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Chapter 1
INTRODUCTION

OVERVIEW OF BANKING SYSTEM IN PAKISTAN BANKING STRUCTURE AND BANKS IN PAKISTAN HISTORY OF THE MCB BANK SCOPE OF THE MCB BANK MANAGEMENT OF THE BANK CORPORATE INFORMATION (MCB BANK) MISSION STATEMENT YEAR 2006 & FUTURE OUTLOOK REGIONAL NETWORK REGIONAL OFFICES ORGANIZATIONAL STRUCTURE FUNCTIONS OF DIVISIONS

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OVERVIEW OF BANKING SYSTEM IN PAKISTAN (SBP Report)

The year under review added further strength to the soundness of the banking system. This is in line with trends witnessed over the past couple of years. Indicators of financial soundness have shown significant improvement and the industry structure presents a robust picture. The major developments during the year are summarized as follows:

A few more banks with low capital base, which could have posed a systemic risk to the sector, merged and became part of more resilient and consolidated institutions, better placed to withstand any adverse shocks.

Profitability and earnings showed a remarkable improvement, thereby contributing significantly towards strengthening the capital base and resilience of the banking system. Credit to the private sector picked up significantly, after showing years of sluggishness. The flow of non-performing loans has been stemmed and their stock came down substantially during the year, as did the NPL indicators. Along with the creation of additional provisions, this led to a considerable reduction in the burden of the infected portfolio on capital base. The system continued to have abundant liquidity. The recent upward movement in the interest rates, however, has increased the market risk. The average intermediation cost came down as a result of cost controls and expanding business volumes. This reflected an increased efficiency in financial intermediation. The privatization of Habib Bank Limited, a post-review development, has increased the share of private sector in the banking system to around 80 percent. This will further promote competition and efficiency in the system.

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While these improvements owe much to financial sector reforms and improved corporate governance in banks, the regulatory and macro-economic environment have also contributed towards this: The economy preformed well and remained on the projected growth trajectory. The demand for bank credit by the private sector picked up. The key indicators of the corporate sector showed robust earnings and debt servicing capacity. Workers remittances, though decelerated as compared to the last year, remained in the projected growth brackets. Consequently, the flow of funds to the banking sector remained intact and was sufficient to maintain a comfortable liquidity position in the market. Fiscal position of the government as well as inflationary trends was in favorable shape, thus enabling the easy monetary regime during the year. To support a vibrant financial system, the State Bank took a number of policy initiatives. This included issuing guidelines on corporate governance to strengthen the culture of accountability and transparency, change of ownership and consolidation of weak institutions, encouragement of consumer financing, and cleaning up of balance sheets through incentivebased recovery drives. Guidelines were also issued to banks on risk management to provide the banks a broader framework to identify measure, monitor and control/mitigate various risks in their business. The State Bank also took a major leap forward shifting from a one-size-fits-all approach of regulation to more risk-focused supervision by categorizing and instituting separate sets of prudential regulations for corporate/commercial banking, SME financing and consumer financing. Realizing the importance of much needed expansion in the scope of business and the due risk management thereof, the SBP issued guidelines in various areas and liberalized its exchange policy in respect of trade financing. The banking sector is sensitive to developments in the economic and political sphere. The countrys political scene saw the resolution of some key issues, which had a salutary impact on its economic condition. Improvement in relations with India also helped restore investor confidence and as the process continues, prospects of boosting regional trade become bright. Despite these improvements, some irritants continue to haunt the geo-political environment. The western border continues to pose problems and, despite

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some progress, will remain in the limelight considering its potential impact on the state of law and order in the country. However, the governments resolve to address the issue generates hope for better days ahead. The results for the first half of the fiscal year paint a positive economic outlook and promise achievement of major growth targets. Strong and robust growth in the manufacturing sector and consistent surge in credit demand further support this belief. There are, however, some subtle concerns that may increase stress both on the economy as well as the banking system. Higher level of economic activity is placing pressures on the external account, despite satisfactory export performance, in form of higher increase in imports, while there is a slowdown in capital repatriation and official inflows, prepayments are being made on external debt. Its intensity will depend upon the future terms of trade oil prices have witnessed a sharp increase recently. The comfort of substantially large foreign exchange reserves and an under-pressure US Dollar (barring sporadic moments of strength) presents the SBP with some significant maneuvering space. Creeping inflation, along with an anticipated global rate hike, is generating sentiments for a similar response in the local market. The magnitude and impact of such a rate hike (as and when it comes) is likely to remain modest as much of the prevalent liquidity is likely to remain in the system. This contributes to the continued strength of the corporate sector over banks, which have already built up significant cushions on the back of robust performance over a couple of years. The debt and liquidity related indicators for corporate have continued their upward trend, giving it the essential robustness for sustaining an upward march even in a changed interest rate environment. This said, the recent string of anti dumping measures taken against Pakistani exports, formation of new trade alliances and a continued influx of cheap foreign imports in the local market have the potential of stalling the recent corporate performance. The household paying capacity could come under strain in the changed rate scenario but given the present leverage margins, it is unlikely to result in growing defaults in the short run. The banking sectors persistent robust operating performance over the last couple of years is a healthy sign. But, the overwhelming portion of trading gains presents a caveat, and this may not be sustainable on long-run basis. The recent upturn in credit demand, if it is to sustain, has the potential of

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making up much of the lost gains. Another caveat is the continuous drain on depositors wealth; they are at present in a disadvantageous position, as they have to settle at a negative real rate of return. Other than the depressing yields, the specter of massive liquidity has not had any adverse impact on the system. Banks adventures in the booming stock market have been capped at twenty percent of their equity. Along with upcoming margin rules for stock trading (as against a highly leveraged badla trade, in which the banking system is an important player) are likely to further solidify the banking systems inherent strength. Credit disbursement at an exponential rate has, at last, broken the protracted spell of sluggishness. However, it has also at the same time, increased the level of credit risk for the banking system. Crucially important is the substantial increase in loans to SMEs, agriculture and consumer finance. This may have helped in diversification of loan portfolios of the banking system but at the same time have enhanced the risk profile, as banks are still going through an evolutionary phase in developing risk appraisals and mitigating techniques in these areas. The future expansion of credit to these new sectors will largely depend upon the extent to which the banks are able to develop internal procedures and controls in risk appraisals and mitigation.

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BANKING STRUCTURE IN PAKISTAN

At present the banking structure in Pakistan comprises of the following:

STATE BANK OF PAKISTAN:

As the Central bank of the country with its offices at Karachi, Lahore, Peshawar, Quetta, Faisalabad, Rawalpindi, Islamabad, Bahawalpur, Multan, Gujranwala, Sialkot, Sukkur And Hyderabad.

COMMERCIAL BANKS:
Commercial Banks have been the most effective mobilizes of saving and have been providing short-term requirement of working capital in trade, Commerce and industry. They are profit-earning concerns. They receive deposit and advance loans to the borrowers. They greatly help in financing internal and external trade of the country.

EXCHANGE BANKS:
The main function of Exchange Banks is to finance the foreign trade by the purchase and sale of the currencies in the form of the drafts, bill of exchange, and telegraphic transfer. They also perform other function of the Commercial banks. In Pakistan banks other than Indian banks have been commonly known as Exchange Banks in the IndoPak. Were engaged primarily in the finance of the foreign trade. At present eight foreign banks with 64 branches in the main port and commercial towns are operating in Pakistan.

COOPERATIVE BANKS:
Cooperative banks are an integral part of the cooperative movement which aims at the promotion of thrift, self-helps and mutual aid among the agriculturists and other with common economic needs so as to bring about better living better business and better methods of production etc.

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SAVING BANKS:
There is only one saving bank in Pakistan i.e., the Government of Pakistan controls Post Office Saving Bank and it wholly. It accepts deposits from public and invests them in Govt. Projects so its operation is Limited.

DEVELOPMENT OF BANKING SECTOR IN PAKISTAN:

When Pakistan came into being there were only two Muslim scheduled banks, Habib Bank Ltd. And Australasia Bank operating at that time. As a new country without resources, it was very difficult for Pakistan to run its own banking system immediately. Therefore in accordance with the provision of Indian independence act 1947, an expert committee was appointed to study this issue. The committee recommended that the reserve bank of India should continue to function in Pakistan till September 30, 1948.So that the problems of time and demand liability, coinage, currencies, exchange etc. can be settled between India and Pakistan. In the meantime the banks including those who have their registered offices in Pakistan transferred themselves to India in order to damage the state. By June 1948 the number of offices of scheduled banks in Pakistan declined from 487 to only 195. But at the same time the number of Muslim scheduled banks rose to four and the number of branches increased to 23. On July 1, 1948 the State Bank of Pakistan was establish which proved to be a strong base for the banking system in Pakistan.

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BANKS IN PAKISTAN
There is a list of Banks and Financial Institutions, servicing in Pakistan
Sr.#

Name of Bank

Web Site of Bank

NATIONALIZED COMMERCIAL BANKS: 1 2 3 4

First Women Bank Ltd Habib Bank Limited National Bank of Pakistan United Bank Limited

http://www.fwbl.com.pk/ www.habibbankltd.com http://www.nbp.com.pk www.ubl.com.pk

DE-NATIONALIZED BANKS: 5 6 Allied Bank of Pakistan Ltd Muslim Commercial Bank Ltd www.abl.com.pk www.mcb.com.pk

SPECIALIZED SCHEDULED BANKS: 7 8 9 10 Agricultural Development Bank of Pakistan Federal Bank for Co-operatives Industrial Development Bank of Pakistan Punjab Provincial Co-operative Bank Ltd www.adbp.org.pk/adbp Nil www.idbp.com.pk

PRIVATE SCHEDULED BANKS:

11 12 13

Askari Commercial Bank Ltd Bank Alfalah Limited Bank Al-Habib Limited

http://www.askaribank.com.pk/ http://www.bankalfalah.com/ http://www.bankalhabib.com/

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14 15 16 17 18 19 20 21 22

Bolan Bank Li Faysal Bank Limit Meezan Bank Limited Metropolitan Bank Limited PICIC Commercial Bank Ltd Platinum Commercial Bank Ltd Prime Commercial Bank Ltd Soneri Bank Limited Union Bank Limited

http://www.bolanbank.com.pk/ http://www.faysalbank.com.pk/ http://www.meezanbank.com/ www.metrobank.com.pk http://www.picicbank.com.pk http://www.platinumcommercialbank.com/ www.primebank.com.pk http://www.soneri.com www.unionbank.com

PROVINCIAL BANKS: The Bank of Khyber 23

24

www.bankofkhyber.com.pk http://www.punjabbank.com/

The Bank of Punjab

MICRO FINANCE BANKS: The First Micro Finance Bank Limited 25

www.khushhalibank.com.pk

FOREIGN BANKS: ABN Amro Bank N.V. 26

27 28 29 30 31 32 33

http://www.abnamro.com/ www.albaraka.com.pk http://www.aexp.com/ Nil www.ca.indosuez.com www.citigroup.net www.db.com Nil

