Internship Report

On

Muslim Commercial Bank

Submitted by: Ayesha Bibi

Supervised by: Muhammad Shoaib

Department of Commerce

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 Government College of commerce, Haripur

Internship report on the Muslim Commercial Bank of Pakistan

Submitted to: Govt College of Management Sciences Haripur

Submitted by: Ayesha Bibi

Registration number: 15-UH-GCMSH-3121

Supervisor: Muhammad Shoaib

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 This internship report submitted to partial fulfill the requirements
For degree of Master of Commerce awarded by the University of Haripur,
Pakistan

GOVERNMENT COLLEGE OF MANAGEMENT

SCIENCES HARIPUR
APPROVAL SHEET

APPROVAL COMMITTEE

1. External Examiner

Name ​Signature

2. Supervisor

Name ​Signature

3. Head of Department

Name ​ ​Signature

4. Principal

Name ​ ​ Signature

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 Acknowledgment

All praises and thanks to Almighty Allah. The Lord and Creator of this
universe by whose power and glory all good things are accomplished. He is
also the most merciful, who bestowed on me the potential, ability and
opportunity to work on this project.

I am grateful to my respected teachers who have guided me in each

step of this project. Indeed, without their kind guidance, I may not be able to
even start this project. May ALLAH give them the reward which they deserve.

Despite the hectic schedule, staff Bank management helped me to clarify my

concepts and make me learn from their experience. Whatever I learned from
them will definitely help me in my upcoming study and the professional life
ahead. Thank you so much for being so cooperative and so helpful every
time. I hope I have been up to your expectations.

In the end, I am thankful to all my teachers and have many prayers for them
who give me the knowledge and make me able to complete my master’s
degree.

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 Executive Summary

A bank is a financial intermediary that creates credit by lending money to the

borrowers, thereby creating corresponding deposits on the bank balance
sheet. Banks take money from people at a low-interest rate and lend that
money to others at a high-interest rate, this difference in the interest rates is
the income of the bank. In addition, the person who carries all these activities
is a banker

Banker carries out the business of banking, which includes conducting current
accounts for his customers, paying cheques drawn on him, collecting cheques
for his customers.

This report was conducted for the purpose to analyze the financial scenario of
the MCB, its structure and especially the performance of the activities of the
MCB GT Road branch Haripur.

In this report, I tried to analyze the working of the different departments of the
bank like cash, clearing, loan, account opening, and IT department and
toward the end, I tried to analyze the weak and plus points of the branch.

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 CHAPTER – ONE

INTRODUCTION

As part of the academic requirement for completing M.COM, the students are
required to undergo administrations for six (6) 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. This
report is about MCB bank ltd.

The Muslim Commercial Bank (MCB) is one of the leading banks in Pakistan,
working smoothly and efficiently in the economy of the country which is
subject to fluctuations most of the time.

Nowadays MCB is having the objective to focus on consumer banking and

their services, which gives them the edge over the rest of the banks in the
country; its consumers’ banking provides consumers with innovative saving
schemes, products, and services.

So far, MCB has shown remarkable achievements in fulfilling all of its

objectives along with the profit limits. Its products have also presented an
admirable response by its clients and contributed a lot in developing the
bank’s repute as well as the economy, which is appreciable.

1.1 Background of the Study

Banks play a vital role in strengthening the economy of any country. They
help in mobilizing savings and provide capital for trade, commerce, and
industry. In Pakistan, the Banking sector has always shown remarkable

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results in the past and is carrying on with it. MCB is one of the leading banks
in Pakistan and has played a key role in the development of the country.

The opportunities provided to understand the bank operations during six

weeks internship in MCB the get road Branch as the requirement for
fulfillment of M.Com (accounts) Degree. In this, report different aspects of the
banking sector in general and MCB in particular.

1.2 Purpose of the Study

● It provides an opportunity to understand the various operations of the

bank.

● Apply the knowledge of classroom lectures in practical work.

● To analyze and interpret the MCB’s Annual Reports.

● Make the recommendations in the light of analysis.

1.3 Scope of the Study

The study revolves around the operations carried out in MCB Bank Limited
GT Road branch, Haripur only and the financial analysis carried out for MCB
over the period of 2014-2018.

1.4 L​imitation of the Study

It said that something is better than nothing is. No matter how efficiently
studies are conducted, it may not be perfect in all respects. This study is
conducted by keeping in view the objectives of the study. The study may not
include broad explanations of facts because of its nature. Secondly, the
limitation, which affects the study, is the restriction on mentioning every fact of
the bank due to the problem of secrecy of the bank. In addition, the availability
of required data was a problem as all the documents and files are kept strictly

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under lock and key due to their confidentiality in nature. Thirdly, the problem
of a short time period also makes the analysis restricted as one cannot
properly understand and thus analyze all the operations of a bank in just a
very short time of six weeks.

1.5 Merits of the Study

The study will benefit the students of accounts and banking. They will take a
better exposure in the field of banking.

1.6 Methodology of the Study

The data have been collected from both primary and secondary data sources.
The following methods have been used for the collection of related data.

1.6.1 Primary Data

“​Primary data is data that is collected by a researcher from first-hand sources,

which is data collected directly from its source. Using a method like surveys
interviews or experiments”

● Interview of bank employees

● Personal observations

1.6.2 Secondary Data

“​Secondary data is a data that have been already collected by and readily
available from other sources, which is collected from newspapers, college
records, Nadra records, etc”

● MCB annual reports

● MCB Brochure

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 ● MCB manuals

1.7 Scheme of Report

The report has divided into five chapters:

Chapter 1 includes the background, purpose, scope, limitations, methodology,

and scheme of the report. Chapter two includes background and history of
banking in Pakistan, the background of MCB, roles, functions, and branches
also it includes the organizational structure of MCB, departments and
organizational charts of MCB. Chapter 3 precludes all the HR practices,
products, and services of MCB in whichever the Muslim commercial bank
deals with Chapter 4 includes financial, SWOT analysis and findings based on
work in chapter three. Chapter 5 includes recommendations of the study
based on the analysis in the previous chapter and overall the organization.

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 CHAPTER - TWO

INTRODUCTION TO THE ORGANIZATION

2.1 Definition of the Bank

A bank is an institution, which deals with money and credit. It accepts

deposits from individuals and firms at a lower interest rate and gives at a
higher rate of interest to those who need them. “A bank is a financial
institution that accepts money from the surplus unit of economy and land to
the deficit unit of the economy.”

Crowther has defined a bank as:

“A bank is a firm which collects money from those who have it spare, it lends
money to those who require it”.

Parking defines a bank as:

“A bank is a firm that takes deposits from households and firms and makes
loans to other households and firms”.

2.2 History of Muslim Commercial Bank

At the time of independence, there were 487 offices of scheduled banks in the
territories now constituting Pakistan. However, by June 1948, the number of
offices of scheduled banks reduced to 195 as many of the banks shifted their

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offices to India. There were 19 non-Indian foreign banks with the status of
small branch offices, which were engaged solely in the export of crops from
Pakistan, while there were only two Pakistani banks namely Habib Bank and
Australasia Bank. Therefore, at the time of independence, Pakistan was in
need of commercial banks and financial institutions. At that time
Quaid-e-Azam Muhammad Ali Jinnah wanted another Muslim bank to be
established. This desire fulfilled when Adamjee with the assistance of
Isphanis Group established Muslim Commercial Bank on July 9, 1947, in
Calcutta. After the creation of Pakistan, MCB shifted its headquarters from
Calcutta to Dhaka on August 17, 1948. MCB again shifted its headquarters
from Dhaka to Karachi on August 23, 1956.

In the year 1974, the government of Pakistan under the leadership of Mr.
Zulfiqar Ali Bhutto nationalized all the commercial banks under the
Nationalization Act 1974. The justification presented for nationalization was
that it would stop the creation of industrial monopolies, ensure fair distribution
of credit, promote the agriculture sector by financing the various needs of the
farmers, enhance the interests of small industrialists, and promote social
welfare in general. The financially small/weak banks merged with banks,
which had a strong financial base. Premier Bank merged with Muslim
Commercial Bank. Five banks came out as the outcome of the mergers; these
banks were the National Bank of Pakistan, Habib Bank of Pakistan, United
Bank Limited, Muslim Commercial Bank Limited, and Allied Bank of Pakistan
Limited.

The results of the nationalization were not as fruitful as were expected. The
service standard of the various nationalized banks diluted. People complained
about the delay in home remittances, dispatch of cheques, drafts, inefficient
counter service, etc. In addition, the problem of overstaffing made the banks
inefficient in controlling their costs. The ratio of bad debts increased as the

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banks extend loans to bureaucrats due to political influence. The government
realized the problem and set up the Privatization Commission on January 22,
1991, to pave way for the privatization of the nationalized banks. Muslim
Commercial Bank was the first bank to privatize as the State Bank of Pakistan
sold 26% of the shares held by it to the public in 1991.

2.2.1 Present Status

Today, MCB has more than 1450 branches all over Pakistan and presence in
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Countries across the globe with a revamped customer-oriented philosophy;
MCB is pursuing new avenues of leadership through innovations, as it gears
up to face the challenges of the new technology.

Now MCB is the largest commercial bank of Pakistan comprising nine

regional headQuarters, 42 Zones and 1450 branches in the country.
Overseas operations of MCB comprise 65 branches, 2 affiliates, 2
representatives’ offices, and 2 subsidiaries. MCB has its registered office at
Karachi. The number of staff of MCB as on 30-06-2009 was 46030.

2.2.2​ CREDIT​ RATING

JCR-VIS Credit Rating Company Limited has assigned a long-term rating of
“AA+”
And a short term rating of “A1+” to the bank

2.3 Organizational Structure of MCB

Muslim Commercial Bank is one of the leading organizations in Pakistan. Its

position is third among the commercial banks of Pakistan. MCB follows the
Functional Organization system. There are different departments in the
organization.

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2.3.1 Regional Department

MCB has a well-organized structure, based on well-defined departmentation.

