Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
2nd Assignment
AH-526270
2nd Assignment
Acknowledgement
All praises to Almighty Allah, the most Gracious, the most Beneficent and the most Merciful, who enabled me to complete this assignment. I feel great pleasure in expressing my since gratitude to my teacher, for his guidance and support for providing me an opportunity to complete my Project. My special thanks and acknowledgments to Mr. Zeeshan for providing me all relative information, guidance and support to compile the practical study at MCB. I will keep my hopes alive for the success of given task to submit this report to my honorable teacher Sir Kamran Mehmood, whose guidance; support and encouragement enable me to complete this assignment.
2nd Assignment
Executive Summary
A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets The word bank was borrowed in Middle English from Middle French banque, from Old Italian banca, from Old High German banc, bank "bench, counter". A commercial bank (or business bank) is a type of financial institution and intermediary. It is a bank that provides transactional, savings, and money market accounts and that accepts time deposits. Commercial Bank is a back bone for any country. They play important role in the development of that country. Commercial banks perform a lot of function and provide many services for their customers. MCB is one of the largest banks of Pakistan, founded in 1947. It is supported by a strong Mian Mansha group. Muslim commercial Bank is playing an important role in the developing economy of Pakistan. But there are still some weaknesses in its system that can be taking some strong Steps.
2nd Assignment
Table of Contents
Contents Page No
01 02 03 04 05 22
1. Title page 2. Acknowledgement 3. Executive Summary 4. Table of contents 5. Introduction to the topic 6. Practical study of organization
7. Practical study of organization with respect 25 to the issue 8. SWOT analysis 9. Recommendations 10. 11. Conclusion References 14 35 36 37
4
2nd Assignment
Introduction to Topic
Bank
A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets Due to their critical status within the financial system and the economy generally, banks are highly regulated in most countries. Most banks operate under a system known as fractional reserve banking where they hold only a small reserve of the funds deposited and lend out the rest for profit. They are generally subject to minimum capital requirements which are based on an international set of capital standards, known as the Basel Accords.
2nd Assignment
One of the oldest items found showing money-changing activity is a silver Greek drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city. In fact, even today in Modern Greek the word Trapeza () means both a table and a bank.
History:
Banking in the modern sense of the word can be traced to medieval and early Renaissance Italy, to the rich cities in the north like Florence, Venice and Genoa. The Bardi and Peruzzi families dominated banking in 14th century Florence, establishing branches in many other parts of Europe. Perhaps the most famous Italian bank was the Medici bank, set up by Giovanni Medici in 1397. The earliest known state deposit bank, Banco di San Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy.
Types of banks
Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises.
6
2nd Assignment
2nd Assignment
10.
all operations and make only what they consider to be sociallyresponsible investments.
8
2nd Assignment
Both combined
Universal banks, more commonly known as financial services companies, engage in several of these activities. These big banks are very diversified groups that, among other services, also distribute insurance hence the term bancassurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity.
2nd Assignment
liquidity to the banking system and act as the lender of last resort in event of a crisis. Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around several well-established principles based on Islamic canons. All banking activities must avoid interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees on the financing facilities that it extends to customers.
Commercial bank
A commercial bank (or business bank) is a type of financial institution and intermediary. It is a bank that provides transactional, savings, and money market accounts and that accepts time deposits.
2nd Assignment
moneychanger, the merchant at the bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Rome that of the Imperial Mint.
documentary performance
and
standby
letter
of
credit,
guarantees,
bonds,
securities
underwriting
boxes.
Sales/distribution or brokerage, with or without advice, of
Traditionally, large commercial banks also underwrite bonds, and make markets in currency, interest rates, and credit-related securities, but today large commercial banks usually have an investment bank arm that is involved in the mentioned activities.
11
2nd Assignment
Mortgage loan
A mortgage loan is a very common type of debt instrument, used to purchase real estate. Under this arrangement, the money is used to purchase the property. Commercial banks, however, are given security - a lien on the title to the house - until the mortgage is paid
12
2nd Assignment
off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it. In the past, commercial banks have not been greatly interested in real estate loans and have placed only a relatively small percentage of assets in mortgages. As their name implies, such financial institutions secured their earning primarily from commercial and consumer loans and left the major task of home financing to others. However, due to changes in banking laws and policies, commercial banks are increasingly active in home financing. Changes in banking laws now allow commercial banks to make home mortgage loans on a more liberal basis than ever before. In acquiring mortgages on real estate, these institutions follow two main practices. First, some of the banks maintain active and wellorganized departments whose primary function is to compete actively for real estate loans. In areas lacking specialized real estate financial institutions, these banks become the source for residential and farm mortgage loans. Second, the banks acquire mortgages by simply purchasing them from mortgage bankers or dealers. In addition, dealer service companies, which were originally used to obtain car loans for permanent lenders such as commercial banks, wanted to broaden their activity beyond their local area. In recent years, however, such companies have concentrated on acquiring mobile home loans in volume for both commercial banks and savings and loan associations. Service companies obtain these loans
13
2nd Assignment
from retail dealers, usually on a nonrecourse basis. Almost all bank/service company agreements contain a credit insurance policy that protects the lender if the consumer defaults.
Unsecured loan
[Unsecured Loans] are monetary loans that are not secured against the borrower's assets (i.e., no collateral is involved). These may be available from financial institutions under many different guises or marketing packages:
Bank overdrafts:
An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation the account is said to be "overdrawn". If there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft limit, then interest is normally charged at the agreed rate. If the POSITIVE balance exceeds the agreed terms, then additional fees may be charged and higher interest rates may apply on;
Corporate bonds Credit card debt Credit facilities or lines of credit Personal loans
2nd Assignment
Commercial banks are authorized to engage in only the following types of activities:
Receiving interest-bearing and interest-free deposits (time,
secured and unsecured credits and engaging in factoring operations with and without the right of recourse, trade finance including the granting of guaranties, letters of credit, acceptance finance, and forfeiting.
Buying, selling, paying and receiving monetary instruments,
such as notes, drafts and checks, certificates of deposit, as well as securities, futures, options and swaps on debt instruments, and interest rates, currencies, foreign exchange, precious metals and precious stones.
Cash and non-cash settlement operations and the provision of
collection services.
Issuing
money
orders
and
managing
money
circulation
Banking in Pakistan
15
2nd Assignment
Banking in Pakistan first formally started in Pakistan during the period of British colonialisation in the South Asia. After independence from British Raj in 1947, and the emergence of Pakistan as a country in the globe, the scope of banking in Pakistan has been increasing and expanding continuously. Pakistan's oldest bank is the State Bank of Pakistan, which is also the central bank of the nation. Before independence on August 14, 1947, the Reserve Bank of India was the central bank of what is now Pakistan. After independence, Muhammad Ali Jinnah took actions to establish a central bank in Pakistan which resulted in the new founding of the State bank of Pakistan, with its headquarters to be based in Karachi. Only 7% of the population uses the banks, has tremendous potential but this needs to be pushed a little further The banking sector in Pakistan has been going through a
comprehensive but complex and painful process of restructuring since 1997. It is aimed at making these institutions financially sound and forging their links firmly with the real sector for promotion of savings, investment and growth. Although a complete turnaround in banking sector performance is not expected till the completion of reforms, signs of improvement are visible. The almost simultaneous nature of various factors makes it difficult to disentangle signs of improvement and deterioration.
Pakistans Banking Sector can be classified under the following broad categories:
16
2nd Assignment
Category
State Bank Pakistan
Description
Central Bank and the Autonomous of and Governing Body for all banking operations in the country These deal primarily in industries of banking and capital markets. They offer a host of unique policies, banking training, services and products which include loans, credit cards, savings and consumer banking
Private Banks
Banks engage in channeling funds Scheduled from depositors to lenders against the primary objective of acquiring profit i.e. Bank Spread These concentrate primarily on International Trade Finance, Innovative Credit Orientation and Plastic Money Investment Banks act as underwriter or agent serving as intermediary between an issuer of securities and the investing public These banks are created with specific interest thus specializing and catering to a particular sector industry.
17
Foreign Banks
Specialized Banks
2nd Assignment
2nd Assignment
Investment Banks
Corp Limited Oman International Bank S.O.A.G Rupali Bank Limited Standard Chartered Bank Limited Crescent Investment Bank Limited First International Investment Bank Limited Atlas Investment Bank Limited Security Investment Bank Limited Fidelity Investment Bank Limited Prudential Investment Bank Limited Islamic Investment Bank Limited Asset Investment Bank Limited Al-Towfeek Investment Bank Limited Jahangir Siddiqui Investment Bank Limited Franklin Investment Bank Limited Orix Investment Bank (Pak) Limited
organized. The State Bank of Pakistan established on July 1, 1948 stands at the apex and is responsible for the operation of the banking system in Pakistan. The other banks which form the banking structure in Pakistan are playing an active role in the economic development of the Country.
19
2nd Assignment
The role of the commercial banks in the growth and development of sound and healthy economy of the Pakistan is briefly discussed as under:
2nd Assignment
system keeps a balance between liquidity and profitability and thus assists in the planned development of the economy.
2nd Assignment
nationalized commercial banks. Under the Qarz-e-Hasria Scheme, financial assistance is provided to the students of in sufficient means and of outstanding caliber who are unable to pursue their studies due to financial difficulties. Loans are provided for pursuing studies both within and outside Pakistan.
22
2nd Assignment
Vision Statement:
TO BE THE LEADING FINANCIAL SERVICES PROVIDER, PARTNERING WITH OUR CUSTOMERS FOR A MORE PROSPEROUS AND SECURE FUTURE
Mission Statement:
WE ARE A TEAM OF COMMITTED PROFESSIONALS, PROVIDING INNOVATIVE AND EFFICIENT FINANCIAL SOLUTIONS TO CREATE AND NURTURE LONG-TERM RELATIONSHIPS WITH OUR CUSTOMERS. IN DOING SO, WE ENSURE THAT OUR SHAREHOLDERS CAN INVEST WITH CONFIDENCE IN US
2nd Assignment
MCB
Bank
Limited (Formerly
Muslim
Commercial
Bank)
was incorporated by the Adamjee Group 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. 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). MCB is Pakistans largest bank by market share 18% its assets are of PKR 605 bln (apprx.)(US$ 7.02 billion) in 2011, and the largest by market capitalization having a market capitalization of US$ 1.8 billion. The Bank has a customer base of approximately 4.5 million and a nationwide distribution network of 1,130 branches, including 8 Islamic banking branches, and over 600 ATMs, in a market with a population of over 160 million. (July 2011 record) In 2011, MCB reported a profit after tax of PKR 15.5 billion (appx. US$183 million) and generated a return on average equity of
24
2nd Assignment
27.35% and a return on assets of 3.25%. The Banks asset quality is strong with a gross NPL ratio of 8.62%. Office in Dubai, UAE. The Bank has also formed a private company in Hong Kong (fully owned subsidiary of MCB) in partnership with Standard Chartered Bank, handling trade transactions of select countries in the Asia-Pacific region.
Public (KSE:[2]) Banking Capital Markets 1947 Registered Office: Islamabad, Principal Office: Karachi Pakistan Mian Mohammad Mansha(Chairman) Loans, Credit Cards, Savings, Consumer Banking etc. PKR 35.782 Billion (2011)
25
2nd Assignment
CORPORATE PROFILE
Board of Directors
Mian Mohammad Mansha Mr. S. M. Muneer Mr. Tariq Rafi Mr. Saleem Shahzad Chairman
Mr. Sarmad Amin Mr. Mian Mansha Mr. Mian Mansha Mr. Aftab Khan Mr. Mushtaq Raza
Umer
Director
Ahmad
Director
Manzar Director
26
2nd Assignment
Mr. Ahmad Alman Director Aslam Dato' Seri Ismail Shahudin Director
Mr. Abdul Farid Bin Director Alias Mr. M.U.A. Usmani President / CEO
Capital formation refers to the increase in the existing stock of capital goods in an economy. Muslim Commercial banks remove the capital deficiency by encouraging saving and investment. The Muslim commercial bank is promoting capital formation in the country by moving the resources to the productive uses. Rate of capital formation is 5 % in Pakistan.
27
2nd Assignment
Mobilization of Savings:
There operates vicious circle of poverty in developing countries like Pakistan. So, savings remain at the lowest level. Savings of people are very low due to international demonstration effect in Pakistan. Muslim Commercial Bank is playing important role in the mobilization of saving by introducing a variety of saving schemes. Banks induce the people to earn interest through saving and it provides various facilities in a country to create a will and power to save. Domestic savings are 9.5 % of GDP.
Availability of Funds:
An additional point of role of banks is more availability of funds. Poor population has poor resources for the economic development in poor countries like Pakistan. The activities like inventions and innovations, research and development and initiatives (effectiveness in responding to challenges) are impossible due to insufficiency of funds in these countries. Banks remove the deficiency of capital by providing different types of funds that leads to economic development.
A major problem faced by the developing countries is burden of foreign Commercial bank provides incentive for the entrepreneurs to take risks and to use idle resources for more and better production. So, banks are helpful in attaining self-sufficiency. Banks provide loan to develop the various economic sectors. It results in reduction in
28
2nd Assignment
imports and increase in exports. Accordingly, banks are very important to achieve the self-sufficiency.
Economic development without use of advanced and the most upto-date technology is impossible. Almost in all the economic sectors backward techniques of productions are used due to poverty in third world countries like Pakistan. Muslim Commercial bank provides more funds to people to make it possible to use the modern techniques of production. Due to implementation of modern technology, there is increase in production level, decrease in cost and save in time.
All the regions and all the sectors of the economy are not equally efficient and developed in an economy. There is big need to develop the backward regions and sectors for the economic development. Rural areas and agricultural sector is still backward n Pakistan. Muslim Commercial Bank is playing an important role in the development of rural and agriculture sector. Growth rate of agricultural sector is 1.2 %.
Industrial sector is the backbone of their economies in rich nations. It is still backward in Pakistan and other poor countries. Muslim Commercial bank provides different types of loans for the development of industrial sector. Industrial development leads to agricultural development and it results in economic development. Growth rate of industries is 1.7%.
29
2nd Assignment
Expansion of Market:
Muslim Commercial banks help in the expansion of market. They help in the formation of sound economic infrastructure in order to raise living standards and to expand trade and commerce of an economy. Muslim Commercial bank causes development of industrial as well as agriculture sector. Accordingly, there is expansion of market that results in economic development.
Foreign trade is one of the most important needs of all the countries of the world. Today international trade, without involving banks, is so difficult. International trade is necessary for the economic development. Muslim Commercials bank is helpful in increasing international trade through following ways: Provision of credit facilities Low rate of interest for the exporters Opening of letter of credit (L/C) Arrangement of foreign exchange Opening of foreign currency accounts
Muslim
exchange reserves
The Muslim commercial bank is very helpful for the government. Now a day, the government has to face the budget deficits because of increased expenditures and falling revenues. In this situation, government has to depend upon deficit financing to meet the budget deficits. To cover the gap between the expenditures and
30
2nd Assignment
revenues, government borrows from the banks. As a result, the development process can be started through borrowed money from banks.
Muslim Commercial bank helps in the just and optimum allocation of resources. Some mega projects cannot be started due to the lack of capital. Muslim Commercial bank provides loans and removes the problem of deficiency of capital. Due to use of resources in an economy, there is increase in production, income and employment etc. Increase in these things leads to economic development.
Creation of money and distribution of money are the two main objectives of Muslim commercial bank. Muslim Commercial banks move the finances toward productive uses. There are a lot of problems in the way of economic development like inflation, deflation, low investment and saving etc. All these problems are possible to remove through creation and distribution of money by Muslim commercial bank. So, fluctuation in the supply of money can attain the economic development.
The Muslim commercial bank is providing a lot of valuable services for the economic development. Some of the most important services provided by Muslim commercial bank are as under: Due to use of credit instruments like cheques, drafts and bills of exchange, banks have reduced the use of currency at the cheapest costs and in the safest manner.
31
2nd Assignment
Banks serve as business and commercial agents of their customers. Banks provide locker facility. Banks accept the various utility bills. They guide the investors while making investment decisions. Banks advance loans for education in foreign countries.
Modern Facilities:
MCB customers in 14 cities. ATM & Online facilities & Balance ready cash etc.
Mobile Banking and Call Centers, Smart Card and Debit Card.
SWOT analysis
The acronym SWOT stands for a firm is internal Strengths and Weaknesses and its external Opportunities and Threats. The purpose of such analysis is to build on companys strengths in
32
2nd Assignment
order to exploit opportunities and counter threats and to correct companys weaknesses. SWOT analysis is based on the assumption that if managers carefully review such strengths, weaknesses, opportunities, and threats, a useful strategy for ensuring organizational success will become evident. Strengths and weaknesses typically relate to the internal
environment of an organization, whereas opportunities and threats are brought about by the external environment of an organization. In the following section both internal and external analyses of MCB are outlined:
Strength:
Strength can be defined as an area where a company is best at doing something or a feature that puts the company at an advantage in comparison to its competitors. MCB enjoys the following strengths: MCB is a well established bank enjoying long history of over 55 years of experience and profitable operation. MCB is the largest private bank in Pakistan and third largest bank among all banks. It has the largest branch network among private banks of Pakistan. MCB is the market leader in introduction of e-banking and it has the largest ATM network in the country.
33
2nd Assignment
MCB has the ability to bring innovative products and services like personalized service, electronic funds transfer, sophisticated financial products such as electronic banking, auto-teller machines and evening banking. Excellent branches appearance gives an edge to MCB over other banks. The branches are well furnished even in less developed areas where other banks branches give a poor view.
Weakness:
A weakness is defined as an area in an organization where the organization is not as good at doing something as its competitors or a thing which an organization lacks thus putting the organization at disadvantage in comparison to its competitors. Based on the above definition, MCB has the following weaknesses. Though MCB is third largest bank in Pakistan, yet the fact remains that it is not market leader as HBL and NBP. The overseas branch network of MCB is limited. It has only four overseas branches, branches three whereas subsidiaries, HBL two has twenty overseas and one affiliates,
representative office. Similarly NBP has fifteen overseas branches, one subsidiary, and four representative offices. Employees at branch level are not properly motivated to work by heart. They take the all routine activities as a boring job. Most of the employees lack managerial training as they are not properly educated. Due to seniority, they have moved up on the hierarchy line to Grade-I, II or III positions having hardly bachelor degrees. This type of senior staff cannot apply the
34
2nd Assignment
Opportunities:
An opportunity can be defined as a change in external environment which if properly exploited with the organizational strengths will result in enhanced sales market share or income. Using its strengths MCB can avail the following opportunities. It can introduce debit card system or may convert the existing ATM cards into a complete debit card. New products like personal loans mortgage and auto leasing and each management which diversify credit risk and add to revenue generating products are currently provided in big cities like Lahore, Islamabad, Karachi and Rawalpindi, these products may be tested for success in other areas like Peshawar, Quetta and Sargodha.
Developing network for electronic transaction require huge
investment which cant be made all at once, there exists an opportunity for MCB to enter into agreement with other banks to use each others ATMs which will result in an increased convenience to MCB customers and customers of other banks. As all around the world remittances of money are strictly monitored so as the money remitted may not fall in hands of so called terrorists for that all conventional money laundering through Hundies have been stopped there is an opportunity for MCB to extend its branch network to various countries
35
2nd Assignment
Threats:
Threat can define as a change in external environment which if not met with proper strategies will result in loss of revenues market share or income. In the context of MCBs external environment the following potential threats exist: Change in interest rate from SBP. The frequent reduction on 6-month and 12-month Treasury Bills discount rates by SBP may create pressure on the banks profitability. The low discount rates are also negatively influencing the advances rates which may affect the banks profits from the other side.
36
2nd Assignment
Recommendation
First of all, the management needs to overlook the major problems that the organization is currently facing and then develop strategies to solve them. Some of the suggestions that I would like to give at the end are:
MCB does not offer any chances of chances of social gathering
for staff. There should be some informal meeting arrangements to restore the atmosphere of mutual trust and confidence and to give them respect. Job rotation for employees. MCB is not currently giving owner ship to employees. It should give certain percentage of shares to employees to develop a feeling of belonging in them. When employees own the on. They own its strengths and weal nesses also. So they readily start working for its progress.
In
Employees should not be considered on Robots. They have brains of their own. They should be thought to use the brains on well on hand. Because they won the night people who are as possible for operations and can give best suggestion.
37
Role of Commercial Banks in Developing the Economy of Pakistan MCB has not built any connection with its customers. For
2nd Assignment
knowing their suggestions about you services. There should be a proper channel for them.
Conclusion
I have concluded that.
A bank is a financial institution and a financial intermediary
that accepts deposits and channels those deposits into lending activities, either directly or through capital markets The word bank was borrowed in Middle English from Middle French banque, from Old Italian banca, from Old High German banc, bank "bench, counter".
A commercial
financial institution and intermediary. It is a bank that provides transactional, savings, and money market accounts and that accepts time deposits. Commercial Bank is a back bone for any country. They play important role in the development of that country. Commercial banks perform a lot of function and provide many services for their customers.
38
2nd Assignment
MCB is one of the largest banks of Pakistan, founded in 1947. It is supported by a strong Mian Mansha group. Muslim commercial Bank is playing an important role in the developing economy of Pakistan. But there are still some weaknesses in its system that can be taking some strong Steps.
Reference
Project report Role of Commercial Banks in developing the Economy of Pakistan www.slideshare.com http://www.mcb.com.pk/ http://www.mcb.com.pk//whyMCB.php http://en.wikipedia.org/wiki/MCB_Pakistan
39
2nd Assignment
http://www.scribd.com/doc/24651033/HR-REPORT-culturalcompatible-practices-inMCB
40