Internship Report

;,, Muslim Commercial Bank Internship Report

Branch: MCB Bank Limited, General Bus Stand, Multan.

Written By:

 Student Name: Muhammad Muzammil Khalil

1. University of Education Multan

Page 1
Internship Report

Page 2
Internship Report

Page 3
Internship Report

PREFACE
In order to be able to cope with the changing environment it is necessary to have some practical
experience. As the students of Business Administration we have to pass through a series of various
managerial techniques. During this practical course we are provided with an opportunity to learn that
how the theoretical knowledge can be implemented in practical grounds.
1
I selected National Bank of Pakistan Gallah Mandi Branch Chichawatni to do my internship. I worked
there for six weeks & it gave me a greater practical knowledge about the operations of a bank.

Dedication

To my Father

And

My beloved Mother

For installing the importance of hard work

And higher education and to my Beloved and

Supportive sister and Brother

ACKNOWLEDGEMENT

In the name of ALLAH, who is the most Merciful to His creation. First of all, I am grateful to ALLAH
ALMIGHTY, who bestowed me with health, abilities and guidance to complete the internship in a
successful manner, and without His help I was unable to perform this responsibility.
More than anybody else, I would like to acknowledge my project advisor, Prof, Muhammad Rashid
Waseem Heading the internship affairs for his never ending support and untiring efforts. He was
always there to guide me whenever I felt stuck off and his encouragement always worked as morale
booster for me. I have found him very helpful while discussing the tricky issues in this work.
I would also like to thank, Mr. Shoukat Khan (Operations Manager of MCB), Mr. Qaisar Javaid
(Branch Manager of MCB). For providing me the opportunity to have an excellent learning experience
during my internship. His critical comments on my work have certainly made me think of new ideas
and techniques.

Page 4
Internship Report

Executive summary:
Muslim Commercial Bank Limited is enjoying more 60 years of experience as one of the leading Bank
in Pakistan, The incorporation of the Muslim commercial bank has taken place on July 9 in 1947.
Muslim commercial bank is positioned at peak of success developing quality banking, heading on
technological developments, professionally leading management, prudent and ethical work
methodologies. Muslim commercial bank was Nationalized along with the private banks in
1974 introduction of following financial products such as Profit And Loss Sharing Account (PLS A/C),
Saving 365 Account, Capital Growth Certificate Scheme, Fund Management Scheme, Khushhali
Bachat Account, Term And Fixed Deposit and Many Others Such As Credit Cards Travellers Cheques.
The remittance departments of the Muslim commercial bank is also having instruments for transferring
of money, telegraphic transfer, mail transfer and cash department deals with both deposits and
withdrawals which go side by side. Working of the cash department is undertaken the account
department which takes measures taking deposit and payment of cash. Department maintains general
journal, book of accounts, ledgers, trial balance and which is finally converted to the financial
statements. The clearing of the Cheques is being done through NIFT (National Institute of facilitation
Technology). Muslim commercial bank is providing the facility to the people who need advances to
fulfill the requirements.

Page 5
Internship Report

TABLE OF CONTENTS

OBJCTIVES OF INTERNSHIP

INTRODUCTION OF ORGANIZATION (MCB) 01

 BRIEF HISTORY OF MCB 02

 Vision 03

 Mission 03

 Organizational hierarchy 04

 Regional Structure 05

 Branch structure 06

ASSIGNMENTS HANDLED AT THE BRANCH 07

 Week 1,2 Deposit Section 07

Page 6
Internship Report

 Week 3 Remittance Department 07

 Week 4 Account Opening Department 08

 Week 5 Foreign Exchnge department 08

 Week 6 Credit Department 10

FINANCIAL ANALYSIS 11

 Vertical Analysis 12

 Ratio Analysis 13

SWOT ANALYSIS 14

SUGGESTIONS AND IMPROVEMENT 17

CONCLUSION 19

RECOMMENDATION 19

REFRENCES 21

Introduction:

History of MCB:

The history of MCB can be divided into three main stages:

 Development Phase
 Nationalization Phase
 Privatization Phase
The incorporation of the Muslim commercial bank is taken by the Adamjee Group on July 9, 1947 as
a limited company. This establishment of the bank is taken under the view of providing banking
facilities to the business community of the South Asia. After the partition of Indo Pak subcontinent in

Page 7
Internship Report

1956 bank transfer its register office to Karachi. The head office of the Muslim commercial bank is
locating permanently in Karachi. Commercial bank is inheriting 64 years Legacy trust of its customer.

1960 is considered as the golden decade in Pakistan economic and financial development. The banking
sector has made noticeable growth during this time and also had provided the Government of
Pakistan strong helping hand for the purpose of achieving Rapid economic growth. Muslim
commercial bank was nationalized on January 1st 1974 under the Banks Nationalization act.

This was the first bank to be privatized in 1991 and the bank was purchased by Consortium of
Pakistani corporate groups led by Nishat group. The banks after the nationalization came under
political and bureaucratic control and deviated from the normal banking practices. the PML decided
advertised all the commercial banks under the act 1991. The State Bank of Pakistan has sold the
holding share of the Muslim commercial bank rupees 149. 8 million transferred to the management.
Mian Muhammad Mansha is the chairman of Muslim commercial bank and has been playing a vital
role in its success.

Objectives of Studying Organization (MCB)

The primary purpose of the study is fulfilling the requirements for the degree of MBA (Marketing).
For the purpose each student of this particular course is required to undergo training in an esteem
organization selected by them, for the period of six to eight weeks.

The secondary purpose of this internship is to comprehend how theoretical knowledge can be applied
to practical situation to observe organizational financial issues and to get identify its
opportunities/problems and also recommend corrective measures. This internship is also very
necessary to gain confidence and become aware of the system of an organization. As an internee I want
to attain following objectives during my internship and organizational study:

a. To build up understanding with a business organization.

b. To learn different tasks of all departments of organization.
c. To develop considerate concerning execution of business processes of organization.
d. To understand diverse levels of decision making in an organization.
e. Understanding to communicate the theory with practice.
f. To develop my expertises regarding application of theory to practical work situation.

