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INTERNSHIP REPORT ON MUSLIM COMMERCIAL BANK LIMITED.

By

BENISH SHAKOOR Roll No # 1217

Submitted in partial fulfillment of the requirement For the degree of Master of Business Administration. at IMIT Group of Colleges. 2011-2012

Internship Report On MCB

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Start in the name of Allah, the one who controls our destiny. Start in ALLAH name, whose promise will never fail us. Start with ALLAH guidance, that which will never mislead me. Start with his help, that which will always suffice you.

Internship Report On MCB

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PREFACE
to join the MCB Faisalabad Medina town branch for the said propose for a period of 6 weeks Practical involvement was a great experience as interaction both with experienced executive and clients cemented the base of knowledge I have been acquiring in classroom. This internship report includes the material about MCB and different departments along with their working procedure. For the completion of this project I meet various persons of this organization. As for my knowledge and hard work is concerned, this report will provide a good in sight of MCB.

BENISH SHAKOOR

Internship Report On MCB

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Internship Report On MCB

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LIST OF ACRONYMS
MCB Muslim Commercial Bank SBP State Bank of Pakistan

EBIT Earning Before Interest and Taxes DD TT MT Demand Draft Telephonic Transfer Mail Transfer

RTC Rupee Traveler Cheque SEVP Senior Executive Vice President AVP Assistant Vice President SVP VP GM HO OGI Senior Vice President Vice President General Manager Head Office Officer Grade I

Internship Report On MCB

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TABLE OF CONTENTS
CHAPTER-1 BRIEF HISTORY
01 01 02 03 03 04 05

1.1 BRIEF HISTORY 1.2 BANKING IN PAKISTAN 1.3 NATIONALIZATION 1.4 PRIVATIZATION 02 1.5 AN OVERVIEW OF MCB 1.6 OBJECTIVES OF MCB 1.7 STRATEGIES TO ACHIEVE OBJECTIVES OF THE BANK 1.8 MCB VISION & MISSION

CHAPTER-2

DIVISIONS\ DEPARTMENTS OF MCB

06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 10 12 14

2.0 DIVISIONS OF MCB 2.1 HUMAN RESOURCE DIVISION 2.2 GENERAL SERVICE DIVISION 2.3 BUSINESS DEVELOPMENT & MARKETING DIVISION 2.4 FINANCE & TREASURY DIVISION 2.5 INDUSTRIAL CREDIT DIVISION 2.6 INTERNATIONAL DIVISION 2.7 CENTRAL ACCOUNT DIVISION 2.8 AUDITS AND INSPECTION DIVISION 2.9 ELECTRONIC AND DATA PROCESSING DIVISION 2.10 LEGAL AFFAIRS DIVISION 2.11 ISLAMIC BANKING DIVISION 2.12 TRAINING DIVISION 2.13 CREDIT MANAGEMENT DIVISION 2.14 DEPARTMENTS OF MCB 2.15 CASH DEPARTMENT 2.16 CLEARING AND COLLECTION DEPARTMENT 2.17 INLAND REMITTANCES

Internship Report On MCB

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CHAPTER-3

FINANCIAL ANALYSIS
16 17 17 21 32 34 35 35 37

3.1 PURPOSE OF FINANCIAL STATEMENT ANALYSIS 3.2 LIMITATIONS OF FINANCIAL STATEMENTS 3.3 TOOLS OF FINANCIAL STATEMENT ANALYSIS 3.4 BALANCE SHEET ANALYSIS 3.5 FORMULAE FOR THE CALCULATION OF THE RATIOS 3.6 RATIOS ANALYSIS 3.7 INTERPRETATION 3.8 LIQUIDITY AND CREDIT RISK MEASUREMENT 3.9 PROFITABILITY MEASUREMENT

CHAPTER#4
4.1 STRENGTHS 4.2 WEAKNESS 4.3 OPPORTUNITIES 4.4 THREATS

SWOT ANALYSES
41 42 44 45

CHAPTER-5

FINDINGS AND RECOMMENDATIONS

46 47 48 49 50 51 51 54

5.1 DEPOSITS DEPARTMENT 5.2 REMITTANCES DEPARTMENT 5.3 CASH DEPARTMENT 5.4 BILLS AND CLEARING DEPARTMENT 5.5 ADVANCES DEPARTMENT 5.6 FOREIGN EXCHANGE DEPARTMENT 5.7 OTHER FINDINGS AND RECOMMENDATIONS BIBLIOGRAPHY

Internship Report On MCB

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CHAPTER-1
1.1 BRIEF HISTORY

HISTORY OF BANKING

Consensus on the origination of word Bank is not yet reached at. Some authors opinion is that this word is derived from the words Bancus or Banque, which mean a bench and they further relate banking business inception to Jews in Lombardy. Other authorities state that the word Bank is derived from the German word Back which means Joint Stock fund and later on due to German occupation of Italy, this word was Italianated into Bank. Authors quote Babylonians (few quotes Chinese) who developed banking system as early as 2000. B.C1 A banker is described as a 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 and includes any post office savings bank.

1.2 BANKING IN PAKISTAN:

Banking started in Pakistan after the bold and emergent decision of formulation of SBP on July 30, 1948. Thereafter this sector has witnessed enormous growth. In 1974 banks were nationalized, in the hope that new era of growth could be achieved through it.

Internship Report On MCB

__________________________________________________________________ However the process is reverse since 1991, up till now MCB, ABL, and UBL have been privatized and HBL is in the process of its privatization. On 14th August 1947, 487 branches of different banks were operating in Pakistan. By 30th June, 1948, 292 branches winded up their business in Pakistan and the remaining 195 branches restricted their banking operations to a minimum level. The only bank, which shifted its head office from Bombay to Karachi, was the Habib Bank Limited. MCB with the assistance of Quaid-e-Azam Mohammad Ali Jinnah, started operation in July 9, 1947 with an Authorized capital of Rs.3 crores. Indo-Pak subcontinent, the Bank moved to Dhaka from where it commenced its business in August 1948. And in 1956 the bank shifted its head office to Karachi, where it is still working. In 1948 Ms. Ispahanani and Mr. Abdul Hameed Adamjee purchased the bank. At that time the bank showed a historical performance and profit.

1.3 NATIONALIZATION
In 1974 the government felt a harsh need of nationalization of banks and financial institution and the nationalization act was introduced. Under this act, MCB was the first bank, which was nationalized. In the same year Premier Bank was merged with MCB and it started work as a government bank this nationalization affected the bank badly.

1.4 PRIVATIZATION
All the financial institutions and banks did not show good performance after nationalization, and again the government felt a big need to privatize these banks. In 1991 the bank was privatized again. The government of Pakistan transferred the management of the bank to National group, one of the leading groups in the field of business. They were sold 25% shares. Now this group has 50% of the total shares. Government has 25% shares and general public also has the same shares. Internship Report On MCB 9

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1.5 AN OVERVIEW OF MCB

The MCB was established one month before the independence in June 1947 first head quarter in Calcutta and after independence it was shifted from Calcutta to Dhaka and afterward its Head quarter was shifted from Dhaka to Karachi in 1948. Among the other 22 scheduled banks with 3525 branches network nationalized on 01st January, 1947through the nationalization of Banks Act, 1974 under the nationalization policy of the Government. MCB was also nationalized and at that time of nationalization Premier Bank was merged in M.C.B LTD in 1974. After the failure of the communism, it was realized though the world the idea of nationalization was not correct and has no any positive effects on economy. This idea developed especially in 1980 decade under which in sub-continent of Asia its importance was also realized. In Pakistan Privatization and de-regulation policy was started in 1998 under this policy the first unit privatized was M.C.B, with a view to stable the economy and to reduce the burden on national exchequer of other sick units. In 1990 this bank was announced for Privatization on the grounds that 51% shares would be for general public out of which 26% shares would be offered to a particular party, which will take administration of bank and lead by Mian Mohammad Mansha who was the first chairman of MCB LTD. Now out of 10% shares only 14.90% shares are being held by State Bank of Pakistan and all other being held by individuals, directors and joint Stock Companies etc (Annual Report of M.C.B).

