MCB Internship Report

INTERNSHIP REPORT ON MCB BANK LIMITED

INTRODUCTION The word 'Bank' is said to have been derived from the words Bancus or Banque or Bank. This history of banking is traced to as early as 2000 B.C. The priests in Greece used to keep money and valuables of the people in temples. These priests thus acted as financial agents. The origin of banking is also traced to early goldsmiths. They used to keep strong safes for storing the money and valuables of the people. The persons who had surplus money found it safe and convenient of deposit their valuables with them. The first stage in the development of modern banking, thus, was the accepting of deposits of cash from those persons who had surplus money with them. The goldsmiths used to issue receipts for the money deposited with them. These receipts began to pass from hand to hand in settlement of transactions because people had confidence in the integrity and solvency of goldsmiths. When it was found that these receipts were fully accepted in payment of debts; then the receipts were drawn in such a way that it entitled any holder to clai claim m the the spec specif ifie ied d amou amount nt of mone moneyy from rom gol goldsmi dsmith ths. s. A depositor who is to make the payments may now get the money in cash from goldsmiths or pay over the receipt to the creditor. These receipts were the earlier bank notes. The second stage in the development of banking thus was the issue of bank notes.

University of the Punjab, Gujranwala Campus 1


The The gold goldsm smit iths hs soon soon disc discove overe red d that that all all the the pe peop ople le who who had had deposited money with them do not no t come to withdraw their funds in cash cash.. They They found ound that that only only a few few pe pers rson onss pres presen ente ted d the the receipts for encashment during a given period of time. They also found that most of the money deposited with them was lying idle. At the same time; they found that they were being constantly requested for loan on good security. They thought it profitable to lend at least some of the money deposited with them to the needy persons. This proved quite a profitable business for the_ goldsmiths. They instead of charging safe keeping charges from the the deposi posito tors rs be beggan to give ive them hem int intere erest on the mone moneyy deposited with them. This was the third stage in the development of banking.



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

"Bank is a dealer in debts—his own and of other people." According to G.W. Gilbert,

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

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



HISTORY OF BANKING IN PAKISTAN The interesting point which I observed during the span of mine internship was the historical background of Banking & Financial sector which is the one in which great improvement and growth is obser observe ved d sinc sincee the the form format atio ionn of Paki Pakist stan an.. For For stud studyi ying ng the the growth of this sector we can divide it into three stages, which are as follows a)

Pre-Nationalization Era

b)

Nationalization Er Era

c)

Post Nationalization Era A) Pre Nati Nationa onaliz lizati ation on Era Era

There were only two Muslim banks in Indo Pak before partition, they were; Habib Bank Ltd. (estd. in 1941 at Bombay) & Australia Bank Ltd. (estd. In 1944 at Lahore). Hindus or Foreigners either owned all other banks, at that time. At the time of partition there were 631 bank branches in area, which came under Pakistani control. But due to blood shed and viole violenc ncee at larg largee scal scale, e, most mostly ly bran branch ches es we were re clos closed ed and and the the disparity can be assessed from the fact that on July 1948 there University of the Punjab, Gujranwala Campus 4


were 195 branches with deposits of Rs.88 crore (880 million) only. Also a factor lagging in Pakistani industry was a central bank of its own, by that time Reserve Bank of India was acting as central bank for both countries and same currency notes were used in both territories. But Reserve Bank of India was biased and Set down Pakistan on many occasions such as the issue of funds transfer etc. In this period drastic steps were taken in government sector for the the impr improve oveme ment nt of over overal alll posi positi tion on.. The The priv privat atee sect sector or also also responded to these changes and some very positive changes were observed. Some of the steps taken by the government in this regard were as under: i.

Inau Inaugu gura rati tion on of Stat Statee Bank Bank of Pakis Pakista tann (SBP) (SBP) on 1st 1st July, July, 1948.

ii. ii.

Sett Settin ingg up of of Nati Nation onal al Ban Bankk of Pak Pakis ista tann in Nove Novembe mber, r, 194 1949 9 to control the 'jute' export in East Pakistan and to act as agent of SBP.

iii. iii.

Larg Larger er powe powers rs were were give givenn to SBP thro throug ugh h SBP Act Act (195 (1956) 6) for controlling purposes.

i v.

Banking Comp ompanies Ordinance 1962 for prote otection and guidance to banks.

v.

Esta Establ blis ishm hmen entt of spec specia iali lize zed d banks banks,, such such as ADB ADBPP (195 (1952) 2);; a) HBFC HBFC (Nov (Nov,, 1952 1952); ); b) P1CIC P1CIC (Oct, (Oct, 1957 1957)) c) IDBP IDBP (Aug (Aug.. 1961 1961); ); d) NDFC NDFC (Jan, (Jan, 1973) 1973).. University of the Punjab, Gujranwala Campus

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

NO.OF BRANCHES

DEPOSITS

Habib Bank Ltd. Nati Nation onal al bank bank of Pakistan Ltd.

667 579

Rs. 6,160 (million) Rs. 5,660 (million)

United Bank Ltd MCB Bank Ltd.

497 506

Rs. 5,670 (million) Rs. 1,640 (million)

Allied Bank Ltd.

145

Rs .

570 (million)



B) Natio National naliza izatio tionn Era: Era:

On January 01, 1974 all Pakistani banks were nationalized through Natio Nationa nali liza zati tion on Act Act 1974 1974.. Unde Underr this this law law all all Paki Pakist stan anii bank bankss became a public property. All small banks were merged in bigger banks to create 5 major Pakistani banks Pakistani banks. These banks were to control by Pakistan Banking Council. There are still cont contro rove vers rsie iess abou aboutt this this act act of gover overnm nmen entt as whet whethe herr it contributed in success of failure of banks. However the major changes after nationalization were as follows: 

Working of banks was extended to under developed areas.



Market expansion for credit and deposits.



Bank Bank we were re enco encour urag aged ed to ex exte tend nd coop cooper erat atio ionn to neglected areas



Decrease in service level of bank officers.



Decrease in profitability as well.



C) POST NATIONALIZATION NATIONALIZATI ON ERA

In 1990 990 the the gover overnm nmeent de deci cide ded d to de dena nati tion onal aliz izee all all the nati nation onal aliz ized ed inst instit itut utes es.. Some Some was was also also sugg sugges este ted d in bank bankin ingg sector. For this purpose, amendments were made to Nati Nation onal aliz izat atio ionn Act Act 1974 1974 and and two two nati nation onal aliz ized ed bank bankss we were re privatized. Along with this a permission to open banks in private sector was also granted. The rules regarding establishment of new banks and for incoming foreign banks were also relaxed. The-three privatized banks are; a)

MCB taken up by a private group in April, 1991

b) ABL taken up by its own employee employeess in September September 1991. 1991. c) UBL taken taken up up by UAE UAE party party in 2002. 2002. After these changes a large number of private and foreign banks started their operations in Pakistan and the present status can be seen from the following figures: SCHEDULED BANKS Category Nationalized Commercial Banks Private / Privatized Commerce Banks Public Sector Specialized Banks Foreign Banks Total Schedule Banks

No. Of Banks 3 18 4 19 44



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

PAKISTAN BANKING SECTOR

• • • • • •

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

NATIONALIZED SCHEDULE BANKS • • •

First Women Bank Ltd. National Bank of Pakistan Habib Bank Ltd.

DE-NATIONALIZED SCHEDULE BANKS • • •

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



SPECIALIZED BANKS • • • •

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

PRIVATE SCHEDULE BANKS • • • • • • • • • • • • • • •

Askari Commercial Bank Ltd. Bank Alfalah Ltd. Bank Al-Habib Ltd. Bolan Bank Ltd. Faysal Bank Ltd. Habib Credit & Exchange Bank Indus Bank Ltd. Metropolitan Bank Ltd. Platinum Bank Ltd. Prime Commercial Bank Ltd. Prudential Bank Ltd. Soneri Bank Ltd. The Bank of Khyber The Bank of Punjab Union Bank Ltd.



FOREIGN BANKS • • • • • • • • • • • • •

• • •

• • • • • •

ABN AMRO Bank N.V. Albaraka Islamic Bank BSC (EC) American Express Bank Ltd. ANZ Grindlays Bank Ltd. Bank of America (NT & SA) Bank of Tokyo Mitsubishi Ltd. Bank of Ceylon Banque Indosuez Citibank N.A. Credit Agricole A.G. Deutche Bank A.G. Doha Bank Ltd. Emirates bank International Ltd. P.J.S.C. Habib Bank A.G. Zurich Hong Kong and Shangai Banking Crop. Ltd. Inter Interna nati tiona onall Fina Financ ncee Inves Investm tmen entt and Comme Commerc rcee Bank Bank Ltd. Mashreq Bank PSC Oman International Bank SOAG Rupali Bank Ltd. Societe Generale, the French Int. Bank Ltd. Standard Chartered Bank Trust Bank Ltd. University of the Punjab, Gujranwala Campus

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DEVELOPMENT FINANCIAL INSTITUTIONS (DFIS) • • • • • • •

• • •

Investment Corp of Pakistan National Development Finance Corp. Pakistan Industrial Credit and Investment Corp. Pak Kuwait Investment Company Pak Libya Holding Company Regional Development Finance Corp. Sa u di P a k I n d u s t r i a l & Ag ri c u l t u ra l I n v e s t m en t Corporation Small Business Finance Corporation House Building Finance Corporation National Investment Trust

INVESTMENT BANKS • • • • • • • • • •

Crescent Investment Bank First International Investment Bank Atlas BOT Investment Bank Security Investment Bank Fidelity Investment Bank Prudential Investment bank Islamic Investment Bank Asset Investment Bank Al-Towfeek Investment Bank Al-Faysal Investment Bank University of the Punjab, Gujranwala Campus

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• • • •

City Corporation Investment Bank (Pak) Ltd. Franklin Investment Bank Ltd. Orix Investment Bank (Pak) Ltd. Trust Investment Bank Ltd.

HISTORY OF THE MCB BANK LIMITED Before separation of Indo Pak, the need for more Muslim banks was was felt felt.. And And Musl Muslim imss havi having ng stro strong ng fina financ ncia iall capa capaci city ty we were re thinking to invest in this sector as well. This was the idea which paved the way for setting up MCB Bank Ltd known as MCB. This was the third Muslim bank in the subcontinent. HISTORY

This bank was incorporated under companies’ act 1913 on 9 th July, 1947 (just before partition) at Calcutta. But due to changing scena scenari rioo of the the regi region on,, the the cert certif ific icat atee of incor incorpo pora rati tion on was was issued on 17th August, 1948 with a delay of almost 1 year; the certificate was issued at Chitagong. The first Head office of the company was established at Dacca and Mr. G.M. Adamjee was appo appoin inte ted d its its firs firstt chai chairm rman an.. It was was inco incorp rpor orat ated ed with with an authorized capital of Rs. 15 million. Afte Afterr some some time time the the regi regist ster ered ed offi office ce of the the comp compan anyy was was shif shifte ted d to Kara Karach chii on Augu August st 23rd 23rd,, 1956 1956 thro throug ugh h a spec specia iall reso resolu luti tion on,, now now rece recent ntly ly the the He Head ad offi office ce of MCB MCB has has be been en transferred to Islamabad in July, 1999 and now Head office is termed as Principle Office.



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

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

When privatization policy was announced in 1990, MCB was the first to be privatized upon recommendations of World Bank and IMF. The reason for this choice was the better profitability condition of the organization and less risky credit portfolio which made'' it a good choice for investors. On April 8th, 1991, the manag managem emen entt cont contro roll was was hand handed ed over over to National National Group (the highest bidders). Initially only 26% of shares were sold to private sector at Rs. 56 per share. AFTER PRIVATIZATION PRIVATIZATION Ten years after privatization, MCB is now in a consolidation stage designed to lock in the gains made in recent years and prepare the groundwork for future growth. The bank has restructured its asset portfolio and rationalized the cost structure in order to remain a low cost producer.

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



•

Launching of different deposit schemes to increase saving level.

•

Increased participation on foreign trade.

•

Betterment of branches and staff service level.

•

Intr Introd oduc ucti tion on of Rupe Rupeee Trav Travel eler er Cheq Cheque uess & Phot Photoo Cred Credit it Card for the first time in Pakistan.

MCB BANK TODAY MCB MCB today oday,, repr repres esen ents ts a ban bank that that has grow grownn with ith time, ime, experience and Pakistan. A major financial institution, in scope and size, it symbolizes a fully growing tree evergreen, strong, and firmly rooted. FOREIGN TRADE

The bank conducted import business during the year amounting to RS. 54.0 billion as compare to RS. 56.4 Billion In 2005. The export business slightly improves to RS. 36.9 Billion From RS. 35.1 Billion. In 2006. Home remittances decline to RS. 16.7 Billion From 30.7 Billion the decline in home remittances business was due due to free freezzing ing of Forei oreiggn Curr Curren ency cy Accou ccounnts, ts, whic which h has has affected the confidence of Pakistanis working overseas .

