MCB - Internship Report (Sahni'z Approach)
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Transcript of MCB - Internship Report (Sahni'z Approach)
UNIVERSITY OF SARGODHA
Department of Commerce
The Internship Report of Ali Raza Sahni (20 – R/08) submitted to
Department of Commerce, UOS under the kind supervision of
Professor Haroon Hussain
MCB Bank Ltd Liaquate Market Branch
Sargodha
Phone # 048 – 3724485
Attached Photocopy of Internship Letter Issued by Branch Manager
Internship Report MCB Bank Ltd.
A Practice by Ali Raza Sahni
(20 – R/08) B.Com (HONS) VII Semester
APPROVAL SHEET
To Whom It May Concern
I Prof. Haroon Hussain (Lecturer) as the Internship Supervisor of Ali
Raza Sahni, S/O Rasheed Ali Asghar Sahni, Student ID: BCOF08M020
recommended that this report be according to official pattern issued by
Department of Commerce, UOS Sargodha. This interpretation is original
by nature and has least factor of plagiarism.
Wish you best of luck
Haroon Hussain
____________________________
Lecturer
Department of Commerce Date # Sept 26, 2011
Checked By:
Malik Muhammad Hayat
_______________________________
Chairman
Department of Commerce Date # ________________
Internship Report MCB Bank Ltd.
A Practice by Ali Raza Sahni
(20 – R/08) B.Com (HONS) VII Semester
PREFACE
Vibrancy and variety lend a growth in the colors of life, which make it so fascinating
that one may desire to live and enjoy it forever. The flux of time helps human being
learns and to manage the assigned tasks and achieve their cherished goals. The main
purpose of internship is to make bridge between theoretical approach and practical
approach.
The internship program is requirement of UOS, Sargodha at levels to understand the
practice of life in real manner. The Department of Commerce is very conscious about
the future challenges of students in the practical life. The B.Com (HONS) program
consists of not only study of bookish material but it is also combination of bookish as
well as practical and extracurricular activities which help in sharpen the skills.
I was fortunate that MCB had given me chance of internship in their working branch
where I spent 6 useful weeks in having an insight in the banking operation. This is my
internship report as the result of my internship training in MCB Bank Ltd. It has
enabled me to understand the practical scenario and sharpen our decision making
power and utilizing the resources in an effective manner, so that our resources
generate maximum profit.
In this report I tried to my best to highlight the important aspects of the banking
practice of MCB explaining the concepts and some techniques as well. I have put all
of my best efforts and tried my level best to give maximum knowledge. I hope these
papers will provides the true and reality based interpretation of the MCB Bank Ltd. I
do not except that all the readers are agreeing with my approach but no one deny these
facts.
Ali Raza Sahni
Roll No # 20 – R/08
B.Com (HONS) – VII / Regular
Internship Report MCB Bank Ltd.
A Practice by Ali Raza Sahni
(20 – R/08) B.Com (HONS) VII Semester
BEST REGARDS TO
MY PARENTS & TEACHERS
WHO LOVE, AFFECTION & PRAYERS HAVE
BEEN A SOURCE OF INSPIRATION AND
ENCOURAGEMENT FOR ME…!
Internship Report MCB Bank Ltd.
A Practice by Ali Raza Sahni
(20 – R/08) B.Com (HONS) VII Semester
Acknowledgement
In the name of Allah Almighty who gave me ability and strength to complete my
internship program as requirement of my academic career. I owe considerable debt to
large number of persons who either directly or indirectly helped me during various
phases of internship. It was a new experience, exciting but challenging and indeed
guidance rather frequently which was afford very generously.
I am very thankful to my Internship Supervisor and kind teacher, Mr. Haroon
Hussain who guides me in very beautiful & nice way. The supervision of Sir Haroon
has provided me a lot of experience to get the view of banking sector.
My special thanks to Sir Mutee – Ur – Rahman, Sir Zahid Ali Akbar, Sir Mohsin
Altaf, Miss Imrana Asad & all other honorable teachers who share their experience &
knowledge with me to complete this report in very efficient manner.
In last, I am fully respectful for those friends and relatives who provide me encourage
to completing this interpretation approach.
Ali Raza Sahni
Internee
ID: [email protected] Date: Sept 16, 2011
Internship Report MCB Bank Ltd.
A Practice by Ali Raza Sahni
(20 – R/08) B.Com (HONS) VII Semester
Content
Unit Content Name Page No:
01 Executive Summary 01
02 Industry Analysis 02
03 Organizational Overview 09
04 MCB Offerings 12
05 Competitors 14
06 Organizational Structure 16
07 Departmental Introduction 20
08 Work Done by Internee (Me) 30
09 Financial Analysis 40
10 SWOT Analysis 60
11 Conclusion 62
12 Recommendations 63
13 Glossary 64
14 References 69
15 Feedbacks 71
Internship Report Unit # 01 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 1 ~
Unit # 01
Executive Summary
By the Grace of Allah Almighty, I have successfully completed my six weeks
internship as per requirement of B.Com (HONS) course. I was appointed as Internee
at MCB Bank Ltd, Regional Branch, Liaquat Market, Sargodha, under the instructions
of MCB Regional Office, Sargodha. I feel myself lucky to have worked with such a
cooperative, dedicated, result oriented team. They all helped me in every kind of task.
MCB's operations continued to be streamlined with focus on rationalization of
expenses, re-alignment of back-end processing to increase productivity, enhancement
of customer service standards, process efficiency and controls. The Bank has taken
the lead in introducing the innovative concept of centralizing Trade Services in the
country by providing centralized foreign trade services to branches with a view to
improve efficiency, expertise and reduce delivery cost.
During the course of internship I learned about different functions performed by
Remittances, Advances, Foreign Exchange and Customer Service Office department
and bank as a whole. I also learned bank’s correspondence with their customers and
within branches. I learned about documentation requirements and record keeping for
different activities and processes, especially the documentation requirement for
different kinds of financing facilities.
At the end I would conclude that the internship has helped me a lot in different areas
of banking and other concern areas of my study. I also learned that how work in tough
situation which would help mw in long way. And it wouldn’t be possible without the
assistance of the team with whom I had spent 6 weeks.
Internship Report Unit # 02 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 2 ~
Unit # 02
Industry Introduction
What is Bank?
There are various views about the origin of the
word “bank”. One view is that it is derived
from an Italian word “banque” which means a
bench. The other point of view is that it has
originated from the German word, “banc”
which means a joint stock firm.
According to Saeed Nasir (2010), a bank is a
financial institution which deals with the money and credit. It is organized on the joint
stock company system primarily for the earning of profit. These banks accepts
deposits from individuals, firms and companies at lower rate of interest and gives at
the higher rate of interest to those who need them. The difference between the terms
at which borrows and those at which it lends forms the source of its profit. In last, a
bank thus is s profit earning institution.
According to the Ian Crowther (1995),
“A bank is s firm which collects money from those who have it spare, it lends
money to those who require it”
According to Mr. Parking (1965),
“A bank is a firm that takes deposits from households and firms and makes
loans to other households and firms”
According to the Banking Companies Ordinance, 1962,
“The Banking means the accepting, for the purpose of lending or investment,
of deposits of money from the public, repayable on demand or otherwise, and
withdraw able by cheque, draft, order”
Internship Report Unit # 02 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 3 ~
And,
“The Banking Company means any company which transacts the business of
banking in Pakistan and includes their branches and subsidiaries functioning o
outside Pakistan of banking companies incorporated in Pakistan”
According to Dr. Herbert L. Hart (1992),
“A banker is one of the ordinary course of his business receives money which
he repays by honoring cheques of persons from whom or on whose accounts he
received it”
According to the G. W. Gilbert (1868),
“A banker is a dealer in capital or more properly a dealer in money. He is an
intermediate party between the borrower and lender. He borrows from one party and
lends to other party”
Evolution of Banking
The word “Bank” is said to have been derived from the words Bancus or Banque.
This history of banking is traced to as early as 2000 B.C. The priests in Greece used
to keep money and valuables of the people in temples. These priests thus acted as
financial agents. The origin of banking is also traced to early goldsmiths. They used to
keep strong safes for storing the money and valuables of the people. The persons who
have surplus money found in safe and convenient of deposit their valuables with
them. The first stage in the development of modern banking, thus, was the accepting
of deposits of cash from those persons who had surplus money with them (Hoggson,
1926).
The goldsmiths used to issue receipts for the money deposited with them. These
receipts began to pass from hand to hand in settlement of transactions because people
had confidence in the integrity and solvency of goldsmiths. When it was found that
these receipts were fully accepted in payment of debts; then the receipts were drawn
in such a way that it entitled any holder to claim the specified amount of money from
goldsmiths.
Internship Report Unit # 02 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 4 ~
A depositor who us to make the payments may now get the money in cash from
goldsmiths or pay over the receipt to the creditor. These receipts were the earlier bank
notes. The second stage in the development of banking thus was the issue of the bank
notes. The goldsmiths soon discovered that all the people who have deposited money
with them do not come to withdraw their funds in cash. They found that only a few
persons presented the receipts for encashment during a given period of time. They
also found that most of the money deposited with them was laying idle (Srinivas,
1915).
At the same time, they also predict that they were being constantly requested for loan
on goods security. They thought it profitable to lend at least some of the money
deposited with them to the needy persons. This proved quite a profitable business for
the goldsmiths. They instead of charging safe keeping charges from the depositors
began to give them interest on the money deposited with them. This was the third
stage in the development of banking (Goldthwaite, 1995).
In beginning of the banking sector, the concept about central bank was not build.
There were few of banks on local or zone levels with their own currency and polices.
These financial institutes were the pioneer of banking system in the history of
mankind. In 1578, the conference in Geneva, Switzerland, the economists of
developed countries took the decision against the metallic or commodity money and
introduces the fiat money in their economies (Matyszak, 2007).
The first bank whose considered, as first true central bank was “Bank of Amsterdam”
established in 1609. This bank was created by Scottish businessman William Paterson
to help the government of England in the situation of war (Grossman, 2010).
In 1661, the “Riks Bank of Sweden” was established as a joint stock bank to lend the
government funds and to act as a clearing house for commerce. And in 1694, the
“Bank of England” was chartered to raise the taxes and borrowing finance to war
zone, which was created in the Austria, England, France & the Netherland (Grossman,
2010).
The “Banque de France” was created in 1800 by Napoleon Bonaparte, after the deep
recession and hyperinflation in the French Revolutionary period. With the passage of
time, the concept of Federal Reserve System in the central bank was emerged in the
Internship Report Unit # 02 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 5 ~
twentieth century. According to this concept, the currency is defined in terms of a
fixed weight of gold. The central bank held a large gold reserve to ensure that their
notes could be converted into gold any time. So, by this concept central bank is a
primarily consolidate who have ability to issue various instruments which are
commonly used as currency for the public and provide the financial stability to the
economy (Grossman, 2010).
After the World War I, there was complete and complicated confusion was created in
the currency and exchange markets. This happened due to the issuance of large
withdrawals from the banks as loans to pay for the war expenses. At that time, there
was no any institution that supervises to the banks and also serves as the fiscal agent
for the governments (Cameron, 1967).
Banking – In Central India
Banking in Indian Central India was originated in the last decades of the 18th century.
