MCB Annual Report 2014 PDF

CONTENTS Vision & Mission..................................
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Strategic Objectives......................................5
Core Values.......................................................15
Awards....................................................................17
Products and Services.....................................................18
Corporate Information.........................................................26
Board of Directors....................................................................28
Profile of the Board of Directors....................................................30
Board Committees............................................................................43
Organizational Structure......................................................................46
Management Committee.........................................................................48
Other Senior Management........................................................................51
Entity Credit Rating......................................................................................52
Corporate Profile of the Bank.........................................................................53
Chairman’s Message.........................................................................................54
President’s Review...............................................................................................55
Stakeholder’s Information
Highlights 2014......................................................................................................57
Financial Performance 2004-2014..........................................................................58
Management Objectives and Critical Performance Indicators (CPI)............................59
Forward Looking Disclosure ................................................................................60
Review of Six Years’ Performance...............................................................................61
Six Years’ Financial Summary.....................................................................................64
Six Years’ Non Financial Summary..............................................................................66
Six Years’ Summary of Concentration & Maturities.......................................................67
Concentration of Advances, Deposits, NPLs and Off Balance Sheet Items ....................68
Maturity Analysis of Assets and Liabilities..................................................................69
Key Interest Bearing Assets and Liabilities...................................................................69
Graphical Presentation of Financial Statements..........................................................70
Statement of Value Added.......................................................................................71
Summary of cash flows.........................................................................................72
Commentary on Six year cash flows.....................................................................72
Cash Flow Statement Direct Method....................................................................73
Groupwise Deposits & Advances......................................................................74
Non Performing Loans....................................................................................75
Investments...............................................................................................76
Markup & Non Markup Income.................................................................77
Administrative Expenses..........................................................................78
Vertical Analysis..................................................................................79
Horizontal Analysis..........................................................................80
Commentary on Six year Horizontal & Vertical Analysis.................81
Quarterly Variance Analyses - 2014.........................................82
Quarterly Performance.........................................................84
Capital Structure.............................................................85
DuPont Analysis.......................................................86
Statement of Charity and Donation......................87
Market Statistics of MCB’s Share.................88
Share Price Sensitivity Analysis..........89
Investor Grievances....................................89
MCB Calendar..................................................90
Issues Raised in Last AGM......................................91
Profile of Shari’ah Advisor............................................91
Directors’ Report to the Members..................................92
Corporate Sustainability Report............................................110
Social & Environmental Responsibility........................................114
Human Resource Management.....................................................115
Managing Conflicts of Interest .........................................................116
IT Governance....................................................................................117
Whistle Blowing Policy................................................................................119
Record Management Policy................................................................................119
Risk & Opportunity Report.....................................................................................120
Stakeholder’s Engagement ......................................................................................122
Code of Conduct........................................................................................................123
Statement on Internal Controls......................................................................................126
Statement of Compliance with the Code of Corporate Governance...........................127
Auditors’ Review Report to the Members on Code of Corporate Governance.........128
Report of the Audit Committee..........................................................................................129
Unconsolidated Financial Statements

Auditors’ Report to the Members........................................................................................132
Statement of Financial Position.............................................................................................133
Profit and Loss Account..........................................................................................................134
Statement of Comprehensive Income....................................................................................135
Cash Flow Statement...............................................................................................................136
Statement of Changes in Equity.............................................................................................137
Notes to and forming part of the unconsolidated Financial Statements..............................138
Annexure...............................................................................................................................206
Consolidated Financial Statements

Directors’ Report on Consolidated Financial Statements................................................238
Auditors’ Report to the Members...................................................................................239
Consolidated Statement of Financial Position.............................................................240
Consolidated Profit and Loss Account......................................................................241
Consolidated Statement of Comprehensive Income.............................................242
Consolidated Cash Flow Statement.....................................................................243
Consolidated Statement of Changes in Equity................................................244
Notes to and forming part of the Consolidated Financial Statements...........245
Annexure.......................................................................................... 317
Branch Network........................................................................................325
Pattern of Shareholding.......................................................................327
Categories of Shareholders.............................................................327
Pattern of Shareholding under CCG ...................................328
Notice of 67th Annual General Meeting............................330
Glossary of Terms...........................................................339
Form of Proxy.........................................................341
ANNUAL REPORT 2014

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ANNUAL REPORT 2014
Vision & Mission

Vision
To be the leading financial services provider, partnering with our
customers for a more prosperous and secure future.
Mission
We are a team of committed professionals, providing innovative
and efficient financial solutions to create and nurture long-term
relationships with our customers. In doing so, we ensure that our
shareholders can invest with confidence in us.
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Strategic Objectives
• Delivering remarkable returns to stakeholders, sustainable
performance, exceeding market and shareholder expectations
• Providing value added services through operational expansion,

geography and upgraded system
• Building a corporate culture of equality, trust and team spirit as

we remain dedicated to being a socially responsible organization
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The Circle of Life

The Circle of Life symbolizes the infinite nature of energy, meaning
every thing that starts comes to an end, but each ending is a start of
something new. Our days turn into months and they turn into years,
measured by hands on a clock, going around in circles and with each
passing moment, our life takes a new turn, reinventing itself, evolving
into something new, offering new challenges and demanding
creativity in solutions. With MCB as a Banking Partner in your life, the
wheel of your life goes round smoother, as we ensure the gears are
well oiled and the bumps in the road are identified early and tackled
efficiently. Moving along with you, in an infinite loop of positive
energy and excellence, in the cycle of life, We are MCB. Bank for Life.
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ANNUAL REPORT 2014
Circle of Security
Circle of Excellence
MCB understands that it doesn’t only work with your money, it also
In everything thatworks
MCB with
does,your
fromdreams
being and aspirations.
a reliable Thispartner
banking is why we strive
to offering a widehard to secure
product your savings
portfolio andbusiness
that suits protect and
your personal
investments, giving
requirements, MCB you the freedom
maintains to dream
a strict bigger
standard and do better.
of excellence. It works to
expand this culture of excellence to the lives of all its stakeholders.
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Circle of Excellence
In everything that MCB does, from being a reliable banking
partner to offering a wide product portfolio that suits business
and personal requirements, MCB maintains a strict standard of
excellence. It works to expand this culture of excellence to the lives
of all its stakeholders.
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Circle of Trust
At MCB, we strive to create and enhance the trust of our esteemed
partners and customers by making their needs our top priority.
Each transaction with MCB thus adds to the level of trust placed in
the institution, allowing for greater prosperity and a life free of
worry.
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Excellence
We take personal responsibility for our role
as leaders in pursuit of excellence. We are a
performance driven, result oriented organization
where merit is the only criterion for reward.
Integrity
We are the trustees of public funds and serve our
community with integrity. We believe in being the best
at always doing the right thing. We deliver on our
responsibilities and commitments to our customers as
well as our colleagues.
Innovation
We encourage and reward people who challenge the
status quo and think beyond the boundaries of the
conventional. Our teams work together for the smooth
and efficient implementation of ideas and initiatives.
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ANNUAL REPORT 2014
Core Values
Respect
We respect our customers’ values, beliefs, culture and
history. We value the equality of gender and diversity of
experience and education that our employees bring with
them. We create an environment where each individual
is enabled to succeed.
Customer Centricity
Our customers are at the heart of everything we do. We
thrive on the challenge of understanding their needs and
aspirations, both realized and unrealized. We make
every effort to exceed customer expectations through
superior services and solutions.
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ANNUAL REPORT 2014
Awards
2014 The Asset Triple A: Best Bank - Pakistan
2014 The Asset Triple A: Best Domestic Bank - Pakistan
2014 CFA 11th Excellence Awards: Best Bank of the year 2013 – Large Bank
2014 CFA 11th Excellence Awards: Most Stable Bank of the year 2013
2014 Asiamoney Awards Best of the Best Domestic Bank
2014 The Asian Banker (USA) Strongest Bank in Pakistan 2014
2014 ICAP and ICMAP: 1st - BCR Award 2013 - Banking Sector
2014 SAFA: 1st Runner up - BCR 2013 in Banking Sector Category

2013 The Asset Triple A: Best Islamic Deal
2013 ICAP and ICMAP: 1st - BCR Award 2012 - Banking Sector
2013 LK Domain Registry Sri Lanka: Best Website Award
2013 Lanka Clear Pvt. Limited: T+1 Cheque Clearing Award
2013 SAFA: 2nd Runner up ‐ BCR 2012 in Banking Sector Category

2012 Euromoney: Best Bank in Pakistan
2012 NFEH: CSR Business Excellence Award “Best Media Coverage”
2012 ICAP and ICMAP: 2nd Best Corporate Report Award 2011 - Banking Sector
2012 World Finance: Best Commercial Bank - Pakistan
2012 Pakistan Centre for Philanthropy: PCP Corporate Philanthropy Award
2011 CFA Association Pakistan: Most Stable Bank of the Year

2011 CFA Association Pakistan: Best Bank of the Year
2011 ICAP / ICMAP: 1st - BCR Award 2010 - Banking Sector
2011 SAFA: Joint 2nd Runner-up for BCR 2010
2010 The Asian Banker: Strongest Bank in Pakistan

2010 The Asian Banker: Leadership Achievement Award
2010 MMT: Best Bank Led MMT Service
2010 ICAP / ICMAP: 1st - BCR Award 2009 - Banking Sector
2010 SAFA: Certificate of Merit Award for BCR 2009
2009 Asiamoney: Best Domestic Bank in Pakistan

2009 The Asset: Best Domestic Bank in Pakistan
2008 Euromoney: Best Bank in Asia





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Products
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ANNUAL REPORT 2014
MCB Products & Services needs, which is collateralized against securities such as local and foreign
currency term deposits, national saving schemes instruments, mutual funds, bank
MCB Current Deposit Product Menu guarantees, etc. This offering facilitates our customers in getting easy access to
liquidity for fulfilling their immediate and/or long-term personal needs against
MCB Current Account: An account with transaction facility and convenience.
their otherwise long-term savings stuck up in various investments made by them.
MCB Bank offers a variety of current accounts in local and foreign currency to
cater to the everyday transaction needs of customers from all walks of life. These
MCB Instant Finance: With MCB Instant Finance, get a loan instantly at any
accounts ensure ease and freedom for the customer to bank from any of the
MCB branch against liquid collateral at competitive pricing.
1200+ branches across the country.
For complete day-to-day banking needs, MCB CURRENT DEPOSIT menu is
MCB Credit Card: MCB Credit Cards carry world class features that provide
designed to provide transaction convenience and flexibility to our valued
transactional & payment convenience to our customers across the globe. The
customers for all their financial dealings. The current account product menu
cards are available in three different ranges i.e. Classic, Gold and Platinum to
includes:
cater to the diverse needs of our distinguished customers. Besides transactional
convenience, these cards also offer payment flexibility / financial convenience
• MCB Business Account: MCB Business Account offers a wide range of
to the customer such as 0% service fee on Installment Plan, transfer balances on
unlimited free transactions and services to cater to the business needs such as
a lower rate or even request for a Pay Order in the customer’s own name.
intercity withdrawals / deposits, Funds Transfer, Cheque book, Banker’s
Cheque, Duplicate Bank Statements, E-Statements, Rupee Traveller Cheques
MCB Prepaid Card: MCB Prepaid Cards are available in three variants to suit
(RTCs), etc.
the customers’ choice and preferences i.e. Ease, Liberty and Freedom with
• MCB Current Life Account: Offers free life insurance coverage besides
option to choose from four unique Plastic designs.
catering to the usual transactional needs.
This Visa supported card does not require prior Bank account and can be used
• MCB Fun Club – Banking for Kids: Helps the kids in developing better
at POS, Internet and ATM globally.
financial planning & management skills.
• Basic Banking Account: Values the basic banking needs of small depositors;
MCB Student Personal Loan: MCB Student Personal Loan is currently being
offers transaction facility with no maintenance charges.
offered to the MBA and Executive MBA students of Lahore University of
• Foreign Currency Current Account: Provides freedom to manage cross
Management Sciences (LUMS). Under this facility, students can take a maximum
border as well as domestic transactional needs.
of PKR 1,000,000 loan from MCB during their MBA program. These loans are
MCB Savings Deposit Product Menu offered at a very affordable rate and with easy repayment term spread over 5
years, post their MBAs.
MCB Bank offers a wide array of local and foreign currency savings products
that suit short term investment and transactional needs. Our Savings Deposit
MCB Personal Loan: MCB Bank offers Personal Loan facility to customers for
menu offers attractive profit rates on various products based on the tenor and
meeting their personal needs. Whether to purchase consumer durable goods,
profit payment option.
have a leisure trip with family or cater to an emergency medical need, MCB
Personal Loan is a Fast, Affordable and Easy Option to meet our customers’
The customers depending on their needs have the option to choose from:
financial needs. The customers are free to choose a repayment term between 1
to 5 years. MCB Personal Loan is offered at competitive markup rates to both
• PLS Savings Account: Provides steady growth to your savings and access to a
self-employed and salaried customers who meet set criteria. It is currently being
complete range of bank services.
offered in 9 major cities in Pakistan.
• Smart Savings Account: Gives the option to smartly place your savings to earn
more.
MCB Wealth Management: MCB Wealth Management helps you make the
• MCB 365 Savings Gold Account: Offers exclusive rates for the high savers
most of your wealth. It offers distribution of insurance products and mutual funds
without any transaction restrictions.
managed by the leading insurance companies & fund managers of Pakistan.
• MCB Savings Xtra Account: Tiered product offering attractive rates to suit
There is a complete range of investment & insurance products to cater to the
saving needs of the customers.
needs of the customers.
• MCB Salary Club Gold Account: A unique product offering for the
organization / company to manage its payroll by getting its employee accounts
MCB Bancassurance: As dreams pass into the reality of action, from the actions
opened with MCB on which the employees can avail free benefits & discounts
stems the dream again. This interdependence constructs the highest form of
on various services
living. Your dreams may be to give your children the best education, live a
• MCB Fun Club - Banking for Kids: We believe saving money is “never too
late, nor ever too early”. MCB Fun Club helps your kids develop the habit of dignified life after retirement, or just keep your loved ones financially secure and
saving and helps them build a better future. protected. What everyone wants from life is a continuous and genuine
• Foreign Currency Savings Account: Save and earn on your foreign currency happiness. Your action to plan for your future financially will stem your dreams.
accounts with access to all banking services. MCB Bancassurance has a financial plan that fits all your needs by fulfilling your
and your loved ones’ dreams and keeping your ‘Har Pal Mehfooz.’ Combining
MCB Term Deposit Product Menu the best of banking and financial solutions, MCB Bancassurance provides a
MCB Term Deposit products offer secure and attractive investment options (both one-stop shop solution for you by guaranteeing convenience and security with a
in Local Currency & Foreign Currency) to customers depending on their need: wide range of products available for all your financial needs. All our plans are
specially designed by reputable insurance providers. These companies have
• Flexi Deposit Account: Gives the option to the customers to conveniently excellent experience with insurance products and guarantee that your funds
choose their profit payment frequency during the placement tenure. would be in good hands as there is a team of professional investment experts in
• Mahana Profit Account: Offers attractive investment option with monthly profit each company working on making the funds grow higher in a secure manner.
pay-out. Each plan is designed to give you a peace of mind because we know that in the
end, it’s not the years in your life that counts. It’s actually the life in your years.
MCB Lending Products
MCB Car4U: MCB Car4U brings for you an affordable and flexible opportunity MCB Investment Services: Investment Services operate with the aim to help you
to have your very own car. To suit your needs, our car financing solution is make the most of your wealth with investment opportunities that match your
designed to give you unmatched convenience in helping you acquire a car of unique financial aspirations. MCB Investment Services offers distribution of
your choice in the shortest possible time at very competitive rates. mutual funds managed by the leading fund managers of Pakistan. We can
suggest the products most suited for your needs, or work with you to create a
MCB Home Loan: A home of your own is a blessing and a long-held aspiration personalized solution completely focused on your expectations of the capital
of many. Now with MCB Home Loan, fulfilling this dream has never been so markets.
easy. MCB Home Loan opens doors to numerous sensible financing options to
help you purchase, build or renovate your new / existing home. MCB Rupee Travellers Cheque: MCB Rupee Travellers Cheque is the best and
safest alternate way of carrying cash. It can be used by travelers, businessmen
MCB Cash4Cash: A finance facility for individuals for fulfilling their personal or by the general public in meeting their day-to-day cash requirements while they
Rupee Travelers Cheque

Your online shopping mate
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ANNUAL REPORT 2014
travel. It is a safe and secure way to make payments because it gives the through initial public offers, offers for sale, rights issues and private equity
purchaser security that even if the cheque is lost it can be refunded. Unlike other es placements.
of funds/remittance transfer, which can only be drawn at a particular branch and
can be encashed only at that branch, MCB Rupee Travellers Cheque can be MCB Advisory Services: Financial and Capital Raising Advisory provides our
encashed at any of our branches across the country. clients with financial advisory services, commercial structuring support and access
to capital resources to help companies successfully finance their business/project.
MCB Lockers: MCB offers the facility and comfort to operate lockers in privacy.
Lockers are available in 4 different sizes i.e., Small, Medium, Large and Extra MCB Trade Products: Trade Products provides a wide range of standard as well
Large with varied insurance coverage as per the size of the locker. Customers can as tailor-made products and solutions to trade customers from all walks of life.
choose from the available options depending upon their need and requirement. Despite having an inventory of standard market products in refined shape, specific
new-to-market products include: “Quick-LC”, which is an internal design of desktop
MCB Burqraftaar Home Remittance: MCB offers an unmatched service for application allowing customers to type-in and print out LC application form. The
overseas Pakistanis to send money home to their family and loved ones. This “XFlex” solution facilitates external export business for customers in cases where
service is FREE & INSTANT throughout our network of international send-agents transportation of documents is not available at the counters of MCB’s
and beneficiaries can collect their remittances from any of the 1200+ MCB discounting/financing branch on the date of extending financing. “MCB-TRIMS”
branches across Pakistan. facilitates the financing of inland trade through the involvement of MCB at both
ends thereby allowing an exporter to get receivables discounted, i.e. the exporter
MCB Motherland Account: MCB offers Non-Resident Pakistanis the facility to open receives payment in a given time (in 48 hours) after performing obligations.
and operate an account in their home country while still residing abroad. It is “Econ-LC” product program allows drafts/bills of exchange to be waived as a
designed to allow transferring of funds to family & loved ones back home with the requirement under LCs available by negotiation; as a consequence, there is
convenience of your own personal account. reduction in overall transaction cost. “Avalization (Export)” has been designed to
facilitate the financing of export by allowing an Exporter (Seller) to discount its
MCB Transaction Banking: Transaction Banking provides a wide range of receivables under credit granted to a counter party, i.e. Importer (Buyer), without
value-added collection & payment services to large corporations through its vast taking payment risk on the Importer (Buyer) under a contract (non LC transactions).
network of real time branches. TBD provides structured and customized Collection Under this “China LC Confirmation programme” branches of MCB’s partner bank
products enabling customers to realize their sales proceeds swiftly from across the located in Hong Kong and China add “Confirmation” to MCB LCs on “Free of
country, supported by real-time MIS reports. Cost” basis thus increasing acceptability of MCB’s Import LCs and facilitate import
customers. We overwhelmingly cherish and stay committed to support the farmers
Online Fund Transfer (OFT): This web based electronic fund transfer facility has in view of unparalleled significance of agri sector in our national life aligned with
been designed to enable large network of franchises /dealers/distributors to economic priorities of the country and role of our bank as a responsible corporate
conduct real time branchless transactions through secured MCB website. citizen.
Dividend Warrant Management: TBD provides a complete and comprehensive

dividend solution to customers from printing of dividend warrants to subsequent MCB Digital Banking Products and Services
encashment though MCB branches & followed by a complete reconciliation.
Foreign dividends are also managed end to end by TBD. Branchless Banking-MCB Lite: In order to further its customers, the Bank has
launched a technology based mobile wallet named MCB Lite. MCB wallet along
Tejarat Card: Tejarat card is a closed loop debit card designed for cash-less with the accompanying VISA card allows customers to handle their daily
electronic cash transactions empowering businesses to conduct branchless transactions and payments in an efficient and real time manner while also
transactions through Point of Sale (POS) terminal. digitalizing the economy. With this product, MCB has initiated the drive for
contributing to the economy by facilitating cash-less transactions in Pakistan.
Sub Clearing Arrangement: Micro finance banks that do not have operating
licenses for clearing can now rely on MCB to act as their sub-clearing agent for MCB E-Commerce: With the introduction of its world class online payment
processing transactions through NIFT. gateway, in partnership with MasterCard International, MCB is poised to play a
major enabling role in the imminent ecommerce boom in Pakistan.
Payment Station: Corporate Payment Station “Pay Direct” offers a real-time
comprehensive payment & transfer mechanism for Corporate & large business MCB eGate: equips websites to accept payments reliably and securely from both
entities. This will allow our customers to print Corporate cheques, issue Bankers credit and debit cards. The key benefit through this initiative is that businesses can
cheque at remote locations, transfer funds to multiple accounts within MCB now accept payments from any company, trader, and proprietor with a Visa,
network & to networks of other banks through IBFT. MasterCard or Union Pay International branded plastic anywhere in the world.
Thus, eGate opens up entire new markets for local businesses as card holders all
TBD - FI Cash Management: We offer unique cash management solutions to our over the world become their potential customers.
local Correspondent Banks & Non-Bank Financial Institutions to meet the particular
requirements and report needs. MCB Visa Debit Card: With global acceptance at over 20 million merchants and
1.5 million ATM’S worldwide, MCB’s Visa Debit Cards are a way towards the
future. We are proud to have Pakistan's first chip-based Visa Debit Card which
MCB Corporate Financing: MCB Corporate Financing provides access to allows customers to enjoy unmatched convenience, enhanced security and
diversified financing options, including working capital loans, term loans, trade round-the-clock accessibility to their funds. MCB Visa Debit Card is also accepted
finance services and investment banking. by over 6,000 ATMs throughout the country. Not only that but it also offers
innovative promotional schemes designed to reward customers every time they use
MCB Project & Structured: Finance structure, where the loan is tightly structured their card at point of sale (POS) for shopping, dining, fuel, travelling etc. With the
around the cash flows, risks are allocated amongst various stakeholders, and there MCB Visa Debit Card, our customers will never feel the need to carry cash on
is limited or no recourse to the sponsors. them. In 2014, the Visa Debit Card portfolio increased by the addition of VISA
Debit Platinum. Matching the persona and lifestyle of high-net-worth customers, the
MCB Syndicated Loans and Debt Capital Markets: MCB Syndicated Loans and VISA Debit Platinum card is a status symbol. Its elegant product packaging,
Debt Capital Markets involve arrangement, underwriting and placement services dedicated services and complimentary benefits ensure that customers feel
for significant financing requirements by large corporate and institutional clients to privileged! This is a payment instrument focused on catering to the high-end
other financial institutions or through the debt capital markets. segment by providing higher daily limits for cash withdrawal and shopping.
MCB Quasi Equity/Hybrid Instruments: MCB Quasi Equity/Hybrid Instruments MCB Mobile: MCB Mobile is a globally recognized award winning mobile
structure and place a category of debt that has some characteristics of equity such payments service that has an enviable track record. With billions in digital
as being unsecured, subordinated or with a potential equity upside. payments, processed across millions of transactions, the service is the first to offer
ease in making payments directly from your mobile phone, irrespective of the
MCB Equity Capital Raising: MCB Equity Capital Raising relates to raising capital telecom provider. It is an easy and secure way to transfer money, carry out
for our clients by offering common or preferred equity to public or private investors, balance inquiry, check mini-statement, buy top-ups, pay bills and much more.

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ANNUAL REPORT 2014
MCB Internet Banking: MCB Internet Banking was launched to bring the project or there may be working capital requirements. Long term financing needs
state-of-the-art online banking experience for its customers. The bank implemented will be met through Term Finance whereas working capital requirements will be
Oracle’s Flex Cube Direct Banking which comes with enhanced securities, met by production finance.The plans are:-
self-registration, friendly interface and a host of functionalities/services. This
implementation enables the bank to deepen its digital banking footprint while • SHADABI PLAN (Agri production Finance)
equipping millions of its customers to avail normal banking services remotely at • KHUSHALI PLAN (Agri Development Finance)
their own convenient time and place.
Shadabi Plan: covers the agriculture loan products for the production requirements
MCB Call Center: In the modern world, customers prefer more convenient ways of of farm & non-farm activities of the farming community. Financing products
conducting their banking transactions and MCB caters to this need with its state of extended under this category are Agriculture Running Finance-Revolving (ARF-R),
the art Call Center services which are available around the clock. The customer no Agriculture Production Finance (APF) and Agriculture Production Finance Growers
longer has to visit the branch to manage his/her bank account. Apart from this, it (APF-G). All working capital needs of non-farm are also covered under Shahdabi
provides personalized banking consultancy services to cater to different financial Plan through APF/ARF.
needs and requirements of different customers.
Khushali Plan: ADF caters the credit needs of farmers, generally long term,
MCB ATMs: MCB has one of the nation's largest ATM network with 930+ ATMs pertaining to development projects related to both farm & non-farm sectors. Under
covering more than 200 cities across the country and still growing. MCB ATMs Khushali Plan, different products are offered to cater sector specific credit needs.
provide our customers with 24-hours of convenience to withdraw cash, view their The products offered are ADF (Tractor Finance), ADF(Aabiari Finance), ADF (Dairy
mini-statement, pay utility bills, buy mobile top-ups, transfer funds and much more! & Meat finance), ADF (Murghbani Finance), ADF (Baghbani Finance), ADF
(Mahigeri Finance) and ADF (Zari Technology Finance).
SMS Alerts: MCB is proud to offer a free SMS Alerts service which allows The amount of finance sanctioned depends upon the credit requirement and
customers to keep track of all of their banking transactions throughout the day. By collateral. Non-farm credit (poultry, fisheries, apiculture, sericulture etc) and
applying to this service, customers receive real time SMS updates whenever they financing for land leveling/development, heavy equipment, agriculture machinery,
conduct a transaction on their MCB bank accounts. It is a great way of keeping vehicles/transport for Agriculture purpose are covered under this plan. There may
yourself up to date with how much spending has been done on their accounts. Our be other development projects proposed by the farmers falling within the ambit of
customers can rest easy with our SMS Alert service as it is completely secure and agriculture financing, which can be considered under this plan.
available 24 hours a day and 7 days a week. MCB has been in the service of extending agri credit facilities to the farmers since its
inception and has played significant role for the promotion and growth of agri sector.
MCB E-Statements: MCB E-Statement initiative adds an additional level of
convenience to online banking. No need to wait for postal deliveries, e-Statements MCB Privilege Banking: As the first local bank to introduce high end retail banking,
are sent directly to your inbox which make it easier to retrieve information when MCB Privilege through its dedicated, world-class Privilege Centers offers a higher
needed. They're safer, more secure & faster than traditional mailings and, of level of personalized services, more rewarding in-branch experience and a wide
course, they're free. Paperless bank statements are better for you and better for the array of deposit and investment products that are tailored to meet the financial
environment. expectations of our affluent clientele. As members of MCB Privilege, customers
experience unparalleled advantages that put them ahead of others. MCB's
Utility Bill Payment Services: MCB Bank’s Utility Bill Payment Services offers a dedicated Privilege Centers wait to welcome you in Karachi, Lahore, Islamabad,
wide range of utilities and customers can conveniently pay their bills online Faisalabad, Sialkot, Rawalpindi and Multan with plans to expand to more
(through MCB Internet Banking, MCB Mobile and MCB Lite) or at the nearest ATM locations.
or MCB Branch. We value your time and are continuously striving to increase the
list of utility bills which can be paid through our channels. MCB Ladies Branch: MCB’s very first Ladies Branch (E-11 Markaz, Islamabad) is
being managed predominantly by female staff focusing on banking needs of all
MCB Merchant Acquiring: MCB has a strong acquiring network of over 4,000 segments especially female clients. The aura of trust and confidence that female
merchants at key locations across Pakistan. Our Point of Sale (POS) network is fully staff carry will encourage customers to discuss and find quick & comfortable
compliant with international safety & quality standards and accepts Visa, banking solutions for their financial needs.
MasterCard and Union Pay payments from all over the world. Our Acquiring team Introduction of MCB Ladies Branch also emphasizes MCB’s prominent role in
is one of the best in the business and provides excellent round the clock support advocating equal employment opportunities for females which is a major step
throughout the year. We also offer closed loop bulk payment solutions and towards recognizing the importance of the role of females in the country.
standing instructions for card acceptance.
MCB Islamic Banking Products: MCB-Islamic Banking Group (IBG) provides
MCB Discounts & Loyalty: At MCB Bank, our mission is to create as much value Shari'ah compliant solutions to its valued customers to fulfill their deposit as well as
as possible for our esteemed customers. We take this mission very seriously and in financing needs. Customers’ needs on deposit side are being satisfied keeping in
the same spirit, our Discounts & Loyalties team has put together more discount view their business, short term and long term investment requirements; whereas on
offers at top merchants for MCB card customers (Debit, Credit, Prepaid and Lite) financing side, the Working Capital, Capital Expenditures, Trade Business and
than any other bank in the country. Due to the variety of discounts at 100+ different Consumer requirements are being satisfied through available Sharia compliant
brands ranging from dining to shopping, we proudly claim that our cards pay for financing products. In addition to existing IB products, IBG believes in facilitating
themselves. its customers by offering new products both on assets and liability side. This year,
IBG has introduced new variants of its asset based products for satisfying specific
MCB AGRI Products: MCB is committed to meet the diversified banking needs of demands of its customers. MCB-Islamic Banking is offering its product through its
the farming community as integral part of overall business strategy of the bank 27 dedicated Islamic Banking branches in 14 cities across the country.
aligned with national objective of achieving self-sufficiency in food security for the
people of Pakistan. Bank fully supports SBP/Govt initiatives launched for Service Quality: To ensure a culture of Quality Service for our customers, we at
strengthening agriculture sector and recognizes its contribution & significance in MCB Bank Ltd., have a dedicated Service Quality Division. The objective of this
national economy. Division is to strengthen and continuously improve the Bank’s service culture. We
Dedicated and specialized staff, supervised by Agriculture Credit Division is value our customers’ feedback and conduct customer satisfaction surveys
posted in agri lending branches to cater for strong business relationships and periodically. The Division has a dedicated team at the Complaint Resolution Unit,
facilitation. The bank’s extensive branch network in all the provinces and which caters to all complaints received in the Bank through different channels and,
diversified product range extends our reach of agri credit facilities across the in liaison with other Groups / Divisions, provides resolution to customers.
country, comprehensively meeting all banking needs of the farmers pertaining to
Farm & Non-Farm activities. Offshore Banking - OBU Bahrain: MCB Bank offers a variety of offshore banking
The agriculture financing products are offered under the two main plans which services like current, savings & term deposits, trade finance, syndicated transaction
cover requirements of both production and development needs of farm & non-farm and other funded/unfunded banking facilities mainly in US$ to eligible and select
activities. The farmers may need long term finance to undertake development offshore clients through its Wholesale Bank Branch in Bahrain.

23
Products & Services
MCB Bank - Sri Lanka
Account
24
ANNUAL REPORT 2014
Savings Account depending on their requirement to protect their documents, jewelry or

The smarter your savings, the higher your returns! any other valuables.
MCB Savings Account is designed to encourage customers to maintain
a healthy account balance, which keeps growing day by day. A tier Foreign Currency Accounts
based interest rate is available for both Personal and Business Banking When you need financial diversity!
customers to enjoy an attractive return on their funds. One of the salient Save in any designated foreign currency and enjoy attractive returns on
features of the Savings Account is that customers have the freedom to your foreign currency savings account. Further we offer a wide range
utilize their funds to meet their day to day financial needs with no of account types for personal and business clients under special
restrictions to the number of transactions they perform. schemes approved by the Exchange Controller of Sri Lanka, such as
Foreign Exchange Earner’s Accounts and Special Foreign Investment
Current Account Deposit Accounts.
Take account of things that matter!
MCB Bank Current account allows our customers to distinguish Leasing
themselves in the financial market with secure and faster cheque Every road is your runway!
clearing processing to carry out their transactions with great level of We offer leasing solutions to help our customers to drive the vehicle that
confidence. MCB Business Account is a special current account they always have dreamt of. Our leasing packages come with
designed for business clients who maintain a healthy average balance competitive interest rates and different repayment tenures up to five
and perform high volume of transactions by offering fee waivers for years. Also we finance for both brand new and reconditioned vehicles
selected banking services, coupled with a host of value additions. to make the leasing package more affordable for each customer.
MCB Kidz Club Remittances

Members Only! Our customers can avail a comprehensive range of money transfer
Children are the wealth of our nation. We offer ample encouragement options including Pay Orders, Demand Drafts and Telegraphic
and incentives to assure them of a future that’s secure. MCB Kidz Club Transfers. Furthermore, we always ensure our customers get the best
Account offers an attractive interest rate plus a wonderful gift scheme exchange rates at conversion. As an International bank that has a wide
based on the account balance. This encourages parents and children correspondent network our customers can be certain that their money is
to grow their account balance in order to enjoy the financial return as secure and reach its destination in the fastest time possible.
well as to collect the gift items reaching the specific account balances.
Trade Services
Fixed Deposits Business is a pleasure!
The future beckons! Empowering individuals and businesses to reach their highest potential
Our Term Deposit Accounts are designed to suit the diversified is foremost on our minds, as we streamline and customize our processes
investment requirements of our customers. Starting from 7 Days Call and product portfolio. This is achieved by maintaining a comprehensive
Deposits, product range extends to Term Deposits that could be fixed up range of trade products and services, offering convenient and secure
to 4 Years. Further, we offer the option of obtaining the interest at modes to transact with their business partners. These include Letters of
maturity or specific interim periods (monthly/quarterly) depending on Credit (LC), Collections, LC Advising, various modes of Guarantees
the customer’s requirement for funds. and Bonds.
MCB Smart Card SME & Corporate Financing

Carry the Bank with you - round the clock, year-round! MCB Smart We offer diversified finance options for both Small & Medium
Card provides access to Savings / Current account 24 hours a day, Entrepreneurs and Corporate customers to achieve success in their
right throughout the year. Our ATM connectivity extends to a network business. These financing options range from overdrafts, leasing for
with over 700 ATMs Island wide. Transactions using MCB Bank ATMs vehicle and machinery, working capital loans, term loans, and trade
are free of charge and also three free transactions are offered for a finance solutions and structured project financing in order to cater to the
month via other bank ATMs connected to the sharing network to offer evolving needs of our Business Banking customers.
convenience to customers.
Islamic Banking
Virtual Banking A right way of Banking for a right way of Life!
Wherever, whenever! MCB Islamic Banking Division is one of the pioneers to introduce
At MCB Bank we relentlessly dedicate our time to trying to make Islamic Banking services in Sri Lanka, which commenced operations in
banking more convenient for our customers. Virtual Banking helps March 2006. Since then the Division has gained a rapid growth
customers to stay updated on their account activities from wherever they among the Islamic Finance Sector of the country by offering a fully
are, and carry out their banking transaction at a time convenient for fledged Shariah compliant product range to its customers. Our savings
them instead of restricting themselves to the standard banking hours. product range (Al-Makhraj Savings and Term Deposits) offers attractive
Local and overseas funds transfer, schedule of Standing Instructions and profit sharing ratios whilst, the I anat Current Account offers convenient
Payments, secure communication link to upload documents are some of and secure ways to transact with a personalized cheque book. In view
the salient features bundled with the product. of Business Clients, a wide range of financing products including
Ijarah, Murabaha, Diminishing Musharika facilities, working capital
Safe Deposit Lockers and structured project financing solutions are available along with a
Where safety is a promise! wide range of trade services.
MCB Safe Deposit Locker service is by far the most convenient way to Islamic Banking customers can also enjoy convenient banking solutions
secure the valuables of our customers. We pride ourselves in offering such as ATM services, Virtual Banking and extended banking hours
our customers ease of mind, and this is yet another service that from 9a.m. to 4p.m. on weekdays plus Saturday Banking services.
highlights our commitment in providing everything necessary to
accommodate their needs. We also offer various types of lockers

25
Corporate
Information
26
ANNUAL REPORT 2014
Board of Directors
Mian Mohammad Mansha
Chairman
(Non-Executive Director)
Auditors
M/s. A. F. Ferguson & Co.
S. M. Muneer (Non-Executive Director) Chartered Accountants
Vice Chairman
Tariq Rafi (Non-Executive Director)
Shahzad Saleem (Non-Executive Director) Legal Advisors
M/s. Khalid Anwer & Co.
Sarmad Amin (Non-Executive Director)
Advocates & Legal Consultants
Aftab Ahmad Khan (Non-Executive Director)
Mian Raza Mansha (Non-Executive Director) Principal/Registered Office
Mian Umer Mansha (Non-Executive Director) MCB Building, 15-Main Gulberg
Dato’ Seri Ismail Shahudin (Non-Executive Director) Jail Road, Lahore, Pakistan.
Ahmad Alman Aslam* (Non-Executive Director)
Muhammad Ali Zeb (Non-Executive Director) Contact us:
UAN: +92 42 111 000 622
Mohd Suhail Amar Suresh (Non-Executive Director)
Email: [email protected]
Imran Maqbool (Executive Director) Visit us: www.mcb.com.pk
President & CEO
Registrar’s and Share

Audit Committee Registration Office
Ahmad Alman Aslam* (Non-Executive Director)
Chairman Head Office
M/s. THK Associates (Pvt.) Ltd.
Tariq Rafi (Non-Executive Director)
2nd Floor, State Life Building No.3
Aftab Ahmad Khan (Non-Executive Director)
Dr. Ziauddin Ahmed Road Karachi, Pakistan.
Dato’ Seri Ismail Shahudin (Non-Executive Director)
Branch Office
Chief Financial Officer M/s. THK Associates (Pvt.) Ltd.
Salman Zafar Siddiqi 2nd Floor, DYL Motorcycles Ltd. Office Building
Plot No. 346, Block No. G-III, Khokhar Chowk
Main Boulevard, Johar Town, Lahore, Pakistan.
Company Secretary
Fida Ali Mirza
* Independent Non-Executive Director under CCG having relevant industry experience.
27
Board of Directors
28
ANNUAL REPORT 2014
29
Board of Directors
MIAN MOHAMMAD MANSHA

Chairman
Mian Mohammad Mansha started his career at the age of 24 as the CEO for Nishat Mills Ltd. At present, the business group is one
of the leading and most diversified in South East Asia, having presence in the Textile, Cement, Insurance, Banking, Financial Services,
Power Generation, Hotel & Hospitality, Dairy, Paper Products and Aviation sectors. It operates in various countries across the globe
including Sri Lanka, Azerbaijan, UAE, USA, Honk Kong and Bahrain.
Mr. Mansha has served as Chairman of MCB Bank since its privatization from 1991 till mid-1995 and then 1997 till date. Presently,
he is the Chairman of Business Strategy & Development Committee, Human Resource & Remuneration Committee and Write Off &
Waiver Committee, at MCB Bank Limited. Previously, he has been associated with Punjab Mineral Company (Pvt.) Limited, Civil Aviation
Authority, Board of Investment (BOI), Punjab Board of Investment & Trade (PBIT), Pakistan Industrial Development Corporation (Pvt.) Limited
(PIDC), Commonwealth Business Council UK, Int’l Advisory Board, Babson College USA, National Management Foundation, Textile
College Faisalabad and Government College of Faisalabad. He has also served as the president for All Pakistan Textile Mills Association
(APTMA) and APTMA, Punjab.
He was presented with Pakistan’s Civil Award, the Sitara-e-Imtiaz, for his contributions to industrial development, in 2004.
Directorships:
• MCB Bank Limited
• MCB-Arif Habib Savings and Investments Limited
• MCB Leasing CJSC Azerbaijan
• Shalamar Medical & Dental College
• Foundation for Advancement of Engineering Sciences & Advanced Technologies
30
ANNUAL REPORT 2014
S. M. MUNEER
Vice Chairman
With experience in sectors ranging from tanneries, textiles, Mr. Muneer is a consummate industrialist. He has been awarded with
The Best Export Performance trophy by the Federation of Pakistan Chamber of Commerce & Industry (FPCCI), the Gold Medallion
Award from the International Export Association, UK and Best Businessman of the Year Award from FPCCI.
In addition, he has received the Sitara-e-Isaar and the Sitara-e-Imtiaz in 2006 and 2007 respectively by the President of Pakistan.
His contributions and achievements go beyond the economic sphere into the education sector as well. He was awarded an
Honorary PhD degree by the Governor of Sindh and is also a member of the Board of Directors of CBM and Greenwich
College, Karachi and the Director of Shaukat Khannum Cancer Hospital, Lahore. Mr. S. M. Muneer is the Chairman of Chiniot
Anjuman Islamia running many Hospitals, Maternity Homes, Schools & Colleges in Karachi, Faisalabad and Chiniot. Mr. S. M.
Muneer was awarded “Life Time Achievement Award” by the President of Pakistan, in the President House in 2012.
Directorships:
• Din Textile Mills Limited
• Din Leather (Pvt.) Limited
• Din Farm Products (Pvt.) Limited
• Trade Development Authority of Pakistan (TDAP)
• Din Industries Limited
• Arabian Sea Country Club
31
TARIQ RAFI
Director
Mr. Tariq Rafi is the Chairman of Siddiqsons Group and is a recipient of the coveted Civil Award Sitara-e-Imtiaz and the Best
Businessman of the year award. He is also the Honorary Counsel General of Republic of Serbia. At MCB Bank, he is on the
board since privatization of the bank and presently is the member of the Audit Committee and Write-off & Waiver Committee.
Directorships:
• Siddiqsons Limited
• Siddiqsons Tin Plate Limited
• Central Depository Co. of Pakistan Limited
• Triple Tree (Pvt.) Limited
32
ANNUAL REPORT 2014
SHAHZAD SALEEM
Director
Mr. Shahzad Saleem is the Chairman of Nishat Chunian Group. He completed his Master’s in Business Administration in 1989
from Lahore University of Management Sciences (LUMS) and in 1990 he laid the foundation of the Nishat Chunian Group with
the setting up of a Spinning Mill.
The group has since diversified into weaving, dyeing/printing and power generation. Nishat Chunian Ltd. ranks amongst the
top 5 textile companies in Pakistan. Shahzad served on the board of Adamjee Insurance Company Ltd. from 2004-2009. He
is on the board of MCB Bank since 1996 and played a key role in the successful ventures undertaken by MCB Bank including
listing on the London Stock Exchange and sale of 20 percent stake of MCB Bank to Maybank, Malaysia.
Apart from work, Shahzad Saleem believes strongly in giving back to society. He has set up a school and hospital for the
underprivileged; he serves on the board of Punjab Institute of Cardiology and is in the process of setting up a state of the art
not-for-profit hospital In Lahore.
With strong ties to LUMS, Shahzad continues to serve the institution in various capacities. He is the founder of the LUMS Alumni
Association and has served as its President for several tenures. He is currently serving on the Board of Trustees of LUMS and is
also the president of the Alumni Association.
Directorships:
• Nishat (Chunian) Limited
• Nishat Chunian Power Limited
• Saleem Memorial Trust Hospital
• NC Properties (Pvt.) Limited
• NC Entertainment (Pvt.) Limited
• NC Electric Company Limited
• NC Energy Limited
• NC Holdings Limited
33
SARMAD AMIN
Director
Mr. Amin has over 34 years of rich business experience in the fields of construction, electrical equipment’s manufacturing and
textiles. He has been serving as Chairman of M/s. Samin Textiles Limited and also has affiliation with Lahore Chamber of
Commerce Industry (LCCI) and All Pakistan Textile Mills Association (APTMA) as a member.
At MCB Bank, he is the Chairman of the Committee on Physical Planning & Contingency Arrangements, a member of the Risk
Management & Portfolio Review Committee and SBP Report Compliance Monitoring Committee.
Directorships:
• Samin Textiles Limited
• Euronet Pakistan (Pvt.) Limited
• MNET Services (Pvt.) Limited
• Schneider Electric Pakistan (Pvt.) Limited
• Alstom Grid Pakistan (Pvt.) Limited
34
ANNUAL REPORT 2014
MIAN RAZA MANSHA

