for the last few years then
analyze and give substantial comments about the changes in the financial position.
Analysis and explanation of these financial statements through ratio analysis has now
become an important skill for performance appraisal because the investors, financial
experts, management executives and the bankers are always rely on these ratios to
make important judgments. The management team of any bank, investor and the
government agencies always concern about liquidity ratios and adequacy ratios of
a bank which interprets the efficiency of a bank. As a part of our course completion,
we have worked on MCB bank for learning the activities of general banking, general
advance and foreign exchange department. We have examined the financial
statements of MCB to find out its ratios by using its past record. After making this
report we came to know that analysis of financial statements through ratios helps to
overcome the past flaws and make the future decisions and strategies. Therefore, it is
very necessary for every organization whether the companys size make financial
statements and to analyze its ratios
2.OVERVIEWOFTHEORGANIZATION
2.1) Introduction
MCB is not achieved overnight. MCB is the largest bank in the private sector as well.
It was incorporated in Calcutta in July 9, 1947 under the Indian companies Act VII of
1936 as a limited company. After the partition of the INDO-PAK subcontinent the
bank move to Dhaka (Capital of former East Pakistan and now Bangladesh) from
where it commenced business in August 1948. In 1956 the bank moved as registered
office to Karachi where the head office currently located. On Jan 13, 1948, the name
The Muslim Commercial Bank Limited was changed to Muslim Commercial Bank
Limited. This is regulated under the Banking Ordinance 1962 & the Companies
6
Ordinance 1984. Thus, the bank inherits a 60 year legacy of trust in its customer and
the citizen of Pakistan. It was privatized in early 1990s.It has a network of over 1200
branches all over the country, with business establishments in Bangladesh, Sri Lanka
and Bahrain.
The province wise break of branch is:
Punjab
54%
Baluchistan
19%
Sindh
21%
KPK
23%
Mission Statement
Challenging and Changing the Way you Bank
Vision Statement
MCB Banks team of committed professionals is dedicated to maintaining long term
customer relationships through outstanding service and convenience.
(Source:
CENTRAL VALUES
Trust
We are the trustees of public funds and serve with integrity & commitment. Ethical
behavior is of critical importance to us. We adopt full compliance with internal and
external policies and procedures, operating within the legal framework
Customer Focus
We continuously seek to exceed MCB customers expectations, forging and
maintaining long term relationships
Innovation
We strive to be the market leaders in innovative products and services offering
customized financial solutions with flawless execution
Teamwork
The diversity of our people is our strength. We inspire and challenge each other
working together to achieve synergy
Achievement
Our people are our most valuable asset. We are committed to a result oriented culture.
Our goals are clear and merit is the only criterion for reward.
Social Responsibility
As responsible citizens we contribute to the social welfare of the community we live
in
(MCB PAKISTAN, 2014)
11
Commercial Bank Award 2004.MCB has a distinction of winning the Asia Money
2004 award for being "The Best Domestic Commercial Bank in Pakistan".
CFA 11th Excellence Awards
Best Bank of the year 2013 (Large Bank category)
Most Stable Bank of the year 2013
Asia money Awards, Hong Kong
Best of the Best Domestic Bank
The Asian Banker, USA
Strongest Bank in Pakistan 2014
Managing Team
Most of MCBs high-ranking management team has had work experience at
worldwide banks and have a strong execution track record.
amount of deposits in year 2012 was 257,462 000,000 and in 2013 was 302,597
000,000 with the number of accounts opened is approximately 4300,000 in 2013 and
5,900,000 in 2014. And borrowings from other financial institutions are 23,943
000,000 on the other hand advances given are 198,239 000,000 and investments made
up to year 2013 are 63,486 000,000. The price earnings ratio in year 2013 was Rs.
10.52
2009
2010
2011
2012
2013
3,500
6,500
6,500
6,500
6,500
DEPOSITS
211,511
221,069
229,342
257,462
325,642
ADVANCES
97,200
137,318
180,323
198,239
298,982
INVESTMENTS
128,277
67,195
69,481
63,486
89,648
BORROWINGS
32,628
7,591
27,378
23,943
41,377
RESERVES
281,636
359,340
4,990,260
5,530,973
6,350,834
2,230
2,432
8,922
12,142
23,299
AUTHORIZE
CAPITAL
PROFIT
(after Taxation)
(Source: MCB Annual report 2009,MCB Annual report 2010, MCB Annual
report 2011, MCB Annual report 2012, MCB Annual report 2013)
It is major commercial banks in Pakistan in terms of assets and deposits industry
leading second in standings of the number of branches and the biggest in terms of
ATMs at the end of 2012. Banks market stake of assets and deposits is to some extent
over 10% for both. Bank is a full service, nationwide bank, offering commercial
banking (retail, SME and wholesale), investment banking (treasury) and Islamic
banking products and services that are allowed under SBP sagacious procedures.
MCB also has five overseas branches. Bank owns and operates one of the two shifts
in Pakistan, and issues common insurance products and facilities traced from its
majority owned insurance subsidiary, Adamjee (major all-purpose insurance company
in Pakistan).
13
1217 domestic branches that is expected to increase to 1310 by the end of this
year , 9 oreign branches, over 644 ATMs, 135 cities, 6
14
MARKET POSITIONING
Market share of assets and deposits MCB is the 4th largest bank in the sector
having nearly 8% market share of total assets and deposits.
