ACKNOWLEDGEMENT

All praises to Almighty ALLAH who gave me the courage and patience for completion of this final report. I wish to acknowledge my gratitude to my inspiring teachers for their endless persistence, support and encouragement, and for providing me a lifetime opportunity to work with Muslim Commercial Bank I am also thankful to my parents, family and friends who continually offered encouraging support.

Table of Contents
EXECUTIVE SUMMARY ....................................................................................................................... 4 OBJECTIVE OF STUDYING THE ORGANIZATION .................................................................................... 5 OVERVIEW OF THE ORGANIZATION ................................................................................................ 6 HISTORY OF THE ORGANIZATION ......................................................................................................... 6 NATURE OF THE ORGANIZATION7 BUSINESS VOLUME..7 NO .OF EMPLOYEES7 PRODUCT LINE8 ORGANIZATIONAL STRUCTURE HEAD OFFICES STRUCTURE BRANCHS STRUCTURE VARIOUS DEPARTMENTS DETAILS STRUCTURE OF FINANCE AND ACCOUNTS DEPARTMENT. DESCRIPTION OF FINANCE/ACCOUNTS DEPARTMENT STRUCTURE. FINANCE AND ACCOUNTS OPERATIONS. ROLE OF FINANCIAL MANAGER.. USE OF ELECTRONIC DATA IN DECISION MAKING. SOURCES OF F UNDS ALLOCATION OF FUNDS.. CRITICAL ANLYSIS FINANCIAL ANALYSIS. RATIO ANALYSIS. VERTICAL ANALYSIS OF BALANCE SHEET..

VERTICAL ANALYSIS OF INCOME STATEMENT. HORIZONTAL ANALYSIS OF BALANCE SHEET HORIZONTAL ANALYSIS OF INCOME STATEMENT COMPETITIVE ANALYSIS.. FUTURE PROSPECTS. WEAKNESSES OF THE ORGANIZATION.. CONCLUSION.. RECOMMENDATIONS REFERENCES.

EXECUTIVE SUMMARY
By the Grace of ALLAH I have completed my internship in Muslim Commercial Bank Limited. This report is an off shoot of my experience in the bank. I have tried my best to sum up all the information, experiences and learning which I have gained there. First of all I have provided the brief overview of the organization. Organizations history, number of employees, pro duct line, business of volume has been discussed briefly. Organization structure has been elaborated by description of head office and branchs hierarchy. It was important to mention that who reports to whom. MCB has various departments e.g. credit, finance, accounts, cash, remittance and clearing. Report contains the detailed information about all the departments. Structure of accounts and finance department has been discussed in detail. Operations of the finance department and the role of the finance managers have been elaborated on the basis of my experience in the bank. The types of software and technology used by the department are included in this section. Various sources of fund generation and the ways to allocated them have been mentioned. Financial analysis is the key to determine an organizations performance. Financial analysis of the organization has been done in the report on the basis of last five year financial statements of the bank. Techniques used for the financial analysis are ratio analysis vertical analysis and horizontal analysis. Future prospects and weaknesses which can hinder the organizational performance have been discussed in detail. In the end report contains recommendation which is essential to improve the productivity of the organization.

OBJECTIVE OF STUDYING ABOUT MUSLIM COMMERCIAL BANK

I was assigned internship in Muslim Commercial Bank; the objective of my study in the bank was to know about banking industrys operation in Pakistan. My internship was a gateway to practical world. It was my earnest desire to have practical knowledge of the banking industry. Theory and books guide you to prepare yourself for outside world and while practical exposure like an internship give you opportunity to apply the theory and knowledge in the working field. My purpose was to know about how the machinery works in a bank. How does finance manager handles finance department, how are financial statements being prepared in going concern. How does a bank collect and manages its funds. What are the sources of funds and how do they allocated by the management. Financial Analysis of an organization gives you clues about its market position. For that purpose it was necessary to study the financial statements of the bank and to apply some sort of techniques. My analysis of financial and other operation of the organization helped me to point out the weaknesses in management affairs. I thoroughly studied the future prospects of the organization. Which paved the way for me to make strategies and to give useful recommendations about organizational development?

THE MUSLIM COMMERCIAL BANK LIMITED

History MCB was founded by ISFHANI and ADAMJEE families in Calcutta on July 9, 1947. MCB is not an overnight success story rather good track of services are responsible for the leaps and bounds progress. After the partition of the Indo-Pak Subcontinent, the bank moved to Dhaka from where it commenced business in August 1948. In 1956, the Bank transferred its registered office to Karachi, where the Head Office is presently located. Thus, the bank inherits a 52-year legacy of trust in its customers and the citizens of Pakistan The performance of MCB was badly affected by bureaucrat government. In January 1974, MCB was nationalized by Bhutto Government following the bank act 1974 subsequently in June 1974 Premier Bank Limited merged with MCB.

When privatization policy was announced in 1990, MCB was the first to be privatized upon recommendations of World Bank and IMF. The reason for this choice was the better profitability condition of the organization and less risky credit portfolio which made'' it a good choice for investors. On April 8th, 1991, the management control was handed over to National Group (the highest bidders). Initially only 26% of shares were sold to private sector at Rs. 56 per share. MCB besides being money financial organization have rendered invaluable services in the economics and social developments of our country. MCB today, represents a bank that has grown with time, experience and Pakistan. A major financial institution, in scope and size, it symbolizes a fully-grown tree. Evergreen, Strong, and firmly rooted.

Nature of Organization
Muslim Commercial Bank is a formal organization where rules and responsibilities are clearly defined.

Business Volume

Profit before tax Profit after tax Total assets Total liabilities Deposits Investment No of branches No of accounts

26,253.075 16,873,175 567,552,613 488,348,404 431,371,937 213,060,882 1061 439264

No. of Employees

There are 11,614 employees of Muslim Commercial Bank in Pakistan.

Product Line

Loans and advances: bank grant loan to the customers MCB also grant different kinds of loan to different customers.MCB grant consumer loan commercial and corporate loan like (pledge, mortgage and hypothecation) Bank accepts deposits which are sustained by the bank in different kind of accounts.MCB bank offer these accounts for depositing the funds. Current account Term Deposit Saving accounts Other services MCB visa credit card MCB smart card MCB rupee traveler cheque MCB ATMS MCB mobile ATMs MCB SMS banking MCB mobile MCB call center MCB lockers MCB investment service MCB advisory service MCB bank insurance MCB local rupee drawing arrangements MCB home remittance MCB equity capital raising MCB Islamic banking

ORGANIZATION STRUCTURE

Head Office Structure

Chairman Mian Mansha

President Muhammad Aftab Manzoor

Corporate Banking Group Muhammad Shoaib Qureshi

Commercial Banking Group_North Imdad Ali Butt

Commercial Banking Group _South Shahid Sattar

Branchs Structure

Chief Manager

Operational Manager

Credit Manager

Supervisor Clearing

Operation Officer Cash Deptt Chief Cash

Teller

Teller

10

DEPARTMENTS IN MCB

There are various departments in MCB which are:

Operations Department Clearing Department Remittance Department Cash Department Advances Department

11

OPERATIONS DEPARTMENT

Types of Accounts Single Joint Partnership Private Limited Public Limited

SINGLE: Only one person can operate this a/c. An individual who can fulfill the requirement of bank can open this a/c. We can call it a personnel or individual a/c. The requirements for this type are National Identity Card Photocopy, Minimum Deposited Balance, Account Opening Form, Letter of Kinship etc. JOINT: In case of joint a/c applicant mentions that how much person will operate the/c. Instruction are given for joint a/c such that the account shall be operated by anyone or more. The requirements for this type are National Identity Card Photocopy, Minimum Deposited Balance, Account Opening Form, Letter Kinship, Additional Signature Form (For Joint Account), Declaration regarding the operator of account.

12

PARTNERSHIP: For partnership a/c, along with the application form other requirements needs satisfied. The requirements for this type are National Identity Card Photocopy, Minimum Deposited Balance, Account Opening Form, Registration certificate, agreement among partners and Commencement of business and private registration, resolution of board of directors, commencement of business, memorandum and articles of association and balance sheet etc. PRIVATE LIMITED: Such type of account is opened in the name of the businesses having private limited concern and mostly medium business enterprises open such kind of accounts. All the board of directors have to submit the declaration regarding the account operator on the company pad and with the rubber stamp with the signature of the all the members of the board of directors. In case of any change in directors bank must be informed regarding that. In case funds are borrowed by the company all the directors approval is necessary rather not only the authorized partner who can be the operator of the account. PUBLIC LIMITED: Public Limited A/C type of account is opened in the name of the businesses having Public limited concern and mostly medium business enterprises open such kind of accounts. And terms regarding board of directors are the same as of private limited.

