MCB Internship Report

INTERNSHIP REPORT ON MCB BANK LIMITED

INTRODUCTION

The word 'Bank' is said to have been derived from the words Bancus or Banque or Bank. This history of banking is traced to as early as 2000 B.C. The priests in Greece used to keep money and valuables of the people in temples. These priests thus acted as financial agents. The origin of banking is also traced to early goldsmiths. They used to keep strong safes for storing the money and valuables of the people. The persons who had surplus money found it safe and convenient of deposit their valuables with them. The first stage in the development of modern banking, thus, was the accepting of deposits of cash from those persons who had surplus money with them.

The goldsmiths used to issue receipts for the money deposited with them. These receipts began to pass from hand to hand in settlement of transactions because people had confidence in the integrity and solvency of goldsmiths. When it was found that these receipts were fully accepted in payment of debts; then the receipts were drawn in such a way that it entitled any holder to claim the specified amount of money from goldsmiths. A depositor who is to make the payments may now get the money in cash from goldsmiths or pay over the receipt to the creditor. These receipts were the earlier bank notes. The second stage in the development of banking thus was the issue of bank notes.

The goldsmiths soon discovered that all the people who had deposited money with them do not come to withdraw their funds

University of the Punjab, Gujranwala Campus 1


in cash. They found that only a few persons presented the receipts for encashment during a given period of time. They also found that most of the money deposited with them was lying idle. At the same time; they found that they were being constantly requested for loan on good security. They thought it profitable to lend at least some of the money deposited with them to the needy persons. This proved quite a profitable business for the_ goldsmiths. They instead of charging safe keeping charges from the depositors began to give them interest on the money deposited with them. This was the third stage in the development of banking.



DEFINITION OF BANK

The term 'bank' is being used for a long time, yet it has no precise definition. The basic reason is that the commercial banks perform not just one but many types of functions. The term bank has been defined differently by different authors. Some are as follows:

According to Crowther,

"Bank is a dealer in debts—his own and of other people."

According to G.W. Gilbert,

"A banker is a dealer in capital or more properly a dealer in money. He is an intermediate party between the borrower and the lender. He borrows from one party and lends to another."

According To Bamkinh Companies Ordinance

U/s3 (B) of Banking Companies Ordinance 1962 "Banker means person transacting the business of accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise and includes any Post Office Savings Bank."

HISTORY OF BANKING IN PAKISTAN



The interesting point which I observed during the span of mine internship was the historical background of Banking & Financial sector which is the one in which great improvement and growth is observed since the formation of Pakistan. For studying the growth of this sector we can divide it into three stages, which are as follows

a) Pre-Nationalization Era

b) Nationalization Era

c) Post Nationalization Era

A) Pre Nationalization Era

There were only two Muslim banks in Indo Pak before partition, they were;

Habib Bank Ltd. (estd. in 1941 at Bombay) & Australia Bank Ltd. (estd. In 1944 at Lahore). Hindus or Foreigners either owned all other banks, at that time.

At the time of partition there were 631 bank branches in area, which came under Pakistani control. But due to blood shed and violence at large scale, mostly branches were closed and the disparity can be assessed from the fact that on July 1948 there were 195 branches with deposits of Rs.88 crore (880 million) only. Also a factor lagging in Pakistani industry was a central bank of

its own, by that time Reserve Bank of India was acting as central bank for both countries and same currency notes were used in both territories. But Reserve Bank of India was biased and Set down Pakistan on many occasions such as the issue of funds transfer etc.

In this period drastic steps were taken in government sector for the improvement of overall position. The private sector University of the Punjab, Gujranwala Campus 4


also responded to these changes and some very positive changes were observed. Some of the steps taken by the government in this regard were as under:

i. Inauguration of State Bank of Pakistan (SBP) on 1st July, 1948.

ii. Setting up of National Bank of Pakistan in November, 1949 to control the 'jute' export in East Pakistan and to act as agent of SBP.

iii. Larger powers were given to SBP through SBP Act (1956) for controlling purposes.

iv. Banking Companies Ordinance 1962 for protection and guidance to banks.

v. Establishment of specialized banks, such as ADBP (1952);

a) HBFC (Nov, 1952);

b) P1CIC (Oct, 1957)

c) IDBP (Aug. 1961);

d) NDFC (Jan, 1973).

These were the steps, which built a strong banking sector in Pakistan. This is also obvious from the facts that by 1973 there were almost 10 foreign banks were working in Pakistan and all over deposit position was around Rs.2300 crore (23,000 million). A bird eye view of 5 top banks was as given below:

BANKING SECTOR IN PAKISTAN IN 1973



BANK NO.OF BRANCHES DEPOSITS

Habib Bank Ltd. 667 Rs. 6,160 (million)

National bank of Pakistan Ltd.

579 Rs. 5,660 (million)

United Bank Ltd 497 Rs. 5,670 (million)

MCB Bank Ltd. 506 Rs. 1,640 (million)

Allied Bank Ltd. 145 Rs. 570 (million)

B) Nationalization Era:

On January 01, 1974 all Pakistani banks were nationalized through Nationalization Act 1974. Under this law all Pakistani banks became a public property. All small banks were merged in bigger banks to create 5 major Pakistani banks Pakistani banks. These banks were to control by Pakistan Banking Council. There are still controversies about this act of government as whether it contributed in success of failure of banks. However the major changes after nationalization were as follows:



Working of banks was extended to under developed areas.

Market expansion for credit and deposits.

Bank were encouraged to extend cooperation to neglected areas

Decrease in service level of bank officers.

Decrease in profitability as well.

C) POST NATIONALIZATION ERA

In 1990 the government decided to denationalize all the nationalized institutes. Some was also suggested in banking sector. For this purpose, amendments were made to Nationalization Act 1974 and two nationalized banks were privatized. Along with this a permission to open banks in private sector was also granted. The rules regarding establishment of new banks and for incoming foreign banks were also relaxed.

The-three privatized banks are;

a) MCB taken up by a private group in April, 1991

b) ABL taken up by its own employees in September 1991.

c) UBL taken up by UAE party in 2002.



After these changes a large number of private and foreign banks started their operations in Pakistan and the present status can be seen from the following figures:

SCHEDULED BANKS

Category No. Of BanksNationalized Commercial Banks 3Private / Privatized Commerce

Banks18

Public Sector Specialized Banks 4Foreign Banks 19

Total Schedule Banks 44

In addition to above mentioned scheduled banks there are 11 Development Financial Institutes (DFI’s), 16 Investment Banks and 21 leasing and Modarbah Companies.

PAKISTAN BANKING SECTOR

Nationalized Commercial Banks Privatized Banks Specialized banks Private banks Foreign banks Other financial Institutions

NATIONALIZED SCHEDULE BANKS

First Women Bank Ltd. University of the Punjab, Gujranwala Campus 8


National Bank of Pakistan Habib Bank Ltd.

DE-NATIONALIZED SCHEDULE BANKS

Allied Bank of Pakistan Limited MCB Bank Limited United Bank Ltd.

SPECIALIZED BANKS

Zarai Taraqiti Bank of Pakistan (ADBP) Industrial Development Bank of Pakistan(IDBP) Punjab Provincial Cooperative Bank Federal bank for Cooperatives

PRIVATE SCHEDULE BANKS

Askari Commercial Bank Ltd. Bank Alfalah Ltd. Bank Al-Habib Ltd. Bolan Bank Ltd. Faysal Bank Ltd. Habib Credit & Exchange Bank Indus Bank Ltd. Metropolitan Bank Ltd. Platinum Bank Ltd. Prime Commercial Bank Ltd.



Prudential Bank Ltd. Soneri Bank Ltd. The Bank of Khyber The Bank of Punjab Union Bank Ltd.

FOREIGN BANKS

ABN AMRO Bank N.V. Albaraka Islamic Bank BSC (EC) American Express Bank Ltd. ANZ Grindlays Bank Ltd. Bank of America (NT & SA) Bank of Tokyo Mitsubishi Ltd. Bank of Ceylon Banque Indosuez Citibank N.A. Credit Agricole A.G. Deutche Bank A.G. Doha Bank Ltd. Emirates bank International Ltd. P.J.S.C. Habib Bank A.G. Zurich Hong Kong and Shangai Banking Crop. Ltd. International Finance Investment and Commerce

Bank Ltd. Mashreq Bank PSC Oman International Bank SOAG Rupali Bank Ltd. Societe Generale, the French Int. Bank Ltd. Standard Chartered Bank Trust Bank Ltd.



DEVELOPMENT FINANCIAL INSTITUTIONS (DFIS)

Investment Corp of Pakistan National Development Finance Corp. Pakistan Industrial Credit and Investment Corp. Pak Kuwait Investment Company Pak Libya Holding Company Regional Development Finance Corp. Saudi Pak Industrial & Agricultural Investment

Corporation Small Business Finance Corporation House Building Finance Corporation National Investment Trust

INVESTMENT BANKS

Crescent Investment Bank First International Investment Bank Atlas BOT Investment Bank Security Investment Bank Fidelity Investment Bank Prudential Investment bank Islamic Investment Bank Asset Investment Bank Al-Towfeek Investment Bank Al-Faysal Investment Bank City Corporation Investment Bank (Pak) Ltd. Franklin Investment Bank Ltd. Orix Investment Bank (Pak) Ltd. Trust Investment Bank Ltd.



HISTORY OF THE MCB BANK LIMITED

Before separation of Indo Pak, the need for more Muslim banks was felt. And Muslims having strong financial capacity were thinking to invest in this sector as well. This was the idea which paved the way for setting up MCB Bank Ltd known as MCB. This was the third Muslim bank in the subcontinent.

HISTORY

This bank was incorporated under companies’ act 1913 on 9th July, 1947 (just before partition) at Calcutta. But due to changing scenario of the region, the certificate of incorporation was issued on 17th August, 1948 with a delay of almost 1 year; the certificate was issued at Chitagong. The first Head office of the company was established at Dacca and Mr. G.M. Adamjee was appointed its first chairman. It was incorporated with an authorized capital of Rs. 15 million.

After some time the registered office of the company was shifted to Karachi on August 23rd, 1956 through a special resolution, now recently the Head office of MCB has been transferred to Islamabad in July, 1999 and now Head office is termed as Principle Office.

This institute was nationalized with other on January 1st, 1974. At that time it had 506 branches and deposits amounting to Rs. 1,640 million. Although. MCB has a reputation of a conservative bank but nationalization also left its effects on this institute as



well and by end of year 1991 in which it was privatized the total number of branches were 1.287 and deposits amounting to as high as Rs. 35,029 million

PRIVATIZATION

When privatization policy was announced in 1990, MCB was the first to be privatized upon recommendations of World Bank and IMF. The reason for this choice was the better profitability condition of the organization and less risky credit portfolio which made'' it a good choice for investors. On April 8th, 1991, the management control was handed over to National Group (the highest bidders). Initially only 26% of shares were sold to private sector at Rs. 56 per share.

AFTER PRIVATIZATIONTen years after privatization, MCB is now in a consolidation stage designed to lock in the gains made in recent years and prepare the groundwork for future growth. The bank has restructured its asset portfolio and rationalized the cost structure in order to remain a low cost producer.

After privatization, the growth in every department of the bank has been observed. Following are some key developments:

Launching of different deposit schemes to increase saving level.

Increased participation on foreign trade.

Betterment of branches and staff service level.

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

MCB BANK TODAY



MCB today, represents a bank that has grown with time, experience and Pakistan. A major financial institution, in scope and size, it symbolizes a fully growing tree evergreen, strong, and firmly rooted.

FOREIGN TRADE

The bank conducted import business during the year amounting to RS. 54.0 billion as compare to RS. 56.4 Billion In 2005. The export business slightly improves to RS. 36.9 Billion From RS. 35.1 Billion. In 2006. Home remittances decline to RS. 16.7 Billion From 30.7 Billion the decline in home remittances business was due to freezing of Foreign Currency Accounts, which has affected the confidence of Pakistanis working overseas.

