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INTERNSHIP REPORT ON MCB BANK LTD. The Internship Report on MCB Bank Ltd.

University of Sargodha Department of Comme rce Page 1

INTERNSHIP REPORT ON MCB BANK LTD. PREFACE Internship is an integral part of B.Com (HONS) program. For the sake of internsh ip the most initial thing is to have a practical experience. This effort may get as a student to get a practical experience if right organization is selected. D uring this internship, a student comes to particle knowledge. He learns what the has so far studied. As a B.Com (HONS) student I have also done my internship in MCB Bank Ltd. Sargodha. Here I come to know a different and very interesting ex perience of learning and working with people. First of all I will tell you about Bank then I will tell operations of different departments. This internship repo rt is specially meant for the students of B.Com (HONS). It is concerned to a bri ef study of operation, functions, tasks and services of the MCB Bank Ltd. Bankin g play very important role in the commerce and economic development of any count ry. Nowa-days banks are using different modern technologies which influence the managerial activities that are why I decided to do my internship training in the bank. In preparation of this report I have tried my best to provide all possibl e information about the operation, functions, task and the corporate information of the MCB Bank Ltd. in brief and comprehensive way. This internship ends with some recommendations after identification of problems that I observed during the course of my internship training. Ali Raza Sahni University of Sargodha Department of Comme rce Page 2

INTERNSHIP REPORT ON MCB BANK LTD. Dedication My report is dedicated to my parents, teachers and my cute friends who are alway s with me in Every Hardships of life and has waited for me to be here at Final s tage. May! Allah Give them Long Life (AMEEN) University of Sargodha Department of Comme rce Page 3

INTERNSHIP REPORT ON MCB BANK LTD. Acknowledgement Most grateful to Almighty Allah who enabled me to utilized my knowledge and skil ls for the preparation and completion of this internship report. I want to expre ss my most humble gratitude to my supervisor and all other teachers and class fe llows who furnished me with the opportunity to complete report I m also thankful to the manager Mr. Rashid Iqbal of MCB, Girls College Road Branch, Sargodha. I am also grateful to my colleagues and friends who provided with the moral suppor t during the completion of this report. Ali Raza Sahni University of Sargodha Department of Comme rce Page 4

INTERNSHIP REPORT ON MCB BANK LTD. EXECUTIVE SUMMARY The banking structure in Pakistan comprises of the following types, State Bank o f Pakistan, Commercial Bank of Pakistan; Exchange Banks, Saving banks, Cooperati ve banks, specialized credit institutions. The state bank of Pakistan is the Cen tral bank of the country and was established on July 01, 1948. The network of ba nk branches now covers a very large segment of national economy. The State Bank of Pakistan issues the shares of these periodically. Bank employees and other co mmon people can also purchase these shares and earn profit. In 1956, MCB transfe rred its registered office to Karachi, where the Head Office is presently locate d. In April 1991, MCB became Pakistans first privatized bank. The corporate branc h at Shahrah-e-Faisal Karachi (SFK) branch is the corporate branch of MCB in Kar achi. The bank is using SWIFT for transfer of information about imports and expo rts. MCB SFK branch has Currently Following three Departments General Banking De partment, Advances Department & Foreign Exchange Department. To open an account the customer has to meet the general banking manager with an introducer. The pro cedure begins with the punching of account opening form to the customer file i.e . customers master file. Before closing any account, bank send letter to the acco unt hold for informing him that his account is going to be closed. There is need an approval form higher authority to close any account. Current deposits are th ose which are payable to bank whenever demanded by the customer. Bank does not p ay any profit on current deposits. The following are the financial products/serv ices of MCB Malay Mail Scheme, PLS Account, Saving 365 Account, Capital growth c ertificate scheme, Fund Management Scheme, Khushali Bachat Account, Term/ Fixed Deposits and others like night banking, credit cards, traveler cheques. In remit tance department like any other bank MCB also have instruments for transferring of money, Telegraphic Transfer, Mail Transfer. In cash department both deposits and withdrawals go side by side. This department works under the accounts depart ment and deals with cash deposits and payments. This department maintains the fo llowing sheets, books, and ledger of account cash received voucher sheet. Cash p aid voucher sheet, Paying- in-slip, Cheque Book, Cash balance book. The clearing in University of Sargodha Department of Comme rce Page 5

INTERNSHIP REPORT ON MCB BANK LTD. Karachi at MCB or other banks is being done t hrough NIFT (National Institute of Facilitation Technology). Bank provides this facility to the people who need advance money to meet their requirement. Party dealing with other banks financial condition of borrower business and as a first step credit proposal is being made. MCB provides advances, which are of t wo types. Secured Advances, Unsecured Advances. MCB usually classified advances in to following types Agricultural Advances, Commercial Advances Industrial Adva nces. Commercial Advances are of following types Demand Finance, Cash Finance, F oreign bills purchased, Finance against imported goods, Finance against foreign bills, Export Refinance Part I (Pre Shipment) & others. Banks Agriculture divisi on deals with the agriculture advances. Bank provides the Agriculture Advances i n order to enhance and support the agriculture sector of the country. Farm Credi t & Non Farm Credit. In foreign exchange, MCB is dealing Foreign Currency Accoun ts, Foreign Remittances, and Foreign Bills for Collection, Imports & Exports For eign currency accounts & the foreign currency department deals with the followin g types of accounts, Dollar Khushali account, Current account, Saving bank accou nt, Term deposit, Prime Currency Scheme. Foreign accounts are convertible on flo ating rate available to the bank. Letter Of Credit facility is being provided by MCB in foreign exchange. HISTORY OF THE MCB BANK LIMITED Before separation of Indo Pak, the need for more Muslim banks was felt. And Musl ims having strong financial capacity were thinking to invest in this sector as w ell. 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. This bank was incorpora ted under companies act 1913 on 9 th July, 1947 (just before partition) at Calcut ta. But due to changing scenario of the region, the certificate of incorporation was issued on 17th August, 1948 with a delay of almost 1 year; the certificate was issued at Chittagong. The first Head office of the company was established a t Dacca and Mr. G.M. Adamjee was appointed its first chairman. It was incorporat ed with an authorized capital of Rs. 15 million. University of Sargodha Department of Comme rce Page 6

INTERNSHIP REPORT ON MCB BANK LTD. After some time the registered office of the company was shifted to Karachi on A ugust 23rd, 1956 through a special resolution, now recently the Head office of M CB has been transferred to Islamabad in July, 1999 and now Head office is termed as Principle Office. This institute was nationalized with other on January 1st, 1974. At that time it had 506 branches and deposits amounting to Rs. 1,640 mill ion. Although. MCB has a reputation of a conservative bank but nationalization a lso 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 privati zed upon recommendations of World Bank and IMF. The reason for this choice was t he better profitability condition of the organization and less risky credit port folio which made'' it a good choice for investors. On April 8th, 1991, the manag ement control was handed over to National Group (the highest bidders). Initially only 26% of shares were sold to private sector at Rs. 56 per share. After Privatization Ten years after privatization, MCB is now in a consolidation stage designed to l ock in the gains made in recent years and prepare the groundwork for future grow th. The bank has restructured its asset portfolio and rationalized the cost stru cture 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 developm ents: Launching of different deposit schemes to increase saving level. Increased participation on foreign trade. Betterment of branches and staff service level. Introduction of Rupee Traveler Cheques & Photo Credit Card for the first time i n Pakistan. University of Sargodha Department of Comme rce Page 7

INTERNSHIP REPORT ON MCB BANK LTD. MCB Bank Today MCB today, represents a bank that has grown with time, experience and Pakistan. A major financial institution, in scope and size, it symbolizes a fully growing tree evergreen, strong, and firmly rooted. Foreign Trade The bank conducted import business during the year amounting to RS. 54.0 billion as compare to RS. 56.4 Billion In 2005. The export business slightly improves t o RS. 36.9 Billion From RS. 35.1 Billion. In 2006. Home remittances decline to R S. 16.7 Billion From 30.7 Billion the decline in home remittances business was d ue to freezing of Foreign Currency Accounts, which has affected the confidence o f Pakistanis working overseas. COMPALINCE YEAR 2006 MCBs strength lies in providing a technological base at the gross root level of t he society with a challenge to educate and assimilate such systems across vast c ultural and economic backgrounds. With over 768 automated branches, 263 online b ranches, over 151 MCB ATMs in 27 cities nationwide and a network of over 16 bank s on the MNET ATM switch, MCB continuously innovates new products and services t hat harness technology for the customers benefits. SOCIAL SECTOR The bank activity participating in the Prime Minister self-employment Scheme. Th e application received from various applicants is being processed on merit and d isposed off as quickly as possible. University of Sargodha Department of Comme rce Page 8

INTERNSHIP REPORT ON MCB BANK LTD. THE BUSINESS MCB is in its over 50 years of operation. It has a network of over 1,000 branches all over the country with business establishments in Sri Lanka and Bahrain. The branch break-up province wise is Punjab (57%), Sindh (21%), NWFP (19%) and Bloc histan (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 br anch network. Fourteen years after privatization, MCB is now in a consolidation stage designed to lock in the gains made in recent years and prepare the groundwork for future growth. The bank has restructured its asset portfolio and rationalized the cost structure in order to remain a low cost producer. MCB now focuses on three core businesses namely Corporate, Commercial and Consum er Banking. Corporate clientele includes public sector companies as well as larg e local and multi national concerns. MCB is also catering to the growing middle class by Providing new asset and liability products. The Bank provides 24 hour banking co nvenience with the largest ATM network in Pakistan covering 27 cities with over 151 ATM locations. The Banks Rupee Traveller Cheques have been market leaders for the past six years and have recently launched their Gift Cheque Scheme. MCB looks with confidence at year 2007 and beyond, making strides towards fulfil lment of its mission, "to become the preferred provider of quality financial ser vices in the country with profitability and responsibility and to be the best pl ace to work". A major achievement of MCB is that the state bank of Pakistan has issued a license to MCB to start Islamic banking. Now MCB is setting up a 1 st I slamic banking branch at 1st floor shaheen complex, Karachi. This complex starts working from September 1, 2003. University of Sargodha Department of Comme rce Page 9

INTERNSHIP REPORT ON MCB BANK LTD. Vision Statement CHALLENGING AND CHANGING THE WAY YOU BANK Mission Statement To become the preferred provider of quality financial services in our country wi th the profitability and responsibility and to be best place to work Our Core Values CUSTOMER FOCUS We treat each of our customer equality & as the most important pe rson while we interact with him/her. We must ensure that we do everything to mee t and exceed the customers expectations with perfect to times, accuracy & qualit y services. EMPLOYEE RESPECT & DIGNITY We treat each of our employees with fairn ess, which includes giving constructive feedback for their development. We celeb rate diversity and seek suggestions from all employees for improvement. We ensur e that responsibility & fairness in all our decision- making. TEAM BASED APPROAC H We work towards achievement of our vision & mission as a combines group. We en courage inter & intra-departmental communications. We treat our colleagues as ou r internal customers & ensure that the requirements of internal customer focus a re always met. University of Sargodha Department of Comme rce P a g e 10



