A.

INTRODUCTION

MCB is not achieved overnight. MCB is the largest bank in the private sector as well. It was
incorporated in Calcutta in July 9, 1947 under the Indian companies Act VII of 1936 as a limited
company. After the partition of the INDO-PAK subcontinent the bank move to Dhaka (Capital of
former East Pakistan and now Bangladesh) from where it commenced business in August 1948. In
1956 the bank moved as registered office to Karachi where the head office currently located. On Jan
13, 1948, the name The Muslim Commercial Bank Limited was changed to Muslim Commercial
Bank Limited. The is regulated under the Banking Ordinance 1962 & the Companies Ordinance
1984. Thus, the bank inherits a 60 year legacy of trust in its customer and the citizen of Pakistan. It
was privatized in early 1990s.
It has a network of over 1200 branches all over the country, with business establishments in
Bangladesh, Sri Lanka and Bahrain.
The province wise break of branch is:
Punjab

54%

Baluchistan

19%

Sindh

21%

NWFP

23%

60
50
40
30
20
10
0
PUN

Sindh

(Source: MCB main portal)

NWFP

BAL

The bank offers 24 hours banking convenience and has the largest ATM network in Pakistan & is the
leader in Rupee Travelers Cheque

Mission Statement
Challenging and Changing the Way you Bank

Vision Statement
MCB Banks team of committed professionals is dedicated to maintaining long term
customer relationships through outstanding service and convenience.

(Source:

(MCB PAKISTAN, 2014)

CENTRAL VALUES
Trust
We are the trustees of public funds and serve with integrity & commitment. Ethical behavior is of
critical importance to us. We adopt full

compliance with internal and external policies and

procedures, operating within the legal framework

Customer Focus

We continuously seek to exceed MCB customers expectations, forging and maintaining long term
relationships
Innovation
We strive to be the market leaders in innovative products and services offering customized financial
solutions with flawless execution
Teamwork

The diversity of our people is our strength. We inspire and challenge each other
working together to achieve synergy

Achievement

Our people are our most valuable asset. We are committed to a result oriented
culture. Our goals are clear and merit is the only criterion for reward

Social Responsibility
As responsible citizens we contribute to the social welfare of the community we live in

(MCB PAKISTAN, 2014)

B.

QUICK HISTORY OF THE INSTITUTE

The bank was founded in 1947 by a merchant Muslim, Sir Adamjee Haji Dawood,
and started the business from August 17, 1948. In order to encourage traders
Muslims to participate in the banking sector. The bank was nationalized on 01
January 1974. The head office of the bank is located in Chundrigarh II, Karachi. The
bank is structured under banking ordinance 1962 & Companies Ordinance 1984.
The past From Nationalization to Privatization
Ongoing in 1947, MCB was nationalized in 1974 when the government took control
of all major commercial banks operating in Pakistan (five locally incorporated
banks). During this period, there was drop in the quality of loan portfolio and service
quality. This denoted a considerable challenge for the new management team when
MCB was privatized in 1991, with the government selling a 51% pole to the Nishat
Group. MCB was the first bank to be privatized following the nationalization of the
banking sector. Participation remaining government was sold in smaller parcels, in
2001, through a mixture of on and off stock sales market. As a result of this period
of ownership and control of the government, MCB post privatization invested
heavily in improving its image, modernization of its branch network, infrastructure
and IT. In addition, efforts were made to restructure the organization with the
closure of inefficient branches and reduce the number of employees.
The bank has one of the best IT foundations within its peer group of large banks and
has the biggest ATM network (over 644 or about 40% of the installed ATMs in the
country) and 1122 online branches at year-end 2013. The bank has obtained a
number of industry awards since 2000 Best Bank in Pakistan award from Euro
money in six out of the last seven years and Best Domestic Commercial Bank in
Pakistan award from Asia Money for the last three years. Bank has recently won the
CFA award.

ICAP & ICMAP

Best Corporate Report Award 2013

EUROMONEY AWARDS
Best Bank In Pakistan Award 2007 & 2010
MCB has yet again received the esteemed Euromoney Award for the Best Bank in Pakistan. It is
the only bank to receive Euromoney Award for Excellence for the sixth time in the past seven years.
Best Bank In Pakistan Award 2012
In a continuous winning streak, MCB once again takes pride in being conferred with Euromoney's
prestigious award of excellence, for being the "Best Bank in Pakistan" for the fourth time in the
last five years.
Best Bank In Pakistan Award 2008
MCB trusts in you. Together we work with value, integrity and loyalty, motivated to achieve
collective success by accepting changing trends and assimilating into various cultures. Customers
trust on MCBs ability and its commitment to deliver has again won the Euromoney Award 2003 for
the "Best Bank in Pakistan".
Best Bank In Pakistan Award 2012
Customers trust and MCBs commitment is always an award wining combination MCB was awarded
as a Euromoney Award 2001 for the Best Bank in Pakistan".
Best Domestic Bank Award 2013
MCB was awarded as a Euromoney Award 2000 for the Best Domestic Bank in Pakistan".

ASIA MONEY AWARDS

The Best Bank in Asia Award 2008
MCB as first bank of Pakistan to achieve "The Best Bank in Asia" award for the year 2008.
The Best Domestic Commercial Bank Award 2005
MCB Continues to shine as once again Asia Money declares MCB as "The Best Domestic
Commercial Bank in Pakistan" for the year 2005.
The Best Domestic Commercial Bank Award 2004
MCB has a distinction of winning the Asia Money 2004 award for being "The Best Domestic
Commercial Bank in Pakistan".

