Financial Reporting and Anlaysis Report On MCB Limited

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD
Topic: MCB Limited Financial Analysis
Submitted to:
Miss Fehmida Akram Report of Financial Reporting and Analysis
Submitted by:
Arooj Abdullah Madiha Shahid Mubeen Mujahid Muhammad Abdullah Zuberi Rafia Kanwal MBA G1 6th 106 114 115 116 125
ACKNOWLEDGEMENT
Pen can do what sword cannot. I pause to think what do justice to express my gratitude to Almighty Allah for his unlimited graciousness because words are scare and knowledge is unlimited to express his majesty. I have the pearls of my eyes to admire the blessings of the compassionate, omnipotent, the Merciful and the Beneficent Allah who is the entire source of knowledge and wisdom. Due to his bounteous blessings, I become able to contribute this comprehensive report toward the deep ocean of knowledge already exist. Heart is warmth with love & thoughts have turned to the city of knowledge The Holy Prophet (P.B.U.H) his saying learn from Cradle to Grave inspired the strong desire in me to undertake this course of valuable studies. That project has been accomplished due to the input of so many people who provided their time expertise & support. Firstly I gratefully acknowledge the contribution of my esteemed TEACHER, they really deserve very special thanks for this unflagging support by his advises & editorial whetting that was crucial to transfer the data to us. Their patience, constructive criticism, guidance and imaginative thinking have helped me in incorporating and reviewing different methodologies and techniques used for business operations in any organization. I especially acknowledge the efforts of Mam Fehmida Akram who enormously helps me throughout the preparation of that report. Thirdly I would like to thank my fellows who provide me help for the completion of that report they provide me time & expertise to complete the report.
TABLE OF CONTENTS
Sr # 1 2 3 4 5 6 7 8 9 10 TITLE Executive Summary Introduction to Industry Introduction to MCB Limited Balance Sheet Income Statement Vertical Analysis of Balance sheet Vertical Analysis of Income Statement Horizontal Analysis of Balance Sheet Horizontal Analysis of Income Statement Ratio Analysis Page 6 8 11 17 18 19 20 21 22 23
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SWOT Analysis Suggestions & Recommendations Conclusion
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EXECUTIVE SUMMARY
Pakistan after getting its independence did not have a strong banking industry. However today the banking industry of Pakistan has been growing over the past few years, mainly because Government of Pakistan implement some policies to betterment of the banking sector, including the privatization of banks in Pakistan and secondly the friendly behavior of STATE BANK OF PAKISTAN in the shape of monetary policy can help to improve the banking sector in our country. Today there are number of different banks established in Pakistan, including foreign incorporated commercial banks, local incorporative commercial banks, Islamic banking and so many more.
My report divided into three parts. In the first parts I briefly introduce the MCB .The MCB is a semi public commercial bank. And they can provide the many types of products for example a Consumer banking services, Islamic banking services, Agricultural finance solutions, Corporate and investment banking..
In the second portion we have studied the 5 years Income Statement and Balance sheet of the MCB and perform horizontal and vertical analysis on these financial statements and then finally trying to analyze the financial health of the MCB by doing its Ratio analysis. The ratio analysis can help to determine the SWOT in our sector and the use of this analysis the company can solve our problem and built our business sector again in the highest rank.
In the third part of the report we gave some recommendations and suggestions by analyzing the overall performance of the MCB.
INTRODUCTION OF SECTOR
The word 'Bank' is said to have been derived from the words Bancus or Banque or Bank. This history of banking is traced to as early as 2000 B.C. Banking in fact is primitive as human society, for ever since man came to realize the importance of money as a medium of exchange, the necessity of a controlling or regulating agency or institution was naturally felt. The priests in Greece used to keep money and valuables of the people in temples. These priests thus acted as financial agents. The origin of banking is also traced to early goldsmiths. They used to keep strong safes for storing the money and valuables of the people. The first stage in the development of modern banking, thus, was the accepting of deposits of cash from those persons who had surplus money with them. The goldsmiths used to issue receipts for the money deposited with them. These receipts began to pass from hand to hand in settlement of transactions because people had confidence in the integrity and solvency of goldsmiths. When it was found that these receipts were fully accepted in payment of debts; then the receipts were drawn in such a way that it entitled any holder to claim the specified amount of money from goldsmiths. A depositor who is to make the payments may now get the money in cash from goldsmiths or pay over the receipt to the creditor. These receipts were the earlier bank notes. The second stage in the development of banking thus was the issue of bank notes. The goldsmiths soon discovered that all the people who had deposited money with them do not come to withdraw their funds in cash. They found that only a few persons presented the receipts for encashment during a given period of time. They also found that most of the money deposited with them was lying idle. At the same time; they found that they were being constantly requested for loan on good security. They thought it profitable to lend at least some of the money deposited with them to the needy persons. This proved a profitable business for the goldsmiths. They instead of charging safe keeping charges from the depositors began to give them interest on the money deposited with them. This was the third stage in the development of banking.