YEAR 2006 COMPLIANCE



MCB’s strength lies in providing a technological base at the gross root root leve levell of the soci societ etyy with with a chal challe leng ngee to educat ucatee and and assi assimi mila late te such such syst system emss acro across ss vast vast cult cultur ural al and and econ econom omic ic backgro background unds. s. With With over over 768 automa automated ted branch branches, es, 263 online online branches, over 151 MCB ATMs in 27 cities nationwide and a netw networ orkk of over over 16 bank bankss on the MNE MNET ATM swit switch ch,, MCB MCB continuously innovates new products and services that harness technology for the customer’s benefits . SOCIAL SECTOR

The The bank bank acti activi vity ty part partic icip ipat atin ingg in the the Prim Primee Mini Minist ster er self self-emplo employm ymen entt Sche Scheme me.. The The appl applic icat atio ionn rece receiv ived ed from from vari variou ouss applicants is being processed on merit and disposed off as quickly as possible. THE BUSINESS

MCB is in it’s over 50 years of operation. It has a network of ove over 1,000 branches all ove over the country with business establishments in Sri Lanka and Bahrain. The branch break-up province wise is Punjab (57%), Sindh (21%), NWFP (19%) and Blochistan (3%) respectively. MCB has an edge over other local banks, as it was the first privatized bank. The State Bank of Pakistan has restricted the number of branches that can be opened by foreign banks, an advantage that MCB capitalizes because of its extensive branch network. Fourteen Fourteen years after privatization, privatization, MCB is now in a consolidation consolidation stage designed to lock in the gains made in recent years and University of the Punjab, Gujranwala Campus 16


prep prepar aree the the groun round dwork ork for futur uturee grow growth th.. The The ban bank has rest restru ruct ctur ured ed its its asse assett port portfo foli lioo and and rati ration onal aliz ized ed the the cost cost structure in order to remain a low cost producer. MCB now focuses on three core businesses namely Corporate, Commercial and Consumer Banking. Corporate clientele includes public sector companies as well as large local and multi national concerns. MCB is also catering to the growing middle class by Providing new asset and liability products. The Bank provides 24 hour hour bank bankin ingg conv conven enie ienc ncee with with the the larg larges estt AT ATM M netw networ orkk in Pakistan covering 27 cities with over 151 ATM locations. The Bank’s Rupee Traveller Cheques have been market leaders for the past six years and have recently launched their Gift Cheque Scheme. MCB looks with confidence at year 2007 and beyond, making stri stride dess towa toward rdss fulf fulfil illm lmen entt of its its miss missio ion, n, "to "to be beco come me the the preferred provider of quality financial services in the country with profitability and responsibility and to be the best place to work". A major achievement of MCB is that the state bank of Pakistan has issued a license to MCB to start Islamic banking. Now MCB is settting up a 1st Isla se Islami micc bank bankin ingg bran branch ch at 1st floor floor shahee shaheenn complex, Karachi. This complex starts working from September 1, 2003.



Vision Statement

CHALLENGING AND CHANGING THE WAY YOU BANK



Mission Statement

To become the preferred provider of quality financial services in our coun co untr try y wit ith h the pr prof ofit itab abil ilit ity y an and d responsibility and to be best place to work



Our Core Values CUSTOMER FOCUS We treat each of our customer equality & as the most important person while we interact with him/her. We must ensure that we do everything to meet and exceed the customers expectations with perfect to times, accuracy & quality services. EMPLOYEE RESPECT & DIGNITY We treat each of our employees with fairness, which includes givi giving ng cons constr truc ucttive ive fee eed dbac back for thei theirr de deve velo lopm pmeent. nt. We celebrate diversity and seek suggestions from all employees for improvement. We ensure that responsibility & fairness in all our decision-making. TEAM BASED APPROACH University of the Punjab, Gujranwala Campus 20


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

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

GOOD CORPORATE CITIZENSHIP We ensure that we contribute our due share to the Govt. we realize that we have a responsibility to the society in which we ope operat rate & we seek seek ways ways of play playin ingg a posi positi tive ve role ole for the the betterment of the community at large.



Management Committee



Board of Directors Mian Mohammad Mansha

Chairman

S.M. Muneer Vice Chairman

Mohammad Aftab Manzoor President & Chief Executive

Tariq Rafi

Director



Sheikh Mukhtar Ahmed

Director

Mohammad Arshad

Director

Shahzad Saleem

Director

Mian Umer Mansha

Director

Sarmad Amin

Director



Audit Committee Mian Mohammad Mansha

Chairman

Shaikh Mukhtar Ahmed

Member

Shahzad Saleem

Member

Chief Financial Officer Ali Amin

Company Secretary Tameez-ul-haque

Auditor A.F.Ferguson & co Chartered accountants M.Yousuf Adil Saleem & co Chartered accountants

Legal Advisor University of the Punjab, Gujranwala Campus 25


Chartered accountants mandiwalla & zafar Advocates & legal consultants

Shariah Advisor Dr. Muhammad Zubair Usmani

Registered Office MCB building, F-6/G-6 Jinnah Avenue, Islamabad

Principle Office Adamjee house 2 nd floor I.I chudrigar road Karachi

Registrar and Share Registration Office THK associates (pvt) Ltd .

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



ORGANIZATIONAL HIERARCHY OF MCB

PRESIDENT

SENIOR EXECUTIVE VICE PRESIDENT

EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

OFFICERS GRADE I II III

ASSISTANTS



CASHIER

PEONS

MANAGEMENT LEVEL

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

………..…………………… ………

Head Office

Regional He Head (E (EVP) ………..……………………

Regional Of Office

Zonal Head (VP)

………..……………………

Zonal Office

Branch Manager

………..……………………

Branch

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



ORGANIZATIONAL SETUP OF MCB

HEAD QUARTER

KARACHI

PROVINCIAL HEAD QUARTERS

PUNJAB

LAHORE

SINDH

KARACHI

BALOCHISTAN

PESHAWAR

NWFP & AZAD KASHMIR

QUETTA

CIRCLE OFFICES

University of the Punjab, Gujranwala Campus 29 BRANCH OFFICES


ORGANIZATIONAL STRUCTURE OF MCB

As MCB is a banking company listed in stock exchange therefore it foll follows ows all all the the lega legali liti ties es whic which h are are impos imposed ed by conce concern rned ed statutes Mr. Muhammad Mansha is chairman & chief executive of the company with a team of 10 directors and 1 vice chairman to help in the business control and strategy making for the company. Operational Management of the bank is being handled by a team of 10 professionals. This team is also headed by Mr. Muhammad Mansha. Mansha. The differ different ent operat operationa ionall depart departmen ments ts are Consume Consumerr Banking & IT div; Financial & Inter branch div; Banking operations div; div; HR & Le Leggal div; iv; finan inanci cial al cont contrrol & Audi udit div; div; Cre Credit dit management div; Commercial Banking div; Corporate Banking div; Trea Treasu sury ry mana manage geme ment nt & FX Grou Groupp and and last lastly ly Spec Specia iall As Asse sets ts Management (SAM) Group.



For effective handling of branches, it has been categorized into three three segmen segments ts with with differ different ent people people handli handling ng each each catego category. ry. These categories are: a)

Corporate Banking

b)

Commercial Banking

c)

Consumer Banking

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

Commercial Banking The branches which has a credit exposure of less than Rs. 100 million but having a credit portfolio of more than Rs. 20 million (excluding staff loans) Usually branches in large markets and commercial areas come under this category.

Consumer Banking These are the branches which have exposure up to Rs. 20 million and these include all the branches which are neither corporate nor commercial branches. University of the Punjab, Gujranwala Campus 31


Recently the organizational structure was re-designed as follows: Province wise branches

Corporate 20 branches

Consumer 637 branches

Commercial 383 branches

MARKETING MIX OF MCB BANK LIMITED Marketing is the task of creating, promoting and delivering goods and service services s to consume consumers rs and busine businesse sses. s. Organi Organizat zation ions s identi identify fy and profile distinct group of buyers who might prefer or require varying produc products ts and market marketing ing mixes. mixes. The customer customer seeks seeks for value and satisfaction. The organizations can increase the value of the customer offe offeri ring ng in se seve vera rall ways ways e.g. e.g. raisi raising ng bene benefi fits ts,, reduc reducin ing g co cost sts s etc. etc. marketing marketing mix is a set of marketing marketing tools that the firm uses to pursue its marketing objectives in the target market. These marketing tools are are know known n as 4 p’s p’s of mark market etin ing. g. Thes These e four four mark market eting ing tool tools s are are viewed as 4c’s by the consumers. 4 P’s Product/ Service Price Place Promotion

4 C’s Customer Solution Customer Cost Convenience Communication



To identify the customer needs and fulfilling hem is the basic objective of an organization. Marketing is not just satisfying your customers, you have to delight them and this can be done by acting upon this phrase. “Under Promise and Over Deliver” MCB Bank provides a winning combination of products and services to its prime customers. It is one of the country’s leading commercial banks, which ensures complete security, and reliability in all-financial transactions.

PRODUCT MIX & PRICES OF MCB BANK

1. MCB Rupee Rupee Traveler Traveler Cheque Cheque MCB Rupee Travelers Cheques are as good as cash cash,, infa infact ct be bett tter er.. Be Bett tter er be beca caus usee with with Rupee Travelers Cheques you have the power to purchase and a feeling of security that should you lose them, you will get a refund. MCB Rupe Rupeee Trav Travel eler erss Cheq Cheque uess are are accep accepte ted d at majo majorr shops shops,, travel agents, hotels, business establishments and MCB branches all over Pakistan. You don't have to be an MCB account holder to buy the Rupee Traveler Cheques. Anybody can purchase them. It's a safe and convenient co nvenient way to conduct everyday business. At a time when thefts and robberies are on the increase, you are better off carrying Travelers Cheques rather than money.



2. Mahnama Mahnama Khushal Khushalii Scheme Scheme A 5- year fixed Deposit Scheme, targeted to persons with small savi saving ngss who who woul would d de desi sire re a regu regula larr mont monthl hlyy retu return rn on thei theirr investment. Salient Features •

•

•

•

•

•

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

Khushali Certificates can be purchased by individuals (singly or jointly) or by the Proprietorship/Partnership concerns or Companies, etc. in their name The Khushali Certificate will be of five years maturity. The interim rate of profit offered will be minimum 1% per mon month. th. If the prof profit it decla eclarred by the the bank bank is hig higher her, additional profit will be paid. Zakat will be deducted wherever applicable on yearly basis whether you will be receiving your profit or encashing your certificates. As per Government Directions, tax on the profit / return is to be deducted by MCB branches at the time of payment.

3.

MCB Khushali Bachat Account

Salient Features



•

8% rate of return per annum.

•

Returns calculated on daily.

•

Average balance and paid half yearly.

•

Introduced first time in Pakistan.

•

The The faci facili lity ty of helpi helping ng acco accoun untt hold holder erss pays pays util utilit ityy bill billss (electricity, telephone and gas) through their account. No queues. No delays .

4.

Prime Currency Scheme

Account

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

•

•

Owing foreign currency account under the Prime Currency Scheme allows you to earn attractive rates of interest in foreign currency. You have a choice between opening this account in your personal name and opening it under joint names. Whether you are a resident or a non-resident Pakistan, MCB Prim Primee Curr Curren ency cy Sche Scheme me invi invite tess all all to oper operat atee a fore foreig ignn currency account.



•

•

•

•

•

•

•

•

Foreign nationals and foreign companies can also open a foreign currency account under the Prime Currency Scheme. Your foreign currency account can be opened in four global currencies: The United States Dollar, the Pound Sterling, the Japanese Yen and the Euro. Travellers Travellers Cheques and Foreign Foreign Currency Notes can also be issued to holders of persona! and Joint accounts. Rupee Loan facility will also available against this account. You can draw any amount of foreign exchange from your foreign currency account and transfer or remit the amount freely to any part of the world without any restrictions. The restrictions imposed by the State of Pakistan for the opening of foreign currency accounts in case of passport; Work-permit and resident Visa have been withdrawn. Your account will be restriction free. The Prime Currency Scheme is exempt from al! forms of taxes including Inc Income ome Tax, Wealth Tax and Zakat deductions. MCB Prime Currency Scheme is a world in itself.

5.

Hajj Mubarak Scheme

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



Unde Underr the the 2 year yearss sche scheme me,, a mont monthl hlyy depo deposi sitt of Rs.1 Rs.180 800 0 is requ requir ired ed,, wher wherea eass unde underr the the 3 year yearss sch scheme, eme, the the requ requir ired ed monthly deposit is only Rs.1200

6.

Capital Growth Certificate Scheme

For long long term term de depos posit itor orss unde underr whic which h the the amou amount nt de depo posi site ted d almo almost st doub double less at the the end end of 5 year years. s. For For the the sche scheme me,, the the mini minimu mum m amou amount nt of de depo posi sits ts is Rs. Rs. 1000 10000 0 whil whilee ther theree is no maxi maximu mum m limi limitt. In case ase of prem premat atur uree enca encash shme ment nt of the the certificate, the depositor will profit at the same rates as that of PL Saving Account.

