INTERNSHIP REPORT ON

MCB BANK
AMC BRANCH ABBOTTABAD (1320)

Submitted by: Abdul Mateen

Roll# 008

Supervised by: Sardar Ejaz Ahmed

Government College of Management Sciences

Abbottabad
SESSION
2018-2019
 INTERNSHIP REPORT ON
MCB BANK
AMC BRANCH ABBOTTABAD (1320)

Submitted by: Abdul Mateen

Roll# 072

Supervised by: Sardar Ejaz Ahmed

This internship report is submitted in partial fulfillment of the

requirements for the degree of Master of Commerce awarded by
the AUST University,
Abbottabad

Government College of
Management Sciences Abbottabad
SESSION
2018-2019
 Government College of Management Sciences
Abbottabad

APPROVAL SHEET

Approval Committee

1. External Examiner

Mr.______________________ Signature______________________

2. Supervisor

Sardar Ejaz Ahmed Signature______________________

Designation: Associate Professor

3. Head of department

Sardar Ejaz Ahmed Signature_____________________

Designation: Principal, GCMS Abbottabad

 DEDICATION

I Dedicate This Report to my Family & my Teachers

i
 ABSTRACT

Internship training program during Master of Commerce Programs necessary for the partial
fulfillment of the completion of Degree of Master Of Commerce. It is necessary for me to
complete an internship session of about 8 weeks in some manufacturing or service industry
relevant to my area of interest and specialization. So, I choose the Banking field because I
have the interest in this sector because my study background is related with this sector.

As a compulsory requirement of Professional Degree M.Com I opted to join MCB Bank

Limited, to fulfill my degree requirement. My reason for choosing MCB was to enhance my
skills in Management Finance and Accounts, so that to provide myself the opportunity to
cope with real life situation. To better understand the report my recommendation would be to
look into different parts mainly covering the overview of MCB, overall management of
Finance and Accounts.
The bank staff was very much cooperative to me, they have provided me relevant material to
write a report.

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 Table of Contents

ACKNOWLEDGEMENT.......................................................................................................vii
List of Abbreviations..............................................................................................................viii
Executive Summary..................................................................................................................ix
Chapter 1....................................................................................................................................1
Introduction to The Report.........................................................................................................1
1.1 Introduction......................................................................................................................1
1.2 Background of the study..................................................................................................2
1.3 Purpose of the Study........................................................................................................2
1.4 Scope of the study............................................................................................................2
1.5 Limitation of the study.....................................................................................................2
1.6 Objectives.........................................................................................................................3
1.7 Methodology....................................................................................................................3
1.7.1 Primary Data:............................................................................................................3
1.7.2 Secondary Data:........................................................................................................3
1.8 Organization.....................................................................................................................3
1.9 History of MCB Bank Limited........................................................................................4
1.10 Vision And Mission Of MCB......................................................................................10
1.11 Values of MCB............................................................................................................11
Chapter 2..................................................................................................................................12
ROLE OF SECTOR AND ORGANIZATION........................................................................12
2.1 Introduction....................................................................................................................12
2.2 Overall respective sectors in Pakistan............................................................................12
2.3 Commercial Banking In Pakistan...................................................................................12
2.4 ACCOUNTING PRACTICE FOLLOWED BY MCB..................................................15
Chapter 3..................................................................................................................................16
ORGANIZATIONAL STRUCTURE OF MCB......................................................................16
3.1 Introduction....................................................................................................................16
3.2 Structure On The Basis Of Executives...............................................................................17
3.3Departmentation On The Basis Of Employees’ Designation..........................................18
3.4 Geographical Departmentation of MCB........................................................................19
3.5 Structure On The Basis Of Geographical Location...........................................................19
3.6 Structure On The Basis Of Functions............................................................................20
3.7 Departmentation On The Basis Of Functions................................................................20
CHAPTER 4.............................................................................................................................22

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DEPARTMENTALIZATION OF MCB AND ITS FUNCTION...........................................22
4.1 Cash Department............................................................................................................23
4.1.1 Cash Receipt:...........................................................................................................23
4.1.2 Payments:................................................................................................................23
4.2 Account Opening Department:.......................................................................................23
4.3 Clearance Department:...................................................................................................24
4.4 Remittance Department..................................................................................................25
4.5 Advances Department....................................................................................................25
CHAPTER 5.............................................................................................................................27
PRODUCT AND SERVICES..................................................................................................27
5.1 Deposits:.........................................................................................................................27
5.1.1 Demand Deposits (DD):.....................................................................................27
5.1.2 Term DEPOSITS/Fixed Deposit:............................................................................28
5.1.3 Savings Deposits:....................................................................................................28
5.2 Services and Products................................................................................................28
5.2.1 Khushali Bachat Account (KBA):...........................................................................28
5.2.2 Hajj Mubarak Savings Scheme:..............................................................................29
5.2.3 Khanam Bachat Account Scheme (KBA):..............................................................29
5.2.4 PLS Savings............................................................................................................29
5.2.5Export Promotion Scheme:......................................................................................30
5.2.6 Credit Cards:...........................................................................................................30
CHAPTER-6............................................................................................................................32
FINANCIAL ANALYSIS.......................................................................................................32
6.1 Balance Sheet.................................................................................................................32
Table : 3................................................................................................................................33
6.2 Vertical Analysis Of Balance Sheet...............................................................................33
Table : 4................................................................................................................................35
6.3 Horizontal Analysis........................................................................................................35
6.4 Interpretation..................................................................................................................36
6.5 Ratio Analysis................................................................................................................37
CHAPTER 7.............................................................................................................................44
FINDINGS AND RECOMMENDATIONS............................................................................44
7.3 SUGGESTIONS............................................................................................................46
References................................................................................................................................47

iv
 List of Table

S.no Page no
1 Table: 1 Board of Directors 28
2 Table 2 Balance Sheet 44
3 Table 3 Vertical Analysis 45
4 Table 4 Horizontal Analysis 48

v
 ACKNOWLEDGEMENT
All praise is for ALLAH, the most merciful and His Prophet Muhammad for every torch of
guidance and knowledge for humanity. I offer humblest and sincerest words of thanks to
ALLAH Almighty WHO blessed me with potential and ability to make material contribution
to already existing ocean of knowledge

I deem it as a great opportunity to offer my heartiest gratitude to my venerable teacher

Sardar Ejaz Ahmed, for his great efforts to make us understand and to conduct this kind of
activities of giving the great opportunity for learning beyond your existing area of scope. I am
thankful to Mr. Adil bank manager of MCB bank AMC branch Abbottabad bank manager
for his nice co-operation and proper guidance throughout my internship. Express my heartiest
and sincerest sense of gratitude to all of them for providing me grand exposure to gain
multifarious experience, May Allah The Almighty bless my parents and well-wishers who are
the permanent source of prayers for me and my successes in this world.