Page 8
Internship Report

g. For improvement of interpersonal relationship.

h. To obtain work habit and sense of responsibility.

COMPETITORS:

 HBL Bank
 Allied Bank
 UBL Bank
 Bank of Punjab
 Meezan Bank

Page 9
Internship Report

Vision:
To be recognized as a leader and a brand synonymous with trust, highest standards of

service quality, international best practices and social responsibility.

Mission

 Institutionalizing a merit and performance culture

 Creating a distinctive brand identity by providing the highest standards of services

 Adopting the best international management practices

 Maximizing stakeholders value

 Discharging our responsibility as a good corporate citizen of Pakistan and in countries

where we operate.

Core Values
 Highest standard of integrity.
 Institutionalization of team work & performance culture.
 Excellence in service.
 Advancement of skills for tomorrow’s challenges.
 Awareness of social & community responsibilities.

Page 10
Internship Report

Page 11
Internship Report

Page 12
Internship Report

a. Number of Employees
1) Branch Manager (Mr. Qaisar Javaid)
2) Operation Manager (Mr. Shoukat Khan)
3) Account Opening Service (Ms. Tasneem Shah)
4) Clearing and Payment from Outside (Mr. Abid Bhatti)
5) Cashier (Mr. Mehboob )
6) Cashier (Mr. Babar)
7) Remittance (Mr. Nasir Sahab)

(2.2)NUMBER OF EMPLOYEES

Permanent 13255
Temporary/ On Contractual basis 899
Bank's own staff strength at the end of the year 1444
Outsourced 2350
Total Staff Strength 16429

Introduction of all Departments

Operations Department:
It is concerned with the operational functions in general banking, which are concerned with
the routine working of the bank. Any problem or ambiguity arise in any branch working is
rectified and corrections are suggested by this division. Operations department is involved
with each customer entering in the branch till the disposal of his transaction either in one way
or the other.

Deposit Department:

Page 13
Internship Report

This department promotes over all business of bank. Deposits are the lifeblood of any bank.
Without deposits bank cannot perform any function of banking. This department fixes the
deposit target of every branch by keeping an eye over the potential customers in that area. It
gives motivation to branches to achieve targets through different campaign and schemes like
cash prizes and special increments. Terms and condition for deposits is also fixed by this
department. Almost all the transactions involving receipts of funds from general public,
associations, organizations and other clients and payments thereto are dealt by this department
at branch level.

Human Resource Department:

This department deals mainly with the work force. Jobs and task specification, employees’
incentives, employees’ career development etc. Human resource department works for the
development and benefit of the employees. Hiring , recruiting, and periodical training is also
done by this department. All the awards, rewards and punishments to the employees who are
found delinquent in their duties are decided by this section.

Credit Department:
This division controls over all credit policies of the MCB like sanction of loans and also keeps
check over securities, mortgage, hypothecation or pledge. It also fix the rate of markup and
other decisions concerning with credit. Product development, risk rating , categorization of
borrowers and risk management decisions are finalized by this department.

Finance Department:
It controls the routine financial matters, the permission of special expenditures incurred in the
branches and other such cases, The Daily position and HO extracts and daily send to this
division by all the branches. This division not only estimates the profit and loss of every
branch but also prepares over all income statement and balance sheet of the complete bank. It
also keeps record of total deposits of the bank and then their classification in the form of loans
into different sectors of economy. It keeps eye on total worth of the bank.

Page 14
Internship Report

Structure of Finance Department

Finance and Accounting Operations
Main function of finance department is to maintain the overall financial position of the
organization. It is a very critical job. Technical work is required. Finance officer must have the
knowledge about the financial management. Organization’s business depends on the
borrowing and lending. Finance officers take decision about the sources of funds and their
utilization. They take complete view of profitability before any decisions. Finance department
reviews organizations expenses and cost and also estimate profit. Before investing they
analyze the business properly its financial condition and risk involved. Banks always invest
where risk is low ad return is high. And borrow from that source where cost is less.
There is a division which deals with accounts. Accountants are hired for accounting purposes.
They prepare financial statements. Financial statements present picture of the business. It is
also very technical work. Gathering of data, compiling, arranging, recording, analyzing and
preparing financial statements from them is the job of accounts departments. They prepare
conditions for analyst to conduct financial analysis of the business. Finance officer evaluate
and make decisions according to that.
Accounting System of the organization:
Accounting system of the organization is mostly based on manual work. Accounting is a very
important part of any organization. For evaluating the net worth of the business powerful
accounting system is important. MCB is following given accounting policies:
 Presentation of the financial statements is according to the IAS.
 Investments are recognized at fair value which involves transaction cost.
 Securities sold with the promise to repurchase at some future date are also measured
according to the accounting rule of the investment securities.
 Derivative instruments are value at their fair value.
 Assets are recorded on their written down value.
Accounting policies are helpful in making decisions. All accounts are maintained and
recorded according to these policies. Accounting system needs efficient and sharp minds to
prepare financials of the company. Most of the work done is manual. It is very lengthy and

Page 15
Internship Report

time consuming. But now computerized record keeping is initiated by the MCB. This change
will help the MCB to maintain its record easily and more efficiently.

Finance System of the organization:

Finance department deals with the finance. Finance system is critical for every entity because
it estimates the net worth of the organization. Finance system is head by CFO who supervises
overall activities. Finance system consists on division related to:
1. Cash & Investment: This deals with the cash requirements. It estimates in what quantity
cash is needed. Holding cash is very important so that whenever customer demands for his
money back bank has enough cash to give him. After evaluating the need for cash bank takes
decision of investment. It always invests in higher return area.
2. Capital budgeting: Capital budgeting is decisions about the investment in fixed assets.
These decisions effect overall position. Complete analysis is important before investing in
fixed assets. Investment in fixed assets is irreversible decision; it means decisions can not be
taken back. Bank has to be very careful before taking decision.
3. Capital structure: Capital structure means ratio of debt and equity in the business. Mostly
business prefer to take debt in small quantity and equity in large. Equity is cushion for the
investors. They prefer high rate of investment. If there are high rate of debts it indicates high
risk associated with it. Finance officer tries to maintain the balance between equity and debt.
4. Inventory: Inventory is also a critical decision. Decision relating to inventory effects
financial condition of the business. There is no such inventory in banking business. But in
some cases stock of some companies is in ban’s custody. Its maintenance is a big deal for the
banks.