YEAR 2006 COMPLIANCE

MCB’s strength lies in providing a technological base at the gross root level of the society with a challenge to educate and assimilate such systems across vast cultural and economic backgrounds. With over 768 automated branches, 263 online branches, over 151 MCB ATMs in 27 cities nationwide and a network of over 16 banks on the MNET ATM switch, MCB continuously innovates new products and services that harness technology for the customer’s benefits.

SOCIAL SECTOR

The bank activity participating in the Prime Minister self-employment Scheme. The application received from various applicants is being processed on merit and disposed off as quickly as possible.

THE BUSINESS



MCB is in it’s over 50 years of operation. It has a network of over 1,000 branches all over the country with business establishments in Sri Lanka and Bahrain. The branch break-up province wise is Punjab (57%), Sindh (21%), NWFP (19%) and Blochistan (3%) respectively.

MCB has an edge over other local banks, as it was the first privatized bank. The State Bank of Pakistan has restricted the number of branches that can be opened by foreign banks, an advantage that MCB capitalizes because of its extensive branch network.

Fourteen years after privatization, MCB is now in a consolidation stage designed to lock in the gains made in recent years and prepare the groundwork for future growth. The bank has restructured its asset portfolio and rationalized the cost structure in order to remain a low cost producer.

MCB now focuses on three core businesses namely Corporate, Commercial and Consumer Banking. Corporate clientele includes public sector companies as well as large local and multi national concerns. MCB is also catering to the growing middle class by

Providing new asset and liability products. The Bank provides 24 hour banking convenience with the largest ATM network in Pakistan covering 27 cities with over 151 ATM locations. The Bank’s Rupee Traveller Cheques have been market leaders for the past six years and have recently launched their Gift Cheque Scheme.

MCB looks with confidence at year 2007 and beyond, making strides towards fulfillment of its mission, "to become the preferred provider of quality financial services in the country with profitability and responsibility and to be the best place to work".

A major achievement of MCB is that the state bank of Pakistan has issued a license to MCB to start Islamic



banking. Now MCB is setting up a 1st Islamic banking branch at 1st floor shaheen complex, Karachi. This complex starts working from September 1, 2003.

Vision Statement

CHALLENGING AND CHANGING THE WAY YOU BANK



Mission Statement

To become the preferred provider of quality financial services in our country with the profitability and responsibility and to be best place to work



Our Core Values

CUSTOMER FOCUSWe treat each of our customer equality & as the most important person while we interact with him/her. We must ensure that we do everything to meet and exceed the customers expectations with perfect to times, accuracy & quality services.

EMPLOYEE RESPECT & DIGNITYWe treat each of our employees with fairness, which includes giving constructive feedback for their development. We celebrate diversity and seek suggestions from all employees for improvement. We ensure that responsibility & fairness in all our decision-making.

TEAM BASED APPROACH



QUEST FOR QUALITY We ensure that each moment of our time is spent on value adding activity. We always seek ways for exceeding expectations of customers & colleagues. We also ensure that we do things right, first time every time.

GOOD CORPORATE CITIZENSHIPWe ensure that we contribute our due share to the Govt. we realize that we have a responsibility to the society in which we operate & we seek ways of playing a positive role for the betterment of the community at large.


We work towards achievement of our vision & mission as a combines group. We encourage inter & intra-departmental communications. We treat our colleagues as our internal customers & ensure that the requirements of internal customer focus are always met.


Management Committee



Board of Directors

Mian Mohammad Mansha Chairman

S.M. Muneer Vice Chairman

Mohammad Aftab Manzoor President & Chief Executive

Tariq Rafi Director

Sheikh Mukhtar Ahmed Director



Mohammad Arshad Director

Shahzad Saleem Director

Mian Umer Mansha Director

Sarmad Amin Director



Audit CommitteeMian Mohammad Mansha Chairman

Shaikh Mukhtar Ahmed Member

Shahzad Saleem Member

Chief Financial OfficerAli Amin

Company SecretaryTameez-ul-haque

AuditorA.F.Ferguson & co

Chartered accountants

M.Yousuf Adil Saleem & co

Chartered accountants

Legal Advisor

Chartered accountants mandiwalla & zafar

Advocates & legal consultants



Shariah AdvisorDr. Muhammad Zubair Usmani

Registered OfficeMCB building, F-6/G-6

Jinnah Avenue, Islamabad

Principle OfficeAdamjee house 2nd floor

I.I chudrigar road Karachi

Registrar and Share Registration Office

THK associates (pvt) Ltd.

Shares department, ground floor sheikh sultan trust building no 2, Beaumont road Karachi



ORGANIZATIONAL HIERARCHY OF MCB

MANAGEMENT LEVEL


PRESIDENT

EXECUTIVE VICE PRESIDENT

SENIOR EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

OFFICERS GRADE

I II III

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

CASHIER

ASSISTANTS

PEONS


The organization chart within a department and in different offices is as follows:

Divisional Heads ………..…………………… Head Office

Regional Head (EVP) ………..…………………… Regional Office

Zonal Head (VP) ………..…………………… Zonal Office

Branch Manager ………..…………………… Branch

(VP, AVP, GRADE 1, 2, 3)

ORGANIZATIONAL SETUP OF MCB



ORGANIZATIONAL STRUCTURE OF MCB

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


PUNJAB

NWFP & AZAD KASHMIR

SINDH

BALOCHISTAN

KARACHI

LAHORE

PESHAWAR

PROVINCIAL HEAD QUARTERS

QUETTA

HEAD QUARTER

CIRCLE OFFICES

BRANCH OFFICES

KARACHI


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

b) Commercial Banking

c) Consumer Banking

Corporate Banking

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

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.

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:

Province wise branches

Corporate Consumer Commercial20 branches 637 branches 383 branches

MARKETING MIX OF MCB BANK LIMITED

Marketing is the task of creating, promoting and delivering goods and

services to consumers and businesses. Organizations identify and

profile distinct group of buyers who might prefer or require varying

products and marketing mixes. The customer seeks for value and

satisfaction. The organizations can increase the value of the customer

offering in several ways e.g. raising benefits, reducing costs etc.

marketing mix is a set of marketing tools that the firm uses to pursue

its marketing objectives in the target market. These marketing tools



are known as 4 p’s of marketing. These four marketing tools are

viewed as 4c’s by the consumers.

4 P’s 4 C’sProduct/ Service Customer Solution

Price Customer CostPlace Convenience

Promotion Communication

To identify the customer needs and fulfilling hem is the basic objective

of an organization. Marketing is not just satisfying your customers, you

have to delight them and this can be done by acting upon this phrase.

“Under Promise and Over Deliver”

MCB Bank provides a winning combination of products and services to

its prime customers. It is one of the country’s leading commercial

banks, which ensures complete security, and reliability in all-financial

transactions.

PRODUCT MIX & PRICES OF MCB BANK

1. MCB Rupee Traveler Cheque

MCB Rupee Travelers Cheques are as good as cash, infact better. Better because with Rupee Travelers Cheques you have the power to purchase and a feeling of security that should you lose them, you will get a refund.

MCB Rupee Travelers Cheques are accepted at major shops, travel agents, hotels, business establishments and MCB branches all over Pakistan. You don't have to be an MCB



account holder to buy the Rupee Traveler Cheques. Anybody can purchase them. It's a safe and convenient way to conduct everyday business. At a time when thefts and robberies are on the increase, you are better off carrying Travelers Cheques rather than money.

2. Mahnama Khushali Scheme

A 5- year fixed Deposit Scheme, targeted to persons with small savings who would desire a regular monthly return on their investment.

Salient Features

Minimum amount of investment shall be Rs.0.010m and the maximum amount of investment would be Rs. 1.000m.

Khushali Certificates can be purchased by individuals (singly or jointly) or by the Proprietorship/Partnership concerns or Companies, etc. in their name

The Khushali Certificate will be of five years maturity.

The interim rate of profit offered will be minimum 1% per month. If the profit declared by the bank is higher, additional profit will be paid.

Zakat will be deducted wherever applicable on yearly basis whether you will be receiving your profit or encashing your certificates.

As per Government Directions, tax on the profit / return is to be deducted by MCB branches at the time of payment.

3. MCB Khushali Bachat Account University of the Punjab, Gujranwala Campus 31


Salient Features

8% rate of return per annum.

Returns calculated on daily.

Average balance and paid half yearly.

Introduced first time in Pakistan.

The facility of helping account holders pays utility bills (electricity, telephone and gas) through their account. No queues. No delays.

4. Prime Currency Account Scheme

Launched to attract deposits in foreign currencies. US Dollars, Pound Sterling, Euro and Japanese Yen.

Salient Features

Owing foreign currency account under the Prime Currency Scheme allows you to earn attractive rates of interest in foreign currency.

You have a choice between opening this account in your personal name and opening it under joint names.

Whether you are a resident or a non-resident Pakistan, MCB Prime Currency Scheme invites all to operate a foreign currency account.



Foreign nationals and foreign companies can also open a foreign currency account under the Prime Currency Scheme.

Your foreign currency account can be opened in four global currencies: The United States Dollar, the Pound Sterling, the Japanese Yen and the Euro.

Travellers Cheques and Foreign Currency Notes can also be issued to holders of persona! and Joint accounts.

Rupee Loan facility will also available against this account.

You can draw any amount of foreign exchange from your foreign currency account and transfer or remit the amount freely to any part of the world without any restrictions.

The restrictions imposed by the State of Pakistan for the opening of foreign currency accounts in case of passport; Work-permit and resident Visa have been withdrawn. Your account will be restriction free.

The Prime Currency Scheme is exempt from al! forms of taxes including Income Tax, Wealth Tax and Zakat deductions.

MCB Prime Currency Scheme is a world in itself.

5. Hajj Mubarak Scheme

A saving scheme, of 2/3 years duration, for the convenience of persons, with a limited income, who desire to perform Hajj was introduced.

Under the 2 years scheme, a monthly deposit of Rs.1800 is required, whereas under the 3 years scheme, the required monthly deposit is only Rs.1200



6. Capital Growth Certificate Scheme

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

7. Fund Management Scheme

This scheme is offered to corporate and customers and is aimed at providing better rate of return up to 15% per annum. One of the objectives of the scheme is to develop secondary market for Government Securities.

8. Consultancy Services

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

9. Self Supporting Scheme

For the benefits of genuine worker/borrowers who are poor and needy and for small entrepreneur the bank as evolved a self supporting scheme: maximum amount of loan Rs.25000



and minimum Rs.5000 per individual. Loan will be totally free of mark-up.

10. Fax Press This product was first of its kind introduced by using modem technology of The Fax Machine. It facilitates speedy transfer of funds within Pakistan. The service guarantees transfer of from one city to another, within an hour.

11. Night Banking Service

For the convenience of the account holder, service has, especially, been introduced at busy commercial centers. Traders and other clients can now make deposit, with case, at such centers up to 8.00PM.

12. Utility Bill Collection

With the aim of extending this service to wider range of customers, the number of MCB branches collecting Utility Bills more than 900.

13. MCB Mobile Banking

At the forefront of technological excellence, MCB proudly introduces MCB MOBILE BANKING*. The convenience of accessing account balance information and mini statements whenever want or wherever may need them, with comfort and peace of mind.

MCB Mobile Banking service is available to all MCB ATM cardholders, 24 hours - 365 days.



MOBILE BANKING AT A GLANCE

MCB Mobile Banking gives easy and quick access to account(s) at a time find convenient, including all holidays.

WITH MCB MOBILE BANKING

· Check balance

· View the last 4 transactions of your MCB account(s).

A FREE SERVICE

MCB Mobile Banking is a free service for MCB account holders who have an ATM card of an SMS message if charged by the service provider.

BANKING AT FINGERTIPS

Dial in anytime to get information regarding balance and mini statements.