At the time of independence, there were 631 offices of scheduled banks in Pakistan, of which 487 were located in West Pakistan alone. As a new country without resources it was very difficult for Pakistan to run its own banking system immediately. Therefore, the expert
committee recommended that the Reserve Bank of India should continue to function in Pakistan until 30th September 1948, so that problems of time and demand liability, coinage currencies, exchange etc. be settled between India and Pakistan. The non-Muslims started transferring their funds and accounts to India. By the end of June 1948 the number of officers of scheduled banks in Pakistan declined from 631 to 225. There were 19 foreign banks with the status of small branch offices that were engaged solely in export of crop from Pakistan, while there were only two Pakistani institutions, Habib Bank of Pakistan and the Australian Bank. The customers of the bank are not satisfied with the uncertain condition of banking. Similarly the Reserve Bank of India was not in the favor of Govt. of Pakistan. The Govt. of Pakistan decided to establish a full-fledge central bank. Consequently the Governor-general of Pakistan Quaid-I-Azam inaugurated the State Bank of Pakistan on July 1, 1948. Thus a landmark was made in the history of banking when the state bank of Pakistan assumed full control of banking and currency in Pakistan. The banking structure in Pakistan comprises of the following types. State Bank of Pakistan Commercial Bank of Pakistan Saving banks. Cooperative banks Specialized credit institutions.
Commercial banks have been the most effective mobilizers of savings and have been providing short-term requirements of working capitals to trade, commerce and industry.

Up to December 31, 1973, there were 14 Pakistan commercial banks that functioned all over the country and in some foreign countries through a network of branches. All these commercial banks were nationalized in January 1, 1974, and were recognized and merged into the following five banks: National Bank of Pakistan Muslim commercial bank limited Habib Bank Limited United Bank Limited Allied Bank of Pakistan
The state bank of Pakistan is the Central bank of the country and was established on July 1, 1948. The separation of East Pakistan and its repercussion in the form of economic depression has caused a lot of difficulties to the banking system in Pakistan. The network of bank branches now covers a very large segment of national economy. The numbers of branches have increased appreciably and there is now on branch of bank for every 3000 heads of population approximately. There is done reasonable growth in deposits from the establishment of Pakistan. Besides this growth, specialized credit and financial institutions have also developed over the years. The Government of Pakistan in the late 90s introducing the need for the privatization of state owned banks and companies. The private sector has accepted the challenge and most of the banks are privatized today. The State Bank of Pakistan issues the shares of these periodically. Bank employees and other common peoples can also purchase these shares and earn profit. Throughout the period of banking history the banks have been expanding rapidly and achieved the desired goal of progress.
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MCB Bank LTD INTRODUCTION

Brief:
MCB is one of the leading banks of Pakistan with a deposit base of about Rs. 230 billion and total assets of around Rs.300 billion. Incorporated in 1947, MCB soon earned the reputation of a solid and conservative financial institution managed by expatriate executives. In 1974, MCB was nationalized along with all other private sector banks. This led to deterioration in the quality of the Banks loan portfolio and service quality. Eventually, MCB was privatized in 1991. During the last fifteen years, the Bank has concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stable deposit base and managing its non-performing loans via improved risk management processes.
History:
MCB has an edge over other local bank, as it was the first privatized bank. The SBP has restricted the number of branches that can be opened by foreign banks. An advantage that MCB capitalizes because of its extensive branch network. Ten years after privatization, MCB is now in a consolidation stage designed to look in the gains made in recent years and prepare the groundwork for future growth. The bank has restructured its assets portfolio and rationalized the cost structure in order to remain a low cost producer. MCB now focuses on three core businesses namely corporate, commercial & consumer banking. Corporate clientele include public sector companies as well as large local & 11

multinational concerns. MCB is also catering to the growing middle class buy providing new assets & liability products. The bank provides 24 hours banking convenience with
the largest ATM network in Pakistan covering 30 cities with over 197 ATM locations. The banks rupee traveler cheques have been market leaders for the past six years & have recently launched their gift cheques scheme. MCB looks with confidence at the year 2006 & beyond, making strides towards fulfillment of its mission, To become the preferred provider of quality financial services in the country with profitability & responsibility & to be the best place to work. MCB in its over fifty years of operations. It has a network of over nine hundred branches all over the country with business establishments in Srilanka & Behrain. The branch breakup province wise is; Punjab (57%), Sindh (31%), NWFP (19%) and Balochistan (3%) respectively.
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 to RS. 36.9 Billion From RS. 35.1 Billion. In 2006. Home remittances decline to RS. 16.7 Billion 12