Page 16
Internship Report

ASSIGNMENTS HANDLED AT THE BRANCH

Week 1:
I learned so many things during my internship in Bank National bank Pakistan. I started from the
Account Opening. I spent a week in account opening section and learned how to open an account how
to fill accounts form after learning and I opened 250 accounts in a week.

Week 2:
I spent my 2ndweek in in the Account Opening Department here I obtained all the necessary
information I was told to adopt the role of an account opening officer and deal with another bank
official who was playing the role of a customer. I tried my best to answer all the questions asked by the
customer and guide him in the best way I could regarding the account opening process in the bank. My
performance was rated as reasonable by the account opening officer.

At a later stage I helped a customer organize the required documents for account opening and even
helped him fill out the form as it was to be filled in English language.

I also gave information about the benefits of "Current Account" account to some existing customers of
the branch as well.

Week 3:

I spent my 3rdweek in the Clearing Department here I got a chance to call a few customers of the
branch over the phone to let them know that the cheque which they had deposited a few days
back has been cleared i.e. the funds according to that cheque have been transferred to their
accounts. This activity was fairly easy. I asked a few questions regarding the identity of the
customer, upon receiving positive response I simply delivered the information to the customer
that money is transferred to his account and it is available for him to use.

Week 4:
I spend my 4thweek in the Remittances Department In this department at Bank National bank
Pakistan. is responsible for issuing new cheque books to the account holders. Upon receiving the new
cheque books the customer has to either sign or put his stamp on the new cheque book. The stamps are
used if the account is opened in the name of a company. I guided a few people who wanted to collect
the new cheque book on the original account holder's behalf. I explained that the original account
holder has to come in person and collect the cheque book himself and it is not possible to collect the
cheque book on his or her behalf. I also got a few cheque books stamped by the customers and handed
them over their new cheque books. Once I helped the customer regarding the information of cheque
book charges. He wanted to know the price of a single cheque which Alfalah charges from its
customers. While conveying the information he desired additionally I explained to him the different

Page 17
Internship Report

cheque books according to the leaves (cheques) & their charges which Alfalah charges from its
customers.

Week 5:
I spent my 5thweek in the Trade Finance Department I was able to go through some old LC's that were
shown to me. I was explained about the format of LC that is used in the organization. I even prepared a
LC according to that format while given with hypothetical values assuming a real life situation.

Week 6:
I spent my 6th week in the Credit DepartmentIn this particular department I got a chance to talk with

some customers and explain to them the features of the funded credit facility that was being offered at

the branch of the bank.. The typical questions which the customers used to ask was how much credit

would be available to them and what was the maximum amount of time which they can avail to repay

the money to the bank. According to my experience & observations almost no one was interested or

bothered about the interest rate on the credit.

1. CRITICAL ANALYSIS

During Internship it was my prime objective to furnish my knowledge (Theory) to various

practical situations. The practical work presents an analytical problem while relating theory
with practice. As a result, analysis of practical versus theory requires a distinct approach. This
part of report is the essence of the internship, as this will help to better understand the working
environment of the bank by finding the relationship between what is written in the books and
what is actually going on in fields. The theory written in the books in cases is not
implemented as it is. In some cases theory is implemented with a little modification but in
other cases theory has nothing to do with practice.
In accounting, banks don’t prepare worksheet, but part of worksheet is prepared like trial
balance. The securities for the loans are handled in the same way as theory says like mortgage,
pledge, hypothecation, advances against insurance policies or liquidation procedure is the
same. There is some difference lies in types of loans in bank that is theory talks about four or
five types of loans that is cash finance, overdraft, loans etc., but in practice there are some

Page 18
Internship Report

more types used by bank like running finance, demand finance etc. All other concepts of
remittances, bills, foreign exchange deposits, letters of credit are in accordance with theory
almost. A bank's balance sheet is different from that of a typical company. You won't find
inventory, accounts receivable, or accounts payable. Instead, under assets, you'll see mostly
loans and investments, and on the liabilities side, you'll see deposits and borrowings.

Critical Analysis (Theory verses Practical)

During Internship it was my prime objective to furnish my knowledge (Theory) to various
practical situations. The practical work presents an analytical problem while relating theory
with practice. As a result, analysis of practical versus theory requires a distinct approach. This
part of report is the essence of the internship, as this will help to better understand the working
environment of the bank by finding the relationship between what is written in the books and
what is actually going on in fields. The theory written in the books in cases is not
implemented as it is. In some cases theory is implemented with a little modification but in
other cases theory has nothing to do with practice.
In accounting, banks don’t prepare worksheet, but part of worksheet is prepared like trial
balance. The securities for the loans are handled in the same way as theory says like mortgage,
pledge, hypothecation, advances against insurance policies or liquidation procedure is the
same. There is some difference lies in types of loans in bank that is theory talks about four or
five types of loans that is cash finance, overdraft, loans etc., but in practice there are some
more types used by bank like running finance, demand finance etc. All other concepts of
remittances, bills, foreign exchange deposits, letters of credit are in accordance with theory
almost. A bank's balance sheet is different from that of a typical company. You won't find
inventory, accounts receivable, or accounts payable. Instead, under assets, you'll see mostly
loans and investments, and on the liabilities side, you'll see deposits and borrowings