Consumer credit market share of bank : The banks have a low market share
of the consumer market as compared with its peers (5%), however they expect to
increase the MCB has launched its consumer credit
15
Cost efficiency: Bank`s Cost / Income is one of the lowest in the peers with a
network of branches that are similar in size due to the efforts of restructuring in recent
years and a trebling of revenue. close in 2007
Profitability: The banks have one of the top cost-effectiveness in the banking
sector on the basis of higher net interest margin.
Shares
(Mn)
Nishat Group
180.7
35.30%
68.1
13.30%
AtifYaseen
31.6
6.20%
Tariq Rafi
28.1
5.50%
SM Mun
26.9
5.30%
Mohammad Arshad
23.4
4.60%
Public
152.9
29.90%
511.7
100.00
Total
16
MCB has over the years concentrated on rationalization its operations through closure
of inefficient branches and reduction in workforce. Over the last five years bank has
open 139 branches and. YTD, MCB increase its staff by 689 employees primarily in
the non-clerical officer class. Bank has invested in technology and is in the process of
implementing a core banking application.
(Source: MCB HR portal)
Year
Employees
2014
Above 10,000
2013
9,895
2012
9,352
2011
9,042
2010
8,625
Cadre (Designation)
No. of
Employees
01.
Chairman
01
02.
SEVP
06
03.
EVP2
10
04.
EVP1
07
05.
SVP
60
06.
VP
350
07.
AVP
1,500
08.
OG-1
1,198
09
OG-2
1,800
10.
OG-3
3,001
12.
OG-4
1,089
11.
CASHIER/CLERICAL
1,487
STAFF
TOTAL
10,509
17
3. ORGANIZATIONAL STRUCTURE
3.1) Organizational chart
Chairman
S. M. Muneer
Vice
Chairman
Tariq Rafi
Director
ShahzadSaleem
Director
Sarmad Amin
Director
MianRazaMansha
Director
Director
MianUmerMansha
Director
Director
Ahmad AlmanAslam
Director
Director
Director
Imran Maqbool
President &
CEO
Advisor
RazaMansha
Audit Committee
19
Chairman
MianUmerMansha
Member
Member
Member
Company Secretary
Fida Ali Mirza
Auditors
1
Ahmad AlmanAslam
Chairman
Tariq Rafi
Member
Member
Advisors
4
Dato' Seri Ismail Shahudin
Mandviwalla&Zafar
Advocates & Legal Consultants
Member
Company Secretary
Fida AliRegistered
Mirza
Office
Principal Office
MCB Tower, I.I. Chundrigarh Road, Karachi.
20
Internal Audits
Observance to latest SBP guidelines
Compliance of audit objections
Provide base line to Internal Control Department
Business Development
All functions of marketing and promotional programs / packages are in the business
development of the field. This department is under siege and is overseen by
MANCOM or group leaders.
Department of Business Development is responsible for advertising and promotional
direct mail, brochures, programs, initiatives, market research, brand development,
database management, marketing and product development activities.
Cash Department
Two main/major functions of Cash department is cash receipts & cash payments. In
cash department, all the counters display notes as per SBP instructions i.e.
Utility Bills
School/College/University Fees
Societies/Embassies/Clubs Fees
Bearer/Open PO & DD
Traveler Cheques
Branch operations
Usually back office workings of the branch especially non-financial transactions that
establish the first relation with the client i.e. account opening & also perform
following functions:
Account Opening
Remittances
It includes incoming and outgoing remittances in both local currency and foreign.
Transfer foreign currency affected the normal mode of demand from foreign bodies
FDD check -FC TC and foreign travelers, mainly through SWIFT messages are also
functions as follows. :
Pay Order
Demand Draft
Mail Transfer
Telegraphic Transfer
Online Transfers
Traveler Cheques
SWIFT
Credits
Advances department of the bank prepared to offer credit loans and forwarded for
approval to the manager and head office. All progress is controlled by the party
22
Loan Application
Handling of all cases regarding loans (short term and long term both)
Foreign exchange
Scope of foreign exchange department includes FC deposits and FC remittances and
Trade Finance. Trade Finance includes Imports & exports, L/Cs e.t.c. Foreign
Exchange Department deals with the following:
Information technology
MCB department of information technology plays an important role in the
competitive market. IT department to help solve the issues involved in IT. It also
works to develop software for the purpose banks and individuals / software training. It
provides a communication link between the branches and offices for monitoring and
control of their contacts. Also fixed exchange communication e-mail.
entity through the Office of the Corporate Secretary and their attorneys provide legal
services to banks. Major Unusual forward to open such accounts Associations NGOs
accounts, trust accounts for taking legal opinion on the opening of these accounts.
Except in the case of death of the account holder's account balances, transfer them to
his legal heirs on the part of the succession certificate, also called the Law
Department.
24
Collections
Collection objective is to maintain minimum levels of crime and to reduce the credit
risk of loans, consumer banking and mortgage portfolios. Instead of contacting past
due loan customers via email and phone in an attempt to exercise the repayment plan.
When these efforts failed, they manage. Repossessions and adhere to protect the
interests of the bank. Collection department allows timely collection of financial
entities of all consumers. It has units divided on the basis of the agency's consumer
banking. Today, every bank has set up an agency for the collection back.