7.

Fund Management Scheme

This scheme is offered to corporate and customers and is aimed at providing better rate of return up to 15% per annum. One of the objectives of the scheme is to develop secondary market for Government Securities. 8.

Consultancy Services

In the process of privatization of public sector units, prospective buyers need professional assistance and MCB, with its expertise, offers to them specialized service for valuation of the market valu valuee of the the indu indust stri rial al uni unit, pre prepar paring ing bid bid docu docume mennts and and arranging finance for the purchase of the unit. University of the Punjab, Gujranwala Campus 37


9.

Self Supporting Scheme

For the benefits of genuine worker/borrowers who are poor and needy and for small entrepreneur the bank as evolved a self supp suppor orti ting ng sche scheme me:: maxi maximu mum m amou amount nt of loan loan Rs.2 Rs.250 5000 00 and and minimum Rs.5000 per individual. Loan will be totally free of markup. 10.

Fax Press

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

11.

Night Banking Service

For For the conv conven enie ienc ncee of the the acco accoun untt holde olderr, serv servic icee has, as, especially, been introduced at busy commercial centers. Traders and and othe otherr clie client ntss can can now now make make de depo posi sit, t, with with case case,, at such such centers up to 8.00PM. 12.

Utility Bill Collection

Wit With the the aim aim of ex exte tend ndiing thi this serv servic icee to wide ider range ange of customers, the number of MCB branches collecting Utility Bills more than 900.



13.

MCB Mobile Banking

At the the fore forefr fron ontt of tech techno nolo logi gica call ex exce cell llen ence ce,, MCB MCB prou proudl dlyy intr introd oduc uces es MCB MCB MOB MOBIL ILE E BA BANK NKIN ING* G*.. The The con conveni venien ence ce of acces accessi sing ng acco accoun untt bala balanc ncee info inform rmat atio ionn and and mini mini stat statem emen ents ts whenever want or wherever may need them, with comfort and peace of mind. MCB MCB Mobi obile Banking service is available to all MCB ATM cardholders, 24 hours - 365 days. MOBILE BANKING AT A GLANCE

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

•

WITH MCB MOBILE BANKING · Check balance · View the last 4 transactions of your MCB account(s).

•

A FREE SERVICE

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

BANKING AT FINGERTIPS

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

14.

MCB Islamic Banking Services University of the Punjab, Gujranwala Campus

39


Isla Islami micc bank bankin ingg serv servic ices es thro throug ugh h ex excl clus usiv ivee unit units/ s/br bran anch ches es offering a range of liability and asset based Sharia compliant products like Musharika, Murabaha, Ijara and Istasana. 15.

MCB Car Cash

Car Car fina financ ncin ingg and and leas leasin ingg at comp compet etit itiv ivee rate ratess with with flex flexib ible le opti option onss Car Car cash ash finan inance cess both both semi semi-c -com omme merrcial cial and and non noncommercial vehicles for personal and business use.

16.

MCB Locker

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

17.

MCB Master Card

THE FUTURE OF MONEY Since the beginning of time, people have tried to find more convenient ways to pay, from gold to paper money and checks. Today, money is moving away from distinct hard hard curren currencie ciess and toward towardss univer universal sal paymen paymentt produc products ts that that transcend national borders, time zones, and, with the Internet, even physical space. Plas Plasti ticc or "vir "virtu tual al"" mone money, y, cred credit it,, de debi bit, t, and and elec electr tron onic ic cash cash products, inevitably will displace cash and checks as the money of the future. University of the Punjab, Gujranwala Campus 40


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

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

•

Welcomed at over 3, 000 outlets in Pakistan.

•

Provides up-to 45 days Free Credit.

•

Joining and Annual Fees to suit you.

•

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

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

Cash Advance Facilities

Available in Pakistan and worldwide with a network of over 1,000 branches and a team of dedicated professionals, MCB is Pakistan’s largest private sector commercial bank. Our Consumer Banking provides customers with innovative saving schemes, products and services. Our ATM network is the largest in Pakistan and our Pak Rupee Travelers Cheques are market leaders. leaders. We were the first to introduce introduce the photo card with the introduction of the MasterCard.



Our Corporate Banking ensures assistance from a dedicated team of prof profes essi siona onall fina financ ncia iall advi adviso sors rs for for unde underw rwri riti ting ng,, proj projec ectt finance or corporate advisory services. When it comes to banking practices, you can depend on us. We’ve been around for over fifty years. 18.

MCB Smart Card

MCB MCB now now brin bringgs you MCB MCB Smart SmartCard Card -a secure and convenient instrument of payment with with unmatc unmatched hed functi functiona onalit lities ies.. It provid provides es 24-hour direct access to your bank account The convenience and flexibility of MCB Smart SmartCard Card will help live a smarter life. It not only helps you manage your expenses, but also avoids undue interest on your day to day credit card transactions.

Your our balance is always within your our reach and you spe pennd accordingly. MCB is the only bank to introduce a debit card that gives the option to choose from domestic and international card for local and global usage respectively

19.

Remit Express

Fas Fastes estt to Pakistan.

Paki Pakisstan. tan.

Any Anyw whe herre

in



The fastest way of getting your money across to Pakistan. Remit Express offers low cost remittance from U.A.E. and Saudi Arabia. Your Your relati relatives ves,, frien friends ds or busine business ss associa associates tes receiv receivee drafts drafts with within in 72 hour hours. s.MC MCB B Re Remi mitt Expre xpress ss has bee eenn spec specif ific ical ally ly designed to meet the needs of the expa xpatriate Pakistani community residing in the Gulf countries.

20.

Easy Personal Loan

Helping You Do More

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

Salient Features •

•

MCB MCB will ill lend lend you you any any amou amount nt,, from Rs 30,0 0,000 to Rs 490,000, depending upon your net monthly income You can choose tenure of 1 to 3 years for the repayment of the loan

•

Bank to Bank Balance transfer

•

Credit Card balance transfer

•

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

•

Availability of early repayment option

•

Repayment Arrangements University of the Punjab, Gujranwala Campus

43


•

Repaym Repa ymen entt of prin princi cipa pall and and mark mark-u -upp is month monthly ly and and can can repaid using either one of the following modes:

•

Direct Salary Transfers

•

Payroll Deduction

Eligibility Criteria •

Minimum net monthly income Rs 10,000

•

25 to 55 years of age

•

Pakistani national

•

At least 2 years of employment with current employer.

•

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

21.

MCB Pyara Ghar

MCB gives dream home at the lowest and best be st poss possiible ble mar mark-u k-up rates ates.. You You can can choose either one of our two mark-up rate options- fixed or variable. Earl Earlyy repa repaym ymen entt opti option on tail tailor or-m -mad adee to allo allow w maki making ng part partia iall prepayments at dates that suit. Who Can Apply

Anyone who fulfills the following criteria is eligible to apply: •

Pakistani national residing in the city and area where the product is launched. University of the Punjab, Gujranwala Campus

44


•

•

•

•

•

•

•

25 years old or above when you apply and under 60 at the time of maturity of the applied financing period. Salaried person, self-employed professional or businessman with a verifiable monthly income stream.

a

Net take -Home income not less than Rs. 25,000 per month. Have 5 years or more of business or professional experience. Employed with the present employer for 2 years with a total employment history of 5 years. Home Purchase Purchase Home Renovation Renovation Home Construction Tenure 3 years to 15 years 2 years to 5 years 3 years to 15 years

22.

MCB Virtual

MCB Virtual provides the continence of banking on int interne ernet. t. Wheth ether at off office ice or home ome or traveling. Log on at www.mcb.com.pk and enjoy 24 hours access of all your accounts for the largest array of service.

23.

MCB Business Sarmaya



MCB MCB Business Sarmaya is a running finance against your our residential property. It offers running finance up to 20 millions with low markup.

24.

MCB Car 4 U

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

PLACING STRATEGIES OF MCB BANK

The location of the bank plays a vital role in making its operations profitable. If the bank

is

located

in

some



business center then it will be very easy for it to attract business people as its customers. Therefore MCB has most of its branches at places where it can reach its targets customer easily. The branch network of MCB is given as follows:

Punjab

632

Sindh

232

NWFP

123

Blochistan

34

Azad Kashmir

19

Domestic

1040

Overseas

4

Total

1045

PROMOTION STRATEGIES OF MCB BANK University of the Punjab, Gujranwala Campus 47


MCB Ba Bank nk is ac acti tive vely ly part articip icipat atin ing g in pro rom mot otio ion n of its its prod produc ucts ts and and se serv rvic ices es thro throug ugh h adve advert rtis isem emen entt and and ot othe herr promotional schemes. Initia Initially lly,, the bank bank foc focuse used d on the the uppe upperr class class custom customer’ er’s s only and offered products for a limited class of people. But now the strategy has been changed and the bank is now targeting the middle market also. The products offered are of diverse nature to cater the needs of maximum number of people. Customer Oriented Attitude

MCB Bank values its customers. Customers’ complaints are encour encourag aged ed becaus because e it gives gives an oppor opportun tunity ity to know know the needs of the customer and build more confidence in them. Most of the promotional efforts are done through  

Direct marketing Public relations

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

and

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

FIELDS OF ACTIVITIES University of the Punjab, Gujranwala Campus 48


The purpose of banks is to provide some services to the general public. And for this purpose different banks provide different services to the people in different forms. The MCB Bank is a commercial bank, in modern time commercial banks play a very impo import rtan antt role role and and thei theirr func functi tion onss are are mani manifo fold ld.. The The main main func functi tion onss and and serv servic ices es whic which h MCB MCB Bank Bank Limi Limite ted d provi provide dess to different peoples are as follows. 1) Open Differ Different ent accounts accounts for for different different people peopless 2) Accepting Accepting various various types types of deposits deposits 3) Accepting Accepting various various types types of deposits deposits 4) Granting Granting loans & advances advances Undert rtak akin ingg of agen agency cy serv servic ices es and and also also gene genera rall util utilit ityy 5) Unde functions, few of those are as under •

•

• •

•

• • •

Coll ollecting cheques and bill of exchange for the customers. Collecting interest due, dividend, pensions and other sum due to customers. Transfer of money from place to place. Actin ctingg an ex exeecut cutor, or, trust rusteee or atto attorn rneey for for the customers. ‘Providing safe custody and facilities to keep jewellery, documents or securities. Issuing of travelers cheques and letters of credit to give credit facilities to travel. Accepting bills of exchange on behalf of customers. Purchasing shares for the customers. Undertaking foreign exchange business.



•

Furnis Furnishin hingg trade trade inform informati ation on and tender tendering ing advice advice to customers.

For proper functioning of branches and the over all bank has been divide divided d in differ different ent depart departmen ments. ts. These These depart departmen ments ts handle handle different jobs so that division of work is there for improvement of functions and also it is easy to control the situation. The general division in a branch is as follows: 1. 2. 3. 4. 5. 6.

Cash Cash dep depar artm tmen entt Deposit Deposit de depar partme tment nt Advances Advances & credit credit depart department ment Remitt Rem ittanc ancee departm department ent Foreign Foreign exchange exchange departmen departmentt Technology Technology departme department nt (new additio additionn in order to cop with with the growing needs of day to day technology requirements)

CASH DEPARTMENT University of the Punjab, Gujranwala Campus 50


The following books are maintained in the Cash Department: •

Receiving Cash Book

•

Paying Cash Book

•

Token Book

•

Scroll Book

•

Cash Balance Book

When cash is received in counter, it is entered in the Scroll Book and Receiving Cashier Book. At the close of the day, these are balanced with each other. When the cheque or any negotiable instrument is presented at counter for payment, it is entered in the token book and token is issued to the customer. The token clerk and the Cashier make entries in the paying book and payment is made to payee. At the clos closee of day day, the Toke Tokenn Book ook and and Payi Paying ng Cash Cashie ierr Book Book are are balanced. The The cons consol olid idat ated ed figu figure re of rece receip iptt and and paym paymen entt of cash cash is entered in the cash balance book and drawn closing balance of cash. Opening Balance + Receipts - Payments = closing Balance.

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



DEPOSIT DEPARTMENT Bank deals in money and they are merely mobilizing funds within the economy. They borrow from one person and lend to another, the differ differenc encee betwee betweenn the rate rate of borrow borrowing ing lendin lendingg forms forms their spread or gross profit. Therefore we can rightly state that deposits are the blood of the bank which causes the body of an institution to get to work. These deposits are liability of the bank so from point of view of bank we can refer to them as liabilities. The total deposits of MCB are growing since its inauguration but after privatization there is a sharp incline in over all deposits of the bank. The increase in deposits is also a cause of increase on total number of accounts; bank has progressed in both aspects.