2. FINANCIAL ANALYSIS

Page 19
Internship Report

“Ratio analysis is changing amount comparisons to ratios and then comparing those ratios to a
known standard.”
When you are analyzing financial statement, it is best to reduce amount comparisons to
percentages or ratios so that you have an easy way to judge those comparisons. And if you compare
those ratio results with what you know to be good, fair or bad, you have a way of determining the
health of a business.
To evaluate a firm’s financial condition and performance, the financial analyst needs to
perform “checkups” on various aspects of a firm’s financial health. A tool frequently used during these
checkups is a Financial Ratio “which relates two pieces of financial data by dividing one quantity by
the other.”
We calculate ratios because in this way we get a comparison that may prove more useful than the raw
numbers by themselves.
For the analysis of the financial statements of the Alfalah Bank Limited. we use the ratio analysis in
order to get a clear vision about the financial position with simple interpretation. For this purpose, we
can analysis the financial statements through the following ratios:
(10.1)RATIO ANALYSIS
 Liquidity Analysis
 Long term debt paying ability analysis
 Profitability Analysis
 Analysis for investor

Liquidity Analysis

Current ratio
Formula: Total current Asset / Total current liabilities

Ratio Name Year 2016 Year 2017

Current ratio 1,276,801,351/ 1,326,180,258/
1,119,271,853 1,187,982,848
= 1.4 = 1.1

Interpretation:
The current ratio is mainly used to give an idea of the company's ability to pay back its short-
term liabilities with its short-term assets. The current ratio of Alfalah Bank Limited in year

Page 20
Internship Report

2017 and 2015 is same while this ratio is higher in year 2016. The overall position shows
better results that bank is Bank Alfalah Limited to pay its short-term obligations.
Current Assets to total Assets
Formula: Current Assets / Total Assets

Ratio Names Year 2016 Year 2017

Current assets to 1,276,801,351/ 1,326,180,258/
total assets 1,316,349,257 1,371,717,946
= 96.8% = 96%

Interpretation:
The current assets to total assets ratio of Bank Alfalah Limited in year 2016 is higher as
compared to year 2015 and 2017 i.e. 96.5% and 96% respectively. So, in overall the bank has
enough current assets to meet its short term financial obligation.
Long term debt paying ability analysis

Debt ratio
Formula: Total Debt / Total Assets
Ratio Names Year 2016 Year 2017
Debt ratio 1,171,468,349/ 1,211,054,416/
1,316,349,257 1,371,717,946
= 0..88 = 0.88

Interpretation:
The debt ratio of the Bank Alfalah Limited is same in all the three years. So, Bank Alfalah
Limited is maintaining its debt to total assets ratio and it shows that the bank is using its assets
efficiently throughout years.
Debt-to-equity ratio
Formula: Total Debt / Total Equity
Ratio Names Year 2016 Year 2017
Debt-to-equity ratio 1,171,468,349/ 1,211,054,416/
108,137,645 104,546,005

Page 21
Internship Report

=10.83 = 11.58

Interpretation:
Bank Alfalah Limited debts are greater than equity portion which shows that company is
highly geared.
Profitability Analysis
Net Profit Margin
Formula: Net Profit / Net Earnings *100
Ratio Names Year 2016 Year 2017
Net Profit Margin 15,665,428/ 5,306,783/
101,125,889*100 100,192,320*100
= 15.49% = 5.2%

Interpretations:
In year 2015 the net profit margin of Bank Alfalah Limited is greater than year 2016 and year
2017. And this ratio net profit margin decline over the years as compared to year 2015. And
net profit margin can be increased if expenses are controlled.
Administrative Expense Ratio
Formula: Administrative expenses / Net Earnings *100
Ratio Names Year 2016 Year 2017
Administrative 35,921,902/ 37,677,868/
expense 101,125,889*100 100,192,320*100
= 35.5% = 37.6%

Interpretations:
This ratio of Bank Alfalah Limited is increasing gradually from year 2015 to 2017. It indicates
that the Bank Alfalah Limited is not controlling its expenses. Administrative expenses should
be decreased in order to increase the profit of bank.
Gross profit margin ratio
Formula: (Mark-up / return / interest earned/ Net Earnings *100
Ratio Names Year 2016 Year 2017
Gross profit margin 44,573,404/ 39,297,962/

Page 22
Internship Report

101,125,889*100 100,192,320*100
= 44% = 39.2%

Interpretations:
Gross profit margin ratio of Bank Alfalah Limited is decreasing from year 2015 to 2017.Bank
Alfalah Limited should develop proper strategies in order to increase sales or decrease interest
expense, so, that gross profit may increase.
Return on Equity
Formula: Net profit after tax / Stockholder’s equity *100
Ratio Names Year 2016 Year 2017
Return on Equity 15,665,428/ 5,306,783/
108,137,645 *100 104,546,005*100
=14.4 % =5%
Interpretation:
In year 2015 the return on equity of Bank Alfalah Limited is greater than year 2016 and year
2017. And the ratio decline over the years as compared to year 2015. Higher this ratio shows
that owners are getting higher return on equity.
Analysis for investor
Dividend per share
Formula: Dividend Paid / Total Outstanding shares
Ratio Names Year 2016 Year 2017
Dividend per share 12,596,042/ 12,912,434/
1,850,011 2,127,513
= 6.80 times = 6.06 times

Interpretation:
Dividend per share shows how much the shareholders were actually paid by way of dividends.
This ratio is better in year 2015 and year 2016 as compared to year 2017.
Earning per Share
Formula: Net Profit / No. Of Outstanding Shares

Ratio Names Year 2016 Year 2017

Page 23
Internship Report

Earning per Share 15,665,428/ 5,306,783/

1,850,011 2,127,513
= 9.13 = 2.18

Interpretation:
Bank Alfalah Limited is most profit Bank Alfalah Limited in 2015 in which earning per share
is 10.5 as compared to year 2016 and year 2017. Because Bank Alfalah Limited should
increase it’s earning per share because earning per share is closely watched by the investing
public.
Dividend payout ratio

Formula: Dividend per share / Earning per share

Ratio Names Year 2016 Year 2017

Dividend payout 6.80/ 9.13 6.06/2.18
ratio = 0.74 =0.57

Interpretation
Dividend payout ratio is higher in year 2015 as compared to year 2016 and 2017. This shows
that the dividend is paid greater in year 2015.