Director
Mian Raza Mansha has more than 20 years diversified professional experience in various business sectors including Banking,
Textile, Power, Cement, Insurance, Hotels, Properties, Natural Gas, Agriculture, Dairy etc. He received his Bachelors degree
from the University of Pennsylvania, USA.
Mr. Raza joined MCB Bank in 1997. At MCB, he is the Chairman of the IT Committee and a member of Business Strategy &
Development Committee and Human Resource & Remuneration Committee.
Directorships:
• D. G. Khan Cement Company Limited
• Nishat Paper Products Co. Limited
• Nishat Hotels & Properties Limited
• Sui Northern Gas Pipeline Limited
• Nishat Developers (Pvt.) Limited
• Adamjee Life Assurance Company Limited
• MCB Financial Services Limited
• Nishat (Gulberg) Hotels and Properties Limited
• Nishat (Raiwind) Hotels and Properties Limited
• Nishat (Aziz Avenue) Hotels and Properties Limited
• Nishat Dairy (Pvt.) Limited
• Euronet Pakistan (Pvt.) Limited
• Nishat Agriculture Farming (Pvt.) Limited
35
AFTAB AHMAD KHAN
Director
Mr. Aftab Ahmad Khan is a fellow member of Institute of Chartered Accountant of Pakistan. He has over 50 years of diversified
professional experience in various sectors. Presently, he serves on the board of various organizations i.e. Commercial Bank,
Textile, Paper, Energy, Hotel and Tourism sectors. He had also served on the Punjab Industrial Development Board and in
public sector organizations such as Ghee, Sugar and Rice mills. At MCB Bank, he is also a member of the Audit Committee, IT
Committee and Write-off and Waiver Committee.
Directorships:
• Nishat Paper Products Co. Limited
• Nishat (Chunian) Limited
• Nishat Chunian Power Limited
• Nishat Energy Limited
36
ANNUAL REPORT 2014
MIAN UMER MANSHA

Director
Mian Umer Mansha was elected as Director to the MCB Board in November 1997 and served till September 2007. He was
re-elected as a Director at MCB Bank in the 61st AGM held on March 27, 2009. Presently, he is the Chairman of the Risk
Management & Portfolio Review Committee and is a member of Business Strategy & Development Committee and Physical
Planning and Contingency Arrangements at MCB Bank.
In addition, he has been serving on the board of various other businesses. Mr. Umer received his Bachelors degree from Babson
College, Boston, USA.
Directorships:
• Nishat Mills Limited
• Adamjee Insurance Company Limited
• Adamjee Life Assurance Company Limited
• Nishat Developers (Pvt.) Limited
• Nishat Dairy (Pvt.) Limited
• Nishat Agriculture Farming (Pvt.) Limited
• Pakistan Business Council
37
AHMAD ALMAN ASLAM
Director
Mr. Aslam has four decades’ professional experience in investment banking, corporate finance and advisory services. He is
managing partner of Ahmad Alman Aslam and Associates, an enterprise engaged in investment banking. Mr. Aslam started his
career with Citibank in 1975 and continued with Citibank for 28 years, serving in various capacities. He was the Managing
Director, based in New York, responsible for all debt issued by borrowers in the emerging markets. Mr. Aslam has also served
as an advisor to EMP Washington, a US$ 6 billion private equity fund.
In Pakistan, he has served on the boards of the State Bank of Pakistan, OGDC, Adamjee Insurance, IGI Asset Management,
Punjab Coal Mining Company, The Bank of Punjab, Punjab Small Industries Corporation and the Private Power and Infrastructure
Board.
Mr. Aslam has a Masters in Business Administration from Punjab University and has attended the program for Management
Development at Harvard University, Cambridge.
38
ANNUAL REPORT 2014
DATO’ SERI ISMAIL SHAHUDIN

Director
Dato’ Seri Ismail Shahudin was appointed onto the Board of MCB on October 26, 2010, representing Malayan Banking
Berhad (Maybank). He was appointed as Director of Maybank on 15 July 2009. He serves as Chairman of Credit Review
Committee of the Board and is currently Chairman of Maybank Islamic Berhad, a wholly owned subsidiary of Maybank. He has
held senior positions in Citibank, serving both in Malaysia and New York, and in United Asian Bank and Maybank. He was
Chairman of Bank Muamalat Malaysia Berhad from 2004 until his retirement in July 2008. In 2002, he assumed the position of
Group Chief Executive Officer of MMC Corporation Berhad prior to his appointment to the Board of Bank Muamalat Malaysia
Berhad. He is also a Director of several public listed companies which include EP Manufacturing Berhad, and Aseana Properties
Limited, a company listed on the London Stock Exchange and Opus International Consultants Limited, a company listed on New
Zealand Stock Exchange.
Directorships:
• Malayan Banking Berhad
• EP Manufacturing Bhd
• Aseana Properties Limited
• Opus International Consultants Limited
• Maybank Islamic Berhad
• EP Metering Services Sdn Bhd
• Peps-JV (M) Sdn Bhd
• UEM Group Bhd
• Opus Group Berhad
• Sutera Mentari Sdn Bhd
• Citra Busana Sdn Bhd
• PKEINPK Sdn Bhd (Formerly known as Perbadanan Kemajuan Ekonomi Islam Negeri Perak)
• Dewan Negara Perak
• UEM Environment Sdn Bhd
• Kualiti Alam Sdn Bhd
• Projek Penyeleggaraan Lebuhraya Berhad
• Yayasan Sultan Azlan Shah
• KUISAS Berhad (Kolej Universiti Islam Sultan Azlan Shah)
• Faber Group Berhad
• Majlis Agama Islam dan Adat Melayu Perak
39
MUHAMMAD ALI ZEB
Director
Mr. Zeb is currently the CEO of Adamjee Insurance Company Limited. He is fellow member of Institute of Chartered Accountants of
Pakistan since 1994 and has 20 years of diversified professional experience in the fields of Finance, Insurance & Manufacturing.
He also holds council memberships of Insurance Association of Pakistan and Pakistan Insurance Institute.
He was co-opted as a Director on MCB Board in June 2013. At MCB Bank Limited, he is also member of Risk Management
and Portfolio Review Committee.
Directorships:
MCB Bank Limited
Adamjee Insurance Company Limited
Adamjee Life Assurance Company Limited
40
ANNUAL REPORT 2014
MOHD SUHAIL AMAR SURESH

Director
Mr. Mohd Suhail Amar Suresh has more than 29 years of global progressive experience in various areas related to Corporate
Strategy, Business Development & Marketing, Information Technology, Systems and Applications Architecture within the Banking
and Telecommunications Industries, both locally and regionally.
His most recent appointment is as the Group Chief Information Officer (GCIO) and the Head of Maybank Shared Services for
the Maybank Group, primarily responsible for transforming IT within Maybank into an IT Service Delivery for the Group. Prior to
this, Mr. Suhail was the Head of Virtual Banking & Payments, primarily responsible for developing and implementing the short
and long-term digital strategy for Community Financial Services (CFS) across the Group.
Prior to his appointment at Maybank, Mr. Suhail was the Managing Director of Malaysian Electronic Clearing Corporation Sdn
Bhd (MyClear), a wholly owned subsidiary of Bank Negara Malaysia, responsible for the growth and success of e-payment
infrastructure and services within the financial industry across Malaysia. He also served as the Group Managing Director of
Malaysian Electronic Payment System Sdn Bhd (MEPS), and was responsible in defining the framework for MEPS to be the
centralized national switch. Mr. Suhail also held several senior positions in the Information Services Division of a commercial
bank. In his various other capacities in multinational organizations, Mr. Suhail was overseeing the overall technology investments
and directing the implementation as well as the integration of Technology services serving various stakeholders within the Asia
Pacific region.
Mr. Suresh was co-opted as Director on MCB Board on February 24, 2014. At MCB, he is also member of Business Strategy
& Development Committee and Risk Management & Portfolio Review Committee.
He received his Masters degree from Charles Sturt University, Australia in 2002.
41
IMRAN MAQBOOL
President & CEO
Mr. Imran Maqbool serves as President & Chief Executive Officer of MCB Bank Limited. He is a seasoned professional with over
three decades of diverse banking experience. Before taking on the CEO position, he was Head of Commercial Branch Banking
Group, where he successfully managed the largest group of the Bank in terms of market diversity, size of workforce, number of
branches on countrywide basis and diversified spectrum of products. In earlier roles, he worked as Head Wholesale Banking
Group–North, remained Country Head of MCB Bank’s Sri Lanka Operations, spearheaded Islamic Banking and Special Asset
Management Groups.
Prior to joining MCB Bank in 2002, Mr. Maqbool was associated with local banking operations of Bank of America and
CitiBank for more than seventeen years. He worked at various senior management level positions in respective banks. He is
currently the Chairman of Pakistan Banks’ Association (PBA). Mr. Maqbool holds an MBA from Institute of Business Administration
(IBA) Karachi and MS in Management from MIT Sloan School of Management, Massachusetts USA.
Directorships:
• MCB Bank Limited (President & CEO)
• Adamjee Insurance Company Limited
• MCB Financial Services Limited
42
ANNUAL REPORT 2014
Board Committees
Audit Committee Business Strategy and Development Committee
Meetings held: 6 Meetings held: 4
Composition: Composition
1. Mr. Ahmad Alman Aslam – Chairman 1. Mian Mohammad Mansha – Chairman

2. Mr. Tariq Rafi 2. Mr. S. M. Muneer
3. Mr. Aftab Ahmad Khan 3. Mian Raza Mansha
4. Dato’ Seri Ismail Shahudin 4. Mian Umer Mansha
5. Mr. Ahmad Alman Aslam
TERMS OF REFERENCE: 6. Mr. Mohd Suhail Amar Suresh
Determining appropriate measures to safeguard the Bank’s 7. President & CEO

assets, reviewing quarterly, half-yearly and annual financial
statements of the Bank, prior to their approval by the TERMS OF REFERENCE:
Board of Directors, focusing on major judgmental areas;
significant adjustments resulting from the audit; the going The main terms of reference of the Committee are to review
concern assumption; any changes in accounting policies and develop vision and mission statements and core
and practices; compliance with applicable accounting values for MCB both from long and short term perspective,
standards; compliance with listing regulations and other develop Bank’s initiatives relating to business philosophy
statutory and regulatory requirements; and significant related and acquisition, strategic investment and divestment, capital
party transactions, reviewing preliminary announcements of raising exercise, strategic alliances and brand management,
results prior to publication, facilitating the external audit and review the important matters with respect to policy initiatives;
discussion with external auditors of major observations arising business organization; oversee expansion plans and
from interim and final audits and any matter that the auditors contingency planning relating to business realignment, review
may wish to highlight (in the absence of management, where and devise short, medium and long term business plans and
necessary), reviewing management letter issued by external policies based on strategy, future direction and milestones
auditors and management’s response thereto, ensuring set by the Board, monitor the progress of the key strategy
coordination between the internal and external auditors of the initiatives undertaken by the Bank and undertake such other
Bank, making recommendation to the Board of Directors the tasks as may be delegated by the Board from time to time.
appointment of external auditors, their removal, audit fees,
the provision by the external auditors of any service to the Human Resource and Remuneration Committee
Bank in addition to audit of its financial statements, reviewing Meetings held: 4
of the scope and extent of internal audit and ensuring that
the internal audit function has adequate resources and is Composition
appropriately placed within the Bank, consideration of major
findings of internal investigations of activities characterized 1. Mian Mohammad Mansha – Chairman
by fraud, corruption and abuse of power and management’s 2. Mian Raza Mansha
response thereto, ascertaining that the internal control systems
including financial and operational controls, accounting
systems for timely and appropriate recording of purchases 4. President & CEO
and sales, receipts and payments, assets and liabilities and
the reporting structure are adequate and effective, reviewing TERMS OF REFERENCE:
of the Bank’s statement on internal control systems prior to
endorsement by the Board of Directors and internal audit The main tasks of the Committee shall be to ensure that the
reports, instituting special projects, value for money studies existing policies are reviewed periodically, and, as necessary,
or other investigations on any matter specified by the Board revised and recommended to the Board, in order to attract
of Directors, in consultation with the CEO and to consider and retain highly qualified employees, the latest entry-level
remittance of any matter to the external auditors or to any other procedures are put in place for recruitment of entrants, the
external body, determining compliance with relevant statutory existing training facilities for the new entrants as well as for
requirements, monitoring compliance with the best practices up-gradation of skill level of all employees are reviewed
of corporate governance and identification of significant and revised, proper classification and reclassification of
violations thereof and considering any other issue or matter as employees’ pay scales, job description, and methods of their
may be assigned by the Board of Directors. periodical review are put in place, an objective criterion
43
for work appraisal/performance is developed & linked Committee on Physical Planning and Contingency
with the annual merit increase, a review is undertaken of Arrangements
the organizational structure to bring it in line with business Meetings held: 4
strategy & development plan and approve an organizational
set up or any revision in the existing set up taking into account Composition
the recommendations of the President, an in-house human
resource expertise is developed. In case there is inadequacy 1. Mr. Sarmad Amin – Chairman
of in-house expertise, the Committee is empowered to hire
2. Mr. S. M. Muneer
Consultant(s), as appropriate, to undertake market analysis
of above policies with a view to developing MCB policies, 3. Mian Umer Mansha
effective management information system is developed to 4. President & CEO
monitor the implementation of policies as approved by the
Board, the selection, evaluation, compensation (including TERMS OF REFERENCE:
retirement benefits) and succession planning of the CEO and
recommend to the Board, the consideration and approval on The main terms of reference of the Committee are to develop
recommendations of CEO on such matters for key management and device an overall plan for physical infrastructure and
positions who report directly to CEO, the selection, evaluation, contingency arrangements for the Bank, to review and monitor
compensation (including retirement benefits) and succession all work in progress, including construction of premises and
planning of the CFO, Company Secretary and Head of renovations, which shall, inter alia, be based on physical
Internal Audit and recommend to the Board. planning, to review, monitor and recommend to the Board
the building plans, master development agreements &
Risk Management and Portfolio Review Committee contingency arrangements and to review, from time to time,
Meetings held: 4 as the Committee deems appropriate, the administrative
structures and plans in place to ensure the ongoing health
Composition and safety of utilities and physical assets, including land &
buildings and recommend, as appropriate, changes in plans
1. Mian Umer Mansha – Chairman arising from this review.
2. Mr. Sarmad Amin
IT Committee
3. Mr. Muhammad Ali Zeb
Meetings held: 4
4. Mr. Mohd Suhail Amar Suresh
5. President & CEO Composition
TERMS OF REFERENCE: 1. Mian Raza Mansha – Chairman

2. Mr. Aftab Ahmad Khan
Main terms of the committee are review the strategies relating
to Bank’s risk and policy framework for management of credit,
market and operational risks, in light of internal developments, 4. President & CEO
guidelines issued by the regulators and international best
practices, on as and when required basis, monitoring of Bank’s TERMS OF REFERENCE:
progress towards Basel-II implementation on as and when
required basis, but at least on half yearly basis, review and The main terms of reference of the Committee with regard to
recommend to Board Bank’s risk appetite statement, as and governance and supervision include approval of an overall
when required and review various reports pertaining to the plan for IT system for the Bank, approval of the organizational
risk in the bank’s portfolio prepared by the Risk Management strategic plan to ensure an effective use of information
Group. The Committee shall also consider comments of technology by all departments and branches, approval
the relevant senior management official/ Committee while and overseeing the management’s program to automate the
reviewing such reports and communicate the planned/ organization’s use of internal information to ensure that data
executed corrective actions to the Board, if required. is organized and shared in a manner that adds value and
enhances productivity, to approve and oversee a reliable
and secure communications infrastructure with the capacity
to address future growth, to approve policies those promote
development of information technology resources in an
organized, deliberate, secured, and cost effective manner,
44
ANNUAL REPORT 2014
to review and approve Management recommendations for IT

standards for ensuring compliance with regulatory requirements
and identifying and mitigating significant IT related risks, to
review and approve the Administrative IT structure, to undertake
any other IT related work assigned to the Committee by the
Board.
SBP Report Compliance Monitoring Committee

Meetings held: 2
Composition
1. Mr. S. M. Muneer – Chairman

2. Mr. Sarmad Amin
4. President & CEO
TERMS OF REFERENCE:
The terms of reference of the Committee are to review six

monthly reports prepared by the Compliance Group and
routed through the President on the actions taken on the
recommendations and observations of SBP in its Annual
Inspection Report, to guide the management in the matters
pertaining to compliance of SBP’s observations, to carry on
liaison between the Board and the Management with a view
to ensuring compliance pertaining to the SBP’s observations;
and to make recommendations to the Board, if necessary, for
taking decisions on expedient and appropriate disposal of
observations of SBP Inspection Report.
Write Off and Waiver Committee
Composition
1. Mian Mohammad Mansha – Chairman

2. Mr. Tariq Rafi
3. Mr. Aftab Ahmad Khan
TERMS OF REFERENCE:
The terms of reference of the Committee are to review and

approve write off & waiver cases on behalf of the Board of
Directors and to submit cases of write off & waiver for post
facto ratification by the Board.
45
Organization
Structure
46
ANNUAL REPORT 2014
Chairman /
Board of Directors
Audit
Committee
President
Audit & RAR Treasury & Wholesale Compliance Financial Corporate

Forex Banking & Control Control Affairs
Group Group Group Group Group Division
Human Special
International Resource Assets Islamic
Investments Management Management Banking
Group Group Group
Group
Information CCM & CSR &

Technology Special
Operations Projects Security
Group Group Group Group
Strategic Legal
Planning & Risk
Investment Management Affairs
Group Group Group
Retail Banking Retail Banking

North South
Capital
Market
Division
47
Management
Committee
Front Row:( L – R) Usman Hassan, Salman Zafar Siddiqi, Imran Maqbool, Mohammad Ramzan, Shahid Malik, Nadeem Afzal, Kamran Rasool
Back Row: (L – R) Raheel Ijaz, Syed Mudassar Hussain Naqvi, Ali Munir, Zargham Khan Durrani, Laqa Sarwar, Muhtashim Ashai,
Agha Saeed Khan, Syed Rashid Rehman, Ali Mubashir Kazmi, Imtiaz Mahmood
48
ANNUAL REPORT 2014
49
Management
Committees
1. Management Committee 6. IT Steering Committee
1. Mr. Imran Maqbool - Chairman 1. Mr. Imran Maqbool - Chairman
2. Mr. Ali Munir 2. Mr. Ali Munir
3. Mr. Mohammad Ramzan 3. Mr. Salman Zafar Siddiqi
4. Mr. Agha Saeed Khan 4. Mr. Imtiaz Mahmood
5. Mr. Raheel Ijaz 5. Mr. Agha Saeed Khan
6. Mr. Usman Hassan 6. Mr. Zargham Khan Durrani
7. Mr. Imtiaz Mahmood 7. Mr. Nadeem Afzal
8. Mr. Ali Mubashir Kazmi 8. Mr. Ali Mubashir Kazmi
9. Mr. Zargham Khan Durrani 9. Mr. Muhtashim Ashai
10. Mr. Nadeem Afzal 10. Mr. M. Nauman Chughtai
11. Mr. Muhtashim Ashai
12. Mr. Laqa Sarwar 7. Disciplinary Action Committee
13. Mr. Syed Rashid Rehman 1. Mr. Usman Hassan - Chairman
14. Mr. Salman Zafar Siddiqi 2. Mr. Agha Saeed Khan
15. Mr. M. Nauman Chughtai 3. Mr. Raheel Ijaz
16. Mr. Syed Mudassar Hussain Naqvi 4. Mr. Laqa Sarwar
17. Mr. Kamran Rasool 5. Mr. Kamran Rasool
18. Mr. Shahid Malik
8. Management Credit Committee
2. Assets & Liabilities Committee 1. Mr. Imran Maqbool - Chairman
1. Mr. Imran Maqbool - Chairman 2. Mr. M. Nauman Chughtai
2. Mr. Ali Munir 3. Mr. Omair Safdar
3. Mr. Salman Zafar Siddiqi
4. Mr. Muhtashim Ashai 9. Issue Tracking and Monitoring Committee
5. Mr. Agha Saeed Khan 1. Mr. Agha Saeed Khan - Chairman
6. Mr. Zargham Khan Durrani 2. Mr. Kamran Zafar Muggo
7. Mr. Nadeem Afzal 3. Mr. Raheel Ijaz
8. Mr. Mohammad Ramzan 4. Mr. M. Nauman Chughtai
9. Mr. Syed Rashid Rehman 5. Mr. Imtiaz Mahmood
10. Mr. M. Nauman Chughtai
10. Litigation Review Committee
3. Purchase & Expense Committee 1. Mr. Syed Mudassar Hussain Naqvi - Chairman
1. Mr. Agha Saeed Khan 2. Mr. Laqa Sarwar
2. Mr. Salman Zafar Siddiqi 3. Mr. Zargham Khan Durrani
3. Mr. Kamran Rasool 4. Mr. Nadeem Afzal
4. Mr. Amin Sukhiani 5. Mr. Usman Hassan
6. Mr. Mansoor Qadir
4. Investment Committee 7. Mr. Amir Nawab
1. Mr. Imran Maqbool - Chairman
2. Mr. Omair Safdar
3. Mr. Mohammad Ramzan
5. Write off Committee

1. Mr. Imran Maqbool - Chairman
2. Mr. Ali Munir
5. Mr. Zargham Khan Durrani
6. Mr. Nadeem Afzal
7. Mr. Omair Safdar
9. Mr. Laqa Sarwar
50
ANNUAL REPORT 2014
Other Senior Management
Fida Ali Mirza

Company Secretary
Malik Abdul Waheed

Advisor to Chairman
Kamran Zafar Muggo

Group Head Audit & RAR
Azfar Alam Nomani

Country Head Sri Lanka
51
Entity Credit Rating
LONG TERM
SHORT TERM
52
ANNUAL REPORT 2014
Corporate Profile of the Bank
MCB is one of the oldest banks of Pakistan, incorporated in 1947. It was privatized in 1991. To accede to international capital
markets, the Bank launched Global Depositary Receipts (GDRs) in 2006. It was the first Pakistani Bank that got its GDRs listed on
the London Stock Exchange. In 2008, the Bank entered into a strategic partnership with Maybank, Malaysia, which owns 20%
stake in it through Mayban International Trust (Labuan) Berhad.
Subsidiaries
MCB Financial Services Limited

Holding: 99.999%
Profile: Float, administer and manage modaraba funds, modarabas and also acts as trustees of various mutual funds.
MNET Services (Private) Limited

Holding: 99.95%
Profile: One of the largest service providers for Electronic Transactions to various financial institutions/banks 99.95% including
related services in Information Technology, software and data processing.
MCB Trade Services Limited

Holding: 100%
Profile: Provides agency services.
MCB - Arif Habib Savings & Investments Limited

Holding: 51.33%
Profile: Asset management, investment advisory, portfolio management, equity research and underwriting.
“ MCB Leasing” Closed Joint Stock Company, Azerbaijan

Holding: 95.00%
Profile: It leases various types of industrial equipment, public transports, real estate and retail auto leases.
With reference to significant holding, the following entities are associates of the Bank;
Adamjee Insurance Company Limited

Holding: 29.13%
Euronet Pakistan (Private) Limited

Holding: 30%
53
Chairman’s Message
I am pleased to share that 2014 has proved to be yet another
remarkable year at MCB Bank Limited, where we continued to exceed
the expectations of our stakeholders and achieved valuable milestones
through persistent efforts of a dedicated and committed team.
MCB Bank Limited is among one of Pakistan’s top three banks, serving as
a valuable partner for its clients because of several factors, chief among
them an absolute devotion to sound corporate governance, financial
solidity based on high liquidity strong capital adequacy, steadfast
commitment to recruiting and developing the highest-quality human
capital available. It continues to develop a progressive track record of
achievements and I am proud to share a few insights on the key factors
that have led to the success of our Bank.
During the year, the Bank maintained strategic focus to deliver record
breaking results in each quarter translating into impressive shareholder
returns, highest market capitalization and recognition through prestigious
international awards. MCB attained another momentous landmark this
year of spanning PKR 100 billion in income tax since its privatization
in 1991, thus playing its part in contributing towards nation building.
The Bank also adhered to its avidly nurtured strong ethical culture
and continued to contribute significantly towards its corporate social
responsibility.
Pakistan has witnessed relevant stability in the recent past, with the
likelihood of smoother times as a result of structured reforms to stimulate
the economy and enable the country to overcome various challenges.
These initiatives will have a positive trickledown effect on the monetary
policy which augurs well for the banking industry.
Our strategy at MCB is clear with our course well defined. With teamwork
and the performance bar set high, there is every reason to be confident
about what the future holds. We have foremost capabilities and expertise
that will enable us to achieve our goals. We are committed to usher in a
better tomorrow for those we serve, for the communities we live in, and
for each other.
I would like to acknowledge the sagacious approach of our Board and

the Management in achieving the vision and objectives set forth by the
Bank. Like always, I look forward to your continued support to take
on the challenges for the year ahead and capitalize on every possible
opportunity to work for a bright future.
For our employees, our shareholders, and our customers, this is the
best guarantee that we will continue to be there for them. That’s why we
remain your “Bank for Life” – and we intend to stay that way.

Chairman
MCB Bank Limited
54
ANNUAL REPORT 2014
President’s Review
Pakistan’s economy during the past year may be best described as one of
incremental but noticeable improvement. The economic recovery finally
began to take effect and we witnessed continued underlying nascent
economic growth with slowly accelerating gains. While conditions were
generally difficult, our clients remained active and our balance sheet
continued to be strong and diverse. Amidst these shifting factors, we
are pleased to report that MCB Bank generated solid results for the year
under review. This exceptional growth in our profitability and strength in
our financial position is a testimony to the customers’ faith in us and the
exceptional effort put-in by our dedicated and talented team.
2014 was the second full year of execution of our 2013 – 2017
strategy. We made exemplary progress thanks to the dedication of our
employees, the trust and confidence of our clients, and the support of our
shareholders. As a consequence, our clients once again entrusted us with
more of their assets and business than in the preceding year, resulting in
remarkable results and a record profit by the Bank which illustrated our
stakeholders’ belief that MCB is their chosen “Bank for Life.”
Customer satisfaction, being our utmost primacy, drives us to serve our

clients with increased passion and dedication. For the first time our
Customer Base stretched to 5.6 million accounts during the year due to
the stellar performance of our Retail, Wholesale and Islamic banking
segments. In 2014 we strengthened our outreach to serve our clients
at their doorstep by adding 16 new branches and 148 new ATM sites
to our widespread network. Free automated SMS service was launched
while MCB Business Account was introduced to cater to the growing
needs of our valued customers. In order to equip our staff with better
tools to serve their clients, employee development and training remained
our foremost priority, with extensive training programs through our
revamped ‘Learning and Development Centres’ across the country.
Resilient IT banking solutions have set the stage for unprecedented

increase in financial activity across the globe. MCB Bank aims to win
customer pride through robust IT infrastructure and technology-driven
innovation. This would not only empower our clients but also help the
Bank in achieving significant improvement in efficiency and in running
its business with greater insight, flexibility and control. With that aim in
mind, MCB achieved two historical milestones during the year. First, it
shifted to an upgraded core banking solution and second, it established
its owned Disaster Recovery Facility. Furthermore, Branchless Banking
has now become the prime area of our concentration after successfully
taking huge strides in the Internet Banking and Mobile Banking arenas.
Its rapid acceptance among our tech savvy clients and its secure platform
encouraged us to enable interoperability with other financial institutions,
including offering the facility of Inter Bank Funds Transfer (IBFT) to its
users. The facility has since been rolled on to Internet Banking and
Mobile Banking services, and on our extensive ATM network. On similar
lines, our Transaction Banking Unit integrated real time payment system
with industry leaders in the money transfer business which allows instant
remittance from across the globe and payments through our branches.
We are actively building up our portfolio of global partners so that
maximum number of our customers benefit from this value added service.
2014; a year of exceptional growth in our assets and net interest margins,
demonstrated strategic planning and execution, keeping the interest of
our stakeholders at heart. In spite of the challenges posed by declining
55
interest rate scenario, and difficult operating environment, we material operating leverage into our business for a longer term
managed to achieve remarkable results with unprecedented performance.
growth in profitability.
To increase our international footprint, the Bank continued
Our deposits, now at an all-time high in MCB history, depict to explore investment opportunities in South Asia, Middle
the confidence and loyalty of our customers, earned through East, Africa and Europe. We are eagerly looking forward to
providing years of quality service. Deposit buildup was inaugurate our Wholesale Operations in Dubai, expected within
paramount with an incremental volume of Rs. 56 Billion (9%) the early part of 2015. To cater to the growing needs of Islamic
against last year, and an increased concentration on Current banking customers, MCB has incorporated a wholly owned
Account-Savings Account (CASA) composition (91%) as at Islamic bank subsidiary. Subject to statutory approvals, it will
December 31, 2014. Credit growth remains the focal point of start its commercial operations in 2015. Also in 2014, MCB
the Bank as it represents our contribution to the economy and added a ‘Ladies Branch’ in Islamabad managed exclusively
was managed in a structured manner with minimal risk. Asset by female staff, after successfully launching similar branches in
mix analysis highlights incremental net advances of Rs. 55 Lahore and Karachi in previous years. These focus on meeting
billion (22%) over last year, while investments registered a record banking needs of female customers in an environment where
growth of Rs. 62 billion (14%). With a deal volume of over Rs. they would feel comfortable and relaxed. It also emphasizes our
100 billion, Investment Banking team successfully completed prominent role in advocating equal employment opportunities
MCB’s first ever privatization mandate and executed its largest while recognizing the integral part they play in our society.
road infrastructure financing project amounting to Rs. 22 billion.
Trade and Home Remittance businesses also contributed to As a recognition of our Bank’s underlying credit strength, PACRA
achieve this splendid growth. Home Remittances alone handled maintained MCB’s long term credit rating of AAA [Triple A] and
cumulative volume of Rs. 190 billion with an impressive growth short-term credit rating of A1+ [A one plus] which reinforces
of 19% over 2013. our strong financial position. MCB Bank’s performance was
acknowledged by various local and international entities. The
Treasury emerged as a significant piece of the Bank’s mosaic. Its Asian Banker (USA) again bestowed upon MCB the “Strongest
top-line, total markup revenue, expanded by 24% comprising Bank in Pakistan” award for 2014, while Asiamoney Awards
of 70% of the Bank’s total markup revenue. Treasury went on declared MCB to be the “Best of the Best Domestic Bank.” CFA
a selective accumulation drive of high yielding government 11th Excellence Awards and Asset AAA awarded MCB “Best
securities which ensured future revenue stability on the face of a Bank of the year 2013” and “Best Bank in Pakistan” awards,
declining interest rate scenario. In case of non-markup revenue, respectively. The joint committee of ICAP/ICMAP once again
Treasury was able to make a paradigm shift by increasing the FX conferred the “Best Corporate Report” award in Financial Sector
revenue of the bank by 57%. Treasury also launched Pakistan’s category to MCB’s annual report for 2013. Honoring our social
first private label Purchasing Managers Index (MCB PMI) which obligations as a responsible corporate citizen, the bank donated
is a leading barometer of the country’s economic health. Rs. 40 million to Chief Minister’s Relief Fund for IDPs of North
Waziristan in 2014.
MCB is among the first Pakistani banks to embark upon an
expense control initiative almost 5 years ago, envisaging tougher In the end, I would like to acknowledge the hard work and
times and squeezed margins. We continue to be acutely focused dedication of all staff members of MCB, who are undoubtedly the
on expense management as a lever for driving incremental core asset of our Bank. It is my utmost belief that our committed
returns. With prudent expense management resulting in a 5% and professional team is the main strategic advantage of MCB
increase over 2013, MCB’s total administrative expenses during over its peers. We are fortunate to have a diverse group of
2014 reached Rs. 20.61 billion. Compensation and benefits qualified, trained and dedicated employees across Pakistan who
being the largest expense, almost half of all administrative view MCB as a great institution to begin, build and sustain their
expenses, shows our resolve and commitment to recognizing the careers. I am also greatly indebted to the guidance of Chairman,
performance. In spite of this disciplined approach to costs, MCB Board of Directors, our foreign partners and the staff members
remains committed to operating efficiently for our shareholders, who helped in making 2014 yet another profitable year. This
while providing best-in-class service to our clients. dedication, commitment and perseverance would drive us to our
goal of “One Bank One Team.” I feel humbled to be given the
We have an impressive track record of delivering superior opportunity to not only represent one of the leading banks of
returns for all our stakeholders and the trend continued this year Pakistan but also to be a member of this team. With our energy,
as well. After tax profitability as on December 31, 2014, was team work, unity of purpose and faith in God, I have no doubt
reported at an unprecedented level of Rs. 24 billion, depicting that we will continue to meet the challenging expectations of
13% growth over last year. In comparison with 2013, Net Interest our shareholders, customers, employees and regulators in the
Margin achieved 15% growth, with Return on Assets (ROA) coming years.
and Return on Equity (ROE) increasing to 2.8% and 23.8%,
respectively. Over the years MCB has gradually increased its At MCB, we know “Who To Thank” and you know “Where To
contribution from Non-Fund Based income. This year was no Bank, for Life.”
different, showing an extraordinary growth of 20%. Provision
against loans and advances has been reversed based on
settlements executed / recoveries posted in classified advances.
Imran Maqbool
By focusing on revenues, expenses and capital efficiency, we
are building near-term benefits, and at the same time driving President & CEO
MCB Bank Limited
56
ANNUAL REPORT 2014
Highlights 2014
PBT
36.7 Billion Investments
+14% 511 Billion
Best Bank in +14%
Pakistan Award
by
Asset AAA
ROA
2.78% Best Corporate
Report Award
2013
Assets
935 Billion
+15% Capital
Adequacy Ratio
20.41%
Strongest Bank in
Pakistan Award
by
Asian Banker
Advances
(Gross)
PKR 322 Billion Highest Market
Capitalization
+20% PKR 340 Billion
(in banking industry)
Non-Markup
Income
PKR 13.4 Billion
ROE +20%
Deposits
23.83% PKR 688 Billion
+9%
57
Financial Performance
(2004 - 2014)
Total Assets Deposits

CAGR 14% CAGR 12%
934.6 688.3
815.5 632.3
767.1
545.1
653.8
491.2
567.6
431.4
509.2
(Rs. in billion)
(Rs. in billion)
443.6 367.6
410.5 330.2
342.1 292.1
298.8 257.5
259.2 229.3 221.1
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Gross Advances Investments

CAGR 8% CAGR 22%
322.3 511.1
268.2 262.4 274.1 269.7 272.8 449.0
249.9
402.1
229.7
206.8
188.1 316.7
(Rs. in billion)
(Rs. in billion)
144.0
213.1
167.1
113.1
96.6
63.5 69.5 67.2
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Non Markup Income

Fund Based Income CAGR 12%
CAGR 20%
13.4
11.2
44.5
43.5 40.9 9.2
37.9 36.8 35.8 8.1
(Rs. in billion)
28.5 6.3 6.4

(Rs. in billion)
5.6 5.8 5.8

23.9 5.0
21.3
4.2
15.0
7.0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Profit Before Tax Profit After Tax

CAGR 25% CAGR 26%
36.7
32.3 31.6 31.5 24.3
21.5
20.7
19.4
26.3
23.2 16.9
21.9 21.3 15.5 15.4 15.3
(Rs. in billion)
(Rs. in billion)
18.5
12.1
13.0 8.9
4.1 2.4
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
58
ANNUAL REPORT 2014
Management Objectives & Strategies / Critical

Performance Indicators
Management’s Relationship between the Bank’s Results Future
Plans / Strategies for Meeting Objectives CPI
Objectives & Management’s Objectives relevance
Lead market position through focused

Despite tough operating environment, MCB
initiatives targeting new products, new
Bank posted a remarkable growth in PBT of
Sustained markets, branchless banking and effective
14% with PAT growing by 13% over 2013.
profitability while cost management
This was achieved despite the interest rate
coping up with
volatility and regulatory revisions in minimum
the operational Rationalize & optimize usage of existing The CPI
deposit rate impacting net interest margins.
challenges. branch network and network strengthening shall remain
Profitability Based on interest rate call, the Bank reprofiled
Being through branch expansion relevant in
its interest earning assets in high yielding
recognized as future
bonds.
one of the most Service portfolio enhancement of all digital
On the operational front, the Bank shifted its
profitable bank products / channels i.e. call center, internet
operational platform to an upgraded version
of the industry. banking, mobile banking, mobile wallet, SMS
for providing transactional convenience to its
alerts, E-statement, ATMs and Debit Cards to
large customer base.
increase non-markup income
The Bank The CPI

aims to deliver Higher profitability to pay higher returns to Shareholder The Bank has paid 140% cash dividend in shall remain
sustained payout shareholders return 2014 (2013: 140%). relevant in
to its investors. future
The Bank aims

to increase The Bank achieved remarkable growth of 9%
its share in Expansion/Increase in deposit base through in its deposits portfolio as compared to 2013 The CPI
the domestic new products and markets thereby increasing Deposit with incremental volume of Rs. 56 Billion. shall remain
deposit pie along customer base beyond the prevalent organic generation CASA base is at an all-time high of 91%. relevant in
with international growth Market share of deposits approximated at future
deposit 8.25% at year end.
generation.
To ensure quality The credit book of the Bank grew by an

asset retention impressive 22% over 2013.
The CPI
with measures Increased focus on advances falling within risk During the year, NPLs of the Bank decreased
shall remain
to constantly appetite defined by the Bank while ensuring Asset Quality by Rs. 1.36 billion. The infection ratio has
relevant in
decrease the diversification improved significantly from 8.68% as at
future
NPLs base of December 2013 to 6.80% as at December
the Bank. 2014.
Introduction
Cost to income ratio improved from 40.05%
of cost cutting The CPI
Centralization and monitoring of operating Effective and as at December 2013 to 37.9% as at
techniques shall remain
expenses to restrain them within conventional efficient cost December 2014.
ensuring relevant in
limits control Administrative expenses (excluding PF
operational future
reversal) of the Bank increased by 5% only.
efficiency.
The capital adequacy ratios of the Bank are The CPI