14. MCB Islamic Banking Services

Islamic banking services through exclusive units/branches offering a range of liability and asset based Sharia compliant products like Musharika, Murabaha, Ijara and Istasana.

15. MCB Car Cash

Car financing and leasing at competitive rates with flexible options Car cash finances both semi-commercial and non-commercial vehicles for personal and business use.

16. MCB Locker The best protection for your valuables. Lockers of different capacities are available nationwide



17. MCB Master Card

THE FUTURE OF MONEY

Since the beginning of time, people have tried to find more convenient ways to pay, from gold to paper money and checks. Today, money is moving away from distinct hard currencies and towards universal payment products that transcend national borders, time zones, and, with the Internet, even physical space.

Plastic or "virtual" money, credit, debit, and electronic cash products, inevitably will displace cash and checks as the money of the future.

MasterCard International has expanded globally in more locations in the world than any other card. The card was introduced by MCB Bank Limited in 1995 and now offers card members over 15 million outlets in 232 countries.

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

Welcomed at over 3, 000 outlets in Pakistan.

Provides up-to 45 days Free Credit.

Joining and Annual Fees to suit you.

24 Hour Customer Services- Call 111-700-700 and you can get information from our customer services representatives

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



Cash Advance Facilities

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

Our Consumer Banking provides customers with innovative saving schemes, products and services. Our ATM network is the largest in Pakistan and our Pak Rupee Travelers Cheques are market leaders. We were the first to introduce the photo card with the introduction of the MasterCard.

Our Corporate Banking ensures assistance from a dedicated team of professional financial advisors for underwriting, project finance or corporate advisory services.

When it comes to banking practices, you can depend on us. We’ve been around for over fifty years.

18. MCB Smart Card

MCB now brings you MCB SmartCard -a secure and convenient instrument of payment with unmatched functionalities. It provides 24-hour direct access to your bank account

The convenience and flexibility of MCB SmartCard will help live a smarter life. It not only helps you manage your expenses, but also avoids undue interest on your day to day credit card transactions.

Your balance is always within your reach and you spend accordingly.

MCB is the only bank to introduce a debit card that gives the option to choose from domestic and international card for local and global usage respectively



19. Remit Express

Fastest to Pakistan. Anywhere in Pakistan.

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

20. Easy Personal Loan Helping You Do More

MCB Easy Personal Loan provides you with the financial advantage to do things you've always wanted to but never had the sufficient funds for. Take that much-needed holiday. Buy a car. Refurnish your house. Purchase a new TV. Finance a better education for your children.

Salient Features

MCB will lend you any amount, from Rs 30,000 to Rs 490,000, depending upon your net monthly income

You can choose tenure of 1 to 3 years for the repayment of the loan

Bank to Bank Balance transfer

Credit Card balance transfer



Loan Protector Shield- insurance coverage of balance loan amount in case of death or permanent and total disability

Availability of early repayment option

Repayment Arrangements

Repayment of principal and mark-up is monthly and can repaid using either one of the following modes:

Direct Salary Transfers

Payroll Deduction

Eligibility Criteria

Minimum net monthly income Rs 10,000

25 to 55 years of age

Pakistani national

At least 2 years of employment with current employer.

Processing fee of 1% of the principal loan amount to be charged at the time of loan disbursement.

21. MCB Pyara Ghar

MCB gives dream home at the lowest and best possible mark-up rates. You can choose either one of our two mark-up rate options- fixed or variable.

Early repayment option tailor-made to allow making partial prepayments at dates that suit.

Who Can Apply

Anyone who fulfills the following criteria is eligible to apply:



Pakistani national residing in the city and area where the product is launched.

25 years old or above when you apply and under 60 at the time of maturity of the applied financing period.

Salaried person, self-employed professional or a businessman with a verifiable monthly income stream.

Net take -Home income not less than Rs. 25,000 per month.

Have 5 years or more of business or professional experience.

Employed with the present employer for 2 years with a total employment history of 5 years.

Home Purchase Home Renovation Home Construction

Tenure 3 years to 15 years 2 years to 5 years 3 years to 15 years

22. MCB Virtual

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

23. MCB Business Sarmaya

MCB Business Sarmaya is a running finance against your residential property. It offers running finance up to 20 millions with low markup. University of the Punjab, Gujranwala Campus 41


24. MCB Car 4 U

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

PLACING STRATEGIES OF MCB BANK

The location of the bank

plays a vital role in making

its operations profitable. If

the bank is located in some

business center then it will

be very easy for it to attract

business people as its customers. Therefore MCB has most of

its branches at places where it can reach its targets



customer easily. The branch network of MCB is given as

follows:

PROMOTION STRATEGIES OF MCB BANK

MCB Bank is actively participating in promotion of its

products and services through advertisement and other promotional schemes.


Punjab 632

Sindh 232

NWFP 123

Blochistan 34

Azad Kashmir 19

Domestic 1040

Overseas 4

Total 1045


Initially, the bank focused on the upper class customer’s only and offered products for a limited class of people. But now the strategy has been changed and the bank is now targeting the middle market also. The products offered are of diverse nature to cater the needs of maximum number of people.

Customer Oriented Attitude

MCB Bank values its customers. Customers’ complaints are encouraged because it gives an opportunity to know the needs of the customer and build more confidence in them.Most of the promotional efforts are done through

Direct marketing Public relations

MCB bank sometimes gets suggestions and recommendations from its good customers.

Branch layout is being designed in such a way that more and more customers are attracted. Some of the branches of MCB Bank have a very good entrance and outlook but many still need to be improved.

FIELDS OF ACTIVITIES

The purpose of banks is to provide some services to the general public. And for this purpose different banks provide different services to the people in different forms. The MCB Bank is a commercial bank, in modern time commercial



banks play a very important role and their functions are manifold. The main functions and services which MCB Bank Limited provides to different peoples are as follows.

1) Open Different accounts for different peoples2) Accepting various types of deposits3) Accepting various types of deposits4) Granting loans & advances5) Undertaking of agency services and also general utility

functions, few of those are as under

Collecting cheques and bill of exchange for the customers.

Collecting interest due, dividend, pensions and other sum due to customers.

Transfer of money from place to place. Acting an executor, trustee or attorney for the

customers. ‘Providing safe custody and facilities to keep jewellery, documents or securities.

Issuing of travelers cheques and letters of credit to give credit facilities to travel.

Accepting bills of exchange on behalf of customers. Purchasing shares for the customers. Undertaking foreign exchange business. Furnishing trade information and tendering advice to

customers.

For proper functioning of branches and the over all bank has been divided in different departments. These departments handle different jobs so that division of work is there for improvement of functions and also it is easy to control the situation. The general division in a branch is as follows:

1. Cash department 2. Deposit department3. Advances & credit department4. Remittance department5. Foreign exchange department



6. Technology department (new addition in order to cop with the growing needs of day to day technology requirements)

CASH DEPARTMENT

The following books are maintained in the Cash Department:

Receiving Cash Book

Paying Cash Book

Token Book

Scroll Book

Cash Balance Book

When cash is received in counter, it is entered in the Scroll Book and Receiving Cashier Book. At the close of the day, these are balanced with each other.

When the cheque or any negotiable instrument is presented at counter for payment, it is entered in the token book and token is issued to the customer. The token clerk and the Cashier make entries in the paying book and payment is made to payee. At the close of day, the Token Book and Paying Cashier Book are balanced.



The consolidated figure of receipt and payment of cash is entered in the cash balance book and drawn closing balance of cash.

Opening Balance + Receipts - Payments = closing Balance.

This is very important department because cash is the most liquid asset and mostly frauds are made in this department, therefore, extra care is taken in this department and nobody is allowed to enter or leave the area freely. Mostly, cash area is grilled and its door is under supervision of the head of that department. All the books maintained in this department are checked by an officer.

DEPOSIT DEPARTMENT

Bank deals in money and they are merely mobilizing funds within the economy. They borrow from one person and lend to another, the difference between the rate of borrowing lending forms their spread or gross profit. Therefore we can rightly state that deposits are the blood of the bank which causes the body of an institution to get to work. These deposits are liability of the bank so from point of view of bank we can refer to them as liabilities.

The total deposits of MCB are growing since its inauguration but after privatization there is a sharp incline in over all deposits of the bank. The increase in deposits is also a cause of increase on total number of accounts; bank has progressed in both aspects.

TYPES OF DEPOSITSDeposits can be segregated on two bases, one is the duration in which there funds are expected to be with the bank and second is the cost of getting these funds. So divide



deposits in two classes according to duration of deposits i.e.

1) Time deposits / liabilities

2) Demand deposits / liabilities

And on the basis of the cost to acquire these funds, a deposit can be classified as any one of following four, High Cost Medium Cost, Low Cost No Cost.

Banks has different kinds of deposit schemes in order to induce deposits. These schemes are a mixture of the above mentioned two types of deposits with an addition of different services & requirements such as minimum balance' requirement, mode of transaction, basis for calculation of profit, deductions, additional benefits, eligibility for different groups.

In the similar fashion, MCB has a large variety of deposit schemes and some of them are as follows:

CURRENT ACCOUNTIn this type of accounts the client is allowed to deposit or withdraw money as and when he likes. He may, thus, deposits or withdraws money several times in a day if he likes. There is also no restriction of amount to be deposited or withdrawn. However, there is requirement of minimum balance maintenance of Rs. 1000/-. Usually this type of account is opened by the businessmen. No profit is paid by the bank and no service charges are deducted by the bank on current deposits account. These types of deposits are also exempt from compulsory deduction of Zakat.

PLS ACCOUNT



This type of account is for those persons who want to make small savings'. This type of account is opened with a minimum deposit of Rs. 1000/-. Under this scheme deposits can be made only up to a-costing amount and withdrawals are allowed twice a week or 8 times a month. If a big amount is required a seven days notice is required before the withdrawal. The profit is paid on these accounts on the minimum balance during a month for the whole of

that month. Zakat & other withholding taxes are deducted as per rules of the government.

KHUSHALI BACHAT ACCOUNTThis is an advance form of PLS saving a/c, in this type of account. The minimum balance requirement for this type is Rs. 2500/-. There is also restriction on the number of withdrawals as well, i.e. up to 4 times in a calendar month. For maintaining this extra balance the customer gets the benefits of profit calculation on daily product basis and also free service of standing instructions of paying utility bills and HBFC installments. All other rules of saving account are applicable.

PLS 365 GOLDThis is a special type of saving account in which customer maintains a minimum balance of Rs. 300,000- and in turn he gets the benefits of daily profit calculations and also there is no restriction on the maximum number of withdrawals as was there in the case of KBA. There is also another advantage of this scheme that if balance on a particular day falls below the minimum balance then only the product of that day is ignored whereas in KBA, if balance falls below the minimum limit then all the products for that month are ignored on in other words no profit is paid for that month.



Khaunm Bachat SchemeThis is a type of term deposit, in this type of deposit an account is deposited and monthly payments of Rs. 1000/- are made by the account holder in this account for a minimum of 10 years. After

the expiry of term, he receives his funds along with profit for the tenor. The distinctive feature of this product is that profit is calculated on monthly basis and charged to account on end of each half /ear. Then profit is also calculated on that amount of profit which is credited to the customer's account. So we can say that in this type of account there is a concept of accumulated profits on profit. This ends in getting a heavy return for the depositor at the end of tenor for his small savings. This product was actually introduced to promote saving habits in the people. Zakat and withholding taxes are deducted as per rules only at the time of maturity while making payment to the customer.

Term Deposits ReceiptsThis is a type of term deposit in which a receipt is issued for varying tenors ranging from 1 month to 5 years or more. These are in the form of receipts and profit on these receipts is paid biannually. These receipts are encashable after expiry of the period for which they were issued. Different profit rates are applied to different type of TDRs.

Under this deposit scheme, a deposit is received from the depositor under the condition that he will intimate the bank before a certain period in case of withdrawals.