We ensure that each moment of our time is spent on value adding activity. We alw ays seek ways for exceeding expectations of customers & colleagues. We also ensu re that we do things right, first time every time. GOOD CORPORATE CITIZENSHIP We ensure that we contribute our due share to the Gov t. we realize that we have a responsibility to the society in which we operate & we seek ways of playing a positive role for the betterment of the community at large. Board of Directors Mian Mohammad Mansha Chairman S.M. Muneer Vice Chairman Mohammad Aftab Manzoor President & Chief Executive University of Sargodha Department of Comme rce P a g e 11

INTERNSHIP REPORT ON MCB BANK LTD. Tariq Rafi Director Sheikh Mukhtar Ahmed Director Mohammad Arshad Director Shahzad Saleem Director Mian Ume r Mansha Director Sarmad Amin Director University of Sargodha Department of Comme rce P a g e 12

INTERNSHIP REPORT ON MCB BANK LTD. Audit Committee Mian Mohammad Mansha Shaikh Mukhtar Ahmed Shahzad Saleem Chairman Member Member Chief Financial Officer Ali Amin Company Secretary Tameez-ul- haque Auditor A.F.Ferguson & co Chartered accountants M. Yousuf Adil Saleem & co Chartered acc ountants Legal Advisor Chartered accountants Mandviwalla & Zafar Advocates & legal consultants Shariah Advisor Dr. Muhammad Zubair Usmani University of Sargodha Department of Comme rce P a g e 13



The organization chart within a department and in different offices is as follow s: Divisional Heads .. Head Office Regional Office Zonal Office Branch (VP, AVP, , 3)


INTERNSHIP REPORT ON MCB BANK LTD. ORGANIZATIONAL STRUCTURE OF MCB As MCB is a banking company listed in stock exchange therefore it follows all th e legalities which are imposed by concerned statutes M r. Muhammad Mans ha is ch airman & chief executive of the company with a team of 10 directors and 1 vice c hairman to help in the business control and strategy making for the company. Ope rational Management of the bank is being handled by a team of 10 professionals. This team is also headed by Mr. Muhammad Mansha. The different operational depar tments are Consumer Banking & IT div; Financial & Inter branch div; Banking oper ations div; HR & Legal div; financial control & Audit div; Credit management div ; Commercial Banking div; Corporate Banking div; Treasury management & FX Group and lastly Special Assets Management (SAM) Group. For effective handling of bran ches, it has been categorized into three segments wit h different people handlin g each category. These categories are: Corporate Banking Commercial Banking Cons umer Banking Corporate Banking These are branches which have an exposure of over Rs. 100 million. Usually inclu des 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. University of Sargodha Department of Comme rce P a g e 16

INTERNSHIP REPORT ON MCB BANK LTD. Consumer Banking These are the branches which have exposure up to Rs. 20 million and these includ e all the branches which are neither corporate nor commercial branches. Recently the organizational structure was re-designed as follows: Province wise branches MARKETING MIX OF MCB BANK LIMITED Marketing is the task of creating, promoting and delivering goods and services t o consumers and businesses. Organizations identify and profile distinct group of buyers who might prefer or require varying products and marketing mixes. The cu stomer seeks for value and satisfaction. The organizations can increase the valu e of the customer offering in several ways e.g. raising benefits, reducing costs etc. marketing mix is a set of marketing tools that the firm uses to pursue its marketing objectives in the target market. These marketing tools are known as 4 ps of marketing. To identify the customer needs and fulfilling hem is the basic objective of an o rganization. Marketing is not just satisfying your customers, you have to deligh t 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 cu stomers. It is one of the countrys leading commercial banks, whic h ensures compl ete security, and reliability in all- financial transactions. University of Sargodha Department of Comme rce P a g e 17

INTERNSHIP REPORT ON MCB BANK LTD. PRODUCT MIX & PRICES OF MCB BANK MCB Rupee Traveler Cheque MCB Rupee Travelers Cheques are as good as cash, infact better. Better because w ith Rupee Travelers Cheques you have the power to purchase and a feeling of secu rity that should you lose them, you will get a refund. MCB Rupee Travelers Chequ es are accepted at major shops, travel agents, hotels, business establishments a nd 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 conv enient 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 mone y. Mahnama Khushali Scheme A 5- year fixed Deposit Scheme, targeted to persons with small savings who would desire a regular monthly return on their investment. Salient Features Minimum a mount of investment shall be Rs.0.010m and the maximum amount of investment woul d be Rs. 1.000m. Khushali Certificates can be purchased by individuals (singly o r jointly) or by the Proprietorship/Partnership concerns or Companies, etc. in t heir name The Khushali Certificate will be of five years maturity. The interim r ate of profit offered will be minimum 1% per month. If the profit declared by th e bank is higher, additional profit will be paid. Zakat will be deducted whereve r applicable on yearly basis whether you will be receiving your profit or encash ing your certificates.6 As per Government Directions, tax on the profit / return is to be deducted by MCB branches at the time of payment. University of Sargodha Department of Comme rce P a g e 18

INTERNSHIP REPORT ON MCB BANK LTD. MCB Khushali Bachat Account Salient Features 8% rate of return per annum. Returns calculated on daily. Avera ge balance and paid half yearly. Introduced first time in Pakistan. The facility of helping account holders pays utility bills (electricity, telephone and gas) through their account. No queues. No delays. Prime Currency Account Scheme Launched to attract deposits in foreign currencies. US Dollars, Pound Sterling, Euro and Japanese Yen. Salient Features Owing foreign currency account under the Prime Currency Scheme allows you to ear n attractive rates of interest in foreign currency. You have a choice between op ening this account in your personal name and opening it under joint names. Wheth er you are a resident or a non-resident Pakistan, MCB Prime Currency Scheme invi tes all to operate a foreign currency account. Foreign nationals and foreign com panies can also open a foreign currency account under the Prime Currency Scheme. Your foreign currency account can be opened in four global currencies: The Unit ed States Dollar, the Pound Sterling, the Japanese Yen and the Euro. Travellers Cheques and Foreign Currency Notes can also be issued to holders of persona! and Joint accounts. Rupee Loan facility will also available against this account. U niversity of Sargodha Department of Comme rce P a g e 19

INTERNSHIP REPORT ON MCB BANK LTD. You can draw any amount of foreign exchange from your foreign currency account a nd transfer or remit the amount freely to any part of the world without any rest rictions. The restrictions imposed by the State of Pakistan for the opening of f oreign currency accounts in case of passport; Work-permit and resident Visa have been withdrawn. Your account will be restriction free. The Prime Currency Schem e is exempt from al! forms of taxes including Income Tax, Wealth Tax and Zakat d eductions. MCB Prime Currency Scheme is a world in itself. Hajj Mubarak Scheme A saving scheme, of 2/3 years duration, for the convenience of persons, with a l imited income, who desire to perform Hajj, was introduced. Under the 2 years sch eme, a monthly deposit of Rs.1800 is required, whereas under the 3 years scheme, the required monthly deposit is only Rs.1200 Capital Growth Certificate Scheme For long term depositors under which the amount deposited almost doubles at the end of 5 years. For the scheme, the minimum amount of deposits is Rs. 10000 whil e there is no maximum limit. In case of premature encashment of the certificate, the depositor will profit at the same rates as that of PL Saving Account. Fund Management Scheme This scheme is offered to corporate and customers and is aimed at providing bett er rate of return up to 15% per annum. One of the objectives of the scheme is to develop secondary market for Government Securities. University of Sargodha Department of Comme rce P a g e 20

INTERNSHIP REPORT ON MCB BANK LTD. Consultancy Services In the process of privatization of public sector units, prospective buyers need professional assistance and MCB, with its expertise, offers to them specialized service for valuation of the market value of the industrial unit, preparing bid documents and arranging finance for the purchase of the unit. Self Supporting Scheme For the benefits of genuine worker/borrowers who are poor and needy and for smal l entrepreneur the bank as evolved a self supporting scheme: maximum amount of l oan Rs.25000 and minimum Rs.5000 per individual. Loan will be totally free of ma rk-up. Fax Press This product was first of its kind introduced by using modem te chnology of The Fax Machine. It facilitates speedy transfer of funds within Paki stan. The service guarantees transfer of from one city to another, within an hou r. Night Banking Service For the convenience of the account holder, service has, especially, been introdu ced at busy commercial centers. Traders and other clients can now make deposit, with case, at such centers up to 8.00PM. Utility Bill Collection With the aim of extending this service to wider range of customers, the number o f MCB branches collecting Utility Bills more than 900. MCB Mobile Banking At the forefront of technological excellence, MCB proudly introduces MCB MOBILE BANKING. The convenience of accessing account balance information and mini state ments whenever want or wherever may need them, with comfort and peace of mind. M CB Mobile Banking service is available to all MCB ATM cardholders, 24 hours - 36 5 days. University of Sargodha Department of Comme rce P a g e 21

INTERNSHIP REPORT ON MCB BANK LTD. MOBILE BANKING AT A GLANCE MCB Mobile Banking gives easy and quick access to account(s) at a time find conv enient, including all holidays. WITH MCB MOBILE BANKING Check balance View the l ast 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 i nformation regarding balance and mini statements. MCB Islamic Banking Services Islamic banking services through exclusive units/branches offering a range of li ability and asset based Sharia compliant products like Musharika, Murabaha, Ijar a and Istasana. MCB Car Cash Car financing and leasing at competitive rates with flexible options Car cash fi nances both semi-commercial and non-commercial vehicles for personal and busines s use. MCB Locker The best protection for your valuables. Lockers of different capacities are avai lable nationwide. MCB Master Card University of Sargodha Department of Comme rce P a g e 22

INTERNSHIP REPORT ON MCB BANK LTD. THE FUTURE OF MONEY Since the beginning of time, people have tried to find more convenient ways to p ay, from gold to paper money and checks. Today, money is moving away from distin ct hard currencies and towards universal payment products that transcend nationa l borders, time zones, and, with the Internet, even physical space. Plastic or " virtual" money, credit, debit, and electronic cash products, inevitably will dis place cash and checks as the money of the future. MasterCard International has e xpanded globally in more locations in the world than any other card. The card wa s introduced by MCB Bank Limited in 1995 and now offers card members over 15 mil lion outlets in 232 countries. Photo security- The first bank in Pakistan to int roduce 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 F ree 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 representati ves on new card application or have your queries resolved anytime of the day. Ca sh Advance Facilities Available in Pakistan and worldwide with a network of over 1,000 branches and a team of dedicated professionals, MCB is Pakistans largest p rivate sector commercial bank. Our Consumer Banking provides customers with inno vative saving schemes, products and services. Our ATM network is the largest in Pakistan and our Pak Rupee Tra velers Cheques are market leaders. We were the fi rst to introduce the photo card with the introduction of the MasterCard. University of Sargodha Department of Comme rce P a g e 23