To maintain a
Healthy equity leading to maintain Strong well above the specified percentages. Bank shall remain
strong capital Capital ratios
capital adequacy ratios maintained Tier-1 to total risk weighted assets relevant in
base
ratio at 18.08% against requirement of 7.0%. future
Significant changes in Objectives & Plans / Strategies
MCB Bank objectives & plans/strategies are well planned and are persistently implemented. No significant change occurred
during the year to affect the objectives and business plans / strategies.
59
Forward Looking Disclosure
Performance of the Bank against forward-looking disclosures of 2013
Forward-looking disclosures of annual report 2013 Performance of the Bank in 2014
We are committed to deliver exceptional financial The Bank has delivered exceptional results for the year 2014
performance while strategizing our way forward in with PBT growing by 14% and PAT by 13%. This was made
wake of the developing challenges. Our key focus possible by significant contribution from the Net interest income
areas include global recognition through increased and non-fund income block. On the cost side, the Bank reported
international presence, improvement in our asset quality, an increase of 5% in administrative expense base which signifies
deployment of cost efficient techniques and increased the deployment of cost efficient techniques.
contribution from non-markup income block. Apart
from international expansion, we are looking forward to On the statement of financial position side, our net advances
a quick penetration in the unbanked segment of the have reported a growth of 22% (Rs. 55 Billion) whereas a
population through branchless banking tools and an considerable decrease has been reported in NPL base taking our
Islamic Banking setup to serve the financial needs of infection ratio to 6.80%. Other major increase in the asset mix is
our domestic customers. investment base which grew by 14% over 2013. Our deposits
have increased by 9%, demonstrating our customers trust and
We remain hopeful that we would maintain the status of loyalty.
one of the leading banks operating in Pakistan through
improved service quality, financially viable tailored On the expansion front, the Bank obtained statutory approvals
products to meet requirements of our esteemed for operating a Branch in Dubai which would be operational in
customer and translating the underlying financial 2015. On the Islamic business front, the Bank has incorporated
strength of the entity into profits a wholly owned Islamic Subsidiary in 2014, for which statutory
approvals are awaited to start commercial operations.
Focusing on branchless banking; we enabled IBFT on e-banking,
Mobile banking and on our wide ATMs network to facilitate our
large customer base.
Detailed analysis covering performance and achievements of

respective groups against their targets for 2014 is included in the
Director’s Report.
60
ANNUAL REPORT 2014
Review of Six Years’ Performance

In this section, commentary on the six years’ contracted by Rs. 1.4 billion in 2014. Over the last
performance of the Bank is being provided, six years, NPLs of the Bank peaked in 2010 at Rs.
covering key highlights; 26.7 billion, following which a downward trajectory
can be observed in NPL base. The coverage ratio
Statement of Financial Position of the Bank has improved from 67.47% in 2009
to 82.84% in 2014. Moreover, the NPLs classified
Total Assets: in “loss” category constitute more than 90% of
the NPLs base as at December 31, 2014, which
The asset base of the Bank has registered a specifies the adequacy of provision held in the
remarkable annualized growth of 13.28% over books of the Bank.
the last 6 years growing from Rs. 509 billion as
at December 31, 2009 to Rs. 935 billion as at Investments:
December 31, 2014. Prime contributors to the said
increase have been advances and investments, During the past few years, the lack of credit
with investments growing annually by approximately opportunities resulted in banking sector money
32% over recent years. The earning asset mix of deployed in Government Papers. With an average
the Bank has been prudently managed to ensure annual growth rate of 32% over the last six years,
maximization of returns to stakeholders. the investment base of the Bank has grown from
Rs. 167 billion in 2009 to Rs. 511 billion in 2014.
Advances:
Deposits:
Credit off-take has been hampered on account
of macro-economic instability and operational The deposit base of the Bank has steadily grown over
challenges faced by the country. Lack of credit the last six years, with absolute numbers increasing
opportunities and intense competition for the from Rs. 368B in 2009 to Rs. 688B in 2014. MCB
same pool of assets resulted in a moderate Bank’ carries the competitive edge of holding the
growth in gross advances base. However, in 2014, highest CASA base, supporting its lower cost of
steps taken in the right direction have paved way deposits. The Bank has been strategically tapering
for advances growth for the industry, with MCB off its high cost deposit. .The CASA base has
taking the major share of the said growth. Despite more than doubled in last 6 years, increasing from
the said growth in advances in 2014, the ADR has Rs. 305 billion in 2009 to Rs. 626 billion in 2014;
dropped from 73.37% in 2009 to 46.83% in 2014. MCB Bank has been able to maintain its share in
the domestic industry deposit pie at approximately
Non-performing Loans: 8%. This is made possible by service excellence,
strategically placed touch points for the customer
Strengthened risk management policies coupled and transactional convenience provided through a
with aggressive provisioning approach has enabled variety of products.
the Bank to keep a check on quality of its assets.
The infection ratio of the Bank was 8.62% as at Equity and Dividends
December 31, 2009 which has dropped to 6.80%
as at December 31, 2014. The quality of asset has • The paid-up capital of the Bank has grown
been one of the prime focus areas of the Bank and from Rs. 6.9 billion in 2009 to Rs. 11.1
the significant recoveries posted in the last few billion in 2014, meeting the statutory capital
years clearly spell out the efforts that have been requirements set by the Central Bank.
directed in this achieving this goal. After registering
a decrease of Rs. 1.1 billion and Rs. 2.3 billion in • In 2008, most affluence strategic partnership
2012 & 2013 respectively, the NPL base has further occurred in Pakistan where the largest Bank
61
of Malaysia, Maybank Berhad, acquired 20% menu coupled with remote banking and
holding in MCB Bank Limited. This brought branchless initiatives taken by the Bank. The
synergies in technology, human resource and product development teams of the Bank have
trade business. been tapping the unbanked segment of the
population and offering them tailored products
• The equity base of the Bank is reflective of the to meet their specific financial requirements.
outstanding financial results achieved through Different types of products have been offered
consistent performance over years. The capital in order to meet the needs of the time like
base of the Bank is rated as strong which is credit card, mobile banking, visa debit card,
substantiated by the reported CAR of 20.41% MCB Lite, prepaid cards, IBFT etc.
as at December 31, 2014 against the statutory
requirement of 10%. The Shareholders’ equity • The fee, commission and brokerage block of
has grown significantly from Rs. 61 billion in the Bank has been constantly increasing over
2009 to Rs. 107 billion in 2014. the years with major contributions coming
from commission earned on card business,
• The Bank has the highest cash dividend bancassurance business, remittances and
per share in the industry with regular interim intercity / intra-city cash transfers.
dividends and remains one of the prime stocks
preferred in the Pakistani equity markets. • The equity investment base of the Bank has
been providing outstanding dividend yields
Profit and Loss account with dividend income and capital gain proving
to be the second highest contributor to non-
Net Interest Margin markup income. During the past 6 years,
approximately Rs. 7 billion has been earned by
• The composition of markup income has seen way of Capital Gains.
a shift in the last six years on the back of
concentration shift in the earning asset base Operating Expenses
of the Bank. The contribution from markup
income earned on advances has reduced • Owing to the strengthened risk management
from 70.55% in 2009 to 37.43% in 2014 framework, the provision charge of the Bank
while markup income from investments has has been on a declining trend over years. The
increased to 61.91% (2009: 26.9%). provision and write-off charge was reported
at Rs. 7.4billion for the year 2009 which was
• The regulatory revisions covering minimum reduced substantially to Rs. 291M for the year
deposit rate during the commentary period 2012. For the year 2013 & 2014, the Bank
has adversely affected the Bank’s net interest reversed provisions to the tune of Rs. 2.9
margin. The said impact was diluted by billion and Rs. 1.4 billion respectively based
improving the CASA base over period taking on the recoveries posted classified advances.
it to an all time high of 91% as at December It is pertinent to add that the Bank carries an
31, 2014. unencumbered general provision of around
0.1% of gross advances and has not taken the
Non-Markup Income benefit of FSV in provision calculation for the
year 2014.
• During last six years, fee, commission income
and capital gains have been the major drivers • The growth in administrative block of the bank
behind non-fund income. Fee, commission has been nominal considering the inflationary
income was supplemented on the back of patterns followed over the period of six years
new products and services added to the and falls within the budgetary limits set. The
62
ANNUAL REPORT 2014
management has been able to introduce cost years which has increased to Rs. 415 billion for
effective techniques / methods to exercise imports and Rs. 171 billion for exports.
control over the administrative expenses.
Centralization of various expense heads and • The Bank has been able to increase its market
imposition of annual capping have been few of share in the remittance business growing from
the key initiatives undertaken in this respect. Rs. 46 billion in 2009, the Bank now has now
This has enabled the Bank to maintain one of volume of Rs. 184 billion in 2014.
the lowest cost to income ratios in the industry.
• In 2008, the Bank launched Bancassurance
Profit before tax and Profit after tax: which was a unique cross functional service
to the customers of the Bank. With only 2,614
• MCB Bank has been able to post outstanding policies and 2,507 customers in 2009, MCB
profitability numbers over the period of last six Bank now manages approximately 16,000
years as substantiated by the highest EPS and policies and customers with premium amount
remarkable return on asset ratio. The annual of over Rs. 3.4 billion.
pre-tax profitability numbers have grown from
Rs. 23.2 billion for 2009 to Rs. 36.7 billion for • MCB Bank launched mobile banking in 2009
2014. The aggregate profit after tax for the last with approximately 53K customers reported by
six years has crossed Rs. 100 billion. the end of the year. As of 2014, the numbers of
mobile customers have grown to approximately
• The profitability ratios have been one of the 567 K with transaction volume of above Rs.
best in the banking industry which are reflective 12 billion.
of the effective management of the affairs and
adoption of prudent strategies. • The Bank launched Privilege Banking in 2009
targeting a specific customer base. As of
Other statistics 2014, Privilege Bank proposition serves 3,118
customers.
• The Bank has added over 1.5 million customers
to its base with the current statistics highlighting
customer base over 5 million.
• With active participation in trade, MCB Bank

has been able to improve trade volume in last 6
63
Six Years Financial Summary 2009 - 2014

2014 2013 2012 2011 2010 2009
Profit & Loss account

Mark-up/ return earned Rs. Mln 77,269 65,064 68,356 68,147 54,821 51,616
Mark-up/ return expensed “ “ 33,757 27,196 27,500 23,620 17,988 15,837
Fund based income “ “ 43,512 37,868 40,856 44,526 36,834 35,779
Fee, Commission, brokerage & FX income “ “ 10,235 8,108 7,131 6,373 5,310 4,409
Dividend and capital gains “ “ 3,200 3,063 2,022 1,739 956 1,234
Total income “ “ 56,947 49,039 50,010 52,639 43,099 41,417
Operating expenses “ “ 21,591 19,639 18,077 16,987 13,160 10,801
Operating profit before tax and provision “ “ 35,357 29,400 31,933 35,651 29,938 30,620
Provisions / write-offs “ “ (1,373) (2,888) 291 4,168 3,685 7,465
Profit before tax “ “ 36,729 32,288 31,642 31,483 26,253 23,155
Profit after tax “ “ 24,325 21,495 20,673 19,425 16,873 15,495
Cash Dividends* “ “ 15,582 14,166 11,959 10,036 8,743 7,602
Bonus shares “ “ - 1,012 920 836 760 691

Statement of Financial Position
Authorised capital “ “ 15,000 15,000 10,000 10,000 10,000 10,000
Paid up capital “ “ 11,130 10,118 9,199 8,362 7,602 6,911
Reserves “ “ 48,830 46,601 44,253 42,186 40,163 38,386
Unappropriated Profit “ “ 46,948 40,552 35,425 28,724 21,416 15,779
Shareholder’s equity “ “ 106,908 97,272 88,877 79,273 69,180 61,076
Surplus on revaluation of assets - net of tax “ “ 23,196 12,959 13,594 9,887 10,024 8,664
Net Assets “ “ 130,104 110,231 102,471 89,160 79,203 69,740
Total Assets “ “ 934,631 815,508 767,075 653,782 567,553 509,224
Earning Assets “ “ 818,676 718,990 663,116 570,362 494,201 443,238
Gross Advances “ “ 322,318 268,192 262,392 249,914 274,144 269,722
Advances - net of provisions “ “ 303,559 248,243 239,583 227,580 254,552 253,249
Non-Performing Loans (NPLs) “ “ 21,908 23,268 25,562 26,665 24,544 23,239
Investments “ “ 511,137 449,006 402,069 316,652 213,061 167,134
Total Liabilities “ “ 804,527 705,277 664,604 564,622 488,349 439,484
Deposits & other accounts “ “ 688,330 632,330 545,061 491,189 431,372 367,605
Current & Saving Deposits (CASA) “ “ 626,112 567,728 464,411 399,687 351,298 304,953
Borrowings “ “ 59,543 38,543 78,951 39,101 25,685 44,662
Interest bearing Liabilities “ “ 511,446 456,348 434,619 362,843 305,902 283,369
Contingencies and Commitments “ “ 226,554 265,428 143,803 165,014 136,246 119,922

Profitability Ratios:
Profit before tax ratio % 47.53% 49.63% 46.29% 46.20% 47.89% 44.86%
Gross Yield on Average Earning Assets “ “ 10.05% 9.42% 11.08% 12.80% 11.68% 12.52%
Gross Yield on Avg. Earning Assets (incl. dividend & capital gains) “ “ 10.47% 9.86% 11.42% 13.14% 11.88% 12.82%
Gross Spread “ “ 56.31% 58.20% 59.77% 65.34% 67.19% 69.32%
Non interest income to total income “ “ 23.59% 22.78% 18.30% 15.41% 14.54% 13.62%
Return on average equity (ROE) “ “ 23.83% 23.09% 24.59% 26.17% 25.91% 27.35%
Return on average assets (ROA) “ “ 2.78% 2.72% 2.91% 3.18% 3.13% 3.25%
Return on Capital Employed (ROCE) “ “ 23.83% 23.09% 24.59% 26.17% 25.91% 27.35%
Cost to income ratio “ “ 37.91% 40.05% 36.15% 32.27% 30.54% 26.08%
Cost to income ratio (excluding pf reversal) “ “ 39.37% 43.52% 40.01% 36.43% 38.01% 35.55%

Investment ratios:
Earnings per share (after tax)** Rs. 21.85 19.31 18.57 17.45 15.16 13.92
Earnings per share (before tax)** “ “ 33.00 29.01 28.43 28.29 23.59 20.80
Breakup value per share (excl. surplus on rev. of assets)** “ “ 96.05 87.39 79.85 71.22 62.15 54.87
Net assets per share** “ “ 116.89 99.04 92.06 79.78 71.16 62.66

Market Ratios
Cash Dividend % 140% 140% 130% 120% 115% 110%
Bonus Shares Issued “ “ - 10.00% 10.00% 10.00% 10.00% 10.00%
Dividend Yield ratio (based on cash dividend) “ “ 4.58% 4.98% 6.20% 8.92% 5.03% 5.01%
Dividend Payout ratio “ “ 64.06% 70.61% 62.29% 55.97% 56.32% 53.52%
Price to book value ratio Times 3.18 2.92 2.39 1.73 3.34 3.64
Price to earning ratio “ “ 13.99 14.56 11.29 7.71 15.08 15.78
Dividend cover ratio “ “ 1.56 1.52 1.75 1.94 1.93 2.04
64
ANNUAL REPORT 2014
Six Years’ Financial Summary 2009-2014

2014 2013 2012 2011 2010 2009
Share Information
Market value per share - Dec 31 Rs. 305.65 281.17 209.76 134.60 228.54 219.68
High - during the year “ “ 311.00 323.00 216.75 250.48 233.80 244.00
Low - during the year “ “ 234.51 182.20 133.00 134.00 173.04 75.00
Market Capitalisation Rs. Mln 340,198 284,501 192,950 112,557 173,740 151,822
Asset Quality and Liquidity ratios:

Gross Advances to deposits ratio % 46.83% 42.41% 48.14% 50.88% 63.55% 73.37%
Net Advances to deposits ratio “ “ 44.10% 39.26% 43.96% 46.33% 59.01% 68.89%
Investments to deposits ratio “ “ 74.26% 71.01% 73.77% 64.47% 49.39% 45.47%
Weighted Average Cost of Deposits “ “ 4.59% 4.00% 4.45% 4.35% 3.96% 3.97%
CASA to total deposits “ “ 90.96% 89.78% 84.74% 81.37% 81.44% 82.96%
NPLs to Gross advances ratio “ “ 6.80% 8.68% 9.74% 10.67% 8.95% 8.62%
Coverage Ratio (specific provision/ NPLs) “ “ 82.84% 83.59% 87.55% 82.02% 77.13% 67.47%
Earning assets to total assets ratio “ “ 87.59% 88.16% 86.45% 87.31% 87.08% 87.04%
Earning assets to interest bearing Liabilities Times 1.60 1.58 1.53 1.57 1.62 1.57
Deposits to shareholder equity “ “ 6.44 6.50 6.13 6.22 6.24 6.02
Assets to Equity “ “ 8.74 8.38 8.63 8.28 8.20 8.34
Risk Adequacy
Tier I Capital Rs. Mln 104,083 95,102 86,341 77,030 67,701 59,896
Total Eligible Capital ““ 117,489 101,296 93,526 82,014 72,856 64,357
Risk Weighted Assets (RWA) ““ 575,663 455,189 422,583 376,442 330,135 337,417
Tier I to RWA % 18.08% 20.89% 20.43% 20.46% 20.51% 17.75%
RWA to total assets “ “ 61.59% 55.82% 55.17% 57.63% 58.17% 66.26%
Capital Adequacy Ratio “ “ 20.41% 22.25% 22.13% 21.79% 22.07% 19.07%
Net Return on Average RWA “ “ 4.72% 4.90% 5.17% 5.50% 5.06% 4.65%
DuPont Analysis
Net Operating Margin % 42.72% 43.83% 41.34% 36.90% 39.15% 37.41%
Asset Utilization “ “ 6.51% 6.20% 7.04% 8.62% 8.01% 8.69%
Leverage Ratio / Equity Multiplier Times 8.57 8.50 8.45 8.23 8.27 8.41
Industry Share º
Deposits % 8.25% 8.40% 8.16% 8.36% 8.42% 8.50%
Advances “ “ 7.23% 6.59% 6.80% 7.16% 7.85% 8.24%
Investments “ “ 9.69% 11.03% 10.34% 10.66% 10.14% 10.16%
Total Assets “ “ 8.25% 8.43% 8.41% 8.76% 8.37% 8.52%
Classified Advances “ “ 3.82% 4.06% 4.16% 4.51% 4.41% 5.21%
Profit before tax “ “ 15.39% 20.14% 18.18% 18.92% 25.78% 30.29%
Market Capitalisation “ “ 21.44% 22.96% 23.58% 20.40% 24.10% 22.35%
Home Remittance “ “ 10.68% 10.48% 10.52% 9.97% 9.29% 6.44%
º based on economic data released by State Bank of Pakistan
Consolidated
Total Assets Rs. Mln 941,606 821,278 771,458 656,874 570,482 511,742
Shareholders’ Equity “ “ 110,095 100,165 91,350 81,392 71,228 63,120
Net Assets “ “ 136,269 115,463 106,475 92,012 81,999 72,313
Profit before tax “ “ 37,354 32,932 32,065 31,322 26,510 23,349
Profit after tax “ “ 24,774 21,950 21,153 19,274 16,873 15,665
Return on Average Assets % 2.81% 2.76% 2.94% 3.14% 3.12% 3.27%
Return on Average Equity “ “ 23.45% 22.80% 24.14% 25.24% 25.12% 26.72%
Earnings per share** Rs. 22.15 19.65 18.76 17.32 15.16 14.07
Breakup value per share (excl. surplus on rev. of assets)** “ “ 122.43 103.74 95.66 82.67 73.67 64.97
Capital Adequacy Ratio % 20.41 22.18% 22.16% 21.88% 22.04% 19.10%
Per Branch
Gross Advances Rs. Mln 261.62 220.37 221.06 213.06 242.18 249.51
Deposits “ “ 558.71 519.58 459.19 418.75 381.07 340.06
CASA “ “ 508.21 466.50 389.12 340.74 310.33 282.10
PBT “ “ 29.81 26.53 26.66 26.84 23.19 21.42
Shares held by sponsors / directors / executives and associated companies is disclosed on Page # 328
* This includes final cash dividend proposed by BoD
** Adjusted for prior years to reflect bonus shares issued during 2014
65
Six Years’ Non Financial Summary 2009-2014

2014 2013 2012 2011 2010 2009
No. of accounts Absolute 5,648,460 5,299,439 4,931,631 4,687,993 4,239,487 3,893,531

No. of branches “ 1,232 1,217 1,187 1,173 1,132 1,081
No. of permanent employees “ 10,601 10,372 10,612 10,090 9,583 9,397

ATMs
No. of ATMs “ 937 789 680 676 493 495
Total active smart/ debit card issued “ 2,109,268 1,875,258 1,367,858 1,242,271 1,144,403 1,490,887
No. of smart cards/Debit cards issued during the year “ 488,706 508,241 469,814 319,390 338,534 259,473
*Debit cards launched in 2011 “

Credit Cards
No. of new issuance “ 7,505 7,187 3,261 2,846 2,845 7,152
No. of customers “ 55,180 53,460 68,075 68,515 69,503 69,737
Total spend (transaction volume) Rs. Mln 4,843 4,306 4,005 4,140 4,386 4,836

Mobile Banking
No. of customers Absolute 566,846 542,449 292,756 149,057 105,372 53,182
No. of transactions - financial “ 1,139,634 906,522 704,008 501,876 437,870 102,021
No. of transactions - non-financial “ 3,097,579 2,996,584 2,673,556 2,139,421 1,857,001 1,278,687
Volume of transactions Rs. Mln 12,258 10,484 8,516 5,647 3,104 525

Bancassurance
No. of customers Absolute 15,695 14,714 10,769 7,835 5,644 2,507
No. of policies “ 16,223 15,481 11,001 8,060 5,812 2,614
Bancassurance Premium Rs. Mln 3,411 2,837 1,888 1,160 683 247
Bancassurance Revenue Rs. Mln 565 723 474 385 275 136

Privilege Banking
No. of accounts Absolute 3,615 2,833 2,372 1,988 1,430 733
No. of customers “ 3,118 2,389 1,872 1,494 1,048 579

Trade
Imports - volume Rs. Mln 414,941 420,964 326,120 341,348 280,392 186,418
Exports - volume “ 171,072 208,640 161,776 149,603 121,870 88,321
Market share of total market trade (Foreign Trade) % 6.91% 7.03% 7.61% 8.20% 8.03% 6.87%
Home Remittance
Volume of home remittance - MCB USD Mln 1,819 1,529 1,470 1,242 898 560
Volume of home remittance - MCB Rs. Mln 184,130 154,656 137,376 106,791 76,485 45,772
Home Remittance MCB Market Share % 10.68% 10.48% 10.52% 9.97% 9.29% 6.44%
66
ANNUAL REPORT 2014
Six Years’ Summary of Concentration & Maturities
Maturities of Total Assets and Total Liabilities

Maturities of Assets (2009-2014) Maturities of Liabilities (2009-2014)
(Rs. in Billion) (Rs. in Billion)
326
293
483
240
223
202
315
296
176
163
166
254
154
153
251
146
231
140
133
125
203
121
198
116
188
185
177
106
164
147
147
92
85
83
122
82
109
63
96
95
56
50
49
74
71
42
61
57
55
35
50
45
39
39
35
33
31
19
17
15
2014 2013 2012 2011 2010 2009 2014 2013 2012 2011 2010 2009
Upto 3M 3M to 1Y 1Y to 3Y 3Y to 5Y 5Y & above Upto 3M 3M to 1Y 1Y to 3Y 3Y to 5Y 5Y & above
Concentration of Advances, NPLs, Deposits and Off-Balance Sheet Items
Gross Advances (2009-2014) Classified Advances (2009-2014)

100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0% 2014 2013 2012 2011 2010 2009
2014 2013 2012 2011 2010 2009
Others Footwear and leather garments Others Footwear and leather garments
Individuals Sugar Individuals Sugar
Financial Cement Financial Cement
Transport, storage and communication Chemical, Petroleum and pharmaceuticals Transport, storage and communication Chemical, Petroleum and pharmaceuticals
Wholesale and Retail Trade Textile Wholesale and Retail Trade Textile
Power (electricity), gas, water, sanitary Agriculture, forestry, hunting and fishing Power (electricity), gas, water, sanitary Agriculture, forestry, hunting and fishing
Automobiles and Electronics Automobiles and Electronics
Deposits (2009-2014) Off Balance Sheet Items (2009-2014)

100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0% 2014 2013 2012 2011 2010 2009
2014 2013 2012 2011 2009 2009
Others Footwear and leather garments Others Footwear and leather garments
Individuals Sugar Individuals Sugar
Financial Cement Financial Cement
Transport, storage and communication Chemical, Petroleum and pharmaceuticals Transport, storage and communication Chemical, Petroleum and pharmaceuticals
Wholesale and Retail Trade Textile Wholesale and Retail Trade Textile
Power (electricity), gas, water, sanitary Agriculture, forestry, hunting and fishing Power (electricity), gas, water, sanitary Agriculture, forestry, hunting and fishing
Automobiles and Electronics Automobiles and Electronics
67
Concentration of Advances, NPLs, Deposits & Off-Balance Sheet Items
Advances (Gross) Classified Advances Deposits Off balance sheet items
Segments by class of business PKR Mln Mix Var. % PKR Mln Mix Var. % PKR Mln Mix Var. % PKR Mln Mix Var. %
Agriculture, forestry, hunting and fishing 21,370 6.63% 29% 432 2% 70% 36,870 5% -29% 7,313 3% 209%
Textile 37,094 11.51% -10% 4,535 21% 10% 3,218 0% 32% 8,636 4% -10%
Chemical, Petroleum and pharmaceuticals 46,484 14.42% 26% 194 1% 6% 3,929 1% -81% 21,557 10% -32%
Cement 1,857 0.58% 108% - 0% -100% 693 0% -17% 1,462 1% -8%
Sugar 15,740 4.88% 1% 236 1% -45% 2,208 0% -5% 6,502 3% 341%
Footwear and leather garments 935 0.29% -80% 73 0% -14% 363 0% -6% 446 0% -74%
Automobiles and Electronics 2,966 0.92% -16% 316 1% -21% 2,683 0% 3% 2,230 1% -23%
Power sector 24,858 7.71% -5% 2 0% - 22,400 3% -40% 6,926 3% 319%
Wholesale and Retail Trade 18,399 5.71% -39% 3,640 17% -10% 32,183 3% -30% 8,643 4% 52%
Transport, storage and communication 62,440 19.37% 138% 596 3% 0% 2,619 5% 1004% 18,040 8% 97%
Financial Institutions 5,341 1.66% 190% 804 4% -1% 7,960 1% -23% 92,917 41% -35%
Individuals 14,342 4.45% 4% 2,932 13% -8% 426,579 62% 21% 743 0% 1613%
Others 70,491 21.87% 40% 8,148 37% -10% 146,623 21% 26% 51,137 23% -6%
Total 322,318 100% 20% 21,908 100% -6% 688,330 103% 9% 226,554 100% -15%
Advances (Gross) Classified Advances

1.97%
6.63%
21.87% 11.51% 20.70% 0.89%
37.19%
1.08%
4.45% 0.00% 0.33%
14.42%
1.44%
1.66% 0.01%
16.62%
19.37% 4.88%
13.38%
7.71% 0.58% 3.67%
5.71%
0.29%
0.92%
2.72%
Agriculture, forestry, hunting and fishing Power sector Agriculture, forestry, hunting and fishing Power sector
Cement Financial Institutions Cement Financial Institutions
Automobiles and Electronics Chemical, Petroleum and pharmaceuticals Automobiles and Electronics Chemical, Petroleum and pharmaceuticals
Transport, storage and communication Footwear and leather garments Transport, storage and communication Footwear and leather garments
Textile Wholesale and Retail Trade Textile Wholesale and Retail Trade
Sugar Individuals Sugar Individuals
Others Others
Deposits Off Balance Sheet Items

0.47% 0.57% 0.10% 0.32% 0.05% 3.23% 3.81%
0.39%
3.25%
5.36% 0.38% 22.57% 9.52%
21.30% 1.16% 0.65%
4.68%
2.87% 0.20%
0.33% 0.98%
3.06%
3.82%
7.96%
41.01%
61.97%
Agriculture, forestry, hunting and fishing Power sector Agriculture, forestry, hunting and fishing Power sector
Cement Financial Institutions Cement Financial Institutions
Automobiles and Electronics Chemical, Petroleum and pharmaceuticals Automobiles and Electronics Chemical, Petroleum and pharmaceuticals
Transport, storage and communication Footwear and leather garments Transport, storage and communication Footwear and leather garments
Textile Wholesale and Retail Trade Textile Wholesale and Retail Trade
Sugar Individuals Sugar Individuals
Others Others
68
ANNUAL REPORT 2014
Maturities of Assets & Liabilities

(Rs. in Millions)
Total Upto 3M 3M to 1Y 1Y to 3Y 3Y to 5Y 5Y & above
Assets
Cash and balances with treasury banks 46,754 46,754 - - - -
Balances with other banks 3,016 3,016 - - - -
Lendings to financial institutions 1,418 1,418 - - - -
Investments - net 511,137 71,776 120,596 185,735 78,627 54,403
Advances - net 303,559 81,953 38,664 106,001 56,002 20,939
Operating fixed assets 31,193 521 1,563 4,168 4,168 20,773
Deferred tax assets 416 16 71 329 - -
Other assets - net 37,555 25,557 3,385 - 8,613 -
935,047 231,011 164,278 296,233 147,410 96,115
Liabilities
Bills payable 16,628 16,628 - - - -
Borrowings 59,543 48,786 8,048 2,709 - -
Deposits and other accounts 688,330 93,335 68,348 316,259 157,811 52,577
Deferred tax liabilities 10,813 116 243 2,550 4,752 3,153
Other liabilities 29,630 16,664 7,906 4,085 379 596
804,943 175,528 84,545 325,603 162,942 56,326
*Maturities of deposits are based on working prepared by the Assets and Liabilities Committee of the Bank.
Key Interest Bearing Assets and Liabilities

2014
2013
Avg. Vol Effective Interest Avg. Vol Effective Interest
(Mln) Interest Rate % (Mln) (Mln) Interest Rate % (Mln)
Interest Earning Assets

Lendings to Financial Institutions 5,292 9.10 481 8,592 8.68 746
Gross Advances (excluding NPLs) 267,161 10.83 28,922 229,192 10.90 24,990
Gross Investments (excluding equity investments) 435,607 10.98 47,835 396,573 9.89 39,233

Interest Bearing Liabilities
Deposits (excl. current deposits) 427,870 7.09 30,341 376,239 6.26 23,561
Borrowings 40,051 6.97 2,790 33,656 8.36 2,813
Discount Rate & KIBOR - 6 months
10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
9.50% 9.50%
9.38% 9.42% 9.91% 9.94% 9.93% 9.92% 9.92% 9.92% 9.94% 9.93% 9.92% 9.94%
Dec-14 Nov-14 Oct-14 Sep-14 Aug-14 Jul-14 Jun-14 May-14 Apr-14 Mar-14 Feb-14 Jan-14
KIBOR - 6 Month Discount Rate
69
Graphical Presentation of Financial Statements
Statement of Financial Position Variance from YE 13

(Rs. in Million)
Net Assets
130,104 Net Assets 18.03%
Liabilities 14.07%
Assets Assets 14.61%

934,631
Liabilities
804,527
0% 1% 2% 3% 4% 5% 6% 7% 8%
Assets Liabilities Net Assets
Profit and Loss Variance from YE 13

(Rs. in Million)
PAT 13%
PAT
24,325
PBT 14%
Net Markup Provision -52%

Income
43,512
Operating Expenses 10%
Non Markup Income 20%

PBT
36,729
Net Markup Income 15%
Non Markup -60% 40%

Income
13,435
Provision
(1,373) Operating
Expenses
21,591
Cash Flows
(Rs. in Million)
2014 2013
(15,175) (12,673)
Financing Financing
(49,394) (54,177)
Investing Investing
53,343 69,725
Operating Operating
70
ANNUAL REPORT 2014
Statement of Value Added
2014
2013
PKR Mln % PKR Mln %
Value Added
Net interest income 43,512 37,868
Non interest income 13,435 11,171
Operating expenses excluding staff costs,
depreciation, amortization and WWF (10,149) (8,582)
Provision against advances, investments & others 1,373 2,888
Value added available for distribution 48,171 43,345
Distribution of value added:
To employees
Remuneration, provident fund and other benefits 9,414 19.54% 10,286 23.73%
Pension fund reversal (832) -1.73% (1,701) -3.93%
8,583 17.82% 8,584 19.80%

To government
Worker welfare fund 735 1.52% 646 1.49%
Income tax 12,405 25.75% 10,793 24.90%
13,139 27.28% 11,439 26.39%
To providers of capital
Cash dividends to shareholders 15,582 32.35% 14,166 32.68%
Bonus shares - 0.00% 1,012 2.33%
15,582 32.35% 15,178 35.02%
To Society
Donations 40 0.08% 25 0.06%

To expansion and growth
Depreciation 1,724 3.58% 1,541 3.56%
Amortization 360 0.75% 260 0.60%
Retained earnings 8,743 18.15% 6,318 14.58%
10,827 22.48% 8,120 18.73%
48,171 100% 43,345 100%
2014 2013
to expansion and to expansion and

growth to employees growth to employees
23% 18% 19% 20%
to society to society
0.08% 0.06%
to government to government
27% 26%
to providers of to providers of
capital capital
32% 35%
71
Summary of Cashflows
(Rs. in Millions)
2014 2013 2012 2011 2010 2009
Cash flows from operating activities 53,343 69,725 96,701 124,460 58,701 78,148
Cash flows from investing activities (49,394) (54,177) (82,369) (105,805) (48,123) (70,369)
Cash flows from financing activities (15,175) (12,673) (11,815) (9,785) (8,568) (6,736)
Cash and cash equivalents at beginning of the year 60,857 57,783 55,293 46,886 44,785 43,674
Cash and cash equivalents at end of the year 49,427 60,857 57,783 55,293 46,886 44,785
Commentary on Cash Flow Statement:

Operating Activities Investing Activities
From an operational perspective, the cash flow activities Total cash outflow from investing activities was at the highest
present a different layout for the respective year. Net cash level in 2011 amounting to Rs. 106 billion. Cash outflow in
outflow from operating activities in 2014 is Rs.53.3 billion investing activities can be observed over years primarily on
which was Rs. 78.1 billion in 2009. Operational cashflow account of increased concentration levels of investment
of 2011 depicts an inflow of Rs. 124.4 billion, primarily on base.
account of recoveries recorded in advances and significant
build-up of Rs. 59.8 billion in deposits. Inflows observed in Financing Activities
operating activities were observed mainly due to increase in Cash outflow from financing activities was primarily by way
deposit base of the bank during past 6 years as advances of dividends to shareholders over the years. MCB has paid
have shown steady growth over 6 years. dividend at each quarter during last six years and since then
approximately Rs. 65 billion has been paid to shareholders.
MCB has the highest dividend payout 64.06% (2009:
53.52%). It has achieved as high as 70.61% in 2013.
124.5
125.0
96.7
95.0
78.1
69.7
65.0 58.7
53.3
35.0
5.0
(Rs. in Billions)
(9.8) (8.6) (6.7)

(15.2) (12.7) (11.8)
(25.0)
(55.0) (49.4) (48.1)

(54.2)
(70.4)
(85.0)
(82.4)
(105.8)
(115.0)
2014 2013 2012 2011 2010 2009
Operating Activities Investing Activities Financing Activities
72
ANNUAL REPORT 2014
Cash Flow Statement

Direct Method
(Rs. in Millions)

2014 2013
Cash flows from operating activities
Mark-up / return / interest and commission receipts 76,230 74,661

Mark-up / return / interest payments (25,680) (32,879)
Payments to employees, suppliers and others (20,113) (19,859)
30,437 21,923
(Increase) / decrease in operating assets
Lendings to financial institutions (194) 327
Net investments in ‘held for trading’ securities (52) -
Advances - net (54,223) (5,831)
Other assets 1,234 (2,169)
(53,235) (7,673)
Increase / (decrease) in operating liabilities
Bills payable 6,489 242
Borrowings 21,284 (40,205)
Deposits and other accounts 55,999 87,270
Other liabilities 1,404 3,796
85,176 51,103

62,378 65,353

Receipt from pension fund - 14,732
Income tax paid (9,035) (10,359)

Net cash flows from operating activities 53,343 69,726

Cash flows from investing activities

Net investments in ‘available for sale’ securities (45,207) (51,034)
Net investments in ‘held to maturity’ securities (598) 406
Dividends received 1,061 941
Investments in operating fixed assets (4,757) (4,663)
Sale proceeds of property and equipment disposed off 107 173
Net cash flows from investing activities (49,394) (54,177)

Cash flows from financing activities

Dividend paid (15,175) (12,673)
Net cash flows from financing activities (15,175) (12,673)

Exchange differences on translation of the net investment in foreign branches (204) 198
Increase in cash and cash equivalents (11,430) 3,073

Cash and cash equivalents at beginning of the year 61,372 57,174
Effects of exchange rate changes on cash and cash equivalents (515) 609
60,857 57,783
Cash and cash equivalents at end of the year 49,427 60,857
Cash flow statement in annual financial statements is required to prepare in line with the format prescribed by State Bank
of Pakistan under BSD Circular No. 4 dated February 17, 2006, ‘Revised Forms of Annual Financial Statements’.
73
Deposits & Advances
(Rs. in Billion)
Groupwise Deposits Groupwise Advances
2014 2013 Variance 2014 2013 Variance

Amount % Amount %
Commercial 638.0 576.1 61.9 11% 79.5 70.0 9.5 14%

Corporate 24.0 30.7 -6.7 -22% 197.3 154.7 42.6 28%
Consumer 7.0 6.5 0.5 8% 9.3 8.8 0.5 6%
Islamic 11.0 11.1 -0.2 -1% 13.9 11.3 2.6 23%
Others 8.4 7.9 0.5 6% 22.3 23.4 -1.1 -5%
Total 688.3 632.3 56.0 9% 322.3 268.2 54.1 20%
CASA to Total Deposit (2009-2014) Weighted Average Cost of Deposits (2009-2014)

% %
90.96%
89.78%
4.59%
4.45%
4.35%
85.20%
82.96%
81.37% 81.44% 4.00% 3.96% .3.97%
2014 2013 2012 2011 2010 2009 2014 2013 2012 2011 2010 2009
Weekly Trend of MCB Deposits and Advances - 2014

710 350
690
670 300
650
250
630
(Advances in billion)
(Deposits in billion)
610 200
590
570 150
550
100
530
510
50
490
470 -
W51
W50
W49
W48
W47
W46
W45
W44
W43
W42
W41
W40
W39
W38
W37
W36
W35
W34
W33
W32
W31
W30
W29
W28
W27
W26
W25
W24
W23
W22
W21
W20
W19
W18
W17
W16
W15
W14
W13
W12
W11
W10
W9
W8
W7
W6
W5
W4
W3
W2
W1
Weekly Deposits Weekly Advances
MCB's Industry share in Deposits and Advances - 2014

10.00% 7.20%
9.50% 7.00%
6.80%
9.00%
6.60%
8.50%
6.40%
8.00%
6.20%
7.50%
6.00%
7.00%
5.80%
6.50% 5.60%
6.00% 5.40%
W51
W50
W49
W48
W47
W46
W45
W44
W43
W42
W41
W40
W39
W38
W37
W36
W35
W34
W33
W32
W31
W30
W29
W28
W27
W26
W25
W24
W23
W22
W21
W20
W19
W18
W17
W16
W15
W14
W13
W12
W11
W10
W9
W8
W7
W6
W5
W4
W3
W2
W1
Deposit Share of MCB 2013 Advances share of MCB 2013
74
ANNUAL REPORT 2014
Non-Performing Loans
(Rs. in Millions)
2014 2013 Variance 2014

NPLs Provision NPLs Provision NPLs Provision Coverage
Categorywise
Substandard 285 62 255 56 12% 9% 22%
Doubtful 874 437 1,453 406 -40% 8% 50%
Loss 20,749 17,651 21,560 18,988 -4% -7% 85%
Total 21,908 18,149 23,268 19,450 -6% -7% 83%
Groupwise
Commercial 2,595 2,416 2,861 2,726 -9% -11% 93%
Corporate 4,474 3,412 4,078 3,052 10% 12% 76%
Consumer 1,981 1,941 2,326 2,263 -15% -14% 98%
Islamic 44 11 8 2 416% 416% 25%
Others 12,814 10,369 13,994 11,407 -8% -9% 81%
Total 21,908 18,149 23,268 19,450 -6% -7% 83%
NPLs and Variance (2009-2014)
26.7
25.6
24.5
23.3 23.2
21.9
8.6%
5.6%
-5.8% -4.1%
-9.0%
2014 2013 2012 2011 2010 2009
NPLs (Rs. In Billion) Variance
Infection and Coverage Ratios (2009-2014)
87.6% 10.7%
82.8% 83.6%
9.0% 8.6%
9.7%
82.0% 77.1%
8.7%
6.8% 67.5%
2014 2013 2012 2011 2010 2009
Infection ratio Coverage ratio
75
Investments
Top 10 Listed Equity Holdings as on December 31, 2014
Company Name Total Shares Book Value Market Value
(numbers) (Rs. Mln) (Rs. Mln)
Sui Northern Gas Pipelines Limited 55,126,789 2,205 1,583
Kot Addu Power Company 14,085,500 883 1,112
Fauji Fertilizer Company Limited 7,382,700 632 865
Fauji Fertilizer Bin Qassim 13,926,000 610 630
United Bank Limited 3,875,207 518 685
Glaxosmithkline Pakistan Limited 2,193,000 503 481
IGI Insurance Limited 2,117,380 461 573
PICIC Growth Fund 16,550,000 457 408
Pakistan Petroleum Limited 2,069,218 454 365
Lafarge Pakistan Cement Limited 27,247,000 448 473
Investment in Associates and Subsidiaries

