Chapter 1

INTRODUCTION

1.1 Background of the study

Pakistan financial sector is experiencing a radical change. The liberalization of
exchange control, large scale of state enterprises , operating of new banks in the private sector,
deregulation of credit controls and conversion to Islamic banking have brought radical
changes in the banking sector of Pakistan.

Recognizing the need to cater to changing competencies, skill sets and succession need
bankers are rapidly equipping themselves to meet the challenges. MCB Bank has been very
successful in coping with the dynamic financial environment of Pakistan.

The reason that I have selected MCB Bank Limited for my study is that MCB Bank is
one of the largest sectors in private sector with a large setup, equipped with technological
apparatus and a large deposits base. MCB Bank has always been trendsetter for other banks,
after the emergence of online banking and computerization, MCB Bank was one of the few
banks that adopted them and offered its services in this respects. Today MCB Bank has one
the largest networks of online branches and almost all of their branches are computerized. Its
rapid growth urged me to study its structural and functional policies before and after
privatization. That’s why I have selected MCB Bank as the organization for my study.

1.2 Purpose of the Study

This study has been conducted as compulsory requirement of BBA (Finance) program.
An internship program of two months in an institution enables the student like us to get the
basic idea about institution and to put the theoretical concept in to practice. The internship
report comprises financial analysis findings and recommendations are the basic purpose of
the entire study as it enable the student to become aware of the performance as well as the
various function of the organization which is definitely a worth effect.

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1.3 Scope of the Study
Banking is a very vast subject. It has many dimensions and its treatment too require
divers field approaches. However, for a meaningful conclusion I have confined the study for
the purpose of understanding the subject matter the recommendation and analysis can be
generalized to the entire country and on all the banks as the culture and environment
prevailing is the same throughout the country. Furthermore, I have learned a lot of things
during my internship period and also during the compilation of this report, which has
enhanced my report writing skill.

1.4 Methodology of Research

While collecting the data and other relevant information I used the following methods:
1. I interviewed different levels of employees of this organization and gathered
information regarding history of this organization, its organizational structure. My
whole study is based on the information gathered in these interviews.
2. In my interviews I have also asked their opinion about the current organizational
structure and what changes they wish to see in the current set up.
3. I have not used questionnaire method to collect information, as it is not 100%
authentic, so that’s why I have used interview method in order to get information for
my study.

1.5 Scheme of the Report

The report has been divided into each section having sub-sections in it. The scheme of
the report is as follows: Chapter 1 includes the introduction, background of the study, purpose
of the study, methodology, and scheme of the study.
Chapter-2 Brief History of MCB, Nature of MCB, Business Volume of MCB, Product Line,
Competitors of MCB and brief Introduction of MCB

Chapter-3 Contains organizational structure of MCB. Hierarchy Chart, Number of

Employees, Main Office, Introduction of Department and Function of Department.

Chapter-4 Includes Critical Analysis and Strategies

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Chapter-5 Includes SWOT Analysis

Chapter-6 Summarizes conclusions and recommendations based on the analysis.

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Chapter 2
OVERVIEW OF THE ORGANIZATION

2.1 Brief History

This bank was incorporated under company’s act 1913 on July, 1947 (just before
partition) at culcatta. But due to changing scenario of the region, the certificate of
incorporation was issued on 17th August, 1948 with a delay of almost 1 year; Mr. G.M.
Adamjee was appointed its first chairman. It was incorporated with an authorized capital of
Rs. 15 million.

After some time the registered office of the company was shifted to Karachi on August
23rd, 1956 through a special resolution. Now the head office of MCB has been transferred to
Islamabad in July, 1999. Head office is now termed as principle Office.

This institute was nationalized on January 1st, 1974. At that time it had 506 branches
and deposits amounting to Rs. 1640 million. Although MCB has reputation of a conservative
bank but nationalization also left its effects on this institute as will and by end of year 1991 in
which it was privatized the total number of branches were 1287 and deposits amounting to as
high as Rs. 35029 million.

1. Privatization
When privatization policy was announced in 1990, MCB was the first to be privatized
upon recommendations of World Bank and IMF. The reason for this choice was the better
profitability condition of the organization and less risky credit portfolio which made it a good
choice for investors. On April 8th, 1991, the 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.