Departmentation in MCB consists of different levels, which are Branch Office,
Regional Office, Circle Office, and Head Office.

2.3.2 Head Office

The head office is the apex office in Karachi, which exercises final control of
the branches, regions, and circle offices. President is the chief executive. Next
to the President, there is one executive director, who is the country head of
the consumer banking followed by two advisors and senior executive vice
president, who are the overseeing executive of various divisions at head
office.

2.3.3 Circle Area Office

The head of the circle office is the general manager. The function of the circle
area office is to administer two or four regions, depending upon the size of the
business of the respective area. The circle office of MCB is in Abbottabad.

2.3.4 Regional Office

The regional manager is the head of a regional office. The function of a

regional office is the development of business and overall control of the
branches under its jurisdiction.

2.3.5 Government Nominee Directors

Among the directors, the government appoints two members known as

government nominee directors.

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2.3.6 Chief Financial Officer

One Chief Financial Officer MCB deals with the financial matters of MCB.

2.3.7 Company Secretary

Company Secretary plays an important role in the company. The secretary of

the board presents the annual report of the bank.

2.3.8 Branch Office

The branch office is the primary and basic unit of a bank. The branch
manager is the head of a branch. In addition, he is responsible for the
management of the overall affairs of the branch. An accountant is the second
officer next to the branch manager. He is in charge and manages various
departments. In the case of a corporate branch, the chief manager is the
head.

2.4 Management

MCB management is working with multi pronged initiatives to operate with

flexibility and further strengthen its market position. There are twelve boards
of directors of MCB. Among them, the government nominates two. The
boards of directors are as follows.

2.4.1 Board of Directors

In the management of a bank, the board of directors is at the top controlling

bodies. There are two boards of directors of the Muslim Commercial Bank.

2.4.2 Directors

There are eight directors of MCB, including one member, as a President and
Chief Executive. The president is the administrative head of a bank. He

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presides over the meeting of the executive board, manages and controls the
affairs of the bank.

2.4.3 Divisional Chiefs

In order to improve the management and operation of a bank, it has split into
a number of divisions. Each division placed under the supervision and control
of divisional chief or senior Executive Vice President (SEVP) or Executive
Vice President (EVP).

2.4.4 Provisional Chief

The provincial Chief has the powers for sanctioning finance and other credit
facilities. He holds office at the provincial level.

2.4.5 Circle Executive

There is the number of circle offices of MCB. They placed directly under the
supervision and control of the Chief Executive.

2.4.6 Zonal Head

Each circle is divided into a number of zones. Zonal Heads administer these
zones. Who holds the post of VP or AVP?

2.4.7 Branch Manager

Each zone of MCB is divided into several branches. The branch manager is
the head of the branch that holds the post of AVP or OG –II

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Table 2.1 Organization Chart of MCB

Head Office Hierarchy

Chairman

Board of Directors

Chief Executive

SEVPs

EVPs

VPs

AVPs

OG I

OG II

OG III

Clerical Staff

Table 2.2: Board of Directors: (as of June 2018)

Mian Muhammad Mansha Chairman

Imran Maqbool President and C.E.O

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Tariq Rafi Director

Yahiya Saleem Director

Mian Umer Mansha Director

Iqra Hassan Mansha Director

Muhammad Ali Zaib Director

Salman Khalid Butt Director

Nor Hizam Bin Hashim Director

Muhammad Suhail Amar Director

Suresh

2.5 Committee
In order to compliance the rule of Corporate Governance in Pakistan, the
MCB formulate the different committees

2.5.1 Management committee

Management Committee/board members have ultimate responsibility for
directing the activity of the organization, ensuring it is running and delivering
the outcomes for which it has been up. Every management committee should
provide leadership to the organization by:
● By setting the strategic directions to guide the activities of an
organization
● Ensuring the effective management of the organization
● Monitoring the activity of the organization
● It plays an important role in decision- making.

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Chief Financial Officer
Mr. Hammad Khalid

Company secretary
Mr.Fida Ali Mirza

Legal Advisor
MR. Khalid Anwar & co
Advocate and legal consultants

Table 2.3: Management committee

Imran Maqbool President and chief executive officer

Mr. Faisal Ijaz SEVP & Group executive information Technology

khan

Atif .R.Bukhari SEVP & Group executive corporate & Investment banking

Sohail Malik SEVP & Group executive corporate & investment banking

Naeem Iqbal SEVP & Group executive asset Remedial Management

Mohtashim Asai SEVP & Group executive international

Jamil Iqbal SEVP & Group executive Global operations

Altaf Hussain SEVP & Group executive Audit,BRR & Investigations

Hanif Akhai SEVP & Group executive Global treasury

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Ayaz Ahmad SEVP & Group executive financial control & corporate
planning

Jamil A. khan SEVP & Group executive Retail banking

2.5.2 Audit committees

The primary function of the organizational Audit Committee is to provide
oversight of the financial reporting process. The audit committee can expect
to review significant accounting and reporting issues and recent professional
and regulatory pronouncements to understand the potential impact on
financial statements

Auditor
KPMG Taseer Hadi & CO
Chartered accountants
A.F. Ferguson & co
(Member firm of PriceWaterhouseCoopers)
State life building, 1-C
I. I Chandigarh Road Karachi Pakistan

Table 2.4 ​ ​Audit committees

1. Mr. Yahiya Saleem Chairman

2. Mian Umer Mansha Member
3. Mr. Muhammad Ali Zeb Member
4. Mr. Nor Hizam Bin Hashim Member

2.5.3 Business Strategy and Development

Business strategy and development can be summarized as the ideas,
initiatives and activities aimed toward making a business better. This includes

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increasing revenues, growth, increasing profitability and making strategic
business decisions.

Functions
● Formulating business strategy
● Strategic market segmentation
● Implementations of plans
● Strategic controls

Table 2.5 Committee (BS and DC)

1. Mian Umer Mansha Member
Chairman

2. Mr. S.M.Muneer Member

3. Mr. Muhammad Suhail Amar Member

Suresh
4. Mr. Salman Khalid Butt Member

5. President and CEO Member

The primary functions of the HRM committee are to monitor, evaluate, and
make the decision on behalf of the board concerning policies and strategic
matters related to the human resource of the company.
● The review recommends the salary framework of the employees.
● Recommend policies for staff development.
● Professional training
● Policies for the remuneration
● Retirement and superannuation of the employs

Table 2.6 Committee (HR &RC)

1. Mr. Yahiya Saleem Chairman
2. Mian Muhammad Mansha Member
3. Mrs. Iqra Hassan Member
4. Mr. Muhammad Ali Zeb Member

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2.5.5 IT Committees

The function of the IT committee might include building a business case of the
project, providing assistance and guidance, monitoring the progress,
controlling the project in IT of the organization.

Table 2.7 IT Committee

1.Mian Umer Mansha Chairman
2. Mr. Yahiya Saleem Member
3. Mr. Muhammad. Suhail Amar Member
Suresh
4. Mr. Salman Khalid Butt Member
5. President and CEO Member

Table 2.8 Categories of shareholders

Categories of Shareholders Shares Held Percentage
Directors, chief executive Officer 119,604,830 10.0927%
Associated Companies 218,170,146 18.4101%
NIT, ICP 912 0.0001%
Banks, Development Financial 16,689,227 1.4083%
institutions
Insurance Companies 97,560,323 8.2325%
Modarabas and Mutual Funds 13,295,678 1.1219%
Shareholders holding 10% 222,606,147 18.7844%
General Public local 137,119,274 11.5707%
General Public Foreign 3,415,323 0.2882%
Others 356,598,146 30.0911%
Grand Total 1,185,060,006 100.0000%

2.6 Vision of MCB

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To be the leading financial services provider, partnering with our customers
for a more prosperous and secure future

2.7 Mission of MCB

The mission statement of MCB is as follows:

“Our mission is to become the preferred provider of quality financial services

in the country with profitability and responsibility and to be the best place to
work.”

2.8 Core Values of MCB

The core values of MCB are as follows:

● Customer Focus

● Quest for Quality

● Team-based Approach

● Employee Respect & Dignity

2.9 Objectives of MCB

Objectives are the results of an activity. They help in achieving the main
purpose and mission of an organization. The main objectives of MCB as
presented in its half-yearly annual report 2018 are as follows:

Improved customer service

● Effective use of electronic media

● Enlightened personnel policies

● Compatible package

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 ● Excellent work environment

● Modernization of branches

● Launching of new products

● Decentralization of authority

● Effective reward and punishment policies

2.10 Business Area of MCB

MCB operates its banking business in the three areas i.e. Commercial
Banking, Consumer Banking, s Corporate Banking. They are discussed
below:

2.10.1 Commercial Banking

Commercial banking includes the basic banking functions like accepting

deposits from those who have it and advancing to those who need it. It also
provides general utility services, performing agency services, discounting bills
of exchange, etc.

2.10.2 Consumer Banking

Consumer Banking Group focuses on the Bank’s marketing and promotional

needs and development of asset and liability products. The group actively
liaises with the technology to develop alternate electronic delivery channels to
the common customer. Consumer banking includes targeting different
customer groups with different products and services to meet their specific
needs: for example different investment products and convenient payment
instruments.

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2.10.3 Corporate Banking

The Corporate Bank offers a whole range of banking products/services that

can be divided into the following categories: Working Capital Loans based on
the customers’ specific needs, different working capital financing facilities
including Running Finance, Cash Finance, Export Refinance, Pre-shipment,
and Post-shipment, etc. Tailor-made solutions are developing keeping in view
the unique requirements of customer business.

The Corporate Bank offers trade finance services that include an entire range
of import and export activities including issuing Letters of Credit (L/Cs),
purchasing export documents, providing guarantees and other support
services. The corporate banking also handles advisory, corporate finance,
and capital markets-related transactions. Within these areas, the bank has
developed expertise in:

● Private Placements

● Debt/Equity Underwriting

● Term Finance Certificates

● Loan Syndication

● Arrangement of Non- Fund Facilities

● Mergers and Acquisitions

● Privatization

● Corporate Advisory

2.11 FUNCTIONS OF A MUSLIM COMMERCIAL BANK

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A commercial bank performs many functions. They can be broadly classified
into two categories; primary functions and secondary functions.