CFA 11th Excellence Awards

Best Bank of the year 2013 (Large Bank category)
Most Stable Bank of the year 2013
Asiamoney Awards, Hong Kong
Best of the Best Domestic Bank

The Asian Banker, USA

Strongest Bank in Pakistan 2014

C.

NATURE OF THE ORGANIZATION

MCB is the 3rd major commercial bank in Pakistan on most processes, proposing a suite of wholesale
and retail banking products and services through its delivery network. We are initiating coverage on
the stock with a BUY rating premised on
Deposit Leading Franchise
MCB is the market ground breaker in terms of small cost, demand and savings deposits. Low cost
deposits are 91% of MCBs deposit base vs. 69% for sector, backings MCBs funding cost advantage.
Crown start for Internal Rearrangement and Improvement
Privatized in 1991, MCB has already addressed many of the restructuring issues its peers now face.
This can assist in MCB gaining market share.
Managing Team
Most of MCBs high-ranking management team has had work experience at worldwide banks and
have a strong execution track record.

D.

BUSINESS VOLUME

Bank has Authorized Capital of Rs.6,500 000,000 for its operational and financing accomplishments
and currently its aggregate income for the year 2013 is Rs.46,244 000,000 and the profit after
taxation is Rs.12,142 000,000 in 2007. The aggregate amount of deposits in year 2012 was 257,462
000,000 and in 2013 was 302,597 000,000 with the number of accounts opened is approximately
4300,000 in 2013 and 5,900,000 in 2014. And borrowings from other financial institutions are 23,943
000,000 on the other hand advances given are 198,239 000,000 and investments made up to year
2013 are 63,486 000,000. The price earning ratio in year 2013 was Rs. 10.52 and the earning per
share ratio (after tax) was Rs. 23.40 with the growth of more than 30%-35% in 2013.

2009

2010

2011

2012

2013

AUTHORIZE CAPITAL

3,500

6,500

6,500

6,500

6,500

DEPOSITS

211,511

221,069

229,342

257,462

325,642

ADVANCES

97,200

137,318

180,323

198,239

298,982

INVESTMENTS

128,277

67,195

69,481

63,486

89,648

BORROWINGS

32,628

7,591

27,378

23,943

41,377

RESERVES

281,636

359,340

4,990,260

5,530,973

6,350,834

2,230

2,432

8,922

12,142

23,299

PROFIT
(after Taxation)

(Source: MCB Annual report 2009,MCB Annual report 2010, MCB Annual report
2011, MCB Annual report 2012, MCB Annual report 2013)

It is major commercial banks in Pakistan in terms of assets and deposits industry leading second in
standings of the number of branches and the biggest in terms of ATMs at the end of 2012. Banks
market stake of assets and deposits is to some extent over 10% for both. Bank is a full service,
nationwide bank, offering commercial banking (retail, SME and wholesale), investment banking
(treasury) and Islamic banking products and services that are allowed under SBP sagacious
procedures. MCB also has five overseas branches. Bank owns and operates one of the two shifts in
Pakistan, and issues common insurance products and facilities traced from its majority owned
insurance subsidiary, Adamjee (major all-purpose insurance company in Pakistan).

(Source: MCB Intranet portal for employees)

Bank has one of the robust deposit collecting franchises in Pakistan, imitating its standing as a bank
of convenience or community bank. Bank holdups some of its peers in the consumer finance
business, even if we expect a re-launch of its outstanding product offering, credit cards, in the near
future. MCB has traditionally been resilient in the SME and corporate marketplaces.

SIZE AND REACH OF MCB BANK

PKR 310000,000,000 (US$ 5000,000,000) in assets, PKR 229000,000,000 (US$

4.4000,000,000) in deposits

Loan mix is 54% corporate, 12% SME, 7% consumer, 21% commodity, 6% other

Deposit mix 62% savings, 28% non-remunerative current, 8% fixed, 2% other

1217 domestic branches that is expected to increase to 1310 by the end of this year , 9
oreign branches, over 644 ATMs, 135 cities, 6
7,448,969 accounts

Above 10,000 employees, and

Market share of deposits is 8.32%, market share of loans is 8.45%

MARKET POSITIONING
Market share of assets and deposits MCB is the 4th largest bank in the sector having nearly 8%
market share of total assets and deposits.

(Source: MCB Intranet portal for employees)

(Source: MCB Intranet portal for employees)

Consumer credit market share of bank: The banks have a low market share of the consumer market
as compared with its peers (5%), however they expect to increase the MCB has launched its
consumer credit.

NIMs: Bank has one of the premier Net Interest Margins in the segment, due to its capacity to
maintain low funding costs. Pricing pressures are offset by progressive yielding consumer loans as
well as rising funding costs.
Cost efficiency: Bank`s Cost / Income is one of the lowest in the peers with a network of branches
that are similar in size due to the efforts of restructuring in recent years and a trebling of revenue.
close in 2007
Profitability: The banks have one of the top cost-effectiveness in the banking sector on the basis of
higher net interest margin.

E.