13

NATURE OF ACCOUNTS: Current Account PLS Saving bank A/C Khushali Bachat Account (KBA) Saving 365 A/C Basic banking A/C (BBA)

CURRENT ACCOUNT: In this type of accounts the client is allowed to deposit or withdraw money as and when he likes. He may, thus, deposits or withdraws money several times in a day if he likes. There is also no restriction of amount to be deposited or withdrawn. However, there is requirement of minimum balance maintenance of Rs. 1000/-. Usually this type of account is opened by the businessmen. No profit is paid by the bank and no service charges are deducted by the bank on current deposits account. These types of deposits are also exempt from compulsory deduction of Zakat. PLS SAVING BANK A/C: This account was started in 1980s after the issuing of banking ordinance in 1980 by Zia Government to develop Islamic banking in Pakistan. In this case customer would be responsible for bearing profit as well as loss. The bank would be within its rights to make investment of credit balances in the PLS saving accounts in any manner at its sole discretion and to make use Of the fund to the best of its judgment in the banking business under the PLS system. For withdrawal of larger amount, 7 days notice in writing is required to be given. Minimum balance is Rs.500/= Not more than eight withdrawals in a year allowed More than Rs.15000/= are not allowed to draw Seven day notice is required for big withdrawal

14

Zakat deducted on @ 2.5% Profit calculated on monthly basis Profit paid on annually basis

SAVING 365 ACCOUNTS: This account is newly developed of MCB and it provides flexibility of saving account to business people. Profit on deposits will be payable on daily product basis on balance of RS. 500,000/- and above. However, if balance in the account falls below RS. 500,000/- on any day, the product will be ignored. There will be no restriction on withdrawal from the account. Zakat and withholding Tax is also applicable on the account opened under this scheme. Minimum balance is Rs.500,000/= Below minimum balance, profit calculation ignored Profit calculated on daily basis Profit paid on annually basis 10% Withholding Tax on minimum balance Zakat deducted on @ 2.5%

KHUSHALI BACHAT ACCOUNT: Saving type account Rate of return is 8% per annum Profit calculated on daily basis Profit paid on half yearly basis Utility bills can be debited through this a/c No charges will be debited for utility payments

15

BASIC BANKING A/C (BBA): Introduced specially for salaried persons. Minimum balance is Rs.1000/= No service charges. Only two transactions allowed, in one month. For more than two transactions Rs.35/- per transaction. Single natured A/C.

ACCOUNT OPENING PROCEDURE: Following steps are involved in A/C opening, ACCOUNT OPENING FORM: Firstly the customer fills the account opening form and provides all the information as provided above. I experienced to fill this form INTRODUCTION: An account is needed to be introduced. The introduction of a current account holder is accepted for the opening of an account. The introducer should be a branch customer or may be account holder of any branch of MCB; however signatures should be verified by the banker. In certain cases, introduction from bank other than bank MCB may be allowed. Personally known accounts may be introduced by the bank staff. Introduction from an account holder not personally coming to the bank should be verified by the bank.

16

STAMPING: Then it is stamped. Stamps like. BAL sign verified, Sign Admitted Stamp, Sign Verified stamps etc are affixed. ACCOUNT NUMBER: After completion of all the procedures the final approval is taken from the branch manager. After obtaining approval, an account number is allotted to the customer and all the information is entered in to the computer and KYC is filled up. Then that account number is writing on the Cheque Book, Specimen Signature cards and account opening form. KNOWING YOUR CUSTOMER: After entering information KYC is filled up. It should be ensured that at the time of filling information in KYC, a customer should be physically present. After this all information is saved in system. I filled KYC form also. APPROVAL: This account is further approved by Manager Operations. SEND FORM TO HEAD OFFICE: After fulfilling all the requirements and verifying the forms from operation manager the account opening form is sent to Head Office Karachi and make request to issue the printed cheque book. LETTER OF THANKS: Subsequent to the opening of an account, letter of thanks should be sent under registered post or courier service to the customer and the introducer. ISSUANCE OF A CHEQUE BOOK: After opening an a/c with the bank, the a/c holder can not immediately start operating his/ her account. The cheque book is issued, when a customer will submit a copy of letter of acknowledgement duly signed by him, in case of new account. And for subsequent issuance of

17

cheque book He/she has to make a request once again in the name of bank for the issuance of cheque book and he should mention title of A/C, A/C number, sign it properly and mention the number of leaves requires. Normally a cheque book having at least 25 leaves is issued but it can also be of 50 leaves. CLOSING OF AN ACCOUNT: There is no. of reasons of closing an account. Some are listed below: If customer desires to close his account In case of death of one account holder. Bankruptcy of the account holder. If an account contain nil balance or not up to the requirement of rules. Before closing any account, bank send letter to the account hold for informing him that his account is going to be closed. There is need an approval from higher authority to close any account.

18

CLEARING DEPARTMENT
In clearing department I worked under supervision of Miss Shumaila Malik. In clearing department and learned about inward and outward clearing and I also learnt about, MEANING OF CLEARING: The word clearing has been derived from the word clear and is defined as, A system by which banks exchange cheques and other negotiable instruments drawn on each other within a specific area and thereby secure payment for their clients through the Clearing House at specified time in an efficient way. CLEARING HOUSE It is a place where cheques are presented, collected from bank branch. It is one of the services provided by NIFT to other commercial banks. NIFT acts as a clearinghouse. NIFT: NIFT stands for National Institutional Facilitation Technologies. Clearing House of SBP has shifted a tiresome part of its work to a private institution named NIFT. NIFT collects cheques, demand drafts, Pay orders, Travelers Cheques, etc. from all the branches of different banks within city through its carriers and send them to the branches on which these are drawn for clearing. After the branches approve the instruments drawn on them, NIFT prepares a sheet for each branch showing the number for instruments and amount In its favor and drawn on it and sends it to each branch. A similar sheet for each bank is also sent to clearing house of SBP where accounts of banks are settled in the same manner.

19

LEARNING IN CLEARING DEPARTMENT My learning in clearing department was of following things: Procedure of clearing a cheque. Checking of cheques. Inward and outward clearing. Different reasons of returning a cheque. Types of clearing stamps.

CLEARING PROCEDURE: Instruments collected are treated as Transfer, Transfer Delivery, Clearing, and Cheque collection. CHECKING OF CHEQUES: When the instruments are collected from the client. Following things are checked Cheque date, instrument should be neither stale/ nor post-dated. Title Amount in figures and words should be the same There should be no cutting and overwriting on the cheque Instrument should not bear any unauthorized alternation. Cheque is crossed.

TRANSFER: When the instruments are collected and paid by the same branch, it is called transfer. TRANSFER DELIVERY: When instruments are collected and paid by two different branches of the same bank situated in the same city, it is called transfer delivery

20

A cheque is processed under transfer delivery when it has crossing stamp and is from local branch of MCB CLEARING: Instruments which are drawn on the branches of some other bank of the same city or of the same area, which is covered by a particular clearing house, are processed for clearing. In outward clearing when cheque is received two copies of voucher SF-37 are prepared, one copy and instruments along with clearing stamp, realization stamp, add list and two vouchers of clearing summary are sent to NIFT in a sealed bag. And clearing records are recorded in clearing register. In Inward clearing instruments received from NIFT are posted in Computers after checking. CHEQUE COLLECTION (C.C): When cheque is from another city then it is grouped as C.C.Such instruments are processed as cheque for collection. In this procedure SF-37 form is used in Cheque collection. Original voucher with cheque, stamped as C.C along with C.C number is sent to main branch of the responding city which is further sent to NIFT. Whereas Carbon copy with Pay-In-Slip is taken by bank for record purposes. PAY-IN-SLIP: It is used for two purposes Whenever we want to deposit cash in our account then pay-in-slip is used by writing amount on it and depositing it to cashier along with money. Whenever we have cheque from any party to be collected in our account we fill pay-in-slip. One part is attached with cheque and another is given to cheque holder as a receipt. NOTE: In inward clearing sometimes cheques are not passed due to some reasons then cheques are sent back to NIFT along with cheque return memo. Some of these reasons are,

21

Cheque incomplete Clearing stamp required. Drawers sign incomplete Drawers sign different from specimen Post Dated Payment stopped by drawer. Amount in words and figures differ. Insufficient funds etc.

22

REMITTANCE DEPARTMENT

REMITTANCE: Remittance is transfer of funds from one place to another or from one person to another. It is an important service provided by banks to customers as well as non-customers. Since it is not a free service it is a source of income for the bank. PARTIES INVOLVED IN REMITTANCE Four parties involved in remittance: Remitter, Remittee, Issuing Bank, Paying Bank REMITTER: One who initiates, or requests for a remittance. The bank charges him a commission for this service. He may or may not be the branchs customer. REMITTEE: A Remittee is also called the beneficiary, or the payee. The person in whose name the remittance is made. A Remittee is also the one who receive the payment. ISSUING BANK: The bank that sends or affects the remittance, through demand drafts, telegraphic transfers, or Mail Transfers. PAYING BANK: Paying Bank also knows as the drawee branch. The branch from where the instrument is drawn.

23

TYPES OF REMITTANCE: Remittance is classified into following four types Inward remittance, instruments received for payment Outward remittance, issuing instrument to the responding branch. Inland remittance, within same country. Foreign remittance, from one country to another country.