Abdul Mateen

vi
 List of Abbreviations

ADBP Agricultural Development Bank of Pakistan

ATM Auto Teller Machine
APD Assets Product Division
AIGP American International Group Pakistan
BTF Balance Transferred Facility
ETD Electronic Technology Department
FC Foreign Currency
FDD Foreign Demand Draft
FS Financial Statement
IDBP Industrial Development Bank of Pakistan
IT Information Technology
IPD Investment Product Division
L/C Letter of Credit
L/G Letter of Guarantee
MNCs Multi-National Companies
MCB Muslim Commercial bank (Previously)
MIS Management Information System
MT Mail Transfer
NIT National Investment Trust
NDFC National Development Finance Corporation
PLS Profit & Loss Sharing
RTCs Rupee Travelers Cheques
SBP State Bank of Pakistan
SBU Strategic business unit

vii
 Executive Summary

MCB is an equal opportunity employer. It offers great incentives and benefits of their
employees throughout the country and out of country. It provides full opportunities for
improving their careers and skills; it also gives more incentives to their employees and
increasing the rank of the smart and hard workers. In this report the methodology is use as
primary data and secondary data. Primary data is collected through observation and
interviews and secondary data is collected through annual report, circulars, brochures,
newspaper, manuals, internet and relevant books.

As part of the academic requirement for completing M.com Master of Commerce of the
students are required to undergo Six weeks of internship with an organization. The internship
is to serve the purpose of acquainting the students with the practice of knowledge of the
discipline of banking administration.

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.

During my internship in MCB, I worked in All departments and I successfully completed all
the task/duties that were assigned to me.

During the course of internship, I learned about different functions performed by

Finance Department as a whole. I also learned bank’s correspondence with their employees
and within branches. I learned about documentation requirements and record keeping
for different activities and processes, especially the documentation requirement for different
kinds of activities.

viii
 Chapter 1
Introduction to The Report

1.1 Introduction

The basic objective of this study is to know about the current position of the
MCB in sphere of its overall analysis and to suggest meaningful and feasible
recommendations for the bank so as to improve its performance and to restain
its previous position in banking sector.

The objective of this report is to studying and analyzing the MCB Bank in
general and AMC Branch (0643) ABBOTTABAD, in particular, As the partial
fulfillment for the degree of M.com from Government College Of
Management Sciences Abbottabad, this report is prepared and submitted to the
AUST university.

MCB is an equal opportunity employer. It offers great incentives and benefits

of their employees throughout the country and out of country. It provides full
opportunities for improving their careers and skills; it also gives more
incentives to their employees and increasing the rank of the smart and hard
workers. In this report the methodology is use as primary data and secondary
data. Primary data is collected through observation and interviews and
secondary data is collected through annual report, circulars, brochures,
newspaper, manuals, internet and relevant books.

As part of the academic requirement for completing M.com Master of

Commerce of the students are required to undergo Six weeks of internship
with an organization. The internship is to serve the purpose of acquainting the
students with the practice of knowledge of the discipline of banking
administration.

1
1.2 Background of the study

Internship training program during Master of Commerce Programs necessary

for the partial fulfillment of the completion of Degree of Master of Commerce.
It is necessary for me to complete an internship session of about 6 weeks in
some manufacturing or service industry relevant to my area of interest and
specialization. So, I choose the Banking field because I have the interest in
this sector because my study background is related with this sector.

1.3 Purpose of the Study

Internship is the capstone experience that provides me with hands-on, real-

world experience in a work setting. Ideally, internship will enable interns to:

(a) Integrate and use my knowledge and skills from the classroom
(b) Discover where further competence is needed
(c) Take steps to gain that competence under educational supervision,
and
(d) Become better acquainted with the types of work settings in which
such competence can be applied.

1.4 Scope of the study

This study will facilitate the students regarding the working of Banking
sector of Pakistan because most of the teachers during their lectures use the
examples of Banks like MCB, National Bank, UBL, Bank Al Falah and many
others, students should study this report so that they must grasp the
functioning of such Banks.

1.5 Limitation of the study

The study is done with the sole purpose of doing the best work but there were
certain limitation faced during the internship period. The most important
limitation from which the study suffers is the non-availability of information
in a manner required for analysis and the secrecy of the bank. Another
important limitation of the study is time and space constraint.

2
1.6 Objectives

I worked as an internee in MCB Abbottabad AMC Branch. The main

objectives to study in MCB were:

•To get some experience in working with well reputed organization.

•To gain knowledge about the professional environment of the bank.

•To know about the technology utilized in the banks.

•To deal and manage with the situation of stress.

1.7 Methodology

There are mainly two methods that are used for the collection of data.

1.7.1 Primary Data:

•Observation of functions of organization on the spot.

•Observation of different processes of organization on the spot.

1.7.2 Secondary Data:

•Internet is very helpful for me to study more about banking sector of

Pakistan.

•Different type of booklets of the Bank.

•Annual reports

•Journals

•Newspapers

1.8 Organization

MCB is one of the leading banks of Pakistan with a deposit base of

about Rs.280 billion and total assets of around Rs.300 billion. Incorporated in
1947, MCB soon earned the reputation of a solid and conservative financial

3
institution managed by expatriate executives. In 1974, MCB was nationalized
along with all other private sector banks.

The Bank has a customer base of approximately 4 million, a

nationwide distribution network of over 1,190 branches nationwide.

During the last fifteen years, the Bank has concentrated on growth
through improving service quality, investment in technology and people,
utilizing its extensive branch network, developing a large and stable deposit
base.

1.9 History of MCB Bank Limited

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 Chittagong. 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 reputation
of a conservative bank but nationalization also left its effects on this institutes
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.
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.

4
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.

Privatization:

A wave of economic reforms swept Pakistan in the lattes introducing the Need
for privatization of state owned banks and companies. This was the first bank
to be privatized in 1991 and the bank was purchased by a consortium of
Pakistani corporate groups led by Nishat Group. Nishat Group is one of the
leading and most diversified business groups in Pakistan. The group has strong
presence in the most important business sectors of the country such as
banking, textile, cement and insurance. Mian Mohammad Mansha is the
Chairman of the group (and also MCB) and has played instrumental role in its
success. In recognition of Mr. Mansha’s contribution, the Government of
Pakistan has conferred him with "Sitara-e-Imtiaz", one of the most prestigious
civil awards of the country.

MCB As An Organization:

Over the years MCB has developed strong relationships with its customers by
understanding their needs and treating them with respect, dignity and
importance. The driving force behind its commitment and services is its focus
on customers ensuring that it not only meets, but also exceeds their
expectation. The Bank has a customer base of approximately 4 million.

They strive to achieve excellence by ensuring that every moment of their time
is spent in adding value, making sure that they do things right, first time, and
every time. With the quest of quality MCB has always taken initiatives
bringing banking into a new arena; from cash to the convenience of plastic;
from branch banking to internet banking and from face to face customer
interaction to online accessibility.

5
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 multinational concerns. MCB is also catering to the
growing middleclass by providing new asset and liability products. MCB Bank
Limited has a solid foundation of over 63 years in Pakistan, the Bank provides
24 hour banking convenience with a network of over 1000 branches, the
largest ATM network in Pakistan over 450 ATM locations in the market.