(10.2)Horizontal Analysis of 3 Years Balance sheet of Bank Alfalah Limited

Year 2015 2016 2017
ASSETS % % %
Cash and balances with treasury banks 100% 120.4 120
Balances with other banks 100% 110 65.5
Lending to financial institutions 100% 18.8 118.1
Investments – net 100% 107.3 124.1
Advances – net 100% 124.7 117.4
Operating fixed assets 100% 102.2 118.9
Deferred tax assets - net 100% 88.9 99.2
Other assets 100% 123.5 129.5
Total assets 100% 114 118.8

Page 24
Internship Report

Liabilities
Bills pay Bank Alfalah Limited 100% 157.8 152.6
Borrowings 100% 188.4 83.1
Deposits and other accounts 100% 111.8 118.8
Sub-ordinate loans - - -
Liabilities against assets subject to finance lease 100% 41.3 61.6
Deferred tax liabilities - - -
Other liabilities 100% 114 121.4
Total liabilities 100% 114.4 118.2
Net Assets 100% 111.2 123.3
Share Capital 100% 110 126.5
Reserves 100% 115.6 127.9
Un appropriated profit 100% 92.8 77.8
Total equity 100% 101.1 97.7
Non-controlling interest 100% 109.7 113.8
100% 101.1 97.8
Surplus revaluation of assets - net 100% 159.3 245
100% 111.2 118.8

Horizontal Analysis:
In balance sheet if I analyze the balance sheet then I have seen that the operating fixed assets have
increased in year 2017 by 118.9% as compared to year 2016 i.e.102.2% . Increase in operating fixed
assets is better for the bank. Investments and advances have also increased in year 2017 than year
2016.
As I further analyze the liabilities and owners equity side then I have come to know that the
borrowing of the bank is lower in year 2017 by 83.1% as compared to year 2016 i.e. 188.4%.
The share capital and the reserves of the bank are also higher in year 2017 i.e. 126.5% and
127.9% respectively as compared to year 2016 which is 110% and 115.6% respectively.
It is seen that the assets, share capital and reserves of bank in year 2017 have been increased as
compared to year 2016. So, I can say that the bank financial position is stronger in year 2017.

Page 25
Internship Report

Vertical Analysis of 3 Years Balance Sheet of Bank Alfalah Limited

Vertical analysis of profit & loss account and balance sheet are given below:
Year 2015 2016 2017
ASSETS % % %
Cash and balances with treasury banks 11.4 12 11.5
Balances with other banks 2.4 2.3 1.34
Lending to financial institutions 3.8 0.6 3.7
Investments – net 27.6 26 28.8
Advances – net 45.7 50 45.2
Operating fixed assets 2.4 2.2 2.5
Deferred tax assets – net 0.9 0.7 0.7
Other assets 5.4 5.8 5.9
Total assets 100 100 100
Liabilities
Bills pay Bank Alfalah Limited 0.7 1 1
Borrowings 2.3 3.9 1.6
Deposits and other accounts 80.3 78.7 80.3
Sub-ordinate loans - - -
Liabilities against assets subject to finance lease 0 0 0
Deferred tax liabilities - - -
Other liabilities 5.1 5.1 5.2
88.7 88.9 88.2
Net Assets 11.2 11 11.7
Represented By
Share Capital 1.4 1.4 1.5
Reserves 2.2 2.3 2.4
(Accumulated loss) / Un appropriated profit 5.5 4.5 3.6
Total equity Attribute Bank Alfalah Limited to share
holders of the bank 9.2 8.2 7.6
Minority interest 0.06 0.06 0.05
9.3 8.2 7.68
(Deficit) / Surplus revaluation of assets – net 1.9 2.7 4
11.2 11 11.7
Vertical analysis of bank

If we analyze the asset side of the balance sheet the advances are lower in year 2017 and 2015
that are 45.2% and 45.7% respectively. And advances are higher in year 2016 by 50%. The
operating fixed assets are higher in year 2017 by 2.5% as compared to other two years. The

Page 26
 Internship Report

operating fixed assets are more productive as compare to current assets so it is better for the
bank.
If we analyze the liability and owners equity side of the balance sheet then we come to know
that Borrowing of bank has decreased in year 2017 by 1.6%. And this is higher in year 2016
i.e. 3.9%. And share capital and reserves are also higher in year 2017 as compared to previous
two years which is a good sign for the bank.
Horizontal Analysis of 3 Years Profit & Loss Statements
Years 2015 2016 2017
Description
Mark-up/Return/Interest earned 100.00% 105.3 104.4
Mark-up/Return/Interest expensed 100.00% 116.4 107.6
Net Mark-up /Interest Income 100.00% 94 82.9
Provision against non-performing advances-net 100.00% 115 280.7
Provision for diminution in the value of investment-net 100.00% 27.5 44.5
Provision against off balance sheet activities - -
100.00% 85.6 209
Net Mark-up /Interest Income after provisions 100.00% 96.1 51.8
NON MARK-MARKUP/INTEREST INCOME
Fee , commission and brokerage income 100.00% 112 124.1
Dividend income 100.00% 130.9 167.6
Income from dealing in foreign currencies 100.00% 118.7 122.8
Gain on sale and redemption of securities – net 100.00% 134.7 162.6
Unrealized gain on revaluation of investments classified as 0.39
held-for-tiding 100.00% -2.78
Share of (losses) / profits from joint ventures 100.00% 294.4 1361.8
Share of profits from associates - net of tax 100.00% 2500.5 -798.1
Other income 100.00% 102.6 129.1
Total non-markup / interest income 100.00% 125.6 131.4
100.00% 106.2 79
NON MARK-UP / INTEREST EXPENSES
Administrative Expenses 100.00% 118.7 121.7
Others Provision / write offs 100.00% 72.3 171.6
Others charges 100.00% 116.3 16.97
Total non-markup / interest expenses 100.00% 117.8 122.1
100.00% 92 26.8
PROFITS BEFORE TAXATION 100.00% 92 26.8
Taxation – current 100.00% 81.8 67.5

Page 27
Internship Report

-Prior years 100.00% - 50

-Deferred 100.00% 35 428.4
100.00% 85.3 20.4
PROFITS AFTER TAXATION 100.00% 95.2 29.9

Horizontal Analysis of Profit & Loss

With the 2015 as a base year I have come to know that there is an increase in the markup/interest
earned in the year 2016 i.e.105.3%. And markup/interest expensed is also higher by 116.4% in year
2016 as compared to year 2017 i.e. 107.6%.
Provision against non-performing advances is higher in year 2017 and it is 280.7% and is lower in
2016 by 115%.
The administrative expenses have increased in year 2017 by 121.7% as compared to year 2016 where
administrative expenses are to 118%. Profit before taxation and net profit after taxation is decreased in
year 2017 as compared to year 2016. In year 2017 net profit after tax is 29.9%, and this percentage is
too much low as compared to year 2016 where net profit after tax is 95.2%. Which shows bank is not
performing well in year 2017 as compared to other year. Bank can increase its profit if the expense is
controlled.