The first banks were “The General Bank of India” which started in 1786, and “Bank
of Hindustan”, which started in 1790; both are now defunct. The oldest bank in
existence in India is the “Reserve Bank of India”, which originated in the “Bank of
Calcutta” in June 1806, which almost immediately became the “Bank of Bengal”.
This was one of the three presidency banks, the other two being the “Bank of
Bombay” and the “Bank of Madras”, all three of which were established under
charters from the British East India Company. For many years the Presidency banks
acted as quasi-central banks, as did their successors. The three banks merged in 1921
to form the “Imperial Bank of India”, which, upon India's independence, became the
State Bank of India (Parinda.com, 2010).
The central banks are the innovation of the
early twentieth century. The Reserve Bank of
India was the first central bank of the Sub-
continent. The Reserve Bank of India (RBI)
was established on April 1, 1935, according to
the provision of Reserve Bank of Indian Act, 1934 by The Great Britain (The Hindu,
2008).
Internship Report Unit # 02 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 6 ~
The head office of the RBI was initially established in Kolkata but was permanently
moved to Mumbai in 1937. The RBI was established on the recommendation of the
“Hilton Young Commission” for the Central India by British Empire. This
commission submitted their report in the year 1926 to Legislative Assembly of
England (The Hindu, 2008).
The functions and focus to establishment of this bank in Central India was to change
the economic environment in this British Control Territory. Following were the basic
constituted to establish this reserve bank as:
To regulate the issue of bank notes
To maintain the reserves to secure the monetary stability
To operate the credit and currency system
We know that, Burma (Myanmar) was no more in Indian Union from 1937 but the
RBI continued their act as the central bank for Burma up to April, 1947. And, after
the partition of Central India, the RBI also served as the central bank of Pakistan up to
June 1948 (Parinda.com, 2010).
Banking – In Pakistan
We know that before the independence August 1947,
the RBI was the central bank for Pak istan’s Economy
under the “Monetary System & Reserve Bank Order
1947”. The immediate and foremost task for the
Pakistan’s Government was to establish a central bank
for the issuances of independent currency, independent
banking system and regulate the economic activities in
the positive manners (RBI – Annual Report, 1947).
But due to innumerable complex problems, it was
decide that the RBI would continue to act as the central bank and currency authority
for the Pakistan till September, 1948 (RBI – Annual Report, 1947). The main
provisions of “The Monetary System & Reserve Bank Order 1947” were as:
Internship Report Unit # 02 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 7 ~
The RBI would be the sole note issuing authority in Pakistan
The Indian Notes will remain legal tender in both
Pakistan & India until 30 September 1948.
The RBI would transfer the assets of equal value to
Pakistani notes to the Pakistan’s Government after the
date of 30th September, 1948.
The Pakistan’s Government would also issue coins in
the country after the 30th September, 1948. The coins
issued by the Indian’s Government would remains legal
tender in Pakistan for at least one year from the date id
issue of Pakistani coins.
The RBI would perform the full functions of “Central Bank of Pakistan” up to
September 23th, 1948.
Immediately after the independence, the newly born state was faced with a serious
banking situation due to the migration of 6.5 Million people. The RBI showed
reluctance in solving the banking crisis in Pakistan. It rather created further
difficulties by refusing to give Rs. 550 Million which was the share cash balance of
Pakistan (SBP – Annual Report, 1955).
Therefore, it is decided to establish own currency regulating authority & policymaker
institute. For this purpose Governor General Quaid-e-Azam Muhammad Ali Jinnah
issued order for the establishment of State Bank of Pakistan on July 1st, 1948. The
RBI relieved of its functions & orders in the favor of Pakistan from the first of July,
1948 (SBP – Annual Report, 1955).
Under the State Bank of Pakistan Order 1948 issued by Quaid-e-Azam Muhammad
Ali Jinnah, the state bank of Pakistan was charged with the duty to "regulate the issue
of bank notes and keeping of reserves with a view to securing monetary stability in
Pakistan and generally to operate the currency and credit system of the country to its
advantage".
Internship Report Unit # 02 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 8 ~
The Governor General of Pakistan Barrister Quaid-e-Azam Muhammad Ali Jinnah,
while inaugurating the State Bank of Pakistan on July 1, 1948, said:
“The bank symbolized the sovereignty of our people in the financial sphere.
The Western Economic System has created many problems for humanity. The
Western Economic System would not help us in setting up a workable economic
order. We should evolve an economic system based on Islamic concept of justice
and equality”
On December 30, 1948, the British Government's commission distributed the RBI’s
reserves between Pakistan and India with the ratio of 30% and 70% for Pakistan &
India, respectively. The loss of Rs. 230 millions which incurred in the transition to
independence were taken from Pakistan (SBP – Annual Report, 1955).
Internship Report Unit # 03 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 9 ~
Unit # 03
Organization Overview
Corporate Profiles
Name: MCB Bank Ltd.
Type: Public Limited
Industry: Banking & Capital Marketing
Founded In: 1947
Headquarter: Islamabad
Principle Office: Karachi
Key People: Maintenance Muhammad Mansha (Chairman)
Offerings: Commercial, Corporate & Consumer Banking
Revenues: More than Rs. 36.84 Billion (PKR)
Net Income: More than Rs. 16.8 Billion (PKR)
Total Assets: More than Rs. 567.6 Billion (PKR)
Locations: 41 Different Cities (In Pakistan)
Branches: 1,130 (In Pakistan)
Customers: 4.5 Million (In Pakistan)
ATM: More than 600 (in Pakistan)
(Source: Wikipedia.com)
Internship Report Unit # 03 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 10
~
MCB – Building Pakistan
Corporate History
The Adamjee Group incorporated MCB Bank Limited on July 9,
1947, under the Indian Companies Act, VII of 1913 as a limited
company. The bank was established with a view to provide
banking facilities to the business community of the South Asia.
The bank was nationalized in 1974 during the government of
Zulfikar Ali Bhutto (ZAB). This was the first bank to be
privatized in 1991 and the bank was purchased by a consortium of Pakistani corporate
groups led by Nishat Group. As of June 2008, the Nishat Group owns a majority
stake in the bank. The president of the bank is M.U.A Usmani.
Founded in 1948, Nishat Group is one of the leading
and most diversified business groups in Pakistan.
The group has strong presence in the most important
business sectors of the country such as banking,
textile, cement and insurance.
Mian Mohammad Mansha is the Chairman of the
group (and also MCB) and has played instrumental
role in its success. In recognition of Mr. Mansha’s
contribution, the Government of Pakistan has conferred
him with "Sitara – e – Imtiaz", one of the most prestigious civil awards of the
country.
MCB has become the only bank to receive the Euro money award for the fourth time
in the last five years. MCB won the "Best Bank in Pakistan" in 2005, 2004, 2003,
2001, and in 2000 the "Best Domestic Bank in Pakistan" awards. In addition, MCB
also has the distinction of winning the Asia Money 2005 & 2004 awards for being
"The Best Domestic Commercial Bank in Pakistan".
Internship Report Unit # 03 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 11
~
Ten years after privatization, MCB is now in a consolidation stage designed to lock in
the gains made in recent years and prepare the groundwork for future growth. The
bank has restructured its asset portfolio and rationalized the cost structure in order to
remain a low cost producer.
MCB now focuses on three core businesses namely Corporate, Commercial and
Consumer Banking. Corporate clientele includes public sector companies as well as
large local and multinational concerns. MCB is also catering to the growing middle
class by providing new asset and liability products. MCB looks with confidence at
year 2005 and beyond, making strides towards fulfillment of its mission, "to become
the preferred provider of quality financial services in the country with profitability
and responsibility and to be the best place to work".
(Source: History of MCB, from Wikipedia.com)
Mission Statement
“To become the preferred provider of quality financial services in the country with
profitability and responsibility and to be the best place to work”
Business Philosophy
MCB Bank knows the best to deal with its customers and thus has a customer oriented
philosophy. The MCB philosophy in their words is described below –
“For us, you are not just a set of numbers; you are a valued customer whom
we know by name. This helps us serve you exactly the way you want us to – that’s the
difference! We offer effective solutions derived from our personal knowledge of all
your banking requirements which are met when we meet you…by name.”
Internship Report Unit # 04 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 12
~
Unit # 04
MCB Offerings
Current Account
Savings Account
Term Deposit
MCB Online Banking
MCB M – NET
MCB Cash Management
MCB Channel Financing
MCB Home Remittance
MCB Corporate Financing
MCB Project & Structured Finance
MCB Syndicated Loans & Debt Capital Markets
MCB Quasi Equity / Hybrid Instruments
MCB Equity Capital Raising
MCB Advisory Services
MCB Islamic Banking
MCB Agri Products
MCB Privilege
MCB Salary Club
MCB Investment Services
MCB Visa Credit Card
MCB Car 4 U
MCB Instant Finance
MCB Smart Card
MCB Rupee Travelers Cheque
Internship Report Unit # 04 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 13
~
MCB ATMs
MCB Mobile ATM
MCB Lockers
MCB SMS Banking
MCB Full-Day Banking
MCB Bancassurance
MCB Call Centre
MCB Mobile
MCB Virtual Banking
(Source: MCB Website, www.mcb.com.pk)
Internship Report Unit # 06 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 14
~
Unit # 05
Competitors for MCB
Competition is a contest between individuals, groups, animals, etc. for territory, a
niche, or a location of resources. It arises whenever two or more parties strive for a
goal which cannot be shared. Competition occurs naturally between living organisms
which co – exist in the same environment. For example, animals compete over water
supplies, food, mates, and other biological resources. Humans compete for water,
food, and mates, though when these needs are met deep rivalries often arise over the
pursuit of wealth, prestige, and fame. Business is often associated with competition as
most companies are in competition with at least one other firm over the same group of
customers (Stigler, 1987).
The list of Banks and Financial Developments Institutions in Pakistan which are
working in Pakistan as secluded banks of SBP are the competitors for the MCB Bank
Ltd. as,
Public Sector Commercial Banks
a) First Women Bank Ltd.
b) National Bank of Pakistan
c) The Bank of Khyber
d) The Bank of Punjab
Specialized Scheduled Banks
a) The Punjab Provincial Co-operative Bank
b) SME Bank Limited
c) Zarai Taraqiati Bank Limited
Private Local Banks
a) Allied Bank Limited
b) Askari Bank Limited
c) Bank Al-Falah Limited
Internship Report Unit # 06 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 15
~
d) Bank Al-Habib Limited
e) My Bank Limited
f) Crescent Commercial Bank Limited
g) NIB Bank Limited
h) Faysal Bank Limited
i) Habib Bank Limited
j) KASB Bank Limited
k) Meezan Bank Limited
l) Atlas Bank Limited
m) Saudi Pak Commercial Bank Limited
n) Soneri Bank Limited
o) United Bank Limited
p) Arif Habib Bank Limited
q) Dubai Islamic Bank Pakistan Limited
r) Bank Islami Pakistan Limited
s) Royal Bank of Scotland
t) Habib Metropolitan Bank Limited
u) JS Bank Limited
v) Standard Chartered Bank (Pakistan) Limited
w) Emirates Global Islamic Bank
x) Dawood Islamic Bank Limited
Micro Finance Banks
a) Khushhali Bank
b) Network Micro Finance Bank Limited
c) The First Micro Finance Bank Limited
d) Rozgar Micro Finance Bank Limited
e) Tameer Micro Finance Bank Limited
f) Pak Oman Micro Finance Bank Limited
(Source: State Bank of Pakistan website, www.sbp.com.pk)
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 16
~
Unit # 06
Organizational Structure
An organization is not a haphazard collection of people, but a meaningful
combination of groups and individuals working together purposefully to meet the
goals of the organization. The organizational structure is the formal configuration
between individuals and groups with respect to the allocation of tasks, responsibilities
and authorities within the organization. The connection between various clusters of
functions of which an organization is composed can be represented in the form of a
diagram is known as an organizational chart. Although we suspect that this particular
revelation is unique, its particular organizational charts reveal a great deal about the
organization. They provide a guide to an organization’s structure, indicating the
formal reporting relationships between individuals at different organizational levels
(Greenberg, 2004).