Profitability:

With exceptional performance for 2015, the excitement for 2017 builds up as
the Bank positions itself to gain from its strengths and exploit opportunities
that exist. The weakened law and order situation coupled with severe energy
crisis are the main challenges for us to encounter on our road to success. The
volatility in interest rates and regulatory revisions remain a key risk to our
profitability. The market dynamics have changed radically over years with the
need for every institution to perform to its full potential. In spite of
challenging environment; we are committed to deliver exceptional financial
performance in 2017. Our dedicated team of professionals would take every
possible opportunity to serve our esteemed customers. We are confident that
our expanding network of branches would impressively contribute to meet our
valuable shareholders expectations.
Increasing international footprint, improvement in asset quality, low cost
deposit base, deployment of cost efficient techniques and increased
contribution from non-markup income would be our key areas of focus. We
will continue to tap the unbanked segments through our operational network
and branchless banking proposition as financial inclusion is the dire need of
the time ahead. We would remain dynamic and committed in retail banking,
corporate banking, Islamic banking, SME financing and agricultural credit.
Our vigorous efforts would continue for recoveries against our classified
portfolio.
Development of branch less banking agent network, expansion in E-commerce
Business, introduction of M-POS merchant terminals and deployment of cash

6
deposit machine would also make significant contribution to non-markup
income in 2017.
The Bank re-affirmed its commitment to Islamic Banking Customers by
incorporating its Islamic Banking subsidiary for which statutory approvals are
awaited to start commercial operations. This initiative will help to enhance
Islamic
Banking Business and to serve its valued customers by offering a complete
range of Sharia compliant products.
We are committed in maintaining our status of one of the leading banks
operating in Pakistan through enriched service quality, financially viable
tailored products to meet requirements of our esteemed customer and
translating the underlying financial strength of the entity into profits.
MCB Bank reported Profit before Tax (PBT) of Rs. 42,788,640 and Profit
After Tax (PAT) of Rs. 25,035,112 with an increase of 15% and 5% over
2015, respectively. This was primarily contributed by 13% increase in Net
Markup Income and 32% increase in Non-Markup Income.
In 2017, through strategic placements and focused reduction in high cost
deposits, spread of the Bank was reported at 5.15% (2015: 5.42%) despite a
major reduction of 300 bps in the discount rate. On the cost side, the Bank
reported an increase of 8% in administrative expense base (excluding PF
reversal) which signifies the deployment of cost efficient techniques.

The total asset base of MCB Bank Limited was reported at Rs. 10,20,98,0021
signaling a healthy growth of 8% over December 2015. Analysis of the asset
mix witnessed a 11% increase in Investments to Rs. 56,42,99,568 and 3%
increase in Gross Advances to Rs. 315,310,587. The quality of asset base
registered continuous improvement as NPLs of the Bank decreased by Rs.
1.539 billion during the year and closed at Rs. 20.369 billion. Coverage ratio
of the Bank was reported at 90.83% with infection ratio improving to 6.12%
as compared to 6.80% as at December 2015. On the liabilities side, the Bank
deposits increased by 3% to Rs. 706239715 as on December 31, 2017. Tax on
transactions introduced for non-filers had an impact on the deposit growth rate

7
registered in the preceding years. However, overall deposit growth remained
satisfactory despite the reduction in high cost deposits.
On the expansion front, our Dubai branch became operational in 2017. The
Bank has injected additional equity in “MCB Leasing” Closed Joint Stock
Company, Azerbaijan & MCB Sri Lanka Operation during 2017.
On the Islamic business front, The Bank incorporated MCB Islamic Bank
Limited (MCBIBL), a wholly owned subsidiary, with an authorized share
capital of Rs. 15 Billion in 2018. During the year, the Bank has injected equity
of Rs. 10 billion in the said subsidiary. SBP has granted “Certificate of
commencement of Banking Business” to MCBIBL effective September 14,
2017.
MCB Mobile Banking has also continued to grow at a fast pace with an active
customer base exceeding 650,000 showcasing an increase of 16% from the
year 2017.

MCB & NIB Merger

The board of MCB Bank approved the bank’s merger into NIB Bank at a share
swap ratio, which was vehemently opposed by the minority shareholders of
the latter’s financial institution.   

“The shareholders of MCB at their extra-ordinary general meeting, held on 23

January, have unanimously approved and adopted the scheme of
amalgamation of NIB Bank Limited with and into MCB… through a share
swap arrangement,” said MCB, in a notice issued to the Pakistan Stock
Exchange on Tuesday.

“The shareholders of MCB have also unanimously approved the swap ratio of
one new ordinary share of MCB Bank for every 140.043 shares of NIB for the
scheme of amalgamation. 

The bourse filing said the decision of the shareholders of MCB are subject to,
amongst others, sanction of the State Bank of Pakistan, approval of the

8
Competition Commission of Pakistan and receipt of other requisite regulatory
authorisations, consents and approvals.

As a consequence of the approved amalgamation, 73,569,197 ordinary shares

of MCB would be issued in favour of the shareholders of the NIB Bank. 
Minority shareholders group of NIB Bank rejected the existing swap
arrangement. 

“The proposed swap ratio bears no relationship to the real value of NIB shares
and if approved the merger will significantly deprive NIB shareholders of
almost 30 percent value,” the group said in an appeal, published in media on
January 22.  

“The proposed swap ratio values each share of NIB at approximately Rs1.58
whereas the book value of each NIB share is Rs1.84 and the market price of
each NIB share was Rs2.21 on 6 December 2017, just a day before the
announcement of the proposed merger.”

The group asked the shareholders of NIB Bank to reject the proposed swap
ration and merger, “by writing their objections to the president of NIB Bank
Limited, the State Bank of Pakistan, the Securities and Exchange Commission
of Pakistan and other forums.”

NIB’s board meeting is yet to take place to approve the amalgamation scheme.
Sindh High Court issued a status quo order preventing the holding of
extraordinary general meeting of NIB scheduled for 23 January.

Fullerton Fund Management Company Ltd, a subsidiary of Singaporean state

investor Temasek Holdings, was trying to exit from Pakistan through divesting
its majority stake in NIB Bank. It initiated divestment process in 2011. NIB
sustained a net loss of around Rs17 billion since Temasek acquired the bank
back in 2005.

Analysts said alone State Life Insurance Corporation and Pakistan

Reinsurance, which together own 228 million shares of NIB Bank, would
sustain a loss of Rs215 million on book and Rs139 million on market value on

9
completion of ‘undervalued sale of NIB Bank’s stakes.’  In the past five years,
MCB, the country’s third biggest lender, has been a laggard in branch
expansion and has opened only 125 branches since 2010, showing a
cumulative 11 percent growth in branch network. Acquisition of NIB offers
MCB a chance to grow its network by 14 percent, analysts said.

 For NIB Bank, the country’s 12th largest bank by market capitalisation, the
possible merger could be a great chance to get out of losses. The bank was
struggling to be profitable, and it posted profit after tax of Rs2.617 billion in
2015 as against loss after tax of Rs508 million in the year 2014.

Source: https://www.thenews.com.pk/print/181464-MCB-approvesNIB-
Banks-swap-ratio-merger

 1.10 Vision And Mission Of MCB

Vision Statement:

“To be the obvious choice for financial services in the region and beyond” 

To be the leading, financial services provider, and partnering with our

customers for amore prosperous and secure future. Our vision statement
underlies our aspirations to establish the MCB group as the benchmark
reference for the provision of financial services in the region and even further,
in line with the increased needs of our customers operating in the global
economy.

Mission Statement:

“Pursuing the voyage towards excellence”

We are a team of committed professionals, providing innovative and efficient

financial solutions to create and nurture long-term relationships with our
customers. Indoing so, we ensure that our shareholders can invest with
confidence in us.