TYPES OF DEPOSITS Deposits can be segregated on two bases, one is the duration in which there funds are expected to be with the bank and second is the cost of getting these funds. So divide deposits in two classes according to duration of deposits i.e. 1) Time Time de depo posi sits ts / liab liabil ilit itie iess 2) De Dema mand nd de depos posit itss / liab liabil ilit itie iess And on the basis of the cost to acquire these funds, a deposit can be classified classified as any one of following following four, High Cost Medium Cost, Low Cost No Cost .



Banks has different kinds of deposit schemes in order to induce deposits. These schemes are a mixture of the above mentioned two types of deposits with an addition of different services & requirements such as minimum balance' requirement, mode of transaction, basis for calculation of profit, deductions, additional benefits, eligibility for different groups. In the the simi simila larr fash fashio ion, n, MCB MCB has has a larg largee vari variet etyy of de depo posi sitt schemes and some of them are as follows:

CURRENT ACCOUNT In this this type type of acco accoun unts ts the the clie client nt is allo allowe wed d to de depo posi sitt or withdraw money as and when he likes. He may, thus, deposits or withdraws money several times in a day if he likes. There is also no restriction of amount to be deposited or withdrawn. However, ther theree is requ requir irem emen entt of mini minimu mum m bala balanc ncee main mainte tena nanc ncee of Rs. Rs. 1000/-. Usually this type of account is opened by the businessmen. No profit is paid by the bank and no service charges are deducted by the bank on current deposits account. These types of deposits are also exempt from compulsory deduction of Zakat.

PLS ACCOUNT This type of account is for those persons who want to make small savings'. This type of account is opened with a minimum deposit of Rs. 1000/-. Under this scheme deposits can be made only up to a-costing amount and withdrawals are allowed twice a week or 8 times a month. If a big amount is required a seven days notice is requ requir ired ed be befo fore re the the with withdr draw awal al.. The The prof profit it is paid paid on thes thesee accounts on the minimum balance during a month for the whole of



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

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

PLS 365 GOLD This This is a spec specia iall type type of savi saving ng acco accoun untt in whic which h cust custom omer er maintains a minimum balance of Rs. 300,000- and in turn he gets the benefits of daily profit calculations and also there is no restriction on the maximum number of withdrawals as was there in the case of KBA. There is also another advantage of this sche scheme me that that if bala balanc ncee on a part partic icul ular ar day day fall fallss be belo low w the the minimum balance then only the product of that day is ignored whereas in KBA, if balance falls below the minimum limit then all the products for that month are ignored on in other words no profit is paid for that month.

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



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

Term Deposits Receipts This is a type of term deposit in which a receipt is issued for varying tenors ranging from 1 month to 5 years or more. These are in the form of receipts and profit on these receipts is paid biannually. These receipts are encashable after expiry of the period for which they were issued. Different profit rates are applied to different type of TDRs. Unde Underr this this de depo posi sitt sche scheme me,, a de depo posi sitt is rece receiv ived ed from from the the depositor under the condition that he will intimate the bank before a certain period in case of withdrawals.



FUNCTIONS OF DEPOSIT DEPARTMENT This was a brief review of different types of deposit schemes. The Deposit Deposit Depart Departmen mentt handle handless the accoun accountt openin opening, g, profit profit payment and accounting of all types of deposit schemes.

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

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

Accounting Entries Acco Accoun unti ting ng entr entrie iess are are also also made made in the the resp respec ecti tive ve books books of account by this department. However, in small and medium size branches, the accountant performs the book keeping duties for all kinds of ledgers.



CLEARING DEPARTMENT

Every banker acts both as a paying as well as a collecting banker, It is however an important function of crossed cheques. A large part of this work is carried out through the bankers clearing house. A clearing house is a place where representative of all banks of the city get together and settle the receipts and payment of cheq cheque uess draw drawnn on each each othe other. r. As the the coll collec ecti ting ng bank banker er runs runs certain risks in receipt of their ownership the law has provided certain protections to the banks. The Negotiable Instrument Act, 1881, lays down hat drawer or holder of a cheque or draft may cross the instrument generally or specially. It further lies down that a crossed cheque can only be paid to a banker, who collects it for a customer in good faith and without negligence.

Types of Cheques •

•

•

are thos thosee cheq cheque ues, s, whic which h are are Transfer Transfer cheques: cheques: are collected and paid by the same branch of bank. Transfer delivery cheques: are those cheques, which are collected and paid by two different branches of the same bank situated in the same city. Clearing cheques: are those cheques, which are drawn on the branches of some other bank of the same city University of the Punjab, Gujranwala Campus

57


or of the same area, which is covered by a particular clearing house. •

are thos thosee cheq cheque ues, s, whic which h are are Collection Collection cheques: cheques: are drawn on the branches of either the same bank or of another bank, but those branches, are not in the same city or they are not the members of clearing house.

Functions of Clearing Department •

•

•

•

To accep cceptt Tran Transf sfer er,, Tran Transf sfer er deliv eliveery, ry, cle clearin aringg and and collection cheques from the customers of the branch and to arrange for their collection. To arrange the payment of cheques drawn on the branch and given for collection to any other branch on MCB or any other members or sub member of the local clearing house. To coll collec ectt amou amount nt of cheq cheque uess draw drawnn on me memb mber ers, s, subsubmember of local clearing house, sent for collection by MCB Branches, not represented at the local clearing house Receiving and scrutinizing the cheques and other deposit instruments, and the pay-in-slip at the counter.

•

Fixing the stamps.

•

Scrutiny and receipt by the authorized officer.

•

Returning the counter file to the depositor.

•

•

Certificate and confirmation by the officer in charge of the department. , Separating the cheque into transfer, transfer delivery, and clearing cheques.



CLEARING PROCESS (FLOW CHART) Cheque with slip given

Slip is asked & filled

Cheque along with slip checked, signed & received by officer Entries in daybooks are made Entries checked & verified by another

Cheques collected at the day end by Main ’ Cheques are sent to respective banks next day after posting in computer by Main

The same day not honored cheques are

The day after tomorrow the banks are informed about dishonored cheques

Provisional entries for returned cheques are debited again in both computer & daybooks Party is informed about returned cheques through Phone or personal contact

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



ADVANCES DEPARTMENT

Advanc Adva nces es are are the the most most impor importa tant nt sour source ce of earn earnin ingg for for the the banks. MCB is also giving full attention towards this aspect and it is also obvious from the growing portfolio of advances and from very low delinquency rate. The credit portfolio of this institution is in a very much better shape than other financial institutions of Pakistan and the credit goes to the management and the staff who are concerned about the quantity and quality as well. •

Loans

•

Cash Credits

•

Overdraft

LOANS Loans Loans are are monet monetar aryy assi assist stan ance ce by a fina financ ncia iall inst instit itut ution ion to a business, individual etc. The loans are granted by the bank in lump sum, so these types called fixed or demand loans. Interest is charged on the whole amount of a fixed loan. The borrower withdraws whole the amount of loan. This type of loan is normally granted against security of gold documents. In case of demand loans against gold or documents, a demand prom promis isso sorry note ote for for the the amou amount nt of loan loan is taken aken from the the borrower loans are granted under;



LOAN AGAINST GOLD

Under this type of loan, which is granted to the borrower the Head Cashier estimates the value of Gold or Gold ornaments through an agent (Gold smith) and keeps a margin of 40 to 50 percent. After the opening the gold loan account a token is given to the borrower, which is a bank receipt. On repayment of loan, the gold or ornaments held as security for it, together with the demand promissory note duly discharged is returned to the borrower and his receipt for the gold ornament taken in the demand loan ledger. This receipts states that he ornaments returned are complete and in order. Part delivery of ornaments is given against part payment of a loan but care is taken that the ornaments still in banks possession fully covers the balance of the loan outstanding. The interest gold loan is to be applied with quarterly.

LOAN AGAINST PLEDGE OF STOCKS

In case of advancing suc such types of loan oans, the foll ollowing precautions are kept in the mind:

•

Stock pledged must be readily saleable

•

Products should be readily saleable

•

Advance should be within the borrows means



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

Credibility



Feasibility Report

By Credibility, bank Judges the credibility of the client by his past bank record, CBI report etc. it is very important in making decision about giving him loan. Feasibility report is on the running or proposed business of the client. The report enables the bank to judge the likely return of the business.

CASH CREDIT Such cash account is opened in the name of the customer who borrows from the bank. Customer is granted a loan up to a certain limit, sanctioned by the head office, from which he can draw when he requires and interest is charged on the amount actually utilized by the customer. In order to avoid the danger of idle fund, the bank charges a certain rate of interest, even if the custom customer er does not withdr withdraw aw any amount. amount. The rate rate charged charged by the bank on cash credit in 46 paisa per thousand on daily basis. The credit is usually given against the securities of goods or merchandize as follows: ADVANCE AGAINST PLEDGE OF STOCKS



When cash is granted against the pledge of stock or product, cash credit form is taken, from the certain products or stock, but the actual pledge is created when the stock or finished products are placed under the bank's lock or the document of title is duly endorsed to the bank by the borrower. HYPOTHECATION OF STOCKS

The difference between pledge and hypothecation is that under a pledge the borrower's goods are placed in the bank's possession under own lock, whereas, under a hypothecation, they remain in the the posse possess ssio ionn of the the borro borrowe werr or guar guaran anto torr and and are are me mere rely ly char charge ged d to the the bank bank unde underr docu docume ment ntss sign signed ed by them them.. Even Even though the documents empower the bank to take possession of the goods hypothecated, but it is possible that the borrower may actually resist any attempt. MORTGAGE OF PROPERTY

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



REMITTANCE DEPARTMENT Remittance department performs following functions: •

Mail Transfer

(MT)

•

Telegraphic Transfer (TT)

•

Demand Drafts

(DD)

MAIL TRANSFER (MT)

When a customer requests the bank to transfer his money from one branch of bank to another branch of the same bank or from one city to another city to the same bank or any other bank. Customer fills the form given by bank. If the customer has an account with that amount as mentioned in the application form then concerned officer will undertake the following procedure to make the mail transfer complete. 1. 2. 3. 4. 5.

Branch Branch Mail Mail tran transfe sferr form form Receiving Receiving Branch Branch Regist Register er copy Issuing Issuing branc branch h regist register er Copy Copy benefi beneficia ciary ry advice advice advice advice to custom customer er



In case where the customer is not account holder of the bank then the customer will have to deposit the amount which he wants to transfer under Mail. Then the above said procedure will be done.

TELEGRAPHIC TRANSFER (TT)

This type of transfer is simple. After filling the application form the concerning officer shall fill the telegraphic transfer form. Then Then it is sent sent to the requi equirred ban bank whic which h on rece receiv ivin ingg it immediately makes the payment to the customer and afterwards the voucher are sent to that bank by ordinary mail. DEMAND DRAFT (DD)

Demand draft is just like cheques and issued when the customer wants to take cash with him personally. The idea behind is to avoid the risk and burden of currency notes in huge quantity. Demand draft can easily be handled whatever amount it has and the mone oney can easily be taken from the bank when it is presented. In fact, the bank persuades the customer to transfer money by drafts and avoid the risk of frauds involves in MT and T.T. Draft is only issued when the bank knows customer and bank has the confidence in him In case of transfer of money by drafts, the customer has to fill an application form. Then the concerned officer fills the following forms: 1. 2. 3. 4.

Cust Custom omer er’s ’s advi advice ce Custom Customer’ er’ss debit debit form form Regi Re gist ster er copy copy Cove Coverr Advi Advice ce University of the Punjab, Gujranwala Campus

65


FOREIGN DEMAND DRAFT

Fore Foreig ignn De Dema mand nd Draf Draftt is just just like like de dema mand nd draf draft. t. The The only only difference is that a bank issues FDD to the bank of another country. It requires foreign exchange and it involves seven forms, which are to be filled.