President
Group heads
Divisions and field
Circle offices
Regional offices
Branch offices
Hierarchy Chart – MCB
As MCB is a banking company listed in stock exchange therefore it follows all the
legalities which are imposed by concerned statutes Mr. Mian Muhammad Mansha is
chairman & chief executive of the company with a team of 10 directors and 1 vice
chairman to help in the business control and strategy making for the company. A team
of 10 professionals is handling operational Management of the bank. Mr. Muhammad
Mansha also heads this team. The different operational departments are Consumer
Banking & IT div; Financial & Inter branch div; Banking operations div; HR & Legal
div; financial control & Audit div; Credit management div; Commercial Banking div;
Corporate Banking div; Treasury management & FX Group and lastly Special Assets
Management (SAM) Group.
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 17
~
For effective handling of branches, it has been categorized into three segments with
different people handling each category. These categories are:
Corporate Banking
Commercial Banking
Consumer Banking
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 18
~
CORPORATE BANKING
These are branches, which have an exposure of over Rs. 100 million. Usually includes
multinational & public sector companies.
COMMERCIAL BANKING
The branch which has a credit exposure of less than Rs. 100 million but having a
credit portfolio of more than Rs. 20 million (excluding staff loans) .Usually branches
in large markets and commercial areas come under this category.
CONSUMER BANKING
These are the branches, which have exposure up to Rs. 20 million, and these include
all the branches, which are neither corporate nor commercial branches.
Recently the organizational structure was re-designed as follows:
Board of Directors
Chairman Mian Muhammad Mansha
Vice Chairman S.M. Muneer
President & Chief Executives Tariq Rafi
Shahzad Saleem
Sarmad Ameen
Mian Umar Mansha
Aftab Ahmed Khan
Atif Yaseen
Dr. Muhammad Yaqub
Muhammad Aftab Manzoor
Advisor Raza Mansha
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 19
~
Audit Committee
Chairman Dr. Muhammad Yaqub
Members Tariq Rafi
Mian Umar Mansha
Aftab Ahmed Khan
Chief Financial Officer Ali Muneer
Company Secretary Tahir Hussain Qureshi
Auditor’s Firms
Chartered Accountants KPMG Taseer Hadi & Co.
Chartered Accountants Riaz Ahmed & Co.
Legal Advisors Mandviwalla & Zafar
Advocaes & Legal Consultants
(Source: Annual Report, 2010 – MCB)
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 20
~
Unit # 07
Departments in MCB
Operations Department
Clearing Department
Remittance Department
Cash Department
Advances Department
Accounts Department
Technology Department
Operations Department
Accounts
Current Account
PLS Saving 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.
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 21
~
PLC Saving 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
Zakat deducted on @ 2.5%
Profit calculated on monthly basis
Profit paid on annually basis
Saving 365 A/C
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 o n 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%
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 22
~
Khushali Bachat A/C
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
Basic Banking A/C
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
Clearing Department
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”
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
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 23
~
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.
Remittance Department
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.
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 branch’s 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.
Types of Remittance
Remittance is classified into following four types
Inward remittance, instruments received for payment
Outward remittance, issuing instrument to the responding branch.
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 24
~
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)
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
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 customer’s 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 paying- in-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.
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 25
~
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
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:
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 26
~
Long Term Loans:
Lease facility for car
For Machinery
For Fixed Assets
Short Term Loans:
Running Finance (R/F)
Cash Finance (C/F)
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 b usiness
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 based 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.
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 27
~
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.
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 Based 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.
Accounts Department
The most important aspect in record keeping of a bank is its accounting system. The
basic purpose for maintaining an accounting system is to ensure consistency in record
keeping and accounts. The basic requirement for any accounting system is that it
should be in accordance with the GAAP i.e. Generally Accepted Accounting
Principles. There are two choices available to an organization for an accounting
system.
Main Functions of Accounts Department
The major function of this department is keeping the record maintenance of each and
every transaction and prepares reports about the amount of deposits and advances and
sent to Head office or State Bank of Pakistan on monthly, quarterly and yearly basis.
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 28
~
Following activities are carried out in Accounts Department.
Budgets and budget review form
Income & expenditures.
Reports and Reconciliation.
Activity checking.
Depreciation & Maintenance of fixed assets provision
Maintenance & depreciation of fixed assets
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.
Online Banking
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.
Internship Report Unit # 07 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 29
~
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.
Automated Teller Machine (ATM)
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
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.
Internship Report Unit # 08 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 30
~
Unit # 08
Work Done by Internee (Me)
The duties that I performed and the thing I learned each day are given as follows:
June 27, 2011 (Monday)
Learning Session about MCB Bank Ltd
June 28, 2011 (Tuesday)
Learning Session about Banking Operations
June 29, 2011 (Wednesday)
Learning Session about MCB Liaquat Branch Operations
June 30, 2011 (Thursday)
On Leave due to Death of Relative
July 1, 2011 (Friday)
Official Bank Holiday
July 2, 2011 (Saturday)
On Leave due to Death of Relative
July 4, 2011 (Monday)
Test Session about Basic Operations
July 5, 2011 (Tuesday)
Learn about basic operations of remittance department
Learn about entries and vouchers for Incoming TT (Telegraphic Transfer)
Made vouchers and entries for Incoming TT
Observed other operations e.g. PO (Pay Order), DD (Demand Draft)
Internship Report Unit # 08 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 31
~
July 6, 2011 (Wednesday)
Learn bank charges for PO, DD, TT & MT
Learn about entries and vouchers for Outgoing TT (Telegraphic Transfer)
Made few Outgoing TT
Learn & Made Inter – Branch Credit Advices
July 7, 2011 (Thursday)
Learn about the payment against
PO & DD
Learn about the issuance of PO
Made entries against the TT and
MT in the Day Book
Made Incoming and Outgoing TT
Made Inter – Branch Credit Advices against the checks
July 8, 2011 (Friday)
Made Debit vouchers against the TT, PO & DD charges
Made Credit vouchers (contra) against the TT, PO & DD charges
Made Incoming and Outgoing TT
Made Inter-Branch Credit Advices against the checks
Made entries in the Day Book
July 9, 2011 (Saturday)
Learn about Incoming & Outgoing TT Entries in the Daily Voucher Record
Sheet
Learn about to make DD and PO
Made Debit vouchers against the TT, PO & DD charges
Made Credit vouchers (contra) against the TT, PO & DD charges
Made Incoming and Outgoing TT
Internship Report Unit # 08 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 32
~
July 11, 2011 (Monday)
Learn basics of Remittance Software System
Made DD and PO entries in the Daily Voucher Record Sheet
Made Inter-Branch Credit Advices entries in the Daily Voucher Record Sheet
Made Incoming and Outgoing TT
Made Inter-Branch Credit Advices against the checks
Made entries in the Day Book
July 12, 2011 (Tuesday)
Learn about different Stamps on the PO
Learn and made entries and vouchers against Incoming MT
Made Incoming and Outgoing TT
Made Inter-Branch Credit Advices against the checks
Made entries in the Day Book
July 13, 2011 (Wednesday)
Learn and recorded the entries against Incoming MT
Made Incoming and Outgoing TT
Made Inter-Branch Credit Advices against the checks
Made entries in the Day Book
Issued Credit Advices against DD
July 14, 2011 (Thursday)
Learn PO and DD issuance in detail
Made the entries against Intercity Received Checks
Made Incoming and Outgoing TT
Made Inter-Branch Credit Advices against the checks
July 15, 2011 (Friday)
Got more information about Remittance Software System
Learn how to make cancellation entries in the Remittance Software System in
case of any discrepancy
Made Debit vouchers against the TT, PO & DD charges
Internship Report Unit # 08 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 33
~
Made Incoming and Outgoing TT
Made Inter-Branch Credit Advices against the checks
July 16, 2011 (Saturday)
Learn how to cancel a DD
Made Incoming and Outgoing TT
Made vouchers for incoming MT
Made Inter-Branch Credit Advices
against the checks
Issued Credit Advices against DD
July 18, 2011 (Monday)
Learn how to make entries against the incoming TT for which the
beneficiary’s account in some other bank
Made Incoming and Outgoing TT
Made Inter-Branch Credit Advices against the checks
Made entries in the Day Book
July 19, 2011 (Tuesday)
Was moved to Credits, got basic information about different operations of
Credits department
Learn about Running Finance against the Saving Certificates also called
Instant Finance
Studied few pages of Credit Manual
Studied a Instant Finance Case
Learn about the entries against Monthly Installment for Car Financing
Made Daily Voucher Sheet
July 20, 2011 (Wednesday)
Learn basic types of financing
Read Running Finance in detail from manual
Studied a Running Finance Case
Made Vouchers
Internship Report Unit # 08 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 34
~
Made Daily Voucher Sheet
July 21, 2011 (Thursday)
Learn about the different documents required for Credit Investigation
Learn about the documents required for Running Finance
Learn the Concepts of Demand and Cash Finance
Made Vouchers
Made Daily Voucher Sheet
July 22, 2011 (Friday)
Studied Export Refinancing from Manual
Made voucher for partial Adjustment of CF (Cash Finance)
Filled ‘’Credit Proposal cum Sanction Advice MCB Instant Financing, BBFS
(Borrower Basic Fact Sheet) and Application for Finance for renewal of 3
cases of CF.