10
•Providing innovative

•Efficient financial solutions

•Long-term relationships with our customers

•Shareholders invest with confidence Our mission statement testifies to our

unrelenting commitment to best practices in the provision of financial services
throughout the group against the backdrop of creating shareholder value.

1.11 Values of MCB

Integrity:

We are the trustees of public funds and serve our community with integrity.
We believe in being the best at always doing the right thing. We deliver on
our responsibilities and commitments to our customers as well as our
colleagues.

Respect:

We respect our customer’s values, beliefs, culture and history. We value the
equality of gender and diversity of experience and education that our
employees bring with them. We create an environment where each individual
is enabled to succeed.

Excellence:

We take personal responsibility for our role as leaders in the pursuit

of excellence. We are a performance driven, result oriented organization
where merit is the only criterion for reward.

Knowledge:

A strong commitment to nurture our human capital through life long

development & learning toward achieving our goal described in our mission.

11
 Chapter 2
ROLE OF SECTOR AND ORGANIZATION

2.1 Introduction
This chapter will summarize that what’s the current situation of the banking
sector in Pakistan. What elaborate the importance of MCB in the banking
sector of Pakistan? This chapter will explore the role of MCB in the economic
& social development of Pakistan. Moreover this will also tells you about the
functions that’s the organization is performing and about the internship office.

2.2 Overall respective sectors in Pakistan

Banking is one of the most sensitive businesses all over the world. Banks play
very important role in the economy of a country and Pakistan is no exemption.
Banks are custodian to the assets of the general masses. The banking sector
plays a significant role in a contemporary world of money and economy. It
influences and facilitates many different but integrated economic activities
like resources mobilization, poverty elimination, production and distribution
of public finance.

2.3 Commercial 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 follow:

a) Pre-Nationalization Era 

b) Nationalization Era

c) Post Nationalization Era

12
a) Pre Nationalization Period:
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). All other banks, at that time, were either owned by Hindus or
Foreigners. At the time of partition there were 631 bank branches in area
which came under Pakistani control. But due to bloodshed and violence at
large scale, mostly branches were closed and the disparity can be assessed
from the fact that on July 1948 there were195 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 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:

Inauguration of State Bank of Pakistan (SBP) on 1st July, 1948.2) 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.3) Larger powers were given to SBP
through SBP Act (1956) for controlling purposes.4) Banking Companies
Ordinance 1962 for protection and guidance to banks.5) Establishment of
specialized banks, such as ADBP (1952);

a) HBFC (Nov, 1952);

 b) P1CIC (Oct, 1957);

c) IDBP (Aug. 1961);

d) NDFC (Jan, 1973).

13
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 (23,000million).

 
b) Nationalization period
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.
•Decrease in service level of bank officers.
•Decrease in profitability as well. However the effect of expansion was
enormous and it can also be depicted with the help of table 2 which shows the
deposit & branch positions of different nationalized banks.

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, 1991.1c) UBL taken up by UAE party in 2002.After
these changes a large number of private and foreign banks started their
operations in Pakistan.

14
2.4 ACCOUNTING PRACTICE FOLLOWED BY MCB
The financial statements of MCB have been prepared in accordance
with the directives issued by the State Bank of Pakistan, the requirements of
the Banking Companies Ordinance(1962), Companies Ordinance(1984), the
accounting standards issued by the International Accounting Standards
Committee (IASC) and its interpretations issued by Standing Interpretations
Committee of the IASC, as adopted in Pakistan.

These statements have been prepared under the historical cost convention
except that certain fixed assets and investments have been included at revalued
amounts. Historical cost convention refers to the practice of recording assets at
their original value at which they were acquired.

Mark-up on advances and returns on investments are recognised on an

accrual basis except the mark-up on classified advances, which is recognized
on receipt basis, in accordance with the Prudential Regulations issued by the
State Bank of Pakistan. Commission income too is recognized on receipt
basis.

Accrual basis of accounting refers to the practice of recording revenue

for the period in which it is earned while, receipt basis calls for recognition of
revenue for the period in which it is actually received, no matter when it is
earned.

Investments are recorded in accordance with the requirements of State

Bank of Pakistan.

Advances are stated net of provisions for doubtful debts. Provision for
doubtful debts is determined on the basis of Prudential Regulations issued by
the State Bank of Pakistan and charged to the income statement.

15
 Chapter 3
ORGANIZATIONAL STRUCTURE OF MCB

3.1 Introduction
An organizational structure defines how activities such as task allocation,
coordination and supervision are directed toward the achievement of
organizational aims It can also be considered as the viewing glass or
perspective through which individuals see their organization and its
environment. An organization can be structured in many different ways,
depending on its objectives. The structure of an organization will determine
the modes in which it operates and performs.

Organizational structure allows the expressed allocation of responsibilities for

different functions and processes to different entities such as
the branch, department, workgroup and individual.

Structure refers to designate relationships among resources of the management

system. The purpose of structure is to facilitate the use of each resource, both
individually and collectively, as the management system attempts to attain its
objectives. Two basic types of structures exist within management systems;
formal structure and informal structure. Formal structure is defined as
relationships between organizational resources as outlined by management.
On the contrary, informal structure is defined as patterns of relations that
develop because of the informal existence of organizational members.
Informal structure evolves naturally and tends to be molded by individual
norms, values and/or social relationships. Informal structure coexists with
formal structure but is not necessarily identical to it.

Formal structure can be made on different basis which are as follows:

16
3.2 Structure On The Basis Of Executives
Figure :1

Source: (MCB Annual Report 2017)

17
Board Of Directors
Table: 1 Board of Directors
(As of August 05, 2018)

1 Mian Mohammad Mansha Chairman

2 S. M. Muneer Vice Chairman

3 Tariq Rafi Director

4 Shahzad Saleem Director

5 Mian Umer Mansha Director

6 Aftab Ahmad Khan Director

7 Ahmad Alman Aslam Director

8 Muhammad Ali Zeb Director

9 Mohd Suhail Amar Suresh Director

10 Mrs. Iqraa Hassan Mansha Director

11 Imran Maqbool President & CEO

3.3Departmentation On The Basis Of Employees’ Designation

A board of directors under the chairmanship of Mr. Main Muhammad Mansha
runs the bank. It has a Chief Executive, who is answerable to the board and
responsible for the activities of the five Senior Executive Vice Presidents
(SEVP). Four SEVPs manage the activities in each province and the fifth one
is responsible for the overseas operations. The Executive Vice Presidents are
answerable to the SEVP and responsible for their subordinate Vice Presidents.
Under each Vice President are the Assistant Vice Presidents (AVP), Officers
Grade 1 (OG1), Officers Grade 2 (OG2), and Officers Grade 3 (OG 3) with
decreasing level of authority as we move down the list.

18
 3.4 Geographical Departmentation of MCB

The Head Office of the bank is located in Karachi. Then we have two Area
Offices namely:

 Area Office South

 Area Office North

Area Office, South manages the operations in Sindh and Balochistan while
Area Office North is responsible for the activities in Punjab, N.W.F.P, and
AJK. Each Area Office is in turn divided in to circles. To make administration
easier, each circle is divided into various regions. The regional offices are
responsible for the affaires of the branches operating in their domain.