1.6 OBJECTIVES OF MCB

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__________________________________________________________________ The main objectives of MCB are to earn Profit by investing the money of depositors, who cant utilize that money for getting required return. So the bank invests that money in the shape of advances and shares, the return or interest Charged on those advances with the depositors. Beside above-mentioned objectives the Bank serves the society by facilitating them in the shape of advances to industries, agriculturists etc. it also provides employment to people; it help in developing economy of the country. It also provides facilities in doing business with other countries.

1.7 STRATEGIES TO ACHIEVE OBJECTIVES OF THE BANK

MCB Limited is a business entity and all its activities are directed towards the prime objectives, which is profit. But the only difference is that it sells intangible products i.e. the services. Now in order to achieve this important goal, the management has evolved multidimensional policies. Especially after privatization of the bank on April 1991, a very enlightened management took the charge of MCB Limited. Mr. Husain Lawai the renowned and experienced banker assumed the office of the Chief Executive i.e. the President of the MCB. Major aspects concentrating are the following: 1. Effective use of electronic media 2. Enlighten Personnel Policies Mainly the whole program was based on the following points. A) Special preference was given to MBA's and then to the experienced staff of BCCI. Ultimately the 1st batch of MBA's was hired in July 1992. The management was aware of the fact that if you offer peanuts, you will find only monkeys, therefore they offered attractive packages and thus was able to succeed in skimming cream of the market.

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__________________________________________________________________ B) A comprehensive six months theoretical program was devised at MCB Staff Colleges, located at Karachi and Lahore for providing some reasonable knowledge to the newly hired qualified staff. The stated theoretical training program was supplemented by the practical branch training.

3. Compatible Package After privatization the staff salaries have been revised three times. The first time was 35%, the second was 32%, and the last one was 20%. 4. 5. 6. 7. 8. Excellent Working Environment Modernization of Branches Launching of New Products Decentralization of Authority Effective Reward Punishment Policy.

1.8 MCB VISION & MISSION Vision Statement

Challenging and Changing the Way you Bank.

Mission Statement
MCB Banks team of committed professionals is dedicated to maintaining long term customer relationships through outstanding service and convenience.

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CHAPTER-2

DIVISIONS /DEPARTMENTS OF MCB

2.0 DIVISIONS OF MCB

Following are the main divisions established in the head office taking the responsibility of their respective functions under the guidance and instructions of their respective heads.

2.1 Human resource division

All matters related to staff as pension, provident fund medical allowances, recruitment policy and other staff matters are dealt here.

2.2 GENERAL SERVICE DIVISION

This division has been created to look after and maintain banks properties. The function of this division is explained as under: Purchase or lease branches premises. Purchase/sale of furniture, fittings, banks vehicles etc. Proper maintenance of banks assets. Looking after communication system.

2.3 BUSINESS DEVELOPMENT & MARKETING DIVISION

This division is established for the promotion of the business of the bank and sets the deposit targets and then makes the schemes to achieve those targets. The functions of this division are categorized as under: Publicity department. Branches opening/closing shifting. Shares floatation/government deposits.

 Consideration on complaints. Utility bills collections. Hajj arrangements. New and innovative policies.

2.4 FINANCE & TREASURY DIVISION

Finance and treasury division deals with following functions: Inward and outward remittances are recorded. Surplus funds are utilized (to purchase the shares of other companies). Balance sheet of the bank is prepared. Public sector advances are released. The safe custody of the securities is maintained. Declaration of the rates of return on PLS Account.

2.5 INDUSTRIAL CREDIT DIVISION

Industrial credit division was established in 1983 with the object of providing loans for different industrial projects and to assist in economic Development of the country and also to invest money for the purpose of earning profit.

2.6 INTERNATIONAL DIVISION

International division deals with the supervision of the foreign exchange function of branches. It solves the problems of the branches regarding international trade.

2.7 CENTRAL ACCOUNT DIVISION

The central accounts division is categorized by the functions as under: Payment section (purchases and procurement and fringes benefits to executives). Reconciliation. Stationery. Zakat and Usher section.

2.8 AUDITS AND INSPECTION DIVISION

Inspection division is established so as to detect any fraud forgery in the branches and sudden visits to branches to keep them alert and attentive during banking hours.This department is working for the improvement of auditing system and continuously searching the best possible means of inspection for effective auditing. MCB uses the both methods i.e. internal audit and external Audit.

2.9 ELECTRONIC AND DATA PROCESSING DIVISION

The function of this division is to record the business of the bank with computer programming, and taking all the transactions and dealings of the bank recorded for the particular period.

2.10 LEGAL AFFAIRS DIVISION

This division deals in following matters: Handling on property documents sent to them by various circles and head office i.e. loan documents etc. Follow up, recovery cases and cases of fraud against employee. The cases against bank are dealt too. Give opinion on various accounts i.e. partnership, deceased and pension accounts. It gives opinions on all-important legal matters.

2.11 ISLAMIC BANKING DIVISION

It is established with the aim of introducing the Islamic Banking at branches in different cities.

2.12 TRAINING DIVISION

The training division is established, so as to train the newly employed staff and the promoted staff to keep them efficient on service. At Presented their two training centers providing facilities to new employees in the country which are situated in Karachi and Lahore.

2.13 CREDIT MANAGEMENT DIVISION

This division generally looks after the credit policy of bank .It also maintains and approves the advances and loans. It sets the rate of interest over the loan for specific period. It usually receives applications from intending borrowers and submits the same application to higher authority for approval.

2.14 DEPARTMENTS OF MCB

MCB is one of the largest private banks of Pakistan. It offers a well-organized structure of specialized services distributed among its various departments. This departmental segregation provides MCB with more proper and professional approach and efficient means of performing each service. Departmentalization makes the services more proficient and specialized procedures for every job are used. At each branch level the duties are divided into seven departments. There is a chief manager at the top level of each branch. He is responsible for the overall performance and working of his branch. The authority is then divided into two heads at the next level. There is a credit manager who handles the credit department operations of the branch. The other one is the operations manager who is responsible for all the rest of the departments. Each branch is divided into the following departments:

Cash department Clearing and collection department Remittance department Foreign exchange department Credit department The functions of each department and their operations are explained as follows:

2.15 CASH DEPARTMENT

The main function of this department is Payment and receipt. It collects and pays money to the customers, on behalf of their account, through cheques or any other negotiable instruments. There are three main functions of the cash department: Payment Clearing Receipts

2.15.1 Payment
The cash department issues payments on request. The checks are received by the department and after their clearance cash is issued to the check-holder. The payment deals with that customer who withdraws money through cheques or any other negotiable instruments. The cashier keeps the record of all payments in the register book. At the end the payment and receipt cashier checks the balance and count the cash. They verify that both register cash and the cash in hand are balance.

2.15.2 Clearing
Another main aspect is the clearance of checks. It includes verification of proper date, amount, endorsements, such as issue stamp, clearing stamp and back-side stamp, and

signature. After proper verification of checks the payments are issued. At the issuance of cash the cash is debited in the clients account.

2.15.3 Receipts
It is responsible for taking cash deposits from its clients who want to store or invest their surplus reserves. In the receipt section, the cashier receives money from the customers on behalf of any individual or the company. Most of the receipt goes through the accounts of the MCB.The cash receipts are done in two forms: Collection of money from customers in their accounts Collection of utility bills

2.15.4 Collection of money from the customer in their accounts

The cash is received from the customers in their accounts. At the time of cash receipt, the clients accounts are credited. Every account holder deposit money in his account, they deposit the money through the bank receive voucher, which is of specific nature i.e. it may be PLS, current or MBKS etc. So the cashier deposits the money that is received. He keeps in record the voucher no, amounts, a/c no etc and then presents to the computer department for posting.