INSTRUMENTS USED IN REMITTANCE: Demand Draft (DD) Telegraphic Transfer (TT) Pay Order (PO) Call Deposit Receipt (CDR) Rupees Traveler Cheque (RTC)

DEMAND DRAFT: DD is a written order given by the branch of the bank on behalf of the customer to other branch of the same bank to pay the certain amount to the customer.DD are issued for the particular place other than place of issuance. DD applicant or recipient, who might not be an A/C holder present it to another bank at a different place requesting it to pay on demand a specified amount of money which is already received to the person named on it. DOCUMENTATION: A printed application form is provided for filling in completely and signing by the applicant. After depositing an amount of draft and commission of the bank, duly completed and signed by two authorized officers, then it is handed over the applicant and credit order is dispatched to drawee branch.

24

TELEGRAPHIC TRANSFER (TT): TT is fund that is transferred electronically which is remitted on the order of a certain person. In this case the authority is given from one bank to other on the behalf of the customer through telecommunication to debit their inter office account through them and credit their parties account mentioned in TT. But it is not practiced these days frequently. PAY ORDER: For this kind of remittance the payer must have the account in the issuing bank. Pay order are more liquid as compared to cheques because cheques may be dishonored while PO cant be. It is written order issued by the bank drawn and payable on itself. It is used for local transfer of money from one person to another person. DOCUMENTATION: The party who requires a pay order will get a printed application from the bank. He will fill it and deposits the amount and commission. CALL DEPOSIT RECEIPT (CDR): It is an instrument like Cheque issued by the bank on account of a customer & in favor of a person, to pay the specified amount. CDRs are issued to make payments, especially when a company goes for some tenders or for purchase of government securities or any contracts with others. DOCUMENTATION: The party who requires a CDR will get a printed application from the bank. He will fill it and deposits the amount and commission. The bank enjoys the benefit of keeping funds deposited until the payment is not made.

25

RUPEES TRAVELER CHEQUE (RTC): RTC is the traveler cheque are acceptable at all branches of MCB, and they carry dozens o f benefits. Security is always being an important issue of concern. TCs provide maximum security while carrying big amounts. DOCUMENTATION: First of all RTC-10 is given to customer. It is filled and then cash is deposited to cash department. One copy is for office and one copy is given to the customer and RTC are issued at that time. NOTE: At time of my stay in remittance department, there was no issue of CDR, TT, RTC, and PO so I was unable to understand its practical aspects, except clearing.

26

CASH DEPARTMENT
The cash department is the most important department of the bank. In cash department both deposits and withdrawals go side by side. This department deals with cash deposits and payments. The following books are maintained in the Cash Department: Cash Receipt Book Cash Payment Book Cash Balance Book The officers in this department are called teller and there were 2 tellers Mr. Nazir and Mr. Abrash at the counter. This department is involved in two activities: Cash Deposits, Cash Payments. CASH RECEIPT BOOK: The cashier is responsible to receive both the paying-in-slip and cash from the depositor. For depositing the cash into customers accounts, there is need to fill in the paying-in-slip giving the related details of the transaction. The cashier check the necessary details provided in the payingin-slip and accounts the cash and tallies with the amount declared in the slip then cashier fills in the Cash voucher received Record Sheet and assigns a voucher no. to both the transaction being made in the sheet and the slip. The 2nd cashier posts the transaction entries in computer ledger. After posting these entries, computer display before posting balance and after posting. Cashier assigns the stamp POSTED on the voucher to show voucher transaction entries are posted.

27

CASH PAYMENT BOOK: The only instrument that can be used to withdraw an amount from an account is the Cheque book. No payments are made by another instrument. When cheque is valid in all respects, the cashier enters the necessary inputs in the computer and posts the entry so that account balance is updated. When cashier posts these entries, computer automatically display the balance before posting the transaction amount, balance after posting. The cashier at the same time maintains the Cash Voucher Received Record Sheet. Then inspects the signature of the customer, cancellation mark of checking officer and stamp of POSTED is placed on cheque before he hands over the cash to customer. CASH BALANCE BOOK: At the end of the working day cashier is responsible to maintain the cash balance book. The cash book contains the date, opening balance, detail of cash payment and received in figures, The consolidated figure of receipt and payment of cash is entered in the cash book and the closing balance of cash is drawn from that i.e. Opening Balance of Cash + Receipts - Payments = Closing Balance

28

TECHNOLOGY DEPARTMENT

It includes; Mobile Banking Phone Banking Online Banking ATM

MOBILE BANKING: It has been launched recently during my internship. It helps in getting accounts details and making transactions using mobiles. PHONE BANKING: "MCB Phone Banking is available to all customers on a countrywide basis. Customers can dial 111-000-622(without any city code/prefix) from their respective cities Customers enjoy 24x7 Round the Clock Phone Banking Services. MCB is the first bank in Pakistan to offer Centralized connectivity.

29

MCB now offers the facility of on-line banking to its customers through its country wide network of branches. Customers can use the ATMs or the banking counters of any branch for day-to-day banking needs, irrespective of branch where they maintain their accounts. There are now more than 250 branches linked through this system and they can transact with each other directly using computer systems and the software named SYMBOLS at their own branches. ATM (Automatic Teller Machine): ATM stands for Automatic Teller Machine. This machine is used to transact in one's account without intervention of humans. These machines are basically used for taking cash, confirming balances and requesting statements / cheque books. MCB has the largest ATM network in the country at the moment with almost one ATM at each online branch and also ATM terminals at International Airports covering 27 cities of Pakistan ATMs are operated through a card issued to the valued customers and by application of Personal Identification Number (PIN number). Now MCB has also entered into a contract with Cirrus which is a subsidiary of MasterCard. This contract will enable an ATM card holder to use his account even when he is out of country at all the ATMs where Cirrus logo is displayed. Green Cards are ordinary cards with a maximum withdrawal facility of Rs. 10,000/- in a day. The annual fee for this card is Rs. 300/- only. Gold Cards are special cars with maximum withdrawal limit of Rs. 25000/- in a day. These cards are issued to the persons having more than Rs. 500000/- as their average balance. International Cards are issued in collaboration with Cirrus and are useable all over the world with maximum withdrawal facility according to the standards of Cirrus.

30

ADVANCES DEPARTMENT
Different banks provide loan facility to general public, companies etc. but MCB provides two types of loans that are as under: Fund Base Loans Non Fund Base Loans

FUND BASE LOANS: In this type of loans cash is directly involved. Bank provides loans in shape of cash. Bank gives credit or limit facility to customers that needed it. In fund based loans there are two further classifications: Long Term Loans: Lease facility for car For Machinery For Fixed Assets Short Term Loans: Running Finance (R/F) Cash Finance (C/F)

31

RUNNING FINANCE:

The MCB provides overdraft facility to the customers for the working capital requirement. These are the loans which are given to those customers whose business runs throughout the year or continuously. Its duration is one year and it is for running business. In advances there are two securities one is known primary security and other is secondary or collateral security. Hypothecation of stock is the primary security and mortgage is the secondary or collateral security. SECURITIES FOR FUND BASE LOANS: Hypothecation of Stock Mortgage Pledge

HYPOTHECATION OF STOCK: In hypothecation of stock the possession of goods and the title remains in the favor of customer. Without the permission of the bank the customer can't sell the stock. It is the restriction of the bank that in god own there should be stock according to the instructions of bank every time. The drawback of this is that there is no check and balance of stock from the bank. The customer can easily sell his stock. MORTGAGE: The bank can mortgage the immovable property like land, building etc as a security. In mortgage the possession remains to customer and title of goods remains to bank.

32

PLEDGE: In this, bank requires the moveable property of the customer as a security like stock, vehicle etc. possession of goods remains to customer and title in the favor of bank. The bank hires a muqaddam [Guard] and the key of store where the stock is pledged is in the security of bank. When customer wants to sell the stock then he pays the amount equivalent to stock which he wants to sell. After receiving amount bank releases his stock for the same amount. NON FUND BASE LOANS: In non fund based loans cash is not directly involved but bank gives guarantee on the behalf of customer. Bank works as a third party and known as Guarantor. Bank provides a security to customer when he needs and someone requires from the customer. DOCUMENTS REQUIRED BY BANK FOR ADVANCES: Request of customer Credit application from bank Basic borrower sheet Net worth certificate CIB report Financials Account statement Property evaluation report For sale value certificate Property documents Title deed [fard] Property map CNIC Account opening form Undertaking

33

Following steps are there: Information required by the bank Preparation of credit proposals Sanction advice

INITIAL INFORMATION: Following information is required to be submitted to bank. Nature & structure of borrower business Names of proprietors, partners or directors Detail of all firms or companies associated with borrower. Financial condition of borrower business An assessment of his business abilities Accurate and up to date financial statements of last two years for comparison purposes Market report on the borrower where borrower has maintained an account with another bank, a report from his bank should also be obtained. A report from credit standing bureau of State Bank of Pakistan

PREPARATION OF CREDIT PROPOSAL: At first a formal application for credit approval is obtained from the party along with complete group position. The partys credibility report is obtained from the bank with which the bank is doing its business. The partys credibility report is also taken from the Head office of Trade Information Division. For obtaining credit, party has to submit the last two years Balance Sheet and Profit & Loss statement duly attested by authorized auditors. If the party is also involved in export or import business then the bank also considers the data of three years about import & export. Current debt and equity ratio is also calculated by the bank. The type of data required to prepare the credit proposal is to be gathered from the different departments. Some data is obtained from the foreign Exchange department. Some data is available in Advance Department. The purpose of obtaining Credit should be explained clearly.