Al-Baraka Islamic Bank B.S.C (E.C.) American Express Bank Limited Bank of Cylon Credit Agricole Indosuez Citibank N.A. Deutsche Bank AG Doha Bank

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34

Habib Bank A.G. Zurich International Finance Investment & Commerce

www.habibbank.com

35

Nil Bank Limited (IFIC) Mashraq Bank psc Oman International Bank S.O.A.G. Rupali Bank Limited Standard Chartered Bank Standard Chartered Grindlays Bank Limited The Bank of Tokyo-Mitsubishi Limited The Hongkong and Shanghai Banking Corporation Limited

36 37 38 39

www.mashreqbank.com www.obioman.com Nil http://www.scb.com/ www.scb.com http://www.btm.co.jp/ (this web site is maintained by their HO, Tokyo Japan) www.hsbc.com.pk

40

41

42

DEVELOPMENT FINANCIAL INSTITUTIONS:

43 44

Investment Corporation of Pakistan National Investment Trust Limited Pak Kuwait Investment Company (Pvt..) Limited

Nil In development phase www.pkic.com http://www.paklibya.com.pk/ www.pakoman.com http://www.picic.com/ www.saudipak.com

45

Pak Libya Holding Company (Pvt.) Limited Pak Oman Investment Company (Pvt.) 47 Limited Pakistan Industrial Credit & Investment 48 Corp. Ltd. Saudi Pak Industrial & Agricultural 49 Investment Company (Pvt..) Limited
46

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50 SME Bank Limited

http://www.smebank.org/

INVESTMENT BANKS: 51 First Standard Investment Bank Limited 52 Asset Investment Bank Limited 53 Atlas Investment Bank Limited 54 Crescent Investment Bank Limited 55 Escorts Investment Bank Limited 56 Fidelity Investment Bank Limited 57 First International Investment Bank Limited Nil Nil In development process www.cresbank.com Nil www.fidelity.com.pk www.interbank.com.p-k www.iibl.com www.jahangirsidiqui.com www.orixbank.com Nil Nil www.trustbank.com.pk

58 Islamic Investment Bank Limited Jehangir Siddiqui Investment Bank 59 Limited 60 61 62 63 Orix Investment Bank (Pak) Limited Prudential Investment Bank Limited Security Investment Bank Limited Trust Investment Bank Limited

VENTURE CAPITAL: 64 65 Pakistan Venture Capital Limited Pak Emerging Venture Limited Nil Nil

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DISCOUNT HOUSES: First Credit & Discount Corporation 66 (Pvt.) Limited 67 National Discounting Services Limited Nil http://www.ndsl.com.pk/ Nil Nil

Prudential Discount & Guarantee 68 House Limited 69 Speedway Fond metal (Pak) Limited

HOUSING FINANCE COMPANIES: 70 71 72 Asian Housing Finance Limited Citibank Housing Finance Co. Limited* House Building Finance Corporation Nil Nil www.hbfc.com.pk www.ihfl.com.pk

73 International Housing Finance Limited

HISTORY OF THE MCB BANK

Muslim commercial Bank Ltd. was established on July 9, 1947 at Calcutta on the express wishes of the founder of Pakistan Qauid-e-Azam Muhammad Ali Jinnah who was deeply concerned with the plight of banking among the Muslim

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community in India. Muslims in general were at that time not favorably inclined towards joining the banking profession. This was therefore a right step taken by the founder of Pakistan to induct. Muslim Commercial Bank first shifted its head office to Chittagong on August 17, 1947, immediately after independence and finally to Karachi on July 15, 1954, which was the federal capital at that time. With the independence of the country, whatever scarce human resources available were utilized in the banking sector. However, as the branch network was expanding, so was the de for trained manpower to man the newly setup branches as well as the controlling offices. In the period 1947 till 1965, young university graduates were recruited and trained for a year by the training department of SBP and then assigned to the commercial banks. In January 1974, the government of Pakistan decided to nationalize all banks in Pakistan under Pakistan Banks Act 1974. By January 1991, MCB was privatized. The bank has done well since then. The bank has now completed more than 13 YEARS, since its privatization and it is, indeed, gratifying to note that during this period, MCB has performed well and has sustained its growth in all the major sectors. The well deserved credit, for this good performance and progress, must surely go to the Banks Management, its Directors and, in no small measure, to the entire MCB team for its dedication, concerted efforts and excellent team spirit. MCB has been a pioneer among the banks in Pakistan, particularly in introduction a number of innovative banking products and services. For the first

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time in the history of Pakistan, these multifarious products mostly in the shape of saving schemes have been introduced by MCB with brand names. This has set the trend and many other banks, both local and foreign, have since followed in MCBs footsteps, by launching new products and services, on similar lines.

SCOPE OF THE MCB BANK

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eing a commercial bank, the MCB Bank performs all such functions as are attributed to commercial banking institution both in the area of resources mobilization, loans, and investment. The bank is thus providing all type of advances to business, trade and commerce on seasonal and annual basis, and is ensuring, through the prudent policy, the safety and protection of its loan portfolios, as the resources base of the bank expands, projects financing will also be brought into its fold.

MANAGEMENT OF THE BANK

At the level of decision-making and implementation, senior management of the bank is drawn from highly accomplished bankers with rich experience in the banking profession both domestic and international.

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The entire responsibilities of policy formulation and management have been placed, under the law, the board of director. These instructions have become an essential part of the culture of the bank.

From left to right M.U.Usmani Ali Munir Malik Abdul Waheed Salman Ahmed Usmani Musaddiq Ijaz Zafar Abrar Mohammad Aftab Manzoor Shahid Sattar

Aneeq Khawar Shoaib Qureshi Naqvi Aamer Hassan Zaidi

CORPORATE INFORMATION
BOARD OF DIRECTORS:
The board of directors has the authority in guiding Bank affairs and in making general policies. Some directors are the personnel of the MCB and others are

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successful businessperson and executives of other major organization. members are included in board of directors: Mohammad Aftab manzoor President & Chief Executive Mian Mohammad Mansha Chairman S.M. Muneer Vice Chairman Tariq Rafi Mohammad Arshad Shahzad Saleem Sarmad Amin Mian Umer Mansha Aftab Ahmaed Khan Atif Yaseen

Nine

Advisor:
Raza Mansha

Audit Committee:
Mian Mohamad Mansha Sheikh Mukhtar Ahmad Aftab Ahmad Khan Chairman Member Member

Chief Financial Officer:

Ali Munir

Company Secretary:
Tahir Hassan Qureshi

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Auditors:
A.F Ferguson & Co. Chartered Accountants Riaz Ahmad & Co. Chartered Accountants

Legal Advisors:
Mandiwalla & Zafar Advocates & Legal Consultant

Registered office:
MCB Building, F-6 /G-6, Jinnah Avenue, Islamabad.

Principle Office:
MCB Tower, I.I. Chundrigar Road, Karachi

Registrars and Share Registration Office:

THK associates (Pvt.) Ltd., Shares Department, Ground Floor, Modern Motors House, Beaumont Road, Karachi

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PHILOSOPHY
For us, you are not just a set of numbers; you are a valued customer whom we know by name. This helps us serve you exactly the way you want us to thats the difference! We offer effective solutions derived from our personal knowledge of all your banking requirements which are met when we meat youby name.

MISSION STATEMENT OF MCB

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To become the preferred provider of quality financial services in the country with profitability and responsibility and to be the best place to work

CORE VALUES
Customer Focus Quest For Quality Employees Respect and Dignity Team Based Approach Good Corporate Citizenship

YEAR 2006 & FUTURE OUTLOOK

uring the year, Pakistans economy continued to grow. GDP growth was 8.42% in FY05, making it the fastest growing economy in the world after China. Record growth was witnessed in both agriculture and large-scale manufacturing,

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but more importantly, the growth was broad-based, with all major sectors performing well. Moreover, despite the humanitarian disaster that struck the northern parts of Pakistan and Azad Kashmir in the form of the October 2005 earthquake, the economy has continued to flourish. The Government of Pakistan raised USD 6 billion Reconstruction and rehabilitation aid. This should minimize the fiscal year stress on account of earthquake rebuilding. Pakistans impressive growth momentum has caught the attention of the international financial world. The World Bank and Asian Development Bank have also indorsed Pakistans impressive growth momentum. Total foreign investment for the first half of fiscal year 2005-06 was USD 1.462 billion, a rise of 190% over the previous year. Your bank is said to continue benefiting from the strengthening of the underlying economy and continued business optimism in 2006. The State Bank tight momentary policy means that banking sector spreads shall continue to remain strong in 2006, although competition for deposits would raise the cost of funds. Meanwhile, the focus on exports is said to continue in 2006, as Pakistan looks to seek as Pakistan looks to seek concessions for its textile exports to the European Union. The Government is also actively looking to forge Free Trade Agreements (FTAs) with various countries, which shall enhance our trade volumes. Furthermore, as relati0ons with India are improving considerably, we can expect India-Pakistan trade to increase substantially in the coming year. Thus, the Bank is expected to grow on the back of continued economic revival, and is well supported by reforms in the financial sector. Additionally, continued cost discipline will remain a clear priority, focus on freebased income will be intensified and adoption of new technologies and infrastructure platforms will be encouraged to maintain our leader ship position. In times to come, our efforts to increase efficiency and optimize our product and service range will see increased determination. Our comprehensive portfolio of business imitative, aimed at capturing additi0onalprofit growth potential will continue. As always, the Banks promise to its shareholders of its commitment to excellence and growth will be maintained. Increase the share of wallet, from existing customers has become the order of the day. Throughout, the year targeted technology investments and high quality services have been emphasized.

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To stay a head of competition, MCB has renewed its commitment to investing in new technology strategically to reduce costs, improve efficiencies, strengthen revenue-generating initiatives, and stronger MIS. A clear vision of service excellence has been communicated throughout the organization. A service culture is being infused within the bank through training and development, performance guidelines and leading by example. In view of increasing complexities and Basel II, the Bank is re-evaluating its approach to assessing, predicting and mitigating risk. Our strategic direction dictates that we quickly adapt to changing market conditions and changing customer requirements to maintain our leadership position. Regular meetings have been held amongst the top management to reinforce this strategic direction, which has been regularly communicated throughout the bank at all levels. Your Bank has again been declared the best bank in Pakistan by two of the most prestigious international publications: 1.The esteemed Euromoney Award for excellence 2005 for The Best Bank in Pakistan and 2.Asia Money Award 2005 for the Best Domestic Commercial Bank in Pakistan are the latest international recognitions of the Bank and its staff for their consistent performance. It is even more gratifying to note that MCB is the only Bank to receive the Euromoney Award for Excellence five times in the last six years and the Asia Money Award twice in a row. In order to provide financial sector services to the Banks clientele and to maximize synergies between group companies, an Asset Management Company has been incorporated with the name and style of MCB Asset Management Company Ltd. The AMC has been established as a result of conducive operating environment, rationalization of regulations and to enhance financial services base. During the current year the Bank has changed its accounting policy in respect of recognition of the net actuarial gains/ losses at each balance sheet date. The change has been made as the management is of the view that the new policy, of faster recognition of actuarial gains/ losses in financial statements, results in a more realistic presentation of the financial statements and financial results therein.