2. After Privatization
Ten years after privatization, MCB Bank is now in a consolidation stage designed to

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lock in the gains made in recent years and prepare the ground work for future growth. The
bank had restructured its assets portfolio and rationalized the cost structure in order to remain
a low cost producer.

After privatization, the growth in every department of the bank had been observed.
Following are some key development:
1. launching of different deposit schemes to increase saving level.
2. Increased participation in foreign trade.
3. Betterment of branches and staff service level.

2.2 Nature of the Organization

MCB is one of the leading banks in Pakistan providing a wide range of banking
services including commercial and public sector banking services. MCB targets at achieving
market recognition in providing quality banking services.
The nature of responsibilities of the Bank is different and unique from other
banks/financial institutions. The MCB has also played an important role in financing the
country’s growing trade, which has expanded through the years as diversification took place.
The bank is providing all banking services of mercantile and commercial banking permissible
in the country, which include

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2.3 Business Volume of MCB
Table-2.1: Business Volume of MCB

Rupees in millions

Year 2020 2021 2022 2023

Total Assets 553,231,467 635,132,711 817,758,326 762,193,593

Deposits 465,571,717 501,872,243 624,939,016 591,907,435

Advances 220,794,075 316,110,406 412,986,865 340,318,930

Reserves 10,813,914 13,879,260 19,941,047 15,772,124

Investments 149,350,096 139,946,995 170,822,491 211,146,038

Horizontal Analysis (%)

Total Assets 100 100 100 100

Deposits 79 76.7 77.7 77.9

Advances 49.7 50.5 44.6 20.6

Reserves 22 24 21 23

Investments 22 20.9 27.7 28.7

Source: www.mcb.com.pk

The business volume of Muslim Commercial Bank is stated in terms of total assets
deposits, advances, reserves and investments. To analyze the trend in these items the
Horizontal analysis of each item is calculated

2.4 Product Line

2.4.1 Current a/c (CD)
In this types of accounts of the client is allowed to deposits or withdraw money as and
when he likes. He may, thus, deposit or withdraw money several times in a day if he likes.
There is also no restriction of accounts to be deposits or withdrawn. However, there is
requirement of maintenance of Rs. 1000/-. Usually this type’s account is opened by the
businessmen. No profit is paid by the bank and no service charges are deducted by the bank

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on current deposits account. These types of deposits are also exempt from compulsory
deduction of Zakat.

2.4.2 PLS Savings Bank a/c (SA)

These types of account are for those persons who want to make small savings. These
types account is opened with a minimum deposit of Rs. 1000/-. Under this scheme deposits
can be made only up to a costing amount and withdrawals are allowed twice a week or 8 times
a month. If a big amount is required a seven days notice is required before the withdrawal.
The profit is paid on these accounts on the minimum balance during a month for the whole of
that month.

2.4.3 Khushali Bachat A/C (SBA)

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

2.4.4 PLS 365 Saving A/C

This is a special type of saving account in which customer maintains a minimum
balance of Rs. 300,000- and in turn he gets the benefits of daily profit calculations and also
there is no restriction on the maximum number of withdrawals as was there in the case of
KBA. There is also another advantage of this scheme that is if balance on a particular day falls
below the minimum balance then only the product of that day is ignored where as in KBA, if
balance falls below the minimum limit then all the products for that month are ignored on in
other words no profit is paid for that month.

2.4.5 MCB ATM Cash Card

The wide spread acceptability and frequent use of MCB ATM Cards have prompted
the Bank to add more value to the cards which cater to customers evolving cash needs

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enabling them to go ahead with ease and convenience.
MCB CASH CARD is useful mean of cash for:
1. Travelers
2. Businessmen
3. General Public

It is safest because the purchaser can rest assured of its security that the card if lost
would be cancelled immediately and he would get the amount refunded easily subject to
completion of refund documents.

It is the best because unlike other modes of transfer of Funds / Remittances which are
drawn on a particular branch and could be encashed only at that branch but the holder of MCB
CASH CARD could draw cash from any of MCB ATMs all over the country, M-Net
Members ATMs and Cirrus Member ATMs globally.