Human resources
25
Human Resources as a function of support for the bank stacks facilitate and enhance
the ability of the Bank to recruit, develop, reward and retain staff with a variety of
staff, has been prepared and motivated. to achieve the objectives and goals of the
Bank, Human Resources provide quality service to all employees and is responsible
for the administration of employee benefits, public relations, employment, salaries,
and training and development.
Basic four functions of this department are:
Hiring of Staff
Training of Staff
Career Development
Firing of Staff
26
27
Finance Department is responsible for the preparation of the budget and the allocation
of departmental FCD following hierarchy levels shown in the diagram above FCD to
ensure that the costs at any point in addition to the budget deficit or cap / budget
surplus and through investment in T-bills or the contraction of the money from the
money market. Make sure that the account of the deposit will be credited with an
interest rate that is required by all.
Furthermore, they scope of responsibilities includes:
Floating funds in the international capital markets to support the Banks lending
operations.
Providing positive financial policy, timely strategic financial planning and risk
management.
Ensuring that all financial obligations are met and collections made.
Matching and enabling for Business planning and budgeting function in the
Bank and periodic reporting to the management and to the Board.
Currency issuance.
Financial control the operation of the office under the provisions of the Manual and
Banking Department.The issue related to the operational management of currencies,
including the design and printing of currency notes and circulating. Banking related to
the operation of the office of the bank, the maintenance of federal and reserve account
of financial transactions in the books of the Comptroller and Director of the Statement
Overview of the Company as defined under the law. of the SBP, 1956 to prepare a
profit and loss account and balance sheet on the basis of determining the budget
estimates of revenue and expenditure. The general fund and fund balances of
employees of the Bank. Control the operation of the functions of the office by the
policies and procedures in accordance with the provisions of the Bank / Guide
department, the purchase / sale of foreign currency, the maintenance of the foreign
exchange reserves of the country.
To achieve the above goals, the Department has been divided into seven divisions as
detailed below:
29
Short term and medium term investment and Swap deposits and maintenance of
Foreign Currency.
Assets capitalization, assets transfers and overall duty to manage and maintain
assets physical inventory, keeping track of physical location of assets.
To ensure the smooth and free running of the Fixed Assets Management
function.
To record all the expenses about repair/ maintenance and rent taxes for MCB
buildings and equipments.
To answer to various probes raised from various internal and external sources
31
Investment Decision
The investment decision is the most important decision of the banks three major
decisions. Mr. Salman ZaffarSiddiqui Chief Financial Officer of MCB bank begins
with determination of total amount of assets needed to be held by the bank. In 2013
total assets are 310 billion and the amount, which is invested in different areas, is 285
billion.
Financing
The second important decision of any organization is to make financial decisions.
Treasurer's dividend policy MCB view of the bank as a part of the Bank's financial
decisions. Dividend payout ratio, the amount of income that can be stored in massive
accumulation of current earnings in the company means fewer dollars will be
available for payment of dividends today. The value of dividends paid to shareholders,
so it must be balanced against the opportunity cost of collection costs as a way of
equity financing.
2.
3.
4.
5.
6.
Financial manager is answerable for all financial matter of the bank he arranged cash
for different branches of MCB bank he receive cash from deposit branches which are
located in industrial areas financial manager is also reconcile the main M.O Account
and also prepare expected budgets for the bank and also make arrangements for
annual and half yearly closing.
Provisioning and accruals of operating expenses
All Functioning Units are directed to calculate and pass entries for all the income and
expenditure, accruals, necessities, which are treated manually tout of the UNIBANK
system).
Any item of income expenditure, earned experienced, but actually not received paid
shall De accrued. On the other hand, any Income received, expenditure paid (e g
commission on LG. rent etc) but not earned 1 incurred should be transferred to
unearned income I prepaid expenses account.
Budgeting
With the end of third quarter as, workout of annual budget for next month needs to be
started in order to meet the agreed drop-dead-dates for finalization completion of the
entire processes before close of financial year.
Last year, a new monetary approach was adopted whereby model changes were
brought in. The approach was widely appreciated by the Board of Directors in view of
its successful implementation. The new budgetary model scientifically transforms
non-financial data into arithmetic numbers in order to define the real potential of
branches for realistic target settings. Same procedure with some further improvements
33
will be applied for coming year budget. The similar cooperation of all the branches /
divisions / areas / regions is begged to making it a real success.