2.15.5 Collection of utilities bills

MCB also offers the facility of payment of utility bills. The customer can deposit electricity, gas, and telephone bills through the bank. The bills are received, stamped and kept in record. Then it is posted in the corresponding accounts of the bank in which the money is deposited.

It also provides this convenience to private companies as well. Private companies also deposit their bills in the MCB accounts, which are similarly received, kept in record and deposited in the corresponding accounts.

2.16 CLEARING AND COLLECTION DEPARTMENT

Clearing implies a system by which banks exchange cheques and other negotiable instruments drawn on each other within a specified area and thereby secure payment for their clients through the clearinghouse at specified time in an efficient way. The major operations of clearing departments are related to the check verification. This is divided as follows: Transfer of checks Clearing of checks

Clearing department handles check related issues. It handles the checks of different other banks such as Allied Bank, NBP etc. At the time of cash deposits, different checks from other banks also come to MCB for deposits. This is the job of clearing department to sort out checks of each bank. Then the net balance for each bank is calculated and adjusted. The procedures for check transfer and clearance are as follows:

2.16.1 TRANSFER OF CHECKS

It deals within the inter-bank transfer of checks. Suppose a person X gives a check of MCB to another person Y who also has an account in MCB, the clearing department will handle it. The clearing department simply debits one account and credits the other one.

Transfer checks X Gives check Y MCB Bank X account Dr Y account -- Cr

2.16.2 CLEARING OF CHECKS

It also deals with the checks of other banks. Suppose an NBP account-holder gives a crosscheck for MCB. Similarly, MCB account-holders give check to people having accounts in other banks; these all banks need to clear their overall balances with each other. The clearing department does this.

Clearing checks MCB Account-holder X Cross check NBP Account-holder Y NBP Bank MCB Deposited

The clearing department makes different envelops for different checks of each bank. It then sends these envelops to the clearinghouse. In the clearinghouse, representatives of different banks take the balances of all the checks and the balances are cleared. Now National Institution of Facilitation Technology (NIFT) takes the job of clearinghouse. It not only separates balances for each bank but also for each branch. The clearing department of MCB separates checks of each bank in different envelops and sends it to NIFT. After NIFT sends the checks to other banks, they send an OK report to NIFT which sends that report back to MCB. This ensures that all checks are safely deposited in the respective banks.

2.16.3 BILLS COLLECTION

The bills collection is the key department in each branch. The objective of this department is to receive the cheques of different bank of different area. Often the cheque is drawn to the clients of another bank or account holder of the MCB and similarly the customer of another bank draw cheque to MCB account. In both cases the cheque is cleared, endorsement conformed, or takes the disbursed

Guarantee. And then deposit to the corresponding department or banks or whatever the case may be. Shortly the bills are divided in the following two main categories. Local bills collection (LBC) Country bills collection (CC)

2.17 INLAND REMITTANCES

This means transfer of funds from one branch to another within the country through following banking instruments Demand Drafts (DDs) Telegraphic / Telex Transfers (TTs) / Fax Press Mail Transfers (MTs) Mail Transfer When a customer requests the bank to transfer his money from this bank to any other bank
or the branch of some other bank in the city, outside the city or outside the country, the first

thing he had to do is to fill an application form. In which he states that I want to transfer the money from this bank to that bank by mail. If the customer is the account holder of the bank, it will debit his account and the concerned officer will fill the six different forms to make the transfer complete. The five forms used for this purpose are listed below:

2.17.1 Demand Draft (DD):

Demand draft is another way of transfer of money from one bank to another bank. Unlike pay order, a form is required to be filled for the issuance of the demand draft in which necessary particulars about the beneficiary and the sender are given. The sender deposits the amount of DD plus commission and other charges on the bank counter, from where he is given a receipt and in accordance with this receipt he is issues a demand draft.

After issuing the DD, the remittance department sends credit advice to the branch to which the DD is sent, when the responsible branch receives the DD from the originating branch, they credit it, and when the DD comes for clearing they debit the account. Up to 100,000 RS 150 for a/c holder RS 250 for non a/c holder OVER 100,000 0.1% for a/c holder 0.2% for non a/c holder

In addition to above charge a fixed excise duty of Rs. 2 per draft.

2.17.2 Telegraphic Transfer (TT):

With the changing requirements of customers, MCB has introduced a faster mode of transfer of money. Like DD the sender is required to apply through a form in which he will give all the necessary details about the sender and the beneficiary. The sender deposits the amount of DD plus commission and other charges on the bank counter, from where he is given a receipt, the remittance officials send a telegram to the concerned branch and they make payment to the customer. Vouchers are sent by ordinary mail to keep the record. On TT, no excise duty is charged only commission and telegram charges are charged.

CHAPTER-3

FINANCIAL ANALYSIS

Financial statement is any written report that purports to show the financial condition of an organization. It may include balance sheet, income statement, cash flow statement, and a report of changes in net worth. For stakeholders of a business, analysis of the financial statements is the primary way to critically examine its financial position, in order to seek answers to varying queries. Publication of financial statements is a statutory requirement for corporations chiefly addressed to stakeholders outside the business, albeit they serve the management for internal control in many ways. The fact that the audit carried out to uncover any material irregularity, is based on sample of items, leaves some room for incredulity. The Financial

Statements of a bank particularly need great care in analysis, as the nature and scope of assets and liabilities differs from that of manufacturing concerns. For example verification and valuation of plant and machinery, stock and tools etc. is grounded on some basic sources as contrary to verification and valuation of deposits, advances, and investments.

3.1 PURPOSE OF FINANCIAL STATEMENT ANALYSIS

Analysis is generally directed towards delving into three broad aspects of a business, which are the driving forces behind the stakeholders decisions. These are: 1. Solvency of the business. 2. Stability of the business and Profitability of the business. The solvency of a business means its ability to meet its liabilities as it mature. The solvency of the business is analyzed by the means of financial statements presently and also in any future adverse business condition.

Stability of the business is measured by its ability to meet interest and principle payment requirements on outstanding debt and also its ability to pay dividends to its stockholders regularly. Profitability is measured by the success of a business in maintaining and increasing the owners equity. The nature and amount of earning as well as their regularity and trend are all significant in this appraisal.

3.2 LIMITATIONS OF FINANCIAL STATEMENTS

Financial statements are based on historical cost convention. They do not portray the real or market value of the items on the face financial statements.

The credibility of financial statements is confined to the audit carried out, and most audit evidence is persuasive rather than conclusive. Financial statements do not disclose any significant future events or contingencies. Financial statements do not compare the actual figures with any standards set. Qualitative information about the business is not found in financial statements. And finally the company management often is under heavy pressure to report rising earnings, accounting policies may be tailored towards this objective.

3.3 TOOLS OF FINANCIAL STATEMENT ANALYSIS 3.3.1 Rupee and percentage changes
In this method the rupee amount of change from year to year and the change in percentage are determined.

3.3.2 Trend percentages

In this method, the changes in financial statement items form a base year to following years are determined to show the extent and direction of change.

3.3.3 Component percentages

Component percentages are calculated to indicate the relative size of each item included in total. For example, each item on balance sheet is expressed as a percentage of total assets.