34

The securities offered by the party to the bank are also evaluated. In case of pledging of property in shape of land or building the complete evaluation of the property should also be attached. After all the necessary documents for applying for advance is fulfilled by the party then the case is sent to Manager for approval. If the credit limit is in his range then he can decide over it otherwise the case is forwarded to seniors. If there is any discrepancy then the party is informed of it. Sanction Advice: When the documents required are complete and there is no ambiguity then the party is advised that their credit or loan is approved and will be available to you soon. The form contains following information: Nature and amount of limit Purpose Security/ Collateral Margin (%). Mark up/ Charges Valid

35

DESCRIPTION OF FINANCE AND ACCOUNTS DEPARTMENT

This department controls all the finance functions of the bank in accordance with the generally accepted rules. The Finance Department is comprised of three main areas:

General Accounting Accounts Payable Payroll

Duties of Finance Department:

Duties of the Finance Department include:

controlling expenditures and obligations (including operating expenses, debt, payroll) receipting and depositing all revenues managing the investment of all monies accounting for all assets and capital project expenditures internal and external reporting

36

ROLE OF FINANCE MANAGER Finance manager plays a significant role by collaborating across business functions in order to determine how to best allocate and manage assets. The financial activities are supervised by the Finance Officer to ascertain solid internal control is in place. An audit of financial practices and principles is conducted annually by an outside audit firm. The finance staff assists in providing the information for audit. Following are the responsibilities of the Finance Manager: Providing and interpreting financial information Monitoring and interpreting cash flows and predicting future trends Analyzing change and advising accordingly Formulating strategic and long-term business plans Researching and reporting on factors influencing business performance Analyzing competitors and market trends Arranging new sources of finance for banks debt facilities Supervising staff Managing banks financial accounting, monitoring and reporting systems Liaising with auditor to ensure that annual monitoring is carried out Managing budgets

37

USE OF ELECTRONIC DATA IN DECISION MAKING

MCB is using different kinds of software for decision making purposes. e. g. Oracle GL

Finance department uses Oracle GL as its information system. Oracle is the product of Oracle E-Business Suit which the organization has acquire as its platform for managing its business transactions and maintaining its records. Oracle ledger works seamlessly with Oracle E-Business Suite products to drive better decision making, sustainable financial discipline, and regulatory compliance and optimized business processes.

38

SOURCES OF FUNDS

Main source of funds in MCB is deposits. Deposits

Total amount of deposits of MCB in 2013 is $431,371,937. There are different types of deposits which are:

Type Fixed Deposits Current Deposits Saving Deposits

Value in 2012 $ 7,896,275,92 $ 1,842,436,4 $ 2,680,834,418

39

ALLOCATION OF FUNDS

Loans MCB bank allocates the fund for profit generation .It is also proved to be the best in terms of fund allocations. MCB allocates its fund by granting loans.

Advances Short-term loans are valuable source of income so bank prefers to allocate funds here. These may include: Cash Credit Overdraft Discounting of Bills

Securities MCB also makes investment in securities. Others Other ways of allocating the funds used by MCB are: Repurchase Agreement Interbank Transaction Project Financing

40

CRITICAL ANALYSIS
MCB is nice organization top work for. It is not only attractive for customers but for job seekers as well. People love to work here. HR policies of the bank are designed in such a way that good performers are always rewarded and every employee is motivated to give his best to the bank. Customer Relations Management o f the bank is doing excellent. The bank has very strict rules and regulations about the customers complaint. Now there is online and virtual banking for customers convenience. Many online facilities are available for customers to provide them maximum satisfaction. MCB has been awarded the Best Bank Award since 2000 to 2006. This is all due to best performance of the bank. However, there are some dark areas as well in the operations of the bank. One big weakness in the operations of the bank is that ATM facility is not available at every branch due to which customers have to visit this facility in far off areas. There is customer discrimination in the bank. Mean to say that bank prefers wealthy customers and treat them well as compared to customers who belong to middle or poor class. Job rotation helps the employees to learn about every area of operation but this thing is missing in MCB. It also takes years in transfer of an employee from one branch to another which results in organization politics. Another major weakness of the bank is ignorance of proper advertising campaign. Bank pays less emphasis n advertising due to which people arent fully aware of its all products.

41

FINANCIAL ANALYSIS OF MCB

MUSLIM COMMERCIAL BANK LIMITED CONSOLIDATED BALANCE SHEET

2010 (Rs.'000') ASSETS

2009 (Rs. '000')

2008 (Rs.'000')

2007 (Rs.000)

2006 (Rs.000)

Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances operating fixed assets deferred tax assets Other Assets 4,401,781 3,000,000 4,100,079 1,051,372 2,081,800 45,407,183 14,78,569 38,774,871 6,009,993 39,631,172 4,043,100 39,683,883 3,807,519 32,465,976 6,577,017

213,060,882 167,134,465 96,256,874

113,089,261 63,486,316

254,551,589 253,249,407 262,510,470 218,690,598 198,239,155 20,947,540 27,705,069 18,014,896 23,040,095 17,263,733 19,810,476 16,024,123 17,868,761 9,054,156 172,373 11,031,450

567,552,613 509,223,727 443,615,904 410,485,517 342,108,243 LIABILITIES

42

Bills payable Borrowings Deposits and other accounts Sub-ordinate loans Liabilities against assets

10,265,537 25,684593

8,201,090 44,662,088

10,551,468 22,663,840

10,479,058 39,406,831

7,089,679 23,943,476

431,371,937 367,604,711 330,181,624 292,098,066 257,461,838 479,232 4,934,018 16,092,319 3,196,734 15,819,082 437,137 21,345,781 1,180,162 11,722,493 11,171,496 1,597,440 -

subject to finance lease Deferred tax liabilities Other liabilities

488,348,404 439,483,714 385,179,850 355,365,842 301,263,929 NET ASSETS 79,204,209 69,740,013 58,436,054 55,119,675 40,844,314

REPRESENTED BY: Share capital Reserves Unappropriated profits 7,602,150 40,162,906 21,414,955 69,180,011 Surplus/ (deficit ) on revaluation of assets-net of tax 10,024,198 79,204,209 8,664,081 69,740,013 6,191,189 58,436,054 9,705,519 55,119,675 5,187,639 40,884,314 6,911,045 38,385,760 15,779,127 61,075,932 6,282,768 36,768,765 9,193,332 52,244,865 6,282,768 34,000,638 5,130,750 45,414,165 5,463,276 24,662,426 5,530,973 35,656,675

43

MUSLIM COMMERCIAL BANK LIMITED CONSOLIDATED INCOME STATEMENT

2010 Rs.( '000') Mark-up /return/ interest earned Mark-up/ return/ interest expensed Net Mark-up /return/ interest income Provision for diminution in the value of investment net Provision against non-performing loans and advances net Bad debts written off directly 3,100,594 52,047 3,597,117 Net mark-up /interest income after provisions Non-mark-up / interest income Fee, commission and brokerage income Dividend Income 4,129,540 543,906 632,346 33,236,412 444,476 54,821,296 17,987,767 36,833,529

2009 Rs.('000') 51,616,007 15,837,322 35,778,685

2008 Rs. ('000') 40.043,824 11,560,740 28,483,084

2007 Rs.(000) 31,786,595 7,865,533 23,921,062

2006 Rs.(000) 25,778,061 4,525,359 21,252,702

1,484,218

2,683,994

105,269

121,197

5,796,527 41,576 7,322,321

1,335,127 4,019,121

2,959,583 199 3,065,051

1,014,540 47,000 1,182,737

28,456,364

24,463,963

20,856,011

20,069,965

3,455,948 459,741 341,402

2,866,729 617,554 727,564

2,634,610 632,300 693,408

2,311,235 811,801 692,010

Income from dealing in foreign

44

currencies Gain on sale of securities net Unrealized loss on revaluation of investments Other income net Total non-mark\interest income 547,680 6,265,306 39,50,718 Non-mark-up / interest expenses Administrative expenses Other provision / (reversal) net Other charges Total non-mark-up / interest expenses Extra ordinary / unusual item Profit before taxation Taxation Current year Prior years Deferred 8,027,433 1,352,467 9,379,900 7,703,305 7,341,257 6,442,356 4,611,359 13,248,643 26,253,075 10,944,304 23,154,945 8,387,837 21,867,566 5,996,290 21,308,035 6,560,711 13,018,487 12,173,942 88,261 986,440 10,111,330 142,824 690,150 7,546,787 10,120 830,839 5,426,116 (3,743) 573,830 6,482,592 11,411 66,708 612,026 5,642,885 34,099,249 (103,198) 942,362 5,791,440 30,255,403 (13,105) 1,000.149 6,448,227 27,304,228 570,505 4,991,416 25,061,381 411,834 773,768 740,429 1,500,865 605,865