Vertical Analysis of 3 Years Profit & Loss Statement

Years 2015 2016 2017
Description
Mark-up/Return/Interest earned 100 100 100
Mark-up/Return/Interest expensed 50.6 55.9 60.7
Net Mark-up /Interest Income 49.4 44 39.2
Provision against non-performing loans and advances 6.4 9.7 17.4
Provision for diminution in the value of investments-
net 3.2 0.8 1.3
Provision against off balance sheet obligations - - 0.7
Bad debts written off directly - - 0
9.7 10.5 19.5
Net Mark-up /Interest Income after provisions 39.63 33.4 19.7
NON MARK-MARKUP/INTEREST INCOME
Fee , commission and brokerage income 10.3 11 12.3
Dividend income 1.6 2 2.6
Income from dealing in foreign currencies 3.3 3.7 3.9
Gain on sale and redemption of securities - net 2.4 3.1 3.8

Page 28
Internship Report

Unrealized gain on revaluation of investments

classified as held-for-tiding - 0.03 0 0
Share of (losses) / profits from joint ventures 0.03 0.09 0.4
Share of profits from associates - net of tax 0.07 1.8 - 0.5
Other income 2.6 2.5 3.2
Total non-markup / interest income 20.5 24.5 25.9
60.2 58 45.5
NON MARK-UP / INTEREST EXPENSES
Administrative Expenses 32.2 35.5 37.6
Other Provision / write offs 0.5 0.3 0.9
Others charges 0.14 0.15 0.02
Total non-markup / interest expenses 32.9 36 38.5
27.2 21.9 7
Extra ordinary / unusual item --- --- ---
PROFITS BEFORE TAXATION 27.2 21.9 7
Taxation – current 9.6 7.7 6.2
-Prior years 0.27 --- 0.01
-Deferred - 1.1 - 1.3 - 4.62
8.7 6.4 1.7
PROFITS AFTER TAXATION 18.4 15.4 5.2

Vertical analysis of profit & loss account

Mark-up/Return/Interest expense ratio has increased in year 2017 which is 60.7% as compared to year
2015 and 2016 where the ratio is 50.6% and 50.9% respectively.Net Mark-up /Interest Income is
higher in year 2015 due to low interest expense as compared to year 2016 and 2017. Net Mark-up
/Interest Income after provisions are also higher in year 2015 as compared to other years.

Profit before taxation is less in year 2017 i.e. 7% and higher in year 2015 i.e. 27.2%. Profit after
taxation is also higher in year 2015 and 2016 i.e. 18.4 and 15.4 respectively. And it is too much less in
2017 and it is 5.2.It means shareholder has not received enough dividends in year 2017 as compared to
other two years.

Page 29
Internship Report

SWOT ANALYSIS

Size of the Balance Sheet:

First of all, a fundamental advantage that Muslim Commercial
Bank has is the size of its balance sheet. The per party exposure
limit is set according to the size of the balance sheet. So large
balance sheet size allows Muslim Commercial Bank to lend Blue
Chip clients and lend them huge amounts, there by restricting its
exposure to less creditworthy clients.

Customer Loyalty:

Page 30
Internship Report

Another advantage for Muslim Commercial Bank is that it has

been around for some time, as a result it has developed a loyal
clientele. This is especially a major advantage in today’s troubled
and highly competitive market

Low Cost Of Capital:

The bank enjoys a low cost of funds of around 7%, and has a
spread of around 3%. MCB here is better placed due to very strong
basic earnings power, which shows up in gross spreads. As the
spreads tighten,. Muslim Commercial Bank also has one of the
lowest cost of capital. One major reason for this is its huge branch
network.
Leader in RTCs Market:
MCB is also the pioneer in Traveller’s Checks market. Currently
Muslim Commercial Bank is the leader of the market with 80%
market share.

Largest ATM Network:

Muslim Commercial Bank also has the largest ATM network in the
country. It is a leader with 70 ATMs in five major cities of Pakistan.

Page 31
Internship Report

Huge Branch Network:

With these cut-throat competition among banks to attract deposits
and other corporate and Investment banking activities, the largest
bank normally has a best chance of survival. The larger the
deposit base, the easier it is to attract more deposits, and the
larger the equity base, the higher the per party exposure
limit. MCB scores on both counts. Based on a total equity of Rs.
3.9bn in 1997, its per party limit is RS770million. Maximum
exposure allowed to any party is 30% of the banks equity. Among
the Pakistani banks MCB ranks fourth in terms of per party
exposure limit.
A way of remaining profitable is to cut costs. Costs as a % of
deposits for MCB is 6.7%. MCB has a network of more than 1200
branches, unmatched by any private or foreign bank, enabling it
to raise deposits at low costs. Around 60% of its deposits come
from small towns and villages where competition from other local
and foreign banks is virtually non existent. As a result it raises
deposits at around 2-2.5% lower than other private banks.

Low Forex; Account to total Deposits:

Another advantage is that Muslim Commercial Bank has one of the
lowest Foreign exchange accounts to total deposit ratios in the
market. This has saved Muslim Commercial Bank from taking any
major hit in the foreign exchange turmoil that the market has gone
through

Page 32
Internship Report

Liability Advantage:
On the liability side MCB has per branch
deposits of 98million, compared to the other newly privatized
banks, RS686million for ABL and RS1287million per branch for
FBL. So, MCB has a lot of potential to increase its deposits without
investing in network.