For review, the fundamentals of the new budgetary model are briefly discussed
hereunder:
The new model has following key features:
34
Module Code
Enterprise Modules
Kernel
FM
General Ledger
GL
Limits Control
LM
Nostro Reconciliation
NR
Interface
IF
Knowledge Manager
KM
Investments Modules
Bonds and Shares
BS
Security Custody
SC
Derivatives Modules
FRA/IRS
FR
Futures
FU
Options
OP
Module Name
Module Code
Treasury Modules
Foreign Exchange
Money Market
Negotiable Paper
Trading Limits
Deposits Modules
Retail
Branch Teller
Funds Transfer
Domestic Payments
Credits Modules
Loans Origination
Customer Lending
Trade Finance
FX
MM
NP
TL
RB
BT
FT
DP
LO
CL
TF
36
PKR632,330 (000,000)
(Rs. in 000)
LCY Currency
10,189,516.00
FCY Currency
13,967,789.00
24,157,305.00
Break-up Customers Wise
Deposits in Fixed Accounts
33,296,703.00
136,613,835.00
81,640,625.00
2,447,944.00
Others
4,336.00
Financial Institutions
RemunerativeDeposits
Non-RemunerativeDposts
8,058,094.00
3,866,582.00
265,928,119.00
Borrowings
23,943.00
Shareholders Equity
35,657.00
265,987,719.00
(Source: Annual Report of MCB, 2013
INTEREST EARNED
65,064,123.00
DIVIDEND INCOME
932,717.00
6,741,404.00
916,572.00
21,30,341.00
OTHER INCOME
449,604.00
37
Advances
Budgeted Figures
(PKR in MLN)
189,472
200,000
5,172
10,000
Inside Pakistan
2,253
5,000
Outside Pakistan
3,917
Outside Pakistan
Net investment in Finance lease
1,761
1,500
4,272
5,000
206,847
Gross Advances
221,500
25,778
Explanation:
It contains both the short term and long term. The advances in LCY isRs.10,
189,516,000/- and FCY (Foreign Currency) is Rs. 13,967,789,000/-. The budgeted
figures for the year were Rs.24, 157,305,000/-. And its under achieved however local
bills discounted more than budgeted figures.Banks main source of earning is from
lending and every minute working of FCD indications to costing the funds received
from different sources. In the above budgeted figures some local financing shows
under achievement of budgeted targets but over achievement of foreign and local
options has somewhat set off the amount. Budgeted targets under achieved due to
liquidity crunch in the market.
38
Strengths
Strong liability side mgt. lowest deposit cost in banking sector due to high % of
current & saving deposits.
Low incremental NPL flow and high coverage (93%) of impaired portfolio over and above SBPs requirements.
Introduce new products and services with innovation for its customers.
Weaknesses
High loan to deposit ratio, which will constrain loan growth to the pace of
deposit growth, or force the bank to seek higher cost debt financing.
High current and saving deposits likened to peer banks, which require higher
cash reserve.
Staff Shortage
Opportunities
Relatively low presence in the consumer finance market, which is a key focus
area for the bank. Potential for stronger net interest margins and fee income
growth.
Penetration levels of consumer finance in Pakistan are among the lowest in the
Asia Pac region.
Improved brand image as the first mover among the Pakistani bank to list
overseas.
Broad retail customer base providing crosses selling opportunities; focus area
could be insurance as MCB has a majority shareholding in Adamjee Insurance
(the largest general insurance company in Pakistan).
Potential for stronger net interest margins and fee income growth.
40
Provide car leasing services to their customers as well. For this purpose separate
department is established to deal this share.
Good opportunity to introduce products and services with innovation and verity
in order to get maximum profit.
Opportunity to hire new and young staff available in the market for innovative
products and services as well as suggestions.
Threats
Alliance within the banking sector to lead to emergence of fewer but larger
banks.
Other banks providing the facility of withdrawal through online this thing
disturbed the bank.
Launch more banks as results more pressure convert to keep remain in the
market and capture the market share.
Customer is all in any sector and today customer is challenging more in less
money so pressure comes on bank that how to withstand this customer in the
bank.
Experience employees leave the bank because other banks offer attractive salary
packages.
2009
2010
2011
2012
2013
41
24,053,669
23,833,253
23,665,549
32,465,976
42,466,875
1,302,592
5,708,323
1,466,045
6,577,017
8,586,942
10,430,450
10,965,297
9,998,828
21,081,800
34,569,874
Net Investments
128,276,842
67,194,971
69,481,487
63,486,316
74,566,981
Net Loans
97,200,179
137,317,773
180,322,753
198,239,155
259,579,527
6,477,064
6,265,397
8,182,454
9,054,156
14,568,794
191,967
172,373
198,567
4,582,823
7,999,821
5,471,697
11,031,450
13,047,258
272,323,619
259,284,835
298,780,780
342,108,243
447,584,818
Bills payable
8,396,320
7,566,684
8,536,674
7,089,679
9,147,589
Borrowings