2.11.1 Primary Functions

The basic functions of a bank are accepting deposits and advancing loans.

2.11.1.1 Accepting Deposits:

This is a very important function of commercial banks, to accept money from

those who have it but cannot put it to profitable use. To attract more deposits,
a bank offers various facilities to customers to deposit their money with it.
These facilities include the current account, savings account, and fixed
account. The current account bears no interest, yet a customer can withdraw
any number of cheques in a day. The saving deposit offers a moderate
interest with a limited withdrawal facility. A fixed deposit offers an interest rate
higher than the savings account; however, the account holder cannot
withdraw the money deposited during that fixed period.

2.11.1.1 Advancing Loans:

The second important function of a bank is to advance the money deposited

with it to those who need it for productive uses. The parties receiving these
loans include businesspersons, traders, exporters, individuals, and
corporations. Loans are extended against proper securities like mortgage,
pledge, and hypothecation of goods and documents of title. To adjust to the
needs of the various types of customers, a bank offers different types of credit
facilities. These facilities include loans, cash credit, overdraft, and discounting
of bills. Cash credit permits customers to withdraw funds within a given limit
and interest is charged on the balance actually withdrawn. Overdraft is
providing for a short period and interest is charged on the amount actually
withdrawn. Discounting of bills refers to making the payment of bills before its
maturity.

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2.11.2 Secondary Functions

The secondary functions are those, which a commercial bank performs for its
customers in addition to their primary functions. These functions include the
following

2.11.2.1 Collection of Bills:

Bank collects and makes payments of cheques and notes for its customers as
the agent of the customer.

2.11.2.2 Collection of Dividend:

The bank provides a very useful service in the collection of dividends or

interest earned on shares, debentures, or TFCs held by its customers.

2.11.2.3 Execution of Standing Instructions:

A customer may order in writing to his bank to make payments of regularly

recurring nature of expenditures to an individual or firm by debiting it to his
account.

2.11.2.4 Acting as Trustee or Executor:

If a customer instructs its bank to act as the trustee in the execution of its will
or asks the bank to act as trustee in the administration of the business
settlement, which requires technical knowledge, the bank acts as trustee or
executor.

2.11.2.5 Foreign Exchange Business:

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A bank transacts foreign exchange business by discounting foreign bills of
exchange and thus provides facilities for financing the foreign trade.

2.11.2.6 Advice on Financial Matters:

Sometimes the banks give valuable advice on various financial matters to

their customers.

2.11.2.7​ ​Safe Custody of Valuable:

A bank keeps valuables, ornaments, documents, etc. for safe custody.

2.12 Department at Branch Level

Departmentalization is one of the building blocks of organization structure.

Processes of grouping jobs according to some logical arrangements are
called departmentalization. Department is used for four common bases, which
are functions, products, customers and locations. In MCB,
departmentalization at the branch level is performing because of functions.
Functional departmentalization groups together those jobs, involving the same
or similar activities.

Departments and their functions are written below.

2.12.1 CASH DEPARTMENT

The cash department handles cash receipts and cash payments.

2.12.1.1 Receipts

The cash department receives money from customers, crediting their

respective accounts that are used for paying their bills or remitting it to their
creditors or suppliers as the case may be. While depositing cash, the client

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fills in the prescribed forms or pay-in-slips, which provides basic information
like the amount to deposit, date, account nature, etc. The cashier signs and
stamps the form or pay-in-slip and returns one copy of the receipt to the
depositor. After the business hours, all pay-in-slips are forward to the
computer department, which credits the same to their respective accounts.

2.12.1.2​ ​Payments

When the bank receives money from customers it undertakes to pay back the
amount on demand. The money can withdraw through cheques, drafts or pay
orders. However, before making a payment, the bank satisfies itself that the
instrument is valid and there is sufficient balance in the customer account to
support the payment. For making payments, the procedure followed is that the
first cheque is present to the token clerk. Token clerk writes down the date,
amount, and account number of the cheque in the token register. Sign and put
the token number on the backside of the cheque, give the token to the
customer and then forward the cheque to an officer who checks the signature
and verifies it by comparing the signature on a specimen card, which the
customer had signed at the time of opening the account. He also debits the
customer’s account in the ledger. The cheque is then forward to the cashier
who makes payment to the person who presents the token. The process may
differ from what mentioned above depending upon the nature of cheques.

2.12.1.3 Kinds of Cheque

A Cheque is defining “written order of a depositor to pay to or to order of a

designated party or to bearer a specified sum of money on-demand”. There
are three types of cheques, which are the following:

2.12.1.4 Bearer Cheque

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It is encashable at the counter or counter payment of the cheque can make to
any person who presents it to the banker.

2.12.1.5 Order Cheque

It is also cashable on the counter but its holder is entitled to collect the
payment of the cheque. For this, he/she has to prove his /her identity through
an account holder of the bank.

2.12.1.6 Cross Cheque

It is not cashable on the counter it could only be credited to the payee’s

account. For example, if there are two persons having accounts at the same
bank and one of the account holder issues a cross-cheque in favor of the
other then the cheque will be credited to the account of the person to whom
the cheque was issued and debited from the account of the person who had
issued the cheque.

2.12.2 Account Opening Department

In order to create a banker’s customer relationship, a customer has to open

an account in a specific bank. In large branches Grade I, II and III Officers are
responsible for opening new accounts. Like opening a new account is the
establishment of a banker customer, the relationship it is very necessary for
the bank to ascertain that the prospective customer is desirable. It is
necessary because, in case of fraud, unintended overdraft, or negligence, the
bank will have a source to trace out the customer.

Such sources establish by asking the customer to bring an existing customer

of the bank that will introduce him (the prospective customer) to the banker.

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In order to protect against losses resulting from fraud or unintended overdraft,
the account opening activity has formalized through certain steps. These
steps in the process account opening are as follows:

● Formal application

● Obtaining Introduction

● Specimen Signature

● Minimum Initial Deposit

● Operating the Account

● Qualification of Customer

2.12.2.1 Main types of accounts

Following are the main types of accounts:

i. Individual Account

An account that is open and operates by a single person called an individual

account. The bank strictly follows the instructions of that individual in
operation of the account.

ii. Joint Account

These are the accounts of two or more persons who are neither partners nor
trustees. The banker obtains clear directions as to whether one or more of
them shall operate the account.

● Accounts of Special Customers:

● Partnership’s account

● Joint-stock company’s account

● Accounts of clubs, societies, and associations

● Agent’s account

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 ● Executors and administrators account.

● Pak rupee non-resident account

● Foreign currency account can be opened in the following currencies:

● United State Dollar

● Pound Sterling

● Deutsche Mark.

● Japanese Yen

2.12.2 Deposit Products

2.12.2.1 SAVING ACCOUNT

If you’re living large and don’t wish to lock your funds for lengthy periods yet
still want to reap the profit from your success, you can have the best of both
worlds with an MCB privilege savings account

2.12.2.2 365 SAVING BUSINESS GOLD ACCOUNT

Transactional flexibility in a saving account 365-day gold account provides
choice to local and international currencies. This account will grow, saving the
flexibility to use this fund for a business that needs an attractive option for our
business customer with a high balance and requiring transaction flexibility.

2.12.2.3 CURRENT ACCOUNT

Low minimum balance requirement unlimited cash deposit and withdrawal
facility at hundreds locker and other affordable transactional facilities network
of over a thousand branches at convenient locations
.
2.12.2.4 MCB SMART CARD
MCB smart card provides access to saving current accounts 24 hours a day
right throughout the year. Our ATM connectivity extends to a sharing network

33
with over 4000 ATMs islandwide via Lanka pay, which is the largest common
ATM network in the country.

​2.12.2.5 ONLINE FUND TRANSFER

This web-based electronic fund transfer facility was designed to enable the
large network of franchises dealer’s distributors to conduct real-time
branchless transactions through secured MCB websites.

​2.12.2.6 MCB LITE

MCB bank received its branchless banking license 7 years ago and formally
started its branchless journey with the launch of MCB lite in 2014. MCB lite
mobile wallet allows customers to handle their daily transactions and payment
in an efficient and real-time manner from one’s mobile phone. Moreover to
support foreign remittance.

2.12.2.7 MCB ATMs

MCB Bank has the second largest ATM network in the country with
1300+ATMS which includes more than 140+OFFSITE ATMs placed at a
commercial location like malls, workplaces, and hospitals for consumer
convenience. The network covers 400+cities across the country.MCB has one
of the best ATM uptime rates across the industry ensured by the presence of
ATM monitoring terms working 24/7, periodic system health checks and timely
hard replacement.

2.12.2.8 VISA DEBIT CARDS

Pakistan 1​st chip-based debit card. It allows the customers to enjoy
unmatched convenience, enhanced security and round the clock accessibility
to their funds.

2.12.3 Clearance Department

34
A clearinghouse is an association of commercial banks set up in a given
locality for the purpose of interchange and settlement of credit claims. The
function of the clearinghouse is performed by the central bank of a country by
tradition or by law. In Pakistan, the clearing system is operated by the SBP. If
SBP has no office at a place, then the National Bank of Pakistan, as a
representative of SBP, acts as a clearinghouse.

In recent years there has taken place a rapid growth in banking institutions.
The use of cheques in making payments has always widely increased. The
collection and settlement of mutual obligations in the form of cheques is now a
big task for all commercial banks.