Trade Financing Advantage:

It is important for a bank to look at the proportion of non-interest
expenses from the non-interest income, which can be very
important when corporate activities slow down. MCB financed 52%
of its costs from fee based income. So, MCB has an advantage in
trade financing compared to its peers due to its size, and does not
stand to lose much on its treasury operations.

Loan Recovery:
MCB has made a significant progress on the loan recovery. During
1997, it recovered RS1.77 billion of bad loans, exceeding its target
of RS1.5 billion.

Diverse Product Range:

Page 33
Internship Report

MCB, at present, is offering a wide variety of financial products,

which serve a diverse customer base. It serves not only common
households through schemes like Mahana Khushali Scheme and
Khanum Bachat Scheme to Blue-chip clients through MCB Saving
Instant and MCB Instant Financing. This gives MCB a competitive
advantage over its competitors.

WEAKNESSES
Over Staffing:
The problem of poor human resource management has been
created during the nationalization era when recruiting and
placement decisions were mainly done on criteria other than
merit. Today, when MCB has to compete against 43 commercial
banks and over 120 NBFIs, it should seriously analyze the
inventory of its human resources. The consumers, who come to
MCB after experiencing services from any foreign or private
commercial bank, have felt that the service quality is very bad.
Along with poor service quality, MCB has been overstaffed mainly
due to political reasons. In 1996 MCB had almost 14,800
employees to manage its 1,334 branches. The overstaffing
resulted in lower earnings for the bank. Although MCB has shed off
almost 2000 employees by offering Golden Handshake Scheme to
its employees. It still maintains a little more than ten employees
per branch. This results in high operating expenses. Despite
having one of the lowest cost of capital of 7.9%, total costs absorb
94% of total revenues.

Un-banked Areas:
Page 34
Internship Report

MCB has over one hundred branches in

areas where there is no other branch in a radius of 3 miles. These
branches can not be closed under SBP regulation. Most of these
branches do not generate sustainable profits and result in high
operating expenses[1].

High Administration Cost:

Even after privatization, the
management has not been able to decrease its operating costs, As
a result, despite enjoying one of the highest spreads in the
industry, MCB’s profitability remained low. MCB has a very low
deposits per branch of 8million deposits per employee as
compared to Faysal Bank which has 21million and Askari has 18
million per employee.

Under-Captialization :
State Bank of Pakistan requires all banks
to maintain equity equal to at least 8% of total assets. The Capital
Adequacy Ratio for MCB in 1997 was 6.13%. however the equity is
inclusive of revaluation on assets. Excluding this amount CAR
comes down to 4.2%. This low capital adequacy decreases the
cushion for depositors and thus increases risk.

In-efficient Top Managers:

Its an interesting fact that the
reports of various financial and brokerage houses that we

Page 35
Internship Report

consulted were almost unanimous in saying that a new president

with more professional approach must be inducted so as to
increase the productivity of the bank.

Lower Revenues to Assets:

MCB has lowest total revenue to assets ratio in the industry. Even
after privatization, the management has not been able to
decrease its operating costs, As a result, despite enjoying one of
the highest spreads in the industry, MCB’s profitability remained
low[2].

Cost Income Ratio:

The cost to income ratio for MCB is the highest in the industry of
private local banks after Schon Bank.

Low Investment in Research:

Although MCB has formed
BDMD for the development of new schemes and strategies to cope
up with ever-changing market but due to the fact that the
Pakistani environment is too volatile so BDMD needs more
investment for research purposes which is now-a-days facing
under-investment.

Low Deposits Per Branch:

MCB has a very low deposits per
branch of 8million deposits per employee as compared to Faysal
Bank which has 21million and Askari has 18 million per employee.

Page 36
Internship Report

OPPORTUNITIES

Low Awareness:
The official savings rate has been hovering between 13 to 15
percent. Low saving rates coupled with high level of informal
economy makes our economy an Un-banked economy compared
to other countries. This can be tipped as a great opportunity for
banks to capitalize upon. Banking industry can increase its efforts
to create awareness among people about the usefulness and the
advantages of banking services can increase their customer base
and find ways to grow sustainably.
In the current situation when, the deposit growth efforts of the
industry has seriously been hampered by the changes in the
political environment, the banks can change their focus to
increasing the number of services and creating awareness about
them. For example, banks can make increased efforts to create
awareness about credit cards and Rupee Travellers Cheques,
which have a great potential to grow.

Long Term Relationships:

Having an old history, MCB has
potential opportunities to exploit its long term relationships with
its customers that have been built during last fifty years.

Page 37
Internship Report

Potential in Foreign Operations:

MCB can also exploit its
foreign operations by expanding them to Middle East and Central
Europe which not only have a big credit market but also a
remittance market for Pakistan.

Potential in Joint Ventures:

MCB can also count upon its
joint ventures that it has started in various countries with different
financial institutions to increase its profitability.

Rupee Fixed Deposit Schemes:

In the current state of the
deposits market, with the FCAs being frozen, people are inclined
towards keeping their savings in Rupee fixed deposits. In this
situation, MCB can, should, and is introducing rupee fixed deposit
schemes with high rates of interest.

THREATS
Political Turbulence:
In a third world country like Pakistan, where it is the fourth elected
government in the last ten years (three of which could not
complete their terms), it becomes difficult to operate smoothly.
Every time the government changes, the newer one revises
immediately the policies and reforms by the last government.

Page 38
Internship Report

There is no consistent fiscal policy of the government. Political

unrest, terrorism and riots are a matter of routine in most parts of
the country. In such a situation, keeping in view the slump in the
economy, the banks being directly related to the state of the
economy face serious threats. The autonomy of the State Bank of
Pakistan has, however, eased up the situation a little.

Narrowing Spreads :

Because of the high degree of competition

in both the deposits and credit markets, the interest spread is
growing narrower and causing serious risks to the bank’s
profitability.

Bad Loans :

The bad debts of MCB as reported in the balance

sheet fore the year 1997 were Rs. 153,804,000 as compared with
the total credit advancements of Rs. 64,365,285,000, out of which,
Rs. 709,975,000 have been defaulted. This amount shows a risk to
the bank’s profitability having a high potential being translated
into a loss.