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The name of your bank has been changed from Muslim Commercial Bank Ltd. To MCB Bank Ltd. The need to change was felt due to the reason that bank was mainly known and popular as MCB. The public at large including customers of the Bank prefer to call the bank MCB and not Muslim Commercial Bank Ltd. It was, therefore, proposed to change the name to MCB Bank Ltd. Being more popular and possessing brand recall from among our customers. The change would also be beneficial in dealing with banks and other institutions in foreign countries as a short name shall be in line with recent trends. In order to cater for anticipated growth the equity of the Bank has been increased through an issue of right shares at 15 percent at a premium of rupees 15 per share in proportion of 15 shares for every 100 shares. The increased equity will also help to meat capital requirement under Basel Accord II. We would like to thank the shareholders for the trust they have posed in their bank by subscribing to the right issue. In conclusion, we applaud the successful efforts of the Government of Pakistan, State Bank of Pakistan and Ministry of Finance in engineering the countrys economic revival. Most importantly, we thank our valued shareholders, management and employees for their relentless support. We shall continue repaying the trust. For your Bank, sky is the limit. Business growth through a new set up of Corporate and Commercial Banking groups and Priority Banking Groups.

BRANCH NETWORK
SECTOR WISE
Sector-wise position of circles/regions as on December 31,2005 _____________________________________________________
GROUP REGIONS CIRCLES NO. OF

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____

BRANCHES

COMMERCIAL-NORTH COMMERCIAL SOUTH Wholesale Banking Islamic Banking TOTAL DOMESTIC Oversees* EPZ TOTAL

23 15 04 -42

8 8 2 18

562 368 12 05 947 04 01 952

PROVINCE WISE
PROVINCE NO. OF BRANCHES

Punjab Sindh NWFP Balochistan Azad Jammu & Kashmir

587 213 105 34 08

Total Domestic
Overseas* EPZ

947
4 1

Total 952 *Sri Lanka: 1.Colombo Main 2.Pettah 3.Maradana Bahrain: 1.OBU Bahrain

ATM Branches:
ATM Branches 234

Online Branches:
Online Branches 535

ORGANIZATIONAL STRUCTURE
MANAGEMENT HIERARCHY:

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BOARD OF DIRECTORS BOARD OF DIRECTORS CHAIRMAN CHAIRMAN SENIOR EXECUTIVE VICE PRESIDENT SENIOR EXECUTIVE VICE PRESIDENT EXECUTIVE VICE PRESIDENT EXECUTIVE VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT ASSISTANT VICE PRESIDENT ASSISTANT VICE PRESIDENT OFFICER GRADE-I OFFICER GRADE-I OFFICER GRADE-II OFFICER GRADE-II OFFICER GRADE-III OFFICER GRADE-III CASH OFFICER CASH OFFICER

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CATEGORIES OF SERVICES

A A

B B

C C

D D

President Executive Vice President Senior Vice President Vice President Assistant

Officer Grade Officer-I Officer Grade-II Officer Grade-III Cash Officer

Clerical Staff

Driver Guard/Gunm an Gate Keepers Tea Boys

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DIVISIONS AND DEPARTMENT

CHAIRMAN CHAIRMAN GENERAL MANAGER GENERAL MANAGER

ADMINISTRATION ADMINISTRATION

CHIEF MANAGER CHIEF MANAGER

ORGANIZATION & METHODS ORGANIZATION & METHODS INFORMATIONAL & INFORMATIONAL & TECHNOLOGY TECHNOLOGY OFFICERS TRAINING OFFICERS TRAINING INSTITUTE INSTITUTE SHARES SHARES

OPERATIONS OPERATIONS

BUSINESS DEVELOPMENT BUSINESS DEVELOPMENT

CREDIT CREDIT

INTERNATIONAL INTERNATIONAL

LAW LAW

FINANCE FINANCE

STATIONERY STATIONERY PLANNING RESEARCH & PLANNING RESEARCH & PUBLICATION PUBLICATION

RECOVERY RECOVERY

AUDIT & INSPECTION AUDIT & INSPECTION

TREASURY TREASURY

Division Headed by General Manager, Departments Headed by Chief Manager

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FUNCTIONS OF DIVISIONS
ADMINISTRATION/HUMAN RESOURCE DIVISION:

GENERAL MANAGER GENERAL MANAGER

ADMINISTRATION & ESTABLISHMENT ADMINISTRATION & ESTABLISHMENT

OFFICERS TRAINING INSTITUTE OFFICERS TRAINING INSTITUTE

This division deals with the problems related to the staff administration. The main function of this department is to arrange a comprehensive training program for recruited staff. Others function

Placing the staff Providing and defining the opportunities for career development and growth Devising and implementing services rules. Promotion and demotion Suspension and termination Transportation Security, health and benefits

includes:

Recruitment Staff remuneration

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OPERATIONS DIVISIONS:

This
GENERAL MANAGER GENERAL MANAGER
COMPUTER DEPARTMENT COMPUTER DEPARTMENT

division is

ENGINEERING & MAINTENANCE ENGINEERING & MAINTENANCE

O & M DEPARTMENT O & M DEPARTMENT

concerned with the operational working in general banking, which is concerned with the routing working of the bank. Any problem or ambiguity arise in any branch working are rectified and suggested for

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correction by this division. usually and takes technical

This Division procedures

Maintenance of the existing building owned by the bank Opening new branches and their

involved the decisions like commissions

maintenance

Stationery of the bank

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DEPARTMENT OF MANAGEMENT SCIENCES

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BUSINESS DEVELOPMENT DIVISION:

GENERAL MANAGER GENERAL MANAGER

MARKETING CELL MARKETING CELL

PRP DEPARTMENT PRP DEPARTMENT

It is the other name of marketing division. It promotes the bank cause i.e. deposits and work for the over all development of the bank. any. Deposits are the lifeblood of This Without deposits bank cannot

schemes like cash prizes and special increments. It publishes an bulletin in which those branches are encouraged who achieves their monthly targets. The main function is to develop and attract the customers and depositors. It also manage Advertising policy Sales promotion Schemes offered by the ban

perform any function of banking.

division fixes the deposits target of every branch by keeping and eye over the potential customers in the area. It gives motivation to branches to achieve their targets through different campaign and

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DEPARTMENT OF MANAGEMENT SCIENCES

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CREDIT DIVISION:

GENERAL MANAGER GENERAL MANAGER

AGRICULTURE CREDIT WING AGRICULTURE CREDIT WING

This

division

control

over

all

credit

the credit proposal to head office credit division. Credit committee approves it after making a through analysis. It also perform

operations like sanction of loans, inland bill purchased (IBP) and also keeps check over securities mortgage, hypothecating or pledge. It also fix the rate of mark-up and other decisions concerning with the credit.

Prepare the policies regarding the sanctioning loan Monitor loans and credit Look after the portfolio of the bank Define credit limits against specified securities

There

is

credit

committee,

which

consists of senior officers; branches send

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INTERNATIONAL DIVISION:

GENERAL MANAGER GENERAL MANAGER

INTERNATIONAL WING INTERNATIONAL WING

FOREX MONEY MARKET INVESTMENT FOREX MONEY MARKET INVESTMENT

ENGINEERING & MAINTENANCE ENGINEERING & MAINTENANCE

This

division

is

providing

important

services tot the bank regarding the matters of international trade, import export, letter of credit etc., it develops correspondent

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relationship with other commission basis and this helps to deal with the clients having import export business. It handles treasury operations.

The marketing and spot inspection cell, which were introduced by the bank, are showing positive results in terms of achieving foreign currency deposit targets and other foreign related businesses.

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FINANCE DIVISION:

GENERAL MANAGER GENERAL MANAGER

BALANCE SHEET RESULTS BALANCE SHEET RESULTS MONITORING SBP AFFAIRS, AND MONITORING SBP AFFAIRS, AND COMPLIANCE COMPLIANCE

SHARES DEPARTMENT SHARES DEPARTMENT

It
COMPANY AFFAIRS COMPANY AFFAIRS

controls the routing financial matters. The permission of special expenditure Incurred in the branches, and other such cases. The daily position and HO extracts are daily sent to this division by all the branches.

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This division not only estimates the profit and loss of every branch but also prepare over all income statement and balance of the complete bank. It also keeps record of total deposits of the bank and then their classification in the form of loans into different sectors of economy.

The basic functions are Monitoring the fiscal and financial policies of the bank

Deals in exploring means for investing banks surplus funds Maintenance employees. and investment of

gratuity and pension funds of the

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RECOVERY DIVISION:

The recovery division, which

GENERAL MANAGER GENERAL MANAGER

was established in 1994 to assist

LAW DEPARTMENT LAW DEPARTMENT

in regularizing the difficult loan accounts, has rendered valuable services this To an policy been in affect in a has framed efficient respect.

recoveries manner,

in accordance with the guidelines issue by the SBP; moreover recovery cells at regional levels have been setup to assist the head office. This division looks after the matters of recovery of loans with the assistance of legal advisors.

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AUDIT AND INSPECTION:

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GENERAL MANAGER GENERAL MANAGER

AUDIT OF AUDIT OF BRANCHES BRANCHES

RECTIFICATION AND RECTIFICATION AND PERSUASION PERSUASION

This department ensures appropriate system of check and balance. It checks all the irregularities, errors, and forgeries if any, under the rules and regulations formed by the Government of Punjab. For this purpose it doesnt only keep and eye on the branches in their vicinity but also conduct surprise audits of and the comprehensive branches.

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This strategy has improves working at the branch level. It not only points out the discrepancies but also tries to solve it. Surprise audit maintain a

good check on the over all working of the branch especially of the side of finance.