From 30.7 Billion the decline in home remittances business was due to freezing of Foreign Currency Accounts, which has affected the confidence of Pakistanis working overseas.
YEAR 2006 COMPLIANCE MCBs strength lies in providing a technological base at the gross root level of the society with a challenge to educate and assimilate such systems across vast cultural and economic backgrounds. With over 768 automated branches, 263 online branches, over 151 MCB ATMs in 27 cities nationwide and a network of over 16 banks on the MNET ATM switch, MCB continuously innovates new products and services that harness technology for the customers benefits.
SOCIAL SECTOR The bank activity participating in the Prime Minister self-employment Scheme. The application received from various applicants is being processed on merit and disposed off as quickly as possible.
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 Blochistan (3%) respectively. MCB has an edge over other local banks, as it was the first privatized bank. The State Bank of Pakistan has restricted the number of branches that can be opened by foreign banks, an advantage that MCB capitalizes because of its extensive branch network. Fourteen 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.
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MCB now focuses on three core businesses namely Corporate, Commercial and Consumer Banking. Corporate clientele includes public sector companies as well as large local and multinational concerns. MCB is also catering to the growing middle
class by Providing new asset and liability products. The Bank provides 24 hour banking convenience with the largest ATM network in Pakistan covering 27 cities with over 151 ATM locations. The Banks Rupee Traveler 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 fulfillment of its mission, "to become the preferred provider of quality financial services in the country with profitability and responsibility and to be the best place to work". A major achievement of MCB is that the state bank of Pakistan has issued a license to MCB to start Islamic banking. Now MCB is setting up a 1st Islamic banking branch at 1st floor shaheen complex, Karachi. This complex starts working from September 1, 2003.
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Vertical Analysis of Balance Sheet
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Vertical/ common Size analysis Muslim Commercial Bank Limited Balance Sheet As on 31st December
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Horizontal Analysis of Balance Sheet
Horizontal/ Index Analysis Muslim Commercial Bank Limited Balance Sheet As on 31st December
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Ratio Analysis
1. Current Ratio: The current ratio measures the number of items of the firm s current assets cover its current liabilities. The current ratio should be part of your business' basic financial planning, meaning it should be tracked monthly or quarterly. By keeping a close eye on this figure, you will recognize if it begins to get out of line. This will allow you to take early action to prevent your business from ending up in a difficult position. Current assets divided by current liabilities Current ratio=current asset/ current liabilities 2007 Current asset 261,263,732 Current liabilities 254,135,024 Current ratio 102.81% 2008 Current asset 245,019,617 Current liabilities 237,825,426 Current ratio 103.02%
2009 Current asset 284,937,950 Current liabilities 266,857,434 Current ratio 106.80% 2010 Current asset 321,850,264 Current liabilities 290,092,433 Current ratio 111.00%
2011 Current asset 376,592,633 Current liabilities 342,463,187 Current ratio 110.00% 23

Interpretation of current ratios of MCB: Current ratio shows a firms ability to cover its current liabilities with its current assets. It is obtained by dividing current assets of the firm by its current liabilities. Current ratio of 1 or higher means that the firm can pay all its current liabilities from its current assets, while a value less than 1 means that the firm will be unable to pay its current liabilities completely by its current assets. A lower value means aggressive approach of the management toward business, but has opposite meaning for creditors, who dont like aggressive approaches of the management. In MCB bank limited 2010 current ratio is strong than other four years. It shows that this years liabilities could be recovered with its assets. After 2010, a bank has maintained good current ratio in 2011 but 2007 and 2008 has weak current ratio because the difference between assets and liabilities decreased in these years. Current ratio does not show the true picture of the organization. Sometimes it shows that organization has ability to pay its obligations but its profitability ratio tells that it has not ability to pay its obligation. But still it is very useful for the analysts especially for the creditors.
2. Quick ratios:
Quick ratio shows a firms ability to meets it current liabilities with its current assets excluding inventories and prepaid expenses, which are least liquid portion of the current assets. Since banks dont have any sorts of inventories, therefore only prepaid expenses are subtracted from the current assets of the bank. This is an important planning tool, especially for businesses that can tie up a lot of assets in inventory. By tracking it monthly, management can keep an eye out for negative trends that could hamper their business' ability to meet its obligations. Quick ration can also use to evaluate the financial health of potential customers, since it also indicates whether a business can pay off its debts quickly. A firm with a low quick ratio may be more likely to delay payments because its assets are tied up elsewhere. Quick ratio= current assets-inventories/current liabilities.
2007 Current assets 261,263732 Inventories 128,276,842 Current liabilities 254,135,024 24