Made Lease Statement
Made Daily Voucher Sheet
July 23, 2011 (Saturday)
Studied Documentation/Collateral Guidelines
Made ‘’Disbursement Status-Leasing” Statement
Made CF Vouchers
Made Voucher Sheet
July 25, 2011 (Monday)
On Leave
July 26, 2011 (Tuesday)
Made entries for monthly mark up against RF (Running Finance)
Studied other types of Export Financing e.g. FAFB (Finance Against Foreign
Bills), FBP (Foreign Bills Purchased)
Studied ‘’Sanction Advice” & ‘’Approval for Financing”
Made Voucher and Voucher Sheet
Internship Report Unit # 08 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 35
~
Studied a Credit Report
July 27, 2011 (Wednesday)
On Leave
July 28, 2011 (Thursday)
Learned “General Documentation” for financing
Learned about FIM(Finance against Imported Merchandise)
Made Daily Voucher Sheet
July 29, 2011 (Friday)
Learned documentation requirement for each type of financing
Made Vouchers
Made Daily Voucher Sheet
July 30, 2011 (Saturday)
On Leave
August 1, 2011 (Monday)
On Leave
August 2, 2011 (Tuesday)
On Leave
August 3, 2011 (Wednesday)
On Leave
August 4, 2011 (Thursday)
On Leave
August 5, 2011 (Friday)
On Leave
Internship Report Unit # 08 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 36
~
August 6, 2011 (Saturday)
On Leave
August 8, 2011 (Monday)
Learning Session about previous working
August 9, 2011 (Tuesday)
Learning Session about previous working
August 10, 2011 (Wednesday)
Learning Session about previous working
August 11, 2011 (Thursday)
Made monthly entry in the ‘Mark-up Recovery Register’
Made ‘Letter to Auditor’
Made Vouchers
Made Daily Voucher Sheet
August 12, 2011 (Friday)
Learned about L/C documents
Learned basics of Foreign Exchange operations
Made Voucher Sheet
August 13, 2011 (Saturday)
Learned about different L/C related terms and definitions
Learned about Payment against Foreign Currency Checks
Learned about Foreign Inward Telegraphic Transfer
Made Voucher Sheet
August 15, 2011 (Monday)
Made vouchers for Foreign Currency Cash withdrawal
Made vouchers for FITT (Foreign Inward Telegraphic Transfer)
Made Voucher Sheet
Internship Report Unit # 08 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 37
~
August 16, 2011 (Tuesday)
Learned about bank charges against L/C
Learned diff. types of SWIFT messages
Made Vouchers
Made Daily Voucher Sheet
August 17, 2011 (Wednesday)
Worked as CSO (Customer Service Officer) because CSO was on leave and
performed the following activities:
Attended phone calls
Attended customer inquiries
Received ATM forms
Received and entered daily DAK
Issued ATM cards
Issued balance Certificates and Bank Statements
Made charges vouchers for TT/DD/PO
August 18, 2011 (Thursday)
Worked as CSO (Customer Service Officer)
August 19, 2011 (Friday)
Worked as CSO (Customer Service Officer)
August 20, 2011 (Saturday)
Studied few chapters of Foreign Exchange Manual
Learned about diff. types of L/Cs
Learned about diff. parties involved in L/C
Learned about Payment modes for L/C
Made Vouchers
Made Daily Voucher Sheet
Internship Report Unit # 08 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 38
~
August 22, 2011 (Monday)
Worked on the seat of A/C Opening/Check Collection/Lockers because the Madam
on this seat was on leave, so learned and performed the following activities:
Opened three accounts
Issued check books
Received ‘Check Book Issuance Requisition’
August 23, 2011 (Tuesday)
Opened new accounts
Issued check books
Received ‘Check Book Issuance Requisition’
Made CCs (Check Collection)
Made Vouchers
August 24 2011 (Wednesday)
Opened new accounts
Issued check books
Received ‘Check Book Issuance Requisition’
Made CCs
Made Vouchers
August 25, 2011 (Thursday)
Opened new accounts
Issued check books
Received ‘Check Book Issuance Requisition’
Made CCs
August 26, 2011 (Friday)
Opened new accounts
Issued check books
Received ‘Check Book Issuance Requisition’
Made Vouchers
Internship Report Unit # 08 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 39
~
August 27, 2011 (Saturday)
Sorted Foreign Currency Signature Verification Cards
Opened new accounts
Issued check books
Received ‘Check Book Issuance Requisition’
Made CCs (Check Collection)
Made Electricity Bills Vouchers
August 29, 2011 (Monday)
Opened new accounts
Issued check books
Received ‘Check Book Issuance Requisition’
Made CCs(Check Collection)
Made SUI GAS Bills Vouchers
Made Telephone Bills Vouchers
Made Electricity Bills Vouchers
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 40
~
Unit # 09
Financial Analysis
Finance is the most important aspect of the business regardless
to their qualified product or service. Without it the startup &
survival of the business is impossible. The invention,
discovery & execution of idea into practical are not as so much
important as the Finance is important to commercialize
anything. According to the Howard & Upton,
“Finance may be defined as that administrative area or set of administrative
functions in an organization which relate to the objectives as satisfactory as possible”
The financial statements are the principle means of reporting the financial condition
and results of operations of a business entity. These statements are means to an end of
helping stakeholders in the decision making proper analysis of these statements helps
a lot. Financial statement analysis helps in determining the financial conditions at any
particular point in time and effectiveness of operations of a firm during a specific
period.
All the stakeholders of business are interested in the analysis of financial statements.
But the focus of interest of all is not the same. For example, creditors and credit
reporting agencies are interested in finding out the credit worthiness of the firm to
which they have extended credit or intend to extend credit. Short – term creditors are
interested in the long – run cash flow which the firm can generate over the long period
of time. Investors are interested in the firm’s ability to sustain profitability over a
period of time. Government agencies analyze the financial data for tax purposes. The
internal users of financial statement like management also analyze the financial data
for planning and control.
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 41
~
Finan
cial P
ositi
on St
atem
ent
2010
2009
2008
2007
2006
2005
(Rs.
In Mi
llions
)(R
s. In
Millio
ns)
(Rs.
In Mi
llions
)(R
s. In
Millio
ns)
(Rs.
In Mi
llions
)(R
s. In
Millio
ns)
Autho
rized
Capit
al10
,000
10,00
010
,000
10,00
06,5
006,5
00
Paid
- up -
Capit
al7,6
026,9
116,2
836,2
835,4
634,2
65
Rese
rves
40,16
338
,386
36,76
934
,001
24,66
29,0
55
Unap
propia
ted Pr
ofit
21,41
615
,779
9,193
5,131
5,531
4,990
Share
shold
er's E
quity
69,18
161
,076
52,24
545
,414
35,65
718
,311
Surpl
us on
Reva
luatio
n of A
ssets
- Net
of Ta
x10
,024
8,664
6,191
9,706
5,188
5,424
Net A
ssets
79,20
469
,740
58,43
655
,120
40,84
423
,734
Total
Asse
ts56
7,553
509,2
2444
3,616
410,4
8634
2,108
298,7
81
Earni
ng As
sets
494,6
0544
4,188
380,1
8734
3,173
292,6
3926
0,948
Gros
s Adv
ance
s27
4,144
269,7
2227
2,847
229,7
3320
6,848
188,1
40
Adva
nces
- Net
of Pro
vision
s25
4,552
253,2
4926
2,135
218,9
6119
8,239
180,3
23
Non -
Perfo
rming
Loan
s (NP
Ls)
24,54
423
,239
18,26
910
,725
8,571
8,396
Inves
tmen
ts 21
3,061
167,1
3496
,632
113,0
8963
,486
69,48
1
Total
Liab
ilities
48
8,349
439,4
8438
5,180
355,3
6630
1,264
275,0
46
Depo
sits &
othe
r Acc
ounts
431,3
7236
7,605
330,1
8229
2,098
257,4
6222
9,342
Curre
nt &
Savin
g Dep
osits
(CAS
A)35
1,298
304,9
5326
8,501
259,8
9622
4,165
216,0
46
Borro
wing
s25
,685
44,66
222
,664
39,40
723
,943
27,37
8
Intere
st be
aring
Liab
ilities
30
5,902
283,3
6924
0,470
232,3
9819
4,363
177,9
24
Conti
ngen
cies &
Comm
itmen
ts 13
6,246
119,9
2226
6,251
213,3
1716
0,843
80,42
7
Financial Highlights
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 42
~
Income Statement
2010 2009 2008 2007 2006 2005
Profits (Rs. In Millions) (Rs. In Millions) (Rs. In Millions) (Rs. In Millions) (Rs. In Millions) (Rs. In Millions)
Markup / Return Earned 54,821 51,616 40,044 31,787 25,778 17,756
Markup / Return Expensed 17,988 15,837 11,561 7,866 4,525 2,781
Fund based Income 36,834 35,779 28,483 23,921 21,253 14,975
Fee, Commission, Brokerage & FX Income 5,310 4,409 4,537 4,328 3,573 4,406
Dividend & Capital Funds 956 1,234 1,255 2,120 1,418 1,348
Total Income 43,099 41,422 34,275 30,369 26,244 20,728
Operating Expenses 13,160 10,801 8,365 6,000 6,549 6,638
Operating Profit before Tax & Provision 29,938 30,620 25,910 24,369 19,695 14,090
Provisions write - off 3,685 7,465 4,042 3,061 1,194 1,072
Profit before Tax 26,253 23,155 21,868 21,308 18,501 13,018
Profit after Tax 16,873 15,495 15,375 15,266 12,142 8,922
Cash Dividends 8,743 7,602 7,225 7,854 3,960 1,715
Bonus Shares 760 691 628 - 819 853
The evaluation of levels and trends in the financial statements percentage over time
affords the analyst insight into the underlying improvements or deterioration in
financial condition and performance. Through a good portion of this insight is
revealed in the analysis of financial ratios, a broader understanding of the trends is
possible when the analysis is extended to include the foregoing considerations (Horne,
2003).
MCB has been a pioneer among the banks in Pakistan,
particularly in introducing a number of innovative
banking products and services. For the first time in the
history of Pakistan, these multifarious products mostly
in the shape of saving schemes have been introduced by
MCB with brand names. This has set the trend and
many other banks, both local and foreign, have since followed in MCB’s footsteps, by
launching new products and services, on similar lines. These products and services
urge to investors to rise up the market share of the MCB.