3.3.4 Ratio analysis

Analysis of relationship of different aspects of financial statements. Comparative Balance Sheet For the years ended Dec. 31, 2009 2010. (Rupees 000) 2009 2010

Amount

Percent Amount

Percent

Assets
Case hand Balance with treasury banks Balance with other banks Lending to financial institutions Investments (net) Advances (net) Other asset Operating fixed assets Deferred tax assets Total Assets Liabilities Bills Payable Borrowing from financial inst. Deposits and other accounts Subordinate loans Liabilities against assets Subject to finance lease Other liabilities Differed tax liabilities Total Liabilities plus stockholders equity Share capital Reserves Unappropriated profit Surpens on revaluation of asset 8k,578,240 18066493 2423140 2278980 283940 1900962 6887022 Total liabilities and Share holders equity 187053515 4.56% 96.32% 1.30% 1.22% .15% 1.02% 3.68% 100% 9045634 1838545 223439676 2665455 3026517 621985 5384934 11698891 235138567 3.85% .78% 95.02% 1.13% 1.29% .26% 2.29% 4.98% 100% 8,097,178 8946624 14544451 4.33% 4.78% 82.62% 6,2661,957 21,987,824 182,705,716 1,600,000 2.66% 9.35% 77.70% ..68% 21,259,900 8,025,689 15470519 55,432,235 76584120 11,400,906 3,659,646 220500 187053515 11.37% 1.62% 8.27% 29.63% 40.94% 6.09% 1.99% .12% 100% 17,867,991 2,154,190 33874620 89609821 78,923,737 8,883,163 3,825,045 235138567 7.60% .92% 14.61% 38.11% 33.28% 3.78% 1.63% 100%

2008

2009

2010

2009 over 2009 over 2010 2010

Liabilities Bill payables Borrowing institutions Deposit and other accounts Subordinated loans 135,990147 154544451 182705716 18.22% 1600000 13.64% from 7,803,443 financial 5,856,198 8097178 8946624 6261957 22.66% 3.76%

21987824 145.76% 52.77%

Liabilities against assets subject to Nil finance lease Other liabilities Deferred tax liabilities Total liabilities Net assets Represented by: Share capital Reserves Unappropriated profit C/F 2,202,855 2,277,630 3,185 8,43,8,055 Nil

8,578,240 9,045,634 5.44% 1,838,545

1.66% 13.96% 23.14%

158,087,843 180166493 223439676 24.01% 5592743 887022 11698891 69.86%

2,423,140 2,665,455 10% 2,278,980 3,026,517 32.80% 2,83,940 6,21,985

9.99% 86%

119.05% 8814.91%

Surplus on revaluation of assets 1,109,073 (net) Share holders equity 5,592,743

1,900,962 5,384,934 183.27% 71.40%

6,887,022 11,698,891 69.86%

23.14%

BALANCE SHEET ANALYSIS PERCENTAGE CHANGES (Rs. In 000)

2008 2009 2010 2009 over 2009 over 2010 Assets Cash and balance with treasury 12,571,424 banks Balances with other banks 4,757,413 3,025,689 15,470,519 55,432,235 76,585,999 11,400,096 3,659,646 2,20,500 2,154,190 33,874,620 89,609,821 78,923,737 8,883,163 3,825,045 28.80% 36.40% 118.96% 42.56% 61.65% 3.05% 28.58% 11.32% 21,259,900 17,867,991 15.95% 69.11% 2010

Lending to financial institution 10,852,094 Investment (net) Advances (net) Other asset Operating fixed assets Deferred tax assets Total Assets 43,110,947 86,359,139 13,203,910 3,604,356 2,55,780

22.08% 13.66% 4.51% 100% 1.53% 13.79% 7.06%

174,715,063 187,055,394 235,138,567 25.70%

3.4 BALANCE SHEET ANALYSIS

The analysis of balance sheet is an effort to evaluate the financial strength of the business at a given date.

3.4.1 Assets
Total assets increased by 25.70% during 2009 over 2010, primarily based on deposit growth. Increase in balance sheet volume is a healthy trend apparently, but it needs further investigation. The balance sheet figures are reported on the day, books are closed. These figures are not based on averages; neither financial statement discloses changes during the year. Specific transactions may be carried out on the day to show favorable balances. For instance on the day of closing of accounts, paying off bills payable will improve the working capital or current ratio. In the following paragraphs assets have been analyzed segments wise.

3.4.2 Cash and balances with treasury banks

This head of balance sheet experienced a phenomenal (base year 2010) decrease of around 55% as compared to 28% decrease in the last year. Further breaking down the information, we come to know that major portion of these funds i.e. around 13 billion Rupees are lying with State Bank of Pakistan mostly in local currency current deposits. This is a statutory practice by commercial banks to deposit extra amount of cash with State Bank of Pakistan. Branches deposit their extra cash with head office, which subsequently deposits this amount with central bank wallets, if not utilized by the Bank in the mean time. Cash and Balances with Treasury Banks are around 8% of the total assets, indicating that cash balances are not fully utilized.

3.4.3 Balances with other banks

The amount standing at around 3 billion of Rupees has decreased by 29% (as compared to previous year). The account is chiefly held with foreign banks both in form of current account and deposit account. The account is .92% of total assets, which is a

satisfactory indication. The account is utilized for import and export transactions with foreign banks. The balances with other banks in normal circumstances carry an interest rate of between 0% to 6.55%, so the amounts in these accounts do not generate much revenue directly, but the services funded by these accounts have some worth. The Reduction in this account can be associated with watchful economic activity because of depending international recessionary trends.

3.4.4 Lending to financial institution

Lending to financial institution has increased by 119% as compared to 42.5% increase in last year. Lending to Financial Institutions has two fragments: Call Money Lending. Repurchase Agreement Lending. Call Money Lending has increased from Rs. 6 billion to 13.14 billion, while Repurchase Agreement Lending has increased from Rs. 4.7 billion to Rs. 10.293 billion. Repurchase Agreement (RPs) is an arrangement where the MCB purchases Govt. Securities from borrower Financial Institutions (FIs) with the end to resell to FIs at a prescribed price on a stated date. The effective interest rate is given by the difference between the purchase price and the sale price. The maturity of RPs is generally very short, from three to 14 days, and sometimes overnight. The RPs are auctioned by SBP almost daily. Repurchase Agreement Lending by MCB is fully secured against Market Treasury Bills, Pakistan Investment Bonds, and Federal Investment Bonds, thus eliminating any risk. So lending to financial institutions are highly liquid and very secure, reaffirming the Banks conservative policy of credit.

3.4.5 Investments
Investments at the face of balance sheet amounted to around Rs. 89.609 billion. Investments increased by 81% as compared to a increase of 28% in the last year.

Commercial banks investments essentially include government debt securities, to minimize credit risk. In Pakistan the capital and money markets have not matured enough to generate funds for projects. The investments have been categorized by four classes: Available-for-sale Securities. Held-to-maturity Securities. Subsidiaries. Associated Undertakings. Almost 85% of the investments are held in available-for-sale securities, which show the strong liquidity position of the Bank. These securities include Market Treasury Bills, Federal Investment Bonds, Pakistan Investment Bonds, Listed TFCs, Shares in Listed Companies etc., which are generally, considered very safe mode of investment. Among these securities T-Bills are highly liquid. Interest rate carried by these securities is not very high but the main concern is the liquidity sought for prudent banking Securities given as collateral has evidenced a sharp decrease of around Rs. 7 billion, which can be ascribed toward decline in Borrowings from Financial Institutions. There is no out of usual provision for diminution in the value of investments, which indicate the overall stability in the money market. Among the securities held-to-maturity, half of the lot include TFCs, Debentures, Bonds, PTCs, which carry as high as 18% interest rate. The new entry in subsidiaries was introduction of MNET Services (Pvt) Ltd. it is the second technological initiative in a row, after the successful operation of ATM network. Investment in associated undertakings remained unchanged.