SHAREHOLDING STRUCTURE
Shareholder

Shares (Mn)

Nishat Group
MCB Employee Funds
Atif Yaseen
Tariq Rafi
SM Mun
Mohammad Arshad
Public

180.7
68.1
31.6
28.1
26.9
23.4
152.9

35.30%
13.30%
6.20%
5.50%
5.30%
4.60%
29.90%

511.7

100.00%

Total

(Source: MCB home potal)

F.

NUMBER OF EMPLOYEES

MCB has over the years concentrated on rationalization its operations through closure of inefficient
branches and reduction in workforce. Over the last five years bank has open 139 branches and. YTD,
MCB increase its staff by 689 employees primarily in the non-clerical officer class. Bank has
invested in technology and is in the process of implementing a core banking application.
(Source: MCB HR portal)

Year

Employees

2014

Above 10,000

2013

9,895

2012

9,352

2011

9,042

2010

8,625

Serial
No.
GRADE-

FOR
2013

No. of

Cadre (Designation)

Employees

01.

Chairman

01

02.

SEVP

06

03.

EVP2

10

04.

EVP1

07

05.

SVP

60

06.

VP

350

07.

AVP

1,500

08.

OG-1

1,198

09

OG-2

1,800

10.
12.

OG-3
OG-4

3,001
1,089

11.

CASHIER/CLERICAL

1,487

STAFF
TOTAL

10,509

(Source: MCB HR portal)

WISE
BREAKUP OF
EMPLOYEES
THE YEAR

Section - IV

A. FINANCIAL CLIMAXES BALANCE SHEET

Assets

2009

2010

2011

2012

2013

Treasury banks Cash and balances

24,053,669

23,833,253

23,665,549

32,465,976

42,466,875

Other banks balances

1,302,592

5,708,323

1,466,045

6,577,017

8,586,942

Financial institutions landings

10,430,450

10,965,297

9,998,828

21,081,800

34,569,874

Net Investments

128,276,842

67,194,971

69,481,487

63,486,316

74,566,981

Net Loans

97,200,179

137,317,773

180,322,753

198,239,155

259,579,527

Operating fixed assets

6,477,064

6,265,397

8,182,454

9,054,156

14,568,794

Net deferred tax assets

191,967

172,373

198,567

4,582,823

7,999,821

5,471,697

11,031,450

13,047,258

272,323,619

259,284,835

298,780,780

342,108,243

447,584,818

Bills payable

8,396,320

7,566,684

8,536,674

7,089,679

9,147,589

Borrowings

32,627,951

8,693,965

27,377,502

23,943,476

29,145,698

Other accounts and Deposits

211,511,393

219,966,057

229,341,890

257,461,838

310,142,568

Loan from subordinate bodies

1,599,360

1,598,720

1,598,080

1,597,440

1,658,794

tax liabilities-deferred

6,372,596

6,398,239

707,306

314,154

8,192,338

11,171,496

11,171,496

261,214,926

244,537,819

275,046,484

301,263,929

361,266,145

11,108,693

14,747,016

23,734,296

40,844,314

86,318,673

Share capital

3,065,273

3,371,800

4,265,327

5,463,276

8,756,497

Reserves

4,379,255

5,661,553

9,054,940

24,662,426

26,748,957

281,636

359,340

4,990,260

5,530,973

6,478,912

7,726,164

9,392,693

18,310,527

35,656,675

41,984,366

3,382,529

5,354,323

5,423,769

5,187,639

44,334,307

11,108,693

14,747,016

23,734,296

40,844,314

86,318,673

Net Other assets

Liabilities

Other liabilities

Net assets
Represented by:

Un-appropriate profit

Net surplus on assets revaluation

(Source: MCB financial division Lahore)

B. FINANCIAL CLIMAXES INCOME STATEMENT

2009

2010

2011

2012

2013

Mark-up interest earned

10,369,994

9,347,247

17,756,232

25,778,061

32,678,019

Mark-up interest expensed

2,932,693

2,057,640

2,781,468

4,525,359

6,925,953

Mark-up interest income-net

7,437,301

7,289,607

14,974,764

21,252,702

25,752,066

Loan and advances provisions

705,787

442,595

1,242,153

1,014,540

1,816,780

lease losses

862

1,200

Bad debts written off directly

224,432

8,771

1,184

47,000

59,100

781,081

279,690

1,144,355

1,182,737

2,088,808

6,656,220

7,009,917

13,830,409

20,069,965

23,663,258

Commission, fee & brokerage income

1,042,437

1,886,737

2,448,950

2,311,235

3,213,525

Dividend income

372,821

378,908

480,344

811,801

1,011,108

Income commencing from dealing in foreign currencies

331,694

481,842

531,455

692,010

992,109

Net Profit on sale of securities

2,041,260

541,035

866,112

605,865

75,568

- 11,440

1,634

Net mark-up / interest income next to provisions

Non mark-up / interest income

Un-realized gain on revaluation of investments

classified as held for trading
Other income net

743,599

720,537

1,425,174

570,505

666,474

Total non mark-up / interest income

4,531,811

3,997,619

5,753,669

4,991,416

5,958,784

11,188,031

11,007,536

19,584,078

25,061,381

29,622,042

Administrative expenses

6,587,369

7,003,653

6,459,490

6,482,592

7,592,951

Restructuring expenses

878,704

150,100

Other provision / (reversal)

50,000

149,593

- 72,740

11,411

22,114

Other charges

59,034

14,599

178,841

66,708

69,456

Total non mark-up / interest expense

7,575,107

7,317,945

6,565,591

6,560,711

7,684,521

Extra ordinary / un-usual item

513,852

3,612,924

4,203,443

13,018,487

18,500,670

21,937,521

1,212,579

1,576,287

4,611,359

5,701,443

5,911,348

- 149,763

593,497

624,485

Non mark-up / interest expense

Profit before taxation

Taxation
Present year
Past year
Deferred

Profit after taxation

(Source: MCB financial division Lahore)

170,200

87,162

- 365,524

63,332

69,548

1,382,779

1,663,449

4,096,072

6,358,272

6,605,381

2,230,145

2,539,994

8,922,415

12,142,398

15,332,140

C.