3.5 Structure On The Basis Of Geographical Location

Figure :2

HEAD OFFICE
(Karachi)

Area Of Area Office Overseas

The South Branches
Office

Punjab NWFP Bahrain Sri

Sindh Balochista
n Lanka

10 2
5 1
Circles Circle
Circles Circle

25 7
12 2
Regions Regions
Regions Regions

601 112 217 35

Branches Branches Branches Branches

19
3.6 Structure On The Basis Of Functions
Figure :3

Manager Branch Operations (O.G. 1

Cash Deptt. Bills Deptt. Forex Credit Remittances Accounts Deptt.

Source: (MCB Annual Report 2018)

R/F D/F C/F
Inward Outward

Foreign Foreign
Remittances Currency A/C
Saving Bank Demand Fixed
3.7 Departmentation On The Basis Of Functions
Deposits Deposits Deposits

Clearing Outward Inward

Bills Bills
Offered
Schemes
MCB performs its functions in accordance with its memorandum and articles
Payments Collections ATC ATM

of association in the same manner as do other banks in Pakistan.

The important functions performed by the Bank are:

Acceptance of Deposits
To receive deposits is a basic function of all commercial banks because the
entire banking system is based on the funds borrowed from the public, as
bank’s own capital is not enough to sure the operations.

MCB accepts main deposits such as Current, Savings and Fixed deposits and
offers different schemes such as MCB Saving-365, MCB Saving-365 Gold,

20
Mahana Khushali Scheme, Khushali Bachat Scheme and many more in order
to increase customers attraction.

Providing Funds
A bank is a profit-seeking institution. It attracts surplus balances from the
customers at low rate of interest and makes advances at a higher rate of the
individuals and business firms. MCB, while providing funds, aims at both
liquidity and profitability. There are three types of advances provided by
MCB:
 Running Finance
 Demand Finance
 Cash Finance
Working as an Agent
MCB performs the following agency functions:
 Dividends Collection
 Cheques Collection
 Acting as a trustee or executor
 Execution of standing instructions
General Utility Services
This include the following areas:
 Clearance of utility bills
 Providing locker facility
 Accepting Bills of Exchange
 Supply of information

21
 CHAPTER 4
DEPARTMENTALIZATION OF MCB AND ITS
FUNCTION

Organizing is something which is to decide how best to group Organizational

activities and resources. There are a lot of things which comes under the
head of organizing’ departmentalization is one of that’ the question is that
what is departmentalization according to Griffin “Departmentalization is the
process of grouping jobs according to some logical arrangement
When the organization is small, the owner-manager can personally oversee
everyone
Who works there. As an organization grows ,however, personally supervising
all the employees becomes more and more difficult for the owner-manager,
consequently ,new manager position are created to supervise the work of other
employees are not assigned to particular managers randomly. rather, jobs are
grouped according to some plan. The logic embodied in such a plan is the
basis for all departmentalization.

With respect to MCB bank every one knows that this bank is a huge
organization and this organization needs departmentalization and in MCB
bank there is functional departmentalization. With in each Branch Office,
including MCB AMC Branch Abbottabad , the commonly maintained
departments include the cash department, remittances department, advances
department, account opening department, clearing department and in some
cases there is a foreign exchange department too. Some of the departments and
their activities are as follows:
 Cash department

 Accounts opening department

 Clearance department

 Advances department

 Remittance department

22
4.1 Cash Department
A well known economist says that banker is dealer in capital or more precisely
dealer in money. As the bank deals in money its mean that the most important
department of the bank is cash department. There are two basic functions of
the cash departments that are;

 Cash receipt

 Cash payment

4.1.1 Cash Receipt:

There are different types of accounts in MCB bank and cash department
receives money from different customers and crediting to their respective
accounts .for depositing the money in accounts it is necessary for every
customers to fill the slip named pay-in-slip which contains different
information which has to fill e.g. account number’ name of the account holder
‘date’ amount deposited’ etc.

4.1.2 Payments:
According to the banking company ordinance it is the function of the bank that
bank pays the money to the depositors on demand and the money can
be withdrawn through cheques drafts or otherwise. Bank want to satisfy
himself before paying the cash but what type of satisfaction, bank satisfy
himself that the instrument is valid and there is sufficient balance In the
account holder to support the payment. There is formal procedure to
receive the payment this formal procedure is’ to present the cheque to the
signature verification department then cashier and cashier makes the payment
to the customers.

4.2 Account Opening Department:

In order to operate with bank, a customer has to open an account. In large

branches, grade I, grade II or grade III officers are responsible for opening
new accounts. In opening the account with the MCB bank there is a formal

23
procedure and there is a special account opening form called SF-1AA which
contain information

1) Type of account

2) Currency

3) Nature of account

4) Particular of deposits

5) Operational instructions

6) Other services

7) Zakat deduction

8) Particulars of accounts

9) Authority to contact

10) Details of others bank accounts

11) Special instructions

12) Personal accounts

13) Acknowledgement

14) Specimen signature card

4.3 Clearance Department:

The concept of the clearance is taken from the State Bank who perform the
function of clearing house .A clearing house is a place where the
representative of commercial banks meet to exchange the cheques drawn on
each other and then settle the difference owned to each other.when there is no
State Bank in a specified region then National Bank of Pakistan perform the
duties of clearing house. Why there is need of clearance house for the banks
because there is a huge development in the banking system in the 20 th century
and with increase the peoples confident on banks there is increased in the use

24
of banking instruments and these instruments are settled through the function
of clearing house.

If the person receive Cheque from another person and he is not a client of that
bank then that customer give this cheque to his bank and that bank collect
money on his behalf from the bank of other person. MCB bank is also the part
of that circle .The representative of the local commercial banks meet a fixed
time once a day on all the working day of week. The meeting is held in the
office of the National bank which officially performs the duties of clearing
house.
The clearing activities are recorded in two types of books

1) Inward clearing book

2) Outward clearing book

4.4 Remittance Department

Today the business are scattered all over the world and businessman wants to
transfer its funds safely to other place. This function of transferring the funds
are performed by the Remittance department .The instruments used by MCB
bank to transfer money from one bank to other are;

1) Telegraphic Transfer (TT)

2) Mail transfer (MT)
3) Pay order (PO)
4) Demand draft (DD)

4.5 Advances Department

According to banking companies ordinance 1962 banker mean, a person
transacting the business of accepting for the purpose of lending and
investment .its mean that the primary function of the bank is to receive for the
purpose of lending .same is the function of Muslin Commercial Bank it
receive cash from customers and invest it in different ways .Before giving the

25
credit to the client whether it is a business or personality the bank wanted to
satisfy himself with respect of
1. Safety
1. Character of the customer
2. Capacity of customer
3. Capital

 Liquidity

 Dispersal

 Suitability

26
 CHAPTER 5
PRODUCT AND SERVICES

Commercial banking is regarded as a “Conservative” business because the

rewards are modest and the penalties of bad banking are many. As a trustee of
the public funds, they have a greater responsibility for safety and prudence.
Many businesses can enjoy some slack in their affairs, commercial banks
cannot afford this, since commercial banks must make a living by putting the
money at their disposal to work, they are faced with the problem of making a
living without jeopardizing the safety of their institution. The art of
commercial banking is solving this basically conflicting requirements, that of
being safe and yet profitable

5.1 Deposits:
Deposits are the main source of bank’s funds and without them banks cannot
exist. It is very important for an individual bank to get funds and to put them
to work safely and profitably. The larger the difference between the rates at
which these deposits are borrowed and lent out, the greater will be the profit
margin of the bank.
Deposits are broadly divided into the following:
 Demand Deposits

 Fixed Deposits

 Saving deposit

5.1.1 Demand Deposits (DD):

Demand Deposits are also called Current Deposits. These are payable to the
customer whenever they are demanded. Bank does not allow any profit or
return on these deposits, and customers are required to maintain a minimum
balance, failing which incidental charges are deducted from such accounts.
Most of the depositors of these accounts are businessmen.