Chapter 2
CIRCLE OFFICE
TEAM BRANCHES UNDER AREA FUNCTIONS OF CIRCLE OFFICE INTRODUCTION

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Introduction
MCB is in its over 50 years of operation. It has a network of over 900 branches all over the country with business establishments in Sri Lanka and Bahrain. The branches break-up province wise is Punjab (62%), Sindh (22%), NWFP (11.1%), and Balochistan (3.6%) and Azad Jammu & Kashmir (0.84%). 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 that can be opened by foreign bank, an advantage that MCB capitalizes because of its extensive branches network. Ten year after Privatization, MCB is now in a consolidation stage designed to lock in the gain made in recent years and prepare the groundwork for future growth. The bank has restricted its assets portfolio and rationalized the cost structured in order to remain a low cost producer. MCB now focus on three core businesses namely Corporate, Commercial and Consumer banking. Corporate client include public sector companies as well

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large local and multi national concerns. The Bank providing 24 hour banking convenience with the largest ATM network in Pakistan covering 15 cities with over 100 ATM locations. The Banks Rupees Traveler Cheque has been market leaders for the past six years and has recently launched their Gift Cheque Scheme. MCB looks with confidence at year 2006 and beyond making strides making strides towards fulfillment of its mission, to become the preferred provider of quality financial services in the country with profitability & responsibility and to be the best place to work.

TEAM
The team of Circle office in the supervision of experienced and highly qualified persons Who is excellent and very nice combination of young, intelligent and energetic group. Miss Sadia as an Area operational manager, Mrs. Farrukh Saleem, Miss Nirma Munir are hardworking, motivated, and professional and committed with theyre duties. They are working strictly with the core values of the MCB BANK LIMITED and have been appreciated by the Head Office and Regional Office.

BRANCHES UNDER REGIONAL AREA

MCB Model Town A Bahawalpur MCB Ghalla Mandi Bahawalpur MCB Farid Gate Bahawalpur MCB Eid Gah MCB Lodhran MCB KhyerPur

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MCB Shahi Bazar MCB Chistian MCB Fortabbas

FUNCTIONS OF CIRCLE OFFICE

Monitoring of branches business and helped them to expand the same Collection of daily, weekly and monthly reports from branches Coach and trained the staff Sanction salary loan Meet with present and prospective clients Transfer and posting of staff in the area

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Chapter 3
BRANCH
INTRODUCTION BRANCH TEAM BRANCH HIERARCHY

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INTRODUCTION
Fortabbas is historical city of south Punjab, and a single branch of MCB is situated at Galla Mandi Fortabbas. The team of branch in the supervision of an energetic, highly qualified person Mr. Waqas Zaffar is an excellent and very nice combination of an experienced person (Mr. ) and young and energetic (Mr.), all are hardworking, motivated, professional and committed with their duties. They are working strictly with the core values of the Bank and have been appreciated by the Head Office and Regional Office. Fortabbas is famous about its cotton and wheat growing. There are some cotton ginning factories in the surrounding areas of city, There is also Al-hayat Flour Mill and Pak Rehmania cotton Factory, Itehad rice mills. There is also lot of shopping bazaars and plazas like Punjab Plaza, Ashraf Plaza, Anarkali bazaar, Chowk Bazar, etc. these all are at the walking distance from the MCB Bank Ltd., Ghallah Mandi branch. MCB branch is dealing in cash financing, demand financing, running financing and also newly introduced consumer financing schemes for salaried and non salaried persons; that are MCB Car Loan, MCB SME Loan, MCB Pyara Ghar Loan, MCB House Loan and Quick Cash.

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BRANCH TEAM
FARRUKH SALEEM MANAGER ASGHAR SHAH OPERATION MANAGER

EJAZ BALOUCH VERIFICATION OFFICER MADAM RAHILA REMITTANCE OFFICER MISS NAIMA ISRAR CUSTOMER SERVICE OFFICER ABDUL JABBAR CASHIER TAHIR MAHMOOD CASH SEPARATOR SAGHIR QURESHI GUARD

HAJJI M. RAFIQ CASHIER SYED M. ALI ZAIDI CREDIT OFFICER MISS NAIMA ACCOUNTANT MISS AISHA CASHIER MUHAMMD AMAN CASH SEPARATOR M. TAUQEER GUARD

MUHAMMAD KHALID PEON/MESSENGER

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BRANCH HIERARCHY

BRANCH BRANCH MANAGER MANAGER Manager Manager Operations Operations Officer Officer Grade Grade I I Officer Officer Grade Grade IIII Officer Officer Grade III Grade III Cash Cash Officer Officer Cash Cash Officer Officer Cash Cash Officer Officer

Messenger Messenger

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Chapter 4
BANKING SERVICES
MCB CONSUMER FINANCING o o MCB CAR 4 YOU MCB PYARA GHAR BANKING SERVICES ACCOUNTS OF SPECIAL CUSTOMERS

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MCB CONSUMER FINANCING

EASY PERSONAL LOANS:
MCB Easy Personal Loan provides you with the financial advantages to do things youve always wanted to but never had the sufficient funds for. Take that much needed holiday. Buy a Car, Refurnish your house, new T.V., CD Player, DVD Player, Motor Cycles, Fridges, Refrigerator, etc. Finance a better education for your children.

ELIGIBILITY CRITERIA:
MCB will lend you any amount from Rs. 30,000/- to Rs. 800,000/depending upon your net monthly income. You can choose tenure of 1 to 3 years or longer which facilitate you for the repayment of the loan. Bank to 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 of principle and mark-up is monthly and can repay using either one of the following modes: Direct salary transfer Payroll Deduction Minimum net monthly income Rs 10,000 20 to 65 years of age Pakistani nationality

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Permanent resident of Karachi At least 2 years of employees of selected institutional MCB customers in Karachi.

CAR FOR YOU SCHEME:

With MCB Car cash you worry of getting a brand new car for yourself and your family is over. Ours is the best option available in the market when you talk about car financing.

FEATURES:
Lowest car financing rate of 13.65% (Limited time offer) Down payment as low as 20% Financing tenure of up to 12 years. You can finance from Rs. 150,000 to Rs. 1.5 million depending upon your income, Vehicle cost and the down payment. Low processing fees of Rs. 3500.

ELIGIBILITY CRITERIA:
Minimum net take income of Rs. 15,000. Your monthly installation for MCB car cash should not exceed 45% of your net take home income.

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25 to 57 years of age. Age of 60 shall not be reached before the maturity of the facility. Pakistan National residing in cities where MCB car cash has been launched. Businessmen and self employed with the minimum experience of 3 years in the same business and profession. For salaried individuals, 2 years with the same employer and overall three years of employment history.

Monthly Installment Calculation:

Your total monthly installation will include finance installment and insurance charges. You can calculate your monthly finance installment by using the following Calculator for your selected term:

Term (years) 3 4 5

Advance Installment 0.03469 0.02797 0.02400

Deferred Installment 0.03516 0.02834 0.02432

Calculate at introductory rates of 16%. Fill in the blank to calculate your monthly finance installment excluding insurance premium charges. DETAILS List price of Car Financing Duration Down Payment (%) Down Payment (Rs.) Finance Amount EXAMPLE 400,000 5 years 20% 80,000 320,000 YOUR CALCULATION

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Factor* 0.02400 Monthly Finance 7,680 Installment Calculated on advance mode of installment payment

PYARA GHAR:

MCB has launched Pyara Ghar-your window to own a home. put your dream home within your reach.

Yes! MCB

With the MCB Pyara Ghar Scheme you can obtain the financing to purchase a house/apartment, Construct your own house or renovate your existing house immediately. Its better than paying a monthly house rent which takes you nowhere other than increasing your expanses.

FEARURES:
A MCB rate gives your dream home at the lowest and best possible markup rates. You can choose either one of our two markup rates options- fix or variable. Early repayment option tailor-made to allow you to make partial prepayments at dates that suit you Option to club your spouses income to avail higher financing amount. We also tailor Corporate Packages for the employees of selected institutions.

ELIGIBILITY CRITERIA:

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Pakistani national resident in the city and area where the product is launched 25 years old or above when you apply and under 60 at the time of maturity of the applied financing period Salaried person, Self-employed professional or a businessman with a verified monthly income stream. Net take-Home income not less than Rs. 25000 per month Have five year or more of business or professional experience. Employed with the present employed for 2 years with a total employed history of 5 years.

DETAILS Financing Amount

HOME PURCHASE

HOME RENOVATION

HOME CONTRUCTION

Debt to Equity Ratio Tenure

Rs.200, 000 to Rs. Rs. 100,000 to Rs. Rs. 200,000 to Rs. 5,00,000 200, 000 5,000,000 (Flexibility up to Rs.7m.) 60:40 30:70 50:50 3 years to 15 years 2 years to 5 years 3 years to 15 years

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CATLOGUE OF PRODUCTS & SERVICES

PRODUCTS & SERVICES

The Largest network of Call now for answer The over 269 on-line branches to in the country growing. your and banking services, ATMs

nation's and 24

largest growing. hour mini transfer

queries, network of over 197

Providing ATM services, mobile Get services,

customers with 24x7 real banking time on-line transaction RTC facilities. MCB information.

services, convenience of cash tele withdrawal, funds

banking services and statement, bill payment product and services.

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Cash services customers. customers reduce

management A deposit account for Cash for corporate customers Helps substantial balance ATMs

withdrawal worldwide. of

with facility at over 630,000

substantially offering profit on a Convenience time

their

receivable daily product basis shopping at over 5 frame, with the facility of million POS locations globally. withdrawals.

collection

improve cash flow and unlimited business management.

A secure instrument of Islamic payment, offering CASH services FREE convenience. It is exclusive

banking Banking through fingertips. units / anytime

at Dial to and

your in get mini

the most powerful Debit branches offering a information and ATM Card providing range of liability and balance your bank account. compliant products 24-hour direct access to asset based Sharia statements.

regarding

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like Istasana.

Musharika,

Murabaha, Ijara and

MCB an

Network hub

for Flexible

and One

of

the

most deposit by

Electronic Transactions is competitive electronics ATM sharing plus other options touch points. The nation's purchase, largest operating switch construction with the highest renovation. transaction volume. of

home popular home MCB. and

for financing facility with accounts

offered

Get a loan in an instant at Fastest to Pakistan, any MCB branch. Offering anywhere in same day financing facility Pakistan. against liquid collateral at International competitive pricing. remittances with a two-way messaging facility delivered at

A local Point of Sale acquiring of all network major card facilitating acceptance brands.

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your doorstep within 24 to 72 hours.