Bank Charges (July-December 2006) S. # Item

Rate

1

Telegram on TT

Actual-MinimumRs.75

2

Postage on MT

Actual-MinimumRs.50

3

Cancellation of DD/Pay order

Rs.50 far Account holder Rs.100 far non Account holder

4

Issuance of Cheque Book

Rs. 3 per leaf

5

Account closing Cost

Rs.250 for LCY

6

Issuance of duplicate Draft


7

Issuance of duplicate FDD

Rs.300

8

Issuance of duplicate Pay order


9

Issuance of RTC

Rs.5 per piece

10

Stop payment charges

Rs.150



11

Issuance of fresh statement

Rs.25

12

Issuance of duplicate statement

Rs 50

TECHNOLOGY DEPARTMENT Techno Tech nolog logic ical al adva advanc ncem emen ents ts are are also also affe affect ctin ingg the the bank bankin ingg industry. The foreign banks have a competitive edge over all local bank bankss in thei theirr tech techno nolo logi gies es'' adva advanc ncem emen ents ts and and auto automa mate ted d syst system ems. s. Loca Locall bank bankss have have also also real realiz ized ed the grav gravit ityy oil oil this this situation and are striving to add computerized systems to their branches MCB is ahead of all other local banks in this field and now it is in a position to even compete with foreign banks. There are more than 1045 branches of MCB all over Pakistan and out of these more than 300 branches are fully computerized Almost all .the branches of big cities are computerized; therefore, the need for a technology department at each branch is growing. Now a day, a computer division is working in each city to provide service to ad the branches of that area. MCB has also introduced the now concept of online online banking. banking. There are now more than 250 branches linked through this syst system em and and they they can can tran transa sact ct with with each each othe otherr dire direct ctly ly usin usingg computer systems at their own branches. Now customers do not have to wait long for their transactions and can operate their account through all the online branches. b ranches. ATM NETWORK University of the Punjab, Gujranwala Campus 67


ATM stands for Automatic Teller Machine. This machine is used to tran transa sact ct in one's one's acco accoun untt with withou outt inte interv rven enti tion on of huma humans ns.. These machines are basically used for taking cash, confirming balances and requesting statements / cheque books. MCB has the largest ATM network in the country at the moment with with almo almost st one one ATM at each ach onli online ne bran branch ch and and also also ATM terminals at International Airports. This network covers more than the 27 cities of Pakistan including the provincial capitals and large commercial cities of the country. ATMs are operated through a card issued to the valued customers and by application of Personal Identification Number (PIN number). A person can withdraw from any machine across Pakistan with having an account in only one branch of MCB. This was only possible with the help of online system. In this system all the machines are linked to central banking host at IRM division Karach Karachii throug through h either either satell satellite ite or teleph telephone one contro controlle ller. r. This This system identifies the card holder and his PIN Number. Now MCB has also entered into a contract with Cirrus which is a subsidiary of MasterCard . This contract contract will enable an ATM card holder to use his account even when he is out of country co untry at all the ATMs where Cirrus logo is displayed. Greenn Card Gree Cardss are ordinary cards with a maximum withdrawal facility of Rs. 10,000/- in a day. The annual fee for this card is Rs. 300/- only. Gold Cards are special cars with maximum withdrawal limit of Rs. 25000/- in a day. These cards are issued to the persons having more than Rs. 500000/- as their average balance.



International Cards are issued in collaboration with Cirrus and and are are usea useable ble all all over over the the worl world d with with maxi maximu mum m with withdr draw awal al facility according to the standards of Cirrus.

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

MANAGEMENT OF THE BRANCH Branch Manager

Ch. Sabir Hussain

Operational Manager

Muhammad Munir

Accountant

Fozan ul Qamer

Credit Manager

Farruk Afrooz

Forex Manager

Majid Iqbal

Chief Cashier

Khursheed Ahmed



Cashier

Muhammad Usman

Billing Cashier

Miss Farwa Asif

CSO

Miss Sumera

OTHER GENERAL INFORMATION OF THE BRANCH Deposits The total deposits of this about to 322.734 million. In deposit there is increasing trend.



Deposits 25

20

n o i l l i 15 M n i t n u o10 m A

5

0 2003

2004

2005

Years



Profit Total remittance of this branch is 2157.319 million in 2005.there is also incrasing trend in profit from 2003 to 2005 because of higher mark up rate charged on the finances. No. of vouchers

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

CASH Month

DEBIT

January February March April May June July August September October November December

2521 2209 2753 3079 3433 2813 3555 3784 4134 4923 6427 2808

CREDIT 2303 2268 2508 2569 2726 2578 2229 2123 2114 1980 1968 2312

TRANFER DEBIT 2140 1835 2141 1982 1944 1962 2021 1928 2078 2337 2871 2992

CREDIT 1967 1725 2395 2040 2018 1972 2123 2030 2135 2350 2720 2925

Total 8911 8037 9797 9670 10121 9325 9928 9865 10461 11590 13986 14037



Financing & Advances

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

Accounts in this branch of MCB are as follows: Current account

Total numbers of current accounts are 1236. PLS account Total numbers of profit and loss accounts are 3950. Khushali bachat account: These are about to 301 accounts Basic Banking Account (Newly Introduced by SBP for salaried person) There are about to 19 accounts. Foreign Currency Accounts: There are about to 60 accounts. MCB 365 Gold Account There are about to 101 accounts.



WORK DONE BY ME During my internship in the MCB Limited, I really enjoyed to work with the staff of Branch, G.T Road, Muridke from 17thJuly to 2nd September, 2006 and have a wish to be employee employee of MCB. It was almost impossible to work in all the departments within that limited time. But on my request, the staff of the branch provided me the opportunity to work in the different departments for the sake of practical knowledge. I am really very thankful to branch manager Sir Ch. Sabir sb that provides me a learning environment in the branch. During my internship training in the MCB as I early mentioned that I have worked in different departments & seats and learnt the followings.



ACCOUNT OPENING DEPARTMENT

Account ope penning and closi osing is the function of accoun ounts depart departmen ments. ts. Bank’s Bank’s custom customers ers may be individ individual ualss (Singl (Singlee or Joi Joint) nt), firms irms (par (p arttner nership ship/p /prropr opriet ietorsh orship ip), ), Auton utonom omou ouss F corp corpor orat atio ions ns,, Limi Limite ted d Comp Compan anie ies, s, Char Charit itab able le Inst Instit itut utio ions ns,, Associations Educational Institutions or Local I Bodies.

R S BASICS TO OPEN AN ACCOUNT T During the span of mine internship in MCB, I learned and observed a lot of about the opening of an account. Basically I think that the opening of an account is the establishment of a contractual relationship between the banker and the cust custom ome er. By ope openin ning an ac acco cou unt at a bank ank a perso erson n beco become mes s a ‘cus ‘custo tome mer’ r’ of a bank bank.. Furt Furthe herr I am goin going g to express the basic requirements and steps involved in the opening of an account.

T W O W E E K S



INTRODUCTION AND PRELIMINARY INVESTIGATION

Before Bef ore open openin ingg an acco accoun untt MCB MCB as like like the the oth other ban banks in Pakistan ascertain whether or not the person who is going to open the account is a desirable customer or not. Then MCB determine the prospective customer’s integrity, respectability, occupation and the nature of business by the introductory references given at the the time time of acco accoun untt open openin ing. g. Negl Neglig igen ence ce in this this info inform rmal al preliminary investigation may result in serious consequences not only for the banker concerned directly but also for other bankers and the general public who may be affected indirectly. In order to further strengthen and streamline this process, the Federal Ombudsman of Pakistan, vide his ruling on complaint No. II/31/5186, has directed the banks to retain with the account opening form a Photostat copy each of the National Identity Cards of the person desiring to open an account as well as that of the introducer. As per these directions, the concerned Branch Managers are required to obtain the original National Identity Cards along with their Photostat copies and then return the original after attesting the authenticity of the retained copy. Preliminary investigation is necessary because of the following reasons: Avoid Frauds: In this regard I learned that if a banker does not make make the the nece necess ssar aryy inqu inquir irie iess me ment ntio ione ned d abov abovee he may may enab enable le dish dishon ones estt pe pers rson onss to poss posses esss cheq cheque ue book bookss for for frau fraudu dule lent nt purposes. If any such person happens to be an undercharged



bankrupt, the banker might be placed in an awkward position for having allowed such a person to open and open a bank account.

Safeguard against unintended overdrafts: Sometimes due to a mistake an account may be given an overdraft, For instance, the ledger keeper, misreading the balance of an account honors a cheque for an amount larger than the balance. Similarly a credit entry belonging to a customer may be made by mistake in another cust custom omer er’s ’s acco accoun unt. t. In such such situ situat atio ions ns the the ex exce cess ss amou amount nt withdrawn by the customer can only be realized if the customer is a respectable person. Inquiries Inquiries about about clients: clients: Being a banker I think MCB has a business obligation to respond to inquiries from other banks etc. about his customer’s financial position. Though the banker gives only a general ideal about the financial standing of his customer, it should nevertheless have the necessary information available with him. Specimen Signature

When an account is opened with MCB customer provides to the bank a specimen of the form of signature which would appear on all his cheques to express his authority for the payment of cheques drawn on his banker. This specimen is taken generally on a card card spec specia iall llyy de desi sign gned ed for for this this purp purpose ose,, and and rule rule for for the the customers, full name, and account number are entered on it. If the bank has reasons to doubt the genuineness of a signature, he should either get it confirmed for his satisfaction or return the cheque with the remark ‘Signature differs’. If the signature



of the customer is forged the banker cannot escape his liability because he has actually acted on his customer’s mandate.

HOW TO OPEN AN ACCOUNT (GENERAL)

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

•

•

•

•

•

Anoth notheer acc account ount hold older of the the ban bank shou should ld prop proper erlly introduce the new customer. The account holder should sign the account account opening form in the presence of bank officer and the signature is duly verified. A copy of identity Card is required by Bank. Agai Agains nstt submi submiss ssio ionn of the the Bank Bank’s ’s pres prescr crib ibed ed appl applic icat atio ionn form, orm, duly duly intr introd oduuced ced in the the man manner ner prov proviide ded d and and on supplying such document, as may be required and account may be opened. The Bank reserves to itself the right to refuse to open and account without assigning any reason. Each account shall be allotted a distinct number that is to be quoted in all correspondence with the bank relation to the account. Minimum amount for opening and continued maintenance of various types of accounts is as follows: Rs.

Saving

500



Current

500

Term Deposit

1000

The The bank bank rese reserv rves es the the righ rightt to chan change ge the the abov abovee me ment ntio ione ned d minimum balance requirement at any time without any notice.

PROCEDURE TO OPEN AN ACCOUNT

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

•

Title of Account

•

Full Name of Applicant

•

Occupation

•

Address

•

Telephone No.

•

Currency of account

•

Nature of Business

•

Introducer’s Name, Address & Signatures

•

Special instruction regarding the account

•

Initial Amount of the Deposit University of the Punjab, Gujranwala Campus

79


•

Signature of the applicant

DOCUMENTS TO BE ATTACHED

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

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

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

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

•

Certified true copy of the Memorandum and Articles of Association of the company. Cert Certif ifie ied d true true copy copy of the the reso resolu luti tion on of the the boar board d of directors / managing committee / governing body regarding conduct of the account. University of the Punjab, Gujranwala Campus

80


•

•

•

Cert Certif ifie ied d list list cont contai aini ning ng name namess and and sign signat atur ures es of the the directors / office bearers.

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

•

Balance Sheet

•

I.D. Card copy of each director

•

Original is also enclosed for inspection and return

•

List of persons authorized to operate the account.

•

Power of Attorney in favor of the person opening account. account .

PARTNERSHIP FIRM ACCOUNT

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

Full Names

•

Address

•

Specimen of signatures of the partners

• •

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

SOCIETIES / CLUBS AND ASSOCIATIONS ACCOUNT

MCB is authorized to open the accounts of the societies/clubs and associations, These are non-trading organizations, formed for the the prom promot otio ionn of cult cultur ure, e, scie scienc nce, e, ed educ ucat atio ion, n, recr recrea eati tion onal al activities and charitable purposes etc. some of these institution University of the Punjab, Gujranwala Campus 81


are registered under the Societies Registration Act, 1866, and are issued a certificate of registration after they have been found fit for registration. ISSUANCE OF CHEQUE BOOK

When a customer opens an account with the bank, he is provided with cheque book for withdrawals from account. However, the first cheque book is given to the customer only when all the required documents are checked. A cheque book contains ten, twenty five, fifty or hundred leaves. The cheque book also carries a requisition slip for the issuance of the new cheque book. This slip is duly filled and singed by the customer. The signature of the customer is verified by the bank and new cheque book is issued to the customer and serial numbers of the cheque are duly entered in the book of the bank. Along with the signature, person should also write his full name & address. Usually only one cheque book is issued at a time, however big concerns who need a number of cheque books at a time, may ask the bank to stock as number of cheque books in their name and to point their name on these cheque books. Bank debits the client’s account for excise duty of Rs.2.50/- per cheque and keeps the cheque book ready for the customer, as on his advice. The officer keeps and maintains the cheque book register Cheque book inventory and cheque books issued are recorded in this register. The account number for which the cheque book is issued and the number of leaves are also recorded in this register when the cheque book issued an entry is passed in the cheque book issue register. In case of loss of cheque book or requisition slip on cheque book University of the Punjab, Gujranwala Campus 82


the customer has to fill the Form No. 216-B to obtain a new cheque book.

UTILITY BILLS COLLECTION

I worked in the utility bills collection department as the MCB collects utility bills on behalf of WAPDA, Sui Gas Companies, and

T Pakistan Telecommunication Corporation Limited by putting the H stamp on the utility bills “Paid”, Date of payment, Signature of I the officer receiving the utility utility bills. After receiving receiving utility utility bills R a list is made on the form which is called Bills scroll form. One D copy of the scroll is with the bank for evidence whereas the

original copy with the receipt of the bills is sent to the billing depa de part rtme ment nt of the the resp respec ecti tive ve commission on the bills.