3.4.6 Advances
The total amount of advances stood at Rs. 79 billion. Advances increased 3.05% from previous year, as compared to a decrease of 11% in the same in The previous year. The increase can be attributed to two major factors. One was the increase in demand for credit from the manufacturing and export clients due to the

situation prevailing after offer the govt. good economic policies (increase in foreign exchange reserves). And second was the higher steadiness demand for seasonal financing due to speed in the sugar season and steadiness in cotton prices leading to a speed in the purchase of cotton. Short-term advances are less than Long-term advances by Rs. 50 billion. We can predict the high pace of long-term development projects from this piece of statistics. If we look at the component balance sheet analysis, it reveals that net advances are around 33% of total assets, while the same were around 41% of total assets in the previous year. At the same time lending to financial institutions and investments has increased as a proportion of total assets. The bank further needs to lower the mark-up rate broaden their deposit base, and a bit relaxation in conservative credit policy.

3.4.7 Other assets

Other assets decreased by 22% from previous year, as compared to an increase by 21% in the previous year. The major portion of this item comprises of taxation and income/markup accrued on advances and investments. No explanation could be found regarding the amount of taxation, which is Rs. 5 billion of worth. This amount may include advance taxes paid and tax rebates and refunds.

3.4.8 Liabilities and shareholders equity

Deposits and Other Accounts A profound increase in deposits is the main cause of increase in Balance Sheet footings. Deposits and other accounts were at Rs. 182 billion, increased by 18% from previous year. According to component balance sheet deposits are 78% of balance sheet total. For a banking concern it is a norm to have such a composition of balance sheet. Most

of the deposits i.e. 93.4% are held by customers in local currency. Deposits in local currency have increased move as contrary to the slight increase in foreign currency deposits during previous years. Major portion of deposits comprises of saving deposits i.e. 60% of total deposits. Fixed deposits are 15% and current accounts are 23% of total Deposits. It is important to note that deposits increased despite a decrease in PLS rates. The major increase has been evidenced in saving deposits, which can be attributed to targeted sales of products like ATM, and some attractive saving schemes.

3.4.9 Borrowings from financial institutions

Borrowing from financial institutions has increased by 145% as compared to an increase of 52% in the last year. Further segmentation reveals that the major increase happened in repurchase agreement borrowings i.e. around Rs. 8 billions. The account is basically a contra account of repurchase agreement lending and the amounts in these accounts fluctuate very rapidly. Borrowings from State Bank of Pakistan under the head of export refinance was the second major account to undergo the increase of around Rs..3 billions. This account is used for extending the export finance to customers, as giving the right to SBP to recover outstanding amount from the Bank by directly debiting current account maintained by the Bank with the SBP. The increase reveals high demand for export refinance by customers due to higher activity in foreign trade.

3.4.10 Bills payable

Bills payable decreased by around 22% as compared to 4% increase in the last year. it shows an improved working capital of the business. Bank is able to pay its short term liabilities at time.

3.4.11 Share capital

The amount of share capital was at Rs. 2.6 billion, with increase of 10% from previous year. The only reason for the increase in share capital is the issue of Rs. 220 million worth of bonus shares during the year.

3.4.12 Reserves
The reserves of the bank registered an increase of only 32% in the year 2009with the year-end figure of Rs. 3 billion compared to last years figure of Rs. 2.27 billion. While in the year 2008, we had seen an increase of .1% in the banks reserves.

3.4.13 Unappropriated profit

The Unappropriated profit for the year 2009 registered a increase of 119.05% compared to last years remarkable increase of 815%. That is, profit for last year was Rs. 284 million whereas for the year 2010 it was Rs. 621 million.

3.4.14 Surplus on revaluation of assets

The bank showed a surplus of Rs. 53 billion at the end of the year, after the revaluation of its assets; an increase of 183% over last years figures. The fixed assets of the bank showed a increase of Rs. 165.3 million while the securities held by it registered a significant increase of Rs. 4.8 billion in their value.

The revaluation of assets was carried out by Iqbal Nanjee & Co., Valuation and Engineering Consultants on the basis of their professional assessment of the market values.

3.4.15 Shareholders equity

Shareholders equity at the end of the year 2009 was Rs. 11.6 billion showing an increase of 69% over last years figure of Rs. 6.9 billion. This can be attributed to the higher profits, the issuance of bonus shares, and the surplus declared on revaluation of assets.

MCB Income statement For the years ended Dec. 31, 2008 2010.
(Rupees 000) 2010 2009 %2009 over 2010
Markup/return/interest earned Markup/return/interest expended Net markup/interest income Provisions Provision for diminution in the valve of invest Provision advances Provision for potential to lease losses Bad debts written off directly Total provisions Net markup/interest income after provisions Non-markup/interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Other income Total non-markup/interest inc. 907071 297748 503593 881746 2,590,158 868637 243994 687854 400140 2,200,625 4.42% 22.03% 26.78% 120. 35% 17.70% 512 721105 721,617 8589570 636 448999 2,216,007 7272321 19.49% 60.60% 67.43% 18.11% against non performing loans and 62064 1704308 100% 100% 15,385,869 6,074,682 9,311,187 17,033,225 7,544,897 9,488,328 9.67% 9.67% 1.86%

11,179,728 Non markup/interest exp. Administrative exp. Other provisions Other charges Total non-markup/interest exp. Extra ordinary and exceptional items Profit before taxation Taxation current for the year For prior years Deferred 8077395 1313 8078708 3,101,020 1,531,551 (169125) 1362,426 Profit after taxation 1,738,594

9,472,946

18.01%

7331623 40,000 147 7,371,770 2,101,176 957,720 35280 993,000 1,108,176 3185

10.17% 100% 793.19% 9.58% 47.58% 59.91% 579.37% 37.20% 56.88% 8814.9%

Unappropriated profit b/f transfer from surplus on 283940 revaluation of fixed assets Prior years Current years (net of tax) 194751 60916 539607 Profit available for appropriation 2278201

3185 1,111,361

16842.13% 104.99%

MCB Income statement For the years ended Dec. 31, 2009 2010.
(Rupees 000) 2010 Amount
Markup/return/interest earned 15,385,869

2009 Percent Amount

137.62% 17,033,225

Percent
179.80%

Markup/return/interest expend Net markup/interest income

6,074,682 9311187

54.34% 83.29%

7,544,897 9488328 62064

79.65% 100.16% .65%

Provision for diminution in the valve of investment Provision against non-performing earns and advances Provision for potential lease losses Bad debts written off directly Total provisions Net markup/interest income after provisions Non-markup/interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Other income Total non-markup/interest income Total income Non-markup/interest expenses Administrative expenses Other provisions Total non-markup/interest exp. Extra-ordinary and exceptional item Profit before taxation Taxation for current year For prior years Deferred Total taxation Profit after taxation Unappropriated profit b/f 8077395 8078708 3,101,020 1531551 (169125) 1,362,426 1,738,594 283940 907071 297748 503593 881746 2,590,158 11,179,728 512 721105 721617 8589570

1,704,308

17.99%

.0004% 6.45% 6.45% 76.83%

636 448999 2216007 7272321

0006% 4.74% 23.39% 76.77%

8.11% 2.66% 4.50% 7.89% 23.17% 100%

868637 243994 687854 400140 2,200,625 9,472,946

9.17% 2.57% 7.26% 4.22% 23.23% 100%

72.25% 72.26% 27.74% 13.70%

7331623 40,000 7371770 2,101,176 957720

77.39% .42% 77.82% 22.18% 10.11% .37% 10.48% 11.70% .03%

(1.51%) 35280 12.19% 15.55% 2.54% 993,000 1,108,176 3185

Transfer from surplus on revaluation of fixed asset: Prior year Current year-net of tax. 194751 60916 539607 Profit available for appropriation 2,278,301 1.74% .54% 4.83% 20.38% 3185 1,111,361 .03% 11.73%