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 43
~
Financial Position Statement
Rs. M % Rs. M % Rs. M % Rs. M % Rs. M % Rs. M %
Assets
Cash and Balances with Treasury Banks 45,407 17% 38,775 -2% 39,631 -1% 39,684 22% 32,466 37% 23,666 -1%
Balances with other Banks 1,479 -75% 6,010 49% 4,043 6% 3,808 -42% 6,577 348% 1,466 -74%
Lendings to Financial Institutions 4,402 47% 3,000 -27% 4,100 290% 1,051 -95% 21,082 111% 9,999 -9%
Investments 213,061 27% 167,134 73% 96,632 -15% 113,089 78% 63,486 -9% 69,481 3%
Advances 254,552 1% 253,249 -3% 262,135 20% 218,961 10% 198,239 10% 180,323 31%
Operating Fixed Assets 20,947 16% 18,015 4% 17,264 8% 16,024 77% 9,054 11% 8,182 2%
Deferred Fixed Assets - - - - - - - -100% 172 -10% 192 100%
Other Assets 27,705 20% 23,040 16% 19,810 11% 17,869 62% 11,031 102% 5,472 -11%
567,553 11% 509,224 15% 443,616 8% 410,486 20% 342,108 15% 298,781 15%
Liabilities
Bills Payable 10,266 25% 8,201 -22% 10,551 1% 10,479 48% 7,090 -17% 8,537 13%
Borrowings 25,684 -42% 44,662 97% 22,664 -42% 39,407 65% 23,943 -13% 27,378 261%
Depsoits 431,372 17% 367,605 11% 330,182 13% 292,098 13% 257,462 12% 229,342 4%
Sub - Ordinated Loan - - - - - -100% 479 -70% 1,597 -0.04% 1,598 -0.04%
Deferred Tax Liabilities 4,934 54% 3,197 631% 437 -63% 1,180 100% - - - -100%
Other Liabilities 16,092 2% 15,819 -26% 21,346 82% 11,722 5% 11,171 30% 8,192 32%
488,348 11% 439,484 14% 385,180 8% 355,366 18% 301,264 9% 275,047 12%
Net Assets
Represented By:
Share Capital 7,602 10% 6,911 10% 6,283 0% 6,283 15% 5,463 28% 4,265 27%
Reserves 40,163 5% 38,386 4% 63,769 8% 34,001 38% 24,662 84% 13,834 137%
Inappropiated Profits 21,415 36% 15,779 72% 9,193 79% 5,131 -7% 5,531 2526% 211 28.00%
Surplus on Revaluation of Assets - Net of Tax 10,024 16% 8,664 40% 6,191 -36% 9,706 87% 5,188 -4% 5,424 1%
79,204 14% 69,740 19% 58,436 6% 55,120 35% 40,844 75% 23,734 63%
2010 2009 2008 2007 2006 2005
Profit & Loss Account
Rs. M % Rs. M % Rs. M % Rs. M % Rs. M % Rs. M %
Markup Earned 54,821 6% 51,616 29% 40,044 26% 31,787 23% 25,778 45% 17,756 95%
Markup Expensed (17,988) 14% (15,837) 37% (11,561) 47% (7,866) 74% (4,525) 63% (2,781) 35%
Net Markup Income 36,834 3% 35,779 26% 28,483 19% 23,921 13% 21,253 42% 14,975 113%
Provisons & Write off (3,685) -51% (7,465) 85% (4,042) 32% (3,061) 156% (1,194) 11% (1,072) 150%
Net Markup Income after Provsions 33,149 17% 28,314 16% 24,441 17% 20,860 4% 20,059 44% 13,903 111%
Non - Markup Expenses 6,265 11% 5,643 -3% 5,791 -10% 6,448 29% 4,991 -13% 5,754 21%
Profit before Tax 13,160 22% 10,801 29% (8,365) 39% (6,000) -8% (6,549) -1% (6,638) -9%
Taxation 26,253 13% 23,155 6% 21,868 3% 21,308 15% 18,501 42% 13,018 221%
Profit after Taxation (9,380) 22% (7,660) 18% (6,493) 7% (6,042) -5% (6,358) 55% (4,096) 152%
16,873 9% 15,495 1% 15,375 1% 15,266 26% 12,142 36% 8,922 267%
20052010 2009 2008 2007 2006
Horizontal Analysis
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 44
~
Cash is increased in 2007 but decrease in 2008; it shows that the liquidity position of
the bank is going to be weak, so it is alarming sign for the bank. Therefore bank
should take necessary steps according to the position. There is decreasing trend in
balance with other banks which is a negative sign. Increase in money at call and short
notice, it means that customers of bank are very punctual in making payments.
Therefore it is good sign for the bank.
In the field of investment, there is increasing trend
with the passage of time. It is common term of
finance” more investment more return. As we
know that main source of profit of a bank is the
difference between the percentages of interest,
Banks pay less rate of interest than receiving the
interest from the customers. In this case advance to
customers very low in 2007 but increase in 2008.
It means that MCB is running very well.
MCB is in a position that it is earning more and more profit with passage of time.
Then bank can purchase more and more fixed assets, and it is bank is doing. Assets of
the banks are increasing day by day by purchasing the assets. More assets mean that
bank has more capacity to pay off its liabilities. There is increasing trend in field of
fixed assets. It is due to purchase of new assets. Other assets have a decreasing trend
which is not a positive sign. Decrease in assets decrease the worth of organization
liabilities
There is increasing trend in dep osits and other accounts which shows the credibility
of the bank. Borrowing is decreasing in 2008 but there is increasing trend in the year
2007. Although it is seeing that bank’s borrowing is increasing with the passage of
time which is not a good sign but there is a positive thing in this behalf, usually banks
borrow money at that time when they would have to give it for earning more profit, I
think the Muslim Commercial Bank doing the same thing for increasing its profits.
Bills payable increase in 2008 but decrease in 2007 negative sign. Other liability has
an increasing trend not good because increase in liability decreases the liquidity
position of the bank. Share capital increase that shows the creditability of bank.
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 45
~
The Muslim Commercial Bank Limited is increasing its reserves and Un-appropriated
profit in order to increase its lending power, which is good sign, because according to
the prudential regulations of State Bank of Pakistan, a bank can lend money (per party
exposure) equal to the 30% of its assigned capital plus reserves.
Interest income increase in 2008 will great proposition which is favorable. It means
that interest received by the bank is increasing with the passage of time. It is good for
a banking company. As we all know that banks provide many services for their
customers and also act as a agent of the customer. The banks receive fee and
commission after their services; it is a main source of bank to receive fee and
commission from their customers. In case bank is taking more fees as compared to
previous years. This is good for the bank.
In foreign currency dealing and dividend there is huge increasing trend which shows
the investment of bank in healthy organization. Other income decrease in 2008 but
this increase mean positive situation.
Return on deposit decreases which shows good sign and it is due to decrease in return
rate. Adam and diminution and provision against non performing loan decreasing
turned that is favorable. Bad debts increased with huge amount not positive sign.
Profit before taxation has increased with greater proportion. Tax increases which are
not bad because it is interrelated with profit, if profit increased, tax also increase.
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 46
~
Financial Position Statement
Rs. M % Rs. M % Rs. M % Rs. M % Rs. M % Rs. M %
Assets
Cash and Balances with Treasury Banks 45,407 8% 38,775 8% 39,631 9% 39,684 10% 32,466 9% 23,666 8%
Balances with other Banks 1,479 0% 6,010 1% 4,043 1% 3,808 1% 6,577 2% 1,466 0.50%
Lendings to Financial Institutions 4,402 1% 3,000 1% 4,100 1% 1,051 0.30% 21,082 6% 9,999 3%
Investments 213,061 38% 167,134 33% 96,632 22% 113,089 28% 63,486 19% 69,481 23%
Advances 254,552 45% 253,249 50% 262,135 59% 218,961 53% 198,239 58% 180,323 60%
Operating Fixed Assets 20,947 4% 18,015 4% 17,264 4% 16,024 4% 9,054 3% 8,182 3%
Deferred Fixed Assets - - - - - - - - 172 0% 192 0%
Other Assets 27,705 5% 23,040 5% 19,810 4% 17,869 4% 11,031 3% 5,472 2%
567,553 100% 509,224 100% 443,616 100% 410,486 100% 342,108 100% 298,781 100%
Liabilities
Bills Payable 10,266 2% 8,201 2% 10,551 2% 10,479 3% 7,090 2% 8,537 3%
Borrowings 25,684 5% 44,662 9% 22,664 5% 39,407 10% 23,943 7% 27,378 9%
Depsoits 431,372 76% 367,605 72% 330,182 74% 292,098 71% 257,462 75% 229,342 77%
Sub - Ordinated Loan - - - - - - 479 0.10% 1,597 0% 1,598 1%
Deferred Tax Liabilities 4,934 1% 3,197 1% 437 0% 1,180 0.30% - - - -
Other Liabilities 16,092 3% 15,819 3% 21,346 5% 11,722 3% 11,171 3% 8,192 3%
488,348 86% 439,484 86% 385,180 87% 355,366 87% 301,264 88% 275,047 92%
Net Assets
Represented By:
Share Capital 7,602 1% 6,911 1% 6,283 1% 6,283 2% 5,463 2% 4,265 1%
Reserves 40,163 7% 38,386 8% 63,769 8% 34,001 8% 24,662 7% 13,834 5%
Inappropiated Profits 21,415 4% 15,779 3% 9,193 2% 5,131 1% 5,531 2% 211 0.10%
Surplus on Revaluation of Assets - Net of Tax 10,024 2% 8,664 2% 6,191 1% 9,706 2% 5,188 2% 5,424 2%
79,204 14% 69,740 14% 58,436 13% 55,120 13% 40,844 12% 23,734 8%
2010 2009 2008 2007 2006 2005
Profit & Loss Account
Rs. M % Rs. M % Rs. M % Rs. M % Rs. M % Rs. M %
Markup Earned 54,821 90% 51,616 90% 40,044 87% 31,787 84% 25,778 84% 17,756 76%
Markup Expensed (17,988) -29% (15,837) -28% (11,561) -25% (7,866) -21% (4,525) -15% (2,781) -12%
Net Markup Income 36,834 60% 35,779 62% 28,483 62% 23,921 63% 21,253 69% 14,975 64%
Provisons & Write off (3,685) -6% (7,465) -13% (4,042) -9% (3,061) -8% (1,194) -4% (1,072) -5%
Net Markup Income after Provsions 33,149 54% 28,314 49% 24,441 53% 20,860 55% 20,059 65% 13,903 59%
Non - Markup Expenses 6,265 10% 5,643 10% 5,791 13% 6,448 17% 4,991 16% 5,754 24%
Profit before Tax 13,160 -22% 10,801 -19% (8,365) -18% (6,000) -16% (6,549) -21% (6,638) -28%
Taxation 26,253 43% 23,155 40% 21,868 48% 21,308 56% 18,501 60% 13,018 55%
Profit after Taxation (9,380) -15% (7,660) -13% (6,493) -14% (6,042) -16% (6,358) -21% (4,096) -17%
16,873 28% 15,495 27% 15,375 34% 15,266 40% 12,142 39% 8,922 38%
20052010 2009 2008 2007 2006
Vertical Analysis
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 47
~
Interest earned decrease which is negative sign. As we know that banks provide many
facilities other than money lending and borrowing. Banks receive fee, commission
etc. for these services. Therefore fee and commission income are increasing which is
good and favorable signs.
Divided income increased but it is very
small other income increase with great
proportion good sign. Return on deposit
decrease good sign because it increases
the profit. Administration expenses are
increased but no alarming rate. Position
against non performing loan us zero
which show bank have good customer.
All provision is zero that sows the good credit policy. Bad debt and other charges
increased but the situation is not alarming. Profit increased. Tax is increased but it is
interrelated with profit.
From the above-mentioned analysis following are my Result about the Operations of
branches of MCB for the year 2008, MCB’s income by operations has been increased
by 122.19% than 2007.
Company’s Total Assets in Pakistan has been increased by 130% than 2007. Deficit
has been decreased by 104 % in comparison with year 2007. Due to financial crisis in
the world investment activities are slowed down in year 2008 and they are decreased
by 152% than year 2007. Due to its sound financial policies MCB’s borrowing from
financial institutions has been decreased by 95 % than year 2007.
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 48
~
Significance of Ratios
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.
Advantages of Ratios Technique
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- firm-comparison 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.