W corp corpor orat atio ion. n. E E K

The The bank bank char charge ge



CASH MANAGEMENT

The most most import important ant depart departmen mentt of MCB which which de deals als in money money (receiving deposits at lower rates and lend them out at higher F rate ratess of int interes erest) t).. This This dep epar artm tmen entt als also call calleed as Ches Chestt OManager or Chest Department and manager of it is called Cash Mana Manage ger. r. In thos thosee bran branch ches es wher wheree this this de depa part rtme ment nt is not not R separately existed, the branch manager performs the duties of T the Chest Manager.

H The excess cash (More than its insured limit by the insurance company) of the branches of the region is collected by the main W its excess cash branch. The main branch is also bound to send (more than its insured limit) to the State Bank E of Pakistan. No branch can have cash its safe more than its insurance at any time E manager will be at the time of closing cash, if it is so the resp respon onsi sibl blee (not (not the the insu insura ranc ncee comp compan any) y) K whet whethe herr or not not he informed to the regional office (exception to the limit which is insured for the day). New Notes and Prize Bonds are also part and parcel of the Cash Mana Manage geme ment nt.. Keys Keys of the the Safe Safe lock locker erss are are with with the the thre threee University of the Punjab, Gujranwala Campus 84


authorized persons each one of them is responsible for cash as at the time of closing the cash the officers including Cash officer presented and lock the safe after counting and scrutinize the cash cash.. The The cash cash off office icer main mainttain ain its its dail dailyy cash cash book book with ith specification of notes (Bonds are also recorded in the books in relation with cash) and other vouchers, after being satisfied the manager authenticates the books and vouchers regarding cash with stamp and signature. at the end I would like to conclude that the cash management is being done in the MCB very effectively.



ADVANCES DEPARTMENT

On my first day of Internship, Manager gives me some advice and told me the ways to success. He told me that if some one wants L have the knowledge to get success in banking career then he must of the one major department of the bank. I.e. A Advances. So from very first day I was interested to work in advances department S to work in this and at my request bank offer me opportunity department last two weeks T Bank adopts adopts the following following procedure procedure in order order to grant a loan. A customer applies for a loan to the manager, who says him to give deta de tail ilss of his proper property ty.. The The de deta tail ilss of T the propos proposal al and the photocopies of the document to the title of property are sent to W the legal advisor of bank. The legal advisor gives his legal opinion O upon the the document documents. s. The branch branch manage manager, r, in the light light of the opinion received from the legal advisor, discusses the proposal with the advancing manager whether to give or not the loan to the applicant. applicant. If manager manager allows grantin grantingg the W loan all the documents documents along with request letter are sent to regional E office for approval. In the regional office the proposal is analyzed and if the office is sati satisf sfie ied d a cons consen entt lett letter er prep prepar ared ed whic whE ich h is sign signed ed by the the

86

K University of the Punjab, Gujranwala Campus S


regi region onal al cont contro roll ller er credit credit.. This This lett letter er is sent sent to the the bran branch ch manager manager.. After After receivi receiving ng it the the manager manager finance finance review reviewss the consent letter, and prepares a DAC (Disbursement Authorization Certificat Certificate). e). DAC can be made made only for people people who have a bank bank account.

The following documentation is made for loan . •

•

•

•

•

An application or request letter for loan by the customer Legal opinion of the legal advisor of the bank (for the title deeds) Consent letter from the regional office Vetting Certificate (includes consent No., Facility whether fund based or no-fund based, addresses etc.) Valu Valuat atio ionn of prop proper erty ty any any consu onsult ltan antt or any any pan panel of consultants approved by State Bank of Pakistan

•

Original title deed or sale deed

•

Affidavit

•

Genera Gene rall powe powerr of atto attorn rney ey (m (mad adee by advo advoca cate te for for the the person/owner taking loan for the company)

•

Mortgage deed

•

Mutation document made

•

•

•

Verification of the prope perrty by the bank from the competent authority Hypothecation of stock certificate (Running is to be given against 75% margin of stock) IB-25R Letter of hypothecation (duly signed by the party) University of the Punjab, Gujranwala Campus

87


•

•

IB-12 , DP Note/Promissory Note (Bank prepared itself, duly signed by the party, revenue stamps of Rs. 100 put on it) IB-6R Agreement of finance mark up (Contract with party for taking mark up on quarterly basis)

•

IB-24 (used for title deed)

•

IB-29 (used for guarantee from party)

•

•

IB-26 (used for pledge of stock, margin is different for different goods) No. IB-28 (used for lien) etc.

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

Running Finance

•

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

•

Demand Finance (against Lien On DSC’s)

•

Tractor Finance

•

Foreign Bills Purchased

•

Finance Against Foreign Bills

•

Export Refinance I

•

Export Refinance II University of the Punjab, Gujranwala Campus

88


The exposure of Muridke Branch is more than 500 Million.

I have learnt about the documentation required for the financing. Maj Major focu ocus on the fina financ ncin ingg is de depe penndin ding on the acco accoun untt turnover and collateral offered. While financing to the fresh client the credit proposal of the client is elevated to the higher office. The bank’s official get the applications form the customer and prepare the case for getting approval for the higher office.

SECURITIES HELD AGAINST FINANCING FOR RUNNING FINANCE

Hypothecation of Stocks (50% Margin) Collateral security (house, land, factory etc..) FOR CASH FINANCE

Pledge of stocks (20 to 25% Margin) Collateral security (house, land, factory etc..) FOR DEMAND FINANCE

Lien over Defense Savings Certificate Lien over Deposits (TDR) Lien over Foreign Currency deposits FOR TRACTOR FINANCING University of the Punjab, Gujranwala Campus 89


Joint ownership of the Tractor Collateral security (Agri land)

FOR EXPORT REFINANCE PART I

Lien over export bills drawn under firms order or contracts Collateral security (house, land, factory etc...) FOR EXPORT REFINANCE PART II

Hyp & Pledge of Stocks Lien over EE statement Collateral security (house, land, factory etc...) FOR FOREIGN BILLS PURCHASED

Lien over export bills drawn under LCs Collateral security (house, land, factory etc...) FOR FINANCE AGAINST FOREIGN BILLS

Lien over export bills drawn under firm order and contracts Collateral security (house, land, factory etc...) FOR BANK GUARANTEE

Cash Margin (As Per Approval of Finance)





BALANCE SHEET



2005 (Rupees in thousands) ASSETS Cash Balance with other banks Lending to financial institutions Investments_ net Advances – net Operating fixed assets Other assets_net Deferred tax assets_net LIABILITIES Deposits and other accounts Borrowings from financial inst. Bills payable Other liabilities Deferred tax liabilities Sub ordinated loans Liabilities against assets NET ASSETS REPRESENTED BY Share capital Reserve Unappropriated profit

2004

23665549 1469333 9998828 69481487 180322753 8182454 5464426 19196 298776797

23833253 5708323 10965297 67194971 137317773 7999821 6154370 ------------259173808

229345176 27377502 8536674 8611600 ------------1598080 ------------275469034 23307763

221069158 7590884 7566684 6525999 269498 1598720 ------------244620924 14552884

4265327 13408005 210662 17883994 Surplus on revaluation of assets 5423768 23307763

3371800 5661553 165208 9198561 5354323 14552884

PROFIT & LOSS ACCOUNT



2005

2004 (Rupees in ‘000)

Mark-up/return/interest earned Mark-up/return/interest expensed Net mark-up/interest income Provision against non-performing loans and advances Provision for diminution in the value of investments Bad debts written off directly Provision for potential lease losses Net mark-up/interest income after provisions NON MARK-UP/INTEREST INCOME Fee commission and brokerage income Dividend income Income from dealing in foreign currencies Other income Gain on Investments Gain / Loss on trading in government securities Total non-mark-up/interest income

17756232 2781468 14974764 1242153

9083863 2057640 7026223 442595

(98982)

(172876)

1184 ---------1144355 13830409

8771 1200 279690 6746533

2448950 480344 531455 1084576 866895 851

1992356 378908 492738 576007 804478 (11440)

5413071 19243480

4232988 10979521

NON MARK-UP/INTEREST EXPENSES Administrative expenses (Reversal) / Other provisions Other charges Total non-mark-up/interest expenses Compensation on delayed tax refund PROFIT BEFORE TAXATION Taxation – current year Prior years

6459490 (72740) 178841 6565591 340598 13018487 4611359 (149763)

7244200 149893 41864 7435657 513850 4057716 1555764

Deferred PROFIT AFTER TAXATION

(365524) 8922415

70240 2431532

Unappropriated profit brought forward

165208


195966


Transferred from surplus on revaluation of fixed Assets Profit available for appropriation APPROPRIATIONS Transfer to Statutory reserve General reserve Capital reserve Proposed cash dividend Reserve for issue of bonus shares Interim cash dividend Rs 1.75 per share Interim cash dividend Rs 1.50 per share Unappropriated profit carried forward Basic and diluted earning per share after tax

83749 248957 9171372

221605 2653337

892241 5500000 ----------426533 853065 649072 639799 8960710 210662 21.36

507999 800000 --------------------337180 337180 505770 2488129 185208 7.21

CASH FLOW STATEMENT


25839


2005 CASH FLOW FROM OPERATING ACTIVITIES Profit/(Loss) before taxation Less: Dividend income

Adjustments for non-cash charges Depreciation Amortization – intangible assets Provision against non-performing advances Provision for diminution in the value of investment Provision for diminution in the value of other assets Bad debts written off directly Gain on sale of non banking assets Loss on sale of fixed assets Provision for potential lease losses Surplus on revaluation of held for trading securities

(Increase)/Decrease in operating assets (Increase)/Decrease Lendings to financial institutions Advances Others assets (Increase)/Decrease in operating assets (Increase)/Decrease Bills Payable Borrowings from financial institutions Deposits Other liabilities

Income tax paid Income tax refund Net cash flow operating activities

2004 (Rupee in 000)

13018487 (480344) 12538143

4057716 (378908) 3678808

575538 60113 1242153 (98982)

598928 ---------442595 (172876)

(72740)

149593

1184 (24664) 22114 ----------(1634)

8771 ------(39324) 1200 ----------

1703082 14241225

988887 4667695

966469 (44248317) 982933 (455458801)

(534847) (40570180) 26142 (41422187)

969990 19786638 8276020 982933 30015581 (1289074) (1152343) -------------(2441417)

(829636) (25037087) 9557765 26142 (16282816) (53037308) (683995) 370208 (53351095)



CASH FLOW FROM INVESTING ACTIVITIES Net investments in available-for-sale securities Net investments in held-to-maturity securities Net in investments in in he held-for tr trading se securities Dividend received Investments in operating fixed assets Investment in subsidiary and associated companies Sale proceeds from non banking assets disposed of Sale proceeds of fixed assets disposed of Net cas ash h fl floow fr froom in inve vest stin ingg ac acti tivvit itie iess CASH FLOW FROM FINANCING ACTIVITIES Redemption of subordinated loans Proceeds from issue of right shares Dividend paid Net cash flow from financing activities Ex. difference in cash transactions in foreign branches Increase/(Decrease) Increase/( Decrease) in cash and cash equivalents Cash and cash equivalent at beginning of the year Effects of exchange rate changes Cash and cash equivalents at end of the year

(20301953)

105292873

16278483

(45878054)

(66056) 588153 (1029307) (77)

--------------181258 (1265675) --------------

589876

--------------

127254 (18 (1 813 1382 827) 7)

81308 5841 58 4117 1710 10

(640) 1390868 (1545483) (155255) 3805

(640) -------(818306) (818946) (56354)

(4406694)

4185315

29547922

25500460

(6346) 29541576 25184882

(144199) 25356261 29541576

FINANCIAL ANALYSIS University of the Punjab, Gujranwala Campus 97


"Finan "Financia ciall statem statement ent analys analysis is is the proces processs of identi identifyi fying ng of fina financ ncia iall stre streng ngth thss and and we weak akne ness sses es of the the firm firm by prop proper erly ly establishing relationship between the items of the balance sheet and and the the prof profit it &los &losss acco accoun unt, t,"" and and it is done done thro throug ugh h rati ratioo analysis. RATIO ANALYSIS

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



Financial ratios can be divided into the following six parts. A. Liquid Liquidity ity ratio ratioss B. Acti Activi vity ty rati ratios os C. Le Leve vera rage ge rat ratio ioss D. Profitabil Profitability ity ratios ratios E. Inve Invest stor or rati ratios os F. Bank Bank spec special ial ratios ratios A. Liquidity ratios  Current ratios  Quick ratios  Absolute Liquid ratio B.

Activity ratios  Inventory turnover ratio  Average collection period  Average payment period  Total assets turnover ratio

C.

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

D.