3.5 FORMULAE FOR THE CALCULATION OF THE RATIOS

i) Current Ratio = Current Assets Current Liabilitie s

ii)

Cash Ratio =

Cash (actual) and with trea sury bank current liabilitie s Total external liabilitie s total assets Total external liabilitie s total equity (internal liabilitie s) Total lendings total deposit Total investment s (net) total deposit Total advances (net) total deposit

iii)

Debt Ratio =

iv)

Debt Equity Ratio =

v)

Lendings Deposit Ratio =

vi)

Investment Deposit Ratio =

vii)

Advances Deposit Ratio =

viii)

Gross Profit Margin =

Net mark - up/interes t income mark - up/interes t/return earned Total profit before taxation mark - up/return/ interest earned

ix)

net profit margin before tax =

x)

Net profit margin after tax =

Net profit after taxa tion mark - up/return/ interest earned

xi)

Asset turnover ratio =

Total revenue (mark - up/interes t earned) Total assets

xii)

Return on assets =

Total profit before taxation Total equity Net income - preferred dividend no. of common share outstandin g Operating expense total expense Operating exp ense total revenue

xiii)

Earnings per share =

xiv)

Operating expense-total expense ratio =

xv)

Operating expense total revenue ratio =

xvi)

Operating expense total assets ratio =

Operating exp ense total asets ratio Operating expense Total deposit ratio

xvii)

operating expense total deposit ratio =

xviii) price earnings ratio =

Face, price per share earnings per share

xix)

dividend yield =

Total dividend total shares outstandin g

3.6 RATIOS ANALYSIS

Liquidity and credit risk measurement 2008

Current ratio Cash ratio Debt ratio Debt equity ratio Lending deposit ratio Investment deposit ratio Advances deposit ratio Profitability measurement Gross profit margin Net profit margin before tax Net profit margin after tax Asset turnover ratio Return on assets Return on equity Earning per share Operating expense total expenses ratio Operating expense total revenue ratio Operating expense total assets ratio Operating expense total deposit ratio .49 .09 .05 .08 .76% .13 3.03 .53 .59 5.10% .06 .56 .12 .07 .09 1.12% .16 4.57 .49 .43 3.94% .05 .60 .20 .11 .06 1.32% .19 6.52 .57 .52 3.43% .04 .98 .08 .97 30 .04 .27 .63

2009
1.00 .12 .96 26 .10 .36 .49

2010
.63 .03 .95 19 .18 .49 .43

3.7 INTERPRETATION
Ratio is a simple mathematical expression of the relationship of one item to another. Ratios are particularly important in understanding financial statements because they permit us to compare information from one financial statement with information from another financial statement. There are some limitations to financial ratios. First different

firms use different accounting policies; secondly different businesses have different volumes and different conditions.

3.8 LIQUIDITY AND CREDIT RISK MEASUREMENT 3.8.1 Current ratio

It is used to determine the short-term debt-paying ability of the business. The ratio is computed by dividing total current assets by total current liabilities. The higher the current ratio, the more liquid the company appears to be. According to the ratio calculated for MCB, the current assets are lower. Than the current liabilities. But there would be enough liquid assets to pay the current liabilities. As the decreased has occurred only due to the increase in deposits. The ratio is particularly an imperative for present deposit holders and prospective deposit holders to base their decisions upon. In general, the current ratio of the Bank is satisfactory with a nominal variation over years.

3.8.2 Cash ratio

The cash ratio determines the position of the business to pay its liabilities with the cash in hand. The cash ratio of MCB for year 2010 is .03 which means that only 3% of liabilities can be paid through cash in hand. At first glance, this ratio may show a very gloomy picture of the business. But it is noteworthy, that the banks are not allowed to keep surplus of their cash with them, they have to deposit it with central bank. Moreover the banks have to pay its depositors, which is not possible by keeping the cash in their wallets. They have to invest it in some profitable ventures.

3.8.3 Debt ratio

Debt ratio is a measure of creditors long-term risk. The ratio is a percentage of total liabilities of total assets. If there are more liabilities in proportion to assets, creditor will hesitate to lend the money, as the chances of payback will shrink. So the lower the debt ratio, the safer the position of creditor. The debt ratio of MCB for the year is .95,

almost the same over previous years. The debt ratio for a bank over 0.90 is considered normal. It also suggests that proprietors finance only 5% of total assets.

3.8.4 Debt-equity ratio

It shows the relationship of total liabilities and equity. Total liabilities are divided by equity. If liabilities outnumber equity, the chances of paying off to the creditors become less in case of liquidation. For stockholders the higher debt-equity ratio means that they will be paid less return, as first the interest will be paid. But there is a positive aspect too. If the return earned on the funds borrowed from creditors is adequately more than the interest paid to the creditors on these funds, stockholders will be left with more profits for appropriation. The debt-equity ratio for MCB is 19, which means that liabilities are 19 times larger than the equity. The ratio for previous years was 26, which enunciate that the equity has increased for the year. The reasons for increase are the issue of bonus shares, increase in interim dividend, and increase in un-appropriated profit.

3.8.5 Landings deposit ratio

This ratio shows the relationship between the total lendings of bank to its total deposits. For the year 2009, this ratio was 18%, which means that the bank has utilized 18% of the deposits for lending purposes. Comparing it to the 10% ratio for previous year we see positive change regarding the profitability.

3.8.6 Investment deposit ratio

Taking the investment of bank as percentage of deposit we see that its 49% of deposit for year 2009. While for previous year it was 36% only which clearly indicates that the management of the bank is focusing more on the better and productive investment prospective during the year.

3.8.7 Advances deposit ratio

Advances were 43% of the deposits for the year 2009 while this ratio was 49% for previous year. Since the overall economic conditions were favorable and predictable (for investment) the management had focused more on investments in year 2009.

3.9 PROFITABILITY MEASUREMENT 3.9.1 Gross profit margin

Gross profit margin for the year was 60%. Profit margin has improved over the years, which indicates the attractive profitability of the Bank. The major reason for increase in profit margin is the greater proportionate increase in interest/return earned and comparatively lower proportionate increase in the interest/return expensed. It is possible only because of better asset portfolio. Further analysis reveals that the Bank made possible attracting large deposits despite of low PLS and mark-up rates, in turn more

Funds were available for investment at less cost. On the other hand the Bank made huge profits on comparatively less amount of advances

3.9.2 Net profit margin before tax

A considerable improvement in net profit margin before tax affirms better internal control by management over administrative expenses. The main reason for control over administrative expenses is the postponement of increase of increase in salaries.

3.9.3 Net profit margin after tax

Net profit margin after tax is .11, which means that 11% of total revenue is left for stockholders equity, while equity is just 5% of total assets. Being more profitable during the year, company issued an interim dividend of Rs. 2.5 per share, Rs. 1.25 per share more than for previous year.

3.9.4 Assets turnover ratio

The assets turnover ratio for MCB is .06, which means that assets generate revenue of about 6% of the total assets. The ratio suggests that assets are adequately productive. The ratio has faced little variations in previous years. In last year it was 9%.

3.9.5 Return on assets

The ratio is calculated by taking the net income as a percentage of total assets. The ratio was 1.12% for previous year, but suddenly jumped to 1.32% in current year. More return on less advances, comparatively less interest paid on deposits, and better control of administrative expenses are the facts on which the improvement in this ratio is grounded.

3.9.6 Return on equity

The ratio is calculated by dividing the net income after taxation left for appropriation by total equity. It recounts the return, equity holders get after interest and operating expenses are paid. Although the whole left is not distributed among shareholders, but improves the equity composition. The ratio of MCB has improved Considerably over last few years. Currently ratio stands at .19, which means that business is earning 19% of the equity for shareholders. In banking business, which is overwhelmingly debt extensive, such a return is very profitable.