Car financing and leasing The flexible finances commercial personal use. options. both and

most

widely Personal

loans local tailored

for and to

at competitive rates with accepted way to pay salaried individuals of Car4u cash for travel related reputed non- secure way to make rates capacity. semi- purposes. A safe and foreign companies at

commercial vehicles for payments nationwide. customer's repayment and business

Providing diversified

access

to MCB, the leader in The best protection for technology, your the Lockers of capacities of valuables. different are provides on

financing banking

options including working now

capital loans, term loans, convenience trade finance services and banking investment banking.

the available nationwide.

internet. You can now access your account

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anytime anywhere.

and

BANKING SERVICES
T
here are the following services being provided to the claims: Acceptance of deposits Granting of loans Transaction Foreign Exchange Services RemittanceCollection SPEDFAXinstant Fund Transfer Service Lockers facility Utility Services

The Bank of Punjab attaches special importance to the fee earning business and

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business base remuneration. As part of diversification of the banks utility services, the collection of bills of INSTAPHONE was added to existing collection arrangements for WAPDA, SUIGAS, WASA, PTCL, and PAKTEL. By using banks extensive branch network, effort have been to made to maximize the exploitation of this source in view of its rich potential of yielding business and deposit direct earning of commission. DEPOSIT SECTION In modern times very few business enterprises are carried out solely with the capital of the owners. Borrowing funds from different sources has becomes an essential feature of today business enterprise. But in the case of a entire banking system is based on it. The borrowed capital of the bank is much greater then their own capital. Banks borrowing is mostly in the form of deposits. These deposits are lent out to different parties. The larger the difference between the rate at which the depositors are borrowed and the rate at which they lent out the greater of the profit margin of the bank. Furthermore, the larger the deposit the larger will be the funds available for employment; larger the funds lent out the greater will be the profit of the bank. To receive the deposit is the basic function of all commercial banks. The bank does not receive these deposits for save keeping purpose only, but they accept deposits as debts. When banks receive deposit from a customer, they relationship of a debtor and creditor is established where by the customer become the creditor and the bank a debtor. When the bank receives amount of deposit as a debtor, it becomes the owner of it. It may, therefore use it as deems appropriate. But there is an implicit agreement that the amount owned would be paid back by the bank to the depositor after a specified period. NATURE OF DEPOSITS Current deposits

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Profit and loss sharing account Short notice term deposits (SNTDR) Call deposit Term deposit receipts (TDR)

Current Deposits In this type of account the customer to allowed to deposit or withdraw cash as and when he likes. Because of their nature, these deposits are treated as the current liabilities of the bank. There is no profit on such deposits. Usually the business community opens this type of account. There following accounting transaction in current accounts. Profit and Loss Sharing Account This type of account is one step toward the Islamic Banking in Pakistan, but the actual theme of this account has been dead, this is being treated as markup/interest base account now. There are two types of PLS accounts: PLS saving account PLS -TDR (Profit and Loss Sharing Term Deposit Receipts)

PLS saving accounts can be opened with the minimum sum of Rs. 500/- and PLS-TDR account can be opened for a sum of Rs. 5000/- or above. Profit is paid on both type of accounts on half yearly basis. Under PLS saving account the depositor undertakes to share profit or loss on the deposits earned or sustained by the bank. Secondly the bank is at the liberty to invest the funds of the deposits in any industry, it deems fit. The PLS deposits are invested in non-interested channels. Short Notice Term Deposits (SNTD)

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This kind of deposit is for a short period. The depositor may withdraw his deposit at any time by giving seven days notice to the bank. This type of deposit facilities the depositor to withdrawn his amount with interest of the deposited period. Call Deposit Call deposits are the also the kind of deposits, which are deposited with banker against any tender. This is without interest deposit. This may be with interest provided the depositor has agreed to keep this amount with the bank for some fixed period. Term Deposit Receipts (TDR) This type of deposit is same as the SNTD. The difference is that SNTD is for the short period (7-30 days) while TDR is for long period (1 month up to 5 years).

ACCOUNT OPENING SECTION Account opening is the first step towards establishing a relationship between the customer and the bank. The MCB Bank is offering basically two type of account in this section: Current Deposit Account Profit and Loss Sharing Account

The necessary condition for a customer, who wants to open an account with the bank, is introduction, which is preferably by the bank officers or any account holder of the bank. The different categories of the accounts that are available are as under:

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Individual Account Joint Account Partnership Account Limited Company Account Clubs, Society, Association, or Trust Account SNTD (short notice term deposits) TDR (term deposit receipts) Foreign Currency Deposits

CLEARING SECTION Clearing is the most important department of the bank performing various functions. Clearing House A clearing house is an organization of the member banks, working under SBP and which is for the purpose of setting inter banks claim resulting from transmission of funds from one bank to another. The branch cheque/instruments are credited in the account of the customer. The clearing can be: Outward Inward

Outward clearing The instrument collected or stored bank wise and a schedules is prepared separately for each bank mentioning the total number of instruments and the amount of the instruments. Then these are recorded in a register called OUTWARD CLEARING REGISTER then a main schedule is prepared showing the total number of cheque and their aggregate amount being presented in the clearing. The cheque/instruments are handed over the clearing branch. Central clearing branch

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issue CREDIT ADVICE to the branch for passing credit to its customer immediately the branch on receiving credit advice debits the clearing account and credit the respective customer account. Inward Clearing On receiving cheque/instruments from central clearing branch, the Incharge checks the number and amount of cheque received in clearing must tally with the main schedule received from central clearing branch. These cheque/ instrument are enter in INWARD CLEARING REGISTER for the cheque/ Instrument passed in clearing is a credit advice for the aggregate amount of cheque passed in clearing is prepared, drawn on central clearing branch. RESERVE AT STATE BANK OF PAKISTAN Deposit held by the bank at SBP serves as cheque clearing and collection balances. Rather than physically transferring funds between banks, cheque clearing and collection can be done by simply debiting or crediting a banks account at SBP. REMITTANCE SECTION Remittance is a major function of the bank. It is the transfer of money from one place to another place. The need for remittance is commonly felt in commercial life particularly and in everyday life generally. By proving this service to the customers the Bank of Punjab earns a lot of income in the form of service charges. The Bank of Punjab deals with the following type of remittance: Demand Draft (DD) Mail Transfer (MT) Telegraphic Transfer (TT)

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Pay Order

Demand Draft (DD) Demand draft is a written order given by the one branch of a bank on behalf of customer to another branch of the same to a certain amount to the certain person. Procedure to prepare demand draft 1. A draft voucher is filled which contains the following information Name of the parties involved Date Amount to be sent Account number (if DD is crossed)

2. A credit voucher is filled in order to get the excise duty and exchange commission. 3. The sender deposits the total amount of the two vouchers i.e. the debit and credit voucher. 4. Then the cashier sends the cash receipt voucher to the accounts section where the officer records the amount paid in his cash scroll. 5. Accountant gives the DD leaf along with the DD voucher to his assistant who records the senders name, amount the receivers name. After writing all the information in the DD register he gives it to the officer along with the DD for authentication.

6. After authentication the DD is handed over to the sender and bank sends the advice
to the concerned branch. So when the part presents the DD in the concerned branch it payment could be made.

Parties involved in the Demand Draft

There are the following parties involved in demand draft: 1. Purchaser or Sender

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The purchaser is the person who sends the money to a particular person payable at a certain branch. 2. Issuing or Drawing Branch The branch from where the demand draft is issued to another branch of the same bank. 3. Drawer Branch Branch on which the drafts have been drawn and have called upon to pay the amount 4. Payee The person who is entitled to receive the amount after presenting the demand draft in the drawer branch Mail Transfer (MT) It is the transfer of money from branch to another branch of the same bank through mail service. In mail transfer there is no need of advice as the amount is directly credited to the receivers account.

Procedure to prepare mail transfer

1. First a voucher is filled in which the sender writes the amount to be sent, name, account number of the receiving person with the branch name and date. 2. A credit voucher is filled in order to deduct exchange, postage charges according to the amount of the mail transfer. 3. Then sender deposits the total amount in the cash section. 4. The cash officer gives the voucher to the officer after affixing received cash stamp and writing the amount in red ink. 5. Then the officer writes the amount paid in the cash scroll and gives the MT to his

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assistant. 6. MT leaf is filled according to the information provided in credit voucher. He also writes the same information in the MT register. Then he gives the MT leaf and MT register to the officer for authentication.
Telegraphic Transfer (TT)

This is the most urgent method of remitting the money from one place to another place. This method is used when the sender desires to send urgently, in this case the sender request the manager of the branch to issue TT.

Procedure to prepare telegraphic transfer

1. For sending the TT, the manager and officer apply a test. In this test the manager and officer uses a coding technique. They write their own code numbers, which is allotted to them as the bank branch code. 2. After making all the confirmation, the concerned branch makes the payment to the receiver. 3. If sender wants to convey the same message through telephone then he has to pay the charges of telephone along with the TT charges. 4. First the person deposit the TT amount along with the charges through the credit voucher then this TT sent to the relevant branch. Pay order (PO) A pay order is written order issued by the bank on its own branch, drawn upon and payable by itself to pay a specified sum of money to the person. The purpose of a pay order is to transfer the fund from one place to another. It is usually not issued in favor of the parties of other cities. Usually the pay order is issued for the local transfer of money from one person to another or from the person to any other department. It is used fro

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different purposes. The purpose may be the repairs by the repairs of the branch or renovation of the branch.

ADVANCES/CREDIT SECTION
It is the loan function, which produces the major portion of banks income, and as such it is the major areas of professional bankers concern and attention. Principles while advancing Basically there are five principles that must be duly observed while advancing money to borrowers. Safety Liquidity Disposal Remuneration Suitability

Forms of Lending Mainly there are two types of advances:

Short-term Lending (maturity with in one year) Long-term Lending (maturity with the period of more than one year) Running Finance Demand Finance Cash Finance Letter of Guarantee

How ever they are further classified as

Running Finance

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This form of finance was previously known as overdraft. When a customer requires the temporary accommodation, his bank allows withdrawal his account in excess of credit balance, which the customer has in its account, a running finance occurs. accommodation is thus allowed collateral security. The When it is against collateral

securities, it is called Secured Running Finance and when the customer cannot offer any collateral security except his personal security, accommodation is called Clean Running Finance. product basis. Demand Finance This is common form of financing to commercial and industrial concerns and is mad available either against pledge or hypothecation of goods produce or merchandise. In demand finance the party is financed up to a certain limit either at once or as and when required. They party due to facility of paying mark-up only on the amount it actually utilizes prefers this form of financing. The customer is in advantageous position in running finance because he has to pay the mark-up on the balance outstanding against him on daily

Securities of Advances

There are the following securities for advances:

Pledge Hypothecation Guarantee Indemnity Charge Advances against Stock Exchange Securities Advances against immovable property

Pledge

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Pledge is defined as The bailment of goods as security for the payment of the debt and the performance of a promise is called pledge. Pledge is the characteristics mode of taking goods as the security and the pledge occurs when the goods or document of the title thereto or the securities are delivered by the customer to his banker to be held as security for the repayment of the advance. In a pledge, the ownership remains with the pledger but the pledge has the exclusive possession of the property until the advances in repaid in full, while in case of default the pledge has the power of sale after giving due notice. People with the safe custody of goods, when entrusted with the goods for the specific purpose may not make the valid pledge. Hypothecation Hypothecation is defined as A legal transaction where by goods may be made available as the security for a debt without transferring either the property or the possession to the ledger. When the property in goods is in charged as the security for a loan from the bank but the ownership and the possession is left with the borrower, the goods are said to be hypothecated. The essence of the hypothecation is that neither the property in the goods nor the possession of them passes to the lender, but the security is guaranteed by means of letter of hypothecation, which usually provides for a bankers charge of the hypothecated goods. Guarantees Guarantee is defined as A contract to perform the promise, or discharge the liability of the third person in case of his default. This is so when an application for the advances cannot offer any tangible security, the banker may rely on the personal guarantees to protect himself against loss and advances or overdraft to the applicant. There fore a guarantee may be either written or oral. The guarantee is a promise by one person called the guarantor or security to another for answering the present or future debt if a