Quick ratios 52.33
2008 Current assets 245,019,617 Inventories 67,194,971 Current liabilities 237,825426 Quick ratios 74.77
2009 Current assets 284,937,950 Inventories 69,481,487 Current liabilities 266,857,434 Quick ratios 80.74
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Interpretation of the quick ratio: Inventories are considered as current assets so they are included in current ratio calculation. Inventories are less liquid. Normally it is not easily converted into cash on short notice. In 2010 quick ratio is better than other years it show that bank can easily recover its liabilities on short notice.
3. Working capital: Working capital is the difference between current assets and current liabilities. Working capital is often considered a measure of liquidity by itself. This ratio shows the amount of liquidity. Working capital is used to check liquidity of the organization. Working capital=current asset-current liability.
2007 Current asset 261,263,732 Current liabilities 254,135,024 Working capital 7,128,708
2010 Current asset 321,850,264 Current liabilities 290,092,433 Working capital 31,757,831 26

Interpretation of the working capital: Working capital is better in 2011, which is 34,129,446 .it means that assets are utilized more economically in 2011 as compared to 2007, 2008, 2009 and 2010. 4. Cash ratio: Cash and cash equivalent/total assets Cash and equivalent are the most liquid assets. The cash ratio shows the proportion of the assets held in the most liquid possible form. It is used to check the liquidity of the organization.
2007 Cash equivalent 25,356,261 Total assets 272,323,619 Cash Ratio 9.31
2010 Cash equivalent 39,042,993 Total assets 342,108,243 27

Cash Ratio 11.41 2011 Cash equivalent 43,491,402 Total assets 410,485,517 Cash Ratio 10.60 Interpretation of cash ratios of MCB: Higher cash ratio also shows the higher rate of satisfaction like other liquidity ratios. Cash ratio is more important liquidity ratio. In 2007 cash ratio was 9.31%, it increased very quickly in 2008 by 11.40%, but in 2009 it declined by 2.99. 2010 was the best year as it shows 11.41% ratio, In 2011, it declined by 10.60%. In short working capital and cash ratio are more realistic and more important ratios, which describe the true picture of any organization. In MCB 2010 is the year in which the liquidity ratios are shown better than other years. So 2010 is mentioned a good year of the Muslim Commercial Bank.
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Leverage Ratios: Leverage ratios of a firm show the extent to which a firm finances its operation from the outside sources and money. The leverage can be determined from analysis of owner equity in business, total liabilities, current and long-term liabilities, long-term assets and total assets of the business. Following are the common leverage ratios to show the degree of leverage the bank is using to finance its activities and assets by liabilities. 5. Debt-To-Total-Assets Ratio It shows that how much assets have been financed by liabilities and it also shows the margin of protection available for the creditors. Debt ratio Debt ratio=Total debt/ Total assets
2007 Total debt 261,214,926 Total assets 272,323,619 Debt Ratio 95.92
2010 Total debt 301,263,929 Total assets 342,108,243 Debt Ratio 88.06 29
Analysis of leverage ratio: Financial leverage is the extent to which a firm is financed with debt. The amount of the debt a firm uses has both positive and negative effects. The more debt the more it is that the firm will have trouble meeting its obligations. Thus the more debts higher profitability of the financial distress and even bankruptcy. Furthermore the chance of the financial distress and debt obligation generally may create conflicts of interest among the stakeholders. In Muslim Commercial bank, year 2007 was heavily financed because debt was the major source of financing in 2007. Debt also had lower transaction cost. But better year was 2011 because Muslim Commercial Bank in this year was not heavily financed and had no trouble to pay its obligations.
6. Debt-To-Equity Ratio: Debt-to-Equity ratio shows the extent to which debt financing is used relative to equity financing. Debt equity is calculated by dividing total liabilities of the bank by the total owner equity.
Total debt divided by shareholders equity Debt to equity ratio=Total debt / shareholders equity or Debt ratio/1-Debt ratio 2007 Total debt 261,214,926 Shares holder equity 3,065,273 Debt to equity Ratio 85.22
2008 30