In practice, the person receiving a cheque is rarely a depositor of the cheque

on the same bank as the drawee bank. He deposits the cheque with his bank,
which is not actually the drawee bank. The bank in which the cheques
deposited becomes a creditor of the drawer’s banks. The debtor bank will pay
his amount of the cheque by transferring it from cash reserves if there are no
offsetting transactions. The bank on which the cheques are drawn becomes in
debt to the bank in which the cheques are deposited. At the same time, the
debtor bank may have cross-claims on other banks. The easy, safe and most
efficient way is to offset the reciprocal claims against each other and receive
only the net amount owned by them. This facility of net inter-bank payments is
provided by the clearinghouse. The representatives of the local commercial
banks meet at a fixed time twice a day on all the business days of the week.
The meeting is at the office of the bank, which officially performs the duties of
the clearinghouse. The representatives of the commercial banks deliver the
cheques payable at other local banks and receive the cheques drawn on their
banks. The cheques are then sorted according to the banks on which they are
drawn. A summary sheet is prepared, which shows the names of the banks
and the total number of cheques delivered and received by them. Totals are

35
also made of all the cheques presented by or to each bank. The difference
between the total represents the amount to pay by a particular bank and the
amount to receive by it. Each bank then receives the net amount due to it or
pays the net amount owed by it. The clearing activities are recorded in the
following books.

2.12.3.1 In Ward Clearing Books

The banks use this book for recording all the cheques that are received by it
in the first clearing. All details of the cheques are placed as records in this
book.

2.12.3.1 ​Outward Clearing Books

The banks use an outward clearing register for recording all the details of the
cheques that the bank delivers to other banks.

2.12.4 Advances Department

The banks do not keep the money deposited by the customers idle; rather it is
advanced to those who need it to invest. Bank’s profit is the difference
between the rate of interest at which the deposits are accepted and the rate at
which they are land. The function of making advances to desirable customers
is performed by the advances department after carrying out a proper credit
analysis of the customer. The major portion of the bank profit earned through
this department.

2.12.4.1 Considerations for the Bank Itself

Under this the following principles are considered:

36
 2.12.4.1.1 Safety:

The banker ensures that financial accommodation is afforded to the right type
of customer and utilized in such a way that it would remain so throughout,
and finally be repaid on the due date to the bank. All security and securing
documents need to be perfect in all respects.

2.12.4.1.2 Liquidity: The banker also ensures that funds invested are not
locked up for an unduly long or identified period.

2.12.4.1.3 Profitability​: The major source of a bank’s income comes

through the financing of viable projects and this important aspect is kept in
constant view. A bank must bear in mind the profitability aspect, but not at the
risk of funds becoming stuck-up.

2.12.4.1.4 Desirability​: While affording credit facilities to the customer, the

banker must ensure that the funds are utilized for productive and undesirable
activities such as hoarding black marketing or for purposes other than the
customer’s normal sphere of business.

2.12.4.2 Considerations Relating to Customers

The banker while selecting customers for financing, based on principles of

good financing, takes into account the following points.

2.12.4.2.1 Integrity: The customer's previous records are looked into to

certain the degree of their honesty and integrity, whether they have been in
respect of any facility allowed in the past by the bank.

37
2.12.4.2.2 Business efficiency: It is important to gauge the customer’s ability
to manage their business efficiently and in a manner that they conserve their
resources and meet their obligations on time.

2.12.4.2.3 Owner’s equity: A customer needs to have sufficient funds, as his

stake in the business as naturally, the customer will be more cautious about
the overuses of funds. Furthermore, a low debt/equity ratio reduces the risk of
business insolvency.

2.12.4.2.4 Other consideration: Alongside character, capacity, and capital,

other factors like project viability, marketability of goods produced, the
conduct of the account, and utilization of the previous limit granted are also
scrutinized.

2.12.4.3 Consideration in respect of the Proposal

Among other angles and aspects, the purpose for which an advance is to
allow, calls for more importance, because of an increasing realization on the
part of banks about their social responsibilities. The productive purpose is
normally giving higher priority. However, projects that assist in rural upliftment,
import substitution are being preferred at time to other commercial projects.

2.12.4.4 Forms of Advances

The various types of financial accommodation provided by MCB are as

follows:

2.12.4.4.1 Running Finance

It is the most commonly used form of advances. Withdrawals on the Current

account are allowed in excess of the credit balance, which the customer has
maintained, thereby creating running finance. Under this type of financial

38
accommodations, the borrower is required to adjust the finance provided by
the bank within the stipulated expiry period. The account may, however, be
freely operated by way of the multi transaction provided that the sanctioned
limit is not, at any time, exceeded and that the account is operated strictly in
accordance with the approved limit terms and conditions.

2.12.4.4.2 Demand Finance

Under the demand finance, a fixed amount of financing accommodation is

allowed to the borrower for a fixed period, repayable either in periodic
installments or in a lump sum, at a fixed future date. The customer has to pay
a mark upon the entire amount whether withdrawn or not.

2.12.4.4.3 Cash Finance

Under this type of advance, accommodation for funds is made against pledge
or hypothecation of goods, products or merchandise. The customer would be
required to adjust the advance within the expiry period but could operate the
account freely within the sanctioned limit. The borrower is allowing borrowing
money from the banker up to a certain limit either at once or as when
required. If the borrower does not utilize the full limit, the banker has to lose
the return on the unutilized amount. To avoid such loss the bank somehow
makes an agreement with the borrowers to pay interest at the prevailing rate
on one –half or one –a quarter of the credit facility.

2.12.5 Remittance Department

One of the important functions of a bank is to transfer funds for customers

from one location to another. The remittances department performs the
function of remitting funds. The transfer of funds may be from one bank to
another or from one branch to another. Instruments used by MCB for
remittances include.

● Telegraphic Transfer

39
 ● Demand Draft

● Mail Transfer

● Pay Order.

2.12.5.1 Telegraphic Transfer (T.T)

Telegraphic transfer is an electronic system of transferring funds. This is the

quickest mode of transferring funds. That is why most of the businesses use
this method of transferring funds. The procedure followed is that first of all the
customer fills in an application form wherein the customers write down his
name, address, the amount to be transferred, the name of the branch to which
the funds are transferred (collecting branch), the name and account number
of the beneficiary, etc. Advice for the TT is prepared and an image of it is sent
to the collecting branch. To reduce the risk of frauds and unintended mistakes
the bank uses a code system called: Test under which various components of
the TT such as currency, date, branch number, TT serial number, and figures
are converted to numeric codes and then the codes are added together to get
a single value. The same is decoding at the collecting branch in the same way
as it is coding. The funds can immediately withdraw almost half an hour after
the funds are the deposit.

​2.12.5.2​ ​Demand Draft (D.D)

A draft is “as an order cheque drawn by one branch of a bank upon another
branch of the same bank." It is a common mode of funds transfer. It is
different from telegraphic transfer in the sense that funds are not immediately
transferred to the collecting branch at the receipt of the draft. The collecting
branch will credit the account of the beneficiary at the receipt of advice from
the paying branch. The procedure for demand draft is that the customers first
fill an application, from wherein he writes down his name and addresses an
amount in figures and words. Name of the collecting branch, name and
account number of the beneficiary, etc. The bank prepares a draft, which if
more than Rs.5000/- will carry a test, and gives it to the customer, who will

40
himself choose the mode to send it to the beneficiary. The draft will be
allocated to each branch of MCB. Demand draft can be open, which is Uncas
able at the cash counter after properly identifying the true beneficiary, or cross
which can be Uncas able by crediting it to the account of the beneficiary.

2.12.5.2 Mail Transfer (M.T)

It is just like demand draft, the only thing differentiating it from demand draft is
that demand draft is physically handed over the customer and upon
presenting the draft amount can be withdrawn. However, in case of mail
transfer one branch sends instructions to other branches ordering it too.
Credit the amount to the account of the person in whose favor the amount is a
deposit. The charges are the same as charged for demand draft with fixed
charges of Rs.40 per mail transfer

2.12.5.3 Pay Order

Pay order is just like demand draft except for that demand draft it is made for
the local transfer of money whereas demand draft is meant for remittance of
funds from one city to another

41
 CHAPTER - THREE

MARKETING FINANCE AND HR PRACTICES

3.1 Marketing

The marketing division is geared toward enhancing the positive image

of the bank through its corporate brand building. Promotion of banks' product
and services on visible optimized mediums, standardization of corporate and
brand communication, branch merchandising, CRS and strong public
relations.

42
 During 2018, the marketing division was involved in extensive media
and out of home (OOH), branding campaigns that played a pivotal role in
increasing brand presence and awareness resulting in steering leads and
business. Another achievement in the year was the revamping of the
corporate brand guidelines of the bank to reinforce consistency amongst all its
visual platforms. The division has also played a key role on the
communication front during the demerger of 90 branches of the bank, which
previously acquired under the amalgamation of former NIB Bank with and into
MCB bank. The marketing division played a key role in celebrating the
milestone throughout the year as well.

Going forward, the marketing division is determined to implement

internal and external branch branding standardization across the bank’s
network, upgrade its corporate digital platform and enhance marketing
visibility of the bank keeping in line with the bank’s strategic focus.

3.2 Head Marketing and Advertising

Custodian of the bank’s brand, positive image and internal and external
communication including advertising marketing branding events internal and
external communication through emerging technologies electronic print and
digital media and corporate social responsibilities etc. To direct the efforts of
the marketing staff and coordinate at the strategic and tactical levels with
other functions of the organization. The Responsibility to execute the CSR
and the PR activities

3.3 Treasury Sales and Marketing

Treasury sales disk dedicated to identify and service the needs of retail and
corporate clients. The treasury sales desk is responsible to identify interest
rates and FX exposures of our clients and offer tailored solutions to hedge or
eliminate their risk exposures. The sales desk offers suitable products

43
according to customer needs and understanding be it plain vanilla FX
products or the more complex derivative product and specialize in among our
customers the appropriate product at competitive pricing.

MCB Treasury offers the following product to the corporate and retail client
base
● Plain vanilla foreign exchange ​(Immediate/forward settlement)
● Fixed income ​(Treasury bills-Pakistan investment bonds-PIBs and ijara
sukuks)
● Derivatives and structured product ​(FX options, interest rate swaps
cross-currency swaps)

3.4 New Sales channel E-Business

E-business is the new way of the sales channel in the market. You can
introduce any kind of product on your official website. The internet completely
changes the selling process for both the buyer and the sellers.