FUNCTIONS OF DEPOSIT DEPARTMENTThis was a brief review of different types of deposit schemes. The Deposit Department handles the account opening, profit payment and accounting of all types of deposit schemes.

Account Opening

Account opening is an agreement in which customer offers his funds and bank accepts these funds, therefore the nature of relation between a banker and customer is of a contractual one and all the conditions applicable to this contract act are also applicable.

Profit payment & calculationProfit payment & calculation is done in accordance with the rules of each type of deposit scheme-by the deposit department. The products for each deposit scheme are calculated separately and added till the end of 6 month period. Then the sum total of these products is multiplied with the respective profit rates which are issued by the Head Office at the end of each half yearly closing. The profit provisions for each type of deposits are also calculated on monthly basis by the same department in order to calculate the net profit or loss position of the branch.

Accounting EntriesAccounting entries are also made in the respective books of account by this department. However, in small and medium size branches, the accountant performs the book keeping duties for all kinds of ledgers.



CLEARING DEPARTMENT

Every banker acts both as a paying as well as a collecting banker, It is however an important function of crossed cheques. A large part of this work is carried out through the bankers clearing house.

A clearing house is a place where representative of all banks of the city get together and settle the receipts and payment of cheques drawn on each other. As the collecting banker runs certain risks in receipt of their ownership the law has provided certain protections to the banks.

The Negotiable Instrument Act, 1881, lays down hat drawer or holder of a cheque or draft may cross the instrument generally or specially. It further lies down that a crossed cheque can only be paid to a banker, who collects it for a customer in good faith and without negligence.

Types of Cheques Transfer cheques: are those cheques, which are

collected and paid by the same branch of bank.

Transfer delivery cheques: are those cheques, which are collected and paid by two different branches of the same bank situated in the same city.

Clearing cheques: are those cheques, which are drawn on the branches of some other bank of the same city or of the same area, which is covered by a particular clearing house.

Collection cheques: are those cheques, which are drawn on the branches of either the same bank or of another bank, but those branches, are



not in the same city or they are not the members of clearing house.

Functions of Clearing Department

To accept Transfer, Transfer delivery, clearing and collection cheques from the customers of the branch and to arrange for their collection.

To arrange the payment of cheques drawn on the branch and given for collection to any other branch on MCB or any other members or sub member of the local clearing house.

To collect amount of cheques drawn on members, sub-member of local clearing house, sent for collection by MCB Branches, not represented at the local clearing house

Receiving and scrutinizing the cheques and other deposit instruments, and the pay-in-slip at the counter.

Fixing the stamps.

Scrutiny and receipt by the authorized officer.

Returning the counter file to the depositor.

Certificate and confirmation by the officer in charge of the department. ,

Separating the cheque into transfer, transfer delivery, and clearing cheques.



CLEARING PROCESS (FLOW CHART)


Cheque with slip given

Cheque along with slip checked, signed & received by officer

The same day not honored cheques are returned to Main Branch

The day after tomorrow the banks are informed about dishonored cheques

Provisional entries for returned cheques are debited again in both computer & daybooks

Party is informed about returned cheques through Phone or personal contact

Cheques are mailed through TCS in case of no personal contact the same day

(If there is any availability)

Slip is asked & filled

Entries in daybooks are made

Entries checked & verified by another officer after banking hours by officer

Cheques collected at the day end by Main Branch’s Officials

Cheques are sent to respective banks next day after posting in computer by

Main Branch


ADVANCES DEPARTMENT

Advances are the most important source of earning for the banks. MCB is also giving full attention towards this aspect and it is also obvious from the growing portfolio of advances and from very low delinquency rate. The credit portfolio of this institution is in a very much better shape than other financial institutions of Pakistan and the credit goes to the management and the staff who are concerned about the quantity and quality as well.

Loans

Cash Credits

Overdraft

LOANS

Loans are monetary assistance by a financial institution to a business, individual etc. The loans are granted by the bank in lump sum, so these types called fixed or demand loans. Interest is charged on the whole amount of a fixed loan.

The borrower withdraws whole the amount of loan. This type of loan is normally granted against security of gold documents.

In case of demand loans against gold or documents, a demand promissory note for the amount of loan is taken from the borrower loans are granted under;

LOAN AGAINST GOLD University of the Punjab, Gujranwala Campus 55


Under this type of loan, which is granted to the borrower the Head Cashier estimates the value of Gold or Gold ornaments through an agent (Gold smith) and keeps a margin of 40 to 50 percent. After the opening the gold loan account a token is given to the borrower, which is a bank receipt.

On repayment of loan, the gold or ornaments held as security for it, together with the demand promissory note duly discharged is returned to the borrower and his receipt for the gold ornament taken in the demand loan ledger. This receipts states that he ornaments returned are complete and in order. Part delivery of ornaments is given against part payment of a loan but care is taken that the ornaments still in banks possession fully covers the balance of the loan outstanding. The interest gold loan is to be applied with quarterly.

LOAN AGAINST PLEDGE OF STOCKS

In case of advancing such types of loans, the following precautions are kept in the mind:

Stock pledged must be readily saleable

Products should be readily saleable

Advance should be within the borrows means

REQUIREMENTS OF LOAN

For granting loan to any party or individual, the bank checks following particulars of the client:

Credibility

Feasibility Report



By Credibility, bank Judges the credibility of the client by his past bank record, CBI report etc. it is very important in making decision about giving him loan.

Feasibility report is on the running or proposed business of the client. The report enables the bank to judge the likely return of the business.

CASH CREDITSuch cash account is opened in the name of the customer who borrows from the bank. Customer is granted a loan up to a certain limit, sanctioned by the head office, from which he can draw when he requires and interest is charged on the amount actually utilized by the customer. In order to avoid the danger of idle fund, the bank charges a certain rate of interest, even if the customer does not withdraw any amount. The rate charged by the bank on cash credit in 46 paisa per thousand on daily basis.

The credit is usually given against the securities of goods or merchandize as follows:

ADVANCE AGAINST PLEDGE OF STOCKS

When cash is granted against the pledge of stock or product, cash credit form is taken, from the certain products or stock,

but the actual pledge is created when the stock or finished products are placed under the bank's lock or the document of title is duly endorsed to the bank by the borrower.

HYPOTHECATION OF STOCKS

The difference between pledge and hypothecation is that under a pledge the borrower's goods are placed in the bank's possession under own lock, whereas, under a hypothecation, they remain in the possession of the borrower or guarantor and are merely charged to the bank University of the Punjab, Gujranwala Campus 57


under documents signed by them. Even though the documents empower the bank to take possession of the goods hypothecated, but it is possible that the borrower may actually resist any attempt.

MORTGAGE OF PROPERTY

Title deeds of immovable property are accepted by the bank only as collateral security or alternatively as unauthorized security.

REMITTANCE DEPARTMENT

Remittance department performs following functions:

Mail Transfer (MT)

Telegraphic Transfer (TT)



Demand Drafts (DD)

MAIL TRANSFER (MT)

When a customer requests the bank to transfer his money from one branch of bank to another branch of the same bank or from one city to another city to the same bank or any other bank. Customer fills the form given by bank. If the customer has an account with that amount as mentioned in the application form then concerned officer will undertake the following procedure to make the mail transfer complete.

1. Branch Mail transfer form2. Receiving Branch Register copy3. Issuing branch register Copy 4. beneficiary advice 5. advice to customerIn case where the customer is not account holder of the bank then the customer will have to deposit the amount which he wants to transfer under Mail. Then the above said procedure will be done.

TELEGRAPHIC TRANSFER (TT)

This type of transfer is simple. After filling the application form the concerning officer shall fill the telegraphic transfer form. Then it is sent to the required bank which on receiving it immediately makes the payment to the customer and afterwards the voucher are sent to that bank by ordinary mail.

DEMAND DRAFT (DD)

Demand draft is just like cheques and issued when the customer wants to take cash with him personally. The idea behind is to avoid the risk and burden of currency notes in huge quantity. Demand draft can easily be handled



whatever amount it has and the money can easily be taken from the bank when it is presented. In fact, the bank persuades the customer to transfer money by drafts and avoid the risk of frauds involves in MT and T.T. Draft is only issued when the bank knows customer and bank has the confidence in him

In case of transfer of money by drafts, the customer has to fill an application form. Then the concerned officer fills the following forms:

1. Customer’s advice2. Customer’s debit form3. Register copy4. Cover Advice

FOREIGN DEMAND DRAFT

Foreign Demand Draft is just like demand draft. The only difference is that a bank issues FDD to the bank of another country. It requires foreign exchange and it involves seven forms, which are to be filled.

Bank Charges (July-December 2006)

S. # Item Rate

1 Telegram on TT Actual-MinimumRs.75

2 Postage on MT Actual-MinimumRs.50

3 Cancellation of DD/Pay order Rs.50 far Account holder

Rs.100 far non Account holder



4 Issuance of Cheque Book Rs. 3 per leaf

5 Account closing Cost Rs.250 for LCY

6 Issuance of duplicate Draft Rs.200 far Account holder


7 Issuance of duplicate FDD Rs.300

8 Issuance of duplicate Pay order Rs.100 far Account holder


9 Issuance of RTC Rs.5 per piece

10 Stop payment charges Rs.150

11 Issuance of fresh statement Rs.25

12 Issuance of duplicate statement Rs 50

TECHNOLOGY DEPARTMENT

Technological advancements are also affecting the banking industry. The foreign banks have a competitive edge over all local banks in their technologies' advancements and automated systems. Local banks have also realized the gravity oil this situation and are striving to add computerized systems to their branches

MCB is ahead of all other local banks in this field and now it is in a position to even compete with foreign banks. There are more than 1045 branches of MCB all over Pakistan and out of these more than 300 branches are fully computerized Almost all .the branches of big cities are computerized; therefore, the need for a technology department at each branch is growing. Now a day, a computer division is working



in each city to provide service to ad the branches of that area.

MCB has also introduced the now concept of online banking. There are now more than 250 branches linked through this system and they can transact with each other directly using computer systems at their own branches. Now customers do not have to wait long for their transactions and can operate their account through all the online branches.

ATM NETWORK

ATM stands for Automatic Teller Machine. This machine is used to transact in one's account without intervention of humans. These machines are basically used for taking cash, confirming balances and requesting statements / cheque books.

MCB has the largest ATM network in the country at the moment with almost one ATM at each online branch and also ATM terminals at International Airports. This network covers more than the 27 cities of Pakistan including the provincial capitals and large commercial cities of the country.

ATMs are operated through a card issued to the valued customers and by application of Personal Identification Number (PIN number). A person can withdraw from any machine across Pakistan with having an account in only one branch of MCB. This was only possible with the help of online system. In this system all the machines are linked to central banking host at IRM division Karachi through either satellite or telephone controller. This system identifies the card holder and his PIN Number.

Now MCB has also entered into a contract with Cirrus which is a subsidiary of MasterCard. This contract will enable an ATM card holder to use his account even when he is out of country at all the ATMs where Cirrus logo is displayed.



Green Cards are ordinary cards with a maximum withdrawal facility of Rs. 10,000/- in a day. The annual fee for this card is Rs. 300/- only.

Gold Cards are special cars with maximum withdrawal limit of Rs. 25000/- in a day. These cards are issued to the persons having more than Rs. 500000/- as their average balance.

International Cards are issued in collaboration with Cirrus and are useable all over the world with maximum withdrawal facility according to the standards of Cirrus.

INFORMATION ABOUT MY BRANCH

I did my internship in MCB Bank Limited Muridke Branch. Some important information about my branch which I observed is as follows:

MANAGEMENT OF THE BRANCH

Branch Manager Ch. Sabir Hussain

Operational Manager Muhammad Munir

Accountant Fozan ul Qamer



Credit Manager Farruk Afrooz

Forex Manager Majid Iqbal

Chief Cashier Khursheed Ahmed

Cashier Muhammad Usman

Billing Cashier Miss Farwa Asif

CSO Miss Sumera

OTHER GENERAL INFORMATION OF THE BRANCH

Deposits

The total deposits of this about to 322.734 million. In deposit there is increasing trend.