Total debt 244,620,924 Shares holder equity 3,371,800 Debt to equity Ratio 72.55
2009 Total debt 275,469,034 Shares holder equity 4,265,327 Debt to equity Ratio 64.58
Analysis of the Debt to equity ratio: The debt equity ratio is a simple rearranged of the debt ratio. Debt equity ratio shows how the firms stockholder bears the risk of the firm. Greater the debt greater risk for the firm s shareholders .In 2010 risk for the share holders was very low as compared to the other years decrease debt to equity ratio was very small on the contrast risk was very high in 2007 because of heavy financing.
7. Equity multiplier: Owner equity to fixed assets ratio: Owner equity to fixed assets ratio shows that how much money does owner in relation to fixed assets invest. If the owner equity exceeds the fixed assets, it means 31

that owner finances a part of current assets. When owner equity is less than fixed assets it means that creditors obligations have been used to finance a part of fixed assets. Total owner equity divided by fixed assets Equity multiplier=Total assets /shareholders equity.
2007 Total Assets 272,323,619 Shares Holder equity 3,065,273 Equity Multiplier 88.84
2011 Total Assets 410,485,517 Shares Holder equity 6,282,768 32

Equity Multiplier 65.34 Equity multiplier Analysis of the equity multiplier: Equity multiplier is yet another representation of the same information. It shows how much total assets the firm has for each dollar of equity. In MCB it is better in 2007 it means that bank has about 88.84 in total assets of 100 of equity.
Coverage Analysis: Coverage ratios analyze the ability of a firm to cover or service its financial obligations. Most common coverage ratios are explained below.
8. Interest Coverage Ratio Interest coverage ratio shows the ability of a firm to cover up its interest charges on the income before interest and taxes. The ratio is obtained through dividing earnings before interest and taxes (EBIT) of the bank by its interest expenses. EBIT divided by interest expense
Interest coverage ratio=EBIT/Interest expense
2007 EBIT 3,162,924 Interest expense 2,932,693 Interest coverage ratio 107.85
2008 EBIT 4,057,716 Interest expense 2,057,640 Interest coverage ratio 197.20 33
Analysis of the interest coverage ratio: Coverage ratio shows the number of the times a firm can recover or meet particular financial obligations. The interest coverage ratio, which is also called the time interest earned ratio, measure the coverage of the firm s interest expense.2009 is the best comparative better coverage of its interest and fixed charged obligations. After 2009, 2010 is better than other three but 2007 is worst than all.
Profitability Analysis: Profitability ratios are of two types those showing profitability in relation to sales and those showing profitability in relation to investment. Together, these ratios indicate the banks overall effectiveness of operation. It creates a relationship between income statement and balance sheet of the firm. Following are the some typical profitability ratios used to analyze the profits of firms. 34
9. Cost To Sales Ratio: Cost to sales ratio determines the cost incurred in generating the sales of the bank. The net sales of banks are its interest/mark up earned while costs of sales are its interest/mark up expense incurred. The ratio is obtained by dividing cost of sales by net sales. The following table shows the cost of sales of MCB over five years of operations. Interest or mark up expensed divided by interest or mark up earned
2007 Interest expense 2,932,693 Interest earned 10,369,994 Cost to sales ratio 28.28
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2011 Interest expense 7,865,533 Interest earned 31,786,595 Cost to sales ratio 24.74 Analysis of the cost to sales ratio: Cost to sales ratio shows the cost incurred in generating the sales of the bank. In 2007 the cost to generate the sales is higher with respect to other financial years. After 2007, 2011 had also higher cost. Year 2095 is best one for MCB but 2007 is worst than all. 10. Return On Investment: Return on investment measure the ratio of profit generated in relation to the total assets employed. Net profit after tax divided by total assets gives the return on investment. Return on investment is an indicator of how profitable a company is. By using this ratio annually, we compare business' performance to industry's norms. Net profit after tax divided by Total assets Return on investment= Net profit after tax/Total assets
2007 Profit after tax 2,230,145 Total assets 272,323,619 Return on Investment 0.82
2009 Profit after tax 8,922,415 Total assets 298,776,797 36

Return on Investment 2.99
2011 Profit after tax 15,265,562 Total assets 410,485,517 Return on Investment 3.72 Analysis of the return on investment ratio Profitability ratios focus on the profit generating performance of the firm. These ratios measure how effectively the firm is generating its profit. They reflect its performance, its risk nests and the effect of leverage. Muslim commercial bank was heavily financed in 2011 that financing was used in investment thats why return on investment is high in 2009 as compare to the other years.
11. Return On Equity: Return on equity is another summary measure of overall banks performance. It can be calculated by dividing the net profit by the owner equity. This ratio tells us the earning power on shareholders book value investment and is frequently used in comparing two or more firms in any industry. A high return one quite often reflects the firms acceptance of strong investment opportunities and effective expense management.
2007 Profit after tax 2,230,145 Shareholders' equity 3,065,273 Return on Equity 72.76 37
2008 Profit after tax 2,431,532 Shareholders' equity 3,371,800 Return on Equity 72.11
price earnings ratio Return on equity is an indicator of how profitable a company is. Use this ratio annually to compare your business' performance to your industry's norms. In year 2011, MCB has a strong investment opportunities which reflects a high return, after this 2010 and 2009 also depicts a high return, whereas, 2007 and 2008 are not satisfied.
12. Market value ratios: 1-P/E ratio 38