E-commerce users found that they could reduce the cost of sale through the
internet. The Internet is a very good media to marketing or advertising their
product. If you launch your own site this is very helpful for you because it is
easier to buy anything for the site rather than go there and then decide. You
can easily access the sites and it is helpful for customers.

3.4.1 Impacts of E-Business on the Bank

Following are the impacts that E-business has on the bank
● New sales channel
● Cost leadership
● Reduced entry cost
● New opportunities
● Information system

44
 ● Efficient quality controlling
● Reduced entry cost
● Easy fraud detection in transaction
● Easy data saving
● Easy data recovery
● Easy management of the business transaction

3.5 MCB Bank Initiates the Wide Mobilization

Mobilization started in MCB bank on 5 April 2009. The objective of the team is
together the bank makes sure that the maximum number of members of MCB
login and use MCB mobile. Remote banking team trained the people of MCB
to use the MCB mobile to ensure that this is very successful across the
countrywide branches.

3.6 Financial services

MCB is the largest private bank in the country with 1200 branches in Pakistan
and they operate internationally. MCB was also the first bank of the
country listed on the London stock exchange in October 2006.

​3.6.1 Services
● Inquiry of account balance
● Request for transfer of funds
● Detail of debit card transitions
● Request for all credit cards
● Blocking service of ATM card throughout the day
● Payment for the bills

3.6.1.1 Mobile Service

● Account balance

45
 ● Mini statement
● Transfer of funds
● Purchase mobile top-ups through MCB mobile service
● Pay your mobile bills
● Pay utility bills
● Make Visa card payment etc.

● Request for credit card address change

● Virtual banking activation
● Complaint registration 24 hours a day
● Mobile banking activation

3.7 Working capital Finance

A complete product suite for extending sharia-compliant products for working
capital finance including Murabaha, commodity salam, istisna, finished goods
Murabaha, finish good Musawamah, and Musharakah running finance for
catering to balance sheet needs of corporates/commercials/MNCs for
managing their day to day funding needs.

3.8 Trade Finance

MCB Bahrain provides all types of trade finance facilities to its clients. Trade
finance services range from opening of all types of L/Cs, advising,
confirmation, discounting of L/Cs, discounting and issuance of bank
guarantees. LC Reimbursement and Remittances; MCB Bahrain also acts as
reimbursement agent on behalf of MCB’s branches in Pakistan Dubai Sri
Lanka to make payments to various banks/beneficiaries all across the world
against their respective L/Cs remittances.

46
3.9 Long Term Finance
For catering to balance sheet requirements under long term financing,
MCB has an array of medium to long term financing products, which includes
corporate ijarah and corporate diminishing Musharakah.

3.10 Financing against Receivables

Financing against receivable is available in the form of invoice
discounting. Invoice discounting is a form of asset-based finance, which
enables a business with evidence to release cash tied up in an invoice to its
debtors/buyers.

3.11 Financing products

MCB bank provides loans to small and medium enterprises to meet
their working capital and business expansion requirements to all sectors of
SME, which meet policy requirements. These facilities are available across
Pakistan.

3.11.1 Working capital facilities

MCB bank offers a diverse mix of financing products aimed at meeting the
working capital requirements of its customers. The following are some of the
fund-based facilities that are provided by MCB Bank.
● Running finance
● Cash finance
● Inland bills purchased
● Finance against imported merchandise
● Finance against trust receipts
● Finance against foreign bills
● Foreign bill purchased
● Finance against packing credit
● Foreign currency import finance

47
 ● Foreign currency bill discount
● Foreign currency export financing

3.11.2 Baghbani Finance

Baghbani finance aims at facilitating the farmers engaged in agriculture by
extending credit facilities covering the entire range of related activities. The
proposals are assessed keeping in view the market potential and
repayment capacity based on the cash flows of the activity. The farmers
extended all types of credit facilities required to produce fruits and
vegetables of better quality. The repayment of the loan is as per
convenience or linked to crop cycle and timing of cash flows. Facilities like
running finance working capital requirement infrastructure development
irrigation etc all covered under this finance. Progressive farmers are
especially encouraged. Following are the features of baghbani finance

● The farmer/applicant should be having an account with our

branch
● The purpose/project should be viable
● Should meet all documentation formalities
● Should be experienced to handle the project
● The loan requirement and tenure or finance depends upon the
purpose and life of the project
● The intending borrower should be able to offer adequate
security acceptable to the bank
● Comprehensive insurance has to be arranged by the borrower
where possible

3.11.3 Mahigiri Finance

Mahigeri finance caters to the credit needs of fish farmers covering the entire
range of activities including marketing of their produce. The loans of the short

48
term depending upon the purpose financing for the value addition process by
the fish farmers is also covered. Following are the features of mahigiri
Finance

● All farmers/fishermen engaged in a nonfarm activity related to fisheries

are encouraged to avail financing facilities
● The loan requirement and tenure of finance depend on the purchase
and life of the project
● The intending borrower should be able to offer adequate security
acceptable to the bank
● Comprehensive insurance has to be arranged by the borrower where
possible

3.11.4 Aabiari Finance

Under the Aabiari finance (irrigation finance) financing facilities for tube
well other wells irrigation systems of all types including sprinklers are covered.
The purpose is to facilitate the farmers in overcoming the shortage of water
for cultivation/plantation since water is an essential requirement for crops.
following are the features of aabiari Finance

● The requirements may differ from farmer to farmer

● Evaluation /assessment of finance will be made on a case to case
basis
● The finance will be for a period determined on the basis of assessment
● Repayment of the loan will be on a biannual basis or linked with crop
cycle
● Three quotations will be required in case of machinery to install.

3.12 HRM Department in MCB

49
 In 2003, people engaged in a comprehensive human resource
management initiative for Muslim Commercial bank limited. The assignment
covered
● Evaluation of all human resource needs of the bank
● Review of existing policies and practices in effect at MCB
● Comparison of the existing policies to other players in the sector
● Proposal for alterations to the existing policies in light of the above
findings and approval of MCBs board for the same
● Presentation of the approved policies in the form of a comprehensive
HR manual
● Job evaluation and design for MCBs first and second layer of top
management including Group Head and Divisional Heads.

3.12.1 HRM Policies and Succession Planning

Human resource policies have been approved by the board of directors
of the bank on the recommendation of the human resource and remuneration
committee of the board in order to provide clear and definitive directions on
human resource HR related matters.

MCB is an equal opportunity employer committed to creating a congenial and

efficient work environment in which the employees assured a
non-discriminatory transparent harassment-free and respectful atmosphere
regardless of their caste creed, religion and gender. Bank talent acquisition
policy provides unbiased criteria for hiring people through lateral and batch
hiring from any background as long as they qualify for the professional criteria
required by the bank. The culture at MCB bank also depicts a healthy
team-based and cooperative environment. We value the unique talents and
perspectives of our employees and strive to create a respectful workplace.

50
3.12.2 The HRM Functions
At the MCB Ltd because people are the key to its success in the
human resource department the importance of the individual while thinking
strategically HR facilitates the creation of an environment in which the people
have the means to constantly evolve in striving for continuous improvement
for the benefit of all the stakeholders. More specifically the HRD contributes to
the business strategy through
● Competency-based HR systems
● Policy and procedures
● Developing capabilities

3.12.3 HRM Planning and Forecasting

Human resource planning and forecasting include the specific and
interrelated activities together constitutes the HRP system

3.12.4 HRM Process

These are steps of HRP in the Muslim Commercial Bank.
● Determining the objectives
● Defining skills required to meet the objectives
● Determine additional human resource requirements
● Develop actions to meet the anticipated HR needs

3.12.5​ ​Forecasting HRM Requirements

The purpose of forecasting human resources is to estimate labor

requirements at some future time period. Such forecasts are of two types.
● The external and internal supply of labor
● The aggregate external and internal supply of labor

51
3.12.6 Methods of Forecasting HR Needs

● Zero Base Forecasting

This method uses the MCBs current level of employment as the starting point
for determining future staff needs in MCB.

● Bottom-Up Approach
It is the forecast method in which each successive level of the MCB starts with
the lowest and forecasts its employee requirement in order to provide
an aggregate forecast of employee needs.

3.12.7 Steps Requirement Process

● Planning
● Job analysis
● Sourcing
● Screening
● Selection
● Interviewing
● Hiring
● Reporting

3.12.8 Employment Selection Process

Recruitment and selection in MCB have many processes and steps that must
be followed.
● Decide what positions to fill through personal planning and forecasting

52
 ● Build a pool of candidates for these jobs by recruiting internal or
external candidates.

3.12.9 External Sources

● Press advertisement
● Educational institutes
● Placement agencies
● Employment exchanges
● Unsolicited applicants
● Employee referrals/Recommendations

3.12.10 Analysis of Positions & Requirement

● After planning it is analyzed that which position is going to be filled and
their requirement is analyzed by the job analysis

● IDENTIFY CANDIDATES
MCB identifies its candidates by developing the criteria of the job description
and job specification and acting upon these criteria job vacancy ads
spread through different Media like newspapers and the internet.

3.13 Sources of Candidates

● Transfers
A transfer is a lateral move to a vacant position in either the employee’s
current department or a new department. A transfer will not normally
result in a change in compensation. In other words, the employees are
transferred from one department to another department due to some
reason.

● Promotion

53
 The employees are promoted from one department to another with more
benefits. A promotion is a move by an employee to a vacant position at
a higher-grade level either within the current department or in a new
department.

● Other Are
Upgrading and Demotion of present employees according to their
performance it will not normally result in a change in compensation

3.12.12 Test Interview

In this process, shortlisted candidates called for test and interview according
to the nature of their applied jobs

3.12.13 Selection Interview

Selection interview conducted for short listed candidates. A selection
interview is the procedure designed to predict future job performance on the
basis of applicants oral responses to oral inquiries

Formats Used in Selection Interviews

● Structured/directed
● Unstructured/non directed

3.13 Training and Development

Training is an organized procedure by which people learn knowledge and or
skill for a definite purpose

MCB has a mix of training methodologies for its employees.