2.4.6 MCB Call Centre

Keeping up with banking services can be tedious. Not with MCB Bank Limited, where
phone service is at your fingertips. Just dial our Call Centre from the comfort of your home or
office or wherever you happen to be. It offers basic banking services for your convenience,
eliminating the need for you to make unwanted trips to your branch. .

2.4.7 International Product

1. Speed Cash
2. Home Remittance
3. Money Gram and Global Money
4. Drawing Arrangements

2.5 Competitors

The competitors of MCB are the following:

1. Habib Bank Limited

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 2. NBP

3. United Bank Limited

4. Allied Bank Limited

These banks provide fast service to their customers because of the online facility. They
also provide Automatic Teller Machine (ATM) service to their customers through out the
country.

2.6 Brief Introduction of the Branch

I did my internship in MCB Bank Limited Kohat Road. It was established in 1979 at
Peshawar City. Some important information about this branch is;
Branch Manager: Mr. Jamal Hussain
Operation: Mr.Sajid Hussain
Customer relation Officer Mr. Sajid Hussain
Cash Officer Mr. Kamran
Security Guard Mr.Yousuf Jan/ Meshtaq

Sweeper Mr. Imran

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 Chapter 3

ORGANIZATIONAL STRUCTURE
3.1 Organizational Hierarchy Chart

Chairman &
President

Board of
Directors
President’s
Secretariat
Secretary
Board of
Directors

Corporate & Credit

Credit Compliance
Management
Management Audit &
Investment Group
Group
Group Inspection
Banking
Group
Group

Operation
HRM & Commercial & Treasury
Group
Administration Retail Banking Management
Group Group Group

I.T. Group
Special Assets Overseas
Management Management
Group Group

Source: www.mcb.com.pk

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3.2 Number of Employees

Table 3.1: Employees of MCB

Permanent 13237

Temporary / On contractual Basis 842

Bank’s staff strength at the end of the year 14079

Outsourced 2350

Total Staff Strength 16248

Source: www.mcb.com.pk

There are different classifications of worker within MCB bank of Pakistan these are:

1. Permanent
2. Temporary

3. Out Source

The employee of MCB is organizing into trade union which represents most of the
available force in MCB bank of Pakistan.

These trade unions utilize their representative power to collectively bargain with the
management of bank in order to advance concern and demand of their membership.

3.3 Main Office

Main office of the MCB of Pakistan is situated at chandrigar road Karachi. The
president of the Bank chair of the Head Office. A secretariat is also working at the Head
Office level for the assistance of the president. The secretariat includes one senior executive
voice president as advisor to the President.

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 Main Office rather a big body with a huge task for smooth function of this matter, the
whole Head Office is divided into 12 department and Groups. Each department or Group is
under control of senior executive voice president and group chief.

3.4 Introduction of the Finance Department

The Finance Department is responsible for overall fiscal managing, financial control,
financial reporting and accounting functions of the Bank. Department ensures that the
accounting records and system are maintained in accordance with internal policies, regulatory
requirements and international accounting standards. It establishes policies and procedures
relating to the finance function, monitors returns on earning assets and reports on various
performance indicators including assets/liability mismatch. The Department directs control of
the budgeting process in accordance with the annual plans, policies, management directives
and strategies, ensuring that quality budgets and forecasts are drawn up and consolidated for
approval.

The Department has well-trained, experienced and qualified human resource,

automation of processes and effective communication with all operating units. The future
focus of the Department would be to improve automation of the accounting processes and
enhance the quality and effectiveness of MIS.

3.5 Functions of the MCB Finance Department

Finance Department performs lending to borrowing from state bank of Pakistan.
Following functions:

1. Lending to General Public

2. Lending to Investors

3. Commercial Banks Multi-Business.

4. Accepts Deposits from public

5. Transfer of money from place to place

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6. Collecting Cheques and bill of exchange for the customers

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Chapter 4

CRITICAL ANALYSIS

4.1 Vision

"To be recognized as a leader and a brand synonymous with trust, highest standards of
service quality, international best practices and social responsibility."

4.2 Mission

“Our mission is to become the preferred provider of quality financial services in the
country with profitability and responsibility and to be the best place to work.”