(2,232,226) (864,824) 2,188,569 7,659,648 16,533 6,492966

(1,294,473) (149,763) 894,590 6,042,473 (365,524) 4,096,072

45

15,265,562 Profit after taxation Unappropriated forward Transfer from surplus on revaluation of fixed assets-net of tax 21,792 15,800,919 22,324 9,215,656 21,319 5,152,069 5,542,828 Profit brought 15,779,27 9,193,332 5,130,750 11,855 16,873,175 15,495,297 15,374,600 5,530,973

8,922,415

502,388

83,749

586,137

Profit available for appropriation Basic and diluted earnings per share -after tax

32,674,094 22.20

24,710,953 22.38

20,526,669 24.47

20,808,390 24.30

9,508,552 17.43

46

RATIO ANALYSIS Ratio analysis is an important and old technique of financial analysis. Ratios are important and helpful in the reference that: These simplify the comprehension of financial statement and tell the whole story of changes in the financial conditions of the business. These provide data for inter-firm comparison. The ratios highlight the factors associated with successful and unsuccessful firms, also reveal strong and weak firms. These help in planning and forecasting these can assist management in its basic functions of forecasting, planning, coordination and control. These help in investment decision in case of investor and lending decision in case of Bankers etc. However, the ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business other things have also to be seen. Great care is needed while calculating meaningful ratios and in interpreting them. Although there are several ratios, which an analyst can employ yet the type of ratios he would, use entirely depends on the purpose for which the analysis is done i.e., a creditor would keep him abreast about the ability of a concern to cover up its current obligations and so would care about current and liquid ratios, Turnover of receivables, coverage of interest by the level of earnings etc.

47

ADVANTAGES OF RATIO ANALYSIS: It helps to give comprehensive financial statements in evaluating aspects of any undertaking in respect of financial health, operations efficiency and profitability. It gives a chance of inter-firmcomparison to measure efficiency and helps management to resort to some remedial measures. It provides a good help in decision making for investors and the financial institutions. CATEGORIES OF RATIO ANALYSIS: Liquidity ratios Debt ratios Profitability ratios Operating Performance ratios

48

LIQUIDITY RATIOS

The liquidity of a firm is measured by its ability to satisfy its short-term obligations as they come due. Liquidity refers to the solvency of the firms overall financial position i.e. the ease with which it pays its bills. Due to low or declining liquidity firm moves towards financial distress and bankruptcy.

Liquidity Measures are: Current ratio Quick (acid-test) ratio Cash Ratio

Current Ratio
The current ratio, one of the most commonly cited financial ratios, measure the firms ability to meet its short-term obligations. It is expressed as follows: Current assets Current ratio = Current liability

49

2010

2009

2008

2007

2006

=305,839,122/35,950, =298,034,271/52,86 =306,184,742/33,215, =262,452,000/ =237,282,14 130 3,178 308 49,885,889 4/31,033,15 5 8.5% 5.6% 9.2% 5.2% 7.6%

Interpretation:

Current ratio shows a firms ability to expire all its current liabilities through current assets. Industry standard for current ratio is 2. A current ratio of 2 means a firm is able to satisfy its entire current obligation. Figure mentioned in the table above shows that MCB current ratios from year 2006-2010 are quite well. So it means MCB is in a position to cover all its current liabilities

50

Acid Test Ratio

=Cash +Cash Equivalent+ Short-term Investments +Accounts Receivables Current Liabilities

2010 2009 =264,348,415/35, =214,919,329/5 950,130 2,863,78 7.3% 4% Interpretation:

2008 2007 2006 =144,031,225/33, =157,632,035/49, =123,611,109/31, 215,308 885,889 033,155 4.3 3.1% 3.9%

Acid test ratio shows the extent of cash and other current assets that are readily convertible into cash in comparison to other short term obligations of an organization. A quick ratio of 0.5 would suggest that a company is able to settle half of its current liabilities instantaneously. Above mentioned acid-test ratios of MCB show that the bank is at an excellent position to convert its assets into cash.

51

Cash Ratio = Cash + Cash Equivalents+ Invested Funds Current Liabilities

2010 =259,946,634/35,95 0,130 7.2%

2009 =211,919,329/528631 78 4%

2008 2007 =139,931,146/33,21 =156,580,663/ 5,308 49,885,889 4.2% 3.1%

2006 =102,529,30 9/31,033,15 5 3.3%

Interpretation

Industry average for cash ratio is 1. From the above mentioned figures we can analyze that MCBs financial performance is quite well from 2006-2010 and in 2010 it is excellent .i.e. a ratio of 7.2%

52

DEBT RATIO
The debt position of a firm indicates the amount of other peoples money being used to generate profits. In general, the financial analyst is most concerned with long term debts, because these commit the firm to a stream of payment s over the long run. Debt Ratio Debt Equity Ratio Interest Coverage Ratio Capitalization Ratio

Debt Ratio

The debt ratio measures the proportion of total assets financed by the firms creditors. The higher this ratio the greater the amount of other people money being used to generate profit. The ratio is calculated by following formula

Debt Ratio= Total Liabilities Total Assets

53

2010

2009

2008

2007

2006

=567,552,613/488, 348,404 1.2%

=509,223,727 /439,483,714 1.2%

=443,615,904/38 5,179,850 0.14%

=410,485,517/ =342,108,243/301,2 355,365,842 1.2% 63,929 1.13%

Interpretation: Debt ratio determines how much a company depends on debt to finance its assets. A higher ratio indicates that the firm too much depends on debts to finance the assets which are risky to its operations. MCB debt ratios from 2006-2010 indicate that the bank relays less on debt and more on equity.

54

Debt Equity Ratio

=Total Liabilities Shareholders Equity

2010 =488,348,404/7, 602,150 64.2

2009 =439,483,714/6,91 1,045 63.6

2008

2007

2006 =301,263,929/ 5,463,276 55.1

=385,179,850/6,282 =355,365,842/6,2 ,768 61.3 82,768 56.6

Interpretation Debt-to-equity ratio is the key financial ratio and is used as a standard for judging a company's financial standing. It is also a measure of a company's ability to repay its obligations. When examining the health of a company, it is critical to pay attention to the debt/equity ratio. If the ratio is increasing, the company is being financed by creditors rather than from its own financial sources which may be a dangerous trend.

55

Interest Coverage Ratio

Interest Coverage Ratio= Earnings before interest and taxes Interest Expense

2010 =39,501,718/13,248,6 43 2.98

2009 =34,099,249/10,994,3 04 3.1

2008 =30,255,403/8, 387,837 3.6

2007 =27,304,238 /5,996,203 4.6

2006 =25,061,381 /6,560,711 3.8

Interpretation: Interest coverage ratio provides a quick picture of a companys ability to pay the interest charges over its debt. An interest-coverage ratio below 1 is an immediate indication that the company, regardless of its industry, is not generating sufficient cash to cover its interest payments. That said, an interest-coverage ratio of 1.5 is generally considered the bare minimum level of comfort for any company in any industry. MCBs interest coverage ratio indicates that the company is at a good position to pay off the interest due on its borrowings. All the figures form 2006-2010 are above than the industry average so it is a clear proof of MCBs credit standing.

56

PROFITABILITY RATIOS

Return on total assets Return on equity Gross Margin Pretax Profit Margin Net Profit Margin

Return on Total Assets

It measures the overall effectiveness of management in generating profits with its available assets. The higher the Return on total assets better will be the performance.

Earnings before Interest and Tax Return on total assets = Total assets

57

2010 =39,501,718/567 ,552,613 6.9%

2009 =34,099,249/509 ,223,727 6.6%

2008 =30,255,403/443 ,615,904 6.8%

2007 =27,304,238/410 ,485,517 6.6%

2006 =25,061,381/342 ,108,243 7.3%

Interpretation: Return on total assets ratio measures a company's earnings before interest and taxes (EBIT) against its total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid. MCBs ROTA was good in 2006 i.e. 7.3%. While in the next year (2007) it declined i.e. 6.6%. Then we can see that it increased again in 2010 by 6.9%. This indicates that bank is in a position to generate sufficient earnings by utilizing its total assets.

58

Return on Equity
Net Income Return on total assets = Shareholders Equity

2010

2009

2008 =15,374,600/6,2 82,768 2.4%

2007 =15,265,562/6,2 82,768 2.4%

2006 =12,142,398 /5,463,276 2.2%

=6,873,175/7,60 =15,495,297/6,9 2,150 11,045 0.91 2.2

Interpretation: This ratio indicates how profitable a company is relative to its total assets. Banks strive to record an ROA of 1.5% or above. MCBs ROA from 2006 to 2009 is quite well. But it is showing a down figure in 2010. I.e. an ROA of 0.91%

59

Gross Margin

Gross Margin= Gross Profit Revenue

2010

2009

2008 =28,483,084/40,04 3,824 70%

2007 =23,921,062/31, 786,595 75%

2006 =21,252,702/25, 778,061 82%

=36,833,529/54,821 =35,778,685/ ,296 51,616,007 67% 69%

Interpretation:

The gross profit margin tells us the profit a company makes on its cost of sales. In other words, it indicates how efficiently management uses labor and supplies in the production process. High margin indicates that company has effective control over its costs. MCBs gross margin from 2006 to 2010 shows that banks earnings are increasing faster than its operating costs. In 2007 it has highest margin 0f 75%. While in 2010 it is low due to economic crisis in the country.