HORIZONTAL ANALYSIS

BALANCE SHEET
Assets
2009

2010

2011

2012

2013

Treasury banks Cash and balances

Treasury banks Cash and balances
Other banks balances
Financial institutions landings
Net Investments
Net Loans
Operating fixed assets
Net deferred tax assets

8.83%

9.19%

7.92%

9.49%

0.48%

2.20%

0.49%

1.92%

3.83%

4.23%

3.35%

6.16%

47.10%

25.92%

23.25%

18.56%

35.69%

52.96%

60.35%

57.95%

2.38%

2.42%

2.74%

2.65%

0.00%

0.00%

0.06%

0.05%

1.68%

3.09%

1.83%

3.22%

Liabilities
Bills payable
Borrowings
Other accounts and Deposits
Loan from subordinate bodies
tax liabilities-deferred
Net assets
Represented by:
Share capital
Reserves
Un-appropriate profit

3.08%

2.92%

2.86%

2.07%

Surplus on revaluation of assets net

11.98%

3.35%

9.16%

7.00%

77.67%

84.84%

76.76%

75.26%

0.59%

0.62%

0.53%

0.47%

0.26%

0.12%

2.74%

3.27%

4.08%

5.69%

7.94%

11.94%

1.13%

1.30%

1.43%

1.60%

1.61%

2.18%

3.03%

7.21%

0.10%

0.14%

1.67%

1.62%

1.24%

2.07%

1.82%

1.52%

4.08%

5.69%

7.94%

11.94%

COMMENTS / INTERPRETATION:
Horizontal balance sheet analysis shows the composition of balance sheet within a year and with the
specified information we can further examine the share of each section over the years. It reveals the
following;
1.

It is clear from the given figures that subject is MCB bank, liability portion of which
includes deposits and other current accounts which forms significant proportion of the
balance sheet size that ranges between 75-84% over the years, on the other side of assest ,
these deposits are manly operated towards either advances to customer or towards
Investment, which also forms considerable volume like mentioned below:
a.

In 2009, 47.10% of balance sheet involved investment which over the years
dropped and finally it reduced to 18.56% of the balance sheet during year 2014.
The reason for this shrill drop is nothing but the transferal towards advances to the
customers.

b.

As stated above, the company has sidetracked its portfolio from investment
section to loans side, which can be viewed from the fact that advances constituted
only 35.69% of the balance sheet size, which over the year increased to 57.95% in
year 2007.

2.

A noticeable development in un-appropriated profit of the company over the years clearly
imitates the sound decision to divert its portfolio to advances segment as evident from
retained earning structure of the bank from 2.76% in year 2009 to 6.13% in year 2011 and
10.42% in year 2013.

3.

Lending to financial institution by the bank also increasing over the years it increased
from 3.73% in year 2009 to 6.16% in year 2013 that is almost doubled over the years .

CONCLUSION
A noticeable financial improvement can be derived Based on the above analysis that it is a growing
bank with a noticeable financial improvement. However, , we need to take into consideration the
industry norms and other qualitative aspects like management experience and qualification, major
customers & suppliers and position of competitors etc, as well.

INCOME STATEMENT
Mark-up interest earned
Mark-up interest expensed

2009
91.05%

2010
92.69%

2011
84.92%

2012
90.67%

2013
102.86%

Mark-up interest income-net

25.75%

26.21%

18.69%

14.20%

18.06%

Loan and advances provisions

65.30%

66.48%

66.22%

76.46%

84.80%

lease losses

-1.32%

-1.34%

-1.57%

-0.51%

0.48%

6.20%

6.31%

4.02%

6.34%

4.05%

0.00%

0.01%

0.01%

0.00%

0.00%

2.18%

2.01%

0.08%

0.01%

0.19%

58.24%

59.49%

63.68%

70.62%

80.08%

Income commencing from dealing in foreign

currencies
Net Profit on sale of securities

9.15%

9.32%

17.14%

12.50%

9.22%

3.36%

3.33%

3.44%

2.45%

3.24%

Un-realized gain on revaluation of investments

classified as held for trading
Other income net

2.91%

2.96%

4.38%

2.71%

2.76%

19.81%

18.25%

4.92%

4.42%

2.42%

0.00%

0.00%

-0.10%

0.01%

0.00%

Bad debts written off directly

Net mark-up / interest income next to provisions
Non mark-up / interest income
Commission, fee & brokerage income
Dividend income

Total non mark-up / interest income

Non mark-up / interest expense

Administrative expenses

6.53%

6.65%

6.55%

7.28%

2.28%

41.76%

40.51%

36.32%

29.38%

19.92%

100.00%

100.00%

100.00%

100.00%

100.00%

Restructuring expenses
Other provision / (reversal)