1. To increase shareholder’s value.

 Provide excellent service and innovative products to customers through effective
corporate governance.

4.3 Strategy
To increase shareholders' value and provide excellent service and innovative products
to customers through effective corporate governance, friendly work environment, and
contributing towards an equitable sub-economic growth.

4.4 Theoretical Concept with the Current Practices

Financial Analysis is an evaluation of a firm’s past performance and its prospects for
the future. It consists of applying analytical tools and techniques to financial statements and
other relevant data to obtain useful information. Its main purpose is to give a clear picture of
the financial position of an organization.

Ratio analysis is an important and age-old technique of a financial analysis. It is

widely used tool of financial analysis. It is defined as the systematic use of a ratio to interpret

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the financial statements so that the strengths and weakness of a firm as well as its historical
performance and current financial conditions, can be determined. It simplifies financial
statements, helps in planning, makes inter-firm comparison possible and helps in investment
decisions.

Ratios make the related information comparable. A single figure by it self has no
meaning but when expressed in terms of a related figure, it yields significant inference. A
financial analyst uses the ratios to compare with its past and expected future ratios to
determine whether the company’s financial condition is improving or deteriorating over time.
He uses the ratios to make two types of comparisons.

1) Internal Comparison
A firm’s present ratio is compared with its past and expected future ratios to determine
whether the company’s financial condition is improving or deteriorating over time.

2) External Comparison
Ratios of a firm are compared with those of similar firms or with industry averages or
norms to determine how the company is faring relative to its competitors.
In this section we analyze the financial ratios of MCB Bank computed utilizing the
information given in its annual reports of the years 2022-2023. Only internal comparison of
the ratios has been made as the ratios for other banks are not available as well as time was also
limited.

4.5 Vertical Analysis

For analyzing an organization, it is useful to express balance sheet and income
statement items as percentage, in addition to financial ratio analysis over time. The percentage
can be related to some totals, such as total assets or total net sales or to some base year. One of
the techniques used for such an approach is called as Common Size Approach.

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 “An analysis of percentage financial statement where all balance sheet items are
divided by total assets and all income statement items are divided by net sales or revenue is
called as common size analysis.”
One common shortcoming in the analysis is that the inability of analysis to
comprehend or visualize, expect casually, the dollar change in individual items that have
taken place from year to year in relation to the total assets, total liabilities and owner’s equity,
or total net sales. This criticism is particularly true when a comparison is being made of two
or more companies, or of one company with the statements for an entire industry. Since there
is no common base for comparison when dealing with absolute figures. However if the
Balance sheet and income statement data are shown in analytical percentage i.e. percentages
of total assets, liabilities and owner equity, and total net sales a common base is supplied. This
type of analysis is known as vertical analysis of financial statements.

If we analyze the ‘assets’ side of the common sized balance sheet then we can see that
the cash increases in 2022 and remain the same in 2021 and 2022. While the balances with
other banks reduces in the three years span. Similarly, lending to financial institution also
decreases. Investment increased in 2022 from 2021 but decreased in 2023. Advances reduced
as compare to 2021 in 2023 but increased for almost 6% in 2023. Operating fixed assets are
high in 2022 and reduced in 2023 but still high as compare to 2021. Other assets reduced in
2022 and increased in 2023.

Similarly if we analyze the liabilities and shareholder’s equity side then we can see
that the both bill payables and borrowing decreases in 2023 as compare to 2021 and again
increases in 2023 but they are still less than the values in 2023. Deposits are reduced in three
years span. While total liabilities are reduced in 2021 and remain almost the same in 2021 and
2022. Shareholder’s equity increased in 2023 and closely the same in the other two years.

In the analysis of financial statement it is often instructive to find out the proportion of
a total group or subgroup, which a single item within them represents. In a Balance sheet the
Assets as well as the Liabilities and Capital are expressed as 100 percent and each item in
these categories is expressed as a percentage of the respective totals. Similarly in the income

16
statement Net Sales are set at 100 percent, this community of size has resulted in this
statement being referred to as “Common Size”.
These types of analysis is extremely helpful in comparing firms whose data differs
significantly in size because every item on the financial statement get placed on a relative or
standardized bases.