Company Name Holding Total Shares Book Value
(numbers) (Rs. Mln)
Associates
Adamjee Insurance Company Limited 29.13% 101,950,924 943.60
Euronet Pakistan (Pvt.) Limited 30.00% 52,521 52.52
Subsidiaries
MCB - Arif Habib Savings & Investments Limited 51.33% 36,956,768 320.12
MNET Services Limited 99.95% 4,997,500 49.98
MCB Financial Services Limited 100.00% 2,750,000 27.50
MCB Trade Services Limited 100.00% 10,000 0.08
MCB Leasing Closed Joint Company Limited 95.00% 1,585,400 178.83
500
471
Category of Investments (2009-2014)
450 431 (Rs. in Billion)
400 376
350
300 295
250
196
200
151
150
100
50 11 12 9 8 10 11 11 12 11 7 10 8
-
2014 2013 2012 2011 2010 2009
T-Bills and PIBs Debt Securities Equity Securities
Investments to Deposits Ratio Investments to Total Assets Ratio
80.0% 74.3% 73.8%

71.0% 60.0% 54.7% 55.1%
52.5%
70.0% 64.5% 48.5%
50.0%
60.0%
49.4% 37.5%
50.0% 45.5% 40.0%
32.8%
40.0% 30.0%
30.0%
20.0%
20.0%
10.0%
10.0%
0.0% 0.0%
2014 2013 2012 2011 2010 2009 2014 2013 2012 2011 2010 2009
76
ANNUAL REPORT 2014
Markup and Non Markup Income

(Rs. in Millions)
2014 2013 2012 2011 2010 2009

Markup Income
Loans and advances 28,922 24,990 29,002 33,985 32,816 36,413
Investments 47,835 39,233 39,034 33,120 20,320 13,894
Deposits with financial institutions 31 95 40 12 16 133
Securities purchased under resale agreements 448 732 257 958 1,564 838
Money at call 33 14 23 72 105 336
77,269 65,064 68,356 68,146 54,821 51,615
Markup Expense
Deposits 30,341 23,561 23,043 20,083 15,806 13,867
Securities under repurchase agreements 1,092 1,706 2,628 1,575 623 723
Other short-term borrowings 1,698 1,108 1,154 1,211 902 775
Discount, Commission and brokerage 499 534 512 662 554 449
Others 127 288 164 89 103 24
33,757 27,196 27,500 23,620 17,988 15,837
Net Markup Income 43,512 37,868 40,856 44,526 36,833 35,777
2014 2013 2012 2011 2010 2009

Non Markup Income
Fee, Commission & Brokerage Income 7,225 6,741 5,934 4,921 4,130 3,332
Dividend Income 1,061 933 1,198 1,003 544 460
Income from dealing in foreign currency 1,443 917 823 921 632 341
Gain on sale of securities 2,140 2,130 825 736 412 774
Other Income 1,566 450 374 531 548 736
13,435 11,171 9,153 8,112 6,266 5,643
Markup Income from Advances and Investments Income Composition

(2009 - 2014) (2009 - 2014)
69.3%
67.2%
65.3%
70.5%
59.8%
56.3%
58.2%
61.9%
60.3%
59.9%
57.1%
49.9%
48.6%
37.4%
38.4%
42.4%
37.1%
26.9%
23.6%
22.8%
18.3%
15.4%
14.5%
13.6%
2014 2013 2012 2011 2010 2009 2014 2013 2012 2011 2010 2009
Income on Advances to Markup Income Net Markup Income to Gross Markup

Income on Investments to Markup Income Non-Markup Income to Net Revenue
77
Administrative Expenses
(Rs. in Millions)
2014 2013 2012 2011 2010 2009

Salaries and allowances 8,755 8,640 8,434 8,307 7,218 6,471
Voluntary Separation Scheme 26 1,058 - - - -
Contributions to defined contribution plan - provident fund 215 198 188 177 159 149
Post retirement medical benefits 157 188 187 170 136 130
Employees' contributory benevolent scheme 28 55 40 51 71 65
Employees' compensated absences 233 147 98 181 191 151
9,414 10,286 8,948 8,886 7,775 6,966
Others Administrative expenses
Non-executive directors' fees 34 32 33 36 32 10
Rent, taxes, insurance, electricity 2,733 2,555 1,965 1,695 1,569 1,356
Legal and professional charges 282 272 177 187 222 240
Communications 965 862 932 936 842 995
Repairs and maintenance 1,499 1,103 1,208 949 681 534
Stationery and printing 561 503 402 385 363 330
Advertisement and publicity 315 119 393 427 232 215
Cash transportation charges 550 482 461 450 403 516
Instrument clearing charges 140 125 187 198 166 137
Donations 40 25 31 84 15 25
Auditors' remuneration 34 32 21 25 15 15
Depreciation 1,724 1,541 1,379 1,115 1,012 909
Amortization of intangible asset 360 260 260 250 160 153
Travelling, conveyance and fuel 315 214 745 728 684 589
Subscription 18 20 18 28 26 14
Entertainment 129 118 110 102 69 74
Training Expenses 35 41 30 46 58 47
Petty Capital items 46 33 35 56 64 49
Card Related Expenses 298 238 147 129 129 58
Others 1,949 1,551 1,926 1,063 877 799
Total other administrative expenses 12,029 10,126 10,462 8,888 7,619 7,069
Administrative expenses 21,443 20,411 19,410 17,774 15,394 14,035
Pension fund reversal (832) (1,701) (1,933) (2,189) (3,220) (3,923)
Total Administrative expenses 20,612 18,710 17,477 15,585 12,174 10,111
Cost to Income Ratio Cost to Income Ratio

(excluding pension fund reversal)
40.0%
37.91% 36.1%
43.5%
39.37% 40.0% 32.3%
38.0% 30.5%
36.4% 35.6%
26.1%
2014 2013 2012 2011 2010 2009 2014 2013 2012 2011 2010 2009
78
ANNUAL REPORT 2014
Six Years’ Vertical Analysis

Statement of Financial Position / Profit & Loss
2014 2013 2012 2011 2010 2009
Rs. Mln % Rs. Mln % Rs. Mln % Rs. Mln % Rs. Mln % Rs. Mln %
Assets
Cash and balances with treasury banks 46,754 5% 59,946 7% 57,420 7% 53,123 8% 45,407 8% 38,775 8%
Balances with other banks 3,016 0% 1,537 0% 1,192 0% 2,281 0% 1,479 0.3% 6,010 1%
Lendings to financial institutions 1,418 0% 1,225 0% 1,551 0% 955 0% 4,402 1% 3,000 1%
Investments 511,137 55% 449,006 55% 402,069 52% 316,652 48% 213,061 38% 167,134 33%
Advances 303,559 32% 248,243 30% 239,583 31% 227,580 35% 254,552 45% 253,249 50%
Operating fixed assets 31,193 3% 28,595 4% 23,738 3% 22,008 3% 20,948 4% 18,015 4%
Other assets 37,555 4% 26,956 3% 41,520 5% 31,184 5% 27,706 5% 23,040 5%
934,631 100% 815,508 100% 767,075 100% 653,782 100% 567,553 100% 509,224 100%
Liabilities
Bills payable 16,628 2% 10,139 1% 9,896 1% 9,467 1% 10,266 2% 8,201 2%
Borrowings 59,543 6% 38,543 5% 78,951 10% 39,101 6% 25,685 5% 44,662 9%
Deposits 688,330 74% 632,330 78% 545,061 71% 491,189 75% 431,372 76% 367,605 72%
Deferred tax liabilities 10,397 1% 4,201 1% 9,530 1% 6,488 1% 4,934 1% 3,197 1%
Other liabilities 29,630 3% 20,064 2% 21,166 3% 18,378 3% 16,092 3% 15,819 3%
804,527 86% 705,277 86% 664,604 87% 564,622 86% 488,349 86% 439,484 86%
Net Assets 130,104 14% 110,231 14% 102,471 13% 89,160 14% 79,204 14% 69,740 14%
Represented by
Share capital 11,130 1% 10,118 1% 9,199 1% 8,362 1.28% 7,602 1% 6,911 1%
Reserves 48,830 5% 46,601 6% 44,253 5.8% 42,186 6.45% 40,163 7% 38,386 8%
Unappropriated profit 46,948 5% 40,552 5% 35,425 4.6% 28,724 4.39% 21,416 4% 15,779 3%
Surplus on revaluation of assets - net of tax 23,196 2% 12,959 2% 13,594 1.8% 9,887 1.51% 10,024 2% 8,664 2%
130,104 14% 110,231 14% 102,471 13% 89,160 14% 79,204 14% 69,740 14%
Profit & Loss Account
Mark-up earned 77,269 85% 65,064 85% 68,356 88% 68,147 89% 54,821 90% 51,616 90%
Mark-up expensed (33,757) -37% (27,196) -36% (27,500) -35% (23,620) -31% (17,988) -29% (15,837) -28%
Net mark-up income 43,512 48% 37,868 50% 40,856 53% 44,526 58% 36,834 60% 35,779 62%
Provisions & write off 1,373 2% 2,888 4% (291) 0% (4,168) -5% (3,685) -6% (7,465) -13%
Net mark-up income after provisions 44,885 49% 40,756 53% 40,565 52% 40,358 53% 33,148 54% 28,314 49%
Non-mark-up income 13,435 15% 11,171 15% 9,153 12% 8,112 11% 6,265 10% 5,643 10%
Non-mark-up expenses (21,591) -24% (19,639) -26% (18,077) -23% (16,987) -22% (13,160) -22% (10,801) -19%
Profit before taxation 36,729 40% 32,288 42% 31,642 41% 31,483 41% 26,253 43% 23,155 40%
Taxation (12,405) -14% (10,793) -14% (10,969) -14% (12,058) -16% (9,380) -15% (7,660) -13%
Profit after taxation 24,325 27% 21,495 28% 20,673 27% 19,425 25% 16,873 28% 15,495 27%
79
Six Years’ Horizontal Analysis
Statement of Financial Position / Profit & Loss
2014 14 Vs 13 2013 13 Vs 12 2012 12 Vs 11 2011 11 Vs 10 2010 10 Vs 09 2009 09 Vs 08
Rs. Mln % Rs. Mln % Rs. Mln % Rs. Mln % Rs. Mln % Rs. Mln %
Assets
Cash and balances with treasury banks 46,754 -22% 59,946 4% 57,420 8% 53,123 17% 45,407 17% 38,775 -2%
Balances with other banks 3,016 96% 1,537 29% 1,192 -48% 2,281 54% 1,479 -75% 6,010 49%
Lendings to financial institutions 1,418 16% 1,225 -21% 1,551 62% 955 -78% 4,402 47% 3,000 -27%
Investments 511,137 14% 449,006 12% 402,069 27% 316,652 49% 213,061 27% 167,134 73%
Advances 303,559 22% 248,243 4% 239,583 5% 227,580 -11% 254,552 1% 253,249 -3%
Operating fixed assets 31,193 9% 28,595 20% 23,738 8% 22,008 5% 20,948 16% 18,015 4%
Other assets 37,555 39% 26,956 -35% 41,520 33% 31,184 13% 27,706 20% 23,040 16%
934,631 15% 815,508 6% 767,075 17% 653,782 15% 567,553 11% 509,224 15%
Liabilities
Bills payable 16,628 64% 10,139 2% 9,896 5% 9,467 -8% 10,266 25% 8,201 -22%
Borrowings 59,543 54% 38,543 -51% 78,951 102% 39,101 52% 25,685 -42% 44,662 97%
Deposits 688,330 9% 632,330 16% 545,061 11% 491,189 14% 431,372 17% 367,605 11%
Deferred tax liabilities 10,397 147% 4,201 -56% 9,530 47% 6,488 31% 4,934 54% 3,197 631%
Other liabilities 29,630 48% 20,064 -5% 21,166 15% 18,378 14% 16,092 2% 15,819 -26%
804,527 14% 705,277 6% 664,604 18% 564,622 16% 488,349 11% 439,484 14%
Net Assets 130,104 18% 110,231 8% 102,471 15% 89,160 13% 79,204 14% 69,740 19%
Represented by
Share capital 11,130 10% 10,118 10% 9,199 10% 8,362 10% 7,602 10% 6,911 10%
Reserves 48,830 5% 46,601 5% 44,253 5% 42,186 5% 40,163 5% 38,386 4%
Unappropriated profit 46,948 16% 40,552 14% 35,425 23% 28,724 34% 21,416 36% 15,779 72%
Surplus on revaluation of assets - net of tax 23,196 79% 12,959 -5% 13,594 37% 9,887 -1% 10,024 16% 8,664 40%
130,104 18% 110,231 8% 102,471 15% 89,160 13% 79,204 14% 69,740 19%
Mark-up earned 77,269 19% 65,064 -5% 68,356 0% 68,147 24% 54,821 6% 51,616 29%
Mark-up expensed (33,757) 24% (27,196) -1% (27,500) 16% (23,620) 31% (17,988) 14% (15,837) 37%
Net mark-up income 43,512 15% 37,868 -7% 40,856 -8% 44,526 21% 36,834 3% 35,779 26%
Provisions & write off 1,373 -52% 2,888 -1093% (291) -93% (4,168) 13% (3,685) -51% (7,465) 85%
Net mark-up income after provisions 44,885 10% 40,756 0% 40,565 1% 40,358 22% 33,149 17% 28,314 16%
Non-mark-up income 13,435 20% 11,171 22% 9,153 13% 8,112 29% 6,265 11% 5,643 -3%
Non-mark-up expenses (21,591) 10% (19,639) 9% (18,077) 6% (16,987) 29% (13,160) 22% (10,801) 29%
Profit before taxation 36,729 14% 32,288 2% 31,642 1% 31,483 20% 26,254 13% 23,155 6%
Taxation (12,405) 15% (10,793) -2% (10,969) -9% (12,058) 29% (9,380) 22% (7,660) 18%
Profit after taxation 24,325 13% 21,495 4% 20,673 6% 19,425 15% 16,873 9% 15,495 1%
80
ANNUAL REPORT 2014
Commentary on Horizontal and Vertical Analysis:
Horizontal Analysis
Asset base of the bank has increased considerably over the past 6 years; highest increase was observed in 2012 where
assets increased by 17%, mainly contributed by investments in terms of volume. On an annualized basis, the asset base
has recorded an increase of 13% over the last six years. Highest increase in investment base was reported in 2011 of 49%,
followed by 27% increase reported for 2012.
The deposit base of the Bank has increased considerably over the years growing from Rs. 368 billion in 2009 to Rs. 688
billion in 2014 translating into an annual growth of 13% over past 6 years. Equity of the bank has also posted healthy increase
due to higher profitability in past 6 years, translating into 14% average growth.
On to Profit and Loss side, gross markup earned has posted an average increase of 12% over a span of six years.
Corresponding to the shift in asset mix, contribution from income on investments has increased over the years. The increase
in markup expense on deposits is on account of regulatory revisions enacted by the Central Bank and volumetric increase
in deposit base. Despite the regulatory revisions enacted during the period, the cost of deposit was strategically managed
by reducing high cost deposits and increasing the CASA base of the Bank. However, the cost of deposit of the Bank has
increased by 20% over the six year period under coverage.
Non-Markup income block has shown steady growth of 15% over 6 years, whereas non-markup expense has grown by
an average of 17% which is justifiable on account of growing operational infrastructure and inflationary patterns. Provision
against advances and investments has been on a declining trend with reversal to the tune of above Rs. 4 billion in last two
years. Profit Before Tax (PBT) and Profit After Tax (PAT) have increased by an average of 9% and 11%, respectively, marking
MCB as one of the most profitable bank in the industry.
Vertical Analysis
Vertical analysis depicts higher concentration levels of investments and advances in the asset base of the Bank. The advances
base of the Bank has posted moderate growth over the last few years due to the lack of credit opportunities and intense
competition. This has resulted in the decrease of advances concentration in the asset mix from 50% in 2009 to 32% in 2014
The investment concentration, on the other hand, had increased from 33% in 2009 to 55% in 2014.
Corresponding to the infrastructural and operational growth registered by the Bank, the deposit base has increased
considerably over the period of six years. Improved quality service levels and tailored products have earned the loyalty of our
customers. This can be substantiated by the fact that the CASA base of the bank has been above 80% over the last many
years. Concentration on deposits remained at similar levels over past 6 years i.e. 74% for 2014(2009 : 72%)
Markup income growth has been steady over the last 6 years. On an average, the contribution from markup income
approximates 88% of the total revenue. Markup expense has increased over the last 6 years, based on regulatory revisions
enacted over the period and growth registered in the deposit base. Concentration of Non-markup income in total income
has increased significantly over the years due to innovative solutions offered to our customers, tactically managed income
from dealing in foreign currencies and gain on sale of securities. With the growth in business non-markup expense has also
increased from 19% in 2009 to 24% in 2014.
81
Quarterly Analysis: 2014
Statement of Financial Position 100%
50%
On quarterly split basis, the asset base of the bank has
0%
reported increase of Rs. 12 billion, Rs. 41 billion and Rs.
332 million in the first, second and third quarter respectively. -50%
During the fourth quarter of 2014, the Bank registered an -100%

exceptional increase of Rs 66 billion which was primarily Q4 2014 Q3 2014 Q2 2014 Q1 2014
driven by net investments increasing by Rs. 51 billion. CASA Term Deposits

Equity of the bank has also increased averaging out Rs. 2.4
The NPL base of the Bank has reported a consistent billion in each quarter which is due to profits retained by the
quarterly decrease in the year 2014. This was made bank.
possible by the rigorous efforts put in by the recovery units
is executing settlements. The Loss concentrated NPL base Bank has highest Capital Adequacy Ratio in the banking
has decreased by a considerable Rs 811 million with major industry and fully meet minimum capital requirement by
recoveries posted in the first quarter of 2014. central bank. Bank fully meets its requirement of Teir I to Risk
Weighted Assets during all the quarters of the year.
NPLs Rs. in Mln
64.60
170.36
140,000 21.00%
19.71%
19.41%
19.12% 20.00%
120,000
(17.39) (175.32) 18.08% 19.00%
(413.92) 100,000
18.00%
(753.31) 80,000 17.00%
(860.64)
117,489
16.00%
108,069
105,765
104,083
60,000
103,543
102,511
100,035
96,775
15.00%
40,000
(1,668.36)
14.00%
20,000
Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 13.00%
0 12.00%
Q4-2014 Q3-2014 Q2-2014 Q1-2014
The net investment base of the Bank grew by Rs. 62 billion
over last year with major increase of Rs. 51 billion reported in Tier I Capital Total Eligible Capital Tier I / RWA
the last quarter. The concentration mix of investment shifted

towards high yielding PIBs based on the interest rate call. Profit & Loss Account
Investment composition The discount remained stable through major part of the year,
200%
with 50 bps cut in November 2014. On the earning asset
side, the Bank registered significant increase in investment
income due to high yielding bonds. Interest income on
0%
advances was Rs. 6.8 billion in the first quarter with a
decreasing trend observed in the 2nd and 3rd quarters with
an increase recorded in the last quarter.
-200%
Q4 2014 Q3 2014 Q2 2014 Q1 2014
Markup Income - Rs. in Mln
Other Debt Instrument Equity Securities(Including Subsidiaries & Associates)
12,260
12,267
11,990
During the financial year 2014, the Bank has maintained 11,317
its CASA base and closed at 90.96%. Strategic decrease

8,115
in term deposit base can be marked over the quarterly
6,892 7,448
intervals converging with the declining interest rate scenario.
6,466
Quarterly decrease in term deposits is evident of the
strategic shift of high cost deposits to low cost savings
account. Highest decrease observed in 1st quarter which is
15% QoQ. The overall decrease in term deposit sums up to Q4 2014
Q3 2014
4% for the year 2014 when compared with December 2013. Q2 2014
Q1 2014
CASA is maintained around 91% during the year 2014. An
extravagant growth in CASA base was observed in 2nd Markup Income - Advances Markup Income - Investments
quarter with Rs. 55 billion for the said quarters.
82
ANNUAL REPORT 2014
On the interest expense avenue, higher markup expense

on deposits was reported as compared to quarters of 2013
due to regulatory revisions during the year 2013 in terms
of revision in interest calculation formula and pegging of
minimum deposit rate (MDR) with the floor of SBP repo
corridor.
The substantial reversal in provision charge is reflective of

the prudent and aggressive provision strategy adopted and
rigorous efforts put in by the recovery units. In 1st, 2nd and
3rd quarters substantial recovery efforts were put in place
and provision of Rs. 553 million, Rs. 386 million and Rs. 393
million has been reversed respectively.
Quarterly Provision/(Reversals) against Advances -

Rs. in Mln
238
(393) (386)
(553)
Q4 2014 Q3 2014 Q2 2014 Q1 2014
In 2014 the record breaking growth in capital markets

provided MCB Bank an opportunity to realize significant
capital gains. The Bank recorded capital gains to the tune
of Rs. 640 million and Rs. 871 million in the 3rd and 4th
quarter. Compensation on delayed tax refunds amounting
to Rs. 1.1 billion was recorded in the third quarter of 2014.
The volatility in exchange rates contributed in recognizing
significant income from dealing in foreign currencies.
The administrative expense base of the Bank depicted

a controlled increase despite the surge in inflationary
pressures recorded in the later part of the financial year. The
administrative expenses block reported 5% (excluding PF
reversal) increase over the last year.
In terms of profitability, 2014 remained an exceptional year

as the Bank reported profit before tax of last three quarters
in excess of Rs. 9 billion. The highest quarterly PBT in Bank’s
history was Rs. 9.7 billion reported for the third quarter of
2014.
83
Quarterly Performance - 2014 & 2013
Rs. In Million
2014 2013
4th Quarter 3rd Quarter 2nd Quarter Ist Quarter 4th Quarter 3rd Quarter 2nd Quarter Ist Quarter
Mark-up earned 20,484 19,212 19,638 17,935 16,593 15,496 16,260 16,715
Mark-up expensed (8,985) (8,635) (8,216) (7,921) (7,216) (5,814) (7,173) (6,993)
Net mark-up income 11,498 10,577 11,423 10,014 9,377 9,682 9,087 9,723
Provisions & write off 78 430 277 588 987 524 546 830
Non-mark-up income 3,885 4,094 2,715 2,740 2,618 2,711 3,492 2,350
Non-mark-up expenses (6,239) (5,394) (4,971) (4,986) (6,441) (4,869) (4,102) (4,226)
Profit before taxation 9,222 9,707 9,444 8,356 6,540 8,048 9,023 8,677
Taxation (3,022) (3,310) (3,229) (2,844) (2,227) (2,753) (2,903) (2,909)
Profit after taxation 6,201 6,398 6,214 5,512 4,313 5,295 6,119 5,768
Assets
Cash and balances with treasury banks 46,754 53,443 71,174 53,795 59,946 58,231 62,563 49,532
Balances with other banks 3,016 3,470 2,340 1,833 1,537 1,695 1,920 2,820
Lendings to financial institutions 1,418 3,690 1,086 1,528 1,225 3,474 6,412 375
Investments 511,137 459,664 444,020 462,148 449,006 405,071 410,222 402,733
Advances 303,559 289,558 284,115 253,183 248,243 224,241 223,090 240,384
Operating fixed assets 31,193 30,273 29,569 28,856 28,595 25,345 24,913 24,126
Other assets 37,555 28,746 36,208 25,910 26,956 28,468 46,037 39,146
934,631 868,845 868,513 827,252 815,508 746,525 775,156 759,116
Liabilities
Bills payable 16,628 8,771 8,841 8,300 10,139 11,608 9,588 9,422
Borrowings 59,543 49,352 30,830 48,755 38,543 15,579 18,397 49,504
Deposits and other accounts 688,330 666,344 685,766 627,144 632,330 584,239 610,341 565,799
Deferred tax liabilities 10,397 3,940 3,927 4,863 4,201 8,331 10,440 9,045
Other liabilities 29,630 24,015 24,662 24,639 20,064 20,191 17,726 21,026
804,527 752,423 754,027 713,701 705,277 639,948 666,491 654,796
Net assets 130,104 116,422 114,486 113,550 110,231 106,578 108,665 104,320
Represented by:
Share capital 11,130 11,130 11,130 11,130 10,118 10,118 10,118 10,118
Reserves 48,830 48,316 47,513 47,124 46,601 46,188 45,461 44,890
Unappropriated profit 46,948 45,275 43,401 40,971 40,552 40,319 39,086 37,015
Surplus on revaluation of assets - net of tax 23,196 11,700 12,442 14,325 12,959 9,952 13,999 12,297
130,104 116,422 114,486 113,550 110,231 106,578 108,665 104,320
84
ANNUAL REPORT 2014
Capital Structure
(Rs. in Millions)
2014
2013
Capital Structure
CET 1 / Tier 1 Capital
Shareholders capital 11,130 10,118
Share premium 9,703 9,703
Reserves 38,733 36,300
Unappropriated profits 46,948 40,552
106,514 96,674
Deductions:
Book value of intangible and advances given for intangible 898 837
Defined benefit pension fund assets - net 944 -
Other deductions 1,588 735
2,430 1,572
Total Tier 1 capital 104,083 95,102
Tier 2 Capital

General provisions subject to 1.25% of total risk weighted assets 609 499
Revaluation reserves 12,990 5,832
Foreign exchange translation reserves 395 598
13,994 6,929
Deductions:
Other deductions 588 735
Total Tier 2 Capital 13,405 6,194
Total Regulatory Capital Base 117,489 101,296
Risk Weighted Assets

Credit Risk 365,816 312,996
Market Risk 115,509 49,591
Operational Risk 94,337 92,602
Total RWA 575,663 455,189
Capital Adequacy Ratios

Tier 1 to total RWA - actual 18.08% 20.89%
Total capital to total RWA - actual 20.41% 22.25%
Tier 1 to total RWA - required 7.00% 6.50%
Total capital to total RWA - required 10.00% 10.00%
365,816
22.25% 22.24%
21.79% 22.07%
350,000 22%
312,996
300,000
273,022 20%
20.41%
246,112 237,636 243,712
250,000 19.07%
200,000 18%
115,509
150,000
94,337
92,602
89,952
16%
84,636
73,076
64,448
60,785
49,590
100,000
45,693
29,257
19,423
14%
50,000
0 12%
2014* 2013* 2012 2011 2010 2009
Credit RWA - Rs. in Mln Market RWA - Rs. in Mln Operational RWA - Rs. in Mln CAR - %
85
DuPont Analysis
2014 2013 2012 2011 2010 2009
Net Operating Margin (PAT / Total Income) A 42.72% 43.83% 41.34% 36.90% 39.15% 37.41%
Asset Utilization (Total Income / Average B 6.51% 6.20% 7.04% 8.62% 8.01% 8.69%
Assets)
Return on Assets C=AxB 2.78% 2.72% 2.91% 3.18% 3.13% 3.25%
Leverage Ratio / (Average Assets / D 8.57 8.50 8.45 8.23 8.27 8.41
Average Equity)
Equity Multiplier
Return on Equity CXD 23.83% 23.09% 24.59% 26.17% 25.91% 27.35%
Following are the main highlights of DuPont analysis:
• Net operating margin measure in term of profit margins showing increasing trend since 2011 due to improved non-
markup income, cost control measures and reversal in provisions.
• Asset utilization in terms of total income has shown decreasing trend due to decrease in discount rate while
corresponding upward revision in minimum deposits rate by regulator.
• Equity Multiplier showing increasing trend since 2011 due to higher profits.
50% 28.00%
43.83% 27.35%
45% 42.72%
41.34% 27.00%
39.15%
40% 36.90% 37.41%
26.17%
25.91% 26.00%
35%
25.00%
30%
24.59%
25% 24.00%
23.83%
20% 23.09% 23.00%
15%
8.62% 8.69% 22.00%
7.04% 8.01%
10% 6.51% 6.20%
21.00%
5%
0% 20.00%
2014 2013 2012 2011 2010 2009
Net Operating Margin Asset Utilization Return on Equity
86
ANNUAL REPORT 2014
Statement of Charity and Donation

(Rs. in Thousand)
2014
2013
CHARITY FUND
Opening balance as on January 01 2,877 6,892
Additions during the year
Received from customers on delayed payments 20,919 8,208

Profit on charity saving account 885 277
21,804 8,485
Payments / utilization during the year
Social welfare (2,000) (1,000)

Health (2,000) (500)
Education (1,000) (1,000)
Relief and disaster recovery - (10,000)
(5,000) (12,500)
Closing balance as at December 31 19,681 2,877
Detail of charity made during the year is as follows:
Saylani Welfare International Trust - 1,000

Care Foundation Pakistan 1,000 1,000
Effected Christian Community in Joseph Colony, Lahore - 5,000
The Lahore Hospital Society - 500
Prime Minister’s Earthquake Relief Fund BALUCHISTAN - 5,000
Childern’s Hospital & The Institute of Child Health 1,000 -
Rising Sun Education & Welfare Society 1,000 -
Shaukat Khanum Memorial Cancer Hospital and Research Centre 1,000 -
Fountain House Institute for Mental Health 1,000 -
5,000 12,500
In addition to above charity, detail of donation by the Bank is given below:
“Chief Minister’s Relief Fund for IDPs North Waziristan – 2014” 40,000 -
Prime Minister’s Earthquake Relief Fund 2013, for Baluchistan - 25,000
40,000 25,000
None of the directors, executives or their spouses had any interest in the donee.
87
Market Statistics of MCB’s Share
Share Price Free Float Market Capitalisation
MCB Scrip GDRs (REG S)

Shares Capital Value
(Rs.) USD
%
High Low Closing Closing (‘000s) (Mln) (Mln)
2014
December 31, 2014 307.95 273.98 305.65 5.50 430,249 38.66% 11,130 340,198
September 30, 2014 311.00 267.05 282.57 5.03 429,083 38.55% 11,130 314,509
June 30, 2014 311.00 251.00 301.35 4.96 431,852 38.80% 11,130 335,412
March 31, 2014 299.25 234.51 251.23 4.04 429,467 38.59% 11,130 279,627
2013
December 31, 2013 303.25 245.00 281.17 4.20 382,395 37.79% 10,118 284,501
September 30, 2013 314.85 240.50 263.05 4.92 381,355 37.69% 10,118 266,166
June 30, 2013 323.00 188.86 242.59 1.94 380,890 37.64% 10,118 245,464
March 31, 2013 239.30 182.20 189.29 2.44 374,879 37.05% 10,118 191,532
Dividend and Bonus 2014 2013

Mln % Mln %
Final cash dividend 4,452 40 3,541 35

3rd interim dividend 3,896 35 3,541 35
2nd interim dividend 3,896 35 3,541 35
1st interim dividend 3,339 30 3,541 35
Bonus - - 1,012 10
40
2,000
32
1,600
24
1,200
16
800
8 400
0 -
Dec 14 Nov 14 Oct 14 Sep 14 Aug 14 Jul 14 Jun 14 May 14 Apr 14 Mar 14 Feb 14 Jan 14 Dec 13 Nov 13 Oct 13 Sep 13 Aug 13 Jul 13 Jun 13 May 13 Apr 13 Mar 13 Feb 13 Jan 13
MCB Turnover (Mln) Sector Turnover (Mln)
33,000
30,000
27,000
24,000
21,000
18,000
15,000
Dec 14 Nov 14 Oct 14 Sep 14 Aug 14 Jul 14 Jun 14 May 14 Apr 14 Mar 14 Feb 14 Jan 14 Dec 13 Nov 13 Oct 13 Sep 13 Aug 13 Jul 13 Jun 13 May 13 Apr 13 Mar 13 Feb 13 Jan 13
KSE 100 index
88
ANNUAL REPORT 2014
Share Price Sensitivity Analysis
Factors that can influence the share price of MCB Bank Limited are given below:
Discount rate / Monetary Policy

Based on different assessment parameters, the State Bank of Pakistan can change the monetary policy rate. Any decrease in
discount rate will result in lower net interest income and reduce profitability of the Bank. As a result, its share price may drop.
Minimum Rate of Return on Deposits

Any upward revision in the minimum deposit rate will result in compression in net interest margins earned due to increased
cost of deposits. Such revision can negatively impact the earning and correspondingly the share price of the scrip.
Inflation
Inflation is considered as a key determinant for policy rate change. Any uptick in the inflation statistics will have a corresponding
impact on the monetary policy rate. With higher discount rates, the Banks will be able to invest in high yielding investments,
thus resulting in increased profitability. This, in turn will have a positive impact on the share price.
Political Stability & Law and order situation

Political stability and controlled law & order situation is a pre-requisite for any economic development. This in turn reposes
investor confidence in the soils of Pakistan, making our corporates a potential investment opportunity. However, any act of
terrorism or political instability can negatively impact the equity market and share prices of traded stocks.
Investor Grievances
The premise of MCB Bank is to ensure that it safeguards the interests of its stakeholders therefore communicates pertinent
information at regular intervals through multiple mediums. However, the Bank acknowledges that there may be instances
where the stakeholders may have unaddressed concerns which if unresolved may become a grievance. To timely address any
untoward incident, the Bank has a well-functioning grievance mechanism that provides a transparent and credible process
resulting in outcomes that are seen as impartial, effective, and durable. Through this initiative the Bank is able to reduce
investment risks, provide an effective avenue to express and resolve concerns, thereby substantiating positive relationship.
The Bank ensures quality services with uncompromising focus on investors’ concerns and transparency in execution thereby
extending respect to the trust placed.
A centralized function namely the Shares department in the Corporate Affairs Division manages any such investor grievances.
Investors can lodge complaints by contacting the shares registrar, or write a letter or send an email to the share department of
the Bank. A designated e-mail address, ([email protected]) has been created to timely address the same and
is readily available through our website and annual reports. The Bank ensures resolution of any grievances within statutory
timelines.
89
MCB Calendar
Calendar of Major Events
Incorporation 1947
Nationalisation 1974
Investment in First Women Bank 1989
Privatisation 1991
Incorporation of MCB Finanical Services Limited 1992
Incorporation of MNET Services (Private) Limited 2001
Investment in Adamjee Insurance Company Limited 2004
Incorporation of MCB Trade Services Limited 2005
Incorporation of MCB Asset Management Company Limited 2005
Change of name from Muslim Commercial Bank Limited 2005
Issuance and Listing of Global Depository Receipts on London Stock Exchange 2006
Strategic acquisition by Maybank 2008
Incorporation of MCB Leasing Closed Joint Stock Company 2009
Investment in Euronet Pakistan (Private) Limited 2011
Amalgamation of MCB Asset Management Company with Arif Habib Investment Limited 2011
Opening of Wholesale Banking Branch in UAE 2014
Incorporation of MCB Islamic Banking Limited - a subsidiary company 2014
Financial Calendar
2014
1st Quarter Results issued on April 22, 2014
2nd Quarter Results issued on August 12, 2014
3rd Quarter Results issued on October 21, 2014
Annual Results issued on February 12, 2015
67th Annual General Meeting Scheduled on March 27, 2015
2013
66th Annual General Meeting held on March 27, 2014
2012
2011
2nd Quarter Results issued on July 26, 2011
2010
63rd Annual General Meeting held on March 31, 2011
2009
62nd Annual General Meeting held on March 26, 2010
90
ANNUAL REPORT 2014
Issues Raised in the Last Annual General Meeting
One of the members enquired about the specific reason for the increase in administrative expenses in the fourth quarter 2013;
to which, CFO responded that there was a one-off charge against Voluntary Separation Scheme (VSS) offered to clerical / non
–clerical staff of the bank for which an approximately cost of Rs. 1.1 Billion was charged in 2013. The chairman explicated that
nullifying the impact of VSS charge and pension fund reversal, the administrative expense base of the bank has decreased
when compared with 2012 which was indicative of the cost effective synergies attained through central authorizations and
annual capping.
Another member enquired about MCB role as corporate member in the society; the Chairman stated that on the spectrum of
corporate social responsibility, MCB donated Rs. 30 Million (Including Rs. 5 Million from Islamic banking Charity) for Earthquake
Relief Fund for Baluchistan whereas Rs. 5 Million was contributed out of charity for rehabilitation of minority community. He
also informed the members that in 2010, MCB Bank built 246 houses for the flood affected areas in Muzaffargarh District
and likewise in 2011 and 2012, the Bank donated Rs. 81 Million and Rs. 31 Million respectively. He added that MCB
contributions towards society at large had been recognized by various local and international organizations. He mentioned
that MCB received “CSR Business Excellence Awards” and recently ranked 8th among 490 top Pakistani companies, based
on donations for charitable purposes.
Profile of Shari’ah Advisor, MCB Islamic Banking Group
Dr. Mufti Muhammad Zubair Usmani son of Mufti Muhammad Rafi Usmani (grand Mufti of Pakistan and President Jamia Dar
ul Uloom Karachi) is a qualified Fazil Dars-e-Nizami from Jamia Dar ul Uloom, Karachi (Wifaq ul Madaris Arabia), Takhassus
Filfiqh (Mufti) from Jamia Dar ul Uloom, Karachi and Doctor of Philosophy holder in Islamic Finance from University of Karachi.
He also holds Bachelor of Arts degree in Economics from University of Karachi and Masters in Arts in International Relations
from University of Karachi. He has done many courses in Islamic Finance from Centre for Islamic Economics (Dar ul Uloom,
Karachi), from International Islamic University Islamabad and specialized course in International Humanitarian laws from Beirut
Lebanon. Mr. Usmani is teaching Tafseer-e-Qura’an, Hadith and Fiqh at Jamia Dar ul Uloom, Karachi and Islamic Finance at
Jamia Dar ul Uloom, Karachi, Bahria University, Sheikh Zayed Islamic Centre of University of Karachi and other institutions.
Mr. Usmani is the author of the books including but not limited to Accounting & Auditing for Islamic Financial system, comparative
study between Islam and Christianity and Ijarah (Islamic Leasing). Mr. Usmani has got published his research papers in various
international journals and has delivered research based lectures/presentations at different national & international seminars,
forums, conferences and seminars. Mr. Usmani is a member Shari’ah Board State Bank of Pakistan besides being Shari’ah
advisor, MCB Islamic Banking Group and supervising various candidates for their Doctor of Philosophy studies.
91
Directors’ Report to the Members
I am pleased to present, on behalf of the Board of Directors, amidst the ongoing drawbacks of an energy crisis,
the 67th annual report of MCB Bank Limited for the year systematic terrorist activity, and fiscal deficit. After recording
ended December 31, 2014. a GDP growth of 4.1% during FY14 as compared 3.70%
for the same period in the last year, the economic activity is
Economy Review projected to increase to 5.1% in the current year. This trend
has also been validated by the MCB Purchasing Managers
In 2014, the global economy witnessed its share of Index (MCB PMI) that stood at 65.69 in November 2014,
opportunities, challenges and risks that steered respective showing signs of continued growth. The Government of
markets. Significant amongst these were the unrest in Pakistan, in its budget for the fiscal year 2014/15, intended
Ukraine that developed into a civil war, Russia annexing to decrease subsidies, eliminate tax breaks, penalize income
Crimea and the aftermath of ISIS in Iraq and Syria. tax evaders are initiatives that signal to a reduction of the
fiscal deficit allowing the country achieving its budgeted
The positive indicators affecting the economic landscape target of 4.9% GDP. However, the pace of success in this
were the sudden and sharp decline in the oil prices at the regard is slower than anticipated/projected where we believe
end of 2014. Since oil is a major component that determines that this seems to be an up-hill task, particularly, on account
the movement of the consumer purchasing power in oil of declining revenues as a result of global decline in oil prices
consuming countries, this initiative helped curb inflation, and increase in security related costs.
push-up the value of the US dollar in these economies and
negatively impacting several oil-producing economies. On the external sector, increase in Pakistan’s Foreign
Exchange reserves is the highlight of the year 2014. The
The US economy showed signs of strengthening after facing reserves held by State Bank of Pakistan (SBP), a key source
subsequent challenges of witnessing slow-down, leading to of concern for some time, escalated from $3.5 billion in
a halt and eventually recovering after a quantitative ease in January 2014 to $10.5 billion in December 2014. This
the US monetary policy. The anticipated increase in the short was as a result of $1.1 billion raised in 3G and 4G auction,
term interest rates are likely to have spill-over effects in 2015 $1.5 billion Saudi inflow, timely materialization of Coalition
on several economies that are pegged against the US Dollar, Support Fund (CSF) payment of IMF tranches and the
especially in emerging markets where the capital flight has successful issue of Sukuk and Euro Bonds. Both issues
an adverse impact on their currency and domestic market. were exceedingly oversubscribed, demonstrating investor’s
The emerging markets are expected to face the brunt of confidence, raising $1 billion and $2 billion respectively.
this situation as they would need to take extra measures This helped stabilize Pak Rupee`s exchange rate versus US
to protect their currency by managing interest rates so as Dollar. PKR started the year at 105.60 against US Dollar;
to minimize the impact on their economies. Some of the appreciated to 96.50 by April; and remained stable at around
consequences of the US economy are likely to be mitigated 98.50 up to August 2014. However, political instability
by the limited growth and low inflation in the Eurozone and starting with sit-ins in Islamabad caused USD/PKR parity to
Japan. Both these economies are likely to offset the global depreciate once again, pushing the parity at one time to 103,
impact of the rebound in the US economy through/with a later stabilizing to close at 100.48 for the year.
more aggressive monetary stimulus as its primary tool to
revive growth. Also in these economies, a consensus has CPI touched a peak of 9.18% in April 2014 and then
been developed where greater structural reforms will be maintained a downward trend during the year, touching a
needed in order to attain sustained growth. low of 3.96% in November as a result of the declining oil and
commodity prices in the international markets. The monetary
Pakistan’s economy continues to show signs of promise policy remained stable for most of the year; however in
Foreign Reserves with SBP

11,500
10,500
9,500
8,500
7,500
6,500
5,500
4,500
3,500
2,500
Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Core Inflation NFNE
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ANNUAL REPORT 2014
November, The State Bank of Pakistan reduced its policy – Islamabad motorway (M2) project for FWO’s 100%
rate by 50 basis points as a result of the improved economic owned subsidiary, amounting to PKR 22B.
indicators. Single digit inflation, robust growth in remittances,
fiscal consolidation measures in place, improved foreign Transaction banking business strived to find new avenues
exchange reserves and rise in exports are indications of for improving profitability by initiating a number of existing
upward trend in our economy. However, energy crisis and and new to Bank customers on PayDirect-digital payment
security situation is still a substantial risk for business activity. platform. On the collections side the business continued to
In spite of these challenges, we are optimistic about the sign new relationships to bolster future profitability for the
outlook for our economy. Bank and strived to maximize wallet share amongst existing
customers. Cash Management team has successfully started
Group Reviews building a portfolio of financial institution clients which is first
of a kind and unique to MCB. Work on new system for Cash
Wholesale Banking Group Management has also been initiated.