Price earnings ratio=Market price per share/ earnings per share
2007 Market price per share 51.40 Earnings per share 7.28 P/E ratio 706.04
2010 Market price per share 246.10 Earnings per share 23.40 P/E ratio 1,051.71
2011 Market price per share 399.95 Earnings per share 24.30 P/E ratio 1,645.88
Analysis of the price-earnings ratio:
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Price earnings ratio of MCB bank is high in 2007 as compared to the other years. Because the market price per share is high in 2007. Because in this year MCB generate an excellent profit. 2006 is also good but 2003 is worst all of them.
13 Earning yield: Earning yield=Earnings per share/Market price per share 2007 Earnings per share 7.28 Market price per share 51.40 Earning Yield 14.16
2008 Earnings per share 7.21 Market price per share 58.70 Earning Yield 12.28
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Analysis of the earning yield: Earning yield of MCB bank is high in 2007 as compared to the other years. Because the market price per share and earnings per share is low in 2007. Earning yield in 2008 and 2009 is also high. Earning yield is unsatisfied in 2011.
14 Earnings Per Share: This ratio determines the amount of income that has been earned on each share outstanding. Net profit after tax divided by total numbers of shares outstanding gives the amount earned on each share. Net profit after tax divided by total number of shares outstanding Earnings per share=Net profit after tax/ Total no of shares
2007 Profit after tax 2,230,145 Total number of shares 306,527 Earnings per share 7.28
2010 Profit after tax 12,142,398 41

Total number of shares 546,327 Earnings per share 22.23
Analysis of the earning per share: Earnings per share mostly depends upon return on investment means ratio of profit generated. Earnings per share is better in 2011 because in this year return on investment was also satisfied. 2007 and 2008 were unsatisfied as earning per share.
15 Gross spread ratio: This ratio indicate the firms overall effectiveness of operation. Gross profit divided by net sales.
2007 Net mark-up/ interest income 7,437,301 Interest earned 10,369,994 Gross spread ratio 71.72
2009 Net mark-up/ interest income 14,974,764 42

Interest earned 17,756,232 Gross spread ratio 84.34
2011 Net mark-up/ interest income 23,921,062 Interest earned 31,786,595 Gross spread ratio 75.26 Analysis of gross spread ratio: This ratio tells the profit of the firm relative to sales, after deduction of cost of production. It is a measure of the efficiency of the firms operation. Gross spread ratio of MCB bank is high in 2009 as compared to the other years. Only because of low expenses during the year. After this 2010 is good but not satisfied as of 2009.
16 Income/ expense ratio:
2007 Total Income 14,901,805 Total expenses 11,288,881 Income/ expense ratio 1.32
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Total Income 23,169,303 Total expenses 10,491,414 Income/ expense ratio 2.21
2011 Total Income 37,797,886 Total expenses 16,489,851 Income/ expense ratio 2.29 Analysis of Income/ expense ratio: Income/ expense ratio of MCB bank is high in 2010 as compared to the other years. Because in this year the expenses as compared to earnings are very low. After this 2009 and 2010 also depicts an excellent income/ expense ratio. But 2007 was the worst one for Muslim Commercial Bank.
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MCBs SWOT ANALYSIS STRENGTHS

MCB is the first Pakistani privatized bank and because of its quality management, marketing, innovation in products and services. Owing to all such factors they have established a good reputation in the banking market. The name of MCB makes you recall the highly cooperative and professional individuals ready to serve you with maximum zeal and zest. The joining of experienced people, advanced management, advance setup and facilities gave MCB an edge over its competitors.
MUSLIM COMMERCIAL BANKS IMAGE:
MCB is a reputable financial organization and is well known all over the Pakistan.
Perception is of producing a high quality services. CUSTOMER CARE: The Bank not only provides high quality services but it also look for the comfort and convenience of the clients, MCB always preferred their customers. MARKET SHARE: MCB has covered much of the potential market and the net profit is increasing years after years. Deposits and advances have sufficiently increased. LARGE NUMBER OF DIVERSIFY PRODUCTS: This is also its main strength as it has diversified in many products such as: Debit Card Visa Card 45