The comparative common-size balance sheet analysis of MCB Bank from 2021 to
2023 of Balance Sheet & Income Statement is given below in a tabular form as:

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Table 4.1 VERTICAL ANALYSIS OF BALANCE SHEET

Source: www.mcb.com

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Table 4.2 VERTICAL ANALYSIS OF INCOME STATEMENT

Source: www.mcb.com

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4.6 Horizontal Analysis
Horizontal analysis is also called as Indexed Analysis. The comparison of financial
statements is accomplished by setting up balance sheets and income statements, side by side
and reviewing the changes which have occurred in individual categories there in from year to
year and over the years. This comparison of financial statements over a number of years also
reveals the direction, velocity, magnitude and the aptitude of the trend or the absolute
changes. The purpose of the horizontal analysis is to develop relationship between one item of
the financial statement with the same item of another year’s financial statement, bank or with
the industry.

When we analyze the assets and compare the percentages of its items for year 2022
and 2023 with the base year 2021, we can see that the cash and balances with the treasury
banks increases in both 2022 and 2023 as compare to the base year 2021. But the balances
with other banks reduce in year 2022 and 2023, as compare to 2021. There is a sharp decrease
in lending to financial institution in 2022 as compare to 2021. Investments increases in 2021
but decreased in 2022. While total assets increased from 2021 to 2023.

There is a very large in crease in the Bills payable and the borrowings from the year
2022 to year 2023. Deposits increased in 2023 as compare to 2022. while total liabilities are
increased in 2023 as compare to the year 2022. All the items of shareholder’s equity and total
shareholder’s equity increased in 2023

For our financial analysis of MCB Bank we have selected the financial data for two
years from 2021 –2023. For horizontal analysis there must be a fixed/base year for the year of
analysis or according to the statistical tools each preceding year is selected a base year for the
coming year i.e. the year of analysis. All financial statement items of the base year are taken
as equal to 100 (percent). We have selected 2022 as the base year and the items for subsequent
year are expressed as an index to that year (2023).

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 The horizontal analysis of financial statements of MCB Bank is given below showing
indexed balance sheets and income statements along with regular statements:

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 Table 4.3 HORIZONTAL ANALYSIS OF INCOME STATEMENT

Source: www.mcb.com

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Table 4.4 HORIZONTAL ANALYSIS OF BALANCE SHEET

Source: www.mcb.com

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 Interpretation

We can see that the cash and balances with the treasury banks increases in both 2022
and 2023 as compare to the base year 2021. But the balances with other banks reduce in year
2023 and 2022, as compare to 2021. There is a sharp decrease in lending to financial
institution in 2022 as compare to 2021. Investments increases in 2021 but decreased in 2022.
While total assets increased from 2021 to 2023.

There is a very large in crease in the Bills payable and the borrowings from the year
2021 to year 2022. Deposits increased in 2022 as compare to 2021. While total liabilities are
increased in 2022 as compare to the year 2022. All the items of shareholder’s equity and total
shareholder’s equity increased in 2023.

Table4.5: Financial Ratios of MCB Bank are Given in Table Below Showing the Trend

Ratio Analysis
RATIOS 2021 2022 2023
Activity Ratio
Receivable Turnover Ratio 0.13 0.14 0.14
Deposits Turnover Ratio 0.027 0.028 0.038
Asset Turnover Ratio 0.069 0.066 0.074
Profitability Ratio
Net Profit Margins 0.68 0.66 0.60
Return On Assets 0.021 0.022 0.029
Return On Equity 0.20 0.16 0.15
Leverage Ratio
Debt to Equity Ratio 6.74 5.55 6.98
Debt to Asset Ratio 0.87 0.84 0.87
Source: Annual Report 2021-2023

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4.7 Ratio Analysis
4.7.1 Liquidity Ratios
Liquidity ratios are used to judge a firm’s ability to meet short term obligations. It
shows the cash solvency of a firm and its ability to remain solvent in the event of adversities

4.7.2 Activity Ratios

Activity Ratios are also known as efficiency or turnover ratio it measures how
effectively the firm is using its assets.