INTERNSHIP REPORT ON MCB BANK LTD. Our Corporate Banking ensures assistance from a dedicated team of professional f inancial advisors for underwriting, project finance or corporate advisory servic es. When it comes to banking practices, you can depend on us. Weve been around fo r over fifty years. MCB Smart Card MCB now brings you MCB SmartCard -a secure an d convenient instrument of payment with unmatched functionalities. It provides 24-hour direct access to your bank accoun t The convenience and flexibility of MCB SmartCard will help live a smarter life . It not only helps you manage your expenses, but also avoids undue interest on your day to day credit card transactions. Your balance is always within your rea ch and you spend accordingly. MCB is the only bank to introduce a debit card tha t gives the option to choose from domestic and international card for local and global usage respectively Remit Express Fastest to Pakistan - Anywhere in Pakist an. The fastest way of getting your money across to Pakistan. Remit Express offe rs low cost remittance from U.A.E. and Saudi Arabia. Your relatives, friends or business associates receive drafts within 72 hours.MCB Remit Express has been sp ecifically designed to meet the needs of the expatriate Pakistani community resi ding in the Gulf countries. University of Sargodha Department of Comme rce P a g e 24

INTERNSHIP REPORT ON MCB BANK LTD. 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 s ufficient funds for. Take that much-needed holiday. Buy a car. Refurnish your ho use. Purchase a new TV. Finance a better education for your children. Salient Fe atures MCB will lend you any amount, from Rs 30,000 to Rs 490,000, depending upon your net monthly income You can choose tenure of 1 to 3 years for the repayment of th e 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 Arrangeme nts Repayment of principal and mark- up is monthly and can repaid using either o ne 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 n ational At least 2 years of employment with current employer University of Sargodha Department of Comme rce P a g e 25

INTERNSHIP REPORT ON MCB BANK LTD. Processing fee of 1% of the principal loan am ount to be charged at the time of loan disbursement. MCB Pyara Ghar MCB gives dr eam home at the lowest and best possible mark-up rates. You can choose either on e of our two mark- up rate options- fixed or variable. Early repayment option ta ilor- made to allow making partial prepayments at dates that suit. Who Can Apply Anyone who fulfills the following criteria is eligible to apply: Pakistani nati onal residing in the city and area where the product is launched. 25 years old o r above when you apply and under 60 at the time of maturity of the applied finan cing period. Salaried person, self-employed professional or a businessman with a verifiable monthly income stream. Net take -Home income not less than Rs. 25,00 0 per month. Have 5 years or more of business or professional experience. Employ ed with the present employer for 2 years with a total employment history of 5 ye ars. Home Purchase Home Renovation Home Construction Tenure 3 years to 15 years 2 years to 5 years 3 years to 15 years MCB Virtual MCB Virtual provides the cont inence of banking on internet. Whether at office or home or traveling. Log on at www.mcb.com.pk and enjoy 24 hours access of all your accounts for the largest a rray of service. University of Sargodha Department of Comme rce P a g e 26

INTERNSHIP REPORT ON MCB BANK LTD. MCB Business Sarmaya MCB Business Sarmaya is a running finance against your residential property. It offers running finance up to 20 millions with low markup. 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 b ut leads you best in life. It is affordable with competitive markup, flexible co nditioning 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 bran ches at places where it can reach its targets customer easily. The branch networ k of MCB is given as follows: Punjab Sindh NWFP Baluchistan Azad Kashmir Domesti c Overseas Total 632 232 123 34 19 1040 4 1045 University of Sargodha Department of Comme rce P a g e 27

INTERNSHIP REPORT ON MCB BANK LTD. PROMOTION STRATEGIES OF MCB BANK MCB Bank is actively participating in promotion of its products and services thr ough advertisement and other promotional schemes. Initially, the bank focused on the upper class customers only and offered products for a limited class of peopl e. But now the strategy has been changed and the bank is now targeting the middl e market also. The products offered are of diverse nature to cater the needs of maximum number of people. Custome r Oriented Attitude MCB Bank values its custom ers. Customers complaints are encouraged because it gives an opportunity to know the needs of the customer and build more confidence in them. Most of the promoti onal efforts are done through Direct marketing Public relations MCB bank sometim es gets suggestions and recommendations from its good customers. Branch layout i s 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. My Internship experience & FIELDS OF ACTIVITIES Which I observed and done The purpose of banks is to provide some services to th e general public. And for this purpose different banks provide different service s to the people in different forms. The MCB Bank is a commercial bank, in modern time commercial banks play a very important role and their functions are manifo ld. The main functions and services which MCB Bank Limited provides to different peoples are as follows. Open Different accounts for different people Accepting various types of deposits Granting loans & advances University of Sargodha Department of Comme rce P a g e 28

INTERNSHIP REPORT ON MCB BANK LTD. Undertaking of agency services and also gener al utility functions, few of those are as under Collecting cheques and bill of e xchange for the customers. Transfer of money from place to place. Acting an exec utor, trustee or attorney for the customers. Providing safe custody and facilitie s to keep jewellery, documents or securities. Issuing of travelers cheques and l etters of credit to give credit facilities to travel. Accepting bills of exchang e on behalf of customers. Purchasing shares for the customers. Undertaking forei gn exchange business. Furnishing trade information and tendering advice to custo mers. For proper functioning of branches and the over all bank has been divided in different departments. These departments handle different jobs so that divisi on 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: (i) Cash departme nt (ii) Deposit department (iii)Advances & credit department (iv) Remittance dep artment (v) Technology department (new addition in order to cop with the growing needs of day to day technology requirements) CASH DEPARTMENT The following books are maintained in the Cash Department: Receiving Cash Book P aying Cash Book Token Book Scroll Book Cash Balance Book When cash is received i n counter, it is entered in the Scroll Book and Receiving Cashier Book. At the c lose of the day, these are balanced with each other. University of Sargodha Department of Comme rce P a g e 29

INTERNSHIP REPORT ON MCB BANK LTD. When the cheque or any negotiable instrument is presented at counter for payment, it is entered in the token book and token i s issued to the customer. The token clerk and the Cashier make entries in the pa ying book and payment is made to payee. At the close of day, the Token Book and Paying Cashier Book are balanced. The consolidated figure of receipt and payment of cash is entered in the cash balance book and drawn closing balance of cash. Opening Balance + Receipts - Payments = Closing Balance. This is very important department because cash is the most liquid asset and mostly frauds are made in t his 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 maintain ed in this department are checked by an officer. DEPOSIT DEPARTMENT Bank deals in money and they are merely mobilizing funds within the economy. The y borrow from one person and lend to another, the difference between the rate of borrowing lending forms their spread or gross profit. Therefore we can rightly state that deposits are the blood of the bank which causes the body of an instit ution 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 in crease on total number of accounts; bank has progressed in both aspects. TYPES O F 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. (i) Time deposits / liabilities (ii) Demand deposits / liabilities And on the basis of the cost to acquire these funds, a deposit can be classified as any one of following four, High Cost Medium Cost, Low Cost No Cost. University of Sargodha Department of Comme rce P a g e 30

INTERNSHIP REPORT ON MCB BANK LTD. 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 th e similar fashion, MCB has a large variety of deposit schemes and some of them a re as follows: CURRENT ACCOUNT In this type of accounts the client is allowed to deposit or withdraw money as and when he likes. He may, thus, deposits or withd raws money several times in a day if he likes. There is also no restriction of a mount to be deposited or withdrawn. However, there is requirement of minimum bal ance maintenance of Rs. 1000/-. Usually this type of account is opened by the bu sinessmen. 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 fr om 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 m inimum deposit of Rs. 1000/-. Under this scheme deposits can be made only up to a-costing amount and withdrawals are allowed twice a week or 8 times a month. If a big amount is required a seven days notice is required before the withdrawal. The profit is paid on these accounts on the minimum balance during a month for the whole of that month. Zakat & other withholding taxes are deducted as per rul es of the government. Zakat and withholding taxes are deducted as per rules only at the time of maturity while making payment to the customer. Term Deposits Rec eipts This is a type of term deposit in which a receipt is issued for varying te nors 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 a fter expiry of the period for which they were issued. Different profit rates are applied to different type of TDRs. University of Sargodha Department of Comme rce P a g e 31

INTERNSHIP REPORT ON MCB BANK LTD. FUNCTIONS OF DEPOSIT DEPARTMENT This was a br ief review of different types of deposit schemes. The Deposit Department handles the account opening, profit payment and accounting of all types of deposit sche mes. Account Opening Account opening is an agreement in which customer offers his funds and bank acce pts 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 a re 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 is mu ltiplied with the respective profit rates which are issued by the Head Office at the end of each half yearly closing. The profit provisions for each type of dep osits are also calculated on monthly basis by the same department in order to ca lculate the net profit or loss position of the branch. Accounting Entries Accoun ting entries are also made in the respective books of account by this department . However, in small and medium size branches, the accountant performs the book k eeping 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 repres entative of all banks of the city get together and settle the receipts and payme nt of cheques drawn on each other. As the collecting banker runs certain risks i n receipt of their ownership the law has provided certain protections to the ban ks. University of Sargodha Department of Comme rce P a g e 32

INTERNSHIP REPORT ON MCB BANK LTD. The Negotiable Instrument Act, 1881, lays dow n hat drawer or holder of a cheque or draft may cross the instrument generally o r specially. It further lies down that a crossed cheque can only be paid to a ba nker, who collects it for a customer in good faith and without negligence. Types of Cheques Transfer cheques: are those cheques, which are collected and paid by the same branch of bank. Both parties have account in the same bank Transfer de live ry cheques: are those cheques, which are collected and paid by two differen t branches of the same bank situated in the same city. Clearing cheques: are tho se chequnes, which are drawn on the branches of some other bank of the same city or of the same area, which is covered by a particular clearing house. Collectio n cheques: are those cheques, which are drawn on the branches of either the same bank or of another bank, but those branches, are not in the same city or they a re not the members of clearing house.( out station cheques) Functions of Clearin g Department To accept Transfer, Transfer delivery, clearing and collection cheq ues from the customers of the branch and to arrange for their collection. To arr ange 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 hou se. To collect amount of cheques drawn on members, sub- member of local clearing house, sent for collection by MCB Branches, not represented at the local cleari ng house Receiving and scrutinizing the cheques and other deposit instruments, a nd the payin-slip at the counter.(verify by the way of a/c number and a/c title) Fixing the stamps. Scrutiny and receipt by the authorized officer. Returning th e counter file to the depositor. University of Sargodha Department of Comme rce P a g e 33