Deposits

0

5

10

15

20

25

2003 2004 2005

Years

Am

ou

nt

in M

illio

n


Profit

CASH TRANFER

Month DEBIT CREDIT DEBIT CREDIT Total

January 2521 2303 2140 1967 8911February 2209 2268 1835 1725 8037March 2753 2508 2141 2395 9797April 3079 2569 1982 2040 9670May 3433 2726 1944 2018 10121June 2813 2578 1962 1972 9325July 3555 2229 2021 2123 9928August 3784 2123 1928 2030 9865September 4134 2114 2078 2135 10461October 4923 1980 2337 2350 11590November 6427 1968 2871 2720 13986December 2808 2312 2992 2925 14037

Total remittance of this branch is 2157.319 million in 2005.there is also incrasing trend in profit from 2003 to 2005 because of higher mark up rate charged on the finances.

No. of vouchers

The vouchers which are transacted in this branch in 2005 are as follows:



Financing & Advances

Mainly, the short term financing such as cash finance, running finance, Demand finance, ERF II, FAFB, FBP are being dealt here.

Number of accounts

Accounts in this branch of MCB are as follows:

Current account

Total numbers of current accounts are 1236.

PLS accountTotal numbers of profit and loss accounts are 3950.

Khushali bachat account:These are about to 301 accounts

Basic Banking Account (Newly Introduced by SBP for salaried person)There are about to 19 accounts.

Foreign Currency Accounts:There are about to 60 accounts.

MCB 365 Gold AccountThere are about to 101 accounts.



WORK DONE BY ME

During my internship in the MCB Limited, I really enjoyed to

work with the staff of Branch, G.T Road, Muridke from

17thJuly to 2nd September, 2006 and have a wish to be

employee of MCB. It was almost impossible to work in all the

departments within that limited time. But on my request, the

staff of the branch provided me the opportunity to work in

the different departments for the sake of practical

knowledge. I am really very thankful to branch manager Sir

Ch. Sabir sb that provides me a learning environment in the

branch.

During my internship training in the MCB as I early

mentioned that I have worked in different departments &

seats and learnt the followings.

ACCOUNT OPENING DEPARTMENT University of the Punjab, Gujranwala Campus 68

FIRST

TWO

WEEKS


Account opening and closing is the function of accounts departments. Bank’s customers may be individuals (Single or Joint), firms (partnership/proprietorship), Autonomous corporations, Limited Companies, Charitable Institutions, Associations Educational Institutions or Local Bodies.

BASICS TO OPEN AN ACCOUNT

During the span of mine internship in MCB, I learned and observed a lot of about the opening of an account. Basically I think that the opening of an account is the establishment of a contractual relationship between the banker and the customer. By opening an account at a bank a person becomes a ‘customer’ of a bank. Further I am going to express the basic requirements and steps involved in the opening of an account.

INTRODUCTION AND PRELIMINARY INVESTIGATION



Before opening an account MCB as like the other banks in Pakistan ascertain whether or not the person who is going to open the account is a desirable customer or not. Then MCB determine the prospective customer’s integrity, respectability, occupation and the nature of business by the introductory references given at the time of account opening. Negligence in this informal preliminary investigation may result in serious consequences not only for the banker concerned directly but also for other bankers and the general public who may be affected indirectly.

In order to further strengthen and streamline this process, the Federal Ombudsman of Pakistan, vide his ruling on complaint No. II/31/5186, has directed the banks to retain with the account opening form a Photostat copy each of the National Identity Cards of the person desiring to open an account as well as that of the introducer. As per these directions, the concerned Branch Managers are required to obtain the original National Identity Cards along with their Photostat copies and then return the original after attesting the authenticity of the retained copy.

Preliminary investigation is necessary because of the following reasons:

Avoid Frauds: In this regard I learned that if a banker does not make the necessary inquiries mentioned above he may enable dishonest persons to possess cheque books for fraudulent purposes. If any such person happens to be an undercharged bankrupt, the banker might be placed in an awkward position for having allowed such a person to open and open a bank account.

Safeguard against unintended overdrafts: Sometimes due to a mistake an account may be given an overdraft, For instance, the ledger keeper, misreading the balance of an account honors a cheque for an amount larger than the balance. Similarly a credit entry belonging to a customer may be made by mistake in another customer’s account. In University of the Punjab, Gujranwala Campus 70


such situations the excess amount withdrawn by the customer can only be realized if the customer is a respectable person.

Inquiries about clients: Being a banker I think MCB has a business obligation to respond to inquiries from other banks etc. about his customer’s financial position. Though the banker gives only a general ideal about the financial standing of his customer, it should nevertheless have the necessary information available with him.

Specimen Signature

When an account is opened with MCB customer provides to the bank a specimen of the form of signature which would appear on all his cheques to express his authority for the payment of cheques drawn on his banker. This specimen is taken generally on a card specially designed for this purpose, and rule for the customers, full name, and account number are entered on it.If the bank has reasons to doubt the genuineness of a signature, he should either get it confirmed for his satisfaction or return the cheque with the remark ‘Signature differs’. If the signature of the customer is forged the banker cannot escape his liability because he has actually acted on his customer’s mandate.

HOW TO OPEN AN ACCOUNT (GENERAL)

Before opening an account in MCB I observed that the following points must be considered in this regard.



Another account holder of the bank should properly introduce the new customer.

The account holder should sign the account opening form in the presence of bank officer and the signature is duly verified.

A copy of identity Card is required by Bank.

Against submission of the Bank’s prescribed application form, duly introduced in the manner provided and on supplying such document, as may be required and account may be opened. The Bank reserves to itself the right to refuse to open and account without assigning any reason.

Each account shall be allotted a distinct number that is to be quoted in all correspondence with the bank relation to the account.

Minimum amount for opening and continued maintenance of various types of accounts is as follows:

Rs.

Saving 500

Current 500

Term Deposit 1000

The bank reserves the right to change the above mentioned minimum balance requirement at any time without any notice.

PROCEDURE TO OPEN AN ACCOUNT

According to my practice in MCB, when a customer wants to open an account, the bank officer gives him an application form. All information, which is necessary to be known by the bank, are requirements of the application form. Form also requires the essential documents to be attached by the



customer.

Basically following information is required to open an account with MCB.

Title of Account

Full Name of Applicant

Occupation

Address

Telephone No.

Currency of account

Nature of Business

Introducer’s Name, Address & Signatures

Special instruction regarding the account

Initial Amount of the Deposit Signature of the applicant

DOCUMENTS TO BE ATTACHED

Further I learned that if you wanted to open an account with MCB then you should attach the following documents with your application form which are different for different categories.

SOLE PROPRIETOR’S ACCOUNT

In order to open an account with MCB Sole Proprietors have to submit their business registration certificate number.

PRIVATE / JOINT ACCOUTS



For individual or private or joint accounts National Identity Card is required.

JOINT STOCK COMPANY

Before an account of a Public Limited Company is opened MCB must ask the person authorized to do so to submit the certified copies or the following documents

Certified true copy of the Memorandum and Articles of Association of the company.

Certified true copy of the resolution of the board of directors / managing committee / governing body regarding conduct of the account.

Certified list containing names and signatures of the directors / office bearers.

Certified true copy of the certificate of incorporation or registration.

Certified true copy of the certificate of commencement of business (in case of public limited companies).

Balance Sheet

I.D. Card copy of each director

Original is also enclosed for inspection and return

List of persons authorized to operate the account.

Power of Attorney in favor of the person opening account.

PARTNERSHIP FIRM ACCOUNT

Information which is required to be submitted to MCB by a partnership firm in this case is as follows:

Full Names

Address

Specimen of signatures of the partners University of the Punjab, Gujranwala Campus 74


Certified true copy of partnership deed Registration No. if the Partnership is registered

SOCIETIES / CLUBS AND ASSOCIATIONS ACCOUNT

MCB is authorized to open the accounts of the societies/clubs and associations, These are non-trading organizations, formed for the promotion of culture, science, education, recreational activities and charitable purposes etc. some of these institution are registered under the Societies Registration Act, 1866, and are issued a certificate of registration after they have been found fit for registration.

ISSUANCE OF CHEQUE BOOK

When a customer opens an account with the bank, he is provided with cheque book for withdrawals from account. However, the first cheque book is given to the customer only when all the required documents are checked. A cheque book contains ten, twenty five, fifty or hundred leaves. The cheque book also carries a requisition slip for the issuance of the new cheque book. This slip is duly filled and singed by the customer. The signature of the customer is verified by the bank and new cheque book is issued to the customer and serial numbers of the cheque are duly entered in the book of the bank. Along with the signature, person should also write his full name & address.

Usually only one cheque book is issued at a time, however big concerns who need a number of cheque books at a time, may ask the bank to stock as number of cheque books in their name and to point their name on these cheque books.

Bank debits the client’s account for excise duty of Rs.2.50/- per cheque and keeps the cheque book ready for the customer, as on his advice.

The officer keeps and maintains the cheque book register Cheque book inventory and cheque books issued are recorded in this register. The account number for which the cheque book is issued and the number of leaves are also


THIRD

WEEK


recorded in this register when the cheque book issued an entry is passed in the cheque book issue register.

In case of loss of cheque book or requisition slip on cheque book the customer has to fill the Form No. 216-B to obtain a new cheque book.

UTILITY BILLS COLLECTION

I worked in the utility bills collection department as the MCB

collects utility bills on behalf of WAPDA, Sui Gas Companies,

and Pakistan Telecommunication Corporation Limited by

putting the stamp on the utility bills “Paid”, Date of

payment, Signature of the officer receiving the utility bills.

After receiving utility bills a list is made on the form which is

called Bills scroll form. One copy of the scroll is with the bank

for evidence whereas the original copy with the receipt of

the bills is sent to the billing department of the respective

corporation. The bank charge commission on the bills.


FORTH

WEEK


CASH MANAGEMENT

The most important department of MCB which deals in money (receiving deposits at lower rates and lend them out at higher rates of interest). This department also called as Chest Department and manager of it is called Cash Manager or Chest Manager. In those branches where this department is not separately existed, the branch manager performs the duties of the Chest Manager.

The excess cash (More than its insured limit by the insurance company) of the branches of the region is collected by the main branch. The main branch is also bound to send its excess cash (more than its insured limit) to the State Bank of Pakistan. No branch can have cash its safe more than its insurance at any time at the time of closing cash, if it is so the manager will be responsible (not the insurance company) whether or not he informed to the regional office (exception to the limit which is insured for the day).

New Notes and Prize Bonds are also part and parcel of the Cash Management. Keys of the Safe lockers are with the three authorized persons each one of them is responsible for cash as at the time of closing the cash the officers including Cash officer presented and lock the safe after counting and scrutinize the cash. The cash officer maintain its daily cash book with specification of notes (Bonds are also recorded in the books in

relation with cash) and other vouchers, after being satisfied the manager authenticates the books and vouchers regarding cash with stamp and signature. at the end I would University of the Punjab, Gujranwala Campus 77


like to conclude that the cash management is being done in the MCB very effectively.

ADVANCES DEPARTMENT


LAST

TWO

WEEKS


On my first day of Internship, Manager gives me some advice and told me the ways to success. He told me that if some one wants to get success in banking career then he must have the knowledge of the one major department of the bank. I.e. Advances. So from very first day I was interested to work in advances department and at my request bank offer me opportunity to work in this department last two weeks

Bank adopts the following procedure in order to grant a loan. A customer applies for a loan to the manager, who says him to give details of his property. The details of the proposal and the photocopies of the document to the title of property are sent to the legal advisor of bank. The legal advisor gives his legal opinion upon the documents. The branch manager, in the light of the opinion received from the legal advisor, discusses the proposal with the advancing manager whether to give or not the loan to the applicant. If manager allows granting the loan all the documents along with request letter are sent to regional office for approval. In the regional office the proposal is analyzed and if the office is satisfied a consent letter prepared which is signed by the regional controller credit. This letter is sent to the branch manager. After receiving it the manager finance reviews the consent letter, and prepares a DAC (Disbursement Authorization Certificate). DAC can be made only for people who have a bank account.