32,627,951
8,693,965
27,377,502
23,943,476
29,145,698
211,511,393
219,966,057
229,341,890
257,461,838
310,142,568
1,599,360
1,598,720
1,598,080
1,597,440
1,658,794
tax liabilities-deferred
6,372,596
6,398,239
707,306
314,154
8,192,338
11,171,496
11,171,496
261,214,926
244,537,819
275,046,484
301,263,929
361,266,145
11,108,693
14,747,016
23,734,296
40,844,314
86,318,673
Share capital
3,065,273
3,371,800
4,265,327
5,463,276
8,756,497
Reserves
4,379,255
5,661,553
9,054,940
24,662,426
26,748,957
281,636
359,340
4,990,260
5,530,973
6,478,912
7,726,164
9,392,693
18,310,527
35,656,675
41,984,366
3,382,529
5,354,323
5,423,769
5,187,639
44,334,307
11,108,693
14,747,016
23,734,296
40,844,314
86,318,673
Liabilities
Other liabilities
Net assets
Represented by:
Un-appropriate profit
42
2010
2011
2012
2013
10,369,994
9,347,247
17,756,232
25,778,061
32,678,019
2,932,693
2,057,640
2,781,468
4,525,359
6,925,953
7,437,301
7,289,607
14,974,764
21,252,702
25,752,066
705,787
442,595
1,242,153
1,014,540
1,816,780
lease losses
862
1,200
224,432
8,771
1,184
47,000
59,100
781,081
279,690
1,144,355
1,182,737
2,088,808
6,656,220
7,009,917
13,830,409
20,069,965
23,663,258
1,042,437
1,886,737
2,448,950
2,311,235
3,213,525
Dividend income
372,821
378,908
480,344
811,801
1,011,108
331,694
481,842
531,455
692,010
992,109
2,041,260
541,035
866,112
605,865
75,568
- 11,440
1,634
743,599
720,537
1,425,174
570,505
666,474
4,531,811
3,997,619
5,753,669
4,991,416
5,958,784
11,188,031
11,007,536
19,584,078
25,061,381
29,622,042
Administrative expenses
6,587,369
7,003,653
6,459,490
6,482,592
7,592,951
Restructuring expenses
878,704
150,100
50,000
149,593
- 72,740
11,411
22,114
Other charges
59,034
14,599
178,841
66,708
69,456
7,575,107
7,317,945
6,565,591
6,560,711
7,684,521
513,852
3,612,924
4,203,443
13,018,487
18,500,670
21,937,521
1,212,579
1,576,287
4,611,359
5,701,443
5,911,348
- 149,763
593,497
624,485
Taxation
Present year
Past year
Deferred
170,200
87,162
- 365,524
63,332
69,548
1,382,779
1,663,449
4,096,072
6,358,272
6,605,381
2,230,145
2,539,994
8,922,415
12,142,398
15,332,140
43
2010
2011
2012
2013
8.83%
9.19%
7.92%
9.49%
0.48%
2.20%
0.49%
1.92%
Liabilities
Bills payable
Borrowings
Other accounts and Deposits
Loan from subordinate bodies
tax liabilities-deferred
Net assets
Represented by:
Share capital
Reserves
Un-appropriate profit
3.83%
4.23%
3.35%
6.16%
47.10%
25.92%
23.25%
18.56%
35.69%
52.96%
60.35%
57.95%
2.38%
2.42%
2.74%
2.65%
0.00%
0.00%
0.06%
0.05%
1.68%
3.09%
1.83%
3.22%
3.08%
2.92%
2.86%
2.07%
11.98%
3.35%
9.16%
7.00%
77.67%
84.84%
76.76%
75.26%
0.59%
0.62%
0.53%
0.47%
0.26%
0.12%
2.74%
3.27%
4.08%
5.69%
7.94%
11.94%
1.13%
1.30%
1.43%
1.60%
1.61%
2.18%
3.03%
7.21%
0.10%
0.14%
1.67%
1.62%
1.24%
2.07%
1.82%
1.52%
4.08%
5.69%
7.94%
11.94%
Comments / Interpretation:
By the horizontal balance sheet analysis we can calculate or figure out the symphony
of balance sheet in a year and by the particular information we can further look at the
share of every part over the years. By the above calculation we revels the following
information of MCB bank.
From the above calculation it is clear that MCB bank liabilities portion which
contains the KASA and other daily deposit accounts that outline major section of the
balance sheet volume that collections between 77-83% in the years of calculations,
while the other side that is of assets, the deposit which the bank is collecting is
invested in advances that also forms significant volume as given below:
In 2010 MCB balance sheet entails 47.01% of financial institutions landing that is
decreasing over the years and lastly it reaches to 18.65% at the end of the year 2013.
44
Basically the main reason for this drop is to banks varies its investment from banks to
customers. As discussed MCB bank changes its investment way that is from
investment to loan that can be seen from the detail that advances represent only 35.9%
of the balance sheet size, which over the year increased to 57.95% in year 2013.
MCB Bank shows a conspicuous growth in un-appropriated profit over the years that
evidently replicate the wealthy decision to switch its portfolio to advances side that
can be seen from retained earning structure of MCB that is on gradual increasing over
the five years period and shows a good decision makings and investments in healthy
portfolios.Also landing increases over the past five years above calculations shows
that its almost double over the past five years.
Conclusion
A noticeable financial improvement can be derived Based on the above analysis that
MCB is a rising bank with a noticeable financial improvement. However, , we need to
take into consideration the industry norms and other qualitative aspects like
management experience and qualification, major customers & suppliers and position
of competitors etc, as well.