INTERNSHIP REPORT ON MCB BANK LTD. Certificate and confirmation by the officer i n charge of the department. Separating the cheque into transfer, transfer delive ry(same bank diff branch), and clearing cheques. CLEARING PROCESS (FLOW CHART) Cheque with slip taken Slip is asked & filled Cheque along with slip chec ked, signed & received by officer Entries in daybooks are made Entries checked & verified by another officer after banking hours by officer Cheques collected a t the day end by Main Branchs Offic ials Cheques are sent to respec ti ve banks nex t day after posting in computer by Main Branc h The same day not honored cheques are returned to Main Branch The day after tomorrow the banks are informed about dishonored cheques Provisional entries for returned cheques are debited again in both computer & da ybooks Party is informed about returned cheques through Phone or personal contac t Cheques are mailed through TCS in case of no personal cont act the same day (If there is any availability) University of Sargodha Department of Comme rce P a g e 34

INTERNSHIP REPORT ON MCB BANK LTD. ADVANCES DEPARTMENT Advances are the most important source of earning for the banks. MCB is also giv ing full attention towards this aspect and it is also obvious from the growing p ortfolio of advances and from very low delinquency rate. The credit portfolio of this institution is in a very much better shape than other financial institutio ns of Pakistan and the credit goes to the management and the staff who are conce rned about the quantity and quality as well. Loans Cash Credits Overdraft LOANS Loans are monetary assistance by a financial institution to a business, individu al etc. The loans are granted by the bank in lump sum, so these types called fix ed 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 gran ted against security of gold documents. In case of demand loans against gold or documents, a demand promissory note for the amount of loan is taken from the bor rower loans are granted under; LOAN AGAINST GOLD Under this type of loan, which is granted to the borrower the Head Cashier estim ates 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 i s 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 ornamen t taken in the demand loan ledger. This receipts states that he ornaments return ed are complete and in order. Part delivery of ornaments is given against part p ayment 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 b e applied with quarterly. University of Sargodha Department of Comme rce P a g e 35

INTERNSHIP REPORT ON MCB BANK LTD. LOAN AGAINST PLEDGE OF STOCKS In case of advancing such types of loans, the following precautions are kept in the mind: Stock pledged must be readily saleable Products should be readily sale able Advance should be within the borrows means REQUIREMENTS OF LOAN For granting loan to any party or individual, the bank checks following particul ars of the client: Credibility Feasibility Report By Credibility, bank Judges th e 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 judg e the likely return of the business. CASH CREDIT Such cash account is opened in the name of the customer who borrows from the ban k. Customer is granted a loan up to a certain limit, sanctioned by the head offi ce, from which he can draw when he requires and interest is charged on the amoun t actually utilized by the customer. In order to avoid the danger of idle fund, the bank charges a certain rate of interest, even if the customer does not withd raw any amount. The rate charged by the bank on cash credit in 46 paisa per thou sand 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 whe n the stock or finished products are placed under the bank's lock or the documen t of title is duly endorsed to the bank by the borrower. University of Sargodha Department of Comme rce P a g e 36

INTERNSHIP REPORT ON MCB BANK LTD. MORTGAGE OF PROPERTY Title deeds of immovable property are accepted by the bank only as collateral se curity or alternatively as unauthorized security. REMITTANCE DEPARTMENT Remittance department performs following functions: Mail Transfer Telegraphic Tr ansfer Demand Drafts Pay order MAIL TRANSFER (MT) When a customer requests the b ank to transfer his money from one branch of ba nk to another branch of the same bank or from one city to another city to the same bank or any other bank. Custo mer fills the form given by bank. If the customer has an account with that amoun t as mentioned in the application form then concerned officer will undertake the following procedure to make the mail transfer complete. Branch Mail transfer fo rm Receiving Branch Register copy Issuing branch register Copy beneficiary advic e advice to customer In case where the customer is not account holder of the ban k then the customer will have to deposit the amount which he wants to transfer u nder Mail. Then the above said procedure will be done. Banks should be same bran ches can be different. TELEGRAPHIC TRANSFER (TT) This type of transfer is simple . After filling the application form the concerning officer shall fill the teleg raphic transfer form. Then it is sent to the required bank which on receiving it immediately makes the payment to the customer and afterwards the voucher are se nt to that bank by ordinary mail. (MT) (TT) (DD) (PO) University of Sargodha Department of Comme rce P a g e 37

INTERNSHIP REPORT ON MCB BANK LTD. DEMAND DRAFT (DD) Demand draft is just like c heques 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 a mount it has and the money can eas ily 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 M T and T.T. Draft is only issued when the bank knows customer and bank has the co nfidence 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: Cust omers advice Customers debit form Register copy Cover Advice FOREIGN DEMAND DRAFT Foreign Demand Draft is just like demand draft. The only difference is that a ba nk issues FDD to the bank of another country. It requires foreign exchange and i t involves seven forms, which are to be filled University of Sargodha Department of Comme rce P a g e 38

INTERNSHIP REPORT ON MCB BANK LTD. INFORMATION ABOUT MY BRANCH Branch Manager Rashid Iqbal Operational Manager Qaiser Waqar General Banking Officer Ali Shahrukh Chief Cashier Mian Iftikhar Cashier Malik Hassan Billing Cashier Muhammad Ali CSO Miss Sundas Gull ACCOUNT OPENING DEPARTMENT Account opening and closing is the function of accounts departments. Banks custom ers may be individuals (Single or Joint), firms (partnership/proprietorship), Au tonomous corporations, Limited Companies, Charitable Institutions, Associations Educational Institutions or Local Bodies. BASICS TO OPEN AN ACCOUNT During the span of job 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 establis hment of a contractual relationship between the banker and the customer. By open ing an account at a bank a person becomes a customer of a bank. F urther I am goin g to express the basic requirements and steps involved in the opening of an acco unt. University of Sargodha Department of Comme rce P a g e 39

INTERNSHIP REPORT ON MCB BANK LTD. INTRODUCTION AND PRELIMINARY INVESTIGATION Before opening an account MCB as like the other banks in Pakistan ascertain whet her or not the person who is going to open the account is a desirable customer o r not. Then MCB determine the prospective customers integrity, respectability, oc cupation and the nature of business by the introductory references given at the time of account opening. Negligence in this informal preliminary investigation m ay 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. I n 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 bank s 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 o f the introducer. As per these directions, the concerned Branch Managers are required to obtain the original National Identity Cards along with their Photostat copie s and then return the original after attesting the authenticity of the retained copy. Preliminary investigation is necessary because of the following reasons: Avoid Frauds: In this regard I learned that if a banker does not make the necess ary inquiries mentioned above he may enable dishonest persons to possess cheque books for fraudulent purposes. If any such person happens to be an undercharged bankrupt, the banker might be placed in an awkward position for having allowed s uch a person to open and open a bank account. Safeguard against unintended overd rafts: Sometimes due to a mistake an account may be given an overdraft, For inst ance, the ledger keeper, misreading the balance of an account honors a cheque fo r an amount larger than the balance. Similarly a credit entry belonging to a cus tomer may be made by mistake in another customers account. In such situations the excess amount withdrawn by the customer can only be realized if the customer is a respectable person. Inquiries about clients: Being a banker I think MCB has a business obligation to respond to inquiries from other banks etc. about his cus tomers financial position. Though the banker gives only a general ideal about the financial standing of his customer, it should nevertheless have the necessary i nformation available with him. University of Sargodha Department of Comme rce P a g e 40

INTERNSHIP REPORT ON MCB BANK LTD. 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 che ques drawn on his banker. This specimen is taken generally on a card specially d esigned for this purpose, and rule for the customers, full name, and account num ber are entered on it. If the bank has reasons to doubt the genuineness of a sig nature, he should either get it confirmed for his satisfaction or return the che que with the remark Signature differs. I f the signature of the customer is forged the banker cannot escape his liability because he has actually acted on his cus tomers mandate. HOW TO OPEN AN ACCOUNT (GENERAL) Before opening an account in MCB I observed that the following points must be considered in this regard. Another account holder of the bank should properly introduce the new customer. The acco unt holder should sign the account opening form in the presence of bank officer and the signature is duly verified. A copy of identity Card is required by Bank. Against submission of the Banks prescribed application form, duly introduced in the manner provided and on supplying such document, as may be required and accou nt may be opened. The Bank reserves to itself the right to refuse to open and ac count without assigning any reason. Each account shall be allotted a distinct nu mber that is to be quoted in all correspondence with the bank relation to the ac count. Minimum amount for opening and continued maintenance of various types of accounts is as follows: Rs. Saving Current Term Deposit 1000 1000 1000 University of Sargodha Department of Comme rce P a g e 41

INTERNSHIP REPORT ON MCB BANK LTD. The bank reserves the right to change the abo ve mentioned minimum balance requirement at any time without any notice. PROCEDU RE TO OPEN AN ACCOUNT According to my practice in MCB, when a custo mer wants to open an account, the bank officer gives him an application form. All informatio n, which is necessary to be known by the bank, are requirements of the applicati on form. Form also requires the essential documents to be attached by the custom er. Basically following information is required to open an account with MCB. Tit le of Account Full Name of Applicant Occupation Address Telephone No. Currency o f account Nature of Business Introducers Name, Address & Signatures Special instr uction regarding the account Initial Amount of the Deposit Signature of the appl icant DOCUMENTS TO BE ATTACHED Further I learned that if you wanted to open an a ccount with MCB then you should attach the following documents with your applica tion form which are different for different categories. SOLE PROPRIETORS ACCOUNT In order to open an account with MCB Sole Proprietors have to submit their busin ess registration certificate number. PRIVATE / JOINT ACCOUTS For individual or p rivate or joint accounts National Identity Card is required. University of Sargodha Department of Comme rce P a g e 42

INTERNSHIP REPORT ON MCB BANK LTD. JOINT STOCK COMPANY Before an account of a Pu blic Limited Company is opened MCB must ask the person authorized to do so to su bmit the certified copies or the following documents Certified true copy of the Memorandum and Articles of Association of the company. Certified true copy of th e resolution of the board of directors / managing committee / governing body reg arding conduct of the account. Certified list containing names and signatures of the directors / office bearers. Certified true copy of the certificate of incor poration 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 pe rsons authorized to operate the account. Power of Attorney in favor of the perso n opening account. PARTNERSHIP FIRM ACCOUNT Information which is required to be submitted to MCB by a partnership firm in this case is as follows: Full Names Ad dress Specimen of signatures of the partners Certified true copy of partnership deed Registration No. if the Partnership is registered University of Sargodha Department of Comme rce P a g e 43