The following documentation is made for loan.

An application or request letter for loan by the customer

Legal opinion of the legal advisor of the bank (for the title deeds)

Consent letter from the regional office

Vetting Certificate (includes consent No., Facility whether fund based or no-fund based, addresses etc.)



Valuation of property any consultant or any panel of consultants approved by State Bank of Pakistan

Original title deed or sale deed

Affidavit

General power of attorney (made by advocate for the person/owner taking loan for the company)

Mortgage deed

Mutation document made

Verification of the property by the bank from the competent authority

Hypothecation of stock certificate (Running is to be given against 75% margin of stock)

IB-25R Letter of hypothecation (duly signed by the party)

IB-12 , DP Note/Promissory Note (Bank prepared itself, duly signed by the party, revenue stamps of Rs. 100 put on it)

IB-6R Agreement of finance mark up (Contract with party for taking mark up on quarterly basis)

IB-24 (used for title deed)

IB-29 (used for guarantee from party)

IB-26 (used for pledge of stock, margin is different for different goods)

No. IB-28 (used for lien) etc.

After that Loan is sanctioned to the party fulfilling all the terms and conditions for the purpose. The procedure given above is for both short and long term loans. The thing which is most important here is that the banks first keeps in mind and analyzes according to the rules prudential regulations of the State Bank of Pakistan.



Following finances in which Muridke Branch is dealing.

Running Finance

Cash Finance (Against Pledge of Stocks of wheat & rice)

Demand Finance (against Lien On DSC’s)

Tractor Finance

Foreign Bills Purchased

Finance Against Foreign Bills

Export Refinance I

Export Refinance II

The exposure of Muridke Branch is more than 500 Million.

I have learnt about the documentation required for the financing. Major focus on the financing is depending on the account turnover and collateral offered.

While financing to the fresh client the credit proposal of the client is elevated to the higher office. The bank’s official get the applications form the customer and prepare the case for getting approval for the higher office.

SECURITIES HELD AGAINST FINANCING FOR RUNNING FINANCE

Hypothecation of Stocks (50% Margin)

Collateral security (house, land, factory etc..)

FOR CASH FINANCE

Pledge of stocks (20 to 25% Margin)

Collateral security (house, land, factory etc..)



FOR DEMAND FINANCE

Lien over Defense Savings Certificate

Lien over Deposits (TDR)

Lien over Foreign Currency deposits

FOR TRACTOR FINANCING

Joint ownership of the Tractor

Collateral security (Agri land)

FOR EXPORT REFINANCE PART I

Lien over export bills drawn under firms order or contracts

Collateral security (house, land, factory etc...)

FOR EXPORT REFINANCE PART II

Hyp & Pledge of Stocks

Lien over EE statement


FOR FOREIGN BILLS PURCHASED

Lien over export bills drawn under LCs


FOR FINANCE AGAINST FOREIGN BILLS

Lien over export bills drawn under firm order and contracts


FOR BANK GUARANTEE

Cash Margin (As Per Approval of Finance) University of the Punjab, Gujranwala Campus 82


BALANCE SHEET

2005 2004 (Rupees in thousands)

ASSETSCash 23665549 23833253Balance with other banks 1469333 5708323Lending to financial institutions

9998828 10965297

Investments_ net 69481487 67194971Advances – net 180322753 137317773Operating fixed assets 8182454 7999821Other assets_net 5464426 6154370Deferred tax assets_net 19196 -------------

298776797 259173808LIABILITIESDeposits and other accounts 229345176 221069158Borrowings from financial inst.

27377502 7590884

Bills payable 8536674 7566684Other liabilities 8611600 6525999



Deferred tax liabilities ------------- 269498Sub ordinated loans 1598080 1598720Liabilities against assets ------------- -------------

275469034 244620924NET ASSETS 23307763 14552884REPRESENTED BY Share capital 4265327 3371800Reserve 13408005 5661553Unappropriated profit 210662 165208

17883994 9198561Surplus on revaluation of assets

5423768 5354323

23307763 14552884

PROFIT & LOSS ACCOUNT

2005 2004(Rupees in ‘000)

Mark-up/return/interest earned 17756232

9083863

Mark-up/return/interest expensed 2781468 2057640 Net mark-up/interest income 1497476

47026223

Provision against non-performing loans and advances

1242153 442595

Provision for diminution in the value of investments

(98982) (172876)

Bad debts written off directly 1184 8771Provision for potential lease losses ---------- 1200

1144355 279690Net mark-up/interest income after provisions

13830409

6746533

NON MARK-UP/INTEREST INCOME Fee commission and brokerage income 2448950 1992356 Dividend income 480344 378908Income from dealing in foreign currencies

531455 492738



Other income 1084576 576007Gain on Investments 866895 804478Gain / Loss on trading in government securities

851 (11440)

Total non-mark-up/interest income 5413071 423298819243480

10979521

NON MARK-UP/INTEREST EXPENSESAdministrative expenses 6459490 7244200(Reversal) / Other provisions (72740) 149893 Other charges 178841 41864 Total non-mark-up/interest expenses 6565591 7435657Compensation on delayed tax refund 340598 513850PROFIT BEFORE TAXATION 1301848

74057716

Taxation – current year 4611359 1555764 Prior years (149763)

Deferred (365524) 70240PROFIT AFTER TAXATION 8922415 2431532

Unappropriated profit brought forward

165208 195966

Transferred from surplus on revaluation of fixed Assets

83749 25839

248957 221605 Profit available for appropriation 9171372 2653337APPROPRIATIONS Transfer to Statutory reserve 892241 507999 General reserve 5500000 800000 Capital reserve ----------- ----------- Proposed cash dividend 426533 ----------- Reserve for issue of bonus shares

853065 337180

Interim cash dividend Rs 1.75 per share 649072 337180Interim cash dividend Rs 1.50 per share 639799 505770

8960710 2488129Unappropriated profit carried forward

210662 185208

Basic and diluted earning per share after tax

21.36 7.21



CASH FLOW STATEMENT

2005 2004 (Rupee in 000)

CASH FLOW FROM OPERATING ACTIVITIES Profit/(Loss) before taxation 13018487 4057716Less: Dividend income (480344) (378908)

12538143 3678808Adjustments for non-cash chargesDepreciation 575538 598928Amortization – intangible assets 60113 ----------Provision against non-performing advances 1242153 442595Provision for diminution in the value of investment

(98982) (172876)

Provision for diminution in the value of other assets

(72740) 149593

Bad debts written off directly 1184 8771Gain on sale of non banking assets (24664) -------Loss on sale of fixed assets 22114 (39324)Provision for potential lease losses ----------- 1200Surplus on revaluation of held for trading securities

(1634) ----------

1703082 98888714241225 4667695



(Increase)/Decrease in operating assets Lendings to financial institutions 966469 (534847) Advances (44248317) (40570180) Others assets 982933 26142

(455458801)

(41422187)

(Increase)/Decrease in operating assetsBills Payable 969990 (829636) Borrowings from financial institutions 19786638 (25037087) Deposits 8276020 9557765 Other liabilities 982933 26142

30015581 (16282816)(1289074) (53037308)

Income tax paid (1152343) (683995)Income tax refund -------------- 370208Net cash flow operating activities (2441417) (53351095)CASH FLOW FROM INVESTING ACTIVITIES Net investments in available-for-sale securities

(20301953) 105292873

Net investments in held-to-maturity securities

16278483 (45878054)

Net investments in held-for trading securities

(66056) ---------------

Dividend received 588153 181258Investments in operating fixed assets (1029307) (1265675)Investment in subsidiary and associated companies

(77) --------------

Sale proceeds from non banking assets disposed of

589876 --------------

Sale proceeds of fixed assets disposed of 127254 81308Net cash flow from investing activities (1813827) 58411710CASH FLOW FROM FINANCING ACTIVITIES Redemption of subordinated loans (640) (640)Proceeds from issue of right shares 1390868 --------Dividend paid (1545483) (818306)Net cash flow from financing activities (155255) (818946)Ex. difference in cash transactions in foreign branches

3805 (56354)

Increase/(Decrease) in cash and cash equivalents

(4406694) 4185315

Cash and cash equivalent at beginning of the year

29547922 25500460

Effects of exchange rate changes (6346) (144199)



29541576 25356261Cash and cash equivalents at end of the year

25184882 29541576

FINANCIAL ANALYSIS

"Financial statement analysis is the process of identifying of financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit &loss account," and it is done through ratio analysis.

RATIO ANALYSIS

Ratio means “one number expressed in term of another a ratio is statistical yardstick by mean of which relationship between two or various figures can be compared or measured. Here we are going to explain the ratio analysis of MCB.



Financial ratios can be divided into the following six parts.

A. Liquidity ratiosB. Activity ratiosC. Leverage ratiosD. Profitability ratiosE. Investor ratiosF. Bank special ratios

A. Liquidity ratios Current ratios Quick ratios Absolute Liquid ratio

B. Activity ratios Inventory turnover ratio Average collection period Average payment period Total assets turnover ratio

C. Leverage ratios Proprietary ratio Debt ratio Debt to Equity ratio Debt to Tangible net worth ratio Debt to Funds ratio External-Internal Equity ratio

D. Profitability ratio



Return on total assets Return on-equity Return on investment Return on fixed assets Average profit per branch Net profit Margin Interest income to total income Interest expense to total expense Return on advances

E. Investor Ratios Earning per share P/E ratio Dividend per share Dividend yield ratio Dividend payout ratio Break up value/Book value per share M/B ratio

F. Bank special Ratios Earning assets to total assets Return on earning assets Net margin to earning assets Loan loss coverage ratio Equity to total assets Deposit time equity Loan to deposit ratio

Because here we are discussing ratio analysis of bank, therefore we will not discuss A & B category of ratios.

LEVERAGE/SOLVENCY ANALYSIS



Solvency analysis of a firm indicates the amount of the other people’s money being used to generate profit. In general, these analyses are more concerned with long term debts, because these commit the firm to a stream of payments over the long run. Solvency analysis includes:

Proprietary ratio Debt ratio Debt to Equity ratio Debt to Tangible net worth ratio Debt to Funds ratio External-Internal Equity ratio

1. PROPRIETARY RATIO

=

Year 2005 (000) 2004 (000)Total Equity 23307763 14552884

Total Assets 298776797 259173808


Total equity

Total Assets


ratio 0.08 0.06

2. DEBT RATIO/ SOLVENCY RATIO

=

Year 2005 (000) 2004 (000)Total Debts 275469034 244620924

Total Assets 298776797 259173808

ratio 0.92 0.94

3. DEBT TO EQUITY RATIO

=

Year 2005 (000) 2004 (000)Total Debts 275469034 244620924

Equity 23307763 14552884

ratio 11.82 16.81

4. DEBT TO TANGIBLE NET WORTH

=

Year 2005 (000) 2004 (000)Total Debts 275469034 244620924


Total equity

Total Assets

Total Debt

Equity

Total Debt

Equity


Tangible net worth 23058725 14552884

ratio 11.94 16.81

5. DEBT TO FUNDS RATIO

=

Year 2005 (000) 2004 (000)Long Term Debts 41318331 22455384

Long Term Funds 64626094 37008268

ratio 0.63 0.60

6. EXTERNAL INTERNAL EQUITY RATIO

=

Year 2005 (000) 2004 (000)External Equity 275469034 244620924

Internal Equity 23307763 14552884

ratio 11.82 16.81

INTERPRETATION


Long term Debt

Long Term Funds

External Equity

Internal Equity


The overall leverage position is showing better trend as compare to previous year. The contribution of equity in total assets is increasing, while the debt contribution is decreasing which is better for business. Equity ratio is increased which shows the better condition of the bank. Solvency Ratio is in good condition. So we can say that overall Solvency condition of the MCB is better with the comparison to the previous year.