4.7.3 Receivables Turnover Ratio: (Advances Turnover)

Receivables turnover or Advances turnover provides insight into the quality of the
firm receivables or advances and how successful the firm is in its collection.
Formula:

Mark-up or Interest Earned 60942798

Advances Turnover Ratio = ----------------------------------------- = ------------------------ for 2023
Advances 412986865

Table 4.6: Receivable turnover ratio

Years 2021 2022 2023

Receivable Turnover 0.13 0.14 0.14

Source: Annual Report 2021-2023

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 Figure 4.1 Receivable turnover ratio

Interpretation
The Receivables Turnover Ratio of MCB for the years 2006 to 2022 is relatively close
to each other. This shows that the turnover of the advances is almost the same for these years.
There is only 0.01 percent improvement in 2022 as compare to 2021 but it remains constant in
2023. Thus we can say that the bank is not improving in its collections of receivables.

4.7.4 Deposits Turnover Ratio

This ratio compares the Markup expense that the bank pays on deposits to the deposits
of the bank.

Formula:

Markup expense 23884768

Deposits Turnover Ratio = ------------------------ = ------------------- for 2023
Deposits 624939016

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Table 4.7: Deposits Turnover ratio

Years 2021 2022 2023

Deposit Turnover 0.027 0.028 0.038

Source: Annual Report 2021-2023

Figure 4.2 Deposits Turnover ratio

Interpretation
The deposit turnover ratio of Muslim Commercial Bank has improved from year 2021
to 2022. It is improved from 0.028 to 0.037 in 2022 and then decreased by 0.8% to 0.029 in
2023. It shows that the interest expense in decreasing on the deposits. Such that it pays 0.029
as interest expense in 2023 on each rupee of deposit or 2.9 % of total deposits with the bank.

4.7.5 Asset Turnover

Usually the total assets turnover measures the activity of the assets and the ability of
the firm to generate sales through the use of the asset.
Formula:

Markup or sale 60942798

Total Asset Turnover Ratio = ---------------------------- = ---------------------- for 2023
Total Assets 817758326

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Table 4.8: Asset Turnover ratio

Years 2021 2022 2023

Asset Turnover 0.069 0.066 0.074

Source: Annual Report 2021-2023

Figure 4.3 Asset turnover ratio

Interpretation
The asset efficiency of the bank has a combine trend in these years. Asset efficiency in
2021 is less as compare to the asset efficiency in 2022 i.e. it is 0.54 in 2021 and 0.59 in 2022.
But in 2023 it is decreased to 0.43. That shows that Muslim commercial bank utilized fewer
assets to generate more interest in 2022 and 0.59 interest is earned per rupee of asset
investment and 0.43 in 2023.

4.7.6 Profitability Ratios

These ratios indicate the firm’s overall effectiveness of the operations.

4.7.7 Net Profit Margins

This is the conservative method of sales profitability. This ratio gives a measure of Net
Income in dollars generated by each dollar of sales. It measures the firm’s profitability of
sales/ interest earned after taking account of all expenses and income taxes.
Formula:

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 Net Income 37058030
Net Profit Margins = ------------------------------------- = ------------------------- for 2023
Markup or Interest Earned 60942798

Table 4.9: Net profit margin

Years 2021 2022 2023

Net Profit Margin 0.68 0.66 0.60

Source: Annual Report 2021-2023

Interpretation

The net profit margins of MCB show that the net profit margin of the bank is
increased. As it is was producing 0.39 % from each rupee of markup earned in 2021 but it is
decreased 0.06 % in 2022. In 2023 it is significantly improved to 0.38 % of each rupee of
gain/markup earned. This may be due to the drop off in the administrative expenses and
increase in taxations.