Car Financing
Agriculture Financing
BRANCH NETWORK It is the greatest strength of the Bank. In 2004, five more branches were added to the network and by the end of the year 2005 the total number of branches was raised from just 53 to 143. MCB has also planned to open more branches in next coming years. SOUND MARKETING: Skillful marketing of the products is being achieving countrywide goals of Muslim Commercial Bank Limited.
PHONE BANKING: Every account holder can conform its balance on Phone and may ask for any query. There are also 24 hours help lines for customers. MOBILE BANKING: It has been launched recently. It helps in getting accounts details and making transactions using mobiles. HIGHLY AUTOMATED BANK: MCB in Pakistan is the also in the list of highly automated banks, about 750, like Emirates because of its modern style of banking through fully computerized control and twenty four hour banking. FASTER BANKING SERVICE:
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MCB have faster banking services that are making it more prominent in the banking industry especially in operations and Foreign exchange. The customer prefers this bank not only because of its faster speedy service rather due to reasonable service charges. INTERNATIONALLY DESIGNED PRODUCTS: MCBs products are internationally designed products. These are valuable and operational in all over the world. CONTRACT WITH CIRRUS: Now MCB has also entered into a contract with Cirrus which is a subsidiary of MasterCard. This contract will enable an ATM card holder to use his account even when he is out of country at all the ATMs where Cirrus logo is displayed.
WEAKNESSES
ADVERTISEMENT: The majority of people are not well aware about the products of MCB. Therefore it should advertise extensively especially RTC and Master Cards. ACCOMMODATE BEHAVIORALLY: A behavior has been noted that bank tries to feel at ease with good looking, rich and educated people and the poor looking customers feel some bit strange in the environment of the bank. The bank employees should try to accommodate behaviorally all type of customers. MISMANAGEMENT OF TIME: Mismanagement of time is another big mistake in MCB branches, the bank official time of closing is 5:30pm but due mismanagement of time allocation and work the staff is normally on their seats till 7:00 or 8:00 clock. 47