2010
2011
2012
2013
91.05%
92.69%
84.92%
90.67%
102.86%
25.75%
26.21%
18.69%
14.20%
18.06%
65.30%
66.48%
66.22%
76.46%
84.80%
-1.32%
-1.34%
-1.57%
-0.51%
0.48%
6.20%
6.31%
4.02%
6.34%
4.05%
0.00%
0.01%
0.01%
0.00%
0.00%
2.18%
2.01%
0.08%
0.01%
0.19%
58.24%
59.49%
63.68%
70.62%
80.08%
9.15%
9.32%
17.14%
12.50%
9.22%
3.36%
3.33%
3.44%
2.45%
3.24%
2.91%
2.96%
4.38%
2.71%
2.76%
19.81%
18.25%
4.92%
4.42%
2.42%
0.00%
0.00%
-0.10%
0.01%
0.00%
6.53%
6.65%
6.55%
7.28%
2.28%
41.76%
40.51%
36.32%
29.38%
19.92%
100.00%
100.00%
100.00%
100.00%
100.00%
57.83%
58.88%
63.63%
32.98%
25.87%
45
Other charges
Total non mark-up / interest expense
Extra ordinary / un-usual item
Profit before taxation
Taxation
Present year
Past year
Deferred
8.53%
7.85%
1.36%
0.00%
0.00%
0.44%
0.45%
1.36%
-0.37%
0.05%
0.52%
0.53%
0.13%
0.91%
0.27%
67.32%
67.71%
66.48%
33.53%
26.18%
4.67%
0.00%
0.00%
32.68%
32.29%
38.19%
66.47%
73.82%
10.78%
10.84%
14.32%
23.55%
22.75%
0.00%
0.00%
0.00%
-0.76%
2.37%
2.32%
1.52%
0.79%
-1.87%
0.25%
13.10%
12.36%
15.11%
20.92%
25.37%
19.58%
19.93%
23.08%
45.56%
48.45%
46
Comments / Interpretation:
By horizontal analysis we can pinpoint and highlight the capacities of income or
expenses that need well amendment and close reviewing. We derive the following
critical information by a comprehensive horizontal analysis of the given P&L of MCB
Revenue Analysis
Banks 90% of the incomes comprises of mark-up/Return/ Interest received from
advances, which particularly increased from Rs. 10,369,994 in 2009 to Rs. 32,678,019
in year 2013. Same effect can be seen from the increasing in advances that is near to
double over five years. There is a increase in markup income that can be because of
increase in inflation and that increased in markup income resulted in improved
revenues for the bank. Net markup income which is after excluding the interest
expenses, the markup/ interest is improving in five years which is 84% in last year
because of these reasons
Growth in the deposits is less than the growth of the advances in the five years which
became a reason of increasing markup. Increased in markup rate on the advances and
low deposit rate became a reason for increasing in profit of MCB.
An extra comprehensively investigation of the above calculations reveals the
following basics towards this overall decline:
The income that is because of increase or gain from sale of securities is on decreasing
trend in five years, which reveals that either the maturity of the much of the securities
held as collateral was due in year 2009 & 2010 and not in the following years or there
might be possibility that the bank is no more holding much of the securities for
investment.
Other incomes impact on the total profit or revenue is also decreased over five years
as it has concentrated from 6.35%in year 2009 to just 2.82% in year 2013.
Expenses Analysis
The interest expenses are 25.57% of total revenue in 2009, however the same turn
down in year 2010 to 18.9%, 14.20% in year 2011 and then over again greater than
before to 18.06% during year 2013.Over the time, the deposit level showed a steady
growth with final 2013 year deposits were 156% of the 2009 deposits. Hence the
increase and decrease in the expenses of interest shows the market price of deposits
47
Current Ratio
This ratio measures that how much current assets bank has to cover or meet up its
current liabilities. This ratio determine that how much business is capable of cover its
present obligations. Each Current ratio demonstrates the bank`s ability to pay or
encounter its current liabilities with its current assets. When there is a current ratio of
more than one it means that bank is capable to pay its current liabilities and when the
ratio is lesser than one shows that the bank will be incapable to meet its current
liabilities wholly by its current assets.
Formula: Current assets divided by current liabilities
2009
Current asset
26,356,261
Current liabilities
27,057,620
Current ratio
103.97%
2010
48
Current asset
Current liabilities
Current ratio
71,156,655
73,578,765
104.07%
Current asset
Current liabilities
Current ratio
102,012,153
98,326,442
104.26%
Current asset
Current liabilities
Current ratio
137,147,099
133,671,869
104.46%
2011
2012
2013
Current asset
Current liabilities
Current ratio
Years
Percentage
158,410,469
151,640,947
104.61%
Current Ratio
2010
2011
104.07%
104.26%
2009
103.97%
2012
104.46%
2013
104.61%
2010
2011
2012
2013
Anal
ysis of Current Ratios of MCB Bank
By these years it is concluded that current ratio is greater than previous years. After
2009, 2010 has good current ratio but 2010 has weak current ratio because the
difference between assets and liabilities increased this year.
49
It shows that organization has ability to pay its obligations but its profitability ratio
tells that it has not ability to pay its obligation. But still it is very useful for the
analysts especially for the creditors.
Quick Ratio
This ratio shows that how much bank can cover its current liabilities with the help of
most currentassets. As in quick ratio we deduct the inventories and prepaid expenses
from current assets but in case of bank there are no inventories so we deduct only the
prepaid expenses. By making and calculating it monthly a firm or a business can be
able to meet its recent obligations with the help of most current assets and by making
this the bank is able to ensure that in case of happening of a irregular event how much
of bank has to cover that. If there is low quick ratio it means that bank is unable to pay
for its liabilities because the assets are using somewhere.