60

Pretax Profit Margin

=Pretax Profit Revenue

2010 2009 =26,253,075/54,821,2 =23,154,945/51,616,007 96 48% 45% Interpretation:

2008 =21,867,566/4 0,043,824 55%

2007 =21,308,035 /31,786,595 67%

2006 =12,142,398 /25,778,061 47%

Pretax profit margin indicates how much profit a firm can generate through sales before paying tax on it. The higher the pre-tax profit margin, the more profitable the company. We can observe from the above mentioned figures that MCBs pretax profit margin is more than 50% in 2007 and 2008 (67% and 55% respectively). While it declined in 2009 and 2006 (45% and 47% respectively). In 2010 bank seems to strive for another high figure by reaching at 48%.

61

Net Profit Margin

=Net Profit Revenue

2010 =16,873,175/54,821, 296 31% Interpretation:

2009 =15,495,297/51,616, 007 30%

2008 =15,374,600/40,0 43,824 30%

2007 2006 =15,265,562/31, =12,142,3 786,595 98/25,778, 061 48% 47%

Net profit margin indicates how much profit a firm can earn through sales after paying off all the taxes. A higher net profit margin tells that companys business is very profitable.Net profit industry average for banks is 8.51%. By the figures mentioned above, we can assess that MCBs net profit margin is very high. Bank is enjoying strong financial position. However, the figure has been declining from 2006 to 2010 which is the result of recent halted economy.

62

OPERATING PERFORMANCE RATIO

Fixed Assets Turnover Ratio

Fixed Assets Turnover Ratio This ratio is a rough measure of the productivity of a companys fixed assets with respect to generating revenue. Higher the productivity of the company, higher is the turnover ratio. Formula for this ratio is: =Revenue Fixed Assets

63

2010 =54,821,296/20,947, 540 26% Interpretation:

2009 =51,616,007/18,014, 896 29%

2008 =40,043,824/17,2 63,733 23%

2007 =31,786,595/1 6,024,123 19%

2006 =25,778,06 1/9,054,15 6 28%

If a company can generate more sales with fewer assets it has a higher turnover ratio which tells it is a good company because it is using its assets efficiently. A lower turnover ratio tells that the company is not using its assets optimally. From the above table we can analyze that MCBs turnover on fixed assets is good. In 2009 turnover was highest. In 2006 turnover was good then it declined in 2007 i.e. 19%. It increased again in 2008 i.e. 23%. IN 2010 the figure declined again by reaching at 26%.

64

VERTICAL ANALYSIS OF BALANCE SHEET

2010 Amou nt ASSETS Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments 213,06 0,882 0.3 7% 14,78, 569 4,401, 781 0.2 6% 7.7 5% 45,407 ,183 8% %

2009 Amoun t %

2008 Amoun t %

2007 Amount %

2006 Amoun t %

38,774, 871

7.6 %

39,631, 172

8.9 39,683,8 % 83

9.7 32,465, % 976

9.5 %

6,009,9 93 3,000,0 00

1.18 % 0.58 %

4,043,1 00 4,100,0 79

0.9 3,807,51 % 9

.92 6,577,0 % 17

1.9 % 0.6 %

0.9 1,051,37 % 2

0.2 2,081,8 5 % 00

167,134 ,465

32.8 %

96,256, 874

21. 113,089, 6 % 261

27. 63,486, 6 % 53. 198,239 2 % 3.9 9,054,1 % 56 ,155 316

18. 5%

Advances

254,55 1,589

0.4 4%

253,249 ,407

49.7 %

262,510 ,470

59. 218,690, 2 % 598

57 %

operating fixed assets

20,947 ,540

0.0 36 %

18,014, 896

3.5 %

17,263, 733

3.9 16,024,1 % 23

2.6 %

deferred tax

172,373

0.0

65

assets Other Assets 27,705 ,069 0.0 48 % Total 567,55 2,613 100 % 509,223 ,727 100 % 443,615 ,904 10 0 % LIABILITIES Bills payable 10,265, 537 Borrowings 1.8 % 8,201,0 90 44,662, 088 367,604 ,711 1.6 % 8.8 % 6.2 % 10,551, 468 22,663, 840 330,181 ,624 2.4 10,479,0 % 58 2.5 7,089,6 % 79 410,485, 517 10 0 % 342,108 ,243 23,040, 095 4.5 % 19,810, 476 4.5 17,868,7 % 61 4.3 11,031, % 450

5% 3.2 %

10 0%

2.1 % 6.1 % 75 %

25,6845 4.5 93 %

5.1 39,406,8 % 31

9.6 23,943, % 71 % 476 257,461 ,838

Deposits and other accounts

431,371 76 ,937 %

74. 292,098, 4 % 066

Sub-ordinate loans Liabilities against assets subject to finance lease Deferred tax liabilities

479,232

0.1 1,597,4 % 40 -

0.4 6% -

4,934,0 18

8.9 %

3,196,7 34

0.62 %

437,137

0.0 1,180,16 98 % 2

0.2 9 %

66

Other liabilities

16,092, 319

2.8 %

15,819, 082 439,483 ,714

3.1 % 86%

21,345, 781 385,179 ,850

4.8 11,722,4 % 93

2.8 11,171, % 496

3.2 % 88 %

Total

488,348 86 ,404 %

86. 355,365, 8 % 842

86. 301,263 6 % ,929

REPRESENTED BY: Share capital 7,602,1 50 1.3 6,911,0 4 % Reserves 40,162, 906 7.0 38,385, 8 % Unappropriated profits 21,414, 955 3.7 15,779, 8 % 69,180, 011 1.2 61,075, 2 % Surplus/ (deficit ) on revaluation of assets-net of tax Total Stockholders Equity 79,204, 209 13. 69,740, 9 % 013 13.7 % 58,436, 054 13. 2% 40,844,3 14 10 % 40,884,3 14 11 .1 % 10,024, 198 1.7 8,664,0 8 % 81 1.7 % 6,191,1 89 1.4 % 5,187,63 9 1.3 5,187,63 % 9 932 11.1 % 52,244, 865 11. 8% 35,656,6 75 8.7 35,656,6 % 75 127 3.1 % 9,193,3 32 0.2 1% 5,530,97 3 1.3 5,530,97 % 3 760 7.5 % 36,768, 765 8.3 % 24,662,4 26 6 % 24,662,4 26 45 1.36 % 6,282,7 68 1.4 2% 5,463,27 6 1.3 5,463,27 % 6 1. 6 % 7. 2 % 1. 6 % 10 .4 % 1. 52 %

67

VERTICAL ANALYSIS OF INCOME STATEMENT

MUSLIM COMMERCIAL BANK LIMITED CONSOLIDATED INCOME STATEMENT

2010 Rs. Mark-up %

2009 Rs. 51,616, 007 15,837, 322 35,778, 685 % 100 % 30.7 % 69%

2008 Rs. 40,043, 824 11,560, 740 28,483, 084 % 100 % 28.8 % 71%

2007 Rs 31,786 ,595 7,865, 533 23,921 ,062 % 100 % 24.7 % 75%

2006 Rs. 25,77 8,061 4,525 ,359 21,25 2,702 % 100 % 17.6 % 82%

/return/ 54,821,2 100 96 %

interest earned Mark-up/

return/ 17,987,7 32.8 67 %

interest expensed Net /return/ income Provision for diminution in the value of investment net Provision against non-performing loans and advances net Bad debts written off directly

Mark-up 36,833,5 67% interest 29

444,476

0.81 %

1,484,2 18

2.9% 2,683,9 94

6.7 %

105,26 9

0.33 %

121,1 97

0.5 %

3,100,59 5.7 4 %

5,796,5 27

11.2 %

1,335,1 27

3.3 %

2,959, 583

9.3 %

1,014 ,540

3.9 %

52,047

0.1 %

41,576

0.08 %

199

6.3 %

47,00 0

0.18 %

68

3,597,11 6.6 7 Net mark-up /interest income after provisions %

7,322,3 21 28,456, 364

14.2 % 55.1 %

4,019,1 21 24,463, 963

99%

3,065, 051

9.6 % 65.6 %

1,182 ,737 20,06 9,965

4.6 % 77.8 %

33,236,4 6.1 12 %

61%

20,856 ,011

Non-mark-up / interest income Fee, commission and brokerage income Dividend Income 543,906 0.1% 459,74 1 Income from dealing in foreign currencies Gain on sale of securities net Unrealized loss on revaluation of investments Other income net 547,680 0.1% 612,02 6 Total nonmark\interest income 6,265,3 06 1.2% 5,642, 885 11.9 % 10.9 % 942,36 2 5,791, 440 2.3 % 14.4 % 1,000. 149 6,448, 227 3.1 % 20% 570,5 05 4,991 ,416 2.2 % 19% 411,834 0.07 % 773,76 8 1.5 % 740,42 9 (103,19 8) 1.85 % (0.2 5%) 1,500, 865 (13,10 5) 4.7 % (0.0 4%) 605,8 65 2.4 % 632,346 0.1% 341,40 2 0.9 % 0.66 % 617,55 4 727,56 4 15.3 % 1.8 % 632,30 0 693,40 8 1.9 % 2.1 % 811,8 01 692,0 10 3.1 % 2.7 % 4,129,54 0 7.6% 3,455,9 48 6.7 % 2,866,7 29 7.2 % 2,634, 610 8.3 % 2,311 ,235 9%