Page 39
Internship Report

Forex Control :

Strict foreign exchange regulations by the

government especially the recent freezing of foreign currency
accounts make it difficult for the bank to operate in foreign
currency transactions. The foreign currency deposits as well as the
remittances by over-seas Pakistanis are a major part of the bank’s
revenues. Any strict regulation by the government concerning the
foreign currency can affect a part of the bank’s operations.

Political Interference:

In Pakistan, where there is a high rate of

corruption and a number of loans are sanctioned on political
pressures, which generally go bad. This political interference is a
serious threat to the operation of the bank and as well as a
smooth flow of currency in the economy.

Un-stable Government Policies :

As discussed earlier, there is

a great deal of political unstability in the country and there is no
consistency in the Government’s economic policies. This results in
uncertainty in the economy and the behaviour of the credit and
deposits markets, which makes it difficult for the bank to operate
and to plan its investment portfolio in the optimum way.
PEST Analysis of MCB
Page 40
Internship Report

The analysis of MCB will take in to account the general environment analysis, the
competitor’s analysis by comparing the products offered by the competitive banks
and the departmental analysis.

The general environment of takes in to account the external factors like politics,
economy of Pakistan, socio-cultural factors and technology. Now we will analyze
these factors one by one and check how these affect the working of MCB:

Political
The current situation of the government in Pakistan is directly affecting the policies of
banks. However, MCB tries hard to keep its business away from the politics but it is
not an easy task. MCB has no accounts of political leaders or parties. However, its
Customer Service Department faces peer pressure from such political parties.

As MCB is trapped in dual sanctions from the State Bank of Pakistan (SBP) and from
the European Union so the changing political environment is not so beneficial for the
bank to operate freely. The changing policies of the government, affects SBP which in
return affects the MCB rules and policies.

The government of Pakistan has privatized most of the banks. The number of
government owned banks have declined constantly, so these changes directly affect
MCB.

Economical
The economy of any country has deep impact on any financial organization.
Economic indicators include Gross Domestic Product (GDP), inflation, balance of
payment, debt of the government. These below graphs will explain how economic
conditions of Pakistan are adversely affecting the banking system of Pakistan.

The pitiable economy of Pakistan and instable government is adversely affecting MCB
and its different departments; recently MCB has redundant many of its employees.
The economy of our Pakistan is very poor. Due to poor economy businesses are
showing low profits and Pakistan stock market is in great danger. Pakistan’s foreign
debts are rising day by day, so such a situation is a huge challenge for MCB to
survive. Due to financial crisis in Pakistan the management of MCB has to face
stressful situations and also working environment. At present the MCB is not
extending loans but recovering the existing ones.

Page 41
Internship Report

Social
MCB has been influenced by the socio-cultural factors. At present most of the
European countries are keeping their eyes on Pakistan as being the terrorist country,
so people of Pakistan are emotionally getting affected by it. Most of the foreign
investments have been stopped in Pakistan. Pakistani people are traditionalists who
do not like the modern banking environment of MCB. Some of the customers do not
use ATMs they still prefer cash counters, so these kinds of socio-cultural factors affect
the banking environment and its operations.

Technological
Technology has a deep influence on different kinds of organizations whether banks or
any kind social welfare organizations. In MCB technology has great effect on the
working environment. Mostly all banks use computers none of the banks keep data
manually so the bank has to be continuously in touch with the modern ways of task
performance. MCB is always ahead to introduce new computer systems for keeping
its staff up to date. The intranet facility is playing an important role in enhancing the
knowledge of staff. Due to technology that bank staff keeps in touch with the
customers through e – mail; ATMs and online banking is only possible due to
technology. In this way technology is playing its key role in and is helping
management to further improve its functions.

Conclusion:
According to the calculated ratios analysis over all position is decreasing in 2013 than 2011,
2012. But to me its still a very sound bank. MCB has the biggest system in Pakistan and in
Asian mainlands. It remains on the number 8 in the world. It is the main bank possessed by
the Government of Pakistan. Clients trust MCB in light of the fact that it is more secure. It has
biggest structure in Asia. No other foundation can even think to take its place. It has solid
budgetary position. MCB earned enormous benefit in previous years. Total assets is high. It

Page 42
Internship Report

gives banking that is competitive to each kind of clients. It offers items which are gainful for
each one.
Anyway there are a few weaknesses which can influence its reputation. Like its
methodology of authorizing credit is excessively protracted. Cost rate is additionally high.
Absence of automated framework is the greatest impediment. Absence of proper staff training.
Over loaded staff. Asset utilization is improper. In any case despite all these elements MCB is
in solid position. In the event that it tries to tackle these issues, nobody can touch its statures.
Recommendation
There are some recommendations for improvement:
To me, what I have observed in the branch where I did my internship that this branch is newly
opened but there is no proper facilities are provided by the bank, like no ATM at all, very bad
internal environment, no help desk, lack of equipments, because it’s a semi government bank
that’s why if the manager wants to provide a facility to the customer he has to ask for
approvals from regional office that takes too long , regional office should facilitate the branch
with full equipments so that customers can feel comfortable. Here are some more
recommendations generally:
1. Staff Training and development is important.
2. Retail and consumer banking must be improved.
3. Internal structure of branches needs to improve.
4. ATM facilities should be provided nationwide.
5. Staff lacks the accounting knowledge. Only persons with sufficient knowledge of
finance and accounting should be hired.
6. All records must be held electronically nationwide in all branches.
7. Profit rate is good try to retain them.
8. Adopt modern accounting systems.

References & Sources

I took help from following sources:
 Website of MCB: www.mcb.com.pk
 Branch officers

Page 43
Internship Report

i. Branch manager
ii. Operations manager
iii. Other staff

Annexes

All the material used in the report is obtained from website of NBP. All financial
statements are downloaded from annual report of MCB www.mcb.com.pk. Financial reports
has been presented in Annual reports. I took financial statements of 2015, 2016 and 2017 from
their respective annual reports.

Page 44