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second person called the Principal Debtor. Indemnity Indemnity is defined as A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor him self or by any other person is called the contract of indemnity. Thus in an indemnity, the promisor is the only person who becomes liable to the promise if the latter suffers a loss on account of his doing something at the express desire of the former. Charge

When immovable property of one person is by act of parties, or operation of law, made security for payment of money to another, and the transaction does not amount to mortgage, the latter person is said to have the charge on the property, and all the provisions herein before contained which apply to a simple mortgage shall, so far as may be apply to such charge. This means that a charge is a right of payment out of certain property. The charge can be created by the act of parties or by the operation of the law and although the property is made a security the payment of loan, is still not the mortgage.
Advances against stock exchange securities A stock exchange security is the vast term that covers all gilt-edged securities such as: Federal and provincial government bonds Post trust or municipal bonds Shares and debentures

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Banker, as security for advances to the customer, frequently accepts these securities. Advances can be against Preference shares Ordinary shares Preferred shares

It can be Quoted or unquoted Registered Bearer Inscribed

Advances against immovable property (Mortgage) A mortgage is the transfer of interest in specific immovable property of r the purpose of securing the payment of the money, advanced or to be advanced. By way of loan, and existing debts or the performance of the engagement this may raises the pecuniary liability. The transferor is called the mortgager and the transferee the mortgagee the principal money and interest of which payment is secured for the time being and instrument, by which the transfer is affected, is called the letter of the mortgage deed.

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ACCOUNTS OF SPECIAL CUSTOMERS

Though every person, legally capable of becoming a party to a contract, can open an account with MCB, yet the capacity of certain classes of persons to make valid
PARTNERSHIP ACCOUNT

agreements are subject to well recognized restrictions, as in case of agents, trustees, executors, administrators, firms and joint stock companies.

Account opening form duly Account opening form duly signed by all the partners signed by all the partners Specimen signature cards Specimen signature cards containing the specimen containing the specimen signatures of the persons signatures of the persons authorized to operate the authorized to operate the account. account. A partnership letter duly A partnership letter duly signed by all the partners in signed by all the partners in their personal capacity is their personal capacity is also obtained.. also obtained All the partners assume the All the partners assume the liability of the firm to the liability of the firm to the bank as joint and several. bank as joint and several. This letter is obtain from This letter is obtain from both registered and nonboth registered and nonregistered firms registered firms accordance with the accordance with the section 25 of Partnership section 25 of Partnership Act1932 Act1932

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JOINT STOCK COMPANY ACCOUNT

Account of the company is opened Account of the company is opened on the resolution of the Board of on the resolution of the Board of Directors, which nominates the Directors, which nominates the persons authorized to operate persons authorized to operate upon the account. upon the account.

The must take the specimen The must take the specimen signatures of the authorized signatures of the authorized persons and allow the operations persons and allow the operations on the account under those on the account under those signatures as long as the authority signatures as long as the authority is not terminated. is not terminated.

When bankers receives a notice of When bankers receives a notice of death, retirement of dismissal of death, retirement of dismissal of the authorized person, he should the authorized person, he should stop the operation on the account stop the operation on the account and wait for the fresh resolution and wait for the fresh resolution authorizing another person before authorizing another person before his death, retirement of dismissal, his death, retirement of dismissal, should be honored by the banker should be honored by the banker because they were valid because they were valid instruments before the termination instruments before the termination of his authority. of his authority.

The banker may open the account The banker may open the account of a newly floated public ltd of a newly floated public ltd company without the certificate of company without the certificate of commencement of business in commencement of business in order to receive the amount of order to receive the amount of issued capital from the issued capital from the prospective shareholders; but he prospective shareholders; but he should not allowed any withdrawal should not allowed any withdrawal from the account till the certified from the account till the certified copy of Certificate of copy of Certificate of Commencement of Business is Commencement of Business is submitted to him. submitted to him.

Failure to obtain this certificate Failure to obtain this certificate necessitates the refund the necessitates the refund the amount to the prospective amount to the prospective shareholder by the promoters. shareholder by the promoters.

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ACCOUNTS OF CLUBS, SOCIETIES AND ASSOCIATIONS

The resolution of the The resolution of the Governing Body/ Managing Governing Body/ Managing Committee authorizes the Committee authorizes the opening of the account with opening of the account with the MCB Bank. the MCB Bank.

The resolution should name the The resolution should name the persons authorized to operate persons authorized to operate upon the account, clearly upon the account, clearly specifying the powers of the specifying the powers of the authorized persons. The authorized persons. The resolution should be signed by resolution should be signed by the Chairman of the meeting at the Chairman of the meeting at which the resolution was passed which the resolution was passed and countersigned by the and countersigned by the Secretary of the Governing Secretary of the Governing Body/ Executive Committee.. Body/ Executive Committee
..

Certified copy of the byelaws Certified copy of the byelaws or rules and regulations, or rules and regulations, clearly showing the limitations clearly showing the limitations of the Managing Committee of the Managing Committee or the Governing Body. or the Governing Body. The account-opening form The account-opening form duly signed by the authorized duly signed by the authorized person(s) who would operate person(s) who would operate on the account on the account An undertaking signed by all An undertaking signed by all the authorized persons on the authorized persons on behalf of the institution, behalf of the institution, expressly mentioning that as expressly mentioning that as and when any change takes and when any change takes place in the persons place in the persons authorized to operate on the authorized to operate on the account, the banker will be account, the banker will be informed immediately. informed immediately.

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Chapter 5
FINANCIAL ANALYSIS

OPERATING HIGHLIGHTS BALANCE SHEET PROFIT AND LOSS ACCOUNT SIX YEAR PROGRESS RATIO ANALYSIS PROJECTED ANALYSIS

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OPERATING HIGHLIGHTS
In line with overall growth of the economy, banking sector continued to register high profits and remarkable progress. Interestingly, year 2006 witnessed profitability of the banks originating from their core activities unlike last year when considerable portion of profitability was on account of CAPITAL GAINS. However, as far as the performance of MCB Bank is concerned the Board is proud that, by the grace of Allah, the Bank has made history during the year 2006 by earning an all time high pre-tax profit of Rs. 1.3018 million reflecting a growth of 73% over the preceding years profit of Rs. 1,002 million. The Shareholders Equity increased as at 31st December 2006 with comfortable Capital Adequacy Ratio of 12.85%. As against 15.5% at the close of previous year On the business side also the Bank achieved highly impressive growth in Deposits and especially in Advances.

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BALANCE SHEET
BALANCE SHEET
AS ON DECEMBER 31, 2005
(Rupees 000)

2009 ASSETS Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Other assets Operating fixed assets Deferred tax assets

2004 23,833,25 3 5,708,323 10,965,297 67,194,971 137,317,773 6,154,370 7,999,821 259,173,773

2003

2002

2001

23,665,549 1,469,333 9,998,828 69,481,487 180,322,753 5,464,426 8,182,454 191,967 298,776,797

24,053,669 1,302,592 10,430,450 128,276,842 97,200,179 6,477,064 4,582,823 272,323,619

17,901,270 2,154,190 33,874,620 89,176,542 15,991,037 8,883,163 3,825,045 235,138,567

21,259,900 3,025,689 15,470,519 45,376,260 76,585,999 11,621,406 3,659,646 187,055,394

LIABILITIES Bills payable Borrowings from financial institutions Deposits and other accounts Subordinated loans Liabilities against assets Subject to finance lease Other liabilities Deferred tax liabilities NET ASSETS REPRESENTED BY: Share Capital Reserves Un-appropriated profit Surplus on revaluation of assets Contingencies and commitments

8,536,674 27,377,45 4 229,345,1 78 8,611,600 275,469,034 23,307,763 4,265,327 13,408,005 210,662 17,883,994 5,423,769 23,307,763

7,566,684 7,590,864 221,069,158 6,525,999 269,499 244,620,924 14,552,884 3,371,800 5,661,553 165,208 9,198,561 5,354,323 14,552,884

8,396,320 32,627,951 211,511,393 8,679,262 261,214,926 11,108,693 3,065,273 4,379,255 281,636 7,726,164 3,382,529 11,108,693

6,261,957 21,987,824 182,705,716 12,484,179 223,439,676 11,698,891 2,665,455 3,026,157 621,985 6,313,957 5,384,934 11,698,891

8,097,178 8,946,624 154,544,451 8,580,465 180,168,704 6,886,690 2,423,140 2,278,980 302,465 5,004,585 1,882,105 6,886,690

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PROFIT AND LOSS ACCOUNT

PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, --------(Rupees 000)

2005 Net Markup/return/interest income after provisions Markup/return/interest earned Markup/return/interest expensed Net Markup/return/interest income Provision against loans & advances and for potential lease losses Provision for diminution in the value of investment Bad debts written off directly Net Markup/return/interest income after provisions Non markup/interest income
Fee, commission and brokerage income

2004 9,083,863 2,057,640 7,026,223 443,795 (172,876) 8,771 279,690 6,746,533 1,992,356 378,908 492,738 1,368,986 4,232,988 10,979,521 7,244,200 149,593 41,864 7,435,657 513,852 4,057,716

2003 10,369,994 2,932,693 7,437,301 1,744, 944 62,064 448,999 2,256,007 5,181,294 1,042,437 372,821 2,784,859 3,864,577 9,045871 6,587,369 937,738 7,525,107 3,612,924 1,382,77 9 1,382,779

2002 15,385,869 6,074,682 9,311,187 512 721,105 721,617 8,589,570 907,071 297,748 881,746 2,096,565 10,686135 7,549,364 529,344 8,078,708 3,101,020

2001 17,033,225 7,544,897 9,488,328 756,652 (150, 000) 224,432 831,084 8,657,244 868,637 243,994 400,14 0 1,512,771 10,170,015 7,331,623 147 7,331,770 2,101,176

17,756,232 2,781,468 14,974,764 1,242,153 (98,982) 1,184 1,144,355 13,830,409 2,448,480 480,344 531,455 1,952,322 5,413,071 19,243,480 6,459,490 (72,740) 178,841 6,565,591 340,598 13,018,487