In 2014 Wholesale Banking Group (WBG) remained focused In 2014 Transaction Banking integrated real time payment
on loan book growth, while continuing to maintain a low system with industry leaders in the money transfer business
infection rate. Our overseas operations in Sri Lanka and which allows instant payment through our branches. Building
Bahrain also continued with balance sheet growth during upon our portfolio of global partners we have further added
the year. partners from UAE, Europe and North America. Successful
marketing campaigns in GCC, Malaysia and UK have raised
Aggressive competition in interest rates amongst top tier overall awareness of MCB Burqraftaar products and MCB
corporate clients and reduction in policy rate during the year services. In 2015 we plan to launch a value added service for
had a negative impact on spreads. Despite these challenges, home remittance beneficiaries aimed at increasing volumes
the group managed to surpass its profitability target with and converting cash customers to MCB account holders
asset growth as well as enhancement of fee based income
in comparison to last year. Acute shortage of foreign currency liquidity, political unrest
towards end of 2014 coupled with already existing energy
To safeguard that growth in the loan book is maintained in shortages required the Bank to adopt a judicious approach
a structured manner with minimal risk, the group ensured in managing growth in Trade business. Despite the overall
periodic monitoring of corporate exposure in terms of trade volumes adversely affected due to the above stated
industrial sectors and regional concentration. During the year, reasons, the Bank managed to register a 5% (US$ terms)
a number of sector study reports, Risk Asset Acceptance increase in foreign Import business. On the other hand
Criteria (RAAC) and strategy papers on large corporate relevant alignment of the Bank to increase fee based
groups were developed for enhanced risk assessment on revenues, Fee and FX from trade, registered a decent growth
an ongoing basis. To further strengthen the initiative, Limit of 8% compared against last year.
review papers were added to address utilization, cross sell,
and line structuring. The investment and Corporate banking WBG is all geared up to continue with its growth strategy in
arms were involved in various transactions focusing on 2015 with renewed focus on book building, service based
provision of effective tailored solutions to cater to business fee enhancement and FX revenue yielding transactions by
requirements of our corporate clients. introducing innovative products and solutions.

Major achievements of WBG during the year are as follows: Bringing international as well as regional experience and
expertise, MCB Bank commenced its overseas operations
• Earmarked All-time high for Corporate Advances in Sri Lanka in 1994. Today on completion of 2 decades it
• Closure of 14 transactions (Project Finance, Advisory has further strengthened its presence with the opening of
and Syndications) totaling deal volume of over PKR another branch in Colombo expanding the network to 9
100B by Investment Banking branches. The flagship branch is located in the heart of
• Successful execution of MCB’s First ever Privatization the commercial city and is designed to serve individual,
mandate with the Secondary Public offering of Allied SME and corporate clients through state of the art banking
Bank Limited as a result of the Government of Pakistan capabilities. This is yet another move, exhibiting the Bank as
divesting 11.5% of its shareholding. The project was an active partner in the growth of the Sri Lankan economy by
seamlessly managed within 19 working days from enhancing its geographical reach through establishing new
the date the mandate was awarded and was also branches and introducing convenient methods of banking.
oversubscribed by ~1.4 times. MCB Bank holds the 3rd largest branch network among
• Second privatization mandate for the strategic sale of foreign banks in Sri Lanka.
National Power Construction Corporation (“NPCC”)
awarded to Investment Banking Group, where
execution will be in 2015.
• Successful execution of the Largest Infrastructure
financing for the modernization and overlay of Lahore
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Special Assets Management Group business setting high benchmarks for the industry. The
success is attributable to the impressive portfolio of alliances
During 2014, SAMG posted highest ever recovery figure offered through the loyalty program including more than 100
of PKR 2.005 Billion despite several macroeconomic discount partners on the menu, efficient SMS alert service
challenges. Accordingly the Group maintained its legacy of and the recently launched Platinum card.
recovering over PKR 1 billion for the 7th consecutive year
and over PKR.1.5 Billion for the 3rd year in a row. This As a market leader, the Bank has always visualized to
remarkable performance translated into an all-time growth introduce products that offer efficiency and convenience for
in recovery yield of 24% as opposed to 19% in the previous our customers. The main focus of the Bank is to continuously
year thereby outperforming its peers. SAMG also executed sought improvement in order to maximize the value of its
203 fresh settlements as opposed to the 136 in the previous Alternate Delivery Channels (ADCs) that include ATMS,
year, setting new record during the year. On Consumer NPLs Mobile Banking, Internet Banking and Call Center.
side, substantial improvement in recovery was witnessed
of PKR 435 million as opposed to PKR 334 million in the In the recent past MCB has been recognized as the Bank to
previous year registering a remarkable growth of 30%. It is initiate technology driven products that facilitate customers
noteworthy to mention that the recoveries done in the year to process payments in the most efficient and convenient
encompassed the successful closure of several chronic, method. This year MCB launched 2 technology driven
complex and big ticket defaults. products namely MCB eGate and MCB Lite. MCB eGate is
a world class online payment gateway brought to Pakistan
This momentous performance has been made possible in partnership with MasterCard International that equips
as a result of Trust in Allah, commitment and dedication of websites to accept payments reliably and securely from both
the entire SAMG team. The focus by the team was on the credit and debit cards around the world. This initiative will have
underlying philosophy of ‘innovative pro-activism’ leading to myriad of benefits for both the customers and merchants,
minimize the infected portfolio by executing high business where consumers will be able to shop from the comfort of
standards, transparency and ethical practices in the their home, have greater access to choice in terms of prices,
resolution and management of distressed advances. features and customer reviews and merchants to save on
stock inventory management. MCB Lite (Wallet) backed by
The strength of SAMG is not only about the numbers being VISA branded plastic was commercially rolled out with an
achieved in a year – it is also about the foundation SAMG has uptake of 50,000 wallets. The Mobile wallet offers to facilitate
built for the future. transactions through their respective handset and a mobile
application on Google Play store. The product facilitates
While posing some positive outlook, the year 2015 carries customers to write digital cheques, transfer money, carryout
several challenges for the banking sector primarily due to balance inquiry, buy tops ups, pay bills at their convenience.
weak corporate business profitability resulting in sluggish The Bank recognizes that facilitating the customer is of
deposit growth, the declining trend of discount rate imposed foremost importancea and has made two key developments
through the monetary policy, challenging security situation at the MCB Call center. The infrastructure and equipment
and continued energy shortages. The group foresees the has been upgraded so as to manage increasing call volumes
remedial management function will continue to play a at MCB Call center and by introducing representatives to
visible role in the medium term scenario. The team is set communicate with customers in their local language.
to deliver based on their progressive approach, dedication,
commitment and faith in Almighty Allah to positively Our previous launches have also witnessed promising results.
contribute towards increasing both the shareholder’s value MCB Mobile has also continued to grow at a fast pace with
and the economic stability of the country. an active customer base touching 500,000 showcasing an
increase of 25% from the year 2013. MCB Internet Banking,
Consumer Banking Segment (Retail Banking Group) a full fledge self-service channel launched is 2013 continued
to grow steadily in the year, resulting in a customer base of
Consumer Banking has continued to move in the right 100,000 customers/registrations.
direction with increased sales and enhancement in its product
portfolio. As part of our strategy, we have been focusing on The Bank has one of the largest ATM networks in the
the right mix of products and services by shifting from lending industry; the Bank continued to expand and added 148
to non-lending revenue streams. Our non-lending business new ATMs in 2014 reaching a mega network size of 930+
is supported by two strong pillars namely, Digital Banking ATMs ensuring strong footprint and convenience for all its
and Bancassurance while the Investment Service business customers nationwide. Merchant Acquiring business is
continues to show steady improvement. The contribution by another important pillar strengthening the Digital Banking
Digital Banking towards Revenue, Net Profit and customer presence where Point of Sale terminals happen to be a
engagement continued on the increasing trend throughout key element in ensuring the presence of MCB in simplifying
2014. payments. While making it secure for the customers, the
Bank achieved EMV compliance standards for the entire fleet
MCB Retail Banking achieved a new milestone of PKR 1 thereby mitigating the risks associated when carrying out
Billion of Non-Funded Revenue from its Visa Debit Card transactions. The POS machines have now been placed in
94
ANNUAL REPORT 2014
a tactical manner such that MCB continues to enjoy highest higher uptimes throughout the year despite deteriorating law
productivity per terminal in the industry. and order situation and energy crisis in the country.
The Bancassurance business continued to deliver its fast- One of the biggest achievements of Retail Banking Group
track pace of growth with new premium bookings to cross in 2014 was as a result of an extraordinarily successful Hajj
PKR 1 Billion mark in 2014. With introduction of some new campaign. With dedicated and focused efforts across the
product offerings available for distribution, the Investment network, MCB became the market leader and set a record
Services business grew by more than 15% over 2013 to of catering to the highest number of Hajj applications in
exceed a sales volume of PKR 7.5 Billion. MCB is the leader the industry. In 2014, keeping in view the customer needs
in Mutual Fund Sales through branch network with coverage and market offerings, Retail Banking Group revamped the
in ~ 350 branches across Pakistan. Substantial growth was existing product offering of its business account into a more
observed in 2014 from only 9 operational Privilege Centers powerful product with increased free of cost facilities for
across Pakistan with a substantial positive shift in CASA:TD customers maintaining a specific deposit balance during the
mix. The business intends to continue to provide value added previous month.
services, with a focus on cross-sell to our top depository
clients through this set up. MCB is the market leader in the During 2014, a new initiative was taken with the introduction
Rupee Traveller cheque (RTC) business catering to the bulk of MCB Ladies Branch (E-11 Markaz, Islamabad) that is
of total industry needs and is offered from more than 800 being managed predominantly by female staff specifically
branches nationwide. focusing on the banking needs of female clientele. This
proposition will help in expanding the scope of our target
The Bank benefits from the synergies created after the audience, primarily the segment of customers hesitant in
merger of consumer and commercial banking in 2013 coming to a branch. The aura of trust and confidence of
to witness growth in sales of consumer lending products. the female staff at the branch will encourage customers to
Credit card issuance and Auto Loans booked during 2014 discuss and find the ideal banking solutions to their financial
increased considerably as compared to the previous year. needs. With the introduction of the Ladies Branch, the Bank
Besides increase in Auto Loan sales volumes, the sales team will be able to emphasize its prominent role in advocating
also managed to increase the Net Financed Amount (NFA) equal employment opportunities for females.
per customer.
During the year as a result of a focused strategy the business
Priorities in 2015 managed to substantially increase its commercial lending
book by ~PKR 9.5 Billion. For 2015 the target for the
• Emphasis on furthering technology through ADCs i.e. business is to continue to grow sustainable and low cost
Internet Banking, Mobile Banking, Call Center, ATMs CASA deposits. The group will focus on introducing new
and cards liability products to address market needs, cross-selling,
• Sales entrenchment growing quality loans and aggressive volume growth in trade.
• Resource optimization
• Improve Non Fund revenue Priorities in 2015
• Leveraging retail client base
• Best in class service quality • Strategic relationship management
• Lead in transaction convenience • Lead in trade business
• Accelerate use of alternate delivery channels
Commercial Branch Banking (Retail Banking Group) • Reduce operational risk
• Improve quality lending
Branch banking network of Retail Banking continued to • Rely on low cost account base
make sustained progress in growing its deposits base in • Optimize usage of existing network
2014. Representing 92.7% of the total Bank’s deposits,
MCB witnessed a growth of 10.7% over last year, with a net Islamic Banking Group
amount of PKR 62B added to the deposit base. This year
the business reached a momentous landmark showcasing MCB Islamic Banking Group offers a complete set of
improvement in overall CASA portfolio which went above solutions that are Shariah Compliant providing a parallel
92% (historic high) despite the substantial increase in the route to conventional or mainstream banking. The products
volume base. Barring the last few weeks of December, the and services offered by the Bank have been developed to
Retail Banking deposit growth rate for the Bank remained safeguard the religious sentiments of customers, ensuring
above the overall industry deposit growth rate. A total of 15 the profits earned as Halal. The Bank caters to a wide variety
branches were added to the branch network bringing the of Shariah Compliant products and services to its valued
number of outlets (RBG) close to 1,200 with continued focus customers of all demographic segments across both the
on sustainable low cost deposits. The management placed asset and liability side.
special emphasis on managing operational risks and this was
reflected in significant improvement in internal audit ratings. At present MCB Islamic Banking has a network of 27
Responding to customer needs, MCB ATMs also recorded branches in 14 cities across the country. In the year 2014,
95
MCB focused on further improvement of its Islamic Banking substantial contribution towards the top and bottom line
brand image through distribution of brochures, marketing of the Bank, contributing both in markup and non-markup
campaigns and placing of stalls at various Islamic Finance revenue.
conferences, seminars and forums. IBG also arranged
extensive trainings for its staff members and for other The growth was a result of effective management,
Groups of the Bank to ensure an in-depth understanding of commitment and dedication of its members. In spite of a
the difference between both mechanisms of Banking. The tumultuous year on the economic and political front, Treasury
Group shall continue to provide training to its staff members was able to face the challenges by remaining vigilant on key
so as to remain competitive in the market and well versed developments in the market, timely management of portfolio
on any developments to mitigate the reputation risk as a risks, effective decision-making and implementation of key
consequence of non-compliance of Shariah in transactions. strategies. The resounding success of the Group was due to
its accurate prediction of market moves and positioning its
To comply with instructions of the regulatory authority and portfolio accordingly. During the year, the Group focused on
the policy of the Bank, the Islamic Banking Group has got increasing the duration of its fixed income portfolio in order to
its operations reviewed by the relevant authorities and capitalize on the future prospects of the yields. This provided
developed products manuals on the same lines. Further, stability in income and eventually resulted in sizeable gain.
under the instructions of regulator, the Group has developed The dedication of the Group to enhance its Non-Interest
a Pool Management System for transparent calculation and Income further increased its stability and revenue base.
distribution of profit to remunerative deposits holders.
Treasury strives to maintain a strong bond with its internal
During 2014, the Group remained cost efficient in its business and external customers. The group, while focusing on its
operations. To strengthen Islamic Banking book size, MCB strengths and abilities, continues to target new relationships
Islamic Banking has shown significant growth both in liability by offering new and improved product lines and developing
and assets portfolio. a mutually beneficial relationship with its customers. It has
therefore embarked on putting in place the infrastructure and
Incorporation of MCB Islamic Bank Limited technical platforms to enable new and structured product
offerings.
During the year, the Bank incorporated MCB Islamic Bank
Limited, a wholly owned subsidiary, with an authorized share Information Technology Group
capital of Rs 15 Billion. Subject to regulatory approvals, the
operation of Islamic Bank Division of MCB Bank Limited In this era, the role of Information Technology in the financial
referred to in Annexure II to the unconsolidated financial sector has emerged as a core success factor to earmark the
statements will be transferred to the said subsidiary. The progress of the Banking industry. With digitalizing customer
commercial operation of the said subsidiary will commence services, Banks are now epitome to the opportunity brought
after formal go ahead from State Bank of Pakistan. by technology. Successful implementation of the same is
Subsequent to the year end, the Bank has injected equity of ensuring the impact of obsolescence and conformance to the
Rs 10 billion in the said subsidiary. availability, security and reliability of customer Information. At
MCB, the management and the Board is committed to enrich
Capital Market the Information Technology infrastructure in the Bank at the
enterprise level, evident from the respective investments
Capital Markets Division recorded another stellar year and made by the Bank.
made record contributions to the bottom line of the Bank.
The Profit-to-Employee ratio by the Division is the highest in The Bank is committed to facilitate customers by providing
the Bank. Although the year witnessed volatile and falling oil value added services that encompass convenience, ease of
prices in the international market, which negatively impacted payments, a wide array of choices that are safe, secure and
the E&P sector, the Division still managed to exceed the reliable. The Bank has to its credit the largest footprint of
year’s budgeted Net Income by a significant margin. In online branches with enterprise-wide pure centralization, wide
the process, KSE-100 Index return for 2014 was also network of ATMs and POS machines. It is also accredited
comfortably beaten. These significant gains can be attributed to provide robust solutions to its customers with the launch
to careful sector and stock allocation, while ensuring high of Internet and Mobile Banking platforms, mobile wallets to
risk-adjusted returns. Our positions in Power, Banking and facilitate branchless banking, 24 hour operational call center
Chemical sectors provided significant upside. Going forward, backed by state-of-the-art enterprise data network, proactive
the Division will continue to look for potential pockets of value features to combat money laundering, fraud and other
while closely monitoring risk. financial crimes. In 2014 the group successfully established
its in-house Disaster Recovery Facility at par with the relevant
Treasury and FX Group industry standards. Based on the current performance and
the trends set forth, the department is geared to exceed the
Treasury had a remarkable growth in 2014, as it continued expectations of its customers in the coming year.
to excel and surpass its targets, building on the series
of successive growth in last 4-years. This resulted in a
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ANNUAL REPORT 2014
Apart from these major deliverables, IT Group streamlined its Operations Manual with improved & more comprehensive
existing operations by reducing the uptime of core banking operational guidelines and Record Management Policy to
and affiliated applications. The team remained committed and strengthen record management process in the Bank. Bank-
played a vital role in ensuring the maximum uptimes during wide internal control (COSO) framework documentation was
the mishap at PTCL though it was beyond the control and updated to incorporate changes in regulations, policies,
scope of the Bank. The strategic vision and the regulatory processes and systems. Functional support was provided in
compliance to maintain dual links at each site including implementation of Electronic Account Opening system that
ATMs in the country was a major savior during such kind of has led to improved account opening turn-around-time for
disaster for the largest service provider in the country. The customers.
availability of Data Centers and the back-end systems along
with all necessary services were available and accessible Other significant accomplishments of the Group during the
throughout, which was indeed a remarkable achievement. year were completion of centralized account opening for all
retail branches across Pakistan, improvement in customer
Looking forward to 2015, IT Group is more committed service and compliance in the area of ATM transactions’
towards: settlement, support for launch of E-Commerce Acquiring
and re-launch of Home Loans and Personal Loans through
i) Enterprise Management Solution improved automation. The Group also led in standardizing
ii) Base upgrade at end-points cheque books for customer convenience in line with SBP
iii) VOIP, Video &TP monitoring & management tools regulations. Continuous support was provided to the
including new IP Voice Logging business for managing growth in the areas of trade services
iv) PCI/DSS Compliance with Implementation for File and cash management including Home Remittances.
Integrity Monitoring tool (FIM)
v) Upgrade of Network Access Controller (NAC) system The Group also improved the infrastructure of the Bank
vi) Implementation of workflow management system while enhancing security and safety standards across the
vii) Expansion of ATM network offices and respective branches. The hallmark in the domain
viii) Major developments in Core Banking Systems of facilities was the completion of a state of the art office
ix) Evaluation and subsequent implementation of a new complex, ‘MCB Center’, which also houses the best in-house
Card Management System Learning & Development Center having a complete facility
for training of employees. This new Center has features of a
Apart from above commitments, IT Group is also planning to High Performance & Sustainable Building through usage of
empower the staff with requisite trainings and job enrichment waste heat for air-conditioning.
plan to enhance motivation.
Business Continuity Plan
Operations Group
Business Continuity Planning is the process whereby MCB
Operations Group remained focused on providing superior ensures the maintenance or recovery of operations, including
customer service, increasing operational efficiency and services to customers, when confronted with adverse events
strengthening controls & regulatory compliance during such as natural disasters, technological failures, human errors
the year. The major milestone achieved during 2014 was and terrorism. The objective of BCP is to minimize financial
upgrade of Core Banking System (CBS) to Ambit 8.5, loss to the institution, continue to serve its customers and
which not only improved user access & controls where the participants of financial markets, mitigate the negative impact
automation resulted in upgrading the technology platform. of disruptions to the reputation, operations and market
Straight through integration with systems opened doors position of the Bank, remain compliant with applicable laws
for more innovative and efficient financial solutions for the and regulations of the central bank and safeguard the welfare
customers. Implementation of modules relating to Advances of staff. Business continuity management includes disaster
for Limit monitoring, Collateral and Loan management recovery, business recovery, crisis management, incident
were the highlights for the Bank from business point of management, emergency management and contingency
view. Another achievement during the year was successful planning.
implementation of Inter-Bank Funds Transfer (IBFT) capability
that enhanced the competiveness of the Bank in the market The Board of Directors periodically reviews the Business
by offering customers the ability to transfer funds to other Continuity Plan of the Bank to ensure that all relevant remedial
member Banks using various distribution channels. actions are present to mitigate any untoward incident.
The Operations Group has always stressed upon strong International Investment Group
process controls, it provided strong support in implementation
of requirements under the U.S. Foreign Accounts Tax MCB as part of its five years strategy had identified
Compliance Act (FATCA). A comprehensive exercise International Expansion as a key driver of its future growth. In
of business process re-engineering and formulation of this regard not only various potential investment opportunities
operational processes and procedures was completed along were identified but regulatory approvals were also sought for
with CBS up-grade. Operations Group issued revised Branch successful closure of these initiatives. Keeping in view the
97
increased focus on International Expansion, International
Investments Group was formed in March 2014 to identify, Regulatory Risk & International Compliance is a key CCG
develop and operationalise potential overseas opportunities. function which provides support and advice to management
and staff on compliance and regulatory issues. It also
Primary goal of International Investment’s Group is to reviews policies and procedures, supports new Initiatives,
capitalize on identified opportunities to establish banking products and services, along with maintaining relationship
operations of MCB Bank in Middle East, Africa & Europe with regulatory authorities. The function is also involved in
along with consolidation of existing overseas operations. managing CDD/AML aspects for Correspondent Banks and
Money Services Business. It has implemented Name Filtering
IIG made a significant progress towards establishing systems to strengthen Customer Due Diligence & Enhanced
wholesale banking operations for MCB in Dubai, where Due Diligence process. It has also developed an Electronic
Formal License has already been granted by Central Bank Digital Library which provides access to all internal circulars/
of UAE. Operations will formally commence after issuance laws/regulations/guidelines and other material received from
of Formal License by State Bank of Pakistan. Going forward regulatory bodies along other multimedia with just a click to
the group aims to further strengthen its footprint in UAE by all users.
opening more branches and expanding to other international
markets. Compliance Assurance function is essentially concerned with
identification, monitoring and resolution of regulatory/control
Service Quality issues through on-site reviews of Branches and Non-Branch
Entities by Compliance Officials, who also provide training to
Customers are the focus of every business today, as they the branch staff. It also conducts Know Your Employee (KYE)
define quality! For service performance to be perceived and exercise by reviewing credentials of newly hired permanent
evaluated by the customer as “High Quality”, a number of employees. Issues Tracking & Monitoring (ITAM) Committee
fundamental service processes must be delivered with structure, with members comprising of Senior Management,
uniformity across all businesses. Our dedicated Service is in place which spearheads expeditious resolution of issues
Quality Division has a key aim to provide Quality service to our pointed out in SBP inspections.
customers by the engagement of employees across all levels.
Identifying the needs of customers is a matter of ensuring Compliance Training & Validations function in coordination
that employees, who depend on one another as individuals, with Human Resource Management Group initiated a
as well as departments, that depend on each other as units, specialized program under “Certified Branch Managers
communicate their needs to one another continually. This, (CBM)” and “Certified Branch Operation Managers (CBOM)”.
develops, strengthens and retains customer relationships It also developed comprehensive training programs on
by improving our cycle time and reducing defects in all the compliance and controls for the staff. Further, off-site reviews
processes resulting in Customer Satisfaction and loyalty. of Key critical accounts and GL control heads were carried
out whilst ensuring effective monitoring.
Service quality is regarded as a critical success factor for
organizations to differentiate from competitors. Service AML Department is committed to the highest standards
Quality Division at MCB Bank Limited has a core function of of AML/CFT compliance and requires management and
measuring the level of services which are being provided to employees to adhere to these standards to prevent use
all customers by the Bank. The practice of excellent service of channels, products and services of the Bank for money
quality standards integrated with consumer products is a laundering and terrorist financing. It monitors out of pattern
powerful generator to cater to customers’ needs and engage transactions to detect possible Money Laundering activities
with them. Considering that banks offer undifferentiated through Transaction Monitoring Solution (MANTAS). Further,
products in a rival market place, we need to pay more system up-gradation of MANTAS to Financial Crime &
attention to service quality in order to gain a competitive Control Management (FCCM) and development of e – KYC
advantage. Banks that master service quality can gain a application, are under final phase of implementation.
competitive edge in terms of higher revenue, customer
loyalty and customer retention. The Internal Control function promotes higher standards of
control through implementation of internationally accepted
Compliance and Controls Group COSO framework. The Risk & Control Self-Assessment
(RCSA) framework of the Bank is effectively functioning for
Compliance & Controls function plays a pivotal role in an ensuring ongoing operating effectiveness of key controls.
organization’s compliance & control structure, for achieving
operational excellence. Keeping in view the strategic The Bank has also registered as Participating Foreign
objectives of the Bank and critical challenges being Financial Institution (PFFIs) and subsequently implemented
faced by the Banking industry in Pakistan, Compliance , Foreign Account Tax Compliance Act (FATCA) – (a Federal
& Controls Group (CCG) enforces a well-integrated and Law of United States of America (USA) )that requires Foreign
robust compliance framework that identifies, manages & Financial Institutions (FFIs) to register with US Tax Authority,
monitors all potential risks that could lead to breach of laws i.e., Internal Revenue Service (IRS)), across the Bank .
& regulations.
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ANNUAL REPORT 2014
Compliance & Controls Group, with a commitment to support Human Resource Management Group
the Bank in its journey towards continuous improvement and
to cope with the ever changing banking environment will HRMG continued to work towards strengthening the internal
continue to increase its effectiveness through professional and external frameworks in order to align the aspirations
development of its staff and strengthening of functional of the employees with the goals and objectives of the
solutions. organization. In this regard, a number of initiatives have been
taken including performance monitoring of RBG branches
Audit and Risk Assets Review Group on SMART goals format, early release of the annual
performance cycle, capacity planning, policy improvements,
Internal audit function plays a pivotal role in an organization’s extensive hiring including induction of several batches
control structure – serving as a foundation intended to lift (Tellers, General bankers, Branch and Operations Managers)
the organization to a greater level of operational excellence. and an enhanced focus on training.
Audit & RAR Group is responsible for the internal audit
function within MCB Bank Limited. The Group conducts Learning and Development Centers of the Bank carried out
audits/reviews of various areas of the Bank under the globally a number of training sessions that were specifically tailored
recognized Risk Based Auditing Methodology. to meet the requirements of the Bank. The L & D centre in
Lahore relocated to its customer built premises in June,
MCB Bank Limited achieved one of the major milestones 2014. During the year L & D played an instrumental role in
during 2014 with the upgrading of the Core Banking coordinating with the President’s team for the dissemination
Solution. Understanding the upgraded system as well as its of bank strategy. This was done through a series of
functionalities and utilization of the same for the purpose of presentations by the President himself in Karachi, Lahore
internal audit engagements was one of the major challenges and Sri Lanka and the L & D team across other centers. A
for Audit & RAR Group during the year. The Group is pleased specific Customer Survey aimed at determining the turn-
to share that the internal audit teams were successfully around time in certain consumer deliverables was also
trained and developed on the upgraded version and optimal carried out through the joint efforts of L & D, Compensation
utilization of the same is being ensured so as to enhance & Policy and HR-Relationship teams.
the efficiency and effectiveness of auditing across the Bank.
Also in the year, stringent follow up on the highlighted In 2014, HR moved towards automation of its processes by
audit issues has been another area of focus, where the adding SAP driven functionalities across its work systems
management of the Bank was able to ensure compliance including payroll, employee management, training and
with recommendations of the Audit Group in letter and spirit. operations. Further self -service portal has been developed
enabling employees to access pay slips, tax information and
In line with the Internal Auditing Standards issued by the leave management portal. The facility has been successfully
Institute of Internal Auditors (IIA), USA, a full scope quality piloted for senior executives, with plans to roll out across the
assessment and functional performance review of the Audit board in 2015. SAP provides a solution that tracks employee
Group was conducted by external consultants for the first information including expenses such as allowances through
time in the history of MCB Bank Limited. the system by allocating them to respective cost centers,
enabling the business to track them more accurately.
With a commitment to support the Bank in its journey
towards continuous improvement, Audit & RAR Group will Throughout the year MCB HR has focused on hiring trained
continue to strengthen its resources and framework to cope and experienced employees from the market to enhance
with the changing and challenging banking environment. the capability of the Business groups and has been the
forerunner in the Industry by providing job opportunities to
Legal Affairs Group fresh graduates. Not only has MCB become the preferred
employer, the Bank has consistently played a pivotal role by
The mission of the Legal Affairs Group is to further the fulfilling its corporate social responsibility. HR has focused
strategic goals and to protect and preserve the legal, ethical on being the link between the employee and the senior
and financial integrity and the reputation of MCB Bank. management to streamline processes in order to reduce
The group ensures providing strategic legal advice on Turn Around Time (TAT) in facilitating employees.
contentious and non-contentious matters thereby ensuring
that businesses conduct their activities in accordance with All HR policies have been reviewed and updated in
applicable laws and by-laws consistent with the mission, accordance with present day requirements and corporate
vision, and values of the Bank. The same is achieved through framework of the Bank. Management has recognized that
Legal Governance, Risk Management and Compliance this is a critical area with strong impact on performance,
(LGRC). procedures and business ethics. Out sourcing, talent
acquisition and succession planning policies were amended
During 2014, the group remained cost efficient and provided and strengthened as well as the Code of Conduct for
support to relevant groups including SAMG, RBG, HRMG, employees. Motor cycle policy was also introduced for
and WBG. Legal Affairs Group is committed to perform up facilitating employees with job description entailing travel. All
the curve in future to help the Bank to achieve better results. changes in policy, procedures and SOPs were also amended
99
accordingly. The policy team also carried out country wide Review Committee” (RM&PRC) which is a sub-committee
training on understanding and implementing policies. of the BOD.
During the year HR also carried out Succession Planning This separation of functions between the risk takers and the
exercise to ensure Business continuity and smooth risk managers provides sufficient independence and yet joint
functioning of all areas in case of attritions and change of responsibility in decision making. Four-Eye-Principle is the
job responsibilities. All stakeholders were consulted and structure that provides a tangible shape and assigns joint
the succession planning was executed thereby fulfilling responsibility to business & risk approving authorities on
internal and external requirements. Talent management and credit & market areas’ lending/exposure requests.
organizational development initiatives were also addressed
including the introduction of a more comprehensive The Board of Directors and its Risk Management &
framework under consideration by Management. Portfolio Review Committee have ensured formulation and
implementation of a comprehensive Risk Management
CSR and Security Framework. Under Board of Directors’ guidance, the
Bank continued to execute the risk strategy and undertake
In 2014 CSR & Security Group focused on strengthening controlled risk-taking activities within this risk management
its organizational structure to meet the growing challenges framework; combining core policies, procedures and
of security to the assets, employees and customers of the process design with active portfolio management.
Bank. The Group endeavored to speed up the process of
converting branches into guard less and technology protected As a matter of principle, the Bank continuously challenges
mode. Besides helping to control the ever increasing cost of itself to improve its Risk Management Framework in the
physical guarding, this initiative helped in making branches light of the international best practices and State Bank of
safe from violation, especially during periods of extended Pakistan guidelines. Various policies related to management
closure when they are most vulnerable. During the year over of different risks were approved or renewed by the BOD on
400 branches were migrated to the Guard less mode. The recommendations of the RM&PRC.
Group also assisted in maintaining high standards of Health
and Safety in the offices and branches by checking the The RM&PRC guides the management on its risk taking
serviceability of Safety equipment installed. activities within the approved policy framework by the Board.
Regular meetings of RM&PRC were convened to oversee
Head of Security and Regional Security Officer of the Group the risk exposures and their trends as a result of the various
delivered a lecture on Branch Security to create awareness of initiatives undertaken by the Bank. The committee reviewed
the necessary remedial actions to be adopted in case of an different aspects of the loan portfolio which, among others,
untoward incident. The team delivered lectures during visits include asset growth, credit quality, credit concentration,
to various circles and addressed the relevant participants in lending business trend and cross sectional analysis. Review
the Staff Colleges and branches. of various aspects of Liquidity risk, Market risk covering
interest rate risk, foreign exchange risk, along with the
Risk Management Framework stressed levels was also a regular feature. Operational
risk levels and key risk indicators pertaining to processes,
The Board of Directors at MCB Bank Limited, actively drive people and reputation were also regularly reviewed by the
the risk management framework that provides an active committee.
approach in dealing with factors that influence the financial
standing of the Bank. With the valuable guidance of BOD, the Management Committee for Risk is an additional platform
Bank has always sought to generate recurrent earnings and to discuss and deliberate key risk issues in the portfolio at
create meaningful returns for its shareholder. An Effective Risk the management level. Regular meetings were convened to
Management Framework and Risk Governance Structure oversee the risk exposures in to the portfolio of the Bank.
remains a cornerstone towards ensuring realization of the
vision of the Bank. Collectively, the strength of the risk profile During the year, the Bank has been selective in disbursing
of the Bank comprises of: its loan to good quality borrowers engaged in different
businesses. The Bank continues to maintain lower than
• Robust Risk Governance Structure average industry level NPL ratios and maintains a fairly
• Strong Capital and Liquidity Position diversified loan portfolio. Even the top 20 Non-Government
• Quality of credit Portfolio Borrowers account for less than 25% of total (Funded +
Non-Funded) exposure. For risk categorized as sovereign/
Empowerment and independence in risk management is government risk, the lending exposure is spread over
the basic principle that is applied as a fundamental part of multiple government owned or controlled organizations and
BOD’s vision. Independence of areas that are responsible departments which are engaged in a variety of tasks that
for measuring, analyzing, controlling and monitoring risk range from different development related works to utility
from the frontline risk takers (i.e. business soliciting groups) distribution and production. Many of these government
is ensured within the bank. In line with this principle, CRO owned corporations operate on profitable self-sustained
functionally reports to the “Risk Management & Portfolio basis. To manage adverse outcomes in terms of unfavourable
100
ANNUAL REPORT 2014
scenarios, multiple factors in the lending structure of the Bank Capital Assessment and Adequacy
provide additional comfort and support, through quality of
eligible collateral, pre-disbursement safety measures and The Bank remains a well-capitalized institution with a capital
post disbursement monitoring. base well above the regulatory limits and Basel capital
requirements. The Bank continues the policy of sufficient
Like all financial institutions, MCB is also exposed to profit retention to increase its risk taking capacity. Quality of
market risks through its trading and other activities. A the capital is evident from Bank’s Tier-1 to total risk weighted
comprehensive structure is in place aimed at ensuring that assets ratio which comes to 18.08% against requirement of
the Bank does not exceed its qualitative and quantitative 7%. Bank’s well capitalization also resulted in a leverage ratio
tolerance for market risk. The Bank has followed a non- of 9.08% which is well above the regulatory limit.
aggressive and balanced approach towards risk taking in
the market risk area, coupled with robust risk management Liquidity management and strategy to overcome
architecture, the Bank has achieved the target of keeping liquidity position
the exposures within the defined risk appetite. A number of
metrics like VaR methodologies complemented by sensitivity The liquidity risk management framework at MCB is designed
measures, notional limits, loss triggers at a detailed portfolio to identify measure and manage the position of the Bank
level, and extensive stress testing are used to capture and in a timely manner. The underlying policies and procedures
report the multi-dimensional aspects of market risk. The include: Risk Management policy, Treasury Policy, Investment
Bank will continue to pursue to have a risk return balanced policy, Contingency Funding Plan, Liquidity Strategy and
portfolio to keep its market risk exposure in line within the Limit Structure which are reviewed and approved regularly
approved risk limits. by both the senior management and members of the Board.
Bank’s comprehensive liquidity management framework MCB Bank also conducts Liquidity Risk Analysis on regular
assists it to closely watch the liquidity position through basis. MCB liquidity Risk Policy envisages to project the
monitoring of early warning indicators and stress testing Bank’s funding position during temporary and long-term
thus enabling an effective decision-making. The liquidity risk liquidity changes, including those caused by liability erosion
management approach at MCB involves intraday liquidity and explicitly identifying quantifying and ranking all sources
management, managing funding sources and evaluation of of funding preferences, such as reducing assets, modifying
structural imbalances in the balance sheet. During the year or increasing liability structure; and using other alternatives
the liquidity position of the Bank remained satisfactory. A large for controlling statement of financial position changes. MCB
and stable base of customer deposits at the Bank, along performs regular liquidity stress tests as part of its liquidity
with a strong capital base provided a source of strength and monitoring activities. The purpose of the liquidity stress tests
supported maintenance of strong liquidity position during the is intended to ensure sufficient liquidity for the Bank under
year. The Bank also has a substantial portfolio of marketable both idiosyncratic and systemic market stress conditions.
securities that can be realized in the event of liquidity stress. MCB’s liquidity risk management approach involves
The Liquidity Coverage Ratio and Net Stable Funding Ratio intraday liquidity management, managing funding sources
of the Bank are well within the Basel prescribed limits. and evaluation of structural imbalances in balance sheet
structure.
In accordance with the Operational Risk policy and
framework, a database covering losses, control breaches The Asset Liability Management Committee of the bank has
and near misses is being maintained. Major risk events are the responsibility for the formulation of overall strategy and
analysed from the control breach perspective and mitigating oversight of the Asset Liability management function. Board
controls are assessed on design and operating effectiveness. has approved a comprehensive Liquidity Risk Policy (part of
Quarterly updates on Operational Risk events are presented Risk Management Policy), which stipulates policies regarding
to senior management and the risk committee of the Board. maintenance of various ratios, funding preferences, and
The Bank has an internal Operational Risk awareness program evaluation of Banks’ liquidity under normal and crisis situation.
which is aimed at building capacity and inculcating risk free MCB Bank monitors and assesses the impact of increase in
culture in the staff through workshops and on-job awareness. NPLs, deposits concentration, deposits withdrawal, decline
Currently, the bank is reporting operational risk capital charge in earnings, expanded business opportunities, acquisitions
under Basic Indicator Approach (BIA) where the Bank and negative reputation, on its liquidity positions. Liquidity
continues to pursue a number of initiatives for the adoption Strategy is also in place, to ensure that the Bank can meet
of The Alternative Standardized Approach (ASA) including its temporal liquidity needs and optimize the contribution
business line mapping and risk and control self-assessment towards the profitability of the Bank. A framework to assess
exercises. The Bank is engaged in dialogue with regulator for the maturity profile of non-contractual assets and liabilities
adoption of advance approach for operational risk. is in place to supplement the liquidity management. As per
preliminary assessments, the Bank’s Liquidity Coverage
Ratio and Net Stable Funding Ratio as per Basel III are well
within the prescribed limits.
101
Financial Highlights Profitability
MCB Bank Limited delivered exceptional results for the year Profit before and after tax of the Bank rose to Rs. 36.7 billion
ended December 31, 2014 meeting stakeholder expectations and Rs. 24.3 billion, registering exceptional growth of 14%
ensuring significant contribution to the sector and economy: and 13% respectively over 2013.It was mainly contributed
by 15% increase in Net Markup income and 20% increase in
Profit and Appropriation Non-Markup Income.
The profit before and after taxation for the year ended The policy rate did not show volatility during major part of the
December 31, 2014 together with appropriations is as under: year with 50bps cut reported in November, 2014. Based on
the interest rate calls, the investment concentration of the
Bank shifted from T-Bills portfolio to high yielding PIBs which
Rs. in Million contributed to the healthy increase of 16% in gross markup
income.