INTERNSHIP REPORT ON MCB BANK LTD. SOCIETIES / CLUBS AND ASSOCIATIONS ACCOUNT MC B is authorized to open the accounts of the societies/clubs and associatio ns, T hese are non-trading organizations, formed for the promotion of culture, science , education, recreational activities and charitable purposes etc. some of these institution are registered under the Societies Registration Act, 1866, and are i ssued a certificate of registration after they have been found fit for registrat ion. 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 ch eque book is given to the customer only when all the required documents are chec ked. A cheque book contains ten, twenty five, fifty or hundred leaves. The chequ e 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 custom er is verified by the bank and new cheque book is issued to the customer and ser ial numbers of the cheque are duly entered in the book of the bank. Along with t he 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 cheq ue 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 clients acco unt 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 regi ster. The account number for which the cheque book is issued and the number of l eaves 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 req uisition slip on cheque book the customer has to fill the Form No. 216-B to obta in a new cheque book. It is issued by operations manager. University of Sargodha Department of Comme rce P a g e 44

INTERNSHIP REPORT ON MCB BANK LTD. FINANCIAL ANALYSIS "Financial statement analysis is the process of identifying of financial strengt hs and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit &loss account," and it is done through ratio analysis. RATIO ANALYSIS Ratio means one number expressed in term of another a ratio is statistical yardst ick by mean of which relationship between two or various figures can be compared or measured. Here we are going to explain the ratio analysis of MCB. Financial ratios can be divided into the following six parts. Liquidity ratios A ctivity ratios Leverage ratios Profitability ratios Investor ratios Bank special ratios University of Sargodha Department of Comme rce P a g e 45

INTERNSHIP REPORT ON MCB BANK LTD. A. Liquidity ratios Current ratios Quick ratios Absolute Liquid ratio Average pa

B. Activity ratios Inventory turnover ratio yment period Total assets turnover ratio

Average collection period

C. Leverage ratios Proprietary ratio Debt ratio Debt to Equity ratio Debt to Tan gible net worth ratio Debt to Funds ratio External-Internal Equity ratio D. Profitability ratio Return on total assets Return on-equity Return on investm ent Return on fixed assets Average profit per branch Net profit Margin Interest income to total income Interest expense to total expense Return on advances University of Sargodha Department of Comme rce P a g e 46

INTERNSHIP REPORT ON MCB BANK LTD. E. Investor Ratios Earning per share P/E rati o Dividend per share Dividend yield ratio Dividend payout ratio Break up value/B ook value per share M/B ratio F. Bank special Ratios Earning assets to total assets Return on earning assets N et margin to earning assets Loan loss coverage ratio Equity to total assets Depo sit time equity Loan to deposit ratio Because here we are discussing ratio analy sis of bank, therefore we will not discuss A & B category of ratios. LEVERAGE/SO LVENCY ANALYSIS Solvency analysis of a firm indicates the amount of the other peoples money being used to generate profit. In general, these analyses are more concerned with lon g term debts, because these commit the firm to a stream of payments over the lon g run. Solvency analysis includes: Proprietary ratio Debt ratio Debt to Equity r atio Debt to Tangible net worth ratio Debt to Funds ratio University of Sargodha Department of Comme rce P a g e 47


External-Internal Equity ratio

PROFITABILITY ANALYSIS Profitability analysis of a firm indicates the overall efficiently of the manage ment. Without profit a company can not attract the outside capital. Profitabilit y analysis includes: Return on total assets Return on-equity Return on investmen t Return on fixed assets Average profit per branch Net profit Margin Interest in come to total income Interest expense to total expense Return on advances Common size analysis Common size analysis is an analysis of financial state ments where total assets divide all balance sheet items and all income statement items are divided by net sales or revenues. Common size statements can be extremely helpful to highlight changes over time in the financial performance and financial condition of a com pany. However, growth or decline in various items of balance sheet and income st atement cannot be detected from the common size percentage only changes in the d ata relative to a total for a particular date or period can be determined. A sta tement item that has increased in rupee amount will show a decrease percentage i f the total has increased at a greater rate than the individual item or vice ver sa. University of Sargodha Department of Comme rce P a g e 48

INTERNSHIP REPORT ON MCB BANK LTD. Variance compared to 2008 2009 Mark-up / return / interest earned Mark-up / retu rn / interest expensed Net mark-up / interest income Provisions & write off Nonmark-up / interest income Non-mark-up / interest expenses Profit before taxation Taxation Profit after taxation EPS Rs. M 51,616 Amount 11,572 % 29% " " " " " " " " Rupees 15,841 35,775 7,465 5,643 10,797 23,155 7,660 15,495 22.42 4,281 7,291 3,423 (149) 2,433 1,287 1,167 121 0.17 37% 26% 85% -3% 29% 6% 18% 1% 1% Inte rpretation: The past two years data shows an increase in all return (i.e. i nterest earned, interest income, Profit after taxation) which is a positive sign . But mostly expenses (i.e. interest expensed, Provisions, Taxation) are also in crease which show negative sign of business. The Bank should have to review its policies to decrease expenses. FINANCIAL RATIOS Profit before tax ratio (PBT/ total income) Gross Spread (NIM/I nt Income) Income/ expense ratio Return on average equity (ROE) Return on averag e assets (ROA) Return on Capital Employed University of Sargodha Times 2009 55.91% 69.31% 3.84 27.35% 2008 63.80% 71.13% 4.10 31.49% 3.25% 27.35% 3.60% 31.49% Department of Comme rce P a g e 49

INTERNSHIP REPORT ON MCB BANK LTD. (ROCE) Earnings per share (EPS before tax) Ea rnings per share (EPS after tax) Advances/ deposits ratio (Gross) Advances/ depo sits ratio (Net) Breakup value per share Breakup value per share (including surp lus) Earning assets to total assets ratio Earning assets to Deposits & borrowing s Deposits to shareholder equity ratio Capital Adequacy Ratio Times Rs. Rs. Rs. 33.50 31.64 Rs. 22.42 22.25 73.37% 68.89% 88.37 100.91 82.64% 79.39% 75.60 84.55 87.23% 85.70% 107.74% 107.75% 6.02 19.07% 6.32 16.28% Inte rpretation: The past two years data shows that mostly financial ratios decr ease which show negative sign of company. The Bank should have to review its pol icies to decrease expenses. DIVIDEND RATIOS Cash Dividend Per Share Dividend Yield Ratio (based on cash divi dend) Dividend Payout Ratio Bonus Shares Issued Rs. 2009 11.00 5% 53.52% 10.00% 2008 11.50 9.14% 56.19% 10.00% University of Sargodha Department of Comme rce P a g e 50

INTERNSHIP REPORT ON MCB BANK LTD. Inte rpretation: The past two years data show s that dividend ratios decrease which show negative sign of company. The Bank sh ould have to review its policies to decrease expenses. Balance Sheet The followi ng table shows balance sheet of MCB for years, 2005, 2006, 2007 and Half year 20 08. Rupees in million Assets Cash 2,005 23,665 2,006 32,465 2,007 39,684 37,855.00 B alance with Ban ks Lending to institutions 1,466 9,998 6,577 21,082 3,808 1,051 5,586.00 Investment short term Advances short term Other Assets Total current As sets 24,741 127,921 5,471 193,262 41,743 144,593 11,031 257,491 66,545 150,980 1 7,868 279,936 211,693.00 Advances long term Investment long term Operating fix a ssets Deferred tax assets Total long term assets 52,405 44,741 8,182 191 105,519 53,646 21,743 9,054 172 84,615 75,752 40,635 14,024 130,411 184,993 Total asset s 298,781 342,106 410,347 396,686.00 Liabilities Bills payable Borro wing short term Deposited and other accounts Other current liab ilities 8,536 20,377 200,30 0 8,192 237,405 Total current liabilities 1,598 Subordinate loans 1,597 479 7,08 9 20,000 200,461 11,171 238,721 10,479 32,200 220,006 11,722 274,407 195,759 160 735 13,082 9,506 12,436 52916 16,211 115,866 32,916 114,000 19,771 1,565 2008 University of Sargodha Department of Comme rce P a g e 51

INTERNSHIP REPORT ON MCB BANK LTD. deposits fixed Borro wing long term Deferred tax liabilit ies Total long term li abilities 37,639 29,041 7,000 57,000 3,943 62,540 72,092 7,207 1,180 80,958 144, 898 Total debt 275,044 301,261 355,365 340,657 Shared capital Reserve fund Un-ap propriated profit 4,990 Surplus on revaluation Share hol der equity 5,432 23,741 5,530 5,187 40,842 5,131 9,706 55,119 56,029 Total Liabilities& OE 298,785 342,1 03 410,484 396,686 5,709 9,609 4,265 9,054 5,463 24,662 6,282 34,000 6,283 34,42 8 962 140936 3,000 Source: MCB, (2005-2008) Annual Report Graph Trend of Balance Sheet Items in absolute figures 300,000 250,000 200,000 150,000 100,000 50,000 2005 2006 2007 Assets Cash Balance with Banks Lending to institutions Investment short term Adv ances short term Other Assets Total current Assets University of Sargodha Department of Comme rce P a g e 52

INTERNSHIP REPORT ON MCB BANK LTD. Graph Trend of Balance Sheet Items in absolut e figures 140,000 120,000 100,000 80,000 60,000 40,000 20,000 2005 2006 2007 Advances long term Investment long term Operating fix assets Deferred tax assets Total long t erm assets Graph Trend of Balance Sheet Items in absolute figures 300,000 Liabilities 250,000 Bills payable 200,000 Borrowing short term 150,000 100,000 50,000 2005 2006 2007 Deposited and other accounts Other current liabilities Total current liabilities University of Sargodha Department of Comme rce P a g e 53

INTERNSHIP REPORT ON MCB BANK LTD. Graph 4.4 Trend of Balance Sheet Items in absolute figures 90,000 80,000 70,000 60,000 50,000 Borrowing long term deposits f ixed Subordinate loans 40,000 30,000 20,000 10,000 2005 2006 2007 Total long term liabilities Def erred tax liabilities Graph 4.5 Trend of Balance Sheet Items in absolute figures 60,000 50,000 Shared capital 40,000 30,000 Reserve f und Un-appropriated prof it Surplus on revaluation Share holder equity 20,000 10,000 2005 2006 2007 University of Sargodha Department of Comme rce P a g e 54