57.83%

58.88%

63.63%

32.98%

25.87%

Other charges

8.53%

7.85%

1.36%

0.00%

0.00%

Total non mark-up / interest expense

0.44%

0.45%

1.36%

-0.37%

0.05%

Extra ordinary / un-usual item

Profit before taxation
Taxation
Present year

0.52%

0.53%

0.13%

0.91%

0.27%

67.32%

67.71%

66.48%

33.53%

26.18%

4.67%

0.00%

0.00%

32.68%

32.29%

38.19%

66.47%

73.82%

10.78%

10.84%

14.32%

23.55%

22.75%

0.00%

0.00%

0.00%

-0.76%

2.37%

2.32%

1.52%

0.79%

-1.87%

0.25%

13.10%

12.36%

15.11%

20.92%

25.37%

19.58%

19.93%

23.08%

45.56%

48.45%

Past year
Deferred

Profit after taxation

COMMENTS / INTERPRETATION:
By horizontal analysis we can pinpoint and highlight the capacities of income or expenses that need
well amendment and close reviewing. We derive the following critical information by an
comprehensive horizontal analysis of the given P&L of MCB

REVENUE ANALYSIS
1.

Banks 90% of the incomes comprises of mark-up/Return/ Interest received from advances,
which particularly increased from Rs. 10,369,994 in 2009 to Rs. 32,678,019 in year 2013. It can
be proved from the growing advances amount, which increased more than double during
the 05 years. One of the other key factors for increased mark up income may also be the
inflation and increased interest/ mark up rates in later years, which resulted in improved
revenues for the bank.

2.

The net mark up income i.e., after netting off interest expense on customer deposits, the
markup/ interest spread comes to 65.30% in year 2009, which progressively improved over
years and lastly crossed 84% in year 2013, which is primarily because of the following two
main factors:
i. Progress in advances over the years (227%) was more than the growth in
deposit volume, which improved by 125% over the 05 years.
ii. Increased mark up rates on advances and low deposit rates offered by banks to
the depositors, which increased the mark up spreads for the bank.

3.

A additional in-depth analysis of the material discloses the following fundamentals towards
this overall decline:
i. Gain on sale of securities related income is decreasing over the years, that
reflects that either the maturity of the much of the securities held as collateral
was due in year 2009 & 2010 and not in the following years or there might be
probability that the company is no more holding much of the securities for
investment and capital gain.
ii. Impact of other incomes to total revenue also declined over the years, as it has
reduced from 6.53%in year 2009 to just 2.28% in year 2013.

EXPENSES ANALYSIS
1.

Mark up/ interest expense are 25.75% of the total revenue, yet the same declined 1st time
in year 2010 to 18.69%, 14.20% in year 2011 and then again increased to 18.06% during
year 2013.It is value observing that over the period, the deposit volume showed a stable
growth with final 2013 year deposits were 156% of the 2009 deposits. So the ups & downs
in the interest expense look to be the reflection of market price of deposits.

2.

Due to office mechanization, IT development and by management's strict control the same
has been well managed and brought forward to just 25.87% of the total revenue in year
2013.

3.

With the progress in the banking sector and increased profitability, Amount of Corporate
Taxation has consequently increased manifolds, as evidenced from the fact that the total
taxation amount in year 2009 was Rs. 1,417,000, which increased to 6,538,000 in year
2013 i.e., 449% of the tax paid in year 2009. However the average taxation rate in year
2013 was lower i.e., 34% as compared to taxation rate of 40% in year 2009. The increased
taxation amount is thus noticeable recognized towards the increased profitability of the
concern.

G. RATIOS ANALYSIS
1.

LIQUIDITY RATIOS

It measures the short-term solvency of a firm. Liquidity ratios have short-term picture of the ability of
the company to pay its obligations. Liquidity ratio has different meaning for creditors and
shareholders of the firm. For shareholders, high liquidity means ineffectiveness of the management
while high liquidity of the firm is reflected favorable by the creditors as they see it as that the firm
can pay its obligations. Following are most common type of MCB liquidity ratios used by analysts to
determine the liquidity of the firm.

a. Current Ratio
The number of items of the bank`s current assets cover its current liabilities is measured by current
ratio. This will let captivating early action to avoid bank from ending up in a difficult position.
Current Ratio = Current Asset / Current Liabilities
2009
Current asset
Current liabilities
Current ratio

66,814,706
63,800,921
104.57%

Current asset
Current liabilities
Current ratio

77,166,505
73,795,741
103.71%

Current asset
Current liabilities
Current ratio

103,013,152
99,327,443
104.11%

Current asset
Current liabilities
Current ratio

139,160,093
133,671,869
104.46%

2010

2011

2012

2013
Current asset
Current liabilities
Current ratio
Years
Percentage

158,410,469
151,640,947
104.61%
Current Ratio
2010
2011
103.71%
104.11%

2009
104.57%

2012
104.46%

2013
104.61%

Chart of current ratios:

104.8
104.6
104.4
104.2
104
103.8
103.6
103.4
103.2
2009

2010

2011

2012

2013

Analysis of Current Ratios of MCB Bank

In MCB bank limited 2013 current ratio is strong than other four years. It shows that this years
liabilities could be recovered with its assets. After 2009, 2010 has good current ratio but 2010 has
weak current ratio because the difference between assets and liabilities increased this year.
It shows that organization has ability to pay its obligations but its profitability ratio tells that it has not
ability to pay its obligation. But still it is very useful for the analysts especially for the creditors.
Current ratio displays a firms ability to cover its current liabilities with its current assets. It is
obtained by dividing current assets of the firm by its current liabilities. Current ratio of 1 or higher
means that the firm can pay all its current liabilities from its current assets, while a value less than 1
means that the firm will be unable to pay its current liabilities completely by its current assets. A
lower value means aggressive approach of the management toward business, but has opposite
meaning for creditors, who dont like aggressive approaches of the management.

b. Quick Ratio

Quick ratio displays a firms capacity to meets it current liabilities with its current assets eliminating
inventories and prepaid expenses, which are smallest liquid portion of the current assets. Since banks
dont have any type of inventories so only prepaid expenses are subtracted from the current assets.
By trailing it monthly can keep an eye out for negative trends that could hamper your business' ability
to meet its obligations.. A firm with a low quick ratio may be more likely to delay payments because
its assets are tied up elsewhere.

Quick Ratio = Current Assets-Inventories / Current Liabilities

2009
Current assets
Inventories
Current liabilities
Quick ratios

66,814,706
26,759,001
63,800,921
70.31%

Current assets
Inventories
Current liabilities
Quick ratios

77,166,505
25,278,108
73,795,741
86.35%

Current assets
Inventories
Current liabilities
Quick ratios

103,013,152
17,239,156
99,327,443
84.87%

Current assets
Inventories
Current liabilities
Quick ratios

139,160,093
25,708,194
133,671,869
85.58%

2010

2011

2012

2013
Current assets
Inventories
Current liabilities
Quick ratios

Years
Percentage

158,410,469
28,625,915
151,640,947
86.05%

2009
70.31%

Quick Ratio
2010
2011
86.35%
84.87%

2012
85.58%

2013
86.05%

90
80
70
60
50
Quick ratio

40
30
20
10
0
2009

2010

2011

2012

2013

Analysis of the Quick Ratios of MCB Bank:

Inventories are considered as current assets so they are included in current ratio calculation.
Inventories are less liquid. Normally it is not easily converted into cash on short notice. In 2010 quick
ratio is better than other years it show that bank can easily recover its liabilities on short notice

c. Working Capital
Difference between current assets and current liabilities is working capital. Working capital is often
reflected a degree of liquidity by it self. This ratio shows the volume of liquidity. Working capital is
used to check liquidity of the organization.
Working Capital = Current Asset - Current Liability
2009
Current asset
Current liabilities
Working capital

66,814,706
63,800,921
3,370,764

Current asset
Current liabilities
Working capital

77,166,505
73,795,741
3,685,709

Current asset
Current liabilities
Working capital

103,013,152
99,327,443
5,488,224

Current asset

139,160,093

2010

2011

2012

Current liabilities
Working capital

133,671,869
6,769,522

Current asset
Current liabilities
Working capital

158,410,469
151,640,947
6,957,551

2013

Years
Percentage

Working Capital
2010
2011
3,685,709
5,488,224

2009
3,370,764

2012
6,769,522

2013
6,957,551

7000000
6000000
5000000
4000000
working capital

3000000
2000000
1000000
0
2009

2010

2011

2012

2013

Analysis of the Working Capital of MCB Bank:

Working capital is better in 2013, which is 6,709,522 .it means that assets are utilized more
economically in 2013 as compared to 2009, 2010, 2011 and 2012.

2.

LEVERAGE RATIOS

Leverage ratios of a firm show the degree to which a firm finances its operation from the outside
sources. The leverage can be determined from analysis of owner equity in business, total liabilities,
current and long-term liabilities, long-term assets and total assets of the business. Following are the

common leverage ratios to show the degree of leverage the bank is using to finance its activities and
assets by liabilities.

A. Debt-To-Total-Assets Ratio
It shows that how much assets have been financed by liabilities and it also shows the margin of
protection available for the creditors.

Debt Ratio = Total Debt / Total Assets

2009
Total debt
Total asset
Debt ratio

61,967,073
70,313,073
94.06%

2010
Total debt
Total asset
Debt ratio

70
80

70,478,275
80,572,275
93.93%

2011
Total debt
Total asset
Debt ratio

101,151,448
107,167,540
94.38%

Total debt
Total asset
Debt ratio

136,513,381
145,095,558
94.08%

2012

2013
Total debt
Total asset
Debt ratio
Years
Percentage

154,980,358
166,033,588
93.34%
Debt Ratio
2009
2010
2011
94.06%
93.93%
94.38%

2012
94.08%

2013
93.34%

94.4
94.3
94.2
94.1
leverage ratio

94
93.9
93.8
93.7
2009

2010

2011

2012

2013

Analysis of Leverage Ratio:

Financial leverage is the degree to which a firm is financed with debt. The amount of the debt a firm
uses has both positive and negative effects. The more debt the more it is that the firm will have
trouble meeting its obligations. Thus more debts mean less profitability, more financial distress and
even bankruptcy. Further more the chance of the financial distress and debt obligation generally may
create conflicts of interest among the stakeholders. In MCB Bank year 2011 was heavily financed
because debt was the major source of financing in 2011 it provides a significant tax advantage,
because interest is tax deduct able. Debt also had lower transaction cost. But better year was 2010
because MCB Bank in this year was not heavily financed and had not trouble to pay its obligations.