Profit before taxation 36,729 On the gross markup income side, the bank recorded an
Taxation 12,405
increase of PKR 12.2B whereas markup expense registered
an increase of PKR 6.56B. Spread analysis of interest
Profit after taxation 24,325 earning assets highlight that interest income on advances
increased by PKR 3.931B which was mainly contributed by
volume increase. On the investment side, the bank recorded
Un-appropriated Profit Brought Forward 40,552
an increase of 109bps as return on investments. The price
Remeasurement of defined benefit plans - net of tax 140 volume variance highlights that PKR 3.8B was contributed
Transfer from Surplus on Revaluation of Fixed by volume whereas PKR 4.7B was contributed by price
48
Assets (net of tax) variance.
40,740
Profit Available for Appropriation 65,064 Markup Income on Advances & Investments
(Rs. In Million)

14,000
Appropriations:
12,260 12,267
11,990
Statutory Reserve 2,432 12,000 11,317
10,204
9,762 9,831
Issue of Bonus Shares - December 2013 1,012 10,000 9,436
8,115
Final Cash Dividend - December 2013 3,541 7,448
8,000 6,892 6,830
6,466 6,390
Interim Cash Dividend - March 2014 3,339 6,138
5,633
6,000
Interim Cash Dividend - June 2014 3,896
Interim Cash Dividend - September 2014 3,896 4,000
Total Appropriations 18,116 2,000
Un-appropriated Profit Carried Forward 46,948

-
Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013
Earnings per share (EPS) - Rupees 21.85
Markup Income on Advances Markup Income on Investments
Dividends
The Bank continued with its strategic focus on low cost

The Board has recommended a final cash dividend @ 40%
deposits with CASA base reported at 90.96% as at
for the year ended December 31, 2014. This is in addition
December 31, 2014.
to 100% interim cash dividends announced during the year.
The effect of the recommendation is not reflected in the
On the interest bearing liabilities side, the total cost of
above appropriations.
deposit increased by 62 bps over last year owing to the two
specific regulatory revisions; change in interest computation
In addition to the financial analysis presented in the
in 2013 from minimum monthly balance to average monthly
stakeholder’s information section, detailed analysis of MCB
balance and linkage of minimum deposit rate with the floor
Bank Limited’s performance compared to the previous year
of repo corridor. The average volume of deposits registered
is as follows:
an increase of 67.6 billion. The cost of saving deposits has
increased by Rs. 7.2B of which Rs. 3.7B was contributed by
volume and balancing 3.5B by price variance. On the fixed
102
ANNUAL REPORT 2014
deposit side, the interest expense has decreased by PKR provisioning has resulted in significant reversals in provision
465M on account of approximately PKR 10B decrease in against advacnes. The quarterly breakdown presented in the
average fixed deposit base. below table specifies the reversal trajectory in provision over
quarters:
Markup expense on deposits
(Rs. In Million) Provision against Advances
(Rs. In Million)
238
9,000
7,988 7,894
8,000
7,371
7,088
7,000 6,663
6,050
6,000 5,559
5,289
5,000 (393) (386)

(469)
(553) (581)
4,000
3,000 (811)
(968)
2,000
Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013
1,000
-
Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 On the administrative expenses side, the Bank registered a
nominal increase of 5% over last year. Major increase was
registered in repairs, utilities and fuel charges. Considering
The Bank achieved a remarkable growth of 20% in non- the growth in operational network and inflationary surge, the
markup income block which increased to Rs. 13.4 billion growth remains well within the budgetary levels. Pension fund
for the year 2014. The increase is mainly contributed by reversal for the year was reported at 832M as compared to
compensation on delayed tax refunds amounting to Rs. 1.1 1.702B reported for last year.
billion, income from dealing in foreign currencies amounting
to Rs. 527 million and fee, commission & brokerage income Administrative Expenses (excluding PF Reversal)
(Rs. In Million)
amounting to Rs. 484 million. The ratio of non-markup
income to total revenue has improved to 23.59% in 2014
from 22.78% in last year and remains one of the key
6,608
6,144
strategically focused area of the Bank. 7,000

5,260
5,160
4,880
6,000
4,769
4,697
4,338
Composition of Non - Markup Income 5,000
4,000
100% 30.00%
3,000
80% 22.98%
23.70%
23.59% 22.78% 23.09% 2,000
25.00%
60% 21.49%
20.29%
19.47% 1,000
40%
20.00%
-
20% Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013
0% 15.00%
Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Statement of Financial Position
Fee, commission and brokerage income Dividend income From statement of financial position perspective, the total
Income from dealing in foreign currencies Capital Gains asset base of the bank was reported at an all-time high of PKR
Other income Non-Markup Income to Net Revenue
934.6B, reflecting a healthy increase of 15% over December,
2013 and growing by 8% over September 30, 2014. The
analysis of the asset mix highlights that net advances have
Catering to the financial and transactional requirements increased by 55B (22%) whereas net investments have
of our privileged customers, the Bank has been actively increased by 62B over December 31, 2013. Gross advances
engaged in the card business, which has supplemented of the Bank have registered an increase of 54.1B over
the fee, commission income by Rs. 248 million. Other 2013. Group wise categorization of advances highlights
significant contributors to the fee income are commission on an increase of 42.5B for Corporate Banking, with increase
remittances and rental income earned on car and equipment of approximately Rs. 9.5B and Rs. 2.5B for Commercial
ijarah. Banking Group and Islamic Banking Group respectively.
Exceptional performance of our recovery units coupled with During the year, the bank focused on its main stream
strengthened risk management framework and aggressive business of credit growth. Growth in transport, storage and
103
communication sector was remarkable presenting 138% December 31, 2013. Approximately 96% of the investment
increase over 2013. Agriculture, forestry, hunting and base is in risk free PIBs and Treasury Bills with 2% exposure
fishing sector recorded a growth of 29% whereas Chemical, in equity securities. A major shift in Government securities
petroleum and pharmaceuticals sector registered a growth concentration level can be observed over the year where
of 26% over last year. Financing in Textile and Wholesale T-Bills decreased from 72% as at December 2013 to
& Retail sectors declined during the year and presented a 28.6% whereas PIBs increased from 24% to 66.47% as
decrease of 10% and 39% respectively. Advances in sugar at December 31, 2014 respectively. With reference to the
sector increased by 1% in 2014. concentration levels in different maturity buckets, 7.23% of
the T-Bill exposure is classified in 3-Month tenor, 10.85% in
Gross Advances 6 month category and balancing 81.93% in 1 year category.
(Rs. In Billion)
On the PIBs side, 48.5% is concentrated in 3 years, 36.87%
250.0 in 5 years and 14.53% in 10 year and above category.
197.3 Composition of Investments

200.0
154.7
328,987
150.0
100.0 79.5
70.0
141,538
4,448
50.0
9.3 8.8 13.911.3 14.214.3

8.0 9.1
-
2,284
Commercial Corporate Consumer Islamic Overseas Others
12,151
3,960
1,573
Dec 2014 Dec 2013
Treasury Bills Pakistan Investment Bonds
Improvement in the quality of our assets remained vital part TFCs, Debentures, Bonds and PTCs Euro Bonds
of our prudent strategy. Our classified advances portfolio Shares in Listed, Unlisted Co.s & Mutual funds Sukuks Bonds
further decreased by Rs. 1.36 Billion and closed at Rs. Subsidiaries & Associated Undertakings
21.91 Billion compared to Rs. 23.27 billion of 2013. The
contraction in NPL base has been primarily observed in the In 2014 the deposit base registered a growth of 9%
loss categorized advances which went down by 811M over amounting to Rs. 56.0 Billion. CASA buildup remained our
2013 based on cash recoveries and settlements executed. concentrated area, as the Bank maintained its highest CASA
With reference to the concentration of NPLs, 94.71% of the base in the industry of 91%.. During the year, current and
total base is categorized in the “loss” category for which saving deposits increased by 10% over 2013. Fixed deposits
100% provision is held after deducting liquid security benefit. decreased by 4% in year 2014 when compared with 2013
The coverage ratio of the Bank was reported at 85.62% with numbers. Retail Banking Group presented the growth of 11
infection ratio improving to 6.8%, primarily on account of % as compared to last year end with an incremental volume
significant increase in gross advances and correspondent of Rs. 62.43. Deposits of the bank have more than doubled
decrease in NPL base. in last 6 years starting from YE2008, which reflects the
underlying strength of the institution and confidence reposed
Assets Quality
by the large customer base.
100% 30,000
86.92% 88.97%
90% 85.62% 84.62% 85.60% 85.66% 85.74% 84.28% Deposits
80% 25,000
750,000
70% 24,936 24,766 24,701
688,330
23,268
(Rs. In Million)
22,100 22,514 20,000 700,000

60% 21,908 21,925
632,330
50% 650,000
15,000
40% 600,000
5.65 545,061
30% 20,541 21,118 21,545
18,798 19,450 10,000 550,000
18,149 18,388 18,388 491,189
20%
500,000 5.30
10%
6.80% 7.12% 7.29% 8.26% 8.68% 10.17% 10.12% 9.41% 5,000 431,372
450,000
0% 4.93
-10% - 400,000 367,605
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 4.69 330,182
2014 2014 2014 2014 2013 2013 2013 2013 350,000
300,000
4.24
Non Performing Loans Specifc Provision
250,000
200,000 3.89 3.92

Coverage Ratio Infection Ratio
150,000
The net investment base of the Bank was reported at PKR 100,000
2014 2013 2012 2011 2010 2009 2008
511.14 Billion, reflecting an increase of PKR 62.13B over
Deposits & other accounts - PKR Mln No. of accounts - Mln
104
ANNUAL REPORT 2014
Non-financial performance efforts would continue for recoveries against our classified
portfolio.
Non-financial performance during the year is tabulated
below: Development of branch less banking agent network,
expansion in E-commerce Business, introduction of M-POS
2014 2013 merchant terminals and deployment of cash deposit
Branch opened during the year Numbers 16 30 machine would also make significant contribution to non-
Credit cards issued during the year Numbers 7,505 7,187
markup income in 2015.
Accounts opened during the year Numbers 349,021 367,808
The Bank re-affirmed its commitment to Islamic Banking
ATM card issued during the year Numbers 488,706 508,241
customers by incorporating its Islamic Banking subsidiary for
ATM installed during the year Numbers 148 109
which statutory approvals are awaited to start commercial
operations. This initiative will help to enhance Islamic Banking
Business and to serve its valued customers by offering a
Market Performance
complete range of Sharia compliant products.
Karachi Stock Exchange continued its rising trend and

We are committed in maintaining our status of one of the
crossed all previous highs while closing at 32,131. There
leading banks operating in Pakistan through enriched
was significant presence of foreign interest in our capital
service quality, financially viable tailored products to meet
market. Basic statistics of KSE as at December 31, 2014 are
requirements of our esteemed customer and translating the
summarized below:
underlying financial strength of the entity into profits.
Listed companies 557 Corporate Awards and Recognitions – 2014

Listed Capital (Billion Rupees) 1,168.48
Market Capitalization (Billion Rupees) 7,380.53 • CFA 11th Excellence Awards
Index KSE 100 32,131.28 -- Best Bank of the year 2013 – Large Bank
Market capitalization of the Bank was recorded at Rs. -- Most Stable Bank of the year 2013
340.2 billion and the share price closed at Rs. 305.65 • Asiamoney Awards
(High: Rs. 311.0, Low: Rs. 234.51).
-- Best of the Best Domestic Bank
Future Outlook • The Asian Banker (USA)
With exceptional performance for 2014, the excitement for -- Strongest Bank in Pakistan 2014
2015 builds up as the Bank positions itself to gain from its • Asset AAA
strengths and exploit opportunities that exist. The weakened
law and order situation coupled with severe energy crisis -- Best Bank in Pakistan
are the main challenges for us to encounter on our road -- Best Domestic Bank
to success. The volatility in interest rates and regulatory
revisions remain a key risk to our profitability. The market • ICAP & ICMAP
dynamics have changed radically over years with the need -- Best Corporate Report 2013
for every institution to perform to its full potential. In spite
of challenging environment; we are committed to deliver • SAFA Award
exceptional financial performance in 2015. Our dedicated
-- 1st Runner-up for Best Presented Annual Report
team of professionals would take every possible opportunity
2013
to serve our esteemed customers. We are confident that
our expanding network of branches would impressively -- Merit Certificate for Corporate Governance
contribute to meet our valuable shareholders expectations.
Credit Rating
Increasing international footprint, improvement in asset
quality, low cost deposit base, deployment of cost efficient The Pakistan Credit Rating Agency (PACRA) through its
techniques and increased contribution from non-markup notification dated June 26, 2014, has maintained bank’s
income would be our key areas of focus. We will continue to long term credit rating of AAA [Triple A] and short-term credit
tap the unbanked segments through our operational network rating of A1+ [A one plus].
and branchless banking proposition as financial inclusion is
the dire need of the time ahead. We would remain dynamic
and committed in retail banking, corporate banking, Islamic
banking, SME financing and agricultural credit. Our vigorous
105
Role and Responsibilities of the Chairman and the evaluation process inherently is expected to have a process
President/CEO of the Bank for setting standards of performance, judging the extent up
to which the actual performance relates to the set standards
The main roles and responsibilities of the Chairman and the and making a future path of action from the results.
President/CEO of the Bank are described below:
MCB Board has put in place a mechanism for an annual
Role of the Chairman evaluation of its own performance whereby Board evaluates
its strategic planning and long-term policies to assess
• Principally responsible for leadership of the Board and the Bank’s performance, monitors budgetary targets and
ensures that the Board plays an effective role in fulfilling ensures implementation of overall corporate strategy.
all its responsibilities. The Board evaluates its performance by looking at the
• Ensures that the Board plays a full and constructive role in
overall performance of the Bank. Specific guidelines on
the development and determination of the Bank’s strategy
composition of Board and its sub-committees along with
and over all commercial objectives.
• Guardian of the Board’s decision-making process. the training requirements set by the statute, is an embedded
• Maintain liaison with the banking and business community control feature set up by the regulators operating in Pakistan.
at national and international level. The Board annually reviews the significant activities and
achievement made by the Board committees. The Board has
Role of the President/CEO an appropriate size and structure and the Board members
have requisite skills/expertise, competency, knowledge and
• Principally entrusted, subject to the control and directions diversified experience considered relevant in the context of
of directors, with the power of management of the affairs the Bank’s operations and to make the Board an effective
of the Bank. governing body.
• Perform duties of the Chief Executive Officer autono-
mously, keeping in view the policies, procedures and During the year, 2014, the Board deliberated on the following
guidelines approved by the Board. significant issues/matters:
• Manage staff resources in an efficient and effective man-
ner to achieve Bank’s business objectives within the
framework of HR policies approved by the Board/HR • Annual Business Plan for 2015.
Committee and the prudential regulations issued by SBP.
• Bank’s performance against ‘MCB Long Term Strategic
• Act as a liaison between the Board and the staff, and
Plan 2013-2017’.
communicate on a regular basis with both to promote
understanding, cohesiveness and coordination between • Bank’s Policies and amendments thereto.
policies and their implementation.
• Exception to Board approved policies.
Statement on Internal Controls • Matters recommended by the Board Sub-Committees.

• Financial Results, on quarterly basis, of the Bank and
The Board is pleased to endorse the statement made by its subsidiaries.
management relating to Internal Control over Financial
• Related Party Transactions as recommended by the
Reporting (ICFR) and overall internal controls. The
Board’s Audit Committee.
Management’s Statement on Internal Controls is included in
the Annual Report. • Performance of Bank’s Business Groups.
• Client Service Reports issued by the External Auditors
Evaluation of Board Performance and its compliance status.
The Board is vested with fiduciary duty of safeguarding the • Shari’ah Advisor’s Report and its compliance status.
interest of the shareholders, setting up strategic direction, • Significant Activities and Achievements of the Board
devising roadmap for attaining the strategic map and Sub-Committees.
evaluating the performance while ensuring regulatory
• Status and implications of all material law suits filed by
compliance. The Board’s role is to provide entrepreneurial
and against the Bank.
leadership of the Bank within a framework of prudent and
effective controls which enables risk to be assessed and • Cases of fraud and irregularities of a material nature.
managed. An effective Board develops and promotes its • Report on Corporate Social Responsibility (‘CSR’)
collective vision of the company’s purpose, its culture, its activities of the Bank.
values and the behaviors it wishes to promote in conducting
its business. • Matters pertaining to State Bank of Pakistan (‘SBP’)
Inspection Reports.
An effective Board also continually needs to monitor and • Report on Governance, Risk Management and
improve its performance. It can only be achieved through its Compliance Issues.
evaluation, which provides a powerful and valuable feedback
mechanism for improving board effectiveness, maximizing
strengths and highlighting areas for further development. The
106
ANNUAL REPORT 2014
Evaluation criteria Statement under Code of Corporate Governance:
The responsibilities of the Board of Directors include setting The Board of Directors is aware of its responsibilities under
the company’s strategic aims, providing the leadership to the Code of Corporate Governance and is pleased to report
put them into effect, supervising the management of the that:
business and reporting to shareholders on their stewardship.
The Board’s actions are subject to laws, regulations and the • The financial statements, prepared by the management
shareholders in general meeting. To fulfill its responsibilities of the Bank, present its state of affairs fairly, the result of
and to discharge its duties, the Board has set the following its operations, cash flows and changes in equity;
evaluation criteria to judge its performance. The Board:
• Proper books of account of the Bank have been
• Evaluates the strategic plan periodically to assess the maintained;
Bank’s performance, considers new opportunities and • Appropriate accounting policies have been consistently
responds to unanticipated external developments. applied in preparation of financial statements.
• Ensures that a vision and/or mission statement and Accounting estimates are based on reasonable and
overall corporate strategy for the Bank is prepared and prudent judgment;
adopted.
• International Financial Reporting Standards, as
• Ensures that significant policies have been formulated.
applicable in Pakistan, have been followed in preparation
• Focuses its attention on long-term policy issues rather
of financial statements and any departure there from
than short-term administrative matters.
has been adequately disclosed and explained in the
• Discusses thoroughly the annual budget of the Bank
Annual Accounts;
and its implications before approving it.
• Exercises its powers and carry out its fiduciary duties • There has been no material departure from the best
with a sense of objective judgment and independence practices of corporate governance;
in the best interests of the Bank. • There are no significant doubts upon the Bank’s ability
• Ensures robust and effective audit and risk management to continue as a going concern;
functions in the Bank.
• Ensures that a system of sound internal control is • The System of Internal Control is sound in design and
established, which is effectively implemented and has been effectively implemented and monitored;
maintained at all levels within the Bank. • Key operating and financial data of last six years is
• Ensures professional standards and corporate values presented in the stakeholder’s section of this report;
are put in place that promote integrity for the board,
• Pattern of Shareholding, complying with the
senior management and other employees in the form
requirements prescribed by the code is annexed with
of a Code of Conduct, defining therein acceptable and
the report;
unacceptable behaviors.
• Exercises its powers as required under applicable laws, • Statement of Compliance with Code of Corporate
rules and regulations. Governance is included in the Annual Report;
• Ensures the compliance of regulatory requirements and • The number of Board and its Committees’ meetings
legislative system in which the Bank operates. held during the year, 2014 and attendance by each
director is mentioned below;
Performance evaluation of the Chief Executive Officer
• The Committees of Board of Directors along with
President / Chief Executive Officer of the Bank is vested with their terms of reference/charter have been separately
the responsibility of managing overall affairs of the Bank. The disclosed in the Annual Report;
Board, assuming a monitoring role, delegates its authority • The Value of investment of provident and pension fund
to the CEO to effectively manage the Bank, implement as at June 30, 2014 on the basis of audited accounts
strategic decisions / policies and align the Bank’s direction is Rs. 12,693.754 Million and Rs. 6,611.830 Million
with the vision and set objectives. Performance evaluation respectively;
of the CEO covers quantitative as well as qualitative
• The Board members have the prescribed education
aspects and is conducted on defined parameters which
and experience required for exemption from Directors’
primarily cover financial performance against budgets,
Training Program or have completed Directors’ Training
adherence to regulations, nurturing an ethical culture within
Program pursuant to clause xi of CCG. Furthermore,
the organization and goal congruence of the entire MCB
appropriate arrangements were made by the bank
family. CEO achievements are substantiated by the overall
for orientation of Directors to acquaint them with their
growth in profitability operations and underlying financial
duties and responsibilities.
strength of the Bank. During the year, the Human Resource
and Remuneration Committee of the Board of Directors
evaluated the performance of the CEO in line with the
established performance based evaluation system. HRMC
recommendation were, thereafter, reviewed and approved
by the Board.
107
Number of Board and sub-committee meetings held and attendance by each Director
Board of
AC BSDC RM PRC HR & RC PPCA ITC SBP RCMC
Director
Members
Meetings Held: 5 Meetings Held: 6 Meetings Held: 4 Meetings Held: 4 Meetings Held: 4 Meetings Held: 4 Meetings Held: 4 Meetings Held: 2
Member Attendance Member Attendance Member Attendance Member Attendance Member Attendance Member Attendance Member Attendance Member Attendance
Mian Mohammad Mansha u 5 - - u 4 - - u 4 - - - - - -
S. M. Muneer u 4 - - u 3 - - - - u 1 - - u 1
Tariq Rafi u 3 u 3 - - - - - - - - - - - -
Shahzad Saleem u 3 - - - - - - - - - - - - - -
Sarmad Amin u 4 - - - - u 4 - - u 4 - - u 2
Mian Raza Mansha u 4 - - u 2 - - u 2 - - u 4 - -
Mohd. Suhail Amar Suresh u 4 - - u 3 u 3 - - - - - - - -
Aftab Ahmad Khan u 4 u 5 - - - - - - - - u 4 - -
Dato’ Seri Ismail Shahudin u 4 u 3 - - - - - - - - - - - -
Mian Umer Mansha u 4 - - u 3 u 4 - - u 4 - - - -
Muhammad Ali Zeb u 5 - - - - u 4 - - - - - - - -
Ahmad Alman Aslam u 4 u 5 u 3 - - u 4 - - u 3 u 1
Imran Maqbool (President & CEO) u 5 - - u 4 u 4 u 4 u 4 u 3 u 2
Change in Board of Directors of Clause (iii) of the Code of Corporate Governance, 2012,
and extended the period of filling such casual vacancy till
During the year 2014, the Board appointed Mr. Mohd Suhail February 28, 2014.
Amar Suresh Bin Abdullah on February 24, 2014, to fill
the casual vacancy occurred on account of resignation of Detail of Board Meetings held outside Pakistan during
Datuk Abdul Farid Bin Alias, which was accepted by the 2014
Board of Directors on October 01, 2013. In this regard, the
Securities and Exchange Commission of Pakistan, vide its The Board meeting to approve financial statements for the
letter No. SMD/SE/2(10)2002, dated January 22, 2014, has nine months period ended September 30, 2014 was held in
granted the relaxation to MCB Bank from the requirement Malaysia.
Pattern of Shareholding
The aggregate shares held by Directors, their spouse(s) and minor children along with other Executives of the Bank as of
December 31, 2014 are as follows:
Directors Self Spouse & Minor Children Total
Mian Mohammad Mansha 7,834 6,424,057 6,431,891

S. M. Muneer 2,059 2,427,986 2,430,045
Tariq Rafi 32,008,864 5,715,093 37,723,957
Shahzad Saleem 902 - 902
Sarmad Amin 2,851 - 2,851
Mian Raza Mansha 12,661,685 28,461,365 41,123,050
Mian Umer Mansha 31,986,378 - 31,986,378
Aftab Ahmad Khan 914 - 914
Ahmad Alman Aslam 665 - 665
Dato’ Seri Ismail Shahudin 669 - 669
Muhammad Ali Zeb 550 - 550
Mohd Suhail Amar Suresh Bin Abdullah 884 - 884
Imran Maqbool - - -
Other Executives* 78,816
*Executive means an employee whose annual basic salary exceeds Rs. 500,000
108
ANNUAL REPORT 2014
All trades in shares carried out by Directors, CEO, CFO, Company Secretary, Executive, their Spouse(s) and Minor Children
during the year 2014 are given as under:
Name Status No. of Shares Purchase / Sale / Transfer
Mr. Mohd Suhail Amar Suresh Bin Abdullah Director 884 Transferred
Mr. Muhammad Furqan Ahmed Executive 150 Purchased
Mr. Muhammad Imran Executive 100 Purchased
Auditors
The retiring auditor M/s A.F. Ferguson & Co. Chartered

Accountants, being eligible for the next term have offered
themselves for reappointment. Upon recommendation of
the Audit Committee, the Board recommends appointment
of M/s A.F. Ferguson & Co., Chartered Accountants, as the
auditors for the year 2015 in the forthcoming Annual General
Meeting.
Acknowledgements
The Board would like to thank the State Bank of Pakistan,

Securities and Exchange Commission of Pakistan, Ministry of
Finance and Federal Board of Revenue for their cooperation,
improved regulatory policies and governance framework and
their continued effort to improve the banking sector and state
of the economy. Our gratitude is also extended to the senior
management for their determination to achieve targeted
milestones and to the business, support and operational
staff for their contribution in materializing set goals.
On behalf of Directors,

February 12, 2015 Chairman, MCB Bank Limited
109
Corporate Sustainability Report
MCB Bank is an organization that firmly believes in nurturing the The Bank holds an approved “Corporate Social Responsibility
various facets of life and helps to foster the growth of communities in Policy” that shows the Bank’s commitment towards serving the
which it operates. By initiating numerous projects and services that community at large.
facilitate the wider community in a socially responsible way, MCB
ensures sustainability of the greater environment and social well- CSR at MCB Bank has continuously geared up its capabilities in
being of its employees. order to act as an adequate point of convergence for the design
and implementation of specific initiatives intended to further its
The Bank adheres to several key principles that accredit it as an engagement with the society and its people. These initiatives have
institution committed to creating a better work place and a cleaner also been appreciated and recognized by entities such as Pakistan
environment evident through various initiatives undertaken with Centre of Philanthropy.
respect to the greater good of the community at large. This is
achieved by inculcating a culture of excellence, good governance, Education for all: MCB Bank recognizes the role of youth in the
transparency, integrity and accountability through commitment to future of Pakistan; therefore has partnered with leading educational
prioritize controls and compliance thereby ensuring that all activities institutes across the country to facilitate. Through this initiative, it
are carried out in accordance to the prevailing regulations. The Bank aims to develop the personality and character of Pakistan’s future
has a well-defined Code of Ethics and Conduct policy, a mandatory generation by perpetrating qualities of inner discipline and control.
document that acts as a guideline for employees while performing In this regard, the Bank has signed an agreement with LUMS for the
their duties. purpose of providing soft loans to its students. Each year, the Bank
allocates special funds that are utilized as sponsorships for various
MCB Bank for Life education based activities. During 2014, the Bank partnered and
sponsored activities for Forman Christian College, LUMS, Institute
MCB Bank truly adheres to its philosophy i.e. “Bank for Life”. It is of Islamic Banking, IBA-Punjab University along with the Institute of
our commitment to empower all stakeholders with best corporate Chartered Accountants of Pakistan.
practices and constructive projects that helps them in pursuing their
goals and achievements. Human Rights: At MCB Bank, our mission is to ensure the political,
educational, social and economic quality of rights of communities
The Bank provides advice and services to individuals, companies, that we operate in and to help advocate the elimination of social
the governments, to help manage finances thereby increasing value/ biases and hatred. The Bank pays special attention to human rights
enhancing wealth. Services range from transforming savings into and ensures that its policies reflect the interest of all of its members
capital to managing cash and payments; from investing assets on and customers without any discrimination. Environment at MCB is
behalf of private and institutional investors to securities trading, risk maintained with utmost professionalism, instilling a feeling of mutual
management, and advising on corporate finance. respect, aiding in upholding the basic rights of the people coming
in at the Bank. We have supported various nonprofit initiatives that
The Bank maintains a highly professional working culture that serve for the rights of humanity
includes mandatory compliance towards the betterment of its
stakeholders at every level. Hence various capacity building and Sports: Sports can play a key role in enhancing social justice and
welfare projects have been initiated in recent years to promote the integration. It can inspire young people and teach them valuable life
living standard of communities at large, and to instill a sense of skills such as teamwork and the importance of commitment. MCB
satisfaction amongst them. Bank realizes this fact and puts a lot of energy and resources into a
broad range of sports based activities. During 2014, the Bank made
MCB Bank, the largest employer sponsors for PEPSI Corporate Premier League, 4th Chief of Naval
Staff Amateur Golf Championship 2014, Multan Golf Club and PAF
MCB Bank is one of the largest employers in Pakistan with Golf Club Islamabad. Sponsorships were also made for the Punjab
strength of around 18,000 employees that proudly acknowledge Youth Festival 2013-2014.
the institution as one that promotes a culture of equality, reflected
through its diversified talent portfolio. This fair practice helps in the Energy conservation:
promotion of cultural harmony within the organization that is quite
evident from its leading position in the industry/sector. MCB Bank is a responsible organization that recognizes the
importance of preserving the environment. The management is
Corporate Social Responsibility geared towards mitigating the impact by promoting practices that
aim to use energy smartly and economically. The Bank believes
MCB Bank is one of the market leaders in the banking sector where it to lead by example where as best practice it has initiated the
understands its responsible role towards the national economy. The installation of solar power systems at some of its branches and
strategy at the Bank has always endured keenness in safeguarding ATMs. These projects have been introduced to make use of natural
the interest of both its internal and external stakeholders, therefore energy thereby reducing the rising operating expenses and limiting
reiterates to operate with strict adherence to regulations and harmful emissions making the organization sustainable.
principles of good governance.
In 2014, in collaboration with WWF Pakistan, the Bank also
The Bank is always active in carrying out community services under celebrated Earth Hour, an awareness campaign that supports the
its different programs. It has so far accomplished numerous projects concept of energy conservation. The Bank also engages employees
and services in the areas of education, health, environment, sports, from time to time through its internal communication forum, best
social awareness, promotion of culture and welfare of charitable practices and initiatives that inculcate/instill a conscious spirit to
organizations keeping in view the greater interest of its employees, save energy.
customers and beloved country as a whole.
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ANNUAL REPORT 2014

Energy Saving Measures banking, distribution of flyers with bills & statements and free
media space to charities for them to conveniently advocate their
The Bank has always been abreast with the socioeconomic issues cause over mass mediums.
of the country whereby it considers its utmost responsibility to
address any such concern in the most appropriate manner. In light Contribution by MCB Bank towards the community has been
of the prevailing energy crisis, the Bank has evaluated various cost recognized by various local and international organizations. It has
effective and reliable sources to provide alternate energy. As a pilot received a “CSR Business Excellence Award” where it has been
case the Bank has successfully converted some of its branches to ranked 8th among 490 top Pakistani Companies as a result of the
solar power in order to address any anomalies before replicating volume of its donations. The Bank has also received a ‘Certificate
the same to relevant others. A recent initiative, the first of its kind of Recognition’ from Pakistan Center for Philanthropy which is
was introduced at the newly built MCB Centre in Lahore, where definitely a source motivation for it to continue towards supporting
the waste heat from air-conditioning is secured to be recycled to such initiatives in the future.
produce alternate energy. There are several other initiatives in the
pipeline that the Bank is evaluating to roll-out in the near future. The Consumer Protection Measures and Procedure for Quality
Bank also engages its employees through its internal communication Assurance of Products & Services
forums to highlight best practices that induce a conscious spirit to
save energy. The Bank is committed to provide world-class quality products
and services to its customers. It maintains a privacy statement for
Environmental Protection Measures the usage of its products i.e. Credit Cards, ATM pins etc. Staff at
customer care department is specifically trained to ensure customer
MCB Bank acknowledges the importance of safe environment that privacy and protection policy while dealing with sensitive information.
is closely linked to the welfare of the community at large. The Bank
has taken initiatives to promote a paperless culture that is linked To ensure a culture of “Quality Customer Service” the Bank carries
not only with the cleanliness of the environment but also with the a dedicated Service Quality Division. The objective of this division
reduction of operating expenses resulting from photocopy and is to strengthen the Bank’s service culture, competitiveness and
printing of papers. Campaigns such as “Credit Card e-statement” infrastructure by maintaining close customer relationships. Regular
are being promoted at the Bank; these also help in saving a notable training sessions are conducted in all circles, call centers and other
amount of paper. front-end staff offices regarding “Service Excellence” & “Customer
Satisfaction”.
Another MCB developed product “Fun Club”, focuses on the
banking needs of the children. Besides serving the banking needs, Customer Satisfaction:
this product maintains balance between personal, corporate,
social and environmental responsibilities. MCB has entered into an A satisfied customer is the key driver/core element to the success of
agreement with WWF for sowing a plant in the name of the kid who any organization. MCB, truly respects its business partners thereby
subscribes for this product. The progress of the plant growth can be ensures that it exceeds the expectation of its customers. The Bank
observed through Google earth. has “Help desks” across its branches, call centres and websites
to help address customer queries within the stipulated turnaround
MCB offices are very particular about plantation; special staff is time. During 2014, a total of 60,174 complaints were resolved at a
hired that looks after the greenery and plantation within and in the success rate of/ level of 99.27%.
surroundings of our buildings. The bank has spent a substantial
amount on plantation expenses which is an evidence of its profound Total Complaints 2014
interest towards healthy environment measures.
Category Closed Open Grand Total
Community Investment, Welfare Schemes & National Cause Complaint 59,733 441 60,174
Donations %age 99.27% 0.73%
MCB Bank seeks to demonstrate a firm commitment towards the

community by being vigilant to identify and support causes that Total Complaints 2014
will facilitate to uplift/betterment of the society. The primary focus Category Within TAT Beyond TAT Grand Total
of the Bank is towards communities where public and private Complaint 24,769 34,964 60,174
sector services are inadequate as a result of geographical or social
isolation or because of insufficient demand levels. In 2014, the %age 41.16% 58.10%
Bank committed Rs. 40 million, in the form of donations to support
the IDPs of North Waziristan. Additionally/also, In the same Category Total Complaints 2014
year, the Bank directly liaisoned with organizations like Sundas Grand
Details Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Total
Foundation, Shaukat Khanum Cancer Hospital, The Patients’ Aid
Complaint 5029 4812 5878 5487 5547 5753 7055 4686 4717 3654 3065 4491 60,174
Foundation [PAF], Jinnah Postgraduate Medical Centre and Pink
Ribbon Campaign of Pakistan. These philanthropies have helped
Turnaround Time (TAT) Monitoring:
the Bank in reaching out to the affected communities at large.
Monitoring and evaluation of service indicators is part of the belief

Besides direct financial support, the Bank also helped through
in increasing and retaining customer base. In order to keep a strong
alternative and innovative mediums e.g. fund-raising via electronic
hold on processes within the Bank, SQ division has devised several
111
controllable measures at par with prevailing market practice. Against role in facilitating the staff from all walks of life. It gives special heed
each measure, a tolerance level along with a timeline is set. Similar to towards the agreement and satisfaction of its staff as a whole. The
the Branch Banking, indicators for Consumer Assets, Credit Cards, Bank has taken various interventions to match with the pace of its
Bancassurance, Call Centre, Mobile Banking and ATM Uptime are labour union. An agreement has been signed with the staff union of
monitored monthly by SQ. The TAT for day-to-day activity and their clerical and non-clerical staff so that it works on the same pace as the
performance against it is then presented to the management to other teams working at the bank. The Bank has allocated dedicated
ensure excellent service through fast delivery process. staff who is there to ensure fair labour practices, grievance handling
and to ensure fair business practices amongst the labour union.
Customer Experience Management:
MCB Bank has introduced a special staff finance facility for the
The Bank is undertaking systematic efforts to make interfaces, purpose of facilitating the clerical and non-clerical staff. Further,
processes and flows at all MCB Bank direct banking contact scholarships are being offered to enhance the educational needs
points. Feedback is elicited from customers for all contact points of the staff children.
via surveys and tests and actions to be taken are identified. The end
goal of these measures is to be the most preferred channel as well Employment of Special Persons
as to become the most popular Direct Banking brand.
MCB Bank is an equal opportunity provider. It has never discriminated
Service Management Program (SMP) on the basis of race, gender, age or disability. The bank has recruited
a sufficient number of special persons at various branches all over
Service Quality has ensured that all service related activities along Pakistan. At MCB Bank, special persons are not discriminated on
with (TAT) Turnaround time for Branch Banking are readily available the basis of their handicaps.
at the branches. During the year, over 1700 Staff members were
trained on ‘Customer Service Excellence’ with reference material Occupational Health and Safety
that is easily accessible. This exercise has helped improve
staff confidence, reduction in customer TAT. This initiative has The Health and Safety of personnel is of utmost importance to
considerably improved branch performances in terms of customer the Bank, where the same is reflected through its “Health & Safety
satisfaction and quality checks. Policy”. The policy reiterates maximum safety standards to be met
by all businesses, functions, offices and branches encouraging
Service Council employees to promote the safety of their colleagues and customers.
Emergency Lights, Fire Proof Cabinets, Fire Detection System,
Service Council has been formulated to bring together key Alarm System, Portable Fire Extinguishers, Safety-Anti Shatter
stakeholders from across the bank with a view to place service on Films, First Aid Kits, Regular Evacuation Drills, Arrangement for
the forefront through thought leadership, collaborative discussions Disables, Emergency Exit Doors, Fire Sprinkler System and Medical
and creation of a clear roadmap supported by facts and data. A Health Insurance are some of the measures that the Bank assures
meeting is held periodically which is convened by SQD Head and for the safety and security of its stakeholders.
chaired by the President himself along with all the Group Heads and
relevant Business Heads. At ATMs and other Alternative Delivery Channels (ADC), special
safety measures are taken into consideration by installing locks
Service Protocols, Complaint Logging and Suggestion Forms and cameras in all ATM Rooms with 24/7 recording. Anti-Skimming
devices have been installed on all ATMs. ATM-safe-usage-guidelines
SQ introduced Service Protocols Booklet in all the branches for are displayed on all ATM screens before the customer undertakes
Standardization of Service Standards. A new, improved complaint a transaction and all customer calls to Call Centre are recorded.
and suggestions forms “Your Priority, Our Concerns!” has been The Bank fully ensures that IVR Transactions are secured via a
introduced in the branches for customer convenience in order to get separate Telephone Banking, PIN (T-PIN), SMS alerts service keeps
feedback recorded. During the year 700 branches were monitored the customers constantly updated of any activity (Debit or Credit) in
with respect to service parameters and protocols. This year the their account.
Bank also introduced formal monitoring of the turnaround time to
open an account thereby automating the process. Another such Developing a positive health and safety culture, where safe and
initiative was the roll-out of Call Back Confirmation that was from healthy working becomes second nature to everyone is what MCB
Bancassurance in 2013 to Wealth Management and Investment Bank aims to achieve and for that, all possible efforts are being
Banking Groups. continuously utilized to touch an optimum level.
Quality Checks and Mystery Shopping Business ethics & anti-corruption measures
During the year, around 500 branches were ‘Mystery Shopped’ by “Fraudulent Market and Credit Risk” cannot be eliminated however
independent external agency and results of this activity was shared the Bank has always been active in identifying and mitigating
with management for further improvement. The average scores possible risks and losses through promulgation of policies and
remained between 80 to 85 percent across all regions including procedures to reduce possibility of such incidents.
troubled non-metropolitan areas/far flung troubled areas.
The “Human Resources Management Group” of the Bank provides
Industrial relations “Code of Conduct and Standard of Ethics”; a comprehensive
document is in place as a part of the Human Resource Policy &
MCB Bank is fully responsible for maintaining a healthy relationship Procedure Manual which is available to all staff members on the
between individual workers and employees where it plays a critical Bank’s Intranet. The Disciplinary Action Committee (DAC) takes
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ANNUAL REPORT 2014

action on any violation of policies & procedures, act of fraud & Rural development programs
forgery, breach of discipline and code of conduct, ethics & business
practices, law of land and statutory regulations by an employee. MCB Bank fully supports the agriculture sector by extending credit
to the farming community. These finances, apart from business
It is imperative that the Bank maintains a strong, positive compliance perspective, have an element of mission aligned with the cause of
culture across the full range of our activities. At MCB Bank, employees supporting our national goals and objective.
are expected to act honestly, responsibly, and with integrity at all
times. The Code of Ethics, of the Bank, describe the values and Agriculture sector shares almost 22 percent of Pakistan’s GDP. It
minimum standards for ethical business conduct and govern all is a catalyst of overall growth and optimistic economic outlook that
of our interactions, whether with clients, competitors, business provides dependable food security and confidence to almost 180
partners, government and regulatory authorities, shareholders, or million people of this country. In this regard, MCB Bank extends
each other. They also form the cornerstones of our policies, which all types of credit facilities to address the needs pertaining to both
provide detailed guidance on how employees should act to ensure farm and non-farm activities. It carries a total of 171 Agri Lending
compliance with applicable laws and regulations. Branches all over Pakistan. MCB Bank encourages farmers to
mechanize harvest by extending credit on easy installments for
The Bank is committed to high standards of Anti-Money Laundering tractor and its implements. A special arrangement is made with
(AML) practices and compliance on Money Laundering. Compliance tractor manufacturers to achieve this objective.
and Controls Group (CCG) of the Bank has devised different
measures in identifying such acts, as per the National Accountability The bank has partnered with State Bank of Pakistan by partially
Bureau Ordinance 1999. CCG ensures that the names of all corrupt sponsoring the Farmers Financial Literacy and Awareness Program
individuals who have been identified by Law Enforcement Agencies/ Phase – II (FFLP). It is an Agricultural Awareness Program that is
State Bank of Pakistan are highlighted for any future correspondence. held at District Level in order to educate the agrarians at grass root
Moreover, the Group carries access to the world renowned tools/ level. Also, the Bank has initiated a Kisan Dost Help Desk campaign
databases, which are of help for the Bank in providing information at its selected branches from where farmers can confidently consult
on proscribed entities as well as identifying suspected persons. professionals for any relevant assistance.
Further, Compliance & Controls Group at MCB has devised tests MCB has 432 rural branches that offer customized product menu
to encourage awareness on areas specifically related to “Know- to suit and meet the requirements of the locals. MCB is committed
Your-Customers”. This exercise is aimed to educate the Bank’s in enhancing knowledge and understanding of banking business
employees to better understand the terminologies of “Know-Your- vis-a.-vis spreading and exploring neglected regions of the country.
Customer” and “Anti Money Laundering. MCB Bank is committed to
fully comply with anti-corruption and anti-bribery laws. This includes
the Bank’s strict prohibition against receiving, accepting, offering,
paying, or authorizing any bribe and any other form of corruption.
MCB Bank wants to deliver long-term value for its shareholders

and society. This means having the right culture, structures and
processes in place to ensure that we practice strong governance,
serve our clients and customers well and provide a great workplace
for our people. Doing what we can to combat financial crime is one
of the utmost components that has taken the Bank ahead till now.
Contribution to national exchequer
MCB Bank has the highest market capitalisation and has

accomplished the remarkable profitability. The Bank is leader in its
contribution to the national exchequer. In 2014 the Bank paid Rs.
9.04 Billion as income tax to Government Treasury and contributed
over Rs. 5 Billion to the national exchequer as withholding tax agent
under different provisions of Income Tax Ordinance 2001.
The contribution by the Bank to the national economy by way

of value addition was Rs. 48.17 Billion, out of which around Rs.
9.41 Billion was distributed to employees and Rs. 15.58 Billion to
shareholders.
The Bank has generated direct and indirect employment for a large
number of people over the years. With the payment of taxes and
the investment in the network, the Bank is making a significant
contribution to the development and growth of the nation.
113
Social and Environmental Responsibility
MCB Bank Limited undertakes its responsibility to be recognized as • Significant investment to develop technological based
an organization that is aware of both its social and environmental ‘Alternative Delivery Channels’ for maximum ‘Financial
obligation. The Bank continuously strives to inculcate the same inclusion’.
by creating awareness amongst stakeholders, streamlining its
operational processes and reinforcing the same through various • Sustainable development through building and maintaining
policies. The key areas that the Bank focuses upon are to provide a sound relationships with our stakeholders through open and
safe and healthy workplace, protect the environment and conserve fair communication.
energy through use of appropriate technology and management
practices. • Communication and dialogue with employees, to build and
share the value of “Mutual Trust and Mutual Responsibility”
Some of the salient features of the Bank policy are as follows: and work together for the success of our all stakeholders.
• Compliance with local, national and international laws and • Respect for people by honoring the culture, customs, history
regulations as well as the spirit thereof and conduct of business and laws of Pakistan. Constantly search for safer, cleaner and
operations with honesty and integrity. superior practices that satisfy the evolving needs of the society.
• Promote and engage in social welfare activities that help • Minimize the environmental impact of business operations, by
strengthen communities and contribute to the enrichment of working to reduce the wastage of all resources.
society.
• Develop, establish and promote practices enabling the
• Provide innovative, safe and outstanding high quality banking environment and economy to coexist harmoniously and
products and services exceeding the expectations of build close and cooperative relationships with individuals and
customers. organizations involved in environmental preservation.
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ANNUAL REPORT 2014
Human Resource Management