4.7.8 Return on Equity (ROE)

Return on equity is calculated by dividing profit after taxation by shareholder’s equity.
ROE compares net profit after taxes to the Shareholder’s Equity. It is a measure of how
effectively the firm's assets are being used to generate profits. A high return on equity reflects
the firm’s acceptance of strong investment opportunities and effective expense management.
Formula:

Profit after taxes 15458590

ROE = ------------------------------- = ----------------------------- for 2023
Shareholder’s Equity 102459218

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Table 4.10: Return on Equity

Years 2021 2022 2023

Return On Equity 0.20 0.16 0.15

Source: Annual Report 2021-2023

Figure 4.5 Return on Equity

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Interpretation

The return on equity of the bank is abridged in 2022 in contrast to 2021 and then
jumped up in 2023 to 0.27. It is 0.31 in 2006. While in 2022 & 2023 it is 0.19 and 0.27
correspondingly. This shows that the return on each rupee invested by the shareholder is 27 %
in 2023. This decrease in the return on equity is due to the decrease in net profit margins.

4.7.9 Return on Assets (ROA)

This ratio shows the efficiency of organization that how efficiently utilizes their assets.

Formula:

Net income 23884768

ROA = -------------------------- = ----------------- for 2023
Total Assets 817758326
Table 4.11: Return on Assets

Years 2021 2022 2023

Return on Assets 0.021 0.022 0.029

Source: Annual Report 2021-2023

Figure 4.6 Return on assets

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 Interpretation
This ratio measures the profitability per rupee of investment in assets. ROA is also
called return on investment (ROI). The ROA ratio of the MCB Bank is showing decreasing
trend.

The return on asset is reduced in 2023 as compare to the year 2021. This shows that
MCB is engaging fewer assets in 2023 then 2022 to generate one rupee of profits after paying
all the taxes.

4.7.10 Debt to Equity Ratio

This ratio shows the amount contributed by creditors and shareholders. It shows to
what extent the firm is using borrowed money. It is computed simply dividing the total debt of
the fire by its shareholders equity.
Formula:
Total debt 715299108
Debit to Equity Ratio = ------------------------- = ----------------------- for 2023
Total equity 102459218
Table 4.12: Debt Ratio
Years 2021 2022 2023

Debit to Equity Ratio 6.74 5.55 6.98

Source: Annual Report 2021-2023

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Figure 4.7 Debt Ratio

Interpretation

The debt to equity ratio for the year 2021 is 6.75 which is increased to 6.98 in 2022
and then decreased to 5.55 in 2023. the at the year 2023 is less with compare to the other years
so it makes it favorable for the creditors because the Creditors mostly like this ratio to be low
as this gives them a creditor’s support in case of shrinking asset values or unexpected losses.

4.7.11 Debt to Assets Ratio

This ratio shows that to which extent the organization assets are financed by debit.
This ration is directly related to risk high ratio means high risk and low ratio means low risk.
This ratio is high because of more deposits in the bank, and deposits are the liability of
customer on bank
Formula:

Total debt 715299108

Debt to assets ratio = --------------- = ------------------------ for 2023
Total asset 817758326

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Table 4.13: Debt and Assets Ratio

Years 2021 2022 2023

Debit to Asset Ratio 0.87 0.84 0.87

Source: Annual Report 2021-2023

Figure 4.8 Debt and Assets Ratio

Interpretation

The debt to equity ratio of MCB Bank for the year 2021 and 2022 is 0.87, which is
reduced to 0.85 by 2023. In year 2023 it is again increased by 0.2%. Which means that 85%
of the total assets is financed by the debt. Thus we can say that in one rupee total assets 85
paisa is financed by debt.

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Chapter 5
SWOT ANALYSIS
5.1 Strengths
i. MCB is a Successive Bank as compared to other banks. ABL-UBL, NBP.
ii. The Customer default rate of MCB Bank is very lower than other Banks in Peshawar
region and sound management and local system.
iii. MCB Bank has the largest ATM network in the country and meeting the challenges of
latest technology by introducing smart card remit express and mobile banking etc.
iv. One of the major strengths of MCB Bank is that it has very stable deposit base.
v. MCB Bank is the largest private Bank in Pakistan with around 1000 branches. Which
cover almost every part of Pakistan and enjoys competitive advantage over other in
Pakistan.
vi. The Bank competitive profitability in the industry and has captured majority of
potential customers in Pakistan.
vii. MCB Bank has the accounts of big organizations like OGDCL, PTCL, EFU, PTC etc.