Dividend income
Income from dealing in foreign currencies

Other income & Gain (Loss) on investment & trading in Govt. securities Total non markup/interest income Non markup/interest expenses Administrative expenses [Reversal] / other provisions Other charges Total non markup/interest expenses Exceptional item [Gain / (Loss)] Compensation on delayed tax refund Profit before taxation Taxation Current Prior years Deferred

4,611,359 (149,763) (365,524) 4,096,072

1,555,764 70,420 1,626,184

1,362,426 1,362,426

993,000 993,000

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Profit after taxation

8,922,415

2,431,532

2,230,145

1,738,594

1,108,176

SIX YEAR PROGRESS

2005 2004 2003
(Rupees in Million)

2002

2001

2000

OPERATING RESULTS:
Mark-up/ Return earned Mark-up/ Return expend Fee, Commission, Brokerage & FX income Fund based income Dividend and Capital gains Total income Provisions/ Write-off Operating expenses Exceptional item Operating Profit before tax and Provision Profit before taxation Profit after tax Dividends Bonus Shares 17,756 2,781 4,056 14,975 1,348 20,388 1,072 6,638 341 14,091 13,019 8,922 1,715 853 6,500 4,265 17,884 298,777 5,424 229,345 27,378 180,323 69,481 9,084 2,058 3,061 7,026 1,172 11,959 429 7,286 514 4,487 4,058 2,432 843 337 6,500 3,372 9,199 259,174 5,354 221,069 7,591 137,318 67,195 10,370 2,933 2,118 7,437 2,414 11,969 831 7,525 4,444 3,613 2,230 843 307 3,500 3,065 7,726 272,324 3,383 211,511 32,628 97,200 128,277 15,386 6,075 1,909 9,311 681 11,901 722 8,079 3,822 3,100 1,739 666 400 3,500 2,665 6,314 235,139 5,385 182,706 21,988 78,924 89,577 17,033 7,545 1,944 9,488 257 11,689 2,256 7,332 4,357 2,101 1,108 606 14,124 7,239 2,393 6,885 371 9,649 1,162 7,165 2,484 1,322 735 165 421 3,500 2,203 4,484 174,715 1,109 135,990 16,891 86,359 43,111

BALANE SHEET:
Authorized Share Capital Paid-up Capital Shareholder's Equity Total Assets Revaluation Reserves Deposits Borrowing from financial institutions Advances net of provisions Investments - net of provisions 3,500 2,423 4,986 187,054 1,901 154,544 8,947 76,584 55,432

FINANCIAL RATIOS:
Gross Spread Ratio (Net Markup Income / Gross Markup Income) Income / Expense ratio 84.34% 3.07:1 77.35% 1.55:1 71.72% 1.59:1 60.52% 1.47:1 55.70% 1.59:1 48.75% 1.35:1

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Return on Average Equity (ROE) Return on Average Assets (ROA) Loan / Deposit ratio Total Assets Turnover Ratio / Fixed Assets {Turnover Ratio=Total Assets / Fixed Assets} Price Earning Ratio Earning Per Share (EPS) (After Tax) Market Value Per Share Book Value Per Share Book Value Per Share including Surplus / [Deficit] on revaluation Number of Branches Number of Employees Number of Accounts OTHERS: Imports Exports

65.89% 3.20% 78.63%

28.73% 0.91% 62.12%

31.77% 0.88% 45.96%

30.77% 0.82% 43.20%

23.40% 0.61% 49.55%

17.50% 0.44% 63.50%

36.51 7.86 21.36 167.8 41.93

32.4 8.14 7.21 58.7 27.28

59.42 7.06 7.28 51.4 25.21

61.47 5.11 6.52 33.35 23.69

51.11 4.11 4.57 18.8 20.58

48.47 9.71 3.34 32.4 20.35

54.64 43.16 952 946 9,377 9,889 4,248,399 4,122,338 138,047 54,794 89,653 37,796

36.24 43.89 28.42 25.39 986 1,045 1,061 1,210 10,164 10,926 11,614 12,133 4,433,539 4,463,530 4,392,164 5,062,364 64,453 28,609 48,842 28,284 53,008 34,968 66,910 33,575

RATIO ANALYSIS

The

relationship

of

one

item

to

another

expressed

in

simple

mathematical form is known as a ratio. A single ratio in itself is meaningless because it does not furnish a complete picture. A ratio becomes meaningful when compared with some standard. So we have

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taken ratios and percentage of the MCB based in its record of the past financial and operating performance. On the following pages, I make the analysis of the financial statements of BOP by using related items for the last five years.

Liquidity Ratios: Current Ratio

RATIO Current Ratio

FORMULA
Current Assets / Current Liabilities

2005

2004

2003

2002

2001

1.07:1 1.04:1 1.03:1 1.05:1 1.00:1

This ratio measures the firms ability to meet its short-term obligations. In 2001 this ratio was 1.00 and in 2005 it was 1.05. In 2002 there is an increase in this ratio and here ratio is reached to 1.05 as compared to 2001, 2003 & 2004 and it is due to increase in Lending to financial institutions and decrease in current liabilities such as borrowing from financial institutions and a minimal decrease in bills payable. After that this increase in 2002 and then decrease in 2003 & 2004. In

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2005 with some increase in present year of 2005 it is 1.07. So overall the firms position is strong because the standard ratio of current ratio is 2.

Networking Capital

Year Rs. 000

2005 19678596

2004 8792911

2003 7528708

2002 11474862

2001 207402

Net Working capital, although not actually a ratio, is a common measure of a firms overall liquidity. This ratio is very useful for lender because when they lend or deposits in the bank they check its flows of net working capital. There is a increasing trend in the net working capital of the bank which is very beneficial for the bank because it can raise more loans or attracts more deposits from the customers.

Analyzing Debt
Debt Ratio

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Year Ratio in %

2005 91.66

2004 94.38

2003 95.92

2002 95.02

2001 96.31

The Debt ratio measures the proportion of total assets financed by the firms creditors. The higher this ratio, the greater the amount of other peoples money being used in an attempt to generate profit. In the MCB Bank the outsiders contribution is nearly about 90% of the total assets. There is nominal increase and decrease in this ratio of the MCB Bank.

Debt Equity Ratio:

Year Ratio (%) 2005 14.83 2004 25.68 2003 32.89 2002 33.41 2001 34.29

The debt equity ratio is another computation that determines its entitys long-term debt-paying ability. From the perspective of long-term debt-paying ability, the lower this ratio is, the better the companys debt position. In 2005 there is a decrease in this ratio and it is due to decrease in the banks total liabilities as compare to increase in the total equities of the bank.

Efficiency Ratios

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Total Assets Turnover

Year Ratio (Times)

2005 0.072

2004 0.047

2003 0.044

2002 0.073

2001 0.101

The total assets turnover indicates the efficiency with which the firm uses its assets to generate sales. Generally, the higher a firms total assets turnover, the more efficient its assets have been used. In the MCB bank this ratio shows a decreasing trend, which shows that the bank cannot utilize its assets more efficiently.

Fixed Asset Turnover

Year Ratio (Times) 2005 2.63 2004 1.53 2003 1.10 2002 1.35 2001 5.15

The fixed assets turnover indicates the efficiency with which the firm uses its fixed assets to generate sales. Generally, the higher a firms fixed asset turnover, the more efficiently its fixed assets have used. This ratio is continuously increasing from 2002 to onward that means the fixed assets are now going to be used at optimum level of generating sales revenue.

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Profitability Ratios
Gross Profit Margin

Year Ratio (%)

2005 87

2004 83

2003 76

2002 64

2001 60

The gross profit margin measures the percentage of each sales/ service revenue rupee remaining after the firm has paid for its services cost. The higher the gross profit margin, the better the firm and vice versa. When we analyze the previous five years data of the MCB bank it shows a very strong increasing trend. This is due to decrease in the services cost.

Operating Profit Margin

Year Ratio (%)

2005 52

2004 21.50

2003 14.60

2002 16.10

2001 9.03

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The operating profit margin measures the percentage of each sales/ service revenue rupee remaining after all costs of services and expenses other than interest and taxes are deducted. It represents the pure profit earned on each service revenue rupee. This ratio also has an increasing trend, which is due to decrease in cost of sales as well as in operating expenses.

Net Profit Margin

Year Ratio (%)

2005 41.40

2004 19.85

2003 9.44

2002 11.45

2001 6.17

The net profit margin measures the percentage of each sales revenue rupee remaining after all services costs and expenses, including interest and taxes, have been deducted.

The higher the firms net profit margins, the better. The net profit margin is a commonly cited measure of the firms success with respect to earnings on service revenue. So when we analyze the previous 5 years data of the MCB bank it shows a strong increasing trend. But in 2005 the percentage of net profit margin increases at very high point as compared to previous years, it means the firms is going to very positively side in respect to increasing trend.

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Return on Total Assets

Year Ratio (%)

2005 3.20

2004 0.91

2003 0.88

2002 0.82

2001 0.61

The return of total assets also called the return on investment. Measures the firms overall effectiveness in generating profits with its available assets. The higher the firms return on total assets the better. There is a increasing trend of the MCB bank return on total asset which shows a effectiveness in generating profits with its available assets

Return on Shareholders Equity

Year Ratio (%)

2005 65.89

2004 28.73

2003 31.77

2002 30.77

2001 23.40

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The return on equity measure the return earned on the owners investments in the firm. Generally, the higher this return, the better for its owners. There is a increasing trend in the return in equity of the MCB bank.

Price Earning Ratio

Year Ratio (Times)

2005 7.86

2004 8.14

2003 7.06

2002 5.11

2001 4.11

The price-earning ratio is commonly used to assess the owners appraisal of share value. The P/E ratio measures the amount investors are willing to pay for each rupee of the firms earning. There is a increasing trend in the P/E ratio of the MCB bank, and it is due to more proportionate increase in EPS as compare to market price per share.

Earning Per Share

Year Rs.

2005 21.36

2004 7.21

2003 7.28

2002 6.52

2001 4.57

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The firms earning per share is generally of interest to percent or prospective stockholders and to management. The earning per share represents the number of rupees earned on behalf of each outstanding share of common stock. There is a increasing trend in earning per share of the MCB bank except in year 2004 in which was decrease which is very attracting for the prospective stakeholders and for management.

GENERAL RATIOS

ADVANCE TO DEPOSIT RATIO

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RATIO

FORMULA

2005 2004 2003 2002 2001

79% 62% 46% 43% 50%

Advance to Deposit Ratio

Advances/Deposit

This ratio shows the relation ship between total deposits and the advances of the bank. It is highest is the year 2005 i.e. 79%. So we can say that in this particular year the bank position is sounder. We can see that this ratio is increasing every year. It means the bank is giving more and more advances / increase its deposits. This is a good positive sign. But one thing is worth mentioning that during the last year this ratio came down little bit. So management pays attention to this side.