The focus of Human Resource Management at MCB Bank Limited is During the year HR carried out Succession Planning exercise to ensure
to recruit, develop, retain and reward best talent. We strive to ensure Business continuity and smooth functioning of all areas in case of attritions
that our employment policies meet relevant social, statutory and and change of job responsibilities. All stake holders were consulted
regulatory conditions and remain committed to building and maintaining and the succession planning was executed thereby fulfilling internal
strong collective relationships and agreements. We have an employee and external requirements. Talent management and organizational
relations presence providing regulatory support in all our key markets, development initiatives were also addressed including the introduction of
ensuring greater alignment of our people - governance policies while a more comprehensive framework under consideration of Management.
also promoting flexible employment practices. Creating a workplace that
endorses diversity and recognises the generational differences of our Motivational Environment and Merit Culture
growing multi-generational workforce remains a key priority for us.
MCB ensures motivational environment and merit culture throughout
All HR policies have been reviewed and updated in accordance with its operational units. It is a Bank that encourages its employees to do
present day requirements and corporate framework of the Bank. their best and get equal reward, position and monetary incentive on
Management has recognized that this is a critical area with strong impact performance and merit basis.
on performance, procedures and business ethics.
The incentive-based pay system at Bank encourages competition among
Outsourcing, talent acquisition and succession planning policies were the employees and fosters the talent of staff members to perform their
amended and strengthened as well as the code of conduct for employees. tasks remarkably with commitment. The Bank compensates its employees
Motor cycle policy was also introduced for facilitating employees whose well in accordance with their work performance and completion of
job description entails travel. For all changes in policy, procedures and targets. Hence, employees are rewarded timely and meritoriously that
SOPs were also amended accordingly. The policy team also carried out provides exceptional results in the context of organizational effectiveness
country wide training on understanding and implementing policies. We and employee motivation.
have also continued to improve employee awareness and understanding
of our Speaking Up policy, which enables staff to confidentially report Organizational structures were strengthened to provide job enrichment
concerns about misconduct, as part of our focus on ensuring fair and and upward mobility not only in HR but across the bank.
sustainable employee relations.
Equal Opportunity Employer
HRMG-Learning & Development
MCB being an equal opportunity employer is committed to create a
People development is the focal point of HR activities and involves congenial and efficient work environment in which the employees are
continuous efforts to develop the skills of the employees at all levels. The assured a non-discriminatory, transparent, harassment free and respectful
Bank is committed to an employee development practice that enables atmosphere regardless of their cast, creed, religion and gender. The Bank
all its employees to reach their optimum potential thereby creating a recruitment policies provide unbiased criteria for hiring people from any
high performance organization. This belief is supported by the Bank religion as long as they qualify for the professional criteria required by the
comprehensive approach towards performance management, career Bank. Our culture at MCB Bank also depicts a healthy, team based and
development and management training. The Bank affirms its belief in cooperative environment. We value the unique talents and perspectives
motivating its work force through positive reinforcement and opportunities of our employees and strive to create a respectful workplace.
in each of these key areas of employee development.
Transfers & Rotation
Training programs are promoted for employees of all levels as part of
our Training Curriculum. It covers a large array of technical trainings. MCB Bank deploy its human resources in such a way that positions are
A number of specialist programs operate within specific businesses. filled by the most suitable staff available throughout the organization and
Currently there are 4 broad categories of training programs: to develop the potential of the staff to the maximum possible extent.
• In-house training programs – core banking disciplines Reward – Award Program

• External trainings through specialized training consultants,
certificate programs etc. In order to provide the due recognition and incentive to the staff and keep
• Overseas training them motivated this Program is successfully being run by SQ. Realizing
• Basic training at entry level that employees are a valuable commodity in today’s ever-changing
workplace, and recognition is a key component to employee satisfaction,
MCB Bank places great importance on personal study and the attainment we feel that Service Awards are an ideal way to ensure that all of our
of job related professional qualifications. This policy aims at providing employees receive the recognition they need to be productive members
financial assistance to employees for self-development initiatives where of the corporate team. The collective efforts of teams are recognized from
the courses / programs are not covered by the normal Bank sponsored all Groups quarterly & yearly and are awarded with “Service Team of the
training programs and where the employees stand to obtain expertise or Quarter” and “Team of the Year Awards”.
skills that are relevant to the banking discipline and / or to the employees’
current or future job roles. The Bank aim is to work as a key strategic partner to the Business and
add value in terms of managing the flow and contribution of human
Succession Planning capital.
Succession Management is the development and retention of high

potential employees so as to create a talent pool from which to fill
key positions in the organization. Succession planning is a continuous
process that involves identification, assessment and development of
talent, to ensure that an organization’s management can keep up with
the changing business environment.
Recognizing the need for securing future leadership capability and

achieving strategic viability, MCB has incorporated the Succession
Management initiative in its HR policy, as part of its organizational
development efforts.
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Managing Conflict of Interest
Overview: reviews and recommends the related party transactions to the
Board for approval.
A director owes certain fiduciary duties, including the duties of
loyalty, diligence, and confidentiality, to Bank, which require that a Moreover, as a statutory requirement, a comprehensively prepared
director must act in good faith and exercise his or her powers for return is submitted on a half yearly interval to the State Bank of
shareholders’ interests and not for their own or others’ interest. Pakistan that primarily covers every related party transaction
executed during the said period.
The Board and the Management of MCB Bank Limited is committed
to the transparent disclosure, management and constant monitoring Exposure in companies where directors are interested
of potential conflicts of interest to ensure that no undue benefit is
passed on. The Board recognizes the responsibility to adhere to The Bank takes exposure in the companies in which our
the defined policies / procedures and avoid perceived conflicts of Directors (including their spouses, parents, and children) hold key
interest that may arise during the course of business. management positions, or are interested as partner, director or
guarantor, or shareholders holding 5% or more of the share capital
The Bank has also developed “Code of Conduct & Ethical Standards of that concern, with the approval of the majority of the directors
for Directors” as per requirements of Code of Corporate Governance excluding the director concerned. The facilities to the persons
which is signed by every Director of the Bank. mentioned above shall be extended at market terms and conditions
and be dealt with at arm length basis.
Disclosure of Interest by Director:
Bank is not taking exposure against the guarantee of any of its
Every director (including spouse and minor children) of a Bank who directors, any of the family members of any of directors and any firm
is in any way, whether directly or indirectly, concerned or interested or private company in which our directors are interested as director,
in any contract or arrangement entered into, or to be entered proprietor and partner.
into, by or on behalf of the Bank shall disclose the nature of his
concern or interest at a meeting of the directors. Directors are Conflicts of Interest Register
required to disclose existing or perceived conflicts of interest prior
to the commencement of each Board meeting. Where a conflict of The Bank maintains a register in which shall be entered separately
interest or potential conflict of interest has been disclosed, the Board particulars of all contracts, arrangements or appointments in which
member concerned shall not take part in the Board discussion of directors are interested.
that topic. The member who has disclosed the conflict cannot vote
on that item.
Insider Trading
Directors shall not deal directly or indirectly in the securities of the

Bank whether on their own account or their relative’s account, if
they are in possession of any unpublished price sensitive information
concerning the Bank. Directors who are in possession of any
unpublished price sensitive information shall not communicate
directly or indirectly the said information to others who trade on such
information
Where any director or his/her spouse sells, buys or takes any

beneficial position, whether directly or indirectly, in the shares of the
Bank, he/she shall immediately notify the Company Secretary in
writing. Such director shall also deliver a written record of the price,
number of shares, form of share certificates, (i.e., whether physical
or electronic within the Central Depository System), and nature of
transaction to the Company Secretary within four days of effecting
the transaction. Further, no director shall, directly or indirectly, deal
in the shares of the Bank, in any manner, during the closed period
Related Party transactions
The Bank has devised a fool proof mechanism for identification of

related parties and execution of related party transaction at arm
length, which are executed in the normal course of business. Based
on the statutory requirements, complete transactional details of
related parties are presented before the Audit Committee for review
and deliberations on a quarterly interval. The Audit Committee
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ANNUAL REPORT 2014
IT Governance
IT Governance is an integral part of enterprise governance Providing guidance, oversight, and strategic thinking on
and consists of the leadership and organizational structures information technology;
and processes that ensure that the organization’s IT sustains Setting the overall direction for IT Group to introduce and
and extends the organization’s strategies and objectives. IT implement innovative technology solutions;
Governance systematically engages the Board members,
Ensuring the availability of Bank’s mission critical services are
executive management and underlying staff. The framework
up running and active DR invocation mechanism at the time of
establishes a discipline used by the organization to measure
disaster.
transparent accountability of decisions, and ensures the
traceability of decisions to assigned responsibilities. Well-
structured IT Governance would assist in creating efficiencies, Information Technology Group (ITG) has been taken care by
enhance conformity to internationally accepted best practices, teams of committed professionals, providing innovative and
improve overall IT performance and also enable better control efficient solutions to achieve and nurture strategic objectives
and security. and goals of Business as well as other support groups under
the guidance of Board IT Committee (BITC) and management
IT Steering Committee (ITSC).
Information Technology Group is headed by Head of IT who in
turn reports functionally and administratively to the President/
Group is further be strengthened by following functions:
CEO. The Office of the Head of IT provides the leadership
for the development and delivery of world-class technology a IT Enterprise Infrastructure
services. The position is directly responsible for; b IT Operations
Directing the operations of Information and technology Services c IT Software Solutions

for efficient and smooth delivery of technology services; d IT Service Management
Integrating IT Strategy with Bank’s Strategy; e Information Security
Encouraging technical innovation and the development of a f Business Technology
robust and dependable technology infrastructure;
g IT Financial Services & Procurement
Strengthening the IT Governance;
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Internal Governance maintaining IT system’s security compliance, define security
The Bank’s IT Steering Committee (ITSC) & Board IT Committee controls in the following listed sections of Information Security
(BITC) are the governing bodies that review, monitor, prioritize Policy, processes, and documentation (SOPs, manuals, etc.)
and approve major IT projects. Key Objectives of these commensurate with Information Security Policy, departmental
committees are: framework, and the changing threat landscape. Information

Security function is responsible to ensure bank wide compliance
with Information Security Policy, handling incidents of security
- To provide a forum for discussions, review and advice on
breach, and recommending corrective action.
Technology needs, Investments, Issues & Progress.
- Prioritize, approve and monitor investments (projects & Project Governance: Effective project governance needs to
resource allocation), financial objectives and performance be in place to ensure the Project is adequately supported
in order to review whether IT and Business strategies and guided towards achieving its intended outcomes, and to
aligned with each other. ensure key decisions are made with appropriate governance
- Assessment of IT capability and adequacy of the IT oversight. BT/IT PMO is a central point of contact at Information
infrastructure & Guidance on strategic goals and direction Technology Group to facilitate ITG’s other verticals and Other
to see if enterprise achieving the optimum use of the IT Groups for endeavouring successful deliveries of major and
resources. critical “IT Projects”. The function is mainly responsible for:
- To review adoption of best practices, standardization and

interoperability internally and externally. Establishing a connect between Technology and Business to
understand business needs and to translate into technology
- To provide resolution of cross-function or intercompany
solutions;
critical issues.
- Consideration of risk exposures and monitoring of risk

Providing an Interface of the IT Group for other business groups
management.
to discuss their initiatives/projects for end-state solutions;
- To review the communication path between the board/
executive and middle management. End to end Project management of technology solution
specifically and providing support for all other business
Information Security: MCB management has centralized the initiatives in general, from technology perspective only;
authority, direction, management, and monitoring of Information
Security activities for the entire organization in the Information Project governance, support processes and methodologies for
Technology Group (ITG) under the umbrella of Information successful delivery of projects and customer requirements;
Security (IS) Team, led by Head of Information Security. This
function is responsible for establishing, elaborating, and
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ANNUAL REPORT 2014
Whistle Blowing Policy

Preamble The Bank does not tolerate harassment or victimization and
takes action, which could involve disciplinary proceedings,
The purpose of this policy is to provide a channel in MCB to protect complainant when they raise a concern in good
Bank Limited (the Bank) for both the staff and outside faith. Retaliation against a whistle-blower is prohibited
parties to raise concern, expose irregularities, help uncover regardless of the outcome of the investigation.
financial malpractice, prevent fraud, eliminate personnel
harassment and to attend grievance of those associated Incentives for Whistle Blowing
without any fear of reprisal or adverse consequences.
Complainant may be awarded monetary benefit/career
Objectives advancement depending upon the nature and gravity of the
disclosure.
The main objective of the policy is to address the concerns
of customers and employees for reported wrongdoings, Whistle Blowing Mechanism
impropriety and inefficiencies affecting the overall
performance of the bank, as per the scope approved by the Employees or outside parties may report their concerns
Board of Directors. or complaints to Whistle Blowing Unit through any of the
following means:
Scope
• Hotline
The policy refers to the deliberate, voluntary disclosure of • E-mail
individual or organizational impropriety by a person who has • Fax
or had privileged access to data, event or information about • Regular Mail
an actual, suspected or anticipated wrongdoing within or by
an organization that is within its ability to control. Concerns and complaints received through these means
are investigated and findings are shared with the senior
Protection of Whistle-blowers management for their necessary action. These findings are
also shared with the Audit Committee.
MCB Bank is committed to the protection of genuine
complainants against action taken in reprisal for the making Number of instances reported to Audit Committee
of protected disclosures. Confidentiality of the complainant’s
identity, the nature of the report and the identity of the Number of whistle blowing incidences reported to the Audit
suspected person is strictly maintained. Committee during the year 2014 was 26.
Record Management Policy

The Bank has put in place comprehensive guidelines for Handling of Record
the management and control of its business records. These
guidelines outline the processes for handling, protection, After classification, the recorded information is given
retention, retrieval, and disposition of recorded business a retention schedule that documents how the records
information in a consistent, efficient and reliable manner. will be handled, stored and disposed of form creation
The guidelines cover following aspects: through active and inactive status to ultimate disposition.
Appropriate procedures are followed to ensure that all
Identification of Record records / documentation are carefully secured after
business hours. It is ensured that all security stationery,
All business and support functions are required to identify, negotiable instruments, confidential customer, employee
protect and retain records as required for normal business documents etc., are properly placed in the vaults/ cabinets
activities and for such periods as are necessary to fulfill and before the close of the branch/ office appropriate
the Bank’s obligations to customers, employees, and controls and procedures related to securing records, data
stakeholders and for compliance with all applicable laws storage and backup are complied. Further, all business and
and regulations. support functions are required to ensure that no records are
destroyed while under legal or regulatory requirements or
Classification of Record the subject of pending or anticipated litigation.
Records are classified as to their value to the Bank and

maintained and kept according, to their usage (activity
level) and retention characteristics. Recorded information is
classified as. Vital, Essential or Non-Essential.
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Risk and Opportunity Report
Risk, being inherent in the banking business has to be managed through operational design keeping in view the risk and
associated reward and to ensure progression of an entity’s value. At MCB, a comprehensive risk management framework
around an approved risk appetite is in place, mechanisms are defined for every identified risk to ensure that the Bank
continuously evaluate the associated risk and ensure presence of an operational mitigating control. On the other side, the
Bank remains committed to pounce on every possible opportunity to translate it into revenues / returns for the stakeholders,
while making sure that the related risk is adequately managed.
Key source of uncertainty
The key source of uncertainty are discussed in note 4.3 of the financial statements.
Materiality Approach
Matters are considered to be material if, individually or in aggregate, they are expected to significantly affect the performance
and profitability of the Bank. The materiality process helps to navigate the complex landscape of stakeholder expectations,
risks and opportunities. The management’s approach to materiality is to focus on issues, identified as most material to the
Bank.
In the chart to follow, we have summarized risks and opportunities and the related mitigating factors.
Risks:
Materiality
Risk type Description Plans and Strategies for Mitigating Risks & Capitalizing Opportunities
rating
Capital adequacy High The risk that the Bank The Bank remains a well-capitalized institution with a capital base well above the
risk has insufficient capital regulatory limits and Basel-III requirements. The Bank regularly assesses the capital
or is unable to meet the requirements and ensures that the minimum capital requirements specified by the
statutory defined capital Central Bank are adhered to. Quality of the capital is evident from Bank’s Tier-1 to
requirements total risk weighted assets ratio which comes to 18.08% against requirement of 7.0%
for 2014.
The Bank will continue the policy of sufficient profit retention to increase its risk taking
capacity and capitalize opportunities
Liquidity risk High The risk that the Bank The Bank’s large and stable base of customer deposits, along with Bank’s strong
is unable to meet its capital base supplemented underlying strength and strong liquidity position during the
financial liabilities as year. Bank also has a substantial portfolio of marketable securities that can be realized
they fall due. in the event of liquidity stress. Bank’s Liquidity Coverage Ratio and Net Stable Funding
Ratio are well within the Basel prescribed limits.
MCB performs regular liquidity stress tests as part of its liquidity monitoring activities.
The purpose of the liquidity stress tests is intended to ensure sufficient liquidity for the
Bank under both idiosyncratic and systemic market stress conditions. MCB’s liquidity
risk management approach involves intraday liquidity management, managing
funding sources and evaluation of structural imbalances in balance sheet structure.
Credit risk High The risk that the Bank has been selective in disbursing its loan to good quality borrowers engaged
Bank will incur losses in different businesses. The Bank continues to maintain lower than average industry
owing to the failure level NPL ratios. Bank has a fairly diversified loan portfolio. Even the top 20 Non-
of a customer or Government Borrowers account for less than 25% of total (Funded + Non-Funded)
counterparty to meet exposure. For risk categorized as sovereign/government risk, our lending exposure is
its obligation to settle spread over multiple government owned or controlled organizations and departments
outstanding amounts. which are engaged in a variety of tasks that range from different development related
works to utility distribution and production etc.
To manage worst outcomes in terms of scenarios multiple factors in bank’s lending

structure provide additional comfort and support, these include quality of eligible
collateral, pre disbursement safety measures, post disbursement monitoring, etc.
Credit Risk Management function identify, measure, manage, monitor and mitigate
credit risk. Organizational structure of this function ensures pre and post-facto
management of credit risk. While, Credit Review function provides pre-fact evaluation
of counterparties, the Credit Risk Control (CRC) performs post-fact evaluation of
financing facilities and reviews clients’ performance on an ongoing process.
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ANNUAL REPORT 2014
Risk and Opportunity Report
Market risk High The risk arising from Bank is exposed to market risks through its trading and other activities. A
fluctuations in interest comprehensive structure is in place aimed at ensuring the bank does not exceed its
rates, foreign currency, qualitative and quantitative tolerance for market risk. The bank has followed a non-
credit spreads, equity aggressive and balanced approach towards risk taking in the market risk area coupled
prices, commodity with robust risk management architecture, thus achieving the target of keeping the
prices and risk related exposures within the defined risk appetite and a reward justifying the efforts. A number
factors such as market of metrics like VaR methodologies complemented by sensitivity measures, notional
volatilities limits, loss triggers at a detailed portfolio level, and extensive stress testing are used
to capture and report the multi-dimensional aspects of market risk.
The Bank will continue to pursue to have a risk return balanced portfolio to keep its
market risk exposure in line within the approved risk limits.
Operational risk Medium The risk of loss resulting In accordance with the Operational Risk policy and framework, a database covering
from inadequate or losses, control breaches and near misses is being maintained. Major risk events are
failed processes, analyzed from the control breaches perspective and mitigating controls are assessed
people, systems or on design and operating effectiveness. Quarterly updates on Operational Risk events
from external events. are presented to senior management and Board’s risk committee. The bank has an
internal Operational Risk awareness program which is aimed at building capacity and
inculcating risk culture in the staff through workshops and on-job awareness.
Regulatory risk Medium The risk arising from Management of regulatory risk entails early identification and effective management of
noncompliance with changes in legislative and regulatory requirements that may affect the Bank. The Bank
regulatory requirements, review key regulatory developments in order to anticipate changes and their potential
regulatory change or impact on its performance
regulator expectations
Country risk Low- The risk of material Country-wise bank’s exposure is monitored on regular basis. Country Exposure Limits
medium losses arising from are in place, which broadly capture direct exposure on sovereigns and exposures
significant country on foreign domiciled counter parties. Additionally, business product wise sub limits
specific events. involving cross border exposure are also implemented. Monitoring of these limits is a
regular feature of Risk Management.
Opportunities:
• Strong capital base and highest Capital adequacy Ratio in peer banks provides the opportunity of exploring International
avenues in emerging markets.
• Consolidation in Banking industry due to MCR requirements.
• Growing Islamic Banking Market will be capitalized through Islamic Bank subsidiary.
• Expansion of the branch network in potential / untapped areas.
• Launching of new products to capitalize the growing branchless Banking.
• Deepening the consumer market penetration through re-launching of Consumer Loans.
• Potential relationship with non-resident Pakistanis to attract FDI and home remittance.
• Population demographics show an increase in working age population and hence increase in Banking needs.
• Focus on Agriculture and SME Financing on account of lower discount rate.

• Every risk has an opportunity as well, various Risks described below are counterbalanced by the opportunities that could
result from positive trends.
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Stakeholder engagement
In achieving and entrenching its integrated approach to sustainability, MCB Bank takes a highly collaborative approach
towards ensuring maximum interaction with, and input by all its stakeholders.
At MCB, stakeholder engagement involves far more than merely communicating with its various stakeholder groups.
The Bank regards its stakeholders as partners and makes every effort to use all possible mediums to ensure that they
are abreast with disclosures, aware of forums to provide valuable input and feedback that can help the Bank to grow,
strengthen relations and meet expectations to serve better.
The following tables provide an overview of stakeholder engagements at MCB Bank
Stakeholders Reasons for engagement Frequency of Methods of engagement

engagement
Employees -- To ensure that we remain an employer of -- Ongoing and daily In addition to the regular communication
choice by providing a safe, positive and engagement at all levels that takes place with direct managers
inspiring working environment of the Bank and teams through a range of interactive
channels, specific employees engagement
-- To understand and respond the needs -- As and when required include:
and concerns of our staff members by staff members
-- Regular electronic and printed newsletters
-- To educate our staff regarding strategic
direction and to communicate the -- Compliance letters
pertinent information relating to bank -- Annual conference
activities -- Strategy sessions
-- One Bank, One Team sessions with senior
management
Customers -- To understand the growing financial -- Regular interaction of Interaction through our branches,
services needs of our customers customers with our relationship managers, call centers, social
branch staff media, surveys and various advertising
-- To provide better solution and advice to activities
our customers’ financial requirements -- Dependent on
customers’ specific
-- To ensure accuracy of our customers requirements
respective information
-- Introduction / launching
of New products
Shareholders/ -- To deliver relevant and timeous information -- Formally, four times -- Annual General Meeting
Analysts to existing and potential shareholders a year at the release
of year-end, half year, -- Local and international road shows
-- To keep shareholders posted to ensure first- and third-quarter
that our shares are traded at a fair value -- Press releases
results
-- To ensure that the image of the bank -- Communications and answering investor /
-- As requested by the analyst questions
and the trust placed in by our valuable analysts and investors
shareholders, continues to improve,
thereby minimizing the potential for
reputational risks
Regulator -- To maintain open, honest and transparent -- Daily, weekly, quarterly These include meetings with representative
relationships with regulator and as required by of regulator and written communications on
regulator need basis
-- To ensure meticulous compliance with
legal and regulatory requirements
Communities -- To have best collaboration with our -- Dependent on events, Consistent support for community
community for delivering our social requirements and on development projects and interaction with
responsibilities request from either side a wide range of non-profit organizations
-- To obtain input from communities
regarding key focus areas
-- To create awareness of our integrated
sustainability commitments and initiatives
Government -- To build strong and constructive -- As and when This include meetings with representative of
relationship with government, both as a considered necessary Government bodies
partner in the development of our country or on request by either
and as a current / potential client side
-- To contribute in legislative development for
evolution in our activities and operations
-- To endorse our commitments for public
sector business development
Media -- To acknowledge the role of media as a -- Frequent interaction Advertisements through Print, electronic,
channel to communicate with relevant with print and electronic social media, website, interviews and
stakeholders and public at large media capacity building seminars
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ANNUAL REPORT 2014
Code of Conduct
• In line with “Statement of Ethics and Business Practices”, interest of the Bank or its customers.
the Employees of the Bank shall;
• In case of potential conflict of interest, the same should be
Abidance of Laws / Rules declared immediately to senior management, action is taken
to resolve and manage it in open manner and resolving the
• Conform to and abide by the Bank rules and policies and conflict of interest on their own would be avoided.
obey all lawful orders and directives which may from time
to time be given by any person or persons under whose • Report to the Company Secretary about any sale and
jurisdiction, superintendence or control, the persona will, purchase of MCB shares (own or spouse) in case the
for the time being, be placed. To undertake at all times annual basic salary exceeds Rs. 500,000/-.
compliance with and observation of all applicable laws,
regulations and Bank policies, wherever the Bank operates. Relatives and close friends
Integrity • Avoid conflict of interest arising, where an employee

makes or participates in a decision which affects another
• Conduct the highest standards of ethics, professional person with whom one has a personal relationship (such
integrity and dignity in all dealings with the public, customers, as a relative, spouse, close friend or personal associate).
investors, employees, and government officials, State Bank In cases where a conflict may arise, employees must
of Pakistan and fellow Bankers and non-engagement in advise their immediate line manager. Wherever possible,
acts discreditable to the Bank, profession and nation employees should disqualify themselves from dealing with
those persons in such situations
• In case of awareness of any breaches of laws and
regulations, frauds and other criminal activities or other Political Participation
similar serious incidents that might affect the interests
of the Bank, the same shall be informed to the senior • Stand firmly against supporting the activities of any Group
management immediately, including any issue, which may or individual that unlawfully threatens public order and
pose a reputational risk safety.
• Not use this policy to raise grievances or act in bad faith • Not obtain membership of any political party, or take part
against colleagues. in, subscribing in aid of, or assist in any way, any political
movement in or outside of Pakistan or relating to the affairs
Professionalism of Pakistan.
• Serve the Bank honestly and faithfully and strictly serve the • Not express views detrimental to the ideology, sovereignty
Bank affairs and the affairs of its constituents, use utmost or integrity of Pakistan.
endeavor to promote the interest and goodwill of the
Bank and show courtesy and attention in all transactions/ • Not canvass or otherwise interfere or use influence in
correspondence with officers of Government, State connection with or take part in any election as a candidate to
Bank of Pakistan, other Banks & Financial Institutions, a legislative/local body or issue an address to the electorate
other establishments dealing with the Bank, the Bank or in any manner announce or allowed to be announced
constituents and the public. publicly as a candidate or prospective candidate whether
in Pakistan or elsewhere. However, the right to vote can
• Disclose and assign to MCB all interest in any invention, be exercised.
improvement, discovery or work of authorship that may
be made or conceived and which may arise out of the • Not bring or attempt to bring political or other pressure/
employment with MCB influence directly or indirectly to bear on the authorities/
superior officers or indulge in derogatory pamphleteering,
• In case the employment is terminated, all rights to contribute, or write letters to the newspapers, anonymously
property and information generated or obtained as part of or in own name contribute or appear in media, with an intent
employment relationship will remain the exclusive property to induce the authority/ superior officers to act in a manner
of MCB inconsistent with rules, in respect of any matter relating to
appointment, promotion, transfer, punishment, retirement
• Comply with the laws and regulations on money laundering or for any other conditions of service of employment.
and fraud prevention and immediate reporting of all
suspicions of money laundering as per the guidelines Financial Interest
provided in KYC & AML Procedures Handbook for
Management and Staff. • Not indulge in any of the following activities:
• Not to engage in any act of violation of KYC & AML • Borrow money from or in any way place myself under
guidelines given by State Bank of Pakistan and exercising pecuniary obligation to a broker or moneylender or anyone,
of extreme vigilance in protecting MCB from being misused including but not limited to any firm, company or person
by anyone to launder money by violating these guidelines. having dealings with the Bank.
• Ensure that all customer complaints are resolved quickly, • Buy or sell stock, shares or securities of any description
fairly and recorded appropriately. without funds to meet the full cost in the case of purchase
or scripts for delivery in the case of sale. However, a bona-
Conflict of Interest fide investment of own funds in such stocks, shares and
securities as wished can be made.
• Avoid all such circumstances in which there is personal
interest conflict, or may appear to be in conflict, with the • Lend money in private capacity to a constituent of the
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Code of Conduct
Bank or have personal dealings with a constituent in the Communication / Contact with Media
purchase or sale of bills of exchange, Government paper or
any other securities. • Be truthful in all advertisings and promotional efforts
and to publish only accurate information about the Bank
• Act as agent for an insurance company otherwise than as operations under valid authority as prescribed in the Bank
agent for or on behalf of the Bank. policy.
• Be connected with the formation or management of a joint • Not give any kind of confidential information or interview
stock company or hold office of a director. on behalf of the Bank or in official capacity in the print/
electronic media or have the photograph displayed or an
• Engage in any other commercial business or pursuit, either act in television/stage plays or in cinema without having
on own account or as agent for another or others. permission from the competent authority.
• Accept or seek any outside employment or office whether Speak Up

stipendiary or honorary.
• To inform line management & HR of any perceived wrong
• Undertake part-time work for a private or public body or doing / malpractice at any level, as an obligation to report it
private person, or accept fee thereof. under the Bank whistle blowing program / policy.
Gift, Favors Etc. Customer Centricity
• Not use the employment status to seek personal gain from • Treat every customer of the Bank with respect and
those doing business or seeking to do business with MCB, courtesy.
nor accept such gain if offered. • Be responsive to customer complaints, and feedback
on products and services.
• Not accept any gift, favors, entertainment or other benefit • Provide relevant, complete and clear information to
the size or frequency of which exceeds normal business customers to the best of one’s knowledge.
contacts from a constituent or a subordinate employee of • Sell products or services to customers that are within the
the Bank or from persons likely to have dealings with the legitimate scope of one’s job.
Bank and candidates for employment in the Bank.
• Remain update with the latest products of the Bank,
• Not accept any benefit from the estate of, or a trust created and provide all relevant information to the customers.
by a customer, or from an estate or trust of which a Bank
Company or business unit is an executor, administrator or Business / Work Ethics
trustee.
• Respect fellow colleagues and work as a team. To be, at
Confidentiality all times, courteous and not to let any personal differences
affect work.
• Maintain the privacy and confidentiality (during the course
of employment and after its termination for whatever • Treat every customer of the Bank with respect and courtesy.
reason), of all the information acquired during the course of
professional activities and refrain from disclosing the same Personal Responsibility
unless otherwise required by statutory authorities / law. All
such information will remain as a trust and will only be used • Demonstrate commitment to the code through words and
for the purpose for which it is intended and will not be used actions.
for the personal benefit of any individual(s).
• Be responsible for data relating to official responsibilities
• Not trade in relevant investments or indulge in giving tips to and not to alter / modify / amend Bank record so as to
another person or dealing on behalf of relatives, friends or obtain any personal benefits, attempt which in doing so
any other third parties, whilst in possession of non-public shall hold the person liable to disciplinary action as per
price sensitive information. Bank policy.
• Not disclose to a customer or customers or to any • Safeguard as a personal responsibility, both the tangible
irrelevant quarter(s) that a suspicious transaction or related and intangible assets of MCB and its customer(s) that are
information is being reported for investigation unless any under personal control and not to use Bank assets for
law enforcement agency requires any lawful information. personal benefits except where permitted by MCB.
(Only designated employee can reveal the facts to that
particular agency with the approval of the relevant quarter) • Not use any Bank facilities including a car or telephone to
promote trade union activities, or carry weapons into Bank
Data Security premises unless so authorized by the management, or to
carry on trade union activities during office hours, or subject
• Only access or update the system and data according to Bank officials to physical harassment or abuse.
the authority given by the Bank. Any unauthorized access
or updation will hold the person liable for a penal action by • Not indulge in any kind of harassment or intimidation
the Bank in accordance with HR policies. whether committed by or against any senior/ junior,
colleague, customer, vendor or visitor.
• Not compromise access to system by communicating
identification and /or passwords to others. • Not use language, written or spoken in intra-office or
communication(s) with individual(s) outside the office that
124
ANNUAL REPORT 2014
Code of Conduct
may contain any statement or material that is offensive to Usage of Communication Tools
others.
• Ensure strict adherence to the use of internet, emails and
• Not engage in any discrimination against an individual’s telephone provided by the Bank for professional use only.
race, color, religion, gender, age, marital status, sexual
orientation or disability. • Never use the Bank system to transmit or receive electronic
images or text containing ethnic slurs, social epithets or
• Not to engage in harassment of any form against woman. anything that might be construed as harassing, offensive
or insulting to others.
Punctuality
• Never utilize Bank system to disseminate any material
• Ensure attendance and punctuality and for any absence detrimental to the ideology, sovereignty or integrity of
during working hours obtain written permission of the Pakistan.
immediate supervisor.
• Never utilize the Bank system for supporting any terrorist
Dress Code activity within and / or outside Pakistan.
• Maintain a standard of personal hygiene / neatness and Reporting and Accountability

follow MCB Bank dress code policy in true spirit to promote
a professional work environment during office hours. • Maintain all books, data, information and records with
scrupulous integrity, reflecting in an accurate and timely
International Travel manner and to ensure that all business transactions are
reported and documented correctly according to the
• Be culturally sensitive to the socio-cultural norms of the business practices.
host country.
• Ensure facts are not misinterpreted pertaining to:
• Represent Country and organization by conforming to high
standards of personal and professional ethics at all times. • Issuing an incorrect account statement / any other
information for any customer or staff member.
Work Environment
• Placing a fake claim for reimbursement of any expenses.
• Help in maintaining a healthy and productive work
environment to meet the responsibilities to fellow • Unrecorded funds or assets of Bank in custody for any
employees, customers and investors, and not to get reason.
engaged in the selling, manufacturing, distributing, using
any illegal substance or getting under the influence of illegal • Posting of false, artificial or misleading entries in the books
drugs while on the job. or record of the Bank
• Ensure strict adherence to all policies of the Bank, as • Intimate line management and HRM of any changes in the
announced by the management from time to time and personal circumstances relating to employment or benefits.
contribute utmost effort in maintaining a conducive work
environment by meticulously adhering and ensuring Insider Trading
adherence to Anti-Harassment and SHE (Safety, Health &
Environment) Policies of the Bank. • Comply with insider trading policy and to abide by all
guidelines provided in the policy.
125
Statement on Internal Controls
The Bank’s internal control structure comprises of the Board resolution of issues. The Working Group escalates/refers key issues
of Directors, Senior Management, Risk Management Group, to ITAM MC Subcommittee for its advice, decision or support. ITAM
Compliance & Control Group, Audit & RAR Group and self- MC Subcommittee regularly monitors performance of the Working
assessment procedures implemented at other group levels. The Group in its meetings.
Bank’s management is responsible to establish and maintain an
adequate and effective system of internal controls and procedures In accordance with SBP directives, the Bank has completed all
under the policies approved by the Board. The management is also stages of ICFR roadmap and the fourth Long Form Report (LFR)
responsible for evaluating the effectiveness of the Bank’s internal on the assessment of Bank’s ICFR for the year 2013 issued by the
control system that covers material matters by identifying control statutory auditors has been submitted to SBP within given timeline,
objectives and reviewing significant policies and procedures. on June 30, 2014. No material deficiency was reported in the LFR,
submitted to the SBP.
The Bank’s internal control system has been designed to identify
and mitigate the risk of failure to achieve overall business objectives Based upon the results through ongoing testing of financial
of the Bank. Internal controls and policies are designed to provide reporting controls and internal audits carried out during the year,
reasonable assurance regarding the effectiveness and efficiency the management considers that the Bank’s existing Internal control
of the Bank’s operations, reliability of financial information and system is adequate and has been effectively implemented and
compliance with applicable laws and regulations. However, it needs monitored. The management will continue enhancing its coverage
to be stated that systems are designed to manage, rather than and compliance with the SBP guidelines on Internal Controls and
eliminate the risk of failure to achieve the business objectives and further strengthen its control environment on an ongoing basis.
can only provide reasonable and not absolute assurance against
material misstatement or loss. Based on the above, the Board of Directors has duly endorsed the
management’s evaluation of internal controls including ICFR in the
The management of the Bank has adopted Integrated Framework Director’s report.
on Internal Controls issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) and has
completed all the stages as set out in the staged roadmap provided
by the SBP through the Guidelines on Internal Controls. The Bank’s
assessment included documenting, evaluating and testing of the
design and operating effectiveness of its internal controls over
financial reporting (ICFR). The Bank has developed a comprehensive
management testing and reporting framework for ensuring ongoing
operating effectiveness of majority of key controls. Farid Ahmad Kamran Zaffar Muggo Salman Zafar Siddiqi
Group Head Group Head Chief Financial Officer
Concerted efforts are made by each Group to improve the Compliance and Audit & RAR Group
Control Environment at grass root level by continuous review Control Group
and streamlining of procedures to prevent and rectify control
lapses as well as imparting training for improvement at various
levels. Compliance & Control Group, through its regional offices/
centralized automated AML solution, also ensures adherence to
the regulatory requirements, with specific emphasis on KYC / AML.
The scope of Audit & RAR Group, independent from line

management, inter-alia includes, review and assessment of the
adequacy and effectiveness of the control activities across the Bank
as well as implementation of and compliance with all the prescribed
policies and procedures. All significant and material findings of
the internal audit reviews are reported to the Audit Committee of
the Board of Directors. The Audit Committee actively monitors
implementation, to ensure that identified risks are mitigated to
safeguard the interest of the Bank.
All significant and material findings of the internal and external

auditors and regulators were addressed on priority basis by the
management and their status was reported periodically to the
Board Audit Committee, who ensured that management has
taken appropriate corrective actions and has put in place a system
to minimize repetition to ensure strengthening of the control
environment.
A separate Issues Tracking & Monitoring (ITAM) Committee

structure with membership comprising of Senior Management is
also in place. Periodic ITAM meetings are held with the goal to
expedite the resolution/compliance of identified issues. ITAM MC
Subcommittee is assisted by a Working Group, which regularly
conducts meetings and follows up with the process owners for
126
ANNUAL REPORT 2014
Statement of Compliance with the Code of Corporate Governance