Formula: Current assetsminus prepaid expencesdivided by current liabilities
2009
Current assets
26,356,261
Prepaid expenses
7,156,898
Current liabilities
27,057,620
Quick ratios
70.96%
Current assets
71,156,655
Inventories
8,156,898
Current liabilities
73,578,765
Quick ratios
85.62%
Current assets
102,012,153
Inventories
21,156,898
Current liabilities
98,326,442
Quick ratios
82.23%
Current assets
139,160,093
Inventories
25,708,194
Current liabilities
133,671,869
Quick ratios
85.58%
2010
2011
2012
2013
Current assets
158,410,469
Inventories
28,625,915
Current liabilities
151,640,947
Quick ratios
86.05%
50
Years
Percentage
2009
70.96%
Quick Ratio
2010
2011
85.62%
82.23%
2012
85.58%
2013
86.05%
90
80
70
60
50
Quick ratio
40
30
20
10
0
2009
2010
2011
2012
2013
Working Capital
2009
Current asset
Current liabilities
Working capital
66,814,706
63,800,921
3,370,764
Current asset
Current liabilities
Working capital
77,166,505
73,795,741
3,685,709
Current asset
Current liabilities
Working capital
103,013,152
99,327,443
5,488,224
Current asset
Current liabilities
139,160,093
133,671,869
2010
2011
2012
51
Working capital
6,769,522
Current asset
Current liabilities
Working capital
158,410,469
151,640,947
6,957,551
2013
Years
Percentage
2009
3,370,764
Working Capital
2010
2011
3,685,709
5,488,224
2012
6,769,522
2013
6,957,551
7000000
6000000
5000000
4000000
working capital
3000000
2000000
1000000
0
2009
2010
2011
2012
2013
Leverage Ratios
This ratio shows that how much of the current working or business of the firm is
running from external sources.For determining it we check the owner equity in the
firm and in all the assets and liabilities. Below there is a detail analysis of leverage
ratio that have been used to check that how much of current operations of the MCB
bank is with the help of external sources
Debt-To-Total-Assets Ratio
It shows that how much of assets have created with the help of debt and how much
the business have a power to cover its debit
Formula: Total debts divided by Total assets
2009
Total debt
Total asset
Debt ratio
61,967,073
70,313,073
94.06%
2010
Total debt
Total asset
70
80
70,478,275
80,572,275
52
Debt ratio
93.93%
2011
Total debt
Total asset
Debt ratio
101,151,448
107,167,540
94.38%
Total debt
Total asset
Debt ratio
136,513,381
145,095,558
94.08%
2012
2013
Total debt
Total asset
Debt ratio
Years
Percentage
154,980,358
166,033,588
93.34%
Debt Ratio
2009
2010
2011
94.06%
93.93%
94.38%
2012
94.08%
2013
93.34%
94.4
94.3
94.2
94.1
leverage ratio
94
93.9
93.8
93.7
2009
2010
2011
2012
2013
pay less tax because tax is on interest less amount and due to which there is ales
taxable amount .In 2010 MCB bank has less debit ratio which means that there is less
outside sources which is also good because the bank now have to pay less obligations
and it can be easily manage.
Debt-To-Equity Ratio
This ratio shows that how much of debit financing is used relative to shareholders
equityinvestments. It is determined by dividing the shareholders equity with total
debts.
Formula: Total debts divided by Total shareholders equity
2009
Total debt
Shareholders equity
Debt to equity ratio
61,967,073
1,087,000
61.71
Total debt
Shareholders equity
Debt to equity ratio
70,478,275
1,142,000
80.54
Total debt
Shareholders equity
Debt to equity ratio
101,151,448
1,255,848
90.43
Total debt
Shareholders equity
Debt to equity ratio
136,286,424
1,507,018
77.32
Total debt
Shareholders equity
Debt to equity ratio
154,980,358
2,004,333
82.33
2010
2011
2012
2013
Years
Percentage
2009
61.71
2012
77.32
2013
82.33
54
100
90
80
70
60
50
40
30
20
10
0
2009
2010
2011
2012
2013
70,313,073
1,087,000
equity
Equity multiplier
64.68
Total assets
Shareholders
80,572,275
1,142,000
2010
equity
55
Equity multiplier
70.55
Total assets
Shareholders
107,167,540
1,255,848
equity
Equity multiplier
85.33
Total assets
Shareholders
145,099,907
1,507,018
equity
Equity multiplier
96.28
Total assets
Shareholders
166,033,588
2,004,333
equity
Equity multiplier
82.84
2011
2012
2013
Years
Percentage
2009
64.68
Equity Multiplier
2010
2011
70.55
85.33
2012
96.28
2013
82.84
100
90
80
70
60
50
Equity multiplier
40
30
20
10
0
2009
2010
2011
2012
2013
Coverage Ratios
This ratio shows that how much the firm has the capability to cover its monetary
obligations. Following are thecommon convergeratios
56
1,244,000
3,017,000
41.23%
ratio
2010
EBIT
Interest expense
Interest coverage
1,902,000
1,380,000
137.82%
ratio
2011
EBIT
Interest expense
Interest coverage
2,842,740
1,117,206
254.45%
ratio
2012
EBIT
Interest expense
Interest coverage
2,850,999
4,276,130
66.66%
ratio
2013
EBIT
Interest expense
Interest coverage
3,346,855
6,977,313
47.96%
ratio
Years
Percentage
2009
41.23%
2012
66.66%
2013
47.96%
57
300
250
200
150
100
50
0
2009
2010
2011
2012
2013
Profitability Ratios
Profitability ratio has two types, one of which shows the profitability with respect to
sales and one shows the profitability with respect to investment. Profitability ratios
help in determining the efficiency of bank.In profitability ratios we are using the
values both from balance sheet and income statement due to which it generate a
relationship in between both of it. Below there are profitability ratios of MCB bank.