INTERNSHIP REPORT ON MCB BANK LTD. The deposits are showing up ward trend that is mainly because the current deposi ts have increased. Fixed deposits are the main source of the fund, which the ban k can safely advance. The fall in fixed deposit and constant falling of interest rate will directly affect the advances capacity of bank. So bank margin on adva nces is shrinking. Thats why bank reserve shift from advances to investment. Shar e holder equity shows increase tremendously in year 2003. Long term assets shows slightly increase, the main reason for which is the increasing in long term inv estment. INCOME STATEMENT PERFORMANCE In the coming text income statement of MCB has analyzed by help of trend analysi s. Income Statement of MCB For the period ended 2005-2008 2,005 Mark up revenue Markup expenses Gross profi t margin Provision for invest Bad debt provision Bad debt actual Total bad debt Net markup income 17,756 2,781 14,975 (99) 1,242 2 1,145 13,830 2,006 25,778 4,526 21,252 121 1,014 47 1,182 20,070 2,007 31,787 7,865 23,922 105 2,960 3,065 20,857 0 2,008 8,188 1,992 6,196 615 0 615 5,581 Non mark up income Fees& commission Dividend inco me Exchange inco me gain on sa les of securities unrealized gain Other income Total non markup Total income 2,4 49 480 532 866 2 1,425 5,754 19,584 2,311 812 692 606 571 4,992 25,062 2,635 632 693 1,501 (13) 563 6,011 26,868 753 92 147 611 15 292 1,910 7,491 Non mark up expenses University of Sargodha Department of Comme rce P a g e 55

INTERNSHIP REPORT ON MCB BANK LTD. Administrative Exp . Other provisions Other charges Total non- markup Exp. Profi t before tax Taxation Profit after taxation 6,460 (73) 179 6,566 13,018 4,096 8, 922 6,483 11 66 6,560 18,502 6,358 12,144 5,022 (4) 541 5,559 21,309 6,042 15,26 7 1696 0 76 1,772 5,719 1740 3,979 Source: MCB, (2005-2008) Annual Report Graph No. 4.6 Trend of Income State ment items in absolute figures. 35,000 30,000 25,000 20,000 15,000 10,000 5,000 re ar ve ku nu p G ex e ro pe ss ns pr es of Pr it ov m isi on arg in Ba fo d ri de nv bt es t pr Ba ov is d io de n bt ac tu al 2,005 2,006 2,007 (5,000) up M ar k M University of Sargodha Department of Comme rce P a g e 56

INTERNSHIP REPORT ON MCB BANK LTD. Graph No. 4.7 Trend of Income State ment item s in absolute figures. 3,000 2,500 2,000 1,500 1,000 500 2,005 2,006 2,007 Exchange income (500) Graph No. 4.8 7,000 6,000 5,000 4,000 3,000 2,000 1,000 (1,000) 2,005 2,006 2,007 Other charge s Administrative Exp. Other provisions Fees& commission Trend of Income State ment items in absolute figures. University of Sargodha Department of Comme rce unrealised gain P a g e 57

INTERNSHIP REPORT ON MCB BANK LTD. The income statement table and trend analysis shows that MCB has been able to co ntrol its interest/ mark up expenses because the NI trend line is steeper than r evenue trend line. Due to decrease in markup expenses total revenue has shown an upward trend of continuous increasing. Net profit shows a continuous growth tre nd but the gross profit is higher than the net profit margin in year 2002. The r eason of this is increase in non mark up expenses and a taxation percentage show s a constant increased. Table 4.3 Common Sizes Balance Sheet Rs. In M illions Co mmon Size % Assets Cash 2005 2006 2007 2005 7.92 2006 9.49 2007 9.67 23,665 32,465 39,684 Balance with Banks 1,466 6,577 3,808 0.49 1.92 0.93 Lending to institutions 9,998 21,082 1,051 3.35 6.16 0.26 Investment short term 24,741 41,743 66,545 8.28 12.20 16.22 Advances short term 127,921 144,593 150,980 42.81 42.27 36.79 Other Assets 5,471 11,031 17,868 1.83 3.22 4.35 University of Sargodha

Department of Comme rce P a g e 58

INTERNSHIP REPORT ON MCB BANK LTD. Total current Assets 193,262 257,491 279,936 64.68 75.27 68.22 Advances long term 52,405 53,646 75,752 17.54 15.68 18.46 Investment long term 44,741 21,743 40,635 14.97 6.36 9.90 Operating fix assets 8,182 9,054 14,024 2.74 2.65 3.42 Deferred tax assets 191 172 0.06 0.05 0.00 Total long term assets 105,519 84,615 130,411 35.32 24.73 31.78 100.00 Total assets 298,781 342,106 410,347 100.00 100.00 Liabilities Bills payable 8,536 7,089 10,479 2.86 2.07

2.55 Borro wing short term 20,377 20,000 32,200 6.82 5.85 7.84 University of Sargodha Department of Comme rce P a g e 59

INTERNSHIP REPORT ON MCB BANK LTD. Deposited and other accounts 200,300 200,461 220,006 67.04 58.60 53.60 Other current liab ilit ies 8,192 11,171 11,722 2.74 3.27 2.86 Total current liabilities 237,405 238,721 274,407 79.46 69.78 66.85 0.53 Subordinate loans 1,598 deposits fixed 1,597 479 9.72 0.47 0.12 29,041 57,000 72,092 16.66 17.56 Borro wing long term 7,000 3,943 7,207 2.34 1.15 1.76 Deferred tax liab ilit ies 1,180 #VA LUE! #VA LUE! 0.29 Total long term liabilities 37,639 Total debt 62,540 80,958 92.05 88.06 86.57 12 .60 18.28 19.72 275,044 301,261 355,365 Shared capital 4,265 5,463 6,282 1.43 1.60 1.53 Reserve fund 9,054 24,662 34,000 3.03

7.21 8.28 University of Sargodha Department of Comme rce P a g e 60

INTERNSHIP REPORT ON MCB BANK LTD. Un-appropriated profit 4,990 5,530 5,131 1.67 1.62 1.25 Surplus on revaluation 5,432 5,187 9,706 1.82 1.52 2.36 Share hol der equity 23,741 40,842 55,119 7.95 11.94 13.43 Total Liabilities& OE 298,785 342,103 410,484 100.00 100.00 100.00 University of Sargodha Department of Comme rce P a g e 61

INTERNSHIP REPORT ON MCB BANK LTD. Rs. In M illion 2005 Mark up revenue Markup expenses Gross profi t margin Provis ion for invest Bad debt provision 17,756 2,781 14,975 -99 1,242 2006 25,778 4,52 6 21,252 121 1,014 2007 31,787 7,865 23,922 105 2,960 Indexed in % 2005 100 15.6 6 84.34 -0.56 6.99 2006 100 17.56 82.44 0.47 3.93 2007 100 24.74 75.26 0.33 9.31 Bad debt actual Total bad debt Net markup income 2 1,145 13,830 47 1,182 20,070 3,065 20,857 0.01 6.45 77.89 0.18 4.59 77.86 0.00 9.64 65.61 Non mark up income Fees& commission Dividend inco me Exchange inco me gain on sa les of securities 2,449 480 532 866 2,311 812 692 606 2,635 632 693 1,501 13.79 2.70 3.00 4.88 8.97 3.15 2.68 2.35 8.29 1.99 2.18 4.72 unrealized gain Other income Total non markup Total income 2 1,425 5,754 19,584 571 4,992 25,062 -13 563 6,011 26,868 0.01 8.03 32.41 110.30 0.00 2.22 19.37 97.22 -0.04 1.77 18.91 84.53 Non mark up expenses Administrative Exp . Other provisions Other charges Total n on- markup Exp. Profit before tax Taxation Profit after taxation 6,460 -73 179 6 ,566 13,018 4,096 8,922 6,483 11 66 6,560 18,502 6,358 12,144 5,022 -4 541 5,559 21,309 6,042 15,267 36.38 -0.41 1.01 36.98 73.32 23.07 50.25 25.15 0.04 0.26 25 .45 71.77 24.66 47.11 15.80 -0.01 1.70 17.49 67.04 19.01 48.03 University of Sargodha Department of Comme rce P a g e 62

INTERNSHIP REPORT ON MCB BANK LTD. RATIO ANALYSIS A ratio is a quantitative relation between two magnitudes of the same kind. In r atio analysis, the financial ratios of the firm are compared to that of its comp etitors. This comparison allows the firm to detect major operating differences, which if corrected, will increase its efficiency. Another very popular method of ratio analysis is to compare the firms financial ratios to industry average or s imilar form in industry or to our own past performance. Before discussion financ ial ratios, three cautions are in order: (i) A single ratio does not generally p rovide sufficient information to judge the overall performance of the firm. Only when a group of ratios is used, a reasonable judgment concerning the firms overa ll financial state can be made. (ii) An analyst, when comparing financial statem ent, should ensure that predetermined uniform standards are used for this purpos e. (iii)It must be ensured that the data used in calculating financial ratios ha ve been developed in the same manner and are sound and reliable. There is no dou bt that financial ratios are a useful guide for managerial decision- making but these are not exact and definite. Ratios only suggest the questions that need to be answered and provide no answers. Let us now calculate some of the key financ ial ratios of MCB for the years 2005-2007 and try to answer the questions that t hese ratios suggest. These ratios are calculated from the Balance Sheet and Profit and Loss Account of Muslim Commercial Bank. Financial Ratios of MCB Years Current Ratio Assets turn over Debt to total assets Coverage ratio Gross p rofit marg in 2005 1.10 0.09 0.97 1.28 55.70% 2006 1.14 0.065 0.95 1.51 60.51% 2 007 1.13 0.038 0.96 2.23 71.72% University of Sargodha Department of Comme rce P a g e 63

INTERNSHIP REPORT ON MCB BANK LTD. Net profit marg in Return on investment Return on equity Debt to equity Receivab les turn over Receivables turnover in days Advances to deposits Investment to de posits Cash ratio Interest earned to advances Interest expense to Deposit 6.51% 0.59% 16.09% 26.16 5.79 62 days 49.55% 35.87% 14.71% 22.24% 4.88% 11.30% 0.74% 1 4.86% 19.10 5.91 61 days 43.20% 49.05% 10.09% 19.49% 3.32% 21.51% 0.82% 20.07% 2 3.51 5.60 64 days 45.96% 60.65% 11.66% 10.67% 1.39% CURRENT RATIO Current Assets Current Liabilities Its shows the firms ability to covers it curre nt liabilities with it current assets. Ratio for 2005 = 193,262 / 237,404 = 1.106 Ratio for 2006 = 257,491 / 238,721 = 1.137 Ratio for 2007 = 279,936/ 274,407 = 1.131 Curre nt Ratios For 2005, 2006, 2007 University of Sargodha Department of Comme rce P a g e 64