5.2 Weaknesses
i. MCB Bank has low motivational level and employees dissatisfaction due to ill
treatment and improper reward system.
ii. Favoritism and Nepotism in recruitment and high employees turnover.
iii. Decision making process is very slow and having no greater number of branches
abroad.
iv. Though ATM network is the largest in Pakistan, still some potential areas don’t have
the ATM.
v. MCB RTC is useable only in Pakistan and some management positions needed are not
professional
vi. Although most of the branches are computerized now, still some important branches
don’t have computers.
vii. MCB Bank have less efficiency of symbol due to disconnectivity.

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5.3 Opportunities
i. Leasing sector is growing in Pakistan for the last two to three years which provides
opportunities to MCB to go ahead in the area as well.
ii. MCB is providing consumer finances at comparatively lower rates which paves a way
to grab more customers.
iii. Islamic trading based banking can enhance the business of the bank and overseas
operations.

5.4 Threats
i. Other private commercial bank with sound profitability is also a threat to MCB e.g
UBL, Alfalah, HBL etc.
ii. For the last of many years, Pakistan is facing economic and political instability which
is a big threat.

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Chapter 6
CONCLUSION AND RECOMMENDATIONS
6.1 Conclusion
With Cooperation of all branch members, I have been able to learn and experience
many new things related to the banking sector and the banks workings. I am able to handle the
public with respect to many different workings on many different instances and also in
account opening for customers and can handle many other tasks as well.

Finally I concluded that MCB is a good organization for a person for his long term
career workings. Overall working and environment of the bank is very comfortable and the
staff is very helpful and respectful of each other and it still maintains a professional
environment. Management of the bank is very strong.

Employees of MCB Kohat Road Branch work more than their working hours and all
the workings take place in a very friendly atmosphere that does not induce pressure on the
person working there. It also shows their loyalty and commitment to the organization. This
branch of MCB relatively small and has climbed its way up very quickly and all that only
because of the employee’s efforts and consideration for each other

Understanding and the effective management of the human resources is the most
difficult challenge faced not only by the bank but by all the organizations. Even though the
people have been sacrificed in the new organizational developments, it is becoming clear that
the true lasting competitive advantage comes through human resources and how they are
managed. MCB seems to not focusing on this highly critical issue as the job satisfaction level
of the employees working at MCB, was quite low.

6.2 Recommendations
From the quantum of profit and its financial date it can be easily judged that after
privatization, MCB Bank Limited is performing well. Its deposits are rowing day-by-day and

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so its profitability. The controlling body is responsible for the productive performance of the
bank following are many observation and suggestion to improve the efficiency for the
development of economy

1. Pakistanis working abroad through MCB send a big portion of one remittance. As we
know a big portion of this amount is wasted in purchase of luxuries. The people can be
motivated to save money by offering various investment schemes. The rate of profit should
increase 1% or 2% than other banks and it would be profitable step for bank..

2. Staff turnover particularly of trained staff result in financial and other losses. The
amount spent by bank on employment, induction and training of outgoing officers constitutes
to beat till another officer should ready prove this work. The exodus of bank officer in the past
has worsened the situation.

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

4. Refresher coursed for the staff is most important in any international organization. All
the employees should have these coursed according to their requirement. Foreign experts can
also be called for this purpose.

5. Every year some of the employees should be sent for training to another countries and
employees form other branches should be brought here. Some more riding material should be
provided. The purpose should be to educate the employees with the advance studies in their
fields. The employees should be provided the opportunities to attend and participate in
seminars and lectures on banking.

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6. Banks should give some more incentive to its employees in order to remove the
conflict between lower and higher officers and should try to improve the working condition of
the bank. As such, system should be designed that every employee who has some problems
with his officers can communication it to higher management and some steps must be taken to
improve that.

7. A proper and conducive centrally managed Internship System should be designed, so

that the forthcoming business students could be able to get firsthand practical touch.

8. For the last many years, the management of MCB is continuously closing its
unprofitable branches and lying of the personnel of these branches. This is creating a situation
of unemployment in the country. This should be stopped and an incentive for the bank
personnel should be introduced.

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 REFERENCES
www.mcb.com.pk
www.sbp.org.net.pk
www.pkeconomist.com

Books & Journals: -

Financial Management (Joseph D)
Annual Report 2023, 2021 MCB Bank ltd

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