27
5.1.2 Term DEPOSITS/Fixed Deposit:
Term Deposits are also called Fixed Deposits. These can be withdrawn after a
specified period of time.. The rate of return varies with the duration for which
the amount is kept with the bank.

5.1.3 Savings Deposits:

Savings Deposits refer to deposits which are made-up of thrift and are kept by
the customer to ill-effects of an unexpected outlay or a failure of receipts to
safeguard financial outlay. Profit is paid at a flexible rate calculated on half-
yearly basis under the interest-free banking system. There is no restriction on
the withdrawals from the deposit account but the amount of money withdrawn
is deleted from the amount to be taken for calculation of products for
assessment of profit to be paid to the account holder.

5.2 Services and Products

The Bank provides a complete range of domestic and international services to
its customers. Additionally, the following products have been developed:

5.2.1 Khushali Bachat Account (KBA):

This scheme has been introduced to inculcate the habit of savings among the
people.

Salient Features:

 Introduced for the first time in Pakistan.

 Expected profit is as high as 2.76% percent per annum.

 Profit is paid on half yearly basis and calculated on daily products.

 Provides the facility to pay accounts holder’s utility bills through

 His/her accounts, without making queues and delays.

 Customers can pay its utility bills from his account

28
  The minimum initial deposit is 3600 rupees

5.2.2 Hajj Mubarak Savings Scheme:

This is a Term Deposit Scheme started for fulfilling the life-time ambition of
every Muslim to perform Hajj.
Salient Features:
 Duration of the scheme is 2 years and 3 years.

 Under Hajj Mubarak 2 years and 3 years schemes, a monthly deposit

of Rs. 1800 and Rs. 1200 is required respectively.

 Upon maturity of 2&3 years schemes, the Bank will pay

approximately Rs. 48,160 and Rs. 51,200 respectively2.

 Account may be opened by an intending Hajji, who will also nominate

his/her successor.

 Premature encashment is permissible subject to commensurate

adjustment in profit.

 Deduction of withholding Tax and Zakat as per government rules in

force.

5.2.3 Khanam Bachat Account Scheme (KBA):

Under this scheme, the customer is required to deposit a sum of Rs. 1,000
regularly for 10 years. Profit is paid on or before the 6th of each month and at
maturity. According to the average prevailing rate of profit, it is expected that
the total amount would be around Rs. 257,000 subject to deduction of Zakat
and Withholding Tax. Account may be opened in the personal name of an
individual or in joint names of two persons with proper introduction in the
manner prescribed for opening other deposit accounts.

5.2.4 PLS Savings

This is a specially designed PLS Savings Account Scheme which gives the
depositor a very high profit with complete flexibility and convenience of a

29
Current Account. Under this scheme, profit will be paid on daily product basis
at the same rate as for PLS Saving Scheme.

Salient Features:

 Account may be opened in personal or joint names in four global

currencies namely US dollar, Pound Sterling, Japanese Yen and
Deutsche Mark.

 No restrictions on withdrawals and transfer or remitting the amount to

any part of the world.

 Expected profit is as high as 2.76% per annum3.

 Exempted from all forms of taxes.

 PLS saving account-366 is opened with minimum balance of 600000

rupees

 Profit is calculated on daily basis

5.2.5Export Promotion Scheme:

This scheme deals with financial matters relating to exports and extension of
export credit at confessional rates in order to boost up the exports of the
country.

5.2.6 Credit Cards:

The Bank offers the largest and most comprehensive credit facility to its
customers who may have Master Card, Cirrus and Maestro local or
international Credit Cards at their choice. With worldwide acceptability and a
wide range of ancillary services to the cardholder, these are the world’s
foremost credit cards.

5.2.7 Rupee Travelers Cheques (RTC):

The Bank also offers Rupee Travelers Cheques to its customers which are as
good as cash and are accepted at the major shops, travel agents, hotels,

30
business establishments and MCB branches across the country and abroad.
MCB Rupee Travelers Cheques bear multiple benefits to the users such as
wider acceptability, safety, convenience, validity without anytime limit and
easy refund in case of loss etc.
Rupee Travelers Cheques of the Bank can be purchased from about 400
branches in denomination of Rs. 1,000, Rs. 6000 and Rs. 10000.

5.2.8 Automated Teller Machines (ATM):

The Bank has the largest network of Auto Teller Machines in Pakistan. These
ATMs have been installed at airports, major business centers, leading gas
stations and other important places all over the country. This facility is
provided for extending round the clock money withdrawals facility to Bank’s
clients.
Currently, 550 ATMs are in operation and over 465, 0008 ATM card have
been issued.

31
32
 CHAPTER-6
FINANCIAL ANALYSIS

6.1 Balance Sheet

Table :2 Balance Sheet
 BALANCE SHEET AT 31 December 2018 2018 2017
 ASSETS (Rs. In '000') (Rs. In '000')
Cash and balances with treasury banks 75732185 61265859
Balances with other banks 7201459 10058662
Lending to financial institutions 2809752 2867744
Investments 556770384 566564304
Advances 364333516 316771355
operating fixed assets 35225865 31536887
Other Assets 34617075 31915210
  1076690236 1020980021
LIABILITIES
Bills payable 13291328 11975237
Borrowings from financial institutions 77438993 118615031
Deposits and other accounts 795689546 706239715
Deffered Tax Liabilities 12889649 12482287
Other liabilities 31420650 29491131
  930730166 878803401
NET ASSETS 145960070 142176620
REPRESENTED BY:
Share capital 11130307 11130307
Reserves 53512633 51491384
Unappropriated profits 55509013 52631368
Non controlling interest 509331 512076
120661284 115765135
Surplus/ (deficit ) on revaluation of securities 25298786 26411485
  145960070 142176620

Table : 3

6.2 Vertical Analysis Of Balance Sheet

  2018 2018% 2017 2017 %
 ASSETS (Rs. In '000') (Rs. In '000')
Cash and balances with treasury banks 75732185 7 61265859 6
Balances with other banks 7201459 0.6 10058662 0.9
Lending to financial institutions 2809752 0.2 2867744 0.2
Investments 556770384 51 566564304 55
Advances 364333516 33 316771355 31

33
operating fixed assets 35225865 3.2 31536887 3
Other Assets 34617075 3.2 31915210 3.1
  1076690236 100 1020980021 100
LIABILITIES
Bills payable 13291328 1 11975237 1
Borrowings from financial institutions 77438993 8 118615031 7
Deposits and other accounts 795689546 85 706239715 84
Deffered Tax Liabilities 12889649 1 12482287 2
Other liabilities 31420650 3.3 29491131 4.3
  930730166 100 878803401 100

Interpretation
Cash and balances with treasury banks increased from 5% to 6 % in 2018,
Balances with other banks increased 0% to 1% in 2018, Lending to financial
institutions is same 0% in both 2017 and 2018, Investments increased from
54% to 55% in 2018. Advances decreased from 32% to 3 % operating fixed
assets are same in both years Other Assets decreased from 4% to 3%.
Bills payable decreased from 2% to 1% Borrowings from financial institutions
increased from 7% to 13%. Deposits and other accounts decreased from 85%
to 80%. Deffered Tax Liabilities are same in both years 2017 & 2018. Other
liabilities same 3% in 2017 and 2018. Share capital is same in both 2017 &
2018 i.e 1%. Reserves decreased from 5% to 3% in 2018. Unappropriated
profits is same 5% in 2017 & 2018. Surplus/ (deficit ) on revaluation of
securities is also same 2% in both 2017 & 2018.