We can broadly categorize these methods into two groups

54
 ● NEEDS ANALYSIS
Identify job performance skills needed to assess prospective trainee’s skills
and develop objectives

● INSTRUCTIONAL DESIGN
Produce the training program content including workbooks exercises and
activities.

CHAPTER - 4

FINANCIAL ANALYSIS

55
Financial Analysis is an evaluation of a firm’s past performance and its
prospects for the future. It consists of applying analytical tools and techniques
for financial statements and other relevant data to obtain useful information.
Its main purpose is to give a clear picture of the financial position of an
organization.

4.1 SWOT ANALYSIS

The word “SWOT” stands for Strengths, Weaknesses, Opportunities, and

Threats respectively. Through this tool, management can analyze the present
as well as the future performance of an organization. Every organization has
Strengths, Weaknesses, Opportunities, and Treats, so SWOT analysis of
MCB has briefly discussed below.

4.1.1 STRENGTHS

● Open communication system and friendly environment developed by

the Management staff.

● Management has the ability to take the right decision at the right time.

● Its staff is well qualified, skilled, knowledgeable, courteous, and can

handle any situation tactfully.

● The staff understands the environment and easily meets the needs of
the people etc.

● Efficient and experienced management involved in the establishment of

the organization, so the MCB Bank Limited the Topi Branch has a good
management system.

● Due to many years of experience, the people of Topi trust on the

branch.

56
4.1.2 WEAKNESSES

● The workload is not equally distributed, which results in an imbalance

of work capacity. Some employees either sit idle or stay out of the
office while some employees overburdened with the work.

● Lack of staff in the Credit Department

● The location of the bank is in the bazaar due to it there is no facility for
car parking especially for employees as well as for customers.

● The Peon’s are not working properly.

● Technological equipment for example currency counters, fraud

currency detectors etc are not available in branches.

● There is no proper arrangement in case of load shedding.

4.1.3 OPPORTUNITIES

● Customer’s feedback on different products and accounts has really

improved the bank performance and encouraged the atmosphere for
future policies.

● The rationalization of the bank’s operations may lead to a high yield

business.

● The branch has also an opportunity to start Islamic Banking.

● There is a good opportunity for the bank to sponsor games on

provincial and national levels for its publicity.

● The offering of credit facilities to middle and lower-income groups can

reduce the default risk and can enhance the bank's goodwill and
profitability.

4.1.4 THREATS

57
 ● Competitors are increasing in the private sector due to the privatization
of the domestic banks.

● Innovation in banking services

● Un-consistency in the government policies regarding the business and

economic sectors

● Change in customers’ demands, because everyone wants to be more

facilitated.

● Growing global technological advancements

● Political interference has spoiled all the good images of the branch.
Whoever comes into power tries to pressurize the bank authorities by
unnecessary interference in the operation of the bank.

● Strict regulations by the government over credit facilities to the

customers as well as the prudential regulations

● Lack of public confidence to open foreign currency accounts due to

political instability

● After matching the performance of the branch with its internal factors;
Strengths and Weakness and the external factors; Opportunities and
Threats we can say that with the help of client focus, to attain greater
customer satisfaction, upgrading the technological infrastructure, by
broadening the customer interest and with the hard work of employees,
the bank will able to achieve its objectives successfully

4.2 RATIO ANALYSIS

Ratio analysis is the qualitative method of gaining insight into an

organization’s liquidity, operational efficiency, and profitability by comparing
the information contained in its financial statements. Ratio analysis is also
known as fundamental analysis.

58
Ratios make related information comparable. A single figure by itself has no
meaning but when expressed in terms of a related figure it yields significant
inference. A financial analyst uses the ratios to compare with its past and
expected future ratios to determine whether the company’s financial condition
is improving or deteriorating over time. He uses the ratios to make two types
of comparisons

4.2.1 LIQUIDITY RATIOS

Liquidity ratio is a class of financial statements matrices use to determine a

debtor's ability to pay off current debt obligation without raising external
capital. Liquidity ratios measure a company's ability to pay debt obligation and
its margin of safety through the calculation of metrics including the current
ratio, quick ratio and operating cash flow ratios.

4.2.1.1 Debt Ratio

Measures the portion of company assets financed by debt (obligations to third

parties). The debt ratio can also be computed using the formula: one
minus Equity Ratio​.

Formula: Total Liabilities / Total Assets

Table no 4.1 DEBT RATIOS

years 2018 2017 2016 2015 2014

Total 1348852 1189672 930739 866608 804527
liabilities
Total 1498130 1343238 1072365 1004410 934631
assets
Debt
Ratio 1348852 1189672/ 930739/ 866608/ 804527/
/ 1343238 1072365 1004410 934631
1498130

0.90 0.88 0.86 0.86 0.86

59
Graph 4.1 Debt Ratio

Interpretation
The debt ratio shows how many firms kept assets against their liabilities. The
firm has assets more than his liabilities. ​Which shows that the bank has an
increase in debt in 2017 &2018? From 2014 to 2016, the debt ratio was the
same because the total assets and total liabilities were the same.

4.2.1.2 Investment to Total Assets

The ratio b/w investment and total assets show investment activities with
reference to its total assets .it indicates the portion of total assets used for
investments in various venues. This ratio is useful for banks and insurance
companies.

Formula Total investment/total assets*100

TABLE 4.2 INVESTMENTS TO TOTAL ASSETS RATIO

Years 2018 2017 2016 2015 2014

Total 749369 656964 555929 565696 511137

Investment

Total 1498130 1343238 1072365 1004410 934631

assets

60
Investmen 749369/ 656964/ 555929/ 565696/ 511137/
t to total
assets 1498130 1343238 1072365 1004410 934631
ratio
*100 *100 *100 *100 *100

50.68 48.90 51.84 56.32 54.68

Graph 4.2

I​nterpretation
The investment to total assets ratio shows how many firms kept assets
against his investment. .it shows the 2018 ratio is less than 2014/2015
because the firm’s assets are more than its investments.

4.2.2 Profitability Ratios

This ratio shows how well a company can generate profit from its operations.
Return on assets. Return on equity, return on investment, Deposits to equity
ratio are all examples of profitability ratios.

4.2.2.1. Return on Assets

This measures how efficiently profits generated from the assets employed in
the business when compared with the ratios of firms in a similar business. A
low ratio in comparison with industry averages indicates an inefficient use of
business assets. The Return on Assets Ratio calculated as follows:

Formula: Net Income / Total Assets × 100

61
Table: 4.3 return to assets ratio
Ratio 2018 2017 2016 2015 2014
Name
21360 22459 21891 25546 24325
N.I
T.Asset 1498130 1343238 1072365 1004410 934631
s
Return 21360/ 22459/ 21891/ 25546/ 24325/
on 1498130* 1343238* 1072365* 1004410* 934631*
Assets 100 100 100 100 100

1.42 1.67 2.04 2.54 2.60

Graph 4.3:

Interpretation
Return on assets shows the firm how much earns on his assets. The firm
uses his assets properly or not. Return on assets has been decreasing over
the years. It is due to the increase in the net income as compared to the sales
times the increase in sales over the worth of assets.

4.2.2.2. Return on Investment

The ROI is perhaps the most important ratio of all. It is the percentage of
return on funds invested in the business by its owners. In short, this ratio tells
the owner whether all the effort put into the business has been worthwhile. If
the ROI is less than the rate of return on an alternative, risk-free investment
such as a bank savings account, the owner may be wiser to sell the company,
but the money in such a savings instrument, The ROI calculated as follows:

62
Formula: Net Income / Total Investment × 100
Table 4.4 Return on Investment Ratio
Ratio Name 2018 2017 2016 2015 2014

N.I 21160 22459 21891 25546 24325

Total 749369 656964 555929 565696 511137
Investment
Return on 21160/ 22459/ 21891/ 25546/ 24325/
Investment 749369* 656964* 555929* 565696* 511137*
100= 100 100 100 100

2.82 3.41 3.93 4.51 4.75

Graph 4.4
The firm invests his investment in different projects and earns a profit on his
investment.

Interpretation
Return on investment Ratio shows the firm how much earned on his
investments.it shows the ROI ratio of 2018 is less.ROI ratio continuously
decreased every year after 2014 because due to the decrease in net income
as compared to the increase in net investment.

4.2.2.3. Return on Equity Ratio (ROE)

Total shareholder’s Equity=share capital+reserves+unappropriated profit

(loss)

This ratio expresses the return on shareholder’s equity.ROE is a direct

measure of returns to the shareholders.it is calculated as a percentage of the

63
net profit after tax to total shareholders equity.it is also useful for the complete
financial sector.

Formula​ ​ OE =
R Net Income/Total Equity

Table 4.5 Return on Equity Ratio

Years 2018 2017 2016 2015 2014

N.I 21360 22459 21891 25546 24325

Total 149278 153556 141627 137802 130104

Equity

ROE ​Ratio 21360/ 22459/ 21891/ 25546/ 24325/

149278 153556 141627 137802 130104

0.14 0.14 0.15 0.16 0.16

Graph 4.5

Interpretation
The return on equity ratio shows the firm how much earns on his
shareholder’s Equity. It shows the ROE ratio of 2018 is less.ROI ratio was
continuously less every year after 2014 because due to the decrease in net
income as compared to the increase in the price of shares.

64
4.2.2.4. Deposit to Equity Ratio

The ratio shows the relationship b/w the total deposits in the bank to the total
shareholder’s equity.

Formula ​D to E Ratio=total deposits/total shareholders Equity

Table 4.6 Deposits to Equity Ratio

Years 2018 2017 2016 2015 2014

Total 1049038 968483 781430 696805 688330

Deposits
Total 149278 153556 141627 137802 130104
Equity
Deposit to 1049038/ 968483/ 781430/ 696805/ 688330/
equity ratio 149278 153556 141627 137802 130104
7.0 6.3 5.5 5.0 5.2

Graph 4.6

Interpretation
Deposits to equity Ratio shows the firm how much it earns on his net deposits
and shareholders Equity.it shows that the ratio of 2018 is more than the last

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five years. This ratio continuously increased every year after 2014 because of
the increase in net Deposit.