Profitability ratio  Return on total assets University of the Punjab, Gujranwala Campus

99


       

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

E. Investor Ratios  Earning per share  P/E ratio  Dividend per share  Dividend yield ratio  Dividend payout ratio  Break up value/Book value per share  M/B ratio F. Bank special Ratios  Earning assets to total assets  Return on earning assets  Net margin to earning assets  Loan loss coverage ratio  Equity to total assets  Deposit time equity  Loan to deposit ratio

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



LEVERAGE/SOLVENCY ANALYSIS

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

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



1. PROPRIETARY RATIO

Total equity Total Assets

=

Year

2005 (000)

2004 (000)

Total Equity

23307763

14552884

Total Assets

298776797

259173808

0.08

0.06

Year

2005 (000)

2004 (000)

Total Debts

275469034

244620924

Total Assets

298776797

259173808

0.92

0.94

Year

2005 (000)

2004 (000)

Total Debts

275469034

244620924

Equity

23307763

14552884

ratio

11.82

16.81

ratio

2. DEBT RATIO/ SOLVENCY RATIO

Total equity

=

Total Assets

ratio

3. DEBT

TO

EQUITY RATIO Total Debt

=

Equity



4. DEBT

TO

TANGIBLE NET WORTH Total Debt

=

Equity

Year

2005 (000)

2004 (000)

Total Debts

275469034

244620924

Tangible net worth

23058725

14552884

11.94

16.81

Year

2005 (000)

2004 (000)

Long Term Debts

41318331

22455384

Long Term Funds

64626094

37008268

0.63

0.60

Year

2005 (000)

2004 (000)

External Equity

275469034

244620924

Internal Equity

23307763

14552884

11.82

16.81

ratio

5. DEBT

TO

FUNDS RATIO Long term Debt

=

Long Term Funds

ratio

6. EXTERNAL INTERNAL EQUITY RATIO

=

External Equity Internal Equity

ratio



INTERPRETATION The overall leverage position position is showing better trend as compare compare to previous year. The contribution of equity in total assets is increa increasin sing, g, while while the deb debtt contri contribut bution ion is decrea decreasin singg which which is better for business. Equity ratio is increased which shows the better condition of the bank. Solvency Ratio is in good condition. So we can say that overall Solvency condition of the MCB is better with the comparison to the previous year.



PROFITABILITY ANALYSIS

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

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



1. RETURN

ON

ASSETS Net Profit after Tax

=

Total Assets

Year Net Profit after Tax Total Assets return

2. RETURN

ON

2005 (000)

2004 (000)

8922415

2431532

298776797

259173808

3.0%

0.93%

EQUITY Net Profit after Tax

=

× 100

× 100

Equity

Year

2005 (000)

2004 (000)

Net Profit after Tax

8922415

2431532

Equity

23307763

14552884

return

38.28%

16.71%

3. RETURN

ON

INVESTMENT Net Profit after Tax

=

× 100

Investment

Year

2005 (000)

2004 (000)


8922415

2431532

Investment

69481487

67194971

12.84%

3.62%

return



4. RETURN

ON

FIXED ASSETS Net Profit after Tax

=

× 100

Fixed Assets

Year

2005 (000)

2004 (000)


8922415

2431532

Fixed Assets

8182454

7999821

109%

30.39%

2005

2004

8922415000

2431532000

No. of branches

1045

1045

Average Profit

8546375

2329054

return

5. AVERAGE PROFIT PER BRANCH Net Profit after Tax

=

No. of branches

Year Net Profit after Tax

6. NET PROFIT MARGIN Net Profit after Tax

=

× 100

Interest Income

Year

2005 (000)

2004 (000)


8922415

2431532

Interest Income

17756232

9083863

50.25%

26.77%

return



7. INTEREST INCOME

TO

TOTAL INCOME

Interest Income

=

× 100

Total Income

Year

2005 (000)

2004 (000)

Total Income

23169303

13316851

Interest Income

17756232

9083863

76.64%

68.21%

return

8. INTEREST EXPENSE

TO

TOTAL EXPENSE

Interest Expense

=

× 100

Total Expense

Year

2005 (000)

2004 (000)

Total Expense

9347059

9493097

Interest Expense

2781468

2057640

return

29.76%

21.67%

9. RETURN

ON

ADVANCES Interest Income

=

× 100

Total Loans

Year

2005 (000)

2004 (000)

Interest Income

17756232

9083863

Total Advances/ Loans

180322753

137317773



return

9.85%

6.61%

INTERPRETATION Profitability analysis shows the entire performance of a business and if we study the profitability trend of bank then it will clear to us that that it show showin ingg a posi positi tive ve tren trend. d. Net Net prof profit it afte afterr tax tax is increased as compare to previous year, due to it return on assets, equi equity ty and and inve invest stme ment nt is incr increa easi sing ng.. Not only only overa overall ll prof profit it is increasing but also average profit of all the branches is increasing. Bank interest income is also increasing due to more advances in this year. This year bank total deposits are also increased and that’s why interest expenses are showing up ward trend.



INVESTOR ANALYSIS

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

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



1. EARNING PER SHARE Net Profit after Tax

=

No. of Shares

Year

2005

2004


8922415000

2431532000

No. of Shares

426532700

337180000

21

7.21

Earning

2. P/E RATIO MP Per Share

=

EPS

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

2005

2004

247.75

247.75

EPS

21

7.21

ratio

11.80

34.36

2005

2004

Total Dividend

1288871000

842950000

No. of Shares

426532700

337180000

MP Per Share

3. DIVIDEND PER SHARE Total Dividend

=

No, of Shares

Year



DPS

3.02

2.5

Year

2005

2004

DPS

3.02

2 .5

MV Per Share

247.75

247.75

ratio

0.012

0.01

4. DIVIDEND YIELD RATIO DPS

=

MV Per Share

5. DIVIDEND PAYOUT RATIO DPS

=

× 100

EPS

Year

2005

2004

DPS

3.02

2 .5

EPS

21

7.21

ratio

14.38%

34.67%

2005

2004

23307763000

14552884000

426532700

337180000

54.64

43.16

6. BOOK VALUE PER SHARE Equity

=

No. of Shares

Year Equity No. of Shares ratio



7. M/B RATIO

=

MV Per Share BV Per Share

Year

2005

2004

BV Per Share

54.64

43.16

MV Per Share

247.75

247.75

4.53

5.74

ratio



INTERPRETATION MCB MCB has also also has has good ood inve invest stme ment nt opp opportu ortuni niti ties es for the investors. This bank has more attraction for investors as compare to previous year. Earning per share is increased due to increase in profit. Book value and market valve of one share in also increased as compa compare re to 2004 2004.. Only Only divi divide dend nd yiel yield d and and payou payoutt rati ratioo is decreased because bank declared fewer dividends as compare to last year but it is also in favor of investors because it will incr increa ease se wealt ealth h of shar shareehold holder erss and and ultim ltimat atee be bennefit efit to investors.



BANK SPECIAL ANALYSIS

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

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



1. EARNING ASSETS

=

TO

TOTAL ASSETS

Earning Assets Total Assets

Year

2005 (000)

2004 (000)

Earning Assets

261272401

221186364

Total Assets

298776797

259173808

0.87

0.85

ratio

INTERPRETATION The efficiency of the banking firm is measured by its ability to utilize its assets in a manner that they could be profitable for the firm. Bank earning assets are increasing as compare to last year but it is just a little bit increase. Advances of bank are increasing but but inve invest stme ment nt as comp compar aree to 2004 2004 is de decr crea ease sed. d. Le Lend ndin ingg to financial institutions is also not very well. Balance with other banks is also not desirable but overall earning assets showing satisfactory position in 2005.



2. RETURN

ON

=

EARNING ASSETS

NP before Tax

× 100

Earning Assets

Year

2005 (000)

2004 (000)

Earning Assets

261272401

221186364

Net Profit before tax

13018487

4057716

4.98%

1.83%

return

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



3. NET MARGIN TO EARNING ASSETS Net Margin

=

× 100

Earning Assets

Year

2005 (000)

2004 (000)

Earning Assets

261272401

221186364

Net Margin

14974764

7026223

5.73%

3.17%

ratio

INTERPRETATION Spre Spread ad is diff differ eren ence ce be betw twee eenn inte intere rest st inco income me and and inte intere rest st expense. This ratio shows the spread position of a bank. In this year bank net margin is increased due to increase in advances and interest income as compare to 2004. Interest expense is also incr increa ease sed d but but thei theirr incr increa easi sing ng tren trend d is lesse lesserr as comp compar aree to interest income so that’s why spread position of bank is increased in this year.



4. LOAN LOSS COVERAGE RATIO Pre tax Income + Provision for loan loss

=

Net Charges off + Provision for loan loss

Year

2005 (000)

2004 (000)

Pre tax Income

13018487

4057716

Provision for Loan Loss

1242153

442595

1184

8771

11.47 times

9.97 times

Net Charges Off ratio

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



5. EQUITY

=

TO

TOTAL ASSETS

Equity Total Assets

Year

2005 (000)

2004 (000)

Total Equity

23307763

14552884

Total Assets

298776797

259173808

0.08

0.06

ratio

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



6. DEPOSIT TIME EQUITY Debt

=

Equity

Year

2005 (000)

2004 (000)

Total Debts

275469034

244620924

Equity

23307763

14552884

ratio

11.82

16.81

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



7. LOAN TO DEPOSIT Loan

=

× 100

Deposit

Year

2005 (000)

2004 (000)

Loan

180322753

137317773

Deposit

229345178

221069158

78.62%

62.11%

ratio

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





TREND ANALYSIS In trend analysis we done two types of analysis, these are Horizontal Analysis

It is conducted by setting consecutive balance sheet, income statement or statement of cash flow side-by-side and reviewing changes in individual categories on a year-to-year or multiyear basis. A comparison of statements over several years reveals direction, spee speed d and and exten xtentt of a tren rend( d(s) s).. The The hori horizo zont ntal al finan inanci cial al statements analysis is done by restating amount of each item or group of items as a percentage.

Vertical Analysis

Like horizontal analysis this can also done for balance sheet and income statement. Here we assign 100% value to any key item of



balance sheet or income statement and then see portion of other items in this percentage.





Particulars ASSETS Cash Balance with other banks Lending to financial institutions Investments_ net Advances – net Operating fixed assets Other assets_net Deferred tax assets_net

2002

2003

2004

2005

100% 100% 100% 100% 100% 100% 100% 100% 100%

134% 60% 30% 143% 123% 120% 73% 0% 116%

133% 264% 32% 75% 174% 209% 69% 0% 110%

132% 68% 30% 78% 228% 214% 72% 191967% 127%

100% 100% 100% 100% 100% 100% 100% 100% 100%

116% 148% 134% 70% 38% 99.9% 0% 117% 94%

121% 35% 121% 72% 15% 99.9% 0% 109% 124%

126% 125% 136% 95% 0% 99.8% 0% 123% 199%

100% 100% 100% 100% Surplus on revaluation of assets 100% 100%

115% 145% 45% 122% 62% 94%

126% 187% 26% 146% 99% 124%

160% 443% 34% 283% 101% 199%

LIABILITIES Deposits and other accounts Borrowings from financial inst. Bills payable Other liabilities Deferred tax liabilities Sub ordinated loans Liabilities against assets NET ASSETS REPRESENTED BY Share capital Reserve Unappropriated profit



2002

2003

2004

2005

250% 200% 150% 100% 50% 0% Tot al As s ets

Tot al Liabilities

E quity

The horizontal analysis of the balance sheet of the bank over all give the positive trend .The result of the balance sheet depict that there is a constant increasing trend in cash, total assets, total liability and equity. There is extraordinary high trend in 2005 in all factors of balance sheet as compare to 2002. The trend of cash is increasing to upward with 32%. The trend of Total asset is also increasing to upward with 27%, and the trend of total liabilities is also increasing with 23% to upward. Equity is increased by 99%.