PROFITABILITY ANALYSIS



Profitability analysis of a firm indicates the overall efficiently of the management. Without profit a company can not attract the outside capital. Profitability analysis includes:

Return on total assets Return on-equity Return on investment Return on fixed assets Average profit per branch Net profit Margin Interest income to total income Interest expense to total expense Return on advances

1. RETURN ON ASSETS

= × 100

Year 2005 (000) 2004 (000)Net Profit after Tax 8922415 2431532

Total Assets 298776797 259173808


Net Profit after Tax

Total Assets


return 3.0% 0.93%

2. RETURN ON EQUITY

= × 100


Equity 23307763 14552884

return 38.28% 16.71%

3. RETURN ON INVESTMENT

= × 100


Investment 69481487 67194971

return 12.84% 3.62%

4. RETURN ON FIXED ASSETS

= × 100




Equity


Investment


Fixed Assets


Fixed Assets 8182454 7999821

return 109% 30.39%

5. AVERAGE PROFIT PER BRANCH

=

Year 2005 2004Net Profit after Tax 8922415000 2431532000

No. of branches 1045 1045

Average Profit 8546375 2329054

6. NET PROFIT MARGIN

= × 100


Interest Income 17756232 9083863

return 50.25% 26.77%

7. INTEREST INCOME TO TOTAL INCOME

= × 100

Year 2005 (000) 2004 (000) University of the Punjab, Gujranwala Campus 98


No. of branches


Interest Income

Interest Income

Total Income


Total Income 23169303 13316851

Interest Income 17756232 9083863

return 76.64% 68.21%

8. INTEREST EXPENSE TO TOTAL EXPENSE

= × 100

Year 2005 (000) 2004 (000)Total Expense 9347059 9493097

Interest Expense 2781468 2057640

return 29.76% 21.67%

9. RETURN ON ADVANCES

= × 100

Year 2005 (000) 2004 (000)Interest Income 17756232 9083863

Total Advances/ Loans 180322753 137317773

return 9.85% 6.61%


Interest Expense

Total Expense

Interest Income

Total Loans


INTERPRETATION

Profitability analysis shows the entire performance of a business and if we study the profitability trend of bank then it will clear to us that it showing a positive trend. Net profit after tax is increased as compare to previous year, due to it return on assets, equity and investment is increasing. Not only overall profit is increasing but also average profit of all the branches is increasing. Bank interest income is also increasing due to more advances in this year. This year bank total deposits are also increased and that’s why interest expenses are showing up ward trend.

INVESTOR ANALYSIS



Investor analysis or market analysis are related to firm market valve, as measure by its current share price to certain accounting values. Investor analysis includes:

Earning per share P/E ratio Dividend per share Dividend yield ratio Dividend payout ratio Break up value/Book value per share M/B ratio

1. EARNING PER SHARE

=

Year 2005 2004Net Profit after Tax 8922415000 2431532000



No. of Shares


No. of Shares 426532700 337180000

Earning 21 7.21

2. P/E RATIO

=

Market price per share is Rs.247.75 on 4th Jan.2007

Year 2005 2004MP Per Share 247.75 247.75

EPS 21 7.21

ratio 11.80 34.36

3. DIVIDEND PER SHARE

=

Year 2005 2004Total Dividend 1288871000 842950000

No. of Shares 426532700 337180000

DPS 3.02 2.5

4. DIVIDEND YIELD RATIO

=

Year 2005 2004DPS 3.02 2.5


MP Per Share

EPS

Total Dividend

No, of Shares

DPS

MV Per Share


MV Per Share 247.75 247.75

ratio 0.012 0.01

5. DIVIDEND PAYOUT RATIO

= × 100

Year 2005 2004DPS 3.02 2.5

EPS 21 7.21

ratio 14.38% 34.67%

6. BOOK VALUE PER SHARE

=

Year 2005 2004Equity 23307763000 14552884000

No. of Shares 426532700 337180000

ratio 54.64 43.16

7. M/B RATIO

=


DPS

EPS

Equity

No. of Shares

MV Per Share

BV Per Share


Year 2005 2004BV Per Share 54.64 43.16

MV Per Share 247.75 247.75

ratio 4.53 5.74

INTERPRETATION University of the Punjab, Gujranwala Campus 104


MCB has also has good investment opportunities for the investors. This bank has more attraction for investors as compare to previous year. Earning per share is increased due to increase in profit. Book value and market valve of one share in also increased as compare to 2004. Only dividend yield and payout ratio is decreased because bank declared fewer dividends as compare to last year but it is also in favor of investors because it will increase wealth of shareholders and ultimate benefit to investors.

BANK SPECIAL ANALYSIS



Bank ratio analysis is little bit different from other organizations and if we want to see the real picture of a bank we have to focus on given special ratios.

Earning assets to total assets Return on earning assets Net margin to earning assets Loan loss coverage ratio Equity to total assets Deposit time equity Loan to deposit ratio

1. EARNING ASSETS TO TOTAL ASSETS

=

Year 2005 (000) 2004 (000)Earning Assets 261272401 221186364


Earning Assets

Total Assets


Total Assets 298776797 259173808

ratio 0.87 0.85

INTERPRETATION

The efficiency of the banking firm is measured by its ability to utilize its assets in a manner that they could be profitable for the firm. Bank earning assets are increasing as compare to last year but it is just a little bit increase. Advances of bank are increasing but investment as compare to 2004 is decreased. Lending to financial institutions is also not very well. Balance with other banks is also not desirable but overall earning assets showing satisfactory position in 2005.

2. RETURN ON EARNING ASSETS

= × 100


Net Profit before tax 13018487 4057716

return 4.98% 1.83%


NP before Tax

Earning Assets


INTERPRETATION

Return on earning assets is increased as compare to previous year because there is increased in net profit in 2005 as compare to 2004. The increasing trend in this ratio is beneficial for business and investors because this ratio shows real profitability position of business.

3. NET MARGIN TO EARNING ASSETS

= × 100



Net Margin

Earning Assets


Net Margin 14974764 7026223

ratio 5.73% 3.17%

INTERPRETATION

Spread is difference between interest income and interest expense. This ratio shows the spread position of a bank. In this year bank net margin is increased due to increase in advances and interest income as compare to 2004. Interest expense is also increased but their increasing trend is lesser as compare to interest income so that’s why spread position of bank is increased in this year.

4. LOAN LOSS COVERAGE RATIO

=

Year 2005 (000) 2004 (000)Pre tax Income 13018487 4057716

Provision for Loan Loss 1242153 442595

Net Charges Off 1184 8771

ratio 11.47 times 9.97 times


Pre tax Income + Provision for loan loss

Net Charges off + Provision for loan loss


INTERPRETATION

This ratio shows how much money is there against Rs 1 loss. This ratio provides a protection to customers who are going to deposit their money in bank. Higher the ratio is beneficial for the bank and customers. In this year loan loss coverage ratio is increased due to decrease in bad debts but in 2004 the ratio of bad debts is more as compare to this year. This shows the efficiency of bank in this year instead of 2004.

5. EQUITY TO TOTAL ASSETS

=

Year 2005 (000) 2004 (000)Total Equity 23307763 14552884

Total Assets 298776797 259173808

ratio 0.08 0.06


Equity

Total Assets


INTERPRETATION

This ratio shows the position of equity in total assets of business. In both years this ratio is almost same. But the bank should increase its equity by increasing the wealth of shareholders.

6. DEPOSIT TIME EQUITY

=

Year 2005 (000) 2004 (000)Total Debts 275469034 244620924

Equity 23307763 14552884

ratio 11.82 16.81


Debt

Equity


INTERPRETATION

This ratio is also known as debt to equity ratio. This shows how much outsiders share in business total equity. Lesser ratio is better for a business and this year bank ratio is decreasing which showing better trend as compare to previous years.

7. LOAN TO DEPOSIT

= × 100

Year 2005 (000) 2004 (000)Loan 180322753 137317773


Loan

Deposit


Deposit 229345178 221069158

ratio 78.62% 62.11%

INTERPRETATION

Loans or advances are the major assets of a bank while deposits are major liabilities of a bank. Higher ratio shows the better solvency of bank. This ratio is increased instead of previous years because advances of the bank are increased as previous years although deposits are also increased this years but its ratio is less.



TREND ANALYSIS

In trend analysis we done two types of analysis, these are

1. Horizontal Analysis

It is conducted by setting consecutive balance sheet, income statement or statement of cash flow side-by-side and



reviewing changes in individual categories on a year-to-year or multiyear basis.

A comparison of statements over several years reveals direction, speed and extent of a trend(s). The horizontal financial statements analysis is done by restating amount of each item or group of items as a percentage.

2. Vertical Analysis

Like horizontal analysis this can also done for balance sheet and income statement. Here we assign 100% value to any key item of balance sheet or income statement and then see portion of other items in this percentage.



Particulars 2002 2003 2004 2005ASSETSCash 100% 134% 133% 132%Balance with other banks 100% 60% 264% 68%Lending to financial institutions

100% 30% 32% 30%

Investments_ net 100% 143% 75% 78%Advances – net 100% 123% 174% 228%Operating fixed assets 100% 120% 209% 214%Other assets_net 100% 73% 69% 72%Deferred tax assets_net 100% 0% 0% 191967%

100% 116% 110% 127%



LIABILITIESDeposits and other accounts 100% 116% 121% 126%Borrowings from financial inst.

100% 148% 35% 125%

Bills payable 100% 134% 121% 136%Other liabilities 100% 70% 72% 95%Deferred tax liabilities 100% 38% 15% 0%Sub ordinated loans 100% 99.9% 99.9% 99.8%Liabilities against assets 100% 0% 0% 0%

100% 117% 109% 123%NET ASSETS 100% 94% 124% 199%REPRESENTED BY Share capital 100% 115% 126% 160%Reserve 100% 145% 187% 443%Unappropriated profit 100% 45% 26% 34%

100% 122% 146% 283%Surplus on revaluation of assets

100% 62% 99% 101%

100% 94% 124% 199%



0%

50%

100%

150%

200%

250%

Total Assets Total Liabilities Equity

2002 2003 2004 2005

The horizontal analysis of the balance sheet of the bank over all give the positive trend .The result of the balance sheet depict that there is a constant increasing trend in cash, total assets, total liability and equity. There is extraordinary high trend in 2005 in all factors of balance sheet as compare to 2002.

The trend of cash is increasing to upward with 32%. The trend of Total asset is also increasing to upward with 27%, and the trend of total liabilities is also increasing with 23% to upward. Equity is increased by 99%.