69

39,50,71 8

0.7% 34,099, 249

66%

30,255, 403

75.5 %

27,304 ,228

85.9 %

25,06 1,381

97%

Non-mark-up / interest expenses Administrative expenses Other provision / (reversal) net Other charges 986,440 12,173,9 2.24 42 88,261 % 0.01 6% 0.18 % Total non-mark-up / interest expenses Extra ordinary / unusual item Profit before taxation Taxation Current year 8,027,4 33 Prior years 1.5 % 7,703,3 05 (2,232, 226) Deferred 1,352,4 67 9,379,9 0.25 % 1.72 2,188,5 69 7,659,6 (4.3 %) 4.2 % 14.8 6,4929 15% 7,341,2 57 (864,82 4) 16,533 (2.2 %) 0.04 % 0.16 18% 6,442, 356 (1,294 ,473) 894,59 0 6,042, (4.1 %) 2.8 % 19% 20% 4,611 ,359 (149, 763) (365, 524) 4,096 17.9 % (0.5 8%) (1.4 2%) 15.9 26,253,0 4.8% 23,154, 75 945 44.9 % 21,867, 566 54.6 % 21,308 ,035 67% 13,01 8,487 50.5 % 10,111, 330 142,82 4 690,15 0 19.6 % 0.8 % 1.33 % 21% 830,83 9 8,387,8 37 7,546,7 87 10,120 18.8 % 0.02 % 2.07 % 21% 5,426, 116 (3,743 ) 573,83 0 5,996, 290 (0.1 %) 1.8 % 18.8 % 6,560 ,711 25% 17% 6,482 ,592 11,41 1 0.04 %
-

25%

13,248,6 2.4% 10,944, 43 304 -

70

00 Profit after taxation Unappropriated Profit brought forward Transfer from surplus on revaluation of fixed assets-net of tax 15,800, 919 Profit available for appropriation 32,674, 094 21,792 16,873, 175 15,779, 27

% 3.1 % 0.3 %

48 15,495, 297 9,193, 332

% 30%

66 15,374, 600

% 38%

473 15,265 ,562 48%

,072 8,922 ,415 17% 502,3 88

% 34.6 % 1.9 %

17.8 %

5,130, 750

12.8 %

5,530, 973

4%

22,324

0.04 %

21,319

0.05 %

11,855

0.03 %

83,74 9

0.3 %

2.9 % 6%

9,215,6 56 24,710, 953

17.9 % 47.9 %

5,152,0 69 20,526, 669

12.8 % 51%

5,542, 828 20,808 ,390

17%

586,1 37 9,508 ,552

2.3 % 36.9 %

65%

71

HORIZONTAL ANALYSIS OF BALANCE SHEET

MUSLIM COMMERCIAL BANK LIMITED CONSOLIDATED BALANCE SHEET

2010 Amount ASSET Cash and balances with treasury banks 45,407,1 83 100 % %

2009 Amount %

2008 Amount %

2007 Amount %

2006 Amount %

38,774,8 71

14. 6%

39,631,1 72

12. 7% 39,683,8 83

12. 6%

32,465,9 76

28 %

Balances with other banks Lending to financial institutions Investments

14,78,56 9 4,401,78 1

100 % 100 %

6,009,99 3 3,000,00 0

(3.1 %) 31. 8%

4,043,10 0 4,100,07 9

(1.7 %) 6.9 %

3,807,51 9 1,051,37 2

(1.5 %) 76 %

6,577,01 7 2,081,80 0

(3.4 %) 52 %

213,060, 882

100 % 100 % 100 % -

167,134, 465 253,249, 407 18,014,8 96 -

27. 5% 5.2 % 14 % -

96,256,8 74 262,510, 470 17,263,7 33 -

54. 8% (3.1 %) 17. 6% -

113,089, 261 218,690, 598 16,024,1 23 -

47 % 14 % 23 % -

63,486,3 16 198,239, 155 9,054,15 6 172,373

70 % 22 % 56. 7% -

Advances

254,551, 589

operating fixed assets deferred tax

20,947,5 40 -

72

assets Other Assets 27,705,0 69 567,552, 613 LIABILITIES Bills payable 10,265,5 37 Borrowings 25,6845 93 Deposits and other accounts Sub-ordinate loans Liabilities against assets subject to finance lease Deferred tax liabilities Other liabilities 4,934,01 8 16,092,3 19 488,348, 404 100 % 100 % 100 % 3,196,73 4 15,819,0 82 439,483, 714 35 % 1.7 % 10 % 21,345,7 81 385,179, 850 437,137 91 % (32 %) 21 % 1,180,16 2 11,722,4 93 355,365, 842 76 % 27 % 27 % 11,171,4 96 301,263, 929 30 % 38 % 431,371, 937 100 % 100 % 100 % 8,201,09 0 44,662,0 88 367,604, 711 20 % (73. 10,551,4 68 22,663,8 (2.8 %) 11. 8% 23 % 10,479,0 58 39,406,8 31 292,098, 066 479,232 (2% 7,089,67 ) (53 %) 32 % 9 23,943,4 76 257,461, 838 1,597,44 0 31 % 6.8 % 40 % 100 % 100 % 23,040,0 95 509,223, 727 91. 7% 10. 3% 19,810,4 76 443,615, 904 28 % 21. 8% 17,868,7 61 410,485, 517 28. 5% 27. 7% 11,031,4 50 342,108, 243 60 % (50 %)

9%) 40 14. 8% 330,181, 624 -

73

NET ASSETS

79,204,2 09

69,740,0 13

12 %

58,436,0 54

26 %

55,119,6 75

30 %

40,844,3 14

48 %

REPRESENTED BY: Share capital 7,602,1 50 Reserves 40,162,9 06 Unappropriated profits 21,414,9 55 69,180,0 11 Surplus/ (deficit ) on revaluation of assets-net of tax 79,204,2 09 100 % 69,740,0 13 11. 9% 58,436,0 54 26 % 55,119,6 75 30 % 40,884,3 14 48 % 10,024,1 98 100 % 100 % 100 % 100 % 100 % 6,911,04 5 38,385,7 60 15,779,1 27 61,075,9 32 8,664,08 1 (70 %) 4.4 % 26 % 11. 7% 13. 6% 6,282,76 8 36,768,7 65 9,193,33 2 52,244,8 65 6,191,18 9 17 % 8.5 % 57 % 24. 5% 38 % 6,282,76 8 34,000,6 38 5,130,75 0 45,414,1 65 9,705,51 9 17 % 15 % 76 % 34 % 3.2 % 5,463,27 6 24,662,4 26 5,530,97 3 35,656,6 75 5,187,63 9 28 % 38. 5% 74 % 48 % 48 %

74

HORIZONTAL ANALYSIS OF INCOME STATEMENT

MUSLIM COMMERCIAL BANK LIMITED CONSOLIDATED INCOME STATEMENT

2010 Rs. Mark-up interest earned /return/ 54,821,29 6 17,987,76 Mark-up/ return/ 7

2009 Rs. 51,616,0 07 15,837,3 22 % 5.8 % 12 %

2008 Rs. 40,043,8 24 11,560,7 40 (1.4) % 27%

2007 Rs 31,786 ,595 7,865, 533 % 42 % 56 %

2006 Rs. %

25,778 53 ,061 4,525, 359 % 74. 8 %

interest expensed Net Mark-up /return/ 36,833,52 interest income Provision for diminution in the value of investment net Provision against nonperforming loans and advances net Bad debts written off directly 52,047 41,576 20 % 199 99. 6% 3,100,594 5,796,52 7 (0.8 ) 1,335,12 7 57% 2,959, 583 4.5 % 1,014, 540 9 444,476 35,778,6 85 1,484,21 8 2.8 % (2.3 ) 28,483,0 84 2,683,99 4 22.7 % (5) 23,921 ,062 105,26 9 35 % 76 %

21,252 42 ,702 %

121,19 72. 7 7 %

67 %

47,000 9.7 %

75

3,597,117

7,322,32 1

(1.0 3) 14 %

4,019,12 1 24,463,9 63

(0.1)

3,065, 051

14. 8% 37 %

1,182, 737

67 %

Net mark-up /interest income after provisions

33,236,41 2

28,456,3 64

26%

20,856 ,011

20,069 39 ,965 %

Non-mark-up / interest income Fee, commission and brokerage income Dividend Income 543,906 4,129,540 3,455,94 8 459,741 16 % 15 % 2,866,72 9 617,554 (0.1 3) 30% 2,634, 610 632,30 0 36 % 88 % 2,311, 235 44 %

811,80 (0. 1 49 )

Income from dealing in foreign currencies

632,346

341,402

46 %

727,564

(0.1 5)

693,40 8

(0.0 9)

692,01 (0. 0 09 )