3.9.7 Earning per share

The ratio is calculated by dividing the net income less preferred dividend by number of shares outstanding. The ratio for MCB is 6.52, which means the share at par value of Rs. 10 is earning Rs. 6.52.

3.9.8 Operating expense total expense ratio

This ratio is an indication of the percentage the operating expenses carry to total expense. Increase in this ratio indicates that the total operating expense has increased in relation to total expense which in turn can be used to find the positive or negative effect on the income of the bank. For year 2009 this ratio was 57% while for previous year this ratio was .49%. The difference (8%) is off settled by the same percentage. Increase in net profit margin before tax.

3.9.9 Operating expense total revenue ratio

This ratio shows the operating expense as %age of total revenue. This percentage was 52% for 2009 while it was 43% for 2008. The huge increase in short term and long term investments (the result is the positive effects of which will appear in the years ahead) in responsible for increase in this ratio.

3.9.10 Operating expense total assets ratio

This ratio is showing a decreasing steadily through the years. For 2003 this ratio was 5.10%, for 2008, 3.94% and for 2009 it is 3.43%. The steady decrease in operating

expense in a positive indication for the bank but management should be careful that it should not be at the expense of de-motivation in delaying increases in salaries and fringe benefits over the years.

CHAPTER#4
4.1 STRENGTHS

SWOT ANALYSIS

One of the major strengths of MCB is that it has very stable deposit base. MCB is largest private bank in Pakistan with around 1000 branches, which cover almost every part of Pakistan.

The bank enjoys competitive advantage over other banks in Pakistan. The bank enjoys competitive profitability in the industry.

MCB has captured majority of potential customers in Pakistan. MCB has the accounts of big organizations like OGDCL, PTCL, EFU, PTC etc. MCB is Successive and Market oriented. MCB investing huge sums on HR development and training. Customer default rate is lower as compared to other banks. MCB has the largest ATM network in the country. Meeting the challenges of latest Technology by introducing Smart card remit express, mobile banking etc.

Laying foundation on sound basis; recently for this they met with the ORACLE representative of South Asia, to purchase ORACLE software for their banking system and transform its environment in such a way so as to come in line with those of other international banks.

Establishment of TFC: Centralized import and export center of MCB in one special circle taking this extensive burden from branches, whereas no other bank has done this so far.

Maintaining an Excessive Earning Acceleration, this is expected to result in substantial value enhancement for investors.

EUROMONEY Awards of Best Bank in Pakistan for best bank in Pakistan, plus the accolade of best domestic band in Pakistan.

Extensive Management Restructuring to translate into bottom line improvement for going forward. This includes induction of professionals in strategic business areas, shedding surplus staff and shutting down loss making low potential branches. From

1996 onwards some 350 Branches were closed down & releasing staff of approx 4600 with golden handshake. Larger Market Share: MCB accounts for 10.4% of total assets, 10.0% of deposits and 11% of loans in the banking system. So it has a clear edge over smaller banks. Striving for income: New Team after massive restructuring, is looking to strive for greater operating income, as is evident from the figure (15) that since 1996 bank has been able to gain some net positive Profit After Tax amount consistently and will be aiming to do so in near future. Perhaps the only large bank in Pakistan to have a formal electronic banking research cell that is exploring the technical requirements and market size Potential of Internet Banking.

4.2 WEAKNESS
Decision making process is very slow. It is not having greater no. of branches abroad. Though ATM network is the largest in Pakistan, still some potential areas dont have the ATM. MCB RTC is useable only in Pakistan. Some management positrons needed are not professional. Although most of the branches are computerized now, still some important branches dont have computers. Low motivational level; non-aggressive marketing. Employees dissatisfaction due to ill treatment and improper reward system.

Favoritism and Nepotism in recruitment. Interest rate is very meager Extensive Management Restructuring though beneficial has some negative impacts on the existing performance of work. Such large scale restructuring results in too much load on single person plus the fear of being fired from the job at any moment.

Slight neglect as part of human resource management staff. Initially employees were given a quota of 2 weeks vacation per year or its equivalent amount in Rs. as a Recreational Activities have been withdrawn. Such program was essential to keep the employees in high spirit giving that extra bit of time for them to personal life.

It is extremely condemnable that sometime a circular is kept clandestine and not disclose to the staff by the branch managers which is in line with their needs due to some inexplicit ulterior motives.

Lack of Job Rotation: Job rotation has not been given due consideration and employees get bored due to monotony.

No Conspicuous rise in Staff Salary: As part of Human of resource Management apart from lack of other employees benefit funds, nothing is done to enhance the staff salary to be used as basic motivational factors in an effort to cut down the administrative cost by the management.

Prevailing Bias and Prejudice: Senior Junior Consideration may result in tussle in future. Therefore it is extremely necessary to develop such amicable environment that builds up harmony.

4.3 OPPORTUNITIES
Leasing sector is growing in Pakistan for the last two to three years which provides opportunity to MCB to go ahead in this area as well. MCB is providing Consumer Finances at comparatively lower rates which paves a way to grab more customers

Financing to small/medium cottage industries will definitely increase its advances and profitability as well. Islamic Trading Based Banking can enhance the business of the bank. Targeting of Hundi/Hawalla through networking and IT potential of MCB. Profitability is expected to strengthen despite decline in interest rate. The drop in interest rates is expected to spur the private sector credit growth in an effort to kickstart the dormant economy serving as impetus for productivity activity in economy; which is likely to compensate for lower interest margins that result from less than proportionate drop in deposit rates.

Banking sector fundamentals improving; on the back of economic stabilization, improved monetary and foreign exchange reserves management by the central bank and drive against loan defaulters.

MCB with its large branch network and hence huge, diversified clientele is placed to benefit from lower NPLs, a new dynamic and cost conscious management, and greater credit demand on the back of governments conscious initiative towards a deflationary monetary policy.

Only Operationally efficient banks will benefit from Low Interest Rates: The declining interest rate environment would lower MCBs cost of equity (COE), thus having a positive impact on its ROIE COE spread, which in turn allows

MCB to show growth in value creation. More Focus on consumer banking activities. Strong earning momentum expected in future, through focus on loan book growth, efficient utilization of idle cash and declining NPL. Deposit expected to grow in future: The Governments decision to lower interest rates has challenged the banking sector, including MCB, on the deposit mobilization front. At the same, however, MCBs large branch network coupled with its excellent market standing compared with other banks offering similar returns on deposits is expected to retain even bolster its deposit base in future at the expense of less efficient public Sector competitors.

4.4 THREATS
Other private commercial bank with sound profitability is also a threat to MCB e.g. UBL, Alfalah, HBL etc. For the last of many years, Pakistan is facing economic and political instability which is a big threat. Afghan war and Iraq war has a deep effect on the economy of Pakistan, which may affect MCB. Foreign banks are flourishing in field of consumer financing. People dont prefer banking culture. They mostly prefer cash transactions. MCB since 1996 is performing well in all most every department at national level particularly. However if there is some competition that MCB may expect to face come from the four nationalized commercial banks, which compete with the MCB in terms of deposit mobilization at retail level. Other banks working on the same phenomena seeking for proficient and efficient staff is expected to enamor qualified and experienced employees of organization by offering some brilliant incentives in the form of high salary and other benevolent funds and this thing may also attract existing efficient staff of MCB. To some extent they seem to be effective in their efforts.

CHAPTER-5

FINDINGS AND RECOMMENDATIONS

Recommendations are based on the previous sections of a report and are suggestions that the analyst feels are required to be implemented in order to improve further the standing and position of the firm in the financial world. These are thus based on the findings and shortcomings noted in an organization while working with it and then writing on it. Opinions of various capable individuals are sought who through their real life experiences and deep insight are better able to judge whether the course of action adopted by the organization is going to prove fruitful or does it require further improvement in the form of changes in its strategies. Following are the findings and recommendations for various Departments that were felt are required while consulting the staff members of MADINA TAWON Branch.