Particulars 2002 2003 2004 2005Mark-up/return/interest earned 100% 67% 59% 115%



Mark-up/return/interest expensed 100% 48% 34% 46% Net mark-up/interest income 100% 80% 75% 161%Provision against non-performing loans and advances

100% 705787%

442575%

1242153%


100% -150000%

-172876%

-98982%

Bad debts written off directly 100% 31% 1.2% 0.16%Provision for potential lease losses 100% 168% 234% 0%

100% 108% 39% 159%Net mark-up/interest income after provisions

100% 77% 79% 161%

NON MARK-UP/INTEREST INCOME Fee commission and brokerage income 100% 115% 220% 270% Dividend income 100% 125% 127% 161%Income from dealing in foreign currencies

100% 66% 193% 106%

Other income 100% 149% 116% 217%Gain on Investments 100% 532% 209% 226%Gain / Loss on trading in government securities

100% 0% -11440%

-851%

Total non-mark-up/interest income 100% 175% 163% 209%100% 100% 92% 172%

NON MARK-UP/INTEREST EXPENSESAdministrative expenses 100% 87% 96% 87%(Reversal) / Other provisions 100% 50000% 149593

%-72740%

Other charges 100% 4496% 3189% 13468% Total non-mark-up/interest expenses 100% 94% 92% 81%Compensation on delayed tax refund 100% 0% 513852

%340596%

PROFIT BEFORE TAXATION 100% 117% 130% 420% Taxation – current year 100% 79% 102% 301% Prior years 100% 0% 0% -

149763%

Deferred 100% -101% -42% 216%PROFIT AFTER TAXATION 100% 128% 140% 513%

Unappropriated profit brought forward

100% 219% 69% 58%

Transferred from surplus on revaluation of fixed Assets

100% 41% 42% 137%

Profit available for appropriation 100% 126% 116% 402%APPROPRIATIONS



Transfer to Statutory reserve 100% 128% 146% 256% General reserve 100% 1000000

%800000%

5500000%

Capital reserve 100% 0% 0% 0% Reserve for issue of bonus shares

100% 77% 84% 213%

Interim cash dividend Rs 1.75 per share 100% 69% 51% 97%Interim cash dividend Rs 1.50 per share 100% 383159

%50577% 639799

%100% 157% 156% 541%

Unappropriated profit carried forward

100% 45% 26% 34%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Mark up Income Mark upExpense

Net mark upbefore provision

Net mark up afterprovision

2002 2003 2004 2005



0%

100%

200%

300%

400%

500%

600%

Net Profit before tax Net Profit after tax

2002 2003 2004 2005

According to horizontal analysis of profit and loss account there is increasing trend. In 2005 there is increase in all factors such as interest income interest income interest income after provision and profit before and after tax because the trust of people on banks is increasing day by day. The increase in profit in 2005 is almost 5 times as compare to 2002.



Particulars 2002 2003 2004 2005ASSETS 100% 100% 100% 100%Cash 8% 9% 9% 8%Balance with other banks 0.92% 0.5% 2.2% 2.8%Lending to financial institutions

14% 3.8% 4% 3.3%

Investments_ net 38% 47% 26% 23%Advances – net 34% 36% 53% 60%Operating fixed assets 1.08% 1.3% 2% 27%Other assets_net 4% 2.4% 3.8% 0.4%Deferred tax assets_net 0% 0% 0% 0%

100% 100% 100% 100%LIABILITIES 100% 100% 100% 100%Deposits and other accounts 82% 81% 90% 83%Borrowings from financial inst.

10% 12.5% 3% 10%

Bills payable 2.8% 3.2% 3% 3%Other liabilities 4% 2.4% 2.6% 3.4%Deferred tax liabilities 0.48% 0.3% 0.8% 0%Sub ordinated loans 0.72% 0.6% 0.6% 0.6%Liabilities against assets 0% 0% 0% 0%

100% 100% 100% 100%NET ASSETS 100% 100% 100% 100%REPRESENTED BY Share capital 23% 28% 23% 18%Reserve 26% 29% 39% 58%Unappropriated profit 5% 3% 1% 1%

54% 70% 63% 77%Surplus on revaluation of assets

46% 30% 37% 23%

100% 100% 100% 100%


Assets

Investments

Cash and balances w ith treasury banks

Operatig f ixed assets

Deferred tax assets

Other assets

Balances w ith other banks

Lendings to f inancial institutions

Advances



Share capital

Reserves

Bills payable

Unappropriated profitOther liabilities

Deferred tax liabilitiesLiabilities against

assets subject to f inance lease

Sub-ordinated loans

Deposits and other accounts

Borrow ings from financial institutions


INTERPRETATION

In balance sheet of bank the most important item is earning assets. There are four earning assets. Bank has strong earning assets like advances investments and lending to financial institutions has major percentage in of assets of bank. In liability and equity analysis the Borrowings from financial institutions and deposits have major portion and reserve and share capital has major portion in equity



Particulars 2002 2003 2004 2005

Mark-up/return/interest earned 100% 100% 100% 100%



Mark-up/return/interest expensed 39% 28% 23% 16%

Net mark-up/interest income 61% 72% 77% 84%

Provision against non-performing loans and advances

0% -1.44% -1% -0.55%


0% 7% 5% 7%

Bad debts written off directly 4.6% 0.008% 0.01% 0%

Provision for potential lease losses 0.003% 2.2% 0.09% 0.006%

5% 8% 4% 6%

Net mark-up/interest income after provisions

56% 64% 72% 78%

Particulars 2002 2003 2004 2005

NON MARK-UP/INTEREST INCOME 100% 100% 100% 100%

Fee commission and brokerage income 35% 23% 47% 45%

Dividend income 11% 8.2% 9% 9%

Income from dealing in foreign currencies

19% 7.3% 12% 10%

Other income 15% 45% 14% 16%

Gain on Investments 30% 16.5% 19% 19.9%

Gain / Loss on trading in government securities

0% 0% -1.1% 0.01%

Total non-mark-up/interest income 100% 100% 100%% 100%%

NON MARK-UP/INTEREST EXPENSES 100% 100% 100% 100%

Administrative expenses 93% 87% 97% 98%

(Reversal) / Other provisions 6.5% 12.4% 2% -1%

Other charges 0.5% 0.6% 1% 3%

Total non-mark-up/interest expenses 100% 100% 100% 100%

INTERPRETATION University of the Punjab, Gujranwala Campus 128


In vertical analysis of profit and loss account the interest expense has decreasing trend from 2002 to 2005 but in 2005 there little bit increase in net interest income but almost have same trend. According to this analysis fee, commission and brokerage income has some worth in our income statement its almost one fourth or one fifth of our interest income and it has increasing trend.

The administrative expenses are also increasing from 2002 to 2005 but overall management is able to reduce expenses, so due to which there is continuous increase in profit before and after tax.



COMPARATIVE STUDY

In comparative study of financial statements, we compare the given year statements with different years or compare with competitors in industry. For this we conduct two types of analysis.

Liquidity ratios Time Series Analysis Cross Sectional Analysis



Ratios 2004 2005 Comments

Leverage Ratios

Proprietary Ratio 0.06 0.08 Good

Debt Ratio 0.94 0.92 Good

Debt to Equity 16.81 11.82 Good

Debt to Tangible Net worth 16.81 11.94 Good

Debt to Funds Ratio 0.62 0.63 Bad

External Internal Equity 16.81 11.82 Good

Profitability Ratios

Return on Assets 0.94% 3.0% Good

Return on Equity 16.71% 38.28% Good

Return on Investment 3.62% 12.84% Good

Return on fixed Assets 30.22% 109% Good



Average profit Per Branch 2329054 8546375 Good

Investors Ratios

EPS 7.21 21 Good

P/E Ratio 34.36 11.80 Bad

Dividend Yield Ratio 0.01 0.012 Good

Dividend Payout Ratio 34.67% 14.38% Bad

Book valve per Share 43.16 54.64 Good

Bank Special Ratios

Earning assets to Total assets 0.85 0.87 Good

Return on earning assets 1.83% 4.98% Good

Net margin to Earning assets 3.17% 5.73% Good

Loan loss coverage Ratio 9.97 times 11.47 times Good

Equity to Total assets 0.06 0.08 Good

Deposit time Equity 16.81 11.82 Good

Loan to Deposit 62.11% 78.62% Good

INTERPRETATIPN

Solvency Ratios Proprietary Ratio, Solvency Ratio, Debt to Equity are all in good position but only debt to fund ratio showing poor condition in this year.

Profitability RatiosAll the ratios involved in profitability showing better trend as compare to 2004 and this shows the efficient management of bank.

Investor Ratios University of the Punjab, Gujranwala Campus 133


Price Earning Ratio, Market/Book Ratio are both in good condition the difference as per previous year is very large. Only dividend yield and payout is decreasing due to lesser declaration of dividend in this year.

Bank Special RatiosThese ratios shows real picture of a bank. All these ratios showing better position as compare to 2004 so overall bank showing better position.



Ratios Bank Alfalah

MCB Comments

Leverage Ratios

Proprietary Ratio 0.04 0.08 Good

Debt Ratio 0.96 0.92 Good

Debt to Equity 33.6 11.82 Good

Debt to Tangible Net worth 14.62 11.94 Good

Debt to Funds Ratio 0.52 0.63 Bad

External Internal Equity 33.6 11.82 Good

Profitability Ratios

Return on Assets 0.685% 3.0% Good

Return on Equity 25.26% 38.28% GoodReturn on Investment 3.62% 12.84% Good

Return on fixed Assets 30.22% 109% Good

Investors Ratios

EPS 5.75 21 Good

P/E Ratio 15.65 11.80 Bad

Dividend Yield Ratio 0.02 0.012 Ok



Dividend Payout Ratio 24.14% 14.38% Bad

Book valve per Share 38.54 54.64 Good

Bank Special Ratios

Earning assets to Total assets 0.95 0.87 Good

Return on earning assets 1.83% 4.98% Good

Net margin to Earning assets 2% 5.73% GoodLoan loss coverage Ratio 5.65 times 11.47 times Good

Equity to Total assets 0.04 0.08 Good

Deposit time Equity 33.6 11.82 Good

Loan to Deposit 62.11% 78.62% Good

INTERPRETATION

MCB Limited is not only showing better trend in this year but also showing better position in industry. The major competitor of MCB is bank Alfalah and it is necessary to depict the real scenario of MCB financial ratios, we compare these with bank Alfalah ratios, so for this purpose we have done cross sectional analysis of MCB with bank Alfalah.

In this analysis, overall leverage position of MCB is good as compare to bank Alfalah. Profitability analysis is also better as compare to bank Alfalah. In investor analysis, P/E ratio is bad but overall market value of MCB is good as compare to bank Alfalah. Bank special ratios of MCB are also good as compare to bank Alfalah.



RECOMMENDATIONS

From the Quantum of the profit and its financial data it can

be easily judged that after privatization, MCB is performing

well. Its deposits are growing day by day and so its

profitability. The controlling body is responsible for the

productive performance of the Bank.

Following are my observation and suggestion to improve the

efficiency for the development of the bank.

There is a criticism on the banking management that

the salaries of the employees are decreasing in every



succeeding year. And I think this will shake the

confidence and working habit of the employees.

There is another recommendation about the bank that

there is no proper timing of the bank and there is made

an unnecessary delay in the banking transactions,

which might not be a good sign for the bank from future

prosperity point of view.

Staff turnover particularly of trained staff result in

financial and other losses. The amount spent by the

bank on employment, induction and training of

outgoing officers constitutes to beat till another officer

should ready prove this work. The exodus of bank

officer in the past has worsened the situation.

Most of the bank employees, are sticking to one seat

only with the result that they become master of one

particular job and loose their grip on other banking

operation. In my opinion all the employees should have

regular job experience all out-look towards banking.

The promotion policy should be adjusted.

Refresher Courses for the staff are most important in

any international organization. Alt the employees

should have these courses according to their

requirement. Foreign experts can also be called for this

purpose.



Every year some of the employees should be sent for

training to other countries and employees from other

branches should be brought here. Some more reading

material should be provided. The purpose should be to

Educate the employees with the advance studies in their

field. The employee should be provided the opportunities

to attend and participate in seminars and lectures on

banking.

Bank should give some more incentive to its employees

in order to remove the conflict between lower and

higher officers and should try to improve the working

condition of the bank.

As such system should be designed that every

employee who has some problems with his officers can

communicate it to the higher management and some

steps must be taken to improve that.

Recruitments should be strictly on merit basis and

induction should be after proper and extensive training.

Old and lazy staff should be replaced by young,

qualified and energetic staff.

Foreign branches should be opened in order to capture

the international market and to earn international

repute for the bank.

Working environment, equipment, furniture and staff



dressing should be according to the modern banking

style.

Proper attention should be paid to upgrade customer

services.

Bank should adopt the global organizational banking

structure to meet the international standards of

banking sector.


MCB Internship Report

Documents

Transcript of MCB Internship Report