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 49
~
2010 2009 2008 2007 2006 2005
Dividend Ratios
Cash Dividend per Share 11.50 11.00 11.50 12.50 7.25 4.02
Bonus Shares Issued Dividend Yield Ratio (based on Cash Dividend) 10.00% 10.00% 10.00% 0.00% 15.00% 20.00%
dividend Payout Ratio 5.03% 5.01% 5.14% 3.13% 2.95% 2.40%
56.32% 53.52% 51.08% 51.45% 39.36% 28.78%
2010 2009 2008 2007 2006 2005
Share Information
Market Value per Sahre - Dec, 31 Rs. 228.54 219.68 125.81 399.95 246.10 167.80
- High During the Year Rs. 233.80 244.00 494.80 434.60 284.50 175.50
- Low During the Year Rs. 17.04 75.00 125.81 244.05 150.30 50.50
Market Capitalization 173,740 151,822 79,044 251,279 134,451 71,572
Price to Book Value (excl. Surplus on Rev. of Assets) Ratio Times 2.51 2.73 1.66 6.09 4.77 6.33
Price to Earning Ratio Times 10.30 10.78 5.66 18.11 14.01 13.00
2010 2009 2008 2007 2006 2005
Industry Share
Depsoits 8.42% 8.50% 8.55% 9.74% 8.58% 8.62%
Advances 7.85% 8.24% 8.63% 9.53% 8.58% 9.20%
Total Assets 8.37% 8.52% 8.51% 10.12% 8.43% 8.64%
Market Capitalization 24.10% 22.35% 18.59% 17.50% 16.22% 14.81%
2010 2009 2008 2007 2006 2005
Consolidated
Total Assets 570,482 511,742 445,286 412,901 343,178 299,712
Shareholders' Equity 71,228 63,120 54,121 47,338 36,404 18,660
Net Assets 81,999 72,313 60,132 57,547 42,185 24,673
Profit (before Tax) 26,510 23,349 21,887 22,526 18,931 13,341
Profit (after Tax) 16,874 15,665 15,323 16,442 12,541 9,214
Return on Assets 3.12% 3.27% 3.57% 4.35% 3.90% 3.30%
Return on Equity 25.11% 26.72% 30.21% 39.27% 45.55% 66.02%
Earnings per Sahre 22.20 20.61 20.16 21.63 16.50 12.12
Breakup Value per Share (excl. Surplus on Rev. of Assets) 93.69 83.03 71.19 62.27 47.89 24.55
Capital Adequacy Ratio 22.04% 19.10% 16.37% 16.69% 19.13% 12.79%
2010 2009 2008 2007 2006 2005
Per Branch
Gross Advances 242.18 249.51 257.40 223.91 208.10 197.63
Deposits 381.07 340.06 311.49 284.70 259.02 240.63
CASA 310.33 282.10 253.30 253.31 225.52 226.94
PBT 23.19 21.42 20.63 20.77 18.61 13.67
2010 2009 2008 2007 2006 2005
Non - Financial Information
Number of Branches 1,132 1,081 1,060 1,026 994 952
Number of Permanent Employees 9,479 9,397 10,160 9,721 9,011 9,377
ATMs 493 495 370 349 263 234
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 50
~
It is observed that Current Ratio has decreasing trend this is because of sharp increase
in short-term loans, which is not positive sign. Quick ratio has mixed trend it
increases in years 2003, 2004 then slightly declining in 2005 & 06 then increases in
2007, it is observed that these fluctuations are occurring due to increase in investment
and increase in stock which is a positive sign.
It is observed that in Debt equity ratio bank has more equity to pay its debts in recent
years, which is positive sign. It is observed that debt of the bank is decreased against
total assets in recent years.
Interest coverage ratio shows
increasing trend this is because of
increase in EBIT. Now bank can
pay its interest expenses more
easily which is positive sign.
Net profit of the bank has also
increasing trend over the previous
last five years which is very
positive sign. Return on assets
depicts increasing trend it is due
to increase in net profit of the
bank, which is positive sign. Due to high net profits Return on equity is increasing
which is also a positive sign.
In Advances to total assets ratio it is observed that it has increasing trend which is
positive sign this is just because of increase in advances to general public and
government sector. Advances to deposits also have positive increasing trend because
advances are assets of the bank,
which are showing increasing,
trend against deposits. Deposits
to liabilities also have increasing
trend people deposited their
money more than in previous
years which shows public trust in
the bank which is also a positive
sign. Net profit to total advances
has also increasing trend over the
last five years which is also a
positive sing. It is observed that
net profit of the bank has sharp
increase than advances, which is
positive sign.
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 51
~
We take year 2003 as base year. It is observed that cash balance, lending to financial
institutions & investment of the bank has increasing trend this is due to increase in
deposits of the bank, which is positive sign. Bank’s advances also having increasing
trend, which is again a positive sign. Bank is paying its bills payable more easily than
before because of more equity and deposits which is a good sign. Borrowing has
sharply decreased in year 2006-07 due to more deposits.
We take year 2003 as base year. It
is observed that cash balance,
lending to financial institutions &
investment of the bank has
increasing trend this is due to
increase in deposits of the bank,
which is positive sign. Bank’s
advances also having increasing
trend, which is again a positive
sign. Bank is paying its bills payable more easily than before because of more equity
and deposits which is a good sign. Borrowing has sharply decreased in year 2006-07
due to more deposits which is good sign. Share capital and profits has sharp increase
over years because of increase in equity, which is a positive sign
It is observed that interest income of the bank has increasing trend due to more
advances, which is a positive sign. Fee income and brokerage of the bank has
increasing trend, which shows sound business of the bank it is positives sign. Share
profit has sharp increase over the years which is due to sale of bank share to general
public it shows public confidence on the bank which is also a positive sign.
Income of bank from dealing in foreign currencies is also having a sharp increase.
Administration expenses have increased in recent years, which are to control bank,
more efficiently than before. Taxation expense of the bank has also increasing trend
which is due to increase in profits which is a positive sign... Net profit of the bank has
sharp-increasing trend, which is due to increase in different kind of income of the
bank. Overall income statement of the bank depicts very sound position of the bank’s
profitability.
It is observed that cash balance, lending to financial institutions & investment of the
bank has increasing trend this is due to increase in deposits of the bank, which is
positive sign. Bank’s advances also having increasing trend, which is a positive sign.
Deposits of the bank have increased more than previous years, which shows public
trusts on the bank. Profit of the bank also showing a stable increase due to increase in
revenue and other income of the bank.
Vertical analysis shows much the same picture as in horizontal analysis. Interest
income and non- interest income of the bank has increasing trend, which shows sound
business of the bank. Income of bank from dealing in foreign currencies is also having
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 52
~
a sharp increase. Administration expenses have increased in recent years, which are to
control bank, more efficiently than before. Taxation expense of the bank has also
increasing trend which is due to increase in profits which is a positive sign. Net profit
is consistently increasing, which is a positive sign for the sound working of the bank.
Dividend
The Board has recommended a final cash dividend @ 30% and bonus shares @ 10%
for the year ended December 31, 2010. This is in addition to 85% interim cash
dividends announced during the year. The effect of the recommendation is not
reflected in the above appropriations.
Profitability
MCB delivered a profit of Rs. 26.253B for the year ended December 31, 2010,
registering a strong growth of 13% over Rs. 23.155B reported for the year 2009.
Profit after tax of the Bank touched Rs. 16.873B, which is higher by 9% over the
previous year 2009.
The interest rates upward revision coupled with the other monetary pressures lead to a
rise in the cost of credit. Given the prudent stakes in appropriate mix of investments,
the Bank was able to maintain interest income, which registered a positive growth of
3% over 2009.
Major component of increase in profits remained interest income, representing 90% of
the total gross income, which rose by 6% from last year to Rs. 55B. The robust
upward flux in investments helped the strong increase in total interest earned
throughout the year. Return on investments was reported at Rs. 20B, growth of 46%
over 2009, with major portion earned on Treasury Bills of Rs. 18.4B in 2010.
Interest expense increased by 14% and was
reported at Rs. 18B. Cost of deposits rose to
Rs. 16B, with a sharp rise of 14% from
2009. Cost on short term borrowings, at Rs.
902M increased by 16% from 2009.
The focus of the Bank has grown into
venues of income covering value added
services along with core banking business.
As a result, non interest income has been on
the rising trend posting an increase of 11% on a yearly basis in 2010 to Rs. 6B.
Fee, commission and brokerage continued to be the major portion of the total non
fund based income, with an increase of 19% over 2009 with major contributions from
commission earned on banc assurance, remittances and trade business. With reference
to the operating expenditure block, the cost cutting methodologies adopted by the
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 53
~
management have kept the increase under control despite the soaring inflation rates
applicable throughout the financial year, 2010. Effective planning and budgeting
policies implemented across bank have greatly pacified the growth rate in
administrative expenses, restricting the same to 9.7% over 2009 (excluding the impact
of PF reversal).
Advances
Given the current weak economic conditions, worsened by the catastrophic floods, the
advances of the Bank witnessed decrease in the earlier quarters of 2010; however, the
off take of advances in the last quarter of 2010 resulted in the year end number to be
reported at Rs. 274B, 2% higher than the segments to this growth are Corporate and
Commercial which added a combined increase of Rs. 9.2B in the current year with
respective increase of 3% and 9% over 2009.
With reference to the industry
specific concentration, increase was
observed in transport, storage and
communication sector, followed by
textile and retail sectors. The Bank’s
exposure in the power and
pharmaceuticals sectors decreased by
4% and 15% respectively, over 2009.
Lending to the private sector also saw
an increase of 3% in 2010, as
opposed to the 11% annual decrease
registered in 2009. Simultaneously,
public sector advance decreased by 1% from 2009 as opposed to a major increase of
32% last year.
The year 2010 saw a continuous rising trend in the industry non-performing loans
(NPLs) in the domestic banking sector. The mid-year floods further devastated the
situation as the exposure to agriculture and SME brought a sharp hit to the lenders.
MCB Bank Limited on the other hand, managed to coop well with the situation and
registered a growth of 6% over 2009.
Given the controlled increase in NPLs, the Bank followed an aggressive approach in
highlighting borrowers with weak /deteriorating basic financial fundamentals and
taking subjective classification charge on such exposures.
The NPL concentration of 85% in the loss category specif ies the adequacy of the
specific provision held by the Bank as provision coverage ratio of the Bank increased
from 70.9% as at December 31, 2009 to 79.8% as at December 31, 2010.
Internship Report Unit # 09 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 54
~
Apart from specific provision and general provision against consumer portfolio, as
required by prudential regulations, the Bank is carrying an unencumbered general
provision of Rs. 274M as at December 31, 2010.
Investments
The investments representing 38% of the total
asset base (2009: 33percentage), increased by
27% from December 2009. Approximately 91%
of the gross investment is concentrated in risk
free government securities with T-Bills
increasing by 32% or Rs. 46B over 2009.
Deposits
On the liability side, the deposit base of the bank witnessed consistent growth
throughout the financial year 2010 and was reported at Rs. 431B as at December 31,
2010. This consistent increase translates into an annual percentage increase of 17%
over 2009 with current deposits increasing by 17%, savings deposits by 14% and
fixed deposits registering a growth of 28% over December 31, 2009. The CASA base
of the Bank constituted 81% of the total deposit base and the prime reason for a lower
cost of deposit.
Market Share and Performance
The consistent growth in profitability of the Bank indicated through interim results
enabled the Bank to capture a considerable share in the market. The local equity
markets depicted relative stability during 2010, resulting in a highest market
capitalization over the last two years.
The equity share of the Bank traded at approximately 2.5X book value throughout the
year and closed at Rs. 228.5 at December 31, 2010, 4% higher than the closing share
price of Rs. 219.7 recorded last year. As a result, the market capitalization of the Bank
was reported at Rs. 174B, being the second highest in the last six years (2007: Rs.