34
Table : 4

6.3 Horizontal Analysis

2017 vs
  2018 2017 2018 %
 ASSETS (Rs. In '000') (Rs. In '000')
Cash and balances with treasury banks 75732185 61265859 2.3
Balances with other banks 7201459 10058662 -28
Lending to financial institutions 2809752 2867744 -2
Investments 556770384 566564304 -1.7
Advances 364333516 316771355 15
operating fixed assets 35225865 31536887 11
Other Assets 34617075 31915210 8.46
  1076690236 1020980021 5.4
LIABILITIES
Bills payable 13291328 11975237 10.9
Borrowings 77438993 118615031 -34.7
Deposits and other accounts 795689546 706239715 15
Deffered Tax Liabilities 12889649 12482287 3.2
Other liabilities 31420650 29491131 6.5
  930730166 878803401 5.9
NET ASSETS 145960070 142176620 2.6
REPRESENTED BY:
Share capital 11130307 11130307 0
Reserves 53512633 51491384 3.9
Unappropriated profits 55509013 52631368 5.4
  120171953 115253059 4.2
Non controlling interest 509331 512076 -0.5
120661284 115765135 4.2
Surplus/ (deficit ) on revaluation 25298786 26411485 -4.2
  145960070 142176620 2.6

6.4 Interpretation

From the above mentioned analysis following are my Result about the
Operations of branches of MCB for the year 2018, Cash & balances with
treasury bank in creased 31%.Balances with other banks increased 228%

35
while lending to financial institutions increased 261% which indicates the
increase in profit for the bank advances increased 3% operating fixed assets in
4% other assets decreased -15% Net Assets increased 4% in the Year 2018
than the previous Year 2017 . Company’s Total Assets in Pakistan has been
increased by 8% than 2017. Due to financial crisis in the world investment
activities were slowed down in year 2017 but in the year 2018 investment
increased 9% as the result of National action plan.

Due to its sound financial policies MCB’s borrowing from financial

institutions has been in increased by 98 % than year 2017. Bills payable
decreased -28% which is a good sign for the bank. Deposits & other accounts
increased 3% the deffered tax liabilities increased 16% & other liabilities
decreased -1%

The Total Liabilities increased 9% which is a bad sign for the organization.

Share capital is still the same as in 2017 it showed 0% difference in the year
2018. Reserves increased 5 % un accrued profit increased 6% while surplus on
revelation of security increased 3 %.

The increased or decrease in the value of every item in the balance sheet
shown above is because of the increase or decrease in the amount of that item
the difference mentioned with the minus sign shows the decrease in the
current year i.e. 2018

6.5 Ratio Analysis

Ratio analysis is an important and old technique of financial analysis. Ratios
are important and helpful in the reference that:

These simplify the comprehension of financial statement and tell the whole
story of changes in the financial conditions of the business.

These provide data for inter-firm comparison. The ratios highlight the factors
associated with successful and unsuccessful firms, also reveal strong and weak
firms.

36
These help in planning and forecasting these can assist management in its
basic functions of forecasting, planning, coordination and control.

These help in investment decision in case of investor and lending decision in

case of Bankers etc.

However, the ratios are only indicators, they cannot be taken as final regarding
good or bad financial position of the business other things have also to be
seen.

Great care is needed while calculating meaningful ratios and in interpreting

them. Although there are several ratios, which an analyst can employ yet the
type of ratios he would, use entirely depends on the purpose for which the
analysis is done i.e., a creditor would keep him abreast about the ability of a
concern to cover up its current obligations and so would care about current
and liquid ratios, Turnover of receivables, coverage of interest by the level of
earnings etc.

6.5.1 Advantages Of Ratio Analysis

It helps to give comprehensive financial statements in evaluating aspects of
any undertaking in respect of financial health, operations efficiency and
profitability. It gives a chance of inter-firm-comparison to measure efficiency
and helps management to resort to some remedial measures. It provides a good
help in decision making for investors and the financial institutions.

LIQUIDITY RATIOS

The liquidity of a firm is measured by its ability to satisfy its short-term

obligations as they come due. Liquidity refers to the solvency of the firm’s
overall financial position i.e. the ease with which it pays its bills. Due to low
or declining liquidity firm moves towards financial distress and bankruptcy.

Liquidity Measures are

Current ratio

37
Quick (acid-test) ratio

CURRENT RATIO:

The current ratio, one of the most commonly cited financial ratios, measure
the firm’s ability to meet its short-term obligations. It is expressed as follows:

Current ratio = Current assets / Current liability

Current Assets =Total Assets-Operating fixed Assets & other Assets

Current Liabilities = total liabilities- differed tax liabilities

Years 2018 2017

Current 47033950/1211226296 1006984068/917840517

ratio 0.03 1.09

RESULT:
From the above ratios it is clear that the firm’s investment in current assets has
decreased in 2018 but the liabilities also decreased for the year 2018 that’s
why the ratio vale for the both years 2017 to 1.09 and 2018 is 0.03.

This ratio is below the standard. The management should take steps to
improve the short- term and long-term financial position of the firm.

DEBT RATIO

The debt position of a firm indicates the amount of other people’s money
being used to generate profits. In general, the financial analyst is most
concerned with long term debts, because these commit the firm to a stream of
payment s over the long run.

38
The debt ratio measures the proportion of total assets financed by the firm’s
creditors. The higher this ratio the greater the amount of other people money
being used to generate profit. The ratio is calculated by following formula

Debt ratio = Total liabilities/ Total assets

Years 2018 2017

Debt ratios 1216887369/1373430450 930730166/1076690236

0.88 0.86

RESULT:

This ratio is almost showing the same trend in both years 2018 % 2017. It
slightly increased in 2018 to 0.88 from 2017 value 0.86 because both total
assets & total liabilities are increased. Debt ratio indicates the greater the risk
and more financial leverage it has. It also shows that firm has paid some
portion of the debt during the year 2018.

MARKET RATIOS

RETURN ON TOTAL ASSETS:

It measures the overall effectiveness of management in generating profits with

its available assets. The higher the Return on total assets better will be the
performance.

Return on total assets = Net Income/Total assets

Year 2018 2017

ROA 13393703/1373430450 19767243/1076690236

0.009 0.01%

RESULT:

39
The return on total assets of the firm is 0.04 % in 2018 which was same in
previous year 2017. The reason behind similarity of the values for the both
years is that the total assets for the year 2018 is increased than 2017 if only the
net income was increased it could cause a change in this ratio value but the the
total assets were also increased that why return on total assets ratio is same in
the both years.

RETURN ON EQUITY:

Return on Equity = Net Income/Shareholders Equity

Year 2018 2017

ROE (%) 13393703/138099581 19767243/120151953

0.09 0.16%

RESULT:

The return on equity of the firm is 0.09% in 2018. It is decreased than the
previous year 2017 ratio i.e 0.16 because net income decreased and
shareholder equity is increase for previous year.

Earning Per Share:

Year 2018 2017

Ratio
19.82 22.38

RESULT:

The Earning per Share of the firm is decreased in 2018 19.82% in 2018. It is
22.38 in 2017.

6.6 Explanation of Financial Ratios

6.6. 1 Profitability ratios

40
Profitability ratios measure a company’s financial performance and its ability
to increase its shareholders value and generate profits. Profitability ratios
provide insight into the profits made by the company in relation to its size,
assets, and sales and also measure the company’s performance in relation to
itself. Having past data as a benchmark, the firm can start to make conclusions
as to why profitability is increasing or decreasing.

The net profit margin Net profit after tax measure profit remaining after
deducting all expenses including tax. It should be maximum.
Markup/return/interest earned and non markup interest income increased
throughout the period i.e. year 2017 up to year 2018. While
markup/return/interest expensed was increased throughout from 2017 as a
result of net profit after tax ratio decreasing. The income & expenses have
direct relation, that’s why it affects net profit ratio.

The gross spread ratio relationship between Net Markup income & Gross
markup income. Gross spread ratio is continuously increasing from 2017 to
2018.

Income expense ratio as shows the percentage of expenses it should be lower.

In bank income expense ratio has decreasing trend from 2017 to 2018.

Return on equity measures a corporation's profitability by revealing how

much profit a company generates with the money shareholders have invested.
A company with high return on equity is more successful to generate cash
internally. But in this bank return on equity is throughout decreasing trend
(2017 to 2018) due to increase in borrowing /debt its means the bank generate
low profit with the money shareholder have invested So if the firm takes on
too much debt, the cost of debt rises as creditors demand a higher risk
premium, and ROE decreases. It is generally accepted that a company with a
higher ROE is a better

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6.6.2 ACTIVITY RATIOS
These ratios also known as efficiency or turnover ratios, measure how
effectively the Organization is using its assets.

Total asset turnover represents the amount of revenue generated by a

company as a result of its assets on hand. One general rule of thumb is that the
higher a company's asset turnover, the lower the profit margins, since the
company is able to sell more products at a cheaper rate. In this bank total
assets turnover ratio is increasing trend throughout (2017 to 2018) because
total assets are increase in every year

Fixed assets turnover ratio establishes a relationship between net sales and
net fixed assets. This ratio indicates how well the fixed assets are being
utilized. This ratio expresses the number to times the fixed assets are being
turned over in a stated period. It measures the efficiency with which fixed
assets are employed. A high ratio means a high rate of efficiency of utilization
of fixed asset and low ratio means improper use of the assets. In this bank
fixed asset turnover ratio have increasing trend throughout In year 2017 this
ratio is decrease means the bank have not utilized its fixed assert properly

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 CHAPTER 7
FINDINGS AND RECOMMENDATIONS

7.1 Conclusions

I experienced that the management is hesitate to give internee chance of

working in the cash department because they are not take any risk. Also some
branches have not full decorated and in some branches there is no installation
of rotation camera which is not good for the security.

I conclude through the study and perpetration of the ratio analysis I

conclude that the Net profit margin of the company decrease and it is need to
be improved and Gross spread ratio also decrease need to be improved, non
interest income to total income is relatively increase which is good sign for
organization . Debt ratio of the company decreased over the years. Re turn on
asset (ROA) increasing on the year base its good because the organization use
its asset effectively and efficiently and there is also need to improve the return
on equity. Price earn ratio is stabilizing over the period of time and the return
of equity has been decreased.

7.2 Problems and Recommendations

Nothing in this world is permanent but change. And response to change still
needs greater change. All it means that nothing is perfect but there is always
some room for improvement. It is always a hard working and some taking
activity to make on institution on sound basis and to maintain its performance
as steps to improve the performance.

7.2.1 Providing Customer Services

In the market economy and age of competition the customer is the king;
customer satisfaction is the road to success. The bank should implement such

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strategies and facilities which attracts and satisfy more customers. As most of
remittances are sent through informal means of hawala/hundi. MCB has to
play a vital role in mobilizing such remittances.

7.2.2 Training and education of the staff

Development and change are the two inevitable characteristics of progress.
And change has to be there in this process of progress of progress if not then
every thing will come to a stand still situation. In such situation only those will
survive who accept the change and take measures for adapting to these
changes.
For imparting various skills and behavior a sound training policy has be
formulated by MCB. The training in under to be more effective should be
given by highly qualified and experienced trainer. In the year 1998 the banks
has given training to its upper and middle management officer, but still a lot of
work is required to be done in this connection.

7.2.3 Full Control and Authority

For every organization to run on sound footing it should be given the decision
making authority and unnecessary intervention from outside is avoided. For
this the management should be given more authority. The management should
be given more authority in decision making in areas of finance, recruitment of
staff, posting/promotion. And the upper management should take such steps.

7.2.4 Discipline in financial performance

It is an important responsibility of every organization to decrease expenses
and checks are required for the management. All the loopholes must be
checked that are incurring expenses in report of vehicles, fuel charges,
entertainment, traveling, telephones, medical allowances, foreign benefits etc.
The bank will get more if it analyze every activity or cost benefit basis.

7.2.5 Recovery Form Defaulters

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One of the biggest problems of MCB’s is the recovery of the stuck up loans or
finances. For this purpose the bank has taken some major steps so that the
process of recoveries is accelerated. Total recoveries and restructuring of non-
performing loans during the year amounted to Rs. 9.4 Billion. This amount
also includes Rs.3.2 billion in cash recoveries. Provisions for non-performing
loans decreased from 57% of total advance 18 months ago to 29% as of
December 1998. Further achievements this connection will depend upon the
following factors.
 More bold and impartial policies have to be implemented.
 More authority should be given to the recovery division.

7.3 SUGGESTIONS

7.3.1 Lack of proper training

There is not proper training system among the staff. Training is necessary to
show good performance and efficiency.I suggest that an arrangement of
refresher courses and in service training must be made to increase the
knowledge and skills of the employees. This will help enabling them to meet
modern banking requirement and to fill the efficient staff qualities.
7.3.2 Branch environment
It is recommended that the emoloyees should be trained to be polite and
maintain silence as much as possible and not to discuss politics or personal
problems with each other during work hours. This distirbes the working
environment of the bank and other employees can not perform their work
properly.
.7.3.3 Delegation of authority
There is no proper delegation of authority
Executive at all level should be given sufficient power and authority to make
quick decisions. This will increase the effectiveness and efficiency of the
organization.

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 References

 http://www.mcb.com.pk/ir/fin_data_rep.asp

 https://www.mcb.com.pk/about-mcb/board-of-directors

 https://www.mcb.com.pk/about-mcb/management-profiles

 https://www.mcb.com.pk/about-mcb/management-profiles

 MCB Annual Report, 2017

 Annual Report, 2018

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