Particulars Mark-up/return/interest ea earned

2002 100%

2003 67%

2004 59%


2005 115%


Mark-up/return/interest Mark-up/return/interest expensed Net mark-up/interest income Provision against non-performing loans and advances Provision for diminution in the value of investments Bad debts written off directly Provision for potential lease losses

46% 161% 1242153 % -98982%

100% 100% 100% 100%

48% 34% 80% 75% 705787% 442575 % 150000% 172876% 31% 1.2% 168% 234% 108% 39% 77% 79%

100% 100% 100% 100% 100% 100%

115% 125% 66% 149% 532% 0%

220% 127% 193% 116% 209% -11440%

270% 161% 106% 217% 226% -851%

100% 100%

175% 100%

163% 92%

209% 172%

NON MARK-UP/INTEREST EXPENSES Administrative expenses (Reversal) / Other provisions Other charges Total non-mark-up/interest expenses Compensation on delayed tax refund

100% 100% 100% 100% 100%

87% 50000% 4496% 94% 0%

96% 149593% 3189% 92% 513852%

PROFIT BEFORE TAXATION Taxation – current year Prior years

100% 100% 100%

117% 79% 0%

130% 102% 0%

Deferred PROFIT AFTER TAXATION

100% 100%

-101% 128%

-42% 140%

87% -72740% 13468% 81% 340596 % 420% 301% 149763% 216% 513%

Unappropriated profit brought forward Transferred from surplus on revaluation of fixed Assets

100% 100%

219% 41%

69% 42%

58% 137%

Net mark-up/interest income after provisions NON MARK-UP/INTEREST INCOME Fee commission and brokerage income Dividend income Income from dealing in foreign currencies Other income Gain on Investments Gain / Loss on trading in government securities Total non-mark-up/interest income

100% 100% 100% 100%


0.16% 0% 159% 161%


Profit available for appropriation APPROPRIATIONS Transfer to Statutory reserve General reserve

100%

126%

116%

402%

100% 100%

Capital reserve Reserve for issue of bonus shares Interim cash dividend Rs 1.75 per share Interim cash dividend Rs 1.50 per share

100% 100% 100% 100%

128% 1000000 % 0% 77% 69% 383159%

146% 800000 % 0% 84% 51% 50577%

Unappropriated profit carried forward

100% 100%

157% 45%

156% 26%

256% 5500000 % 0% 213% 97% 639799 % 541% 34%

2002

2003

2004

2005

180% 160% 140% 120% 100% 80% 60% 40% 20% 0% Mark up Inc ome

Mark up Expense

Net mark up Net mark up after before provision provision



2002

2003

2004

2005

600% 500% 400% 300% 200% 100% 0% Net Profit before tax

Net P rofit after t ax

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





Particulars ASSETS Cash Balance with other banks Lending to financial institutions Investments_ net Advances – net Operating fixed assets Other assets_net Deferred tax assets_net

2002 100% 8% 0.92% 14% 38% 34% 1.08% 4% 0% 100% 100% 82% 10% 2.8% 4% 0.48% 0.72% 0% 100% 100%

2003 100% 9% 0.5% 3.8% 47% 36% 1.3% 2.4% 0% 100% 100% 81% 12.5% 3.2% 2.4% 0.3% 0.6% 0% 100% 100%

2004 100% 9% 2.2% 4% 26% 53% 2% 3.8% 0% 100% 100% 90% 3% 3% 2.6% 0.8% 0.6% 0% 100% 100%

2005 100% 8% 2.8% 3.3% 23% 60% 27% 0.4% 0% 100% 100% 83% 10% 3% 3.4% 0% 0.6% 0% 100% 100%

23% 26% 5% 54% Surplus on revaluation of assets 46% 100%

28% 29% 3% 70% 30% 100%

23% 39% 1% 63% 37% 100%

18% 58% 1% 77% 23% 100%

LIABILITIES Deposits and other accounts Borrowings from financial inst. Bills payable Other liabilities Deferred tax liabilities Sub ordinated loans Liabilities against assets NET ASSETS REPRESENTED BY Share capital Reserve Unappropriated profit



Assets Cash and balances with treasury banks

Other assets

Deferred tax assets Operatig f ixed assets

Balances w ith other banks Lendings to financial institutions

Investments Advances

Liabilities against assetssubjectto to finance fi nancelease

Otherliabilities liabilit ies

Deferredtax eferred tax liabilities Unappropriated profit Reserves

Sharecapital Sharec apital Sub-ordinatedloans

Bills payable

Borrowingsf rom financial institutions

Deposits and other accounts



INTERPRETATION In balance sheet of bank the most important item is earning assets. There are four earning assets. Bank has strong earning asse assets ts like like adva advanc nces es inve invest stme ment ntss and and lend lendin ingg to fina financ ncia iall institutions has major percentage in of assets of bank. In liability and equity analysis the Borrowings from financial institutions and deposits have major portion and reserve and share capital has major portion in equity





Particulars

2002

2003

2004

2005

Mark-up/return/interest earned

100%

100%

100%

100%

Mark-up/return/interest Mark-up/return/interest expensed

39%

28%

23%

16%

61%

72%

77%

84%

0%

-1.44%

-1%

-0.55%

Net mark-up/interest income

Provision against non-performing loans and advances Provision for diminution in the value of investments Bad debts written off directly

0%

7%

5%

7%

4.6%

0.008%

0.01%

0%

Provision for potential lease losses

0.003%

2.2%

0.09%

0.006%

5%

8%

4%

6%

Net mark-up/interest income after provisions

56%

64%

72%

78%

Particulars NON MARK-UP/INTEREST INCOME Fee commission and brokerage income Dividend income Income from dealing in foreign currencies Other income Gain on Investments Gain / Loss on trading in government securities Total non-mark-up/interest income NON MARK-UP/INTEREST EXPENSES Administrative expenses (Reversal) / Other provisions Other charges Total non-mark-up/interest expenses

2002 100% 35% 11% 19% 15% 30% 0%

2003 100% 23% 8.2% 7.3% 45% 16.5% 0%

2004 100% 47% 9% 12% 14% 19% -1.1%

2005 100% 45% 9% 10% 16% 19.9% 0.01%

100% 100% 93% 6.5% 0.5% 100%

100% 100% 87% 12.4% 0.6% 100%

100%% 100% 97% 2% 1% 100%

100%% 100% 98% -1% 3% 100%



INTERPRETATION In vert vertic ical al anal analys ysis is of prof profit it and and loss loss acco accoun untt the the inte intere rest st expense has decreasing trend from 2002 to 2005 but in 2005 there little bit increase in net interest income but almost have same same tren trend. d. Acco Accord rdin ingg to this this anal analys ysis is fee, fee, comm commis issi sion on and and brokerage income has some worth in our income statement its almost one fourth or one fifth of our interest income and it has increasing trend. The administrative expenses are also increasing from 2002 to 2005 but overall management is able to reduce expenses, so due to which there is continuous increase in profit before and after tax.



COMPARATIVE STUDY University of the Punjab, Gujranwala Campus 140


In comparative study of financial statements, we compare the give givenn year year stat statem emen ents ts with with diff differ eren entt year yearss or compa compare re with with comp compet etit itor orss in indu indust stry ry.. For For this this we cond conduc uctt two two type typess of analysis.

Liquidity ratios  Time Series Analysis  Cross Sectional Analysis





Ratios

2004

2005

Comments

Leverage Ratios Proprietary Ratio

0.06

0.08

Good

Debt Ratio

0.94

0.92

Good

Debt to Equity

16.81

11.82

Good

Debt to Tangible Net worth

16.81

11.94

Good

Debt to Funds Ratio

0.62

0.63

Bad

External Internal Equity

16.81

11.82

Good

Profitability Ratios Return on Assets

0.94%

3 .0 %

Good

Return on Equity

16.71%

38.28%

Good

Return on Investment

3.62%

12.84%

Good

Return on fixed Assets

30.22%

109%

Good

Average profit Per Branch

2329054

8546375

Good

Investors Ratios EPS

7.21

21

Good

P/E Ratio

34.36

11.80

Bad

Dividend Yield Ratio

0.01

0.012

Good

Dividend Payout Ratio

34.67%

14.38%

Bad

Book valve per Share

43.16

54.64

Good

Bank Special Ratios Earning assets to Total assets

0.85

0.87

Good

Return on earning assets

1.83%

4.98%

Good

Net margin to Earning assets

3.17%

5.73%

Good

Loan loss coverage Ratio

9.97 times

11.47 times

Good

Equity to Total assets

0.06

0.08

Good

Deposit time Equity

16.81

11.82

Good

Loan to Deposit

62.11%

78.62%

Good



INTERPRETATIPN Solvency Ratios Proprietar Proprietaryy Ratio, Solvency Solvency Ratio, Debt to Equity are all in good position but only debt to fund ratio showing poor condition in this year. Profitability Ratios All the ratios involved in profitability showing better trend as compare to 2004 and this shows the efficient management of bank. Investor Ratios Price Earning Ratio, Market/Book Ratio are both in good condition the difference as per previous year is very large. Only dividend yie yield ld and and payo payout ut is de decr crea easi sing ng due due to less lesser er de decl clar arat atio ionn of dividend in this year. Bank Special Ratios Thes Thesee rati ratios os show showss real real pict pictur uree of a bank bank.. Al Alll thes thesee rati ratios os showi showing ng be bett tter er posi positi tion on as compa compare re to 2004 2004 so over overal alll bank bank showing better position.





Ratios

Bank Alfalah

Proprietary Ratio Debt Ratio Debt to Equity Debt to Tangible Net worth Debt to Funds Ratio External Internal Equity Return on Assets Return on Equity Return on Investment Return on fixed Assets EPS P/E Ratio Dividend Yield Ratio Dividend Payout Ratio Book valve per Share

MCB

Leverage Ratios 0.04 0.08 0.96 0.92 33.6 11.82 14.62 11.94 0.52 0.63 33.6 11.82 Profitability Ratios 0.685% 3.0% 25.26% 38.28% 3.62% 12.84% 30.22% 109% Investors Ratios 5.75 21 15.65 11.80 0.02 0.012 24.14% 14.38% 38.54 54.64

Comments

Good Good Good Good Bad Good Good Good Good Good Good Bad Ok Bad Good

Bank Special Ratios

Earning assets to Total assets Return on earning assets Net margin to Earning assets Loan loss coverage Ratio Equity to Total assets

0.95 1.83% 2% 5.65 times 0.04

0.87 4.98% 5.73% 11.47 times 0.08

Good Good Good Good Good

Deposit time Equity

33.6

11.82

Good

Loan to Deposit

62.11%

78.62%

Good



INTERPRETATION MCB Limited is not only showing better trend in this year but also showing better position in industry. The major competitor of MCB is bank Alfalah and it is necessary to depict the real scenario of MCB financial ratios, we compare compare these with bank Alfalah ratios, so for this purpose we have done cross sectional analysis of MCB with bank Alfalah. In this this anal analys ysis is,, over overal alll leve levera rage ge posit position ion of MCB MCB is good good as compare to bank Alfalah. Profitability analysis is also better as compare to bank Alfalah. In investor analysis, P/E ratio is bad but overall market value of MCB is good as compare to bank Alfalah. Bank special ratios of MCB are also good as compare to bank Alfalah.



RECOMMENDATIONS

From the Quantum of the profit and its financial data it can be easily judged that after privatization, MCB is performing well. Its deposits are growing day by day and so its profitability. The controlling body is responsible for the productive performance of the Bank. Follo Followi wing ng are are my obser observat vatio ionn and and sugg sugges esti tion on to impr improve ove the the efficiency for the development of the bank. •

There is a criticism on the banking management that the salaries of the employe oyees are decreasing in every succeeding year. And I think this will shake the confidence and working habit of the employees.

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There is another recommendation about the bank that there is no proper timing of the bank and there is made an unnecessary delay in the banking transactions, which might not be a good sign for the bank from future prosperity point of view. University of the Punjab, Gujranwala Campus

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Staf Stafff turn turnov over er part partic icul ular arly ly of trai traine ned d staf stafff resu result lt in financial and other losses. The amount spent by the bank on empl em ploym oymen ent, t, indu induct ction ion and and trai traini ning ng of outgo outgoin ingg offi office cers rs constitutes to beat till another officer should ready prove this work. The exodus of bank officer in the past has worsened the situation.

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Most of the bank employees, are sticking to one seat only with the result that they become master of one particular job and loose their grip on other banking operation. In my opinion all the employees should have regular job experience all out-look towards banking. The promotion policy should be adjusted.

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Refresher Courses for the staff are most important in any international organization. Alt the employees should have thes thesee cours courses es acco accord rdin ingg to thei theirr requ requir irem emen ent. t. Fore Foreig ignn experts can also be called for this purpose.

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Ever Everyy year year some some of the the em empl ploy oyee eess shou should ld be sent sent for for trai traini ning ng to othe otherr coun countr trie iess and and em empl ploy oyee eess from from othe otherr bran branch ches es shou should ld be brou brough ghtt here here.. Some Some more more read readin ingg material should be provided. The purpose should be to University of the Punjab, Gujranwala Campus

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Educate the employees with the advance studies in their field. The employee should be provided the opportunities to attend and participate in seminars and lectures on banking. •

Bank should give some more incentive to its employees in orde orderr to remov removee the the conf confli lict ct be betw twee eenn lowe lowerr and and high higher er officers and should try to improve the working condition of the bank.

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As such system should be designed that every employee who has some problems with his officers can communicate it to the higher management and some steps must be taken to improve that.

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Recruitments should be strictly on merit basis and induction should be after proper and extensive training.

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Old and lazy staff should be replaced by young, qualified and energetic staff.

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Foreign branches should be opened in order to capture the international market and to earn international repute for the bank.

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Work Workin ingg envi enviro ronm nmen ent, t, equi equipm pmen ent, t, furn furnit itur uree and and staf stafff dressing should be according to the modern banking style.



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Prop Proper er atte attent ntio ionn shou should ld be paid paid to upgr upgrad adee cust custom omer er services.

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Ban Bank shou should ld adop adoptt the the globa loball orga organi niza zattion ional bank bankiing structure to meet the international standards of banking sector.


MCB Internship Report

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