MCB BANK LIMITED (As of December 31, 2014)
This statement is being presented to comply with the Code of made during the year.
Corporate Governance (“the CCG”) contained in Regulation
11. The directors’ report for this year has been prepared in
No. 5.19 of Rule Book of Karachi Stock Exchange Limited, for
compliance with the requirements of the CCG and fully
the purpose of establishing a framework of good governance,
describes the salient matters required to be disclosed.
whereby a listed company is managed in compliance with the
best practices of corporate governance. 12. The Financial Statements of the Bank were duly endorsed
by CEO and CFO before approval of the Board.
MCB Bank Limited (“the Bank”) has applied the principles
contained in the CCG, in the following manner: 13. The directors, CEO and executives do not hold any
interest in the shares of the Bank, other than that
1. The Bank encourages representation of non-executive
disclosed in the pattern of shareholding.
directors on its Board of Directors. At present, all the
directors on the Board are non-executive, except for 14. The Bank has complied with all the corporate and
President/CEO. financial reporting requirements of the CCG.
2. The directors have confirmed that none of them is serving 15. The Board has formed an Audit Committee. It comprises
as a director on more than seven listed companies, of four (4) members who are non-executive directors
including MCB Bank Limited (excluding the listed and the Chairman of the Committee is an independent
subsidiaries of MCB Bank Limited). director.
3. All the resident directors of the Bank are registered as 16. The meetings of the Audit Committee were held at least
taxpayers and none of them has defaulted in payment once every quarter, prior to approval of interim and final
of any loan to a banking company, a DFI or an NBFI or, results of the Bank and as required by the CCG. The
being a member of a stock exchange, has been declared terms of reference of the Committee have been formed
as a defaulter by that stock exchange. and advised to the Committee for compliance.
4. One casual vacancy occurred on the Board on October 17. The Board has formed a Human Resource &
01, 2013, which was filled on February 24, 2014, i.e. Remuneration Committee. It comprises of four members,
beyond 90 days as mentioned in Clause (iii) of CCG; of whom three are non-executive directors, including the
however, the Bank has obtained relaxation from the Chairman of the Committee.
Securities and Exchange Commission of Pakistan in
18. The Board has set up an effective internal audit function
accordance with the requirements of Clause (xlii) of CCG.
which is considered suitably qualified and experienced
5. The Bank has prepared a Code of Conduct for employees for the purpose and is conversant with the policies and
and Code of Conduct & Ethical Standards for directors procedures of the Bank.
and has ensured that appropriate steps have been taken
19. The statutory auditors of the Bank have confirmed that
to disseminate it throughout the Bank along with its
they have been given a satisfactory rating under the
supporting policies and procedures.
quality control review program of the ICAP, that they or
6. The Board has developed a vision/mission statement, any of the partners of the firm, their spouses and minor
overall corporate strategy and significant policies of the children do not hold shares of the Bank and that the firm
Bank. A complete record of particulars of significant and all its partners are in compliance with International
policies, along with the dates on which they were Federation of Accountants (IFAC) guidelines on code of
approved or amended has been maintained. ethics as adopted by the ICAP.
7. All the powers of the Board have been duly exercised 20. The statutory auditors or the persons associated with
and decisions on material transactions, including them have not been appointed to provide other services
appointment and determination of remuneration and except in accordance with the listing regulations and the
terms and conditions of employment of the CEO and auditors have confirmed that they have observed IFAC
non-executive directors, have been taken by the Board/ guidelines in this regard.
shareholders.
21. The ‘closed period’, prior to the announcement of
8. The meetings of the Board were presided over by the interim/final results, and business decisions, which may
Chairman and, in his absence, by the Vice Chairman materially affect the market price of Bank’s securities,
or a director elected by the Board for this purpose and was determined and intimated to directors, employees
the Board met at least once in every quarter. Written and stock exchange(s).
notices of the Board meetings, along with agenda and
22. Material/price sensitive information has been
working papers, were circulated at least seven days
disseminated among all market participants at once
before the meetings. The minutes of the meetings were
through stock exchange(s).
appropriately recorded and circulated.
23. We confirm that all other material principles enshrined in
9. The Board members have the prescribed education
the CCG have been complied with.
and experience required for exemption from Directors’
Training Program or have completed Directors’ Training
Program pursuant to clause xi of CCG. Furthermore,
appropriate arrangements were made by the bank for
orientation of Directors to acquaint them with their duties
and responsibilities. Lahore Mian Mohammad Mansha
February 12, 2015 Chairman
10. The Board has approved the appointment of Company
Secretary, including his remuneration and term &
conditions of employment. Furthermore, no new
appointments of CFO and Head of Internal Audit were
127
Review Report to the Members on Statement of Compliance
with Best Practices of Code of Corporate Governance
We have reviewed the Statement of Compliance with the best Based on our review, nothing has come to our attention
practices contained in the Code of Corporate Governance which causes us to believe that the Statement of Compliance
prepared by the Board of Directors of MCB Bank Limited to does not appropriately reflect the Company’s compliance,
comply with Regulation G-1 of the Prudential Regulations in all material respects, with the best practices contained
for Corporate / Commercial Banking issued by the State in the Code of Corporate Governance as applicable to the
Bank of Pakistan, Regulation No. 35 of the Karachi Stock Company for the year ended December 31, 2014.
Exchange, the Lahore Stock Exchange and the Islamabad
Stock Exchange, where the Bank is listed.
The responsibility for compliance with the Code of

Corporate Governance is that of the Board of Directors of
the Bank. Our responsibility is to review, to the extent where
such compliance can be objectively verified, whether the
Statement of Compliance reflects the status of the Bank’s A. F. Ferguson & Co.
compliance with the provisions of the Code of Corporate Chartered Accountants
Governance and report if it does not. A review is limited Lahore Engagement Partner
primarily to inquiries of the Bank’s personnel and review of Dated: February 28, 2015 Imran Farooq Mian
various documents prepared by the Bank to comply with
the Code.
As part of our audit of the financial statements, we are

required to obtain an understanding of the accounting and
internal control systems sufficient to plan the audit and
develop an effective audit approach. We have not carried
out any special review of the internal control system to
enable us to express an opinion as to whether the Board’s
statement on internal control covers all controls and the
effectiveness of such internal controls.
Regulation 35(x) of the Listing Regulations requires the

Company to place before the Board of Directors for their
consideration and approval, related party transactions
distinguishing between transactions carried out on terms
equivalent to those that prevail in arm’s length transactions
and transactions which are not executed at arm’s length
price recording proper justification for using such alternate
pricing mechanism. Further, all such transactions are also
required to be separately placed before the Audit Committee.
We are only required and have ensured compliance of
requirement to the extent of approval of related party
transactions by the Board of Directors and placement of
such transactions before the Audit Committee.
We have not carried out any procedures to determine

whether the related party transactions were undertaken at
arm’s length prices or not.
128
ANNUAL REPORT 2014
Report of the Audit Committee

The Audit Committee comprises of four (4) non-executive directors including one Independent Director, being Chairman of
the Audit Committee. The members of the Audit Committee are qualified professionals and possess enriched experience of
working at the Boards & Senior Management levels of multinationals, operating in both banking and non-banking sectors.
Moreover, the Chairman of the Audit Committee has four decades of professional experience in investment banking, corporate
finance and advisory services. Chairman of the Audit Committee has served in one of the global financial institution for 28
years. He has also served on the Boards of the State Bank of Pakistan, OGDC, Adamjee Insurance, IGI Asset Management,
Punjab Coal Mining Company, The Bank of Punjab, Punjab Small Industries Corporation and the Private Power & Infrastructure
Board. Another member is the fellow member of the Institute of Chartered Accountants of Pakistan (ICAP) and has over 50
years of diversified professional experience in various sectors.
The Head of Internal Audit has direct access to the Board’s Audit Committee. The Committee ensures staffing of the internal
audit function with personnel of sufficient internal audit acumen, and that the function is equipped with the necessary
resources and authority to execute their responsibilities independently and objectively.
Audit Committee remained actively engaged in the review of bank’s financial statements as well as audit activities in
accordance with the requirements of Code of Corporate Governance and that of Charter of the Audit Committee, duly
approved by the Board of Directors. Audit Committee held six (6) meetings including one special meeting, during the year
2014, on the following agenda items:
• Review of Bank’s periodic financial statements, including disclosure of related party transactions prior to their approval
by the Board of Directors (BoD).
• Review of status of compliance against observations highlighted by internal and external auditors, including regular
updates on the rectification actions taken by the management in response to the audit findings.
• Review of status of implementation of decisions of BoD and its sub-committees.
• Review of significant issues highlighted by internal auditors during audits/reviews of branches/offices of the Bank.
• Review of analysis of audit ratings allotted to branches/offices.
• Review of analysis related to significant frauds and forgery incidents in the Bank, with specific focus on nature,
reasons alongwith Management action thereof.
• Review, approval and oversight of Audit & RAR Group’s Strategic Plan, Annual Audit Plan & Budget alongwith resource
requirements of the Group.
• Review of status of trainings imparted to internal audit staff.
• Oversight of complaints lodged under the Bank’s Whistleblowing program alongwith resolutions thereof.
• Recommendation of scope and appointment of external auditors, including finalization of audit and consultancy fee.
Audit Committee further ensured coordination between internal and external auditors.
• Monitoring of compliance status of issues highlighted in SBP inspection reports.
• Review of Internal Audit Policy of Wholesale Banking Operations-UAE.
• Review of Manuals related to Branch Internal Audits and Audit Ratings of Sri Lanka Operations.
• Review of Annual Internal Quality Assurance Report of the Audit & RAR Group.
• Review of report issued by External Assessors on Internal Audit Quality Assurance & Functional Performance
Assessment of the Audit & RAR Group.
• Review of statement on Internal Control Systems, prior to endorsement by the BoD.
Internal Control Framework and Role of the Internal Auditor

The Bank’s internal control structure comprises of the Board of Directors, Senior Management, Risk Management Group,
Compliance & Controls Group, Financial Control Group, Self-Assessment process within business groups and Internal Audit.
The Management is responsible for establishing and maintaining a system of adequate internal controls and procedures
for implementing strategy and policies, as approved by the Board of Directors. The Bank adopted integrated framework
on Internal Controls issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and has
completed all the stages, as set out in the staged roadmap provided by the SBP through the Guidelines on Internal Controls.
The scope of Audit & RAR Group, independent from line management, inter-alia includes, review and assessment of the
adequacy and effectiveness of the control activities across the Bank, as well as implementation of and compliance with all the
prescribed policies and procedures. All significant and material findings of the internal audit reviews are reported to the Audit
Committee of the Board of Directors. The Audit Committee actively monitors implementation, to ensure that identified risks
are mitigated to safeguard the interest of the Bank.
Ahmad Alman Aslam

Lahore Chairman Audit Committee
Dated: February 12, 2015 MCB Bank Limited
129
Notes
130
ANNUAL REPORT 2014
MCB Bank Limited

Unconsolidated Financial Statements
For the year ended December 31, 2014
131
Auditors’ Report To The Members
We have audited the annexed unconsolidated statement of financial position of MCB Bank Limited as at December 31, 2014
and the related unconsolidated profit and loss account, unconsolidated statement of comprehensive income, unconsolidated
cash flow statement and unconsolidated statement of changes in equity together with the notes forming part thereof (herein-
after referred to as the ‘financial statements’) for the year then ended, in which are incorporated the unaudited certified returns
from the branches except for fifty branches which have been audited by us and nine branches audited by auditors abroad
and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were
necessary for the purposes of our audit.
It is the responsibility of the Bank’s management to establish and maintain a system of internal control, and prepare and present
the financial statements in conformity with approved accounting standards and the requirements of the Banking Companies
Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984). Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with the international standards of auditing as applicable in Pakistan. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of any
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting policies and significant estimates made by management,
as well as, evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis
for our opinion and, after due verification, which in the case of loans and advances covered more than sixty percent of the total
loans and advances of the bank, we report that:
(a) in our opinion, proper books of account have been kept by the Bank as required by the Companies Ordinance, 1984
(XLVII of 1984), and the returns referred to above received from the branches have been found adequate for the
purpose of our audit;
(b) in our opinion:
(i) the unconsolidated statement of financial position and unconsolidated profit and loss account together with
the notes thereon have been drawn up in conformity with the Banking Companies Ordinance, 1962 (LVII of
1962), and the Companies Ordinance, 1984 (XLVII of 1984), and are in agreement with the books of account
and are further in accordance with accounting policies consistently applied;
(ii) the expenditure incurred during the year was for the purpose of the Bank’s business; and
(iii) the business conducted, investments made and the expenditure incurred during the year were in accordance
with the objects of the Bank and the transactions of the Bank which have come to our notice have been
within the powers of the Bank;
(c) in our opinion and to the best of our information and according to the explanations given to us, the unconsolidated
statement of financial position, unconsolidated profit and loss account, unconsolidated statement of comprehensive
income, unconsolidated cash flow statement and unconsolidated statement of changes in equity together with the
notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and give the
information required by the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984
(XLVII of 1984), in the manner so required and give a true and fair view of the state of the Bank’s affairs as at December
31, 2014 and its true balance of profit, its comprehensive income, its cash flows and changes in equity for the year
then ended; and
(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted
by the Bank and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.
A. F. Ferguson & Co.

Chartered Accountants
Lahore Engagement Partner
Dated: February 28, 2015 Imran Farooq Mian
132
ANNUAL REPORT 2014
Unconsolidated Statement of Financial Position

As at December 31, 2014
Note 2014 2013
(Rupees in ‘000)
ASSETS
Cash and balances with treasury banks 6 46,753,804 59,946,150
Balances with other banks 7 3,015,624 1,536,946
Lendings to financial institutions 8 1,418,181 1,224,638
Investments - net 9 511,137,192 449,006,019
Advances - net 10 303,559,480 248,242,965
Operating fixed assets 11 31,192,588 28,595,338
Deferred tax assets - net - -
Other assets - net 12 37,554,615 26,956,315
934,631,484 815,508,371
LIABILITIES
Bills payable 14 16,627,700 10,138,726
Borrowings 15 59,542,861 38,542,660
Deposits and other accounts 16 688,329,520 632,330,286
Sub-ordinated loan - -
Liabilities against assets subject to finance lease - -
Deferred tax liabilities - net 17 10,397,100 4,201,373
Other liabilities 18 29,630,241 20,064,345
804,527,422 705,277,390
NET ASSETS 130,104,062 110,230,981
Represented by
Share capital 19 11,130,307 10,118,461
Reserves 20 48,830,005 46,601,214
Unappropriated profit 46,947,863 40,552,043
106,908,175 97,271,718
Surplus on revaluation of assets - net of tax 21 23,195,887 12,959,263
130,104,062 110,230,981
Contingencies and commitments 22

The annexed notes 1 to 46 and Annexures I to V form an integral part of these financial statements.
Imran Maqbool S. M. Muneer Tariq Rafi Mian Umer Mansha

President and Chief Executive Director Director Director
133
Unconsolidated Profit and Loss Account
Note 2014 2013
(Rupees in ‘000)
Mark-up / return / interest earned 24 77,268,988 65,064,123

Mark-up / return / interest expensed 25 33,756,685 27,195,894
Net mark-up / interest income 43,512,303 37,868,229
Provision / (reversal) for diminution in the value of investments - net 9.3 (355,809) (6,834)
Provision / (reversal) against loans and advances - net 10.5.2 (1,093,906) (2,828,783)
Bad debts written off directly 10.6.1 20 -
(1,449,695) (2,835,617)
Net mark-up / interest income after provisions 44,961,998 40,703,846

Non-mark-up / interest income
Fee, commission and brokerage income 7,225,093 6,741,404
Dividend income 1,060,729 932,717
Income from dealing in foreign currencies 1,443,180 916,572
Gain on sale of securities - net 26 2,141,840 2,130,341
Unrealized gain / (loss) on revaluation of investments
classified as held for trading (2,273) -
Other income 27 1,566,475 449,604
Total non-mark-up / interest income 13,435,044 11,170,638
58,397,042 51,874,484
Non-mark-up / interest expenses
Administrative expenses 28 20,611,649 18,709,969
Other provision / (reversal) - net 12.3 76,935 (52,285)
Other charges 29 979,011 928,595
Total non-mark-up / interest expenses 21,667,595 19,586,279
Extra ordinary / unusual item - -
Profit before taxation
36,729,447 32,288,205
Taxation - Current year 11,920,022 15,170,974

- Prior years - -
- Deferred 484,669 (4,378,107)
30 12,404,691 10,792,867
Profit after taxation 24,324,756 21,495,338
Unappropriated profit brought forward 40,552,043 35,424,921

Transfer from surplus on revaluation of fixed assets - net of tax 47,629 35,788
40,599,672 35,460,709
Profit available for appropriation 64,924,428 56,956,047
Basic and diluted earnings - after tax Rupees per share 33 21.85 19.31

134
ANNUAL REPORT 2014
Unconsolidated Statement of Comprehensive Income

2014 2013

(Rupees in ‘000)
Profit after tax for the year 24,324,756 21,495,338
Other comprehensive income
Items that will not be reclassified to profit and loss account
Remeasurement of defined benefit plans - net of tax 139,526 49,373
Items that may be reclassified to profit and loss account
Effect of translation of net investment in foreign branches (203,685) 198,410

Comprehensive income transferred to equity 24,260,597 21,743,121
Components of comprehensive income not reflected in equity
Net change in fair value of available for sale securities 15,920,182 (3,697,164)
Deferred tax (5,635,929) 1,189,889
10,284,253 (2,507,275)
Total Comprehensive income 34,544,850 19,235,846


135
Unconsolidated Cash Flow Statement
Note 2014 2013
(Rupees in ‘000)

Profit before taxation 36,729,447 32,288,205
Less: Dividend income (1,060,729) (932,717)
35,668,718 31,355,488
Adjustments for non-cash charges
Depreciation 11.2 1,724,216 1,541,314
Amortization 11.3 359,734 260,424
Provision for Workers’ Welfare Fund 29 734,589 645,764
Charge / (reversal) for defined benefit plan - net 28 (413,543) (1,311,767)
Unrealized (gain) / loss on revaluation of investments classified as held for trading 9.5 2,273 -
Gain on disposal of fixed assets - net 27 (31,120) (42,687)
1,003,389 (1,794,854)
36,672,107 29,560,634
Lendings to financial institutions (193,543) 326,834
Net investments in ‘held for trading’ securities (52,330) -
Advances - net (54,222,629) (5,830,862)
Other assets - net (12,150,909) (2,778,730)
(66,619,411) (8,282,758)

Bills payable 6,488,974 242,442
Borrowings 21,284,080 (40,205,492)
Deposits and other accounts 55,999,234 87,269,558
Other liabilities 9,157,104 (2,529,334)
92,929,392 44,777,174
62,982,088 66,055,050
Defined benefits paid (603,308) (706,361)
Receipt from pension fund - 14,731,898
Income tax paid (9,035,362) (10,355,097)
Net cash flows from operating activities 53,343,418 69,725,490

Net investments in ‘available for sale’ securities (45,207,446) (51,033,235)
Net investments in ‘held to maturity’ securities (597,679) 405,975
Dividends received 1,060,790 940,745
Investments in operating fixed assets (4,757,264) (4,663,196)
Sale proceeds of property and equipment disposed off 107,184 173,089
Net cash flows from investing activities (49,394,415) (54,176,622)

Dividend paid (15,175,107) (12,673,334)
Net cash flows from financing activities (15,175,107) (12,673,334)
Exchange differences on translation of the net investment in foreign branches (203,685) 198,410
Increase in cash and cash equivalents (11,429,789) 3,073,944
Cash and cash equivalents at beginning of the year 61,372,069 57,173,579

Effects of exchange rate changes on cash and cash equivalents (514,945) 609,601
60,857,124 57,783,180
Cash and cash equivalents at end of the year 34 49,427,335 60,857,124

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ANNUAL REPORT 2014
Unconsolidated Statement of Changes in Equity

Capital Reserves Revenue Reserves

Share capital Reserve for issue of Share Exchange Statutory General Unappropriated Total
of bonus shares premium translation reserve reserve reserve profit
(Rupees in ‘000)
Balance as at December 31, 2012 9,198,601 - 9,702,528 399,782 15,550,960 18,600,000 35,424,921 88,876,792

Profit after taxation for the year ended
December 31, 2013 - - - - - - 21,495,338 21,495,338
Remeasurement of defined benefit

plans - net of tax - - - - - - 49,373 49,373
Exchange differences on translation of net

investment in foreign branches - - - 198,410 - - - 198,410
Transferred from surplus on revaluation of fixed

assets to unappropriated profit - net of tax - - - - - - 35,788 35,788
Transferred to statutory reserve - - - - 2,149,534 - (2,149,534) -
Transfer to reserve for issue of bonus shares - 919,860 - - - - (919,860) -
Issue of bonus shares - December 2012 919,860 (919,860) - - - - - -
Final cash dividend - December 2012 - - - - - - (2,759,581) (2,759,581)
Interim cash dividend - March 2013 - - - - - - (3,541,471) (3,541,471)
Interim cash dividend - June 2013 - - - - - - (3,541,470) (3,541,470)
Interim cash dividend - September 2013 - - - - - - (3,541,461) (3,541,461)

December 31, 2014 - - - - - - 24,324,756 24,324,756

plans - net of tax - - - - - - 139,526 139,526

investment in foreign branches - - - (203,685) - - - (203,685)

assets to unappropriated profit - net of tax - - - - - - 47,629 47,629
Transferred to statutory reserve - - - - 2,432,476 - (2,432,476) -
Transfer to reserve for issue of bonus shares - 1,011,846 - - - - (1,011,846) -
Issue of bonus shares - December 2013 1,011,846 (1,011,846) - - - - - -
Final cash dividend - December 2013 - - - - - - (3,541,461) (3,541,461)
Interim cash dividend - March 2014 - - - - - - (3,339,092) (3,339,092)
Interim cash dividend - June 2014 - - - - - - (3,895,608) (3,895,608)
Interim cash dividend - September 2014 - - - - - - (3,895,608) (3,895,608)
For details of dividend declaration and appropriations, please refer note 45 to these financial statements.

137
Notes to and forming part of the unconsolidated Financial Statements
1. STATUS AND NATURE OF BUSINESS the International Accounting Standards Board

and Islamic Financial Accounting Standards (IFAS)
MCB Bank Limited (the ‘Bank’) is a banking issued by the Institute of Chartered Accountants
company incorporated in Pakistan and is engaged of Pakistan as are notified under the Companies
in commercial banking and related services. The Ordinance, 1984, provisions of and directives
Bank’s ordinary shares are listed on all the stock issued under the Companies Ordinance, 1984
exchanges in Pakistan whereas its Global Depository and Banking Companies Ordinance, 1962. In case
Receipts (GDRs) representing two ordinary shares requirements differ, the provisions and directives
(2013: two ordinary shares) are traded on the given in Companies Ordinance, 1984 and Banking
International Order Book (IOB) system of the Companies Ordinance, 1962 shall prevail.
London Stock Exchange. The Bank’s Registered
Office and Principal Office are situated at MCB -15 The State Bank of Pakistan has deferred the
Main Gulberg, Lahore. The Bank operates 1,222 applicability of International Accounting Standard
branches including 27 Islamic banking branches (IAS) 39, ‘Financial Instruments: Recognition and
(2013: 1,208 branches including 27 Islamic banking Measurement’ and IAS 40, ‘Investment Property’ for
branches) within Pakistan and 10 branches (2013: 9 Banking Companies through BSD Circular No. 10
branches) outside the country (including the Karachi dated August 26, 2002. The Securities and Exchange
Export Processing Zone branch). Commission of Pakistan (SECP) has deferred
applicability of IFRS-7 Financial Instruments:
2. BASIS OF PRESENTATION Disclosures on banks through S.R.O 411(1) /2008
dated April 28, 2008. Accordingly, the requirements
2.1 These financial statements represent separate of these standards have not been considered in the
financial statements of MCB Bank Limited. The preparation of these financial statements. However,
consolidated financial statements of the Group are investments have been classified and valued in
being issued separately. accordance with the requirements prescribed by the
State Bank of Pakistan through various circulars.
2.2 In accordance with the directives of the Federal
Government regarding the shifting of the banking IFRS 8, ‘Operating Segments’ is effective for the
system to Islamic modes, the State Bank of Bank’s accounting period beginning on or after
Pakistan has issued various circulars from time to January 1, 2009. All banking companies in Pakistan
time. Permissible forms of trade-related modes are required to prepare their annual financial
of financing include purchase of goods by banks statements in line with the format prescribed under
from their customers and immediate resale to them BSD Circular No. 4 dated February 17, 2006,
at appropriate profit in price on deferred payment ‘Revised Forms of Annual Financial Statements’,
basis. The purchases and sales arising under these effective from the accounting year ended December
arrangements are not reflected in these financial 31, 2006. The management of the Bank believes that
statements as such but are restricted to the amount as the SBP has defined the segment categorization in
of facility actually utilized and the appropriate portion the above mentioned circular, the SBP requirements
of profit thereon. The Islamic Banking branches of the prevail over the requirements specified in IFRS 8.
Bank have complied with the requirements set out Accordingly, segment information disclosed in these
under the Islamic Financial Accounting Standards financial statements is based on the requirements
issued by the Institute of Chartered Accountants laid down by the SBP.
of Pakistan and notified under the provisions of the
Companies Ordinance, 1984. 3.2 Standards, interpretations and amendments to
published approved accounting standards that
2.3 The financial results of the Islamic Banking are effective in the current year
branches have been consolidated in these financial
statements for reporting purposes, after eliminating The Securities and Exchange Commission of
material inter-branch transactions / balances. Pakistan (SECP) has notified Islamic Financial
Key financial figures of the Islamic Banking Accounting Standard (IFAS) 3, ‘Profit and Loss
branches are disclosed in Annexure II to these Sharing on Deposits’ issued by the Institute of
financial statements. Chartered Accountants of Pakistan. IFAS 3 shall
be followed with effect from the financial periods
2.4 For the purpose of translation, rates of Rs. 100.4831 beginning after January 1, 2014 in respect of
per US Dollar (2013: Rs. 105.3246) and Rs. 0.7659 accounting for transactions relating to ‘Profit and
per LKR (2013: Rs.0.8052) have been used. Loss Sharing on Deposits’ as defined by the said
standard. The standard has resulted in certain
3. STATEMENT OF COMPLIANCE new disclosures in the financial statements of the
Bank as disclosed in Annexure II to these Financial
3.1 These financial statements have been prepared Statements.
in accordance with the approved accounting There are certain other new and amended standards,
standards as applicable in Pakistan. Approved interpretations and amendments that are mandatory
Accounting Standards comprise of such International for the Bank’s accounting periods beginning on or
Financial Reporting Standards (IFRS) issued by after January 1, 2014 but are considered not to
138
ANNUAL REPORT 2014

be relevant or do not have any significant effect on where judgment was exercised in the application of
the Bank’s operations and therefore not detailed in accounting policies are as follows:
these financial statements.
a) Classification of investments
3.3 Standards, interpretations and amendments to
published approved accounting standards that In classifying investments, the Bank follows the
are relevant and not yet effective guidance provided in SBP circulars:
The following standards, amendments and - Investments classified as ‘held for trading’, are
interpretations of approved accounting standards securities which are acquired with an intention to
will be effective for accounting periods beginning on trade by taking advantage of short term market
or after January 01, 2015: / interest rate movements and are to be sold
Effective date within 90 days of acquisition.
(accounting
periods beginning
on or after) - Investments classified as ‘held to maturity’ are
non-derivative financial assets with fixed or
IAS 27 Separate financial statements (Amendments) January 01, 2015 determinable payments and fixed maturity. In
IFRS 10 ‘ Consolidated financial statements (Amendments) January 01, 2015 making this judgment, the Bank evaluates its
IFRS 11 ‘Joint Arrangements January 01, 2015 intention and ability to hold such investment to
IFRS 12 ‘ Disclosure of interests in other entities (Amendments January 01, 2015 maturity.
IFRS 13 - Fair value measurement January 01, 2015
- The investments which are not classified as ‘held
There are other new and amended standards and for trading’ or ‘held to maturity’ are classified as
interpretations that are mandatory for the Bank’s ‘available for sale’.
accounting periods beginning on or after January 1,
2015 but are considered not to be relevant or do not b) Provision against advances
have any significant effect on the Bank’s operations
and are therefore not detailed in these financial The Bank reviews its loan portfolio to assess the
statements. amount of non-performing advances and provision
required there against on regular basis. While
The management anticipate that the adoption of the assessing this requirement various factors including
above standards, amendments and interpretations the delinquency in the account, financial position of
in future periods, will have no material impact on the borrowers and the requirements of the Prudential
the financial statements other than in presentation / Regulations are considered.
disclosures.
The amount of general provision is determined
4. BASIS OF MEASUREMENT in accordance with the relevant regulations and
management’s judgment as explained in notes
4.1 These financial statements have been prepared 10.5.3 and 10.5.5.
under the historical cost convention except that
certain classes of fixed assets are stated at revalued c) Impairment of ‘available for sale’ equity
amounts and certain investments and commitments investments
in respect of certain forward exchange contracts have
been marked to market and are carried at fair value. The Bank determines that ‘available for sale’
equity investments are impaired when there has
4.2 The financial statements are presented in Pak been a significant or prolonged decline in the fair
Rupees, which is the Bank’s functional and value below its cost. The determination of what
presentation currency. The amounts are rounded off is significant or prolonged requires judgment. In
to the nearest thousand. making this judgment, the Bank evaluates among
other factors, the normal volatility in share price. In
4.3 Critical accounting estimates and judgments addition, the impairment may be appropriate when
there is an evidence of deterioration in the financial
The preparation of financial statements in conformity health of the investee and sector performance,
with the approved accounting standards requires the changes in technology and operational/financial
use of certain critical accounting estimates. It also cash flows.
requires the management to exercise its judgment
in the process of applying the Bank’s accounting d) Taxation
policies. Estimates and judgments are continually
evaluated and are based on historical experiences, In making the estimates for income taxes currently
including expectations of future events that are payable by the Bank, the management considers
believed to be reasonable under the circumstances. the current income tax laws and the decisions of
The areas where various assumptions and estimates appellate authorities on certain issues in the past.
are significant to the Bank’s financial statements or
139
e) Fair value of derivatives c) Available for sale
The fair values of derivatives which are not quoted These are investments, other than those in
in active markets are determined by using valuation subsidiaries and associates, that do not fall under
techniques. The valuation techniques take into the ‘held for trading’ or ‘held to maturity’ categories.
account the relevant interest rates at the balance
sheet date and the rates contracted. Investments are initially recognized at cost which
in case of investments other than ‘held for trading’
f) Depreciation, amortization and revaluation of include transaction costs associated with the
operating fixed assets investment.
In making estimates of the depreciation / amortization All purchases and sales of investments that require
method, the management uses the method which delivery within the time frame established by
reflects the pattern in which economic benefits regulation or market convention are recognized at
are expected to be consumed by the Bank. The the trade date. Trade date is the date on which the
method applied is reviewed at each financial year Bank commits to purchase or sell the investment.
end and if there is a change in the expected pattern
of consumption of the future economic benefits In accordance with the requirements of the State
embodied in the assets, the method is changed Bank of Pakistan, quoted securities, other than
to reflect the changed pattern. Such change is those classified as ‘held to maturity’, investments
accounted for as change in accounting estimates in in subsidiaries and investments in associates are
accordance with International Accounting Standard subsequently re-measured to market value. Surplus
(IAS) 8 “Accounting Policies, Changes in Accounting / (deficit) arising on revaluation of quoted securities
Estimates and Errors”. Further, the Bank estimates which are classified as ‘available for sale’, is taken to
the revalued amount of land and buildings on a a separate account which is shown in the balance
regular basis. The estimates are based on valuations sheet below equity. Surplus / (deficit) arising on
carried out by independent professional valuers revaluation of quoted securities which are classified
under the market conditions. as ‘held for trading’, is taken to the profit and loss
account, currently.
g) Staff retirement benefits
Unquoted equity securities (excluding investments
Certain actuarial assumptions have been adopted in subsidiaries and associates) are valued at the
as disclosed in Note 36 of these financial statements lower of cost and break-up value. Break-up value of
for the actuarial valuation of staff retirement benefit equity securities is calculated with reference to the
plans. Actuarial assumptions are entity’s best net assets of the investee company as per the latest
estimates of the variables that will determine the available audited financial statements. Investments
ultimate cost of providing post employment benefits. classified as ‘held to maturity’ are carried at
Changes in these assumptions in future years may amortized cost.
affect the liability / asset under these plans in those
years. Associates are all entities over which the Group has
significant influence but not control. Subsidiaries
5. SUMMARY OF SIGNIFICANT ACCOUNTING are all entities over which the Group has the power
POLICIES to govern the financial and operating policies
accompanying a shareholding of more than one half
5.1 Investments of the voting rights. Investments in subsidiaries and
investments in associates are carried at cost less
The Bank classifies its investments as follows: accumulated impairment losses, if any.
a) Held for trading Provision for impairment in the values of securities

(except debentures, participation term certificates
These are securities, which are either acquired for and term finance certificates) is made currently.
generating profit from short-term fluctuations in Provisions for impairment in value of debentures,
market prices, interest rate movements, dealers participation term certificates and term finance
margin or are securities included in a portfolio in certificates are made as per the requirements of the
which a pattern of short-term profit taking exists. Prudential Regulations issued by the State Bank of
Pakistan.
b) Held to maturity
5.2 Sale and repurchase agreements
These are securities with fixed or determinable
payments and fixed maturity in respect of which the Securities sold subject to a repurchase agreement
Bank has the positive intent and ability to hold to (repo) are retained in the financial statements as
maturity. investments and the counter party liability is included
in borrowings. Securities purchased under an
agreement to resell (reverse repo) are not recognized
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ANNUAL REPORT 2014

in the financial statements as investments and the to ensure that the carrying amount of assets does
amount extended to the counter party is included not differ materially from the fair value. To the extent
in lendings to financial institutions. The difference of the incremental depreciation charged on the
between the purchase / sale and re-sale / re-purchase revalued assets, the related surplus on revaluation
price is recognized as mark-up income / expense on of land and buildings (net of deferred taxation) is
a time proportion basis, as the case may be. transferred directly to unappropriated profit.
5.3 Advances Gains / losses on sale of property and equipment

are credited / charged to the profit and loss
Advances are stated net of specific and general account currently, except that the related surplus
provisions. Specific provision is determined on on revaluation of land and buildings (net of deferred
the basis of the Prudential Regulations and other taxation) is transferred directly to unappropriated
directives issued by the State Bank of Pakistan profit.
(SBP) and charged to the profit and loss account.
Provisions are held against identified as well as Subsequent costs are included in the asset’s
unidentified losses. Provisions against unidentified carrying amount or are recognized as a separate
losses include general provision against Consumer asset, as appropriate, only when it is probable that
and Small Enterprise (SEs) loans made in future economic benefits associated with the item
accordance with the requirements of the Prudential will flow to the Bank and the cost of the item can be
Regulations issued by SBP and provision based on measured reliably. All other repairs and maintenance
historical loss experience on advances. Advances are charged to the profit and loss account.
are written off when there is no realistic prospect
of recovery. 5.4.1 Intangible assets
Leases where the Bank transfers substantially all Intangible assets are stated at cost less accumulated
the risks and rewards incidental to ownership of an amortization and accumulated impairment losses,
asset to the lessee are classified as finance leases. if any. Intangible assets are amortized from the
A receivable is recognized at an amount equal to the month when these assets are available for use,
present value of the lease payments including any using the straight line method, whereby the cost
guaranteed residual value. Finance lease receivables of the intangible assets are amortized over its
are included in advances to the customers. estimated useful lives over which economic benefits
are expected to flow to the Bank. The useful lives
5.4 Operating fixed assets and depreciation are reviewed and adjusted, if appropriate, at each
balance sheet date.
Property and equipment, other than land carrying
value of which is not amortized, are stated at cost 5.4.2 Leases (Ijarah)
or revalued amount less accumulated depreciation
and accumulated impairment losses, if any. Land Assets leased out under ‘Ijarah’ are stated at cost
is carried at revalued amount. Cost of property and less accumulated depreciation and accumulated
equipment of foreign operations includes exchange impairment losses, if any. Assets under Ijarah are
differences arising on currency translation at year- depreciated over the period of lease term. However,
end rates. in the event the asset is expected to be available for
re-ijarah, depreciation is charged over the economic
Capital work-in-progress is stated at cost less life of the asset using straight line basis.
accumulated impairment losses, if any. These are
transferred to specific assets as and when assets 5.5 Impairment
become available for use.
The carrying amount of assets are reviewed at
Depreciation on all operating fixed assets is charged each balance sheet date for impairment whenever
using the straight line method in accordance with events or changes in circumstances indicate
the rates specified in note 11.2 to these financial that the carrying amounts of the assets may not
statements and after taking into account residual be recoverable. If such indication exists and
value, if any. The residual values, useful lives and where the carrying value exceeds the estimated
depreciation methods are reviewed and adjusted, if recoverable amount, assets are written down to
appropriate, at each balance sheet date. their recoverable amounts. Recoverable amount is
the greater of net selling price and value in use.
Depreciation on additions is charged from the month The resulting impairment loss is taken to the profit
the assets are available for use while no depreciation and loss account except for impairment loss on
is charged in the month in which the assets are revalued assets, which is adjusted against the
disposed off. related revaluation surplus to the extent that the
impairment loss does not exceed the surplus on
Surplus on revaluation of land and buildings is revaluation of that asset.
credited to the surplus on revaluation account.
Revaluation is carried out with sufficient regularity
141
5.6 Staff retirement benefits Employees’ compensated absences
The Bank operates the following staff retirement Liability in respect of employees’ compensated
benefits for its employees: absences is accounted for in the year in which these
are earned on the basis of actuarial valuation carried
a) For clerical / non-clerical staff who did not opt for the out using the Projected Unit Credit Method.
new scheme, the Bank operates the following:
5.7 Taxation
- an approved contributory provident fund;
- an approved gratuity scheme; and Current
- a contributory benevolent scheme
Provision for current taxation is based on taxable
b) For clerical / non-clerical staff who joined the Bank income at the current rates of taxation after taking
after the introduction of the new scheme and for into consideration available tax credits and rebates.
others who opted for the new scheme introduced in The charge for current tax also includes adjustments
1975, the Bank operates the following: where considered necessary, relating to prior years
which arise from assessments framed / finalized
- an approved non-contributory provident fund during the year.
introduced in lieu of the contributory provident
fund; Deferred
- an approved pension fund; and
- contributory benevolent scheme Deferred tax is recognised using the balance sheet
liability method on all temporary differences between
c) For officers who joined the Bank after the introduction the amounts attributed to assets and liabilities for
of the new scheme and for others who opted for the financial reporting purposes and amounts used for
new scheme introduced in 1977, the Bank operates taxation purposes. The Bank records deferred tax
the following: assets / liabilities using the tax rates, enacted or
substantively enacted by the balance sheet date
- an approved non-contributory provident fund expected to be applicable at the time of its reversal.
introduced in lieu of the contributory provident Deferred tax asset is recognised only to the extent
fund; that it is probable that future taxable profits will be
- an approved pension fund; and available against which the asset can be utilised.
- contributory benevolent fund. Deferred tax assets are reduced to the extent that
it is no longer probable that the related tax benefit
However, the management has replaced the pension will be realised. The Bank also recognises deferred
benefits for employees in the officer category with tax asset / liability on deficit / surplus on revaluation
a contributory provident fund for services rendered of securities and deferred tax liability on surplus on
after December 31, 2003. revaluation of fixed assets which is adjusted against
the related deficit / surplus in accordance with the
d) For executives and officers who joined the Bank on requirements of International Accounting Standard
or after January 01, 2000, the Bank operates an (IAS) 12, ‘Income Taxes’.
approved contributory provident fund.
Deferred tax liability is not recognized in respect
e) Post retirement medical benefits to entitled of taxable temporary differences associated with
employees. exchange translation reserves of foreign operations,
where the timing of the reversal of the temporary
Annual contributions towards the defined benefit difference can be controlled and it is probable that
plans and schemes are made on the basis of actuarial the temporary differences will not reverse in the
advice using the Projected Unit Credit Method. The foreseeable future.
above benefits are payable to staff at the time of
separation from the Bank’s services subject to the
completion of qualifying period of service. 5.8 Provisions
Past service cost is the change in the present value Provisions are recognized when the Bank has a legal
of the defined benefit obligation resulting from a plan or constructive obligation as a result of past events
amendment or curtailment. The Bank recognises and it is probable that an outflow of resources will
past service cost as an expense at the earlier of the be required to settle the obligation and a reliable
following dates: estimate of the amount can be