4.2.2.5. Cash Flow Ratio

This ratio expresses the proportion of cash spun off from ongoing operations.
This ratio is useful for the financial sector.

Formula​ ​Cash Ratio = Cash generated from operations /profit after tax

Table – 4.6: Cash Flow Ratio

Years 2018 2017 2016 2015 2014

Cash 103175 106072 74222 60568 46754

Net Profit 21360 22459 21891 25546 24325

Cash Ratio 103175/ 106072/ 74222/ 60568/ 46754/

21360 22459 21891 25546 24325

4.83 4.72 3.39 2.37 1.92

Interpretation

The cash flow ratio shows the inflow and outflow of cash in the organization.
This ratio shows the cash flow of 2018 as compared to the last 5 years, which

66
is due to the increase in cash flow on all operations as compared to the net
profit

4.2.3 A​ctivity Ratio

The activity ​ratio measures the firm’s ability to convert different accounts
within its balance sheet into cash or sales. The activity ratio shows the recent
activities of the organization.

4.2.3.1 Debt to Asset Ratio

This ratio expresses the capacity of total debt by a bank on its total assets
employed in the business. It calculated, as a percentage of total debt to total
assets. It is useful for the financial sector.

Formula ​ ​Debt to Asset Ratio = Total Debt/Total Asset

TABLE: 4.7 DEBTS TO ASSET RATIO

Years 2018 2017 2016 2015 2014

Total Debt 1348852 1189672 930739 866608 804527

Total 1498130 1343238 1072365 1004410 964631

Assets

Debt to 1348852/ 1189672/ 930739/ 866608/ 804527/

assets 1498130 1343238 1072365 1004410 934631
ratio

0.90 0.89 0.87 0.86 0.86

Graph: 4.7 Debts to Asset Ratio

67
Interpretation

Debt to assets ratio shows to compare the total debt and total assets of the
organization this radio show the incensement in every year. The Ratio
increase due to the increase in Deposits and shareholders’ Equity

4.2.3.2 Debt to Equity Ratio

This ratio expresses the capacity of total debt by a bank on its total
shareholders’ equity employed in the business.it is calculated, as a
percentage of total debt to total equity.it is useful for the financial sector.

Formula ​ ​Debt to Equity Ratio = Total Debt/Total Equity

Table: 4.8 Debts to Equity Ratio

Years 2018 2017 2016 2015 2014

Total Debt 134885 1189672 930739 866608 804527

2

Total Equity 149278 153566 141627 137802 130104

Debt to Equity 134885 1189672/ 930739/ 866608/ 804527/

Ratio 2/ 153566 141627 137802 130104
149278

9.0 7.74 6.57 6.2 4.83

68
Graph: 4.8 Debts to Equity Ratio

Interpretation

Debt to Equity Ratio shows the percentage of total debt to total equity.it is
useful for the financial sector. This radio regularly increases in every financial
year due to the increase in the firm’s deposits and shareholders’ investments.

4.2.3.3 Capital Ratio

The ratio b/w shareholders equity and total assets express the percentage of
equity in total assets.

Formula ​Capital ratio=Total shareholders’ equity/Total Assets*100

Table 4.9 Capital Ratio

Years 2018 2017 2016 2015 2014

Total 149278 153556 141627 137802 130104

Equity
Total 1498130 1343238 1072365 1004410 934631
Assets
Capital 149278/ 153556/ 141627/ 137802/ 130104/
ratio 1498130* 1343238* 1072365* 1004410* 934631*
100 100 100 100 100
9.96 11.43 13.21 13.71 13.92

Graph 4.9

69
Interpretation

A capital ratio expresses the whole capital of the firm. It expresses the total
shareholder’s equity to total assets. This ratio also shows the secretion of
capital. The total capital ratio in after 2016 was decreased and the last 3 years
were the same due to an increase in total assets.

4.3 Common Size Analysis

For analyzing an organization, it is useful to express balance sheet and

income statement items as a percentage, in addition to financial ratio
analysis over time. The percentage can relate to some totals, such as
total assets or total net sales or to some base year. One of the
techniques used for such an approach is called the Common Size
Approach.

“An analysis of percentage financial statement where all balance sheet items
are divided by total assets and all income statement items are divided
by net sales or revenue is called a common size analysis

70
4.3.1 Vertical Analysis

One common shortcoming in the analysis is that the inability of analysis to

comprehend or visualize, except casually, the dollar change in individual
items that have taken place from year to year in relation to the total assets,
total liabilities and owner’s equity, or total net sales. This criticism is
particularly true when a comparison is made of two or more companies or of
one company with the statements for an entire industry. Since there is no
common base for comparison when dealing with absolute figures However if
the Balance sheet and income statement data are shown in analytical
percentage i.e. percentages of total assets, liabilities and owner's equity, and
total net sales a common base is supplied. This type of analysis known as
vertical analysis of financial statements

In the analysis of financial statements, it is often instructive to find out the

proportion of a total group or subgroup, which a single item within them
represents. In a Balance sheet, the Assets, as well as the Liabilities and
Capital, are expressed as 100 percent and each item in these categories
expressed as a percentage of the respective totals. Similarly, in the income
statement Net Sales set at 100 percent, this community of size has resulted in
these statements referred to as “Common Size”.

These types of analysis are extremely helpful in comparing firms whose data
differ significantly in size because every item on the financial statement gets
placed on a relative or standardized basis.

The comparative common-size balance sheet analyses of MCB Bank from

2014 to 2018 of Balance Sheet & Income Statement given below in a tabular
form as:

Balance Sheet (MCB Bank)

As at December 31, 2014 TO 2018

71
Table 4.10

2018 2017 2016 2015 2014

Rupees in Mln

ASSETS

CASH AND BALANCES 1,031,75 106,072 74,222 60,568 46,754

WITH TREASURY
BANKS

BALANCES WITH 11,879 4,579 4,344 3,611 3,016

OTHER BANKS

LENDINGS TO 35,106 4,398 2,810 3,080 1,418

FINANCIAL
INSTITUTIONS

INVESTMENTS 749,369 656,964 555,929 565,696 511,137

ADVANCES 503,581 469,356 348,117 304,122 303,559

OPERATING FIXED 41,070 39,170 32,409 29,227 30,498

ASSETS

INTANGIBLE ASSETS 372 404 343 723 694

OTHER ASSETS 53,578 62,295 54,191 37,384 37,555

1,498,130 1,343,238 1,072,365 1,004,410 934,631

LIABILITIES

BILLS PAYABLE 15,699 22,681 12,844 11,889 16,628

BORROWINGS 216,019 133,070 74,515 118,040 59,543

DEPOSITS 1,049,038 968,483 781,430 696,805 688,330

SUBORDINATED 3,891 3,893 - - -

LOANS

DEFERRED TAX 1,532 4,625 11,260 11,377 10,397

LIABILITIES

OTHER LIABILITIES 62,673 56,921 50,690 28,498 29,630

72
 1,348,852 1,189,672 930,739 866,608 804,527

NET ASSETS 149,278 153,566 141,627 137,802 130,104

REPRESENTED BY:

Share Capital 11,851 11,851 11,130 11,130 11,130

RESERVES 74,148 70,866 53,347 51,309 48,830

Surplus on 9,747 17,073 23,680 24,616 23,196

Revaluation of Assets
Unappropriated 53,532 53,776 53,469 50,747 46,948
Profit
149,278 153,566 141,627 137,802 130,104

73
TABLE – 4.10.1​: ​Balance Sheet of Vertical Analysis

2018 2017 2016 2015 2014

% % % % %

ASSETS

C​ash and Balances with 7 8 7 6 5

Treasury Banks

B​alances with other 1 0 0 0 0

Banks

L​endings to Financial 2 0 0 0 0
Institutions
Investments 50 49 52 56 55

Advances 34 35 32 30 32

Operating fixed assets 3 3 3 3 3

Intangible assets 0 0 0 0 0

Other assets 4 5 5 4 4

100 100 100 100 100

LIABILITIES

Bills payable 1 2 1 1 2

Borrowing 14 10 7 12 6

Deposits 70 72 73 69 74

Subordinated loans 0 0 - - -

Deferred tax liabilities 0 0 1 1 1

Other liabilities 4 4 5 3 3

Total Liabilities 90 89 87 86 86

Net Assets 10 11 13 14 14

74
REPRESENTED BY:

Share Capital 1 1 1 1 1

Reserves 5 5 5 5 5

The Surpluson 1 1 2 2 2
revaluation of assets
Unappropriated Profit 4 4 5 5 5

10 11 13 14 14

4.3.2 Comments on Vertical Analysis of Balance Sheet

In a vertical analysis of the balance sheet, show the following position.

1) Cash has gradually increased in 2017 and 2018. And 2014 and 2015
continue to decrease in cash.
2) Balance with other bank-increasing trends in only 2018. However, after
these years this trend moves to downward. The bank lends more
money to the financial institutions as compared to the previous year.
3) The bank invested in 2014, 2015, and 2016 more as compared to other
years.
4) In 2017 and 2018 the bank gave high advances but in 2016, 2015 and
2014 this trend is decreasing. The bank gives low advances.
5) The operating assets of bank gradually same in all years
6) The bills payable are short-term liabilities. The bills payable increasing
trend in 2014 and 2017 year the bank takes short-term loans.
7) Borrowings of the bank gradually increase because the bank takes a
loan from other institutes to fulfil his requirement so the borrowing ratio
of the bank increases by 14% in 2018.

75
 8) The deposits and other account balance gradually increase. However,
in 2014 and 2016 the deposit of the bank increased and it. The
customer withdraws his money.

4.3.3 Vertical analysis of profit and loss statement:

The most common use of vertical analysis is an income statement is to show

the variance expense line items as a percentage of sales, though it can be
used to show the percentage of different revenue line items that make up
total sales.