5.1 DEPOSITS DEPARTMENT

The comparative analyses reveal that MCB has the lowest share of Deposits out of the total in the market. Since deposits are the lifeblood of a bank, it should attract more customers and expand its deposit base in the following manner

5.1.1 Simplification of procedures

The procedure of opening an account should be simplified. The account opening form should be self-explanatory and include translations in Urdu for those customers who are not well read, since the fact cannot be ignored that many people do not have a good understanding of English.

5.1.2 No Duplication of activities

Once the account opening form is filled there should be no reason to submit a written application for opening an account, since it not only is a wasteful and time consuming exercise on the part of the customer but also makes filing lengthy.

5.1.3 Incentives for depositors

Those who deposit large amounts of money or are old customers of the bank should be given free credit lines upto a certain limit. Besides, financial advice should be provided to customers in case there is a change in the market trend before they seek for it.

5.1.4 Integrated marketing approach

All the officers in Deposits Department should be involved in marketing and not just opening accounts and maintaining their records. This can be done through improving their personnel relations skills and applying the Uni-Service concept of visiting the potential customers at their offices and homes.

9.1.5 Performance appraisal

MCB should follow the performance evaluation policy strictly and award those who bring in deposits and help it increase its market share. Unfortunately, this has been stated in the banks policy but is not being implemented.

5.2 REMITTANCES DEPARTMENT

The Remittances Department at the Branch is divided into Inland Remittances and Foreign Remittances.

Both these are dealt by separate officers and involve using specific stationary and procedures. The following recommendations are made for this very important Department of the bank

5.2.1 Organizing the department

The Department is spread over the entire bank with no specific person or desk for the purpose. Usually drafts and telegraphic transfers are made in the cash counter that results in hassle for the other customers. A senior officer detached from the other officers

Performing inland remittance transactions handles the foreign remittances. It would be better for them to sit together so that they can benefit from his experience and know how.

5.2.2 Centralized money gram services

The customers receiving funds from abroad have to wait quite long in order to get their money as the branch sends the application form through fax to the City Branch from where it is confirmed whether the amount has been credited to the MADINA TOWN Branch or not. This confirmation takes long at times and there is always a fear of the bank losing its goodwill in case of lengthy delays. The service should thus be decentralized and the Hub Branch having the authority of directly confirming the amount.

5.3 CASH DEPARTMENT

The following recommendations are made for the Cash Department.

5.3.1 Expansion of the cash counter

The Cash Department at the Branch needs special attention in the sense that the cash counter is small and becomes crowded when there are more than five to six customers to attend. Customers purchase drafts and other instruments from the very same counter where utility bills are collected and cash is deposited and withdrawn. Hence, if a new

counter cannot be built due to certain limitations the utility bills should be collected through a window so that the regular customers do not face any problems.

5.3.2 Extended timings for cash

In order for the bank to progress and compete with the others in the market, it should extend the time for accepting and withdrawing cash. The customers face great hardship especially when they come from far off places and find that the cash counter is closed for the daily transactions.

5.4 BILLS AND CLEARING DEPARTMENT

The following suggestions are made for this Department keeping in view the problems noted in it.

5.4.1 Career development

It has been noted that the officers taking bills for clearing do not involve themselves much with the other operations of the bank and thus remain on the very same post and seat throughout their banking career. This is against the modern day policies of organizations giving their employees conducive, rewarding and equal opportunities of prospering and growing with it. Thus, the Human Resource Department at the Head Office should prepare a plan that shows the future growth potential of the employees based on their job performance and evaluation and make it known to all.

5.4.2 Job rotation

There should be job rotation of employees especially in this department as it was felt that the employees here know quite less as compared to the others. This will enhance their capabilities and help them break the monotony making them find their work more interesting.

5.4.3 Personality nourishment

The clearing officer has less to do with the operations of the bank and thus does not sit at a front desk of the branch. As a result, he becomes usually casual and relaxed About his apparel. This leaves a bad impression of the bank when he leaves the premises. A dress code should be implemented and observed by all the employees in order to build a reputation of the bank.

5.5 ADVANCES DEPARTMENT

There were certain drawbacks in the application and processing for the loan requests that were observed at the branch. The findings and the recommendations are as under

5.5.1 Proper documentation

If valid documents are not obtained before sanctioning the loan limit, it becomes irrecoverable in case of default by the borrower. It has been noted that at times the related officers oblige the customer by letting him submit the documents later and approving the limit by getting the Disbursement Authorization Certificate from the Credit Committee. It proves to be very time and resource consuming afterwards tracing the borrower to bring in the documents. Therefore, correct and complete documents should be attained before the amount is sanctioned and no leniency shown in any case.

5.5.2 Computerized record

All the sanctioned cases should have record on the computer as it is easy to access and does not involve the hassles of maintaining and retrieving large and old files. For this purpose, training programs should be organized for the Relationship Managers to enable them to have a basic computer know how. Through this, they would also be able to assess the financial position of the prospective borrower in minutes by using related financial software.

5.5.3 Verification of security

Physical verification of the security tendered is a must rather than to merely rely on the documents. It had been noted that where the property to be hypothecated/ mortgaged lay in remote areas such as the Gadoon Industrial Estate regular physical visits are avoided by the officers

5.6 FOREIGN EXCHANGE DEPARTMENT

There various shortcomings that were noted in this Department and hence the following recommendations

5.6.1 Centralization of the Department

All foreign trade related transactions are routed to the Foreign Exchange Department in Islamabad, which causes unnecessary delay to the customer. In case of haste or pressure from the importer/ exporter or some other reason the documents sent to the Forex Department are not complete or correct the case is sent back to the MADINA TAWON P Branch and it takes yet longer to process it.

5.7 OTHER FINDINGS AND RECOMMENDATIONS

The following recommendations are for the bank as a whole

5.7.1 Establishment of marketing department at the hub branch

Nowadays no organization can survive in this tough competitive world without having able to market itself and its products. Keeping this in mind a Marketing Department should be introduced in all the Hub branches that would easily implement the marketing policies of the Head Office.

5.7.2 Development of managerial leadership

Good managerial skills make positive contribution towards higher effective results. MCB should focus on the effective utilization of its human resource by applying the modern style of management. This can only be possible if political interferences are discouraged especially when hiring and placing personnel and the recruitment policies are changed to give preference to M.B.A. and M. Com. Students.

5.7.3 Tests for promotions

A sizeable portion of the officers at MCB is promoted without conducting any tests and interviews. This results in undeserving people sitting on the managerial posts and steering the organization away from its goals and objectives in the long run.

5.7.4 Training for credit management

Special trainings on credit management should be imparted to the staff dealing in financing activities of the bank. This is very important in light of current loan default scenario in the economy.

5.7.5 Delegation of powers

Delegating powers to the Department in-charges up to the greater possible extent will most certainly reduce the workload on the managers and they would be able to perform well by taking quick remedial actions where necessary. Besides, the spare time will be spent dealing with matters of more important nature.

5.7.6 Research and development department

A Research and Development Department in MCB will help it to adopt new procedures and modern techniques that will help the bank to compete with the others. An R&DD should be maintained at all the Hub Branches that would define the target market For the bank in that particular area and through its findings suggest measures to improve the performance of branches there.

BIBLIOGRAPHY
1. Annual Report of MCB 2010 2. Brochures/Leafletss 3. Accounts opening forms of MCB 4. Donnelley, Gibson, Ivanceivich (Fundamentals of Management) 5. Briefings by head of each division department & other officer of MCB