CASH TO DEPOSIT RATIO

RATIO

FORMULA

2005

2004

2003

2002

2001

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CASH DEPOSIT RATIO

TO CASH/DEPOSIT

10%

11%

11%

10%

14%

The ratio shows the relationship between the cash and the total deposit of the bank. This ratio shows the fluctuation in 5 years. This ratio discusses the utilization of cash with respect to deposits of the customers received by the bank. The highest is in the year 2001 i.e. 14% and in 2005 it is decrease by 4%. The ratio is remaining constant during the last five years.

EQUITY TO ASSET
RATIO FORMULA

2005
5.99%

2004
3.55%

2003
2.84%

2002
2.68%

2001
2.68%

EQUITY

Total asset

TO ASSET equity/Total

This ratio shows the relationship between the equity and the total assets. This ratio discusses that how much the management uses the available funds of the owners. It is increasing with the increase of investment in branches. It means that Companys worth is very sound therefore, the prices of its share in the market is increasing.

EQUITY TO DEPOSIT RATIO

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RATIO
Equity Deposit

FORMULA
To Total Equity/Deposit

2005
7.80%

2004
3.16%

2003
3.65%

2002
3.46%

2001
3.24%

This ratio is increasing every year except in 2004. This ratio shows the relationship between the total equity and the total deposits of the customers. This ratio describes the contribution of the customer deposits portion in the Owners Equity. It is highest in the year 2005 and lowest in the year 2004. It means that its equity is more than its deposits.

Chapter 6
CONCLUSION & SUGGESTIONS

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STRENGTHS WEAKNESSES OPPORTUNITIES THREATS CORPORATE PORTFOLIO ANALYSIS (THE BCG MATRIX) AREAS OF IMPROVEMENTS FOR MCB CORPORATE OBJECTIVES FOR MCB SUGGESTIONS TO IMPROVE SUGGESTION TO CHANGE OBSERVATIONS ON BEST PRACTICE

SWOT ANALYSES STRENGTHS

The Government of the Punjab owns the major shares of MCB, so it can develop a good image & trust among its customers.

Stability of Bank is strength of any bank. The MCB Bank has growth since its establishment.

The MCB Bank provides the loan facility on sound basis that is very crucial for any bank to recover the loan. The MCB Bank has conservative

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policy for advances. So there are very few bad debts or now bank is minimizing its bad debts by high check.

Personal selling has key role in banking services. The officers of the MCB Bank go to the potential customers to develop the business. relationship with customers, they achieve the deposit targets. By the

The promotion criteria of the bank are on the basis of the efficiency and passing the diploma examination of Institute of Bankers, Pakistan.

It is the policy of the management that requirements are made according to the principles of merit.

There is no union in the MCB Bank. Working environment is good. Managers and Officers work together as a team. They are very cooperative with each other.

The officers are really cooperative, supportive and helpful, in my experience during internship at model town B Bahawalpur. I noted their involvement to prepare each case of loan.

The bank has very spanned network of branches in Punjab as well as in other provinces or country whole of the country and also in foreign branches.

Profit rate is high as compare to other banks. It provides courteous services to its customers.

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WEAKNESSES
o The MCB Bank is centralized organization. The authority is not given to the branch level. Branch Managers have to take permission from the Regional office or Head office for credit except Quick Cash. Managers had to get permission if they have to given more rate of profit to the customers. So the customers have to wait for days, which may cause the change of customers. Managers cannot negotiate with customers without the permission of Regional office. o The MCB Bank has less modern technology. Most of branches are computerized but not online. Due to limited of online facility, the banks services are low and foreign banks and other online banks have large market share. In this era modern technology like Online and ATM are very necessary for competition at each branch. o Salaries of the officers and staff members are less as compared to other private banks. o The MCB Bank has very less promotional activities. Their advertising campaign is very weak. newspapers advertisements. o The MCB Bank has less staff members in the branches of Southern Punjab as compared to Northern Punjab. This deviation creates problem for the employees, they spent most of their time in the bank to complete even their daily routine work. They have to sit till 7:00 or 10:00 pm before going back to their homes. For this reason their normal life is disturbing which create the irritation in the behavior of employees. o The banks expenses are increasing at very high rate. They only use personal selling and some

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o The MCB Bank has less interest in foreign exchanges, and very few branches are involved in the business of foreign exchange business. o Mostly small branches are running in losses. o The MCB bank has only sixteen regional offices in whole Pakistan. It is very difficult to control all branches. o The MCB Bank is deviating from the basic banking principles, because the basic function of bank is to accept the deposit and advance loans. But analysis of financial statement of MCB Bank showing the advances are less as compared to investment. o MCB is not taking keen interest in the marketing of travelers cheque than other banks. So, MCB is loosing its share due to the less interest. o Duty Hours Are not Properly followed the working hours are from 9:00 A.M to 5:00 P.M. this is because of extra burden of work on them and desire to fulfill the goal of the branch o It has been observed that most of the staff member knowledge is limited. They only know their routine duties. If any thing other than normal routine occurs, they are confused. o It has a non-professional management. o There is limited use of modern banking techniques like ATMs, online banking, credit cards, and traveler cheque. o Employees are unsatisfied due to unfair promotion system. There is not a right criterion for promotion; many of vacancies are filled at approach basis. o Employees have Lethargic attitude especially in main branches. o MCB RTC Market leading but it is useable in Pakistan only.

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OPPORTUNITIES
Although commercial banks have launched many products but a gap existing between the customers want and what the banks are providing. This is an opportunity for the MCB Bank to move in and fill the gap between the ideal bank and the current service offerings by aggressive advertising, consumers friendly attitude products and service for attracting customers. The bank has opportunity to expand the branch network all over the county, and it would be able to develop business and can start many other schemes for investment. The MCB Bank has opportunity to use latest technology for providing good services to customers. There is an opportunity for more businesses if the MCB opens its more branches in foreign countries. There is an opportunity for more businesses if the MCB offered credit cards. Different multinational are establishing their business in Pakistan. there is a lot of potential for future businesses. Providing advance technologies through out the country in its branch network should do modernization of bank. It will attract customers attention. Deposits and advances rates will increase hence profit rate increases. Steps should be taken to increase banks deposits and advances, as these are less than other competing banks. Such policies should be So

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adopted by bank that can attract customers and rate of deposits and advances can increase. The presence of more technical and professional staff can help out the bank in making progress especially in marketing department which should have effect on Banks policy making, making schemes of bank successful and can stabilize down its position. MCB should concentrate more industrial sector and agriculture sector. They should provide finances to the farmers both on short term and long term basis. New schemes for deposits and finances should be introduced regularly. Proper advertising of the products and services of the bank is required.

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THREATS
o The salaries of the officers and staff members are less as compared to other banks. It may cause experts drain from the MCB Bank to other banks. o Expansion of newly establishing banks like Faysal Bank, PICIC Commercial Bank, Union Bank, Bank Alfalah, Askari Commercial Bank and foreign branches like ABN Amro etc., and their better performance may cause loss of the market share of the MCB. o According to the World Bank report, the Pakistan has become an over banked economy. With the cutthroat competition for deposits in the industry, the battle is on for the market share. The concept of 24 hrs banking, telephone and online banking, ATM and credit card are a direct result of the intense competition. But MCB is far behind the above mentioned services and will not provide better services as compared to other banks; it will lose its market share. o The MCB Bank is also forced to give loans on potential basis. Due to this the recovery of such loans may become very difficult. o Promotional activities of the MCB are not sufficient. Due to this it may lose market share.

o Due to low entry barriers, there are more competitors; also the global competition has increased. o Because of unfair promotion system and absence of proper recruitment techniques competent persons may move to o Financial environment is changing day to day, new technologies are introduced by foreign banks that provide customer efficient and quick services. o There is a need of proper marketing because certain schemes face failure due to ignoring marketing of the product. Failure of the schemes or products is a threat because it becomes a cause of decrease in profits.

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o Financial environment is changing day by day, new technologies are introduced by foreign banks that provide customers by efficient and quick services. o Employees are involving so much in internal politics & lobbies among them, which disturb working conditions & goodwill of the bank. o Lack of customization

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CORPORATE PORTFOLIO ANALYSIS

BCG Matrix
A strategy that seeks to determine how an organization should compete in each of its SBUs (Strategic Business Units). HIGH
MARKET SHARE

LOW

In the BCG Matrix the MCB Bank Limited lies at the star position due to increase HIGH in market share with the increase in equity. The MCB Bank due to high market
ANTICIPATED GROWTH RATE

S R
TA

QUESTION MARK

share stand at STAR position. Because MCB management increases its market share in 2005 by increasing their investment in its branches and by reducing its staff and due to increase in deposits and advances.

LOW

CASH DOG COW S

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AREAS OF IMPROVEMENTS FOR MCB

STRUCTURE TECHNOLOGY
> Work processes > Methods > Equipments > Work specialization > Departmentalization > Chain of command > Span of control > Centralization > Formalization > Job redesign

PEOPLE
> Attitudes > Expectations > Perceptions > Behavior

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SUGGESTIONS TO IMPROVE

The banks overall objectives and strategies should be formulated. Major objectives should be allocated among divisional and departmental units. Regional chiefs collaboratively set specific objectives for their units with their branch managers. Specific objective must be collaboratively set with all department members. Defining how objectives are to be achieved, are specified and agreed upon by branch managers and employees. The action plans should be implemented. Progress toward objectives must be periodically reviewed, and feedback is provided. Successful achievement of objectives must be reinforced by performancebased rewards.

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CORPORATE OBJECTIVES FOR MCB

Strategic Objective

A bigger market share A higher, more secure industry rank Higher service quality Lower cost relative to key competitors Broader or more attractive product line A stronger reputation with customer Superior customer services Recognition as a leader in technology and/or product innovation Increased ability to compete n international markets Expanded growth opportunities

Financial objective

Faster revenue growth Faster Earnings growth Higher dividends Wider profit margin Higher returns on invested capital Stronger bond and credit ratings Bigger cash flow A rising stock price A more diversified revenue base Stable earnings during reversionary periods

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SUGGESTIONS TO CHANGE
Education and Communication

Communicate with the employees to help them see the logic of change. Educate employees through one-on-one discussion, memos, group meetings, or reports. Appropriate if source of resistance is either poor communication or misinformation. Must be mutual trust and credibility between branch managers and employees.

Participation Allow those who oppose a change to participate in the decision. Assume that they have expertise to make meaningful contribution. Involvement can reduce resistance, obtain commitment to seeing change succeed and increase quality of decision. Facilitation and support Provide supportive efforts such as employee counseling or therapy, new skills training, or short paid leave of absence.

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Negotiation Exchange something of value to reduce resistance. May be necessary when resistance comes from a powerful source. Potentially high costs and likelihood of having to negotiate with other resisters. Coercion Using direct threats or force. Inexpensive and easy way to get support. May be illegal, even legal coercion can be perceived as bullying.

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Chapter 7
APPENDIXES

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