INTERNSHIP REPORT ON MCB BANK LTD. 2007 1.13 3 2006 1.14 2 2005 1.1 1 2003 2004 2005 Years 2006 2007 2008 2009 Current Ratio INTERPRETATION Current Ratio of MCB has slightly decreased in 2007 as compared t o 2006. Falling current ratio of MCB shows the aggressive approach of MCB toward s working capital management. This surely improves profitability as the percenta ge of current assets. However, this may increase the risk of short-term insolven cy due to the inability of meeting with small amount of current assets the short obligations as they come due. ASSETS TURNOVER RATIO Mark Up Revenue Total Assets It tells the relative efficiency with which a firm utilizes its total assets to generate sales. Ratio for 2005= 17,756/ 298,781 = 0.091 Ratio for 2006 = 25,778 / 342,106 = 0.06 5 Ratio for 2007= 31,7897/ 410,347 = 0.038 Assets turn over ratio for, 2005, 200 6, 2007 University of Sargodha Department of Comme rce P a g e 65

INTERNSHIP REPORT ON MCB BANK LTD. 0.038 2007 3 0.065 2006 2 2005 0.09 1 2003.5 2004 2004.5 2005 Years 2005.5 2006 2006.5 2007 2007.5 Assets turn over INTERPRETATION This shows revenue generated per rupee investment in total assets. This ratio is decreased in 2007, because the total assets increased in 2007. Bank has relativ ely low ATR, because they are selective in advancing loan. INTEREST COVERAGE RATIO Earning Before Income Tax Interest Expense This ratio shows that number of time a company can cover or meet its financial charges or obligation. Ratio for 2005 = 19,584 / 6,566 = 1.28 Ratio for 2006 = 25,062/ 6,560 = 1.51 Rat io for 2007 = 26,868/ 5,559 = 2.23 Coverage Ratios for 2005, 2006, 2007 University of Sargodha Department of Comme rce P a g e 66

INTERNSHIP REPORT ON MCB BANK LTD. 2007 2.23 3 2006 1.51 2 2005 1.28 1 2002 2003 2004 2005 Years 2006 2007 2008 2009 2010 Coverage ratio INTERPRETATION The interest coverage ratio of MCB has shown an improvement over the period of three years. In the year 2007, the ratio is 2.23. Which shows that the income in 2007 covers 2.23 times the interest expense constitute the main e xpense of the business, it is why the interest expense is so higher and the rati o is so lower. DEBT TO EQUITY RATIO Total Debt Total Equity The Ratio shows extend to which the firm is financed by debt. Ratio for 2005 = 275,044 / 23741 = 26.16 Ratio for 2006 = 301,261 / 40,842 = 19. 09 Ratio for 2007 = 355,365 / 55,119 = 23.51 University of Sargodha Department of Comme rce P a g e 67

INTERNSHIP REPORT ON MCB BANK LTD. Debt to Equity Ratio for 2005, 2006, 2007 23.51 2007 3 2006 19.1 2 26.16 2005 1 1990 2000 2010 Years 2020 Debt to equity 2030 2040 INTERPRETATION MCBs upward trend of Debt to Equity ration shows that the bank is not relying in debt financing. The ratio of 2007 as compared to 2006 has increas ed. DEBT TO TOTAL ASSET RATIO Total Debt Total Assets It shows the percentage of firm assets that are supporte d by debt financing. Ratio for 2005 = 275,044 / 298,781 = 0.963 Ratio for 2006= 301,261/ 342,106 = 0. 950 Ratio for 2007 = 355,365/ 401,347 = 0.959 University of Sargodha Department of Comme rce P a g e 68

INTERNSHIP REPORT ON MCB BANK LTD. Debt to total Asset Ratio 2007 0.96 3 2006 0.95 2 2005 0.97 1 2003 2004 2005 Years 2006 2007 2008 2009 Debt to total assets INTERPRETATION Debt to assets ratio is slightly increased in the year 2007 as co mpared to 2006 because of the growing debt. GROSS PROFIT MARGIN RATIO Gross Profit x 100 Net Revenue This ratio tells that the profit of the firm rela tively to sales, after we deduct the cost of producing the goods. Ratio for 2005 = 14,975/ 17,756X 100 = 55.70% Ratio for 2006 = 21,252/ 25,778 X 100= 60.51% Ratio for 2007 = 23,922/ 31,787 X 100 = 71.72% University of Sargodha Department of Comme rce P a g e 69

INTERNSHIP REPORT ON MCB BANK LTD. Gross Margin Ratio for 2005, 2006, 2007 71.72% 2007 3 60.51% 2006 2 55.70% 2005 1 2003 2004 2005 Years 2006 Gross profit margin 2007 2008 INTERPRETATION MCB gross profit margin per rupee has shown a rising trend over a year. This shows that the efficiency of the bank in controlling cost of sale an d better stately of pricing product. NET PROFIT MARGIN RATIO Net Profit after Taxes Net Revenue It is measure of the firm profitability of sale after taking account of all expense a nd income taxes . X 100 Ratio for 2005 = 8,922/ 17,756 X 100 = 6.51% Ratio for 2006 = 12,144/ 25,778 X10 0 =11.30% Ratio for 2007 = 15,267/ 31,787 X 100 = 21.51% University of Sargodha Department of Comme rce P a g e 70

INTERNSHIP REPORT ON MCB BANK LTD. Net Profit Margin For 2005, 2006, 2007 21.51% 2007 3 11.30% 2006 2 6.51% 2005 1 2003.5 2004 2004.5 2005 Years 2005.5 2006 2006.5 2007 2007.5 Net profit margin INTERPRETATION Net profit margin of MCB has improved, during the current year tr emendously. This signal towards higher efficiency and lower administrative cost of the bank. RETURN ON INVESTMENT RATIO Net Profit after Taxes Total Assets X 100 This ratio measures the profitability per rupee of investment in assets. Ratio for 2005 = 8,922 / 298,781 X 100= .59% Ratio for 2006 = 12,144/ 342,106 X 100 = .74% Ratio for 2007 = 15,267/ 410,347 X 100 = .82% Return on Investment Ratio for 2005, 2006, 2007 University of Sargodha Department of Comme rce P a g e 71

INTERNSHIP REPORT ON MCB BANK LTD. 0.82% 2007 3 0.74% 2006 2 0.59% 2005 1 2003.5 2004 2004.5 2005 2005.5 2006 2006.5 2007 2007.5 Years Return on investment INTERPRETATION MCBs ROI has shown improvement over the previous years. This is du e to the increase in net profit margin of MCB. RETURN ON EQUITY RATIO Net Profit Total Equity X 100 This ratio shows that residual profit as a proportion of the bank value of commo n shareholder equity. Ratio for 2005 = 8,922 / 23,741 X 100= 16.09% Ratio for 20 06 = 12,144/ 40,842 X 100 = 14.86 % Ratio for 2007 = 15,267/ 55,119 X 100 = 20.0 7% Return on Equity for 2005, 2006, 2007 University of Sargodha Department of Comme rce P a g e 72

INTERNSHIP REPORT ON MCB BANK LTD. 20.07% 2007 3 14.86% 2006 2 16.09% 2005 1 2003.5 2004 2004.5 2005 Years 2005.5 2006 2006.5 2007 2007.5 Return on equity INTERPRETATION The ROE of MCB has shown a mix trend. In the 2006 it decreased as compare to year 2005 but it increase in year 2007. The increase in ROE is due t o improvement in Net Profit Margin. ADVANCE TO DEPOSIT RATIO Total Advance X 100 Total Deposit This ratio shows the company advances employed per unit of deposit. Ratio for 2005= 180,323/ 229,342 X 100= 49.55% Ratio for 2006 = 198,239/ 257,462 X 100 = 43.20% Ratio for 2007 = 218,961/ 292,0 98 X 100 = 45.96% Advance to Deposit Ratio for 2005, 2006, 2007 University of Sargodha Department of Comme rce P a g e 73

INTERNSHIP REPORT ON MCB BANK LTD. 45.96% 2007 3 43.20% 2006 2 49.55% 2005 1 2003.5 2004 2004.5 2005 2005.5 2006 2006.5 2007 2007.5 2008 Years Advances to de posits INTERPRETATION This ratio of MCB over the resent 3 years has shown a mix trend, but deposit has increasing tremendously. This shown a concentration on investmen t as the rate of interest declining on lending. INVESTMENT TO DEPOSIT RATIO Total Investment Total Deposit X 100 This ratio shows the bank investment employed per unit of deposits. Ratio for 20 05= 69,482/ 229,342 X 100 = 35.87% Ratio for 2006= 63,486/ 257,462 X 100 = 49.05 % Ratio for 2007= 113,087/ 292,098 X 100 = 60.65% Investment To Deposit Ratio Fo r 2005, 2006, 2007 University of Sargodha Department of Comme rce P a g e 74

INTERNSHIP REPORT ON MCB BANK LTD. 60.65% 2007 3 49.05% 2006 2 35.87% 2005 1 2003 Investment to deposits 2004 Years 2005 2006 2007 2008 INTERPRETATION The year data showed that MCB has toward higher risk and conseque ntly higher yield investment, rather than under less risky loaning activities. CASH RATIO Cash & Cash Equivalents X 100 Current Liabilities It is the ratio of cash and ca sh equivalents to current liabilities. It shows that how much cash available to cover the current liabilities. Ratio for 2005 = 23,665/ 237,405 X 100 = 14.71% R atio for 2006 = 32,466 / 238,721 X 100= 10.19% Ratio for 2007 = 39,684/ 274,407 X 100 = 11.66% Cash Ratio for 2005, 2006, 2007 11.66% 2007 3 2006 10.09% 2 2005 14.71% 1 2003.5 2004 2004.5 2005 2005.5 2006 Years Cash ratio 2006.5 2007