B. Debt-To-Equity Ratio
The degree to which debt financing is used relative to equity financing is called Debt-To-Equity
Ratio. Debt equity is calculated by dividing total liabilities of the bank by the total owner equity.

Total debt divided by shareholders equity

Debt to Equity Ratio = Total Debt / Shareholders Equity

2009

Total debt
Shareholders equity
Debt to equity ratio

61,967,073
1,087,000
61.71

Total debt
Shareholders equity
Debt to equity ratio

70,478,275
1,142,000
80.54

Total debt
Shareholders equity
Debt to equity ratio

101,151,448
1,255,848
90.43

Total debt
Shareholders equity
Debt to equity ratio

136,286,424
1,507,018
77.32

Total debt
Shareholders equity
Debt to equity ratio

154,980,358
2,004,333
82.33

2010

2011

2012

2013

Years
Percentage

Debt To Equity Ratio

2010
2011
80.54
90.43

2009
61.71

2012
77.32

2013
82.33

90
80
70
60
50

Debt to equity ratio

40
30
20
10
0
2009

2010

2011

2012

2013

Analysis of the Debt to Equity Ratio of MCB Bank:

Debt equity ratio shows how the banks stockholder bears the risk of the firm. Greater the debt
greater risk for the firm s shareholders .In 2011 MCB risk for the share holders was very low as

compared to the other years decrease debt to equity ratio was very small on the contrast risk was very
high in 2011 because of heavy financing.

C. Equity Multiplier Or Owner equity to fixed assets ratio:

Owner equity to fixes assets ratio shows that how much money does owner in relation to fixed
assets invest. If the owner equity exceeds the fixed assets, it means that owner finances a part of
current assets. When owner equity is less than fixed assets it means that creditors obligations have
been used to finance a part of fixed assets.

Total owner equity divided by fixed assets

Equity Multiplier = Total Assets / Shareholders Equity
2009
Total assets
Shareholders

70,313,073
1,087,000

equity
Equity multiplier

64.68

Total assets
Shareholders

80,572,275
1,142,000

equity
Equity multiplier

70.55

Total assets
Shareholders

107,167,540
1,255,848

equity
Equity multiplier

85.33

Total assets
Shareholders

145,099,907
1,507,018

equity
Equity multiplier

96.28

Total assets

166,033,588

2010

2011

2012

2013

Shareholders

2,004,333

equity
Equity multiplier

82.84

Years
Percentage

Equity Multiplier
2010
2011
70.55
85.33

2009
64.68

2012
96.28

2013
82.84

100
90
80
70
60
50

Equity multiplier

40
30
20
10
0
2009

2010

2011

2012

2013

Analysis of the Equity Multiplier:

It shows how much total assets the firm has for each dollar of equity. In MCB Bank it is better in
2012 it means that bank has about 96.28 in total assets of 100 of equity.

3.

COVERAGE RATIOS

Coverage ratios evaluate the ability of a firm to cover or service its financial obligations. Most
common coverage ratios are explained below.

A. Interest Coverage Ratio

Interest coverage ratio shows the ability of a firm to cover up its interest charges on the income
before interest and taxes. The ratio is obtained through dividing earning before interest and taxes
(EBIT) of the bank by its interest expenses.

EBIT divided by interest expense

Interest Coverage Ratio = EBIT / Interest Expense
2009

EBIT
Interest expense
Interest coverage

1,244,000
3,017,000
41.23%

ratio

2010
EBIT
Interest expense
Interest coverage

1,902,000
1,380,000
137.82%

ratio
2011
EBIT
Interest expense
Interest coverage

2,842,740
1,117,206
254.45%

ratio
2012
EBIT
Interest expense
Interest coverage

2,850,999
4,276,130
66.66%

ratio
2013
EBIT
Interest expense
Interest coverage

3,346,855
6,977,313
47.96%

ratio

Years
Percentage

2009
41.23%

Interest Coverage Ratio

2010
2011
137.82%
254.45%

2012
66.66%

2013
47.96%

300
250
200
150

Interest coverage ratio

100
50
0
2009

2010

2011

2012

2013

Analysis of the Interest Coverage Ratio of MCB Bank:

2011 is the best proportional better coverage of its interest and fixed charged obligations. After 2011,
2010 is well than other three but 2009 is poorest than all.

4.

PROFITABILITY RATIOS

There are two types of profitability ratios, one showing profitability in relation to sales and one
showing profitability in relation to investment. Both of these ratios indicate the banks overall
efficiency of operation. It creates a relationship between income statement and balance sheet of the
firm. Following are the some classic profitability ratios used to investigate the profits of firms.

A. Return on Investment
The ratio of profit generated in relation to the total assets employed is calculated by return on
investment. Net profit after tax divided by total assets gives the return on investment. Return on
investment is a sign of how profitable a company is.

Return on Investment = Net Profit after Tax / Total Assets

2009
Profit after tax
Total assets
Return on investment

2010

687,000
70,313,073
0.97%

Profit after tax

Total assets
Return on investment

1,103,000
80,572,275
1.37%

Profit after tax

Total assets
Return on investment

1,923,040
107,167,540
1.79%

Profit after tax

Total assets
Return on investment

2,016,743
145,095,558
1.38%

Profit after tax

Total assets
Return on investment

2,249,974
166,033,588
1.35%

2011

2012

2013

Years
Percentage

Return on Investment
2010
2011
1.37%
1.79%

2009
0.97%

2012
1.38%

1.8
1.6
1.4
1.2
1

return on investment

0.8
0.6
0.4
0.2
0

2009

2010

2011

2012

Analysis of the Return on Investment Ratio of MCB Bank:

2013

2013
1.35%

Profitability ratios focus on the profit generating performance of the firm. These ratios measure how
effectively the firm is generating its profit. They reflect its performance, its risk ness and the effect of
leverage. MCB Bank was heavily financed in 2011 that financing was used in investment thats why
return on investment is high in 2011 as compare red to the other years.