251B).
As a result of significant growth in profit numbers, the earning per share (EPS) of the
Bank was reported at Rs. 22.20 for the year end 2010 as compared to Rs. 20.38 in
2009. This combined with the improved share price led to a P/E (Price to Earnings)
ratio of 10.30.
The book value of the Bank was reported at Rs. 91 increasing from Rs. 80.3 as at
December 31, 2009. The return on equity of the Bank was reported at 25.9% (2009:
27.3%), with ROA reported at 3.13% (2009: 3.25%).
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Contribution towards the national exchequer and the economy of the
country
MCB Bank Limited is one of the main contributors to the national exchequer. The
Bank paid Rs. 11,692.657M as income tax to Government treasury during 2010.
Furthermore, the Bank contributed over Rs. 6 Billion to the national exchequer as
withholding tax agent under different provisions of Income Tax Ordinance, 2001.
The Bank’s contribution to the national economy by way of value addition was Rs.
32.5B out of which Rs. 7.8B and Rs. 9.5B were distributed to employees and
shareholders respectively.
Credit Rating
The Pakistan Credit Rating Agency (PACRA)
maintained the long term credit rating of AA+
[double A plus] and short term credit rating of A1+
[A one plus] of the Bank, through its notification in
June 2010 (2009: Long term: AA+ [double A plus]
and Short term: A1+ [A one plus]).
The Economy of Pakistan
During the last three years, Pakistan has recorded an annual average growth of 3% in
GDP with the commodity producing sectors achieving an annual average growth of
1.9% only, which was lower than the estimated annual growth in population.
Consequently, supply shortages developed, which were accompanied by demand
pressures emanating mainly from an expansionary fiscal policy that relied
increasingly on borrowing from the State Bank of Pakistan and the banking system to
finance mainly unproductive government expenditure. Supply bottlenecks reinforced
by demand pressures led to a sharp rise in prices which increased by approximately
15% per year in the last three years.
The recurring borrowing requirements of the government and the pressure on the
budget deficit depicted the inability of the policies to meet the core objective of
curtailing inflation, and resulted in tiring impact being met through expansionary
monetary measures. However, to partly offset the expansionary impact of the fiscal
policy, the State Bank resorted to tightening of the credit policy for the private sector
and increased its policy rate several times putting upward pressure on lending rate of
banks.
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With continuous injection of high powered money by government excessive
borrowing from the State Bank of Pakistan, the tightening of the monetary policy by
increasing policy rate had only limited effect on the overall expansion of liquidity
with the result that price pressures continued to mount.
The demand for credit from the loss making public sector corporations and financing
of interagency debt by borrowing from commercial banks added to expansion of
liquidity in the economy but credit squeeze for the private sector, which was already
being adversely affected by load shedding of electricity and gas combined with an
increase in their prices reflecting a rise in their world prices and reduction of subsidies
under an agreement with the IMF.
Containment of government borrowing from the banking system and improvement of
financial health of large public sector corporations is an essential prerequisite for the
State Bank of Pakistan to contain monetary expansion within safe limits, reduce price
pressures and to ease its policy rate to avoid further chocking off the private sector.
In spite of expansionary stance of the fiscal policy,
adverse effects of floods on domestic production, and
increasing price pressures the country was able to
maintain a healthy level of foreign exchange reserves
reflecting a rising trend in exports, a sharp increase in
remittances, availability of bilateral assistance and
disbursements from international financial organizations,
particularly the IMF under a Standby arrangement. The
difficult economic conditions face by the country has
had their adverse affect on the asset portfolio of the
banking system and nonperforming loans increased
under depressed market conditions.
In spite of it, the banking system remained generally insulated from the fall out effects
from the world recession and financial crisis, and it was able to maintain a healthy
trend in profitability, thanks to privatization of banks and banking reforms introduced
in the country since the nineties.
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The disturbing trends in the economy can only be reversed by major structural
reforms undertaken under a well thought out and effectively implemented strategy to
put the fiscal house in order including containment of expenditure, higher revenue and
elimination of interagency debt through their sale or reforms and thereby limiting
domestic and foreign borrowing for budget financing, measures to contain inflation,
increase domestic saving rate, accelerate economic growth and expand access to
world markets of high value exports. It is a tall order of policy reforms but a dire need
of the country.
Notwithstanding the difficult economic situation of the country, MCB Bank continued
to make progress in its operations and achieve sound financial results. In the
subsequent sections of the report, a review of operations is followed by a d etailed
analysis of the financial results of the Bank along with narration of on major structural
reforms undertaken to strengthen the foundations of the Bank for future growth.
Corporate Banking Group
The aim of the Corporate Banking Group for 2010 was to buildup trade volumes and
ramp up fee income while maintaining a healthy risk asset portfolio in the current
economic conditions.
The Group successfully executed its strategy and managed to post an increase of 52%
in trade volumes and increased cash management & home remittances throughputs by
26% and 76% respectively, which contributed a significant increase of 22% increase
in fee income over the same period last year. The increase in trade, collections and
home remittances were, in great part, the result of leveraging in-house expertise,
strengthening client relationships while continuing to roll out new products and
offerings. Loan growth in 2010 remained subdued at 8% given the presence of
enhanced levels of systemic and borrower risks. The quality of the Group’s loan
portfolio continued to compare favorably to the industry as nonperforming loans, as a
percentage of total loans were around 2% only.
Moving forward, in 2011 the Group will continue to focus on Transaction Banking
products as revenue and volume drivers in a challenging environment while
maintaining the quality of the Bank’s risk assets will, as always, remain a key
imperative.
Commercial Banking Group
The group equipped with wide spectrum of banking products and service for large
local corporations, SME / Agriculture sector and retail customers made exceptional
progress in 2010. The extensive network of more than 1000 commercial branches
across Pakistan was further strengthened by record opening of 51 new commercial
branches (including 3 sub branches) in 2010. Commercial Branch Banking group
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(CBBG) achieved the highest ever deposit growth of 17.75% with emphasis on
increase in low cost deposits.
CBBG achieved remarkable growth of 43% in trade volume which was used as a
catalyst for generating deposits and advances. Despite an ailing economy, adverse
macroeconomic indicators and worst floods of the century, CBBG closed 2010 with
the key performance indicators being positive. CBBG branches were first to become
operational after the massive devastation caused by the floods. The dedicated efforts
of commercial banking team ensured protection of all assets during flood crisis.
CBBG team extended support to masses as MCB Bank became exclusive bank for
donor agencies and MCB brand was advertised free of cost in electronic & print
medium. Commercial banking team took initiative of launching self help flood relief
efforts for employees that were affected by the flood and donations of Rs. 2.75
Million were distributed among staff members. In addition to these Maybank staff
also made generous contributions for the flood affected victims.
The year witnessed strengthening operations and credit structure to improve internal
controls and efficient systems. Special emphasis on providing quality customer
services throughout the year led to ATM uptime of 94% - 96% during Eid festivities.
Going forward in 2011, the focus would remain on recoveries along with increase in
advances. Continued emphases on deposits growth by offering new liability products
to tap new avenues of market segments would be a key strategy. Commercial banking
team would be focusing on enhancing revenue growth and profitability through cross
selling various financial products, strengthening internal controls operational
structure, capacity building, proficient customer services and optimizing branch
banking platform.
Consumer Banking Group
In 2010, the group focused on consolidating and broadening its menu of services
offered to the Bank’s individual customers. The ground breaking MCB Mobile
service went from strength to strength and established itself as the leading Bank- led
money transfer service in the country. The excellence of the service received
international recognition as well – with MCB winning the best Bank-led money
transfer service award at the Global MMT awards in Dubai in 2010. Remote Banking
will continue to be a game-changer in 2011 with the planned launch of Visa Debit
card and through the introduction of low cost, entry level banking products and
services.
The footprint of the Privilege Banking offering also grew in 2010, with a new
Privilege Center opening up in Multan, which is the first facility of its nature in the
city and will strengthen MCBs Bank’s penetration into the high net worth segment.
Critical fee based businesses like Bancassurance and Investment Services gained
momentum in 2010, and contributed significantly to the bottom line. MCB Bank is
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now among the top 3 providers of Bancassurance in the country within 3 years of
launching the initiative and well-positioned to continue this momentum with the
support of tailor made products developed for the Bank’s customer base by well
reputed Insurance providers.
Given the state of the economy, 2010 also saw us following a conservative strategy in
Consumer Financing. The Bank had considerable success in stabilizing the lending
portfolios, and was able to contain credit losses as compared to previous years. At the
same time, the continued commitment to be an active long-term player in this market
was underlined with the launch of the Platinum credit card, which will, combined
with our Privilege Banking strategy, enable MCB Bank to make further inroads into
the high-net worth segment.
Islamic Banking Group
This has been a year of major achievements
for MCB Islamic Banking (MCB IB).
Targets were exceeded and growth was
observed in almost all areas of business.
MCB IB improved financial structuring
and has as a result became self sufficient
in generation of liabilities to fund its
earning assets. The group has increased
its network reach by opening 5 new
dedicated branches (including 2 sub
branches) in the year 2010 depicting a
step forward in its long term business focus. Strategic branch
relocations have also led to growth in the business.
Deposit generation targets were achieved and exceeded through restructuring of sales
model and improvement in dedicated branch network. Focus on trade business has
resulted in growth by 113% with respect to the previous year and has prepared
grounds for further growth in future. Volumes of new accounts opened grew by 55%,
highlighting the effective implementation of our sales strategy. In order to serve a
diversified set of customers, MCB IB added a new product of “Shariah Compliant
Bank Guarantee” to its product menu in 2010.
Going forward Islamic Banking group intends to establish enhanced network reach by
opening new branches. In the following year the Group will follow an aggressive
strategy to cater the trade based needs of the Bank’s valuable existing and potential
customers. This objective shall be achieved by development of new foreign and
inland trade based products. Marketing tools to create awareness of MCB Islamic
Banking shall be strategically used to position our products more effectively in the
market.
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Unit # 10
SWOT Analysis
Strengths
Following are the strengths of the MCB Bank.
One of the major strengths of MCB is that it has
very stable deposit base.
MCB is the largest private bank in Pakistan with
around 1000 branches, which cover almost every part of Pakistan.
The bank enjoys competitive profitability in the industry.
MCB has captured majority of potential customers in Pakistan.
MCB has the accounts of big organizations like OGDCL, PTCL etc.
MCB is a successive and market oriented bank.
MCB is investing huge sums on HR development and training.
Customer default rate is lower as compare to other banks.
MCB has the largest ATM network in the country.
Meeting the challenges of latest technology by introducing smart card, remit
express, mobile banking etc.
Weakness
Decision making process is very slow.
It is not having greater number of branches abroad.
Though ATM network is largest in the country, still some potential areas do
not have the ATM.
MCB RTCs are usable only in Pakistan.
Some management positions do not work properly.
Low motivational level, non aggressive marketing.
Employees' dissatisfaction due to ill treatments and improper reward system.
Favoritism and nepotism in recruitment.
Opportunities
Opportunities exist in house mortgage products since the people are investing
most of their funds in the agriculture and construction sector.
The bank should form differentiated products for its overseas customers
already operating in all cities of Pakistan.
Customer relation officers with marketing knowledge should be hired at least
in the main branches for providing better services to customers.
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Threats
Increase in number of private banks in the country resulting into increased
competition in the consumer and commercial financing both.
The overall low investment, low interest rates and high liquidity are also a
threat for this large commercial bank.
Other private commercial banks with sound profitability are also a threat to
MCB Bank e.g. UBL, HBL, Bank Alfalfa etc.
PEST Analysis
Political
The political situations are very important for economy of the country. Due to
political instability the valuation of currency drop down the bank investment shrinks
and the rate of production decreases and that situation leads to increase in poverty and
low standards of living.
Economical
Economical situation are also very important for banking sector. Because when
interest rates are high then credit demands are low, so the rates of investments
decrease economy. When investments shrinks then business activity have comes to an
end. And from that the unemployment prevails in economy. On other hand when
interest rate are low then circulation of money, inflation rate, investments, and supply
increases, then price level also increase but purchasing power decrease.
Social
Socially when the productivity of bank increase then rate of production also increases
and per capita income and standard of living also increase, so it boosts up the
economy.
Technology
Technological advancements are very important to compete globally. From
technological advancement the work can easily be done, quality of service and
products improved. Customers are more satisfied and customer’s loyalty also
increased.
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Unit # 11
Conclusion
MCB is an effectively operating and profit making organization and carrying out its
activities under a specified system of procedure. The main regulatory body is State
Bank of Pakistan, which provides policy guidelines and ensures that the money
market operates on sound professional basis. While the head office specifies the
whole procedure of functions and operations. This procedure has been modernized
with the passage of time with a view to streamline the approach and underlying
procedure for effective overhauling of its own capabilities so as to bring them at par
with international practices.
The use of information technology in Pakistan is quite limited. An example of this is
the fact that Credit cards have been used very commonly abroad as a medium of
transaction, still it is not considered as a reliable mod of transaction. Acceptability of
credit card transaction in Pakistan is limited from the users' end because:
Cash is still the most comfortable mode on transaction, because of cultural dislike for
borrowing from the formal sector (issues of riba [interest] and easier access to
informal channels,) and also because of the presence high denomination currency
which could be carried easily. The fear of transaction information being made
available to the authorities giving rise to questions on sources on the income.
Over the last four years mainly as there result of aggressive marketing by the foreign
banks credit cards have been able to penetrate the middle and upper income salary
class to high degree which the business community is still uncomfortable with idea
given the second reason stated above. Foreign banks continue to dominate this
business segment with CITI bank and Standard Chartered leading with more than
hundred thousand card members each.
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Unit # 12
Recommendations
Following are my observation and suggestion to improve the efficiency for the
development of the bank:
Human Resource Department should be there in order to motivate and trained
the employees. I have noted some dissatisfaction among the employees due to
in efficient promoting system.
There is a criticism on the banking management that the salaries of the
employees are decreasing in every succeeding year. And I think this will shake
the confidence and working habit of the employees.
There should be proper advertising and marketing of those products, which are
quiet, new for customers.
Most of the bank employees, are sticking to one seat only with the result that
they become master of one particular job and lose their grip on other banking
operation. In my opinion all the employees should have regular job experience
all out- look towards banking. The promotion policy should be adjusted.
Refresher Courses for the staff are most important in any international
organization. Alt the employees should have these courses according to their
requirement. Foreign experts can also be called for this purpose.
Bank 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 communicate it to the higher management and
some steps must be taken to improve that.
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Unit # 13
Glossary
AER – Annual earnings rate on an investment.
Annuity – A life insurance product which pays income over the course of a set
period. Deferred annuities allow assets to grow before the income is received and
immediate annuities (usually taken from a year after purchase) allow payments to
start from about a year after purchase.
APR – The annual percentage rate of interest, usually on a loan or mortgage,
usually displayed in brackets and representing the true cost of the loan or
mortgage as it shows any additional payments beyond the interest rate.
Bank Statements – This is a statement from the bank giving details of
transactions in the relevant account. It can be requested at any intervals required,
usually monthly.
Bear Market – A bear is somebody who believes that the market is falling and a
bear market is a falling market. See bull market for the opposite.
Bounced Cheque – when the bank has not enough funds in the relevant account
or the account holder requests that the cheque is bounced (under exceptional
circumstances) then the bank will return the cheque to the account holder. The
beneficiary of the cheque will have not been paid. This normally incurs a fee
from the bank.
Bonds – These are securities which pay interest at specified intervals and the
principle amount of the loan is paid at maturity.
Bull Market – A bull is somebody who believes that the market is rising and a
bull market is a rising market. See bear market for the opposite.
Cashback Mortgages – This is when the mortgage provider lends the money for
the mortgage and, in addition, a lump sum to pay for, for example, building work
to be carried out.
Central Clearing Time (in England and Wales) – This is the time that it takes
for the monies from a cheque to be taken out of the payee’s account and put into
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the payer’s account. This is three working days in England and Wales, as long as
the cheque was paid in before 16.30.
Certified Documents – These are photocopies of original documents that have
been signed by a professional i.e. a solicitor, accountant, teacher, doctor or bank
official. The professional also states, on the document, "original seen" since they
must be able to verify that these are genuine copies and therefore have to have
seen the original, they also date the document and put their full name, profession
and their address.
Charges – This is the money paid to the bank for services rendered. Charges
include overdraft fees, charges for bouncing cheques, interest on overdraft and
any charges that a business account might normally incur.
Charge Cards – Cards which can be used like a credit card but the charge has to
be paid off on the due date. They usually have a high limit or no limit.
Cheque Book – A small, bound booklet of cheques. A cheque is a piece of paper
produced by your bank with your account number, sort-code and cheque number
printed on it. The account number distinguishes your account from anyone elses,
the sort-code is your bank’s special code which distinguishes it from any other
bank. In times gone by, anything with the correct details and a verifiable
signature could act as a cheque. Even an elephant was once used!
Cheque Clearing – This is the process of getting the money from the cheque-
writer’s account into the cheque receiver’s account.
CHIP and PIN – A Chip is a small electronic insert placed into a cheque or
credit card. The PIN is a four digit personal identification number which is used
with the card by the card-holder.
Clearing Bank – This is a bank that can clear funds between banks. For general
purposes, this is any institution which we know of as a bank or as a provider of
banking services.
Contract Hire – This is a way of hiring an item of large capital value where the
maintenance is the responsibility of the company that hires out the item. A fixed
monthly figure is paid and the item can be sold, usually to an unconnected third
party.
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Credit Rating – This is the rating which an individual (or company) gets from the
credit industry. This is obtained by the individual’s credit history, the details of
which are available from specialist organisations (Equifax and Experian are the
two big operators in the U.K. www.equifax.co.uk and www.experian.co.uk).
Credit Scoring – This is the process of assessing an individual’s credit-
worthiness. The process involves taking information from an individual on an
application form (for example when applying for a store card) and weighting the
answers given. Certain responses will attract higher scores than others and the
total score will determine whether or nor the organization wants to do business
with the individual, or if they represent too high a credit risk.
Credit-Worthiness – This is the judgement of an organization which is assessing
whether or not to take a particular individual on as a customer. An individual
might be considered credit-worthy by one organisation but not by another. Much
depends on whether an organization is involved with high risk customers or not.
County Court Judgement – This is when a judge at a county or small claims
court finds against an individual and they have a county court judgement made
against them. This is recorded nationwide (and by the credit tracking
organizations Experian and Equifax) so anyone wanting to know the credit-
worthiness of an individual will know that the county court judgement exists.
Once it is paid off then the record remains but it is shown as being paid which
reduces the credit risk associated with the person with the county court
judgement.
Direct Debit – An amount of money taken from a bank account, set up by the
recipient and can vary in amount and exact time that it is taken from an account.
Mortgages are usually direct debits.
Endowment Mortgage – Interest only is paid over the term of this sort of
mortgage and the capital is repaid at the end of the term by using the monies from
an endowment policy.
Factoring – This is when a business sells its invoices to a specialist company or
bank which chases payment and pays a percentage of the invoice back to the
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original business. The business can then continue with its work and problems
from cash-flow are reduced by having money from unpaid invoices up-front.
Hire Purchase – When an item of large capital value is bought over time by
paying a deposit and fixing a period over which the loan will run (usually
between 12 and 60 months) and then paying fixed and equal repayments over this
period.
Identity Verification – This is often used by financial institutions to verify the
customer and usually takes the form of a pass-word and the answer to an obscure
personal question such as the customer’s mother’s maiden-name.
Interest – The amount paid or charged on money over time. If you borrow money
interest will be charged on the loan. It you invest money, interest will be paid
(where appropriate to the investment). Interest rates usually bear a close
relationship to the Bank of England’s base rate. It is expressed in percent.
Lease Purchase – This is an agreement made on an item of high capital outlay
(for example, a car) where the ownership is transferred to the person who is
leasing the item at the end of the contract, providing all the terms and conditions
of the purchase have been fulfilled.
Money Laundering – This is when money gained from crime is put into a bank
so that it can be accessed safely by the criminals and terrorists. It makes the
proceeds of illegal activities easier to get to.
Money Transfer – This is the movement of money from one account to another.
Money Transfer Abroad – This is the movement of money from one account to
another, the second being in a different country from the first.
Offsetting – This is when the credit balances in a current and savings account are
netted off against the account holders borrowings (typically a mortgage) so that
the rate paid on the borrowing is reduced as a result of the credit held in other
accounts, which reduces the amount that is being borrowed.
Overdraft – This is when a person has a minus figure in their account. It can be
authorized (agreed to in advance or retrospect) or unauthorized (where the bank
has not agreed to the overdraft either because the account holder represents too
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great a risk to lend to in this way or because the account holder has not asked for
an overdraft facility).
Payee – The person who receives a payment. This often applies to cheques. If
you receive a cheque you are the payee and the person or company who wrote the
cheque is the payer.
Payer – The person who makes a payment. This often applies to cheques. If you
write a cheque you are the payer and the recipient of the cheque is the payee.
PEP – Personal Equity Plans have been replaced by ISAs. Existing PEPs can be
retained but, since April 1999, no new ones can be opened.
Phishing – This is when a criminal uses the internet to try to fraudulently obtain
details of peoples accounts so that they can use these accounts themselves,
usually to take money out of.
Repayment Mortgage – This is a mortgage where the sum borrowed is paid off
by the end of the mortgage term. It involves monthly repayments which consist of
the interest on the loan plus some of the capital borrowed.
Security for Loans – Where large loans are required the lending institution often
needs to have a guarantee that the loan will be paid back. This takes the form of a
large item of capital outlay (typically a house) which is owned or partly owned
and the amount owned is at least equivalent to the loan required.
Standing Order – A regular payment made out of a current account which is of a
set amount and is originated by the account holder.
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Unit # 14
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A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 71
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Internship Report Unit # 15 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 72
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Internship Report Unit # 15 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 73
~
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Internship Report Unit # 15 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 74
~
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Internship Report Unit # 15 MCB Bank Ltd.
A Practice by Ali Raza Sahni under the supervision of Sir Haroon Hussain ~ 75
~
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