Gain on sale of securities net

411,834

773,768

(0.8 7)

740,429

(0.7 9)

1,500, 865

(9.9 )

605,86 (0. 5 47 )

Unrealized loss on revaluation of investments Other income net

(103,19 8)

(13,10 5)

547,680

612,026

(0.1 1)

942,362

(0.7 2)

1,000, 149

(0.8 )

570,50 (0. 5 04 )

Total non-

6,265,306

5,642,8

9.9

5,791,4

7.6

6,448,

(3)

4,991,

20

76

mark\interest income 39,50,718

85 34,099,2 49 (7.6 )

40 30,255,4 03

% (6.6)

227 27,304 ,228 (5.9 )

416

25,061 (5. ,381 3)

Non-mark-up / interest expenses Administrative expenses 12,173,942 10,111, 330 16% 7,546,7 87 38% 5,426, 116 55% 6,48 2,59 2 Other provision / (reversal) net Other charges 986,440 88,261 142,82 4 690,15 0 Total non-mark-up / interest expenses 13,248,643 10,944, 304 17% 30% 830,83 9 8,387,8 37 15.8 % 36% (0.6) 10,120 88% (3,743 ) 573,83 0 5,996, 290 41.8 % 54% 6,56 0,71 1 Extra ordinary / unusual item Profit before taxation 26,253,075 23,154, 945 1.5 % 21,867, 566 16% 21,308 ,035 18.8 % 13,0 18,4 87 Taxation Current year 8,027,433 7,703,3 05 Prior years (2,232, 4% 7,341,25 8.5 7 (864,82 % 6,442 ,356 (1,29 19.7 % 4,611, 359 (149,7 42. 5 % 50 % 50 % 1% 11,4 11 87 %
-

46 %

77

226)

4)

4,473 )

63)

Deferred

1,352,467

2,188,5 69

(6.1)

16,533

98. 7%

894,5 90 6,042 ,473 15,26 5,562 5,530 ,973 11,85 5

33.8 % 35%

(365,5 24) 4,096, 072

(1. 2) 56 % 47 %

9,379,900

7,659,6 48

18%

6,49296 6

30. 7%

Profit after taxation

16,873,175

15,495, 297

8.2 % (4.8)

15,374,6 8.9 00 5,130,7 50 % (2.2 ) 2.2 %

9.5 % (2.5)

8,922, 415

Unappropriated Profit brought forward Transfer from surplus on revaluation of fixed assets-net of tax

15,779,27

9,193, 332

502,38 68 % 8 83,749 (2. 8)

21,792

22,324

(0.0 2)

21,319

45%

15,800,919

9,215,6 56 24,710, 953

41.7 % 24%

5,152,06 67 9 % 20,526,6 37 69 %

5,542 ,828 20,80 8,390

64%

586,13 96 7 % 9,508, 552 70 %

Profit available for appropriation

32,674,094

36%

78

COMPETITIVE ANALYSIS

Competitive Factor Total Assets Total Liabilities Revenue

MCB 567,552,613 488,348,404 54,821,296

Habib Bank Limited 924,699,403 828,448,632 81,325,028

Allied Bank of Pakistan 468,044 413,956 44,993

United Bank Limited 698,784,979 630,369,914 59,331,761

Major competitors of MCB are Habib Bank Limited, Allied Bank of Pakistan and United Bank Limited. By competitive analysis we came to know that MCBs total assets are 567,552,613 which are less than the HBLs total assets of 924,699,403 and above than the total assets of UBL and ABL. It means MCB is doing well as compared to UBL and ABL but it is still far behind the HBL. At liabilities side MCBs liabilities are less than its all competitors. ABLs liabilities are less than those of MCB because its assets are less as well. So ABL is weak competitor of MCB. On revenue side we see that MCBs revenues are greater than those of ABL. But they are less than those of UBL and very less than the revenues of HBL. So HBL is the strongest competitor of MCB. MCB still needs to improve its financial position to grasp the market share of HBL.

79

FUTURE PROSPECTS
Key features of MCB future prospects are: MCB is determined to work on the customer satisfaction by launching new products. MCB wants to capture all the local markets and wants to capture the share of global market as well by payroll, trade policy and making the cash management more effective MCB aims at introducing more affective financial services to take the leading position in the banking industry. MCB targets at reducing the expenditure and investing in the businesses which are more profit oriented. MCB is planning to increase its branch network by purchasing more land area and by establishing new offices there. MCB is looking to establish ATM facility at every branch. Virtual banking, mobile banking is proving of MCBs future outlook for virtual customer relations management.

80

WEAKNESSES OF THE ORGANIZATION

Following weaknesses has been observed in the operations of the organization: Inappropriate Advertisement: Majority of people are not aware about the products of the MCB. This is all due to absence of a proper advertisement campaign. Discrimination among Customers: Customer service department discriminates between customers by preferring rich and well dressed persons over the poor and simple one. This behavior should be negated Mismanagement of Time: Another weakness of the branch is time mismanagement. Branch closing time is 5:30 pm but employees keep on working till 7:00 pm or 8:00 pm. This happens due to absence of a proper schedule.

81

CONCLUSION

My internship had been an excellent experience of 6 weeks. I learnt a lot about the banking industry and the professional life. I learned about the working of various departments. I learned how to open an account, how to deal the customers effectively, how to complete the given task within deadline. I learned about the working of accounts and finance department. I learned to make financial statements according to professional standards. I learned to do the financial analysis. My experience in the department increased my basic knowledge about finance and accounts. I learned how to compare the companys performance with those of competitors. Group work taught me how to manage the conflict. MCB is a great organization to work and learn. It is one of the reputed organizations in our banking industry. Financial figures of the bank highlight the banks contribution in Pakistans economy. It was a matter of great honor for me to work in MCB.

82

RECOMMENDATIONS
Some recommendations which can improve the branchs performance are:

Proper Advertising: Bank must let the potential customer know about the attractive products of MCB. This is done by the advertising on television and through press coverage, in conjunction with direct mail, window displays, leaflet in branches and in other appropriate locations (such as hotels, shops etc.) and including leaflet in statements of accounts sent to existing customers.

Availability of more ATMs: Automated Teller Machines should be available at every branch for increase in customer Service. It will attract other competitors customers as well.

Increased Services: One way to retain the customer is to offer wide range of the services such as tax advice, free life insurance equivalent to amount deposited, shares portfolio management , fund management facility etc. Bank must have slightly different mix of services and mean of providing these so that customers can choose which suits them best.

Time Management There should be a good management of time for the sake of employees i.e. offering them free break hours instead of making them to work in this time as well.

Employee Career Development

83

MCB should provide greater facilities to employees and give them bonuses for their hard work and promotions as well. There is a criticism on bank management that the salaries of the employees are not increasing properly. This can shake the confidence and work habit of the employees. Recruitment of Professional Staff The bank should hire banking professionals having experience in their respective fields that will boost the performance of the bank. Job rotation and promotions Most of the bank employees have been sticking on a seat from years, these results in making them master of one particular job and losing their grip on other bank operations. Job rotation is essential for such employees. Promotion policy should be adjusted. Better communication system Steps should be taken to improve communication within organization so that employees can deliver their grievances to higher management.

84

REFERENCES
Muslim Commercial Bank Limited. (2012).Annual Report. Retrieved from https://www.mcb.com.pk/uploads/FCG/docs/MCB%20Annual%20Report_2012.pdf Muslim Commercial Bank Limited. (2010). Annual Report. Retrieved from https://www.mcb.com.pk/uploads/FCG/docs/Annual%20Report%202010.pdf Muslim Commercial Bank Limited. (2009). Annual Report. Retrieved from https://www.mcb.com.pk/uploads/FCG/docs/MCB%20Annual%20Report%202009.pdf Muslim Commercial Bank Limited. (2008). Annual Report. Retrieved from https://www.mcb.com.pk/ir/pdf/MCB%20Annual%20Report%202008.pdf Muslim Commercial Bank Limited. (2007). Annual Report.. Retrieved from https://www.mcb.com.pk/uploads/FCG/docs/MCB%20Annual%20Report%202007.pdf Muslim Commercial Bank Limited. (2006). Annual Reports. Retrieved from https://www.mcb.com.pk/uploads/FCG/docs/MCB%20Annual%20Report%202006.pdf Muslim Commercial Bank Limited. (2013). Financial Reports. Retrieved https://www.mcb.com.pk/ir/fin_data_rep.asp Pakistan Stock Exchange http://www.pakstockexchange.com/stock2/index_new.php Eugene F. Brigham, Michael C Ehrhardt. (2010). Financial Management: Theory and Practice .13e United Bank Limited, Pakistan. https://www.ubldirect.com/corporate/Default.aspx Erum Zadi. (2010, Nov 26). MCB maintains Edge over Competitors. Retrieved from http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/business/26Nov-2010/MCB-maintains-edge-over-competitors Allied Bank of Pakistan. https://www.abl.com/ Habib Bank Limited http://www.hbl.com/about-us.php http://www.hbl.com/downloads/pdf/annual/2010/2010-financial-statements-group.pdf https://www.abl.com/investor-relations/financials-reports/ from

85

86