Return on Investment
This ratio shows that how much of net profit is created by engaging the total assets. It
simply explains the profitability of the business. By using ROI we check that how
much of total assets giving the profitability.
Formula: Profit after the tax divided Total assets
2009
Profit after tax
Total assets
Return on investment
9,177,657,
12,313,073,
0.97%
9,3150,232,
14,572,275,
1.37%
2010
58
2011
Profit after tax
Total assets
Return on investment
10,923,040,
107,167,540,
1.79%
2,016,743,
145,095,558,
1.38%
2012
2013
Profit after tax
Total assets
Return on investment
Years
Percentage
22,499,747,
166,033,588,
1.35%
Return on Investment
2010
2011
1.37%
1.79%
2009
0.97%
2012
1.38%
2013
1.35%
1.8
1.6
1.4
1.2
1
return on investment
0.8
0.6
0.4
0.2
0
2009
2010
2011
2012
2013
226.85
6.32
424.84%
251.50
9.66
533.13%
294
12.76
736.67%
326.08
10.09
1249.55%
397.95
11.23
934.55%
2010
2011
2012
2013
Years
Percentage
2009
424.84%
2012
1249.55%
2013
934.55%
1400
1200
1000
800
price earning ratio
600
400
200
0
2009
2010
2011
2012
2013
In the above calculations bank has the highest ratio in 2012 as compared to other
ratio.
6.32
26.85
23.58%
9.66
51.50
18.75%
12.76
94.00
13.57%
10.09
126.80
7.95%
11.23
104.95
10.70%
2010
2011
2012
2013
Years
Percentage
2009
23.58%
Earning Yield
2010
2011
18.75%
13.57%
2012
7.95%
2013
10.7%
61
25
20
15
Earning yeild
10
5
0
2009
2010
2011
2012
2013
687,000
4,341,840
6.32%
1,103,000
10,654,980
9.66%
1,923,040
125,607
15.31%
2,016,743
150,279
13.42%
2,249,974
200,354
2010
2011
2012
2013
62
Years
Percentage
11.23%
Earnings per Share
2010
2011
9.66
12.76
2009
6.32
2012
10.09
2013
11.23
14
12
10
8
6
4
2
0
2009
2010
2011
2012
2013
2009
46.7%
2010
63.3%
2011
32.5%
2012
26.6%
2013
39.6%
70
60
50
40
Profit before tax ratio
30
20
10
0
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
63
Percentage
66.1%
75.1%
51.3%
44.6%
52.7%
80
70
60
50
40
30
20
10
0
2009
2010
2011
2012
2013
Gross spread ratio of the bank is on improving trend, which increased from 66.1% in
year 2009 to 75.1% in year 2010.This is clear from the above that markup/ return/
interest earned over the years increased from Rest. 9.851M in 2009 but decreased in
2013.
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2009
1.6
2010
1.9
2011
1.4
2012
1.3
2013
1.5
2009
2010
2011
2012
2013
2009
3.9%
2010
2.1%
2011
1.2%
2012
1%
2013
1.5%
4
3.5
3
2.5
2
1.5
1
0.5
0
2003
2004
2005
2006
2007
2009
20.7%
2010
13.1%
2011
11.2%
2012
8.9%
2013
11.9%
65
25
20
15
Dividend payout ratio:
10
0
2003
2004
2005
2006
2007
66
Gap of Communication
There is a lack of communication between the lower staff and upper management.
67
68
7. CONCLUSION
We conclude from the above mentioned data that the vision and mission of the MCB
bank which would help the customers in long term prospective, how they capture the
customer mind and by having those features in their financial products and services
that are according to the desires of the customer. As Bank is a financial services
industry so this is service oriented industry so the services which you give to their
customer are matter (how you deal your customer). MCB would train there staff to
deal their customers by giving value to their customers. They also would like to focus
on their research and development and the innovation in technologies, which would
rather help them in the future so that nothing would be much comparable, then having
the most outstanding technology in each of their departments.
8. RECOMMENDATIONS
69
MCB Bank can recover its Marketing policies to gain 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.
Customers accounts are the main source of funds to the bank. Branch
Officials should review the Dormant (Inactive) Accounts list and timely report to
the Head Office. This is important for the management as to know why the
customers with draws their money and most commonly.
Motivate Employees
The bank should do more for the welfare of its employees. The present steps are not
enough.
Customer Care
As the banking business is much more based on customers rather than other
businesses. In this monopolistic type of business competitions, where there are
penalty of substitutes available, the customer care is very much important.
9. BIBLIOGRAPHY
71
corporate bankruptcy.
America:http://onlinelibrary.wiley.com/doi/10.1111/j.15406261.1968.tb00843.x/abstract.
THOMSON REUTERS. (2013). Global Project Finance Review . New Yourk:
THOMSON REUTERS.
USAID. (2013). THE CAUSES AND IMPACTS OF POWER SECTOR CIRCULAR
DEBT IN PAKISTAN. Islamabad: Planing Commission of Pakistan.
World Bank. (2013). World Development Indicators. Washington: Creative
Commons Attribution .
10.ANNEXURES
72
Annexure -I
BRANCH STRUCTURE& FUNCTIONS
73
Annexure II
74
Annexure IV
76
Annexure V
77