AND ALSO, Costly documents are required for loan sanctioning. Some times bank also never meets stated rate of profit
OPPORTUNITIES
PRIVATIZATION: As on December 31, 1998, sixty-eight scheduled banks with 9,106 branches are operating in Pakistan. As on this date, total population of Pakistan is 140.03 million. Total number of personal accounts with all scheduled banks as on December 31,1997, are 28.98 million. If we consider the population statistics of working age group as on December 31,1997, it stands to the figure of 96.64 million. Thus we can say those 28% of working age people of Pakistan are having accounts with banks while 72% are unbanked. The need of privatization has made people to switch to banks to satisfy their needs of lending and borrowing. This not only increases the deposits but also the credit business. DIVERSIFICATION: They may enter in New business or any other consumer-durable product in order to promote their name, by introducing Loan for the students, small businesses, and handicraft industry. SOME MORE OPPERTUNITIES: Information Technology. Credit cards can give more earning. Establishing more foreign Branches. They should introduce Student Finance Facility.
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They should also introduce mobile ATM
THREATS
CHANGE IN GOVERNMENT POLICIES: Change in government policies has affected the banking business. Still banks have to wait to get permission of state bank. The freezing of foreign currency accounts is a vital example of letting people not to trust on banks. COMPETITION: The Competition has become severe by the entrants of so many banks, So to exist one will have to prove himself in its services through excellent management and will have to satisfy its shareholders. Otherwise he will be out the market. LOW INVESTMENT: The decrease purchasing power of consumer in the current economic situation of the country affecting the business activity speed too much and the result is the low investment from the investors in new projects can create problem for the bank because it is working a lot in trade. STATE BANK REGULATION: As the Bank introduces unique products so they face problem if State Bank Of Pakistan employ taxes on them which force them to increase the rate of Interest. EXPECTATIONS OF THE PEOPLE: Due to huge competition among those banks and MCB,, people are the basic beneficiaries from it and thus their expectations tend to increase about the products and the relative rate of interest thus creating a threat for MCB. SOME BANKS ARE OFFERING KISAN CARDS.
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SUGGESTIONS & RECOMMENDATIONS
Following are some suggestions for Muslim Commercial Bank, Ltd. ADVERTISING: Bank must let potential customers know that all attractions for banking exist. This is done by advertising on television and obtaining press coverage, in conjunction with direct mail, window displays, leaflet in branches and in appropriate other locations (such as hotels, shops, etc.) and including leaflets in statement of accounts sent to existing customers in the hope that they will tell potential customers about the services provided by our bank. INCREASED ATMS LOCATIONS: Some personal sector customers prefer not to come to branch. They increasingly want to deal with the bank in other ways, such as home banking or use of Automated Teller Machines (ATMs), which need to be at every branch or some important shopping plazas and airports etc.
INCREASED SERVICES: One way to retain the customers is to offer a wide range of services such as tax advice, free life insurance equivalent to amount deposited, shares portfolio management, fund management facility, etc., complimentary to the core services. Banks must have a slightly different mix of services and mean of providing these such that customers can choose the mix that suits them best. MANAGEMENT OF TIME: There should be a good management of time for the sake of employees i.e. offering them free break hours instead of making them work in this time as well.
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GROWTH SCOPE FOR EMPLOYEES: MCB should provide greater facilities to its employees, and give them bonuses for their hard work and Promotions as well. There is a criticism on the 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 BANKING PROFESSIONALS: The bank should hire banking professionals having experience in their respective fields that will boost the performance of the company as currently MBAs are produced for this field so they should be hired for enhancing the performance of company. ATTRACT CUSTOMERS: The banking company should offer such policies which would attract customers which are denied by other banking in the market. JOB ROTATION AND PROMOTIONS: Most of the bank employees, are sticking to one seat only with the result that they become master of one particular job and lose their grip on other banking operation. In my opinion all the employees should have regular job experience all out-look towards banking. The promotion policy should be adjusted COMMUNICATION SYSTEM FOR EMPLOYEES: As such system should be designed that every employee who has some problems with his officers can communicate it to the higher management and some steps must be taken to improve that.
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Conclusion
MCB bank Limited is a banking company incorporated in Pakistan and is engaged in commercial banking and related services. The banks ordinary are listed on all the stock exchanges in Pakistan whereas its global depository receipts are traded on the international order book system of the London stock exchange. The bank operates 1020 branches including Islamic banking branches. After analyzing its income statements, balance sheet, cash flow statement, products and services, loans, it is concluded it is second best bank in the Pakistan. MCB taking progress by leaps and bounds, soon it will become the first best commercial bank of the Pakistan. The consumer banking industry has many opportunities to grow, customer wants convenience mode of banking for which new products & services should be introduced on the other hand it is giving huge profits to bank while the level to risk is less in consumer financing as compare to others. Wealth Management Service which is a new service in Pakistan Consumer Banking industry its awareness should be increased as in our survey it reveals that most of the respondent even dont have any idea of consumer financing. Banks customers want new services to be introduced in which Interbank Transfer Facility & Money at door step the most are demanding services. In recent years the regulation for tenure and amount of consumer financing has been changed many times but still the banks customers are not totally satisfied by the tenure of consumer financing. Improper guidance, slow processing and bank statement are the major problems faced by banks customers in getting consumer loans. The reason for these problems is that people applying for consumer loans dont have proper information about the requirements by the banks and due to high number of applications & lengthy procedure by banks the loan Very few borrowers know that the rate of interest being charges on consumer finance by the financial institutions is too high as compared to prime interest. In case of credit cards the respondents in our survey marked High Markup Rate as the major problem they are facing in Credit Cards. Despite of many changes in bank policies and strict regulations by SBP still banks customers are facing hidden charges problem. Due to unclear policies and term & condition of banks, customers are not able to know about different charges of banks and the problem of hidden charges occurs . Although CIB provide complete and accurate information about the banks customer credit records 53

but still loans default occur in consumer financing the problem is not with only due false customer records but also due to wrong policies and improper assessment by bank which cause defaults on consumer loans . The target market for issuing consumer loans for banks in the middle class because they have the strong ability to pay off their loans, banks should make adequate polices to provide loans to lower class on easy terms and low markup rate. Upper class is generally not focused for consumer financing because they have enough resources & purchasing power to buy any asset.
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Financial Reporting and Anlaysis Report On MCB Limited

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FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

Topic: MCB Limited Financial Analysis

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

SWOT Analysis Suggestions & Recommendations Conclusion

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

MCB Bank LTD INTRODUCTION

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

MCB BANK TODAY

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

Vertical Analysis of Balance Sheet

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

2007 Current assets 261,263732 Inventories 128,276,842 Current liabilities 254,135,024 24

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

2010 Cash equivalent 39,042,993 Total assets 342,108,243 27

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

2011 Total Assets 410,485,517 Shares Holder equity 6,282,768 32

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

Interest coverage ratio=EBIT/Interest expense

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

2009 Profit after tax 8,922,415 Total assets 298,776,797 36

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

12. Market value ratios: 1-P/E ratio 38

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

Analysis of the price-earnings ratio:

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

2010 Profit after tax 12,142,398 41

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

2009 Net mark-up/ interest income 14,974,764 42

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD

16 Income/ expense ratio:

FINANCIAL ANALYSIS OF MUSLIM COMMERCIAL BANK LTD