2007.5 University of Sargodha Department of Comme rce P a g e 75

INTERNSHIP REPORT ON MCB BANK LTD. INTERPRETATION Cash ratio increased during th e financial period of 2005-2007 but it indicates decrease in 2005. Because bank slope down the lending process and make payment for current and fixed liabilitie s. CONCLUSION After doing the common size, growth and ratio analysis of MCB, bank limited, we conclude that the financial health of MCB is continually improving. The effectiv e control of cost of funds and operating and administrative expenses has resulte d in continuously growing trend in profit margin. Both the slightly increasing i n Total Assets turnover trend and highly growing profit margin trend has resulte d in continuously improving ROA. The broadening of equity base and high retentio n ratio has resulted in growing trend in owner equity. The bank average collecti on period has dropped which shows the efficiency of the bank. Present Status: During the first half of 2010, MCB has shown an after tax profit of Rs 7.94 bill ion, an increase of 2.4% over the same period last year. As a result, EPS has al so increased by 2.4%, from Rs 10.2 per share to Rs 10.45 per share. EBIT increas ed by almost 5% as compared to the same period last year, the improvement being attributed to an increase in the interest margin from 30.69% to 32.96%.. Markup increased marginally over the past six months, as compared to the first half of 2009, while markup expense increased significantly, resulting in a decline in th e net markup income. However, due to lower provisions, a rise of 10% was seen in the net markup after provisioning. Non- markup income increased by 8.5%, mainly due to a sharp rise in fee, commission, and brokerage income. Non- markup expen ses saw a rise of 22% over the same period last year, as a result of which the i ncreases in income could not be completely translated into earnings. During the first six months of 2010, Deposits rose to Rs 419 billion, from Rs 367 billion i n December 2009, a rise of 14%. Within Deposits, Fixed Deposits saw a growth of almost 21%, followed by Current accounts and Savings Deposits growing by 15% and 10% respectively. Borrowings declined from Rs 44.6 billion in December 2009, to only Rs 13.3 billion by June 2010. The increase in Deposits was thus offset by the decrease in Borrowings, resulting in only a small change in liabilities. On the Assets side, lending to University of Sargodha Department of Comme rce P a g e 76

INTERNSHIP REPORT ON MCB BANK LTD. financial institutions increased from Rs 3 bi llion in December 2009 to Rs 16.5 billion by the end of the first half of 2010. Cash and balances with treasury banks rose by 14.7% while balances with other ba nks declined sharply. NPLs saw an increase of 15.7% as compared to the same peri od last year, rising to Rs 24.13 billion. This rise was much larger than the inc rease in NPLs of UBL, which was only 6.7%. However, MCB has a lower ratio of NPL s to Advances than its competitor, a sign of better asset quality. Due to increa sed caution in lending, Advances of MCB saw a negative growth over the past six months. The Advance to Deposit ratio also declined as a result, dropping to 63% from 74% at the end of last year, which is lower than the industry average. MCB has announced an interim dividend of Rs 3.00 per share, and increase from the Rs 2.50 per share announced the previous year. Banking sector overview:The banking system, as a whole, remains healthy despite the economy going through a period of economic difficulty. The banking sector ab sorbed the build-up of nonperforming loans in the system while maintaining profi tability and robust balance sheets. Much of the credit for this must go to the S BP for the policies it has pursued over the last decade to ensure that banks are adequately capitalized and adhere to prudent risk management INVESTMENTS The investments, especially the Government papers, which declined in both absolu te rupee terms as well as a proportion of total assets during the first FY08, re gistered a slight increase during the last quarter. Actually, the heightened cre dit risk on account of deterioration in macroeconomic fundamentals and already c onstrained liquidity profile induced the banks to risk- free MTB The banking sys tem is marked with a high concentration as a fewer number of banks hold a major share of the system's total assets and deposits. This concentration has been fol lowing an overall declining trend as the medium sized banks gradually gained mar ket share. However, due to unusual liquidity stress that affected mainly the sma ll AND medium sized banks the market share of 5 large banks increased. University of Sargodha Department of Comme rce P a g e 77

INTERNSHIP REPORT ON MCB BANK LTD. DEPOSITS The deposits in the industry are generally showing an upward trend, though the g rowth is slow. The industry has been witnessing a gradual shift in deposits from savings to term deposits for quite some time. This trend emerged largely in res ponse to SBP's policy incentives to encourage the mobilization of longer terms d eposit so as to reduce the maturity mismatches. Consequently, fixed deposits gai ned a significant share of savings deposits since 2004. Other factors like gener al rise in interest rates and innovative deposits scheme have also augmented dep ositors preference for the term deposits. ADVANCES the worsening business and economic environment somewhat increased the credit ri sk, which compelled the banks to adopt cautious lending strategy, particularly i n consumer sector where the advances have been decreasing since the start of CY0 8. Some new loans have been issued of which a significant portion of these were disbursed to public sector enterprise thus the Advances show decling trend. NPLs This rise in NPLs observed across all the banking groups except specialized ban ks, where NPLs have actually decreased. NPLs have been on the rise mainly due to poor economic performance of the economy and the FSV benefit, thus resulting in worsening the Asset quality ratio. Interestingly, in the wake of economic slowd own, banks seem to facilitate the businesses through rescheduling/ restructuring of loans; the Textile sector being the major beneficiary. Latest banking indust ry numbers show an effort to keep balance sheets clear of NPLs by recognizing an d providing for NPLs on criteria that are more stringent. This approach might lo ok costly in the meantime but in the long run it'll definitely benefit banks by providing a cushion to withstand During the last fifteen years, the Bank has con centrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stabl e deposit base and managing its non-performing loans via improved risk managemen t processes. University of Sargodha Department of Comme rce P a g e 78

INTERNSHIP REPORT ON MCB BANK LTD. In 2005, the management of the bank abbreviated its name from Muslim Commercial Bank Limited to MCB Bank Limited to explore international markets; they were fac ing resistance due to the word Muslim specially from Western Countries to avail license. In 2008 the head office of MCB was shifted from Karachi to Lahore in a newly constructed building, namely MCB House located at Sharea Ghous-ul-Azam, co mmonly known as Jail Road. The MCB Towe r in Karachi serves as the MCB's headqua rters, and is also the ta llest building in Pakistan. MCB, advised by Merrill Ly nch, became the fourth Pakistani company (the other three being Hubco, PTCL and Chakwal Cement - they all have been delisted) to list on the London Stock Exchan ge when it raised US$150 million global depositary receipts. In May 2008 Malaysi an bank, Maybank and MCB signed an agreement, whereby Maybank will acquire up to 20% of the ordinary shares in MCB from Nishat Group. The acquisition is in- lin e with Maybanks strategy, as Malaysias financial services leader in the region, to build its presence in key growth markets across the region. It also paves the w ay for MCB, one of Pakistans premier financial services groups, to engage Maybank as its exclusive foreign commercial bank strategic partner. Maybank initially a cquired from Nishat Group 94,241,527 ordinary shares in MCB, representing a 15% stake in the Bank, for a cash price of PKR470 per share. The total consideration paid was approximately US$686 million. The purchase price represented a 11.4% p remium to MCBs closing share price of PKR 422 on May 2, 2008, and a premium of 12 .9% to the average closing share price for MCB over the 30 trading days immediat ely preceding the date of this announcement. Based on MCBs December 31, 2007 audi ted book value, the purchase price represents an implied price to book value mul tiple of 5.13x, a price to 2007 earnings multiple of 18.0x and a price to 2008 e arnings multiple of 15.2x. In July 2008 Maybank exercised its right to increase its stake to 20%. The stake in MCB allows Maybank the right to appoint two Direc tors to represent its interest on the Board of MCB. One of these Directors was t o be appointed immediately and University of Sargodha Department of Comme rce P a g e 79

INTERNSHIP REPORT ON MCB BANK LTD. the second Director will be appointed upon co mpletion of the term of the existing Board, scheduled to be on March 27, 2009. A s part of the transaction, Maybank and MCB are also expected to enter into a bus iness cooperation arrangement which will include, among others, Islamic banking, retail banking, credit cards, asset management and SME banking. Leveraging Mayb anks leadership and experience in these segments coupled with MCBs brand and broad distribution network, Maybank and MCB believe that significant revenue synergie s can be attained. Both Maybank and MCB are also expected to benefit from increa sed business ties and trade flows between Pakistan and Malaysia. RECOMMENDATIONS From the Quantum of the profit and its financial data it can be easily judged th at a fter privatization, MCB is performing well. Its deposits are growing day by day and so its profitability. The controlling body is responsible for the produ ctive performance of the Bank. Following are my observation and suggestion to im prove the efficiency for the development of the bank. There is a criticism on th e banking management that the salaries of the employees are decreasing in every succeeding year. And I think this will shake the confidence and working habit of the employees. There is another recommendation about the bank that there is no proper timing of the bank and there is made an unnecessary delay in the banking transactions, which might not be a good sign for the bank from future prosperity point of view. Staff turnover particularly of trained staff result in financial and other losses. The amount spent by the bank on employment, induction and tra ining of outgoing officers constitutes to beat till another officer should ready prove this work. The exodus of bank officer in the past has worsened the situat ion. Most of the bank employees, are sticking to one seat only with the result t hat they become master of one particular job and loose their grip on other banki ng operation. In my opinion all the employees should have regular job experience all out- look towards banking. The promotion policy should be adjusted. University of Sargodha Department of Comme rce P a g e 80

INTERNSHIP REPORT ON MCB BANK LTD. Refresher Courses for the staff are most impo rtant in any international organization. Alt the employees should have these cou rses according to their requirement. Foreign experts can also be called for this purpose. Every year some of the employees should be sent for training to other countries and employees from other branches should be brought here. Some more re ading material should be provided. The purpose should be to Educate the employee s with the advance studies in their field. The employee should be provided the o pportunities to attend and participate in seminars and lectures on banking. Bank should give some more incentive to its employees in order to remove the conflic t between lower and higher officers and should try to improve the working condit ion of the bank. As such system should be designed that every employee who has s ome problems with his officers can communicate it to the higher management and s ome steps must be taken to improve that. Recruitments should be strictly on meri t basis and induction should be after proper and extensive training. Old and laz y staff should be replaced by young, qualified and energetic staff. Foreign bran ches should be opened in order to capture the international market and to earn i nternational repute for the bank. Working environment, equipment, furniture and staff dressing should be according to the modern banking style. Proper attention should be paid to upgrade customer services. Bank should adopt the global organ izational banking structure to meet the international standards of banking secto r. University of Sargodha Department of Comme rce P a g e 81

INTERNSHIP REPORT ON MCB BANK LTD. Reference Siddiqui Kamran (2004) An internship Report on MCB satellite . Institute of Busi ness and Management Science. David, R.F, (1998). 7th Edition, Strategic Manageme nt; concepts & Cases New Jersey; Prentice-Hall Ine. Emery. D.R, J.D Finnerty and J.D. Stowe, (1998) Principles of Financial Management. New Jersey; Prentice Hal l. Griffin R.W (1997) Management Essentials; Concepts and Application, Chicago S cience Research Associates, Inc. Howard, MA (1979), Management Essentials, Conce pts and Application Chicago; Science Research Associates, Inc. Kenney, R. D and S.Y. Me Mullen (1978). 6th Edition, Financial Statemetns; Form, Analysis, and in terpretation. London; Irwin-Dorsey International. Meenai. S.A. Money and Banking in Pakistan, Karachi The allies Book Corporation. Nasir. M.S Money Banking & Fi nance, Kitab Markaz; Faisalabad. University of Sargodha Department of Comme rce P a g e 82