Table 4.10.2 Income Statement (MCB BANK)

2018 2017 2016 2015 2014

Rs Mln

Markup/ Return/ Interest 83,319 74,091 67,400 80,393 77,249

earned

Markup/ Return/ Interest (37,305) (31,429) (23,586) (31,077 (33,557)

expensed )

Net Markup/ Interest Income 46,014 42,662 43,814 49,316 43,512

Non-Mark-Up Income 17,198 18,118 16,175 16,566 12,944

Total Income 63,212 60,780 59,989 65,882 56,456

Non-Mark-Up Expenses (32,902) (28,721) (22,989) (22,895 (21,591)

)

Profit Before Provisions 30,110 32,059 36,999 42,987 34,865

Provision & Write off 1,753 (1,045) (925) (659) 1,864

Profit before Taxation 32,064 31,014 36,075 42,329 36,729

76
Taxation (10,704) (8,555) (14,184) (16,782 (12,405)
)

Profit After T​axation 21,360 22,459 21,891 25,546 24,325

Table: 4.10.3 Vertical Analysis of Income

Statement
2018 2017 2016 2015 2014

% % % % %

Markup earned 100 100 100 100 100

Markup expenses -37 -34 -28 -32 -37

Net Markup Income 46 46 52 51 48

Non-Mark-Up income 17 20 19 17 14

Total income 63 66 72 68 63

Non-Mark-Up expenses -33 -31 -28 -24 -24

Profit Before Provisions 30 35 44 44 39

Provisions & Write off 2 -1 -1 -1 2

Profit Before Taxation 32 34 43 44 41

Taxation -11 -9 -17 -17 -14

Profit after taxation 21% 24% 26% 26% 27%

77
4.4 HORIZONTAL ANALYSIS

The horizontal analysis is also called ​Indexed Analysis​. The comparison of

financial statements is accomplished by setting up balance sheets and
income statements, side by side and reviewing the changes which have
occurred in individual categories therein from year to year and over the years.
This comparison of financial statements over a number of years also reveals
the direction, velocity, magnitude and the aptitude of the trend or the absolute
changes. The purpose of the horizontal analysis is to develop the relationship
between one item of the financial statement with the same item of another
year’s financial statement, bank or with the industry.

For our financial analysis of MCB Bank, we have selected the financial data
for FIVE years from 2014 –2018. For horizontal analysis, there must be a
fixed/base year for the year of analysis or according to the statistical tools,
each preceding year is selected a base year for the coming year i.e. the year
of analysis. All financial statement items of the base year are taking as equal
to 100 (percent). We have selected 2014 as the base year and the items for
the subsequent year expressed as an index to that year (2018).

The horizontal analysis of financial statements of MCB Bank given below

showing indexed balance sheets and income statements along with regular
statements:

Balance Sheet (MCB Bank)

As of December 31, 2014, TO 2018

TABLE: 4.11.1 HORIZONTAL ANALYSIS BALANCE SHEET (MCB

Bank)

2018 2017 2016 2015 2014

78
 % % % % %

ASSETS

C​ash and 220.67 228.25 158.75 129.54 100

balances with
treasury banks
B​alances with 393.86 151.82 144.03 119.72 100
other banks
L​endings to 247.57 310.15 198.16 217.20 100
Financial
Institutions
I​nvestments 146.60 128.52 108.76 110.67 100

A​dvances 165.89 154.61 114.67 100.18 100

Operating fixed 134.66 128.43 106.26 95.83 100

assets
Intangible assets 53.60 58.21 49.42 104.17 100

Other assets 142.66 165.87 144.29 99.54 100

Total Assets 160.29 143.71 114.73 107.46 100

LIABILITIES

Bills payable 94.41 136.40 77.24 71.49 100

Borrowing 362.79 223.48 125.14 198.24 100

Deposits 152.40 140.70 113.56 101.23 100

Subordinated 0 0 0 0 0
loans
Deferred tax 14.73 44.48 108.30 109.04 100
liabilities
Other liabilities 211.51 192.10 171.07 96.17 100

Total Liabilities 167.65 147.87 115.68 107.71 100

Net Assets 114.73 118.03 108.85 105.91 100

REPRESENTED
BY:
Share Capital 106.47 106.47 100 100 100

79
Reserves 151.84 145.12 109.25 105.06 100

The surplus on 42.02 73.60 102.08 106.12 100

revaluation of
assets
Inappropriate 114.02 114.54 113.88 10809 100
Profit
114.73 118.03 108.85 105.91 100

Comments on Horizontal Analysis of Balance Sheet

2014 has taken as base year.

1. Cash And Balance With Treasury Banks

We take 2014 as a base year then cash and balance with treasury banks
were equal to 100. Then, from 2014-2018 it shows fluctuations. Although it
shows that from 2017-2018, it increases from 2015-2016 In the given
years 2017 shows the highest value. This means that 2017 liquidation
power was highest. It can be beneficial that we can easily fulfill our current
liabilities, but in 2015 cash and bank balance decrease.
2) Investment
Similarly 2014 acts as a base year equal to 100. Therefore, it also
fluctuates from 2014-2018. However, investments in 2018 are higher than
all others.
3) Total Assets
With the passage of time, the banking company becomes stronger with its
assets. In 2014, if Assets are 100% higher than in 2018, it becomes 180%
more because investments in 2018 are higher than others.

4) Total Liabilities
As assets go up, it also affects liabilities. Because these both have a
constant relationship we invest more in 2018 but due to getting more loans

80
 means liabilities. In addition, on the other hand 2018 the liabilities are
increasing all of the years.

TABLE: 4.11.3 HORIZONTAL ANALYSIS

INCOME STATEMENT (MCB BANK)

2018 2017 2016 2015 2014

% % % % %

Markup earned 107.82 95.88 87.22 104.04 100

Markup expensed (110.51) (93.10) (69.86) (92.06) 100

Net Markup Income 105.75 98.04 100.69 113.33 100

Non-Mark-up income 132.86 139.97 124.96 127.98 100

Total income 111.96 107.65 106.25 116.69 100

Non-Mark-up expenses (152.38) (133.02 (106.47) (106.03) 100

)

Profit before provisions 86.93 91.95 106.12 123.29 100

Provisions & write off 94.04 (56.06) (49.62) (35.35) 100

Profit before taxation 87.29 84.44 98.21 115.24 100

Taxation (86.28) (68.96) (114.34) (135.28) 100

Profit after taxation 87.81 92.32 89.99 105.01 100

Horizontal analysis of the income statement is usually in a five-year format, in

the below analysis we take five-year data. A variance also showed that states
the difference between the six-year for each line item. So that you can see
general changes by account over multiple years.

81
 CHAPTER - 5

CONCLUSION AND RECOMMENDATIONS

5.1 Conclusion
During my internship at MCB bank (Ltd), it was a good experience and
I learned so much about banking and the working and I also observed many
things in which something is good for the banking business and I observe
some weaknesses in MCB branches. The good thing is that most of the
branches are online and connected with the main bank and the online system,
which I like and observe, is secure and time-saving and there are fewer
chances of the mistake as compared to non-online banks. There is also the
facility of ATM machines in almost all the branches of MCB bank.

I experienced that the management is hesitant to give an internee

chance of working in the cash department because they are not taking any
risk. In addition, some branches have not fully decorated and in some
branches, there is no installation of a rotation camera, which is not good for
the security.

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

conclude that the net profit margin of the company decreases and needs to be
improved and the gross spread ratio also decreases the need to improve.
ROA’s return on asset decrease needs to improve. The debt ratio has been
increasing and relatively stable.

82
 Finally, I conclude that by keeping the entire thing in mind that the
organization is doing good business overall but the need to make the policies
of the organization more effective and stabilized which makes the
organization sound more reliable and strong.

5.2 Recommendation for Improvement

● From the Quantum of the profit and its financial data it can be easily
judged that after privatization, MCB is performing well. Its deposits are
growing day by day and so its profitability. The controlling body is
responsible for the productive performance of the bank.

● Following are my observations and suggestions to improve the

efficiency of the development of the bank.

● Bank should give some more incentives to its employees in order to

remove the conflict between lower and higher officers and should try to
improve the working condition of the bank.

● As such a system should be designed that every employee who has

some problems with his officers can communicate it to the higher
management and some steps must be taken to improve that.

● Recruitments should be strictly on merit basis and induction should be

after proper and extensive training.

● Young, qualified and energetic staff should replace old and lazy staff.

● Foreign branches should open in order to capture the international

market and to earn international repute for the bank.

83
● The working environment, equipment, furniture and staff dressing
should be according to the modern banking style.

● In some branches, there is not the proper installation of the security

cameras so I suggest that in every branch there is the installation of the
rotation security cameras, which is necessary for the security of the
organization.

● There is no proper reception in the bank branches so the people have

no proper information nor guidelines so the organization takes a
measure for the reception so that it is good for the customer because
every customer is valuable for the bank.

● The last suggestion is that there is proper education and training of the
staff of the organization and the work on the behavior of the staff. If
there is proper training and behavior, it is good for the organization and
this step holds the customer for a long period.

● MCB mobile banking should have the following facilities in every

branch, in order to make it more desirable for the customer.

● The customer should be able to request for issuance of checkbooks

from their mobile phones through MCB mobile banking.

● The customer can request a mini-statement through MCB mobile

banking instead of they should give the facility of requesting a full
statement of their current accounts.

● They should introduce the imaging system in every branch where the
signatures of the customer are scanned. This helps when the customer

84
 gives a cheque they will process though an image database. Thus
reducing workload and making the service more efficient.

● MCB should introduce more schemes like Mala-Mal, which helps the
bank to attract more deposits in short terms.

● The lighting system of the branch is very poor. There is no proper air
conditioner in the branch. The new air conditioner should be installed in
the branch in order to provide a comfortable environment to the
employees.

● Seminars on the banking system should be arranged by higher

authorities of the organization and all the staff should invite to attend
the seminar. This will improve creativity among the staff in the field of
Banking.

REFERENCE AND THE SOURCES USED

MCB annual report 2014, 2015,2016,2017,2018

Financial Statement Analysis of State Bank of Pakistan

Financial Management by Eugene F.brigham / Michel C.Ehrhardt

85