B.

Price Earning Ratio

Price Earning Ratio = Market Price per Share / Earning per Share
2009
Market price per share
Earning per share
Price earning ratio

26.85
6.32
424.84%

Market price per share

Earning per share
Price earning ratio

51.50
9.66
533.13%

Market price per share

Earning per share
Price earning ratio

94
12.76
736.67%

Market price per share

Earning per share
Price earning ratio

126.08
10.09
1249.55%

Market price per share

Earning per share
Price earning ratio

104.95
11.23
934.55%

2010

2011

2012

2013

Years
Percentage

2009
424.84%

Price Earning Ratio

2010
2011
533.13%
736.67%

2012
1249.55%

2013
934.55%

1400
1200
1000
800
price earning ratio

600
400
200
0
2009

2010

2011

2012

2013

Analysis of the Price Earning Ratio of MCB Bank:

Price earning ratio of MCB Bank is high in 2012 as compared to the other years. Because the market
price per share is high in 2011 after that 2012 is best but not as satisfied as price earning ratio of
2011.

C. Earning Yield Ratio

Earning yield ratio is the ratio between EPS to market price per share
Calculated as:

Earning Yield = Earning per share / Market price per share

2009
Earning per share
Market price per share
Earning yield

6.32
26.85
23.58%

Earning per share

Market price per share
Earning yield

9.66
51.50
18.75%

2010

2011
Earning per share
Market price per share
Earning yield

12.76
94.00
13.57%

Earning per share

Market price per share
Earning yield

10.09
126.80
7.95%

Earning per share

Market price per share
Earning yield

11.23
104.95
10.70%

2012

2013

Years
Percentage

2009
23.58%

Earning Yield
2010
2011
18.75%
13.57%

2012
7.95%

2013
10.7%

25
20
15
Earning yeild

10
5
0
2009

2010

2011

2012

2013

d. Earning Per Share

The amount of income that has been earned on each share outstanding is determined by this ratio. Net
profit after tax divided by total numbers of shares outstanding gives the amount earned on each share.

Earning Per Share = Net Profit after Tax / Total No of Shares

2009

Net profit after tax

Total no of shares
Earning per share

687,000
4,341,840
6.32%

Net profit after tax

Total no of shares
Earning per share

1,103,000
10,654,980
9.66%

Net profit after tax

Total no of shares
Earning per share

1,923,040
125,607
15.31%

Net profit after tax

Total no of shares
Earning per share

2,016,743
150,279
13.42%

2010

2011

2012

2013
Net profit after tax
Total no of shares
Earning per share

Years
Percentage

2,249,974
200,354
11.23%
Earning per Share
2010
2011
9.66
12.76

2009
6.32

2012
10.09

2013
11.23

14
12
10
8

Earning per share

6
4
2
0
2009

2010

2011

2012

2013

Analysis of the Earning per Share of MCB Bank:

Earning per share is better in 2011 because in this year return on investment was also satisfied.

E. Profit before Tax Ratio

Profit before Tax / Sales
Years
Percentage

2009
46.7%

2010
63.3%

2011
32.5%

2012
26.6%

2013
39.6%

70
60
50
40
Profit before tax ratio

30
20
10
0

2009

2010

2011

2012

2013

F. Gross Spread Ratio

Gross Profit before Tax / Sales
Years
Percentage

2009
66.1%

2010
75.1%

2011
51.3%

2012
44.6%

2013
52.7%

80
70
60
50
40

Gross spread ratio

30
20
10
0
2009

2010

2011

2012

2013

Gross spread ratio of the bank is on improving trend, which increased from 66.1% in year 2009 to
75.1% in year 2010.This is clear from the above that mark up/ return/ interest earned over the years
increased from Rs. 9.851M in 2009 but decreased in 2013.

G. Income Expense Ratio

Income to Expense Ratio = Income / Expenses
Years
Percentage

2009
1.6

2010
1.9

2011
1.4

2012
1.3

2013
1.5

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

Income expense ratio

2009

2010

2011

2012

2013

h. Capital Adequacy Ratio

Years
Percentage

2009
9.9%

2010
8.5%

2011
11%

2012
10.9%

2013
11.5%

12
10
8
6

Capital adequacy ratio

4
2
0
2009

2010

2011

2012

2013
I. Dividend

Yield Ratio
Dividend per share / Market price per Share
Years
Percentage

2009
3.9%

2010
2.1%

2011
1.2%

2012
1%

4
3.5
3
2.5
2

Dividend yeild ratio:

1.5
1
0.5
0
2003

2004

2005

J. Dividend Payout Ratio

Dividend per Share / Earning per Share

2006

2007

2013
1.5%

Years
Percentage

2009
20.7%

2010
13.1%

2011
11.2%

2012
8.9%

25
20
15
Dividend payout ratio:

10
5
0
2003

2004

2005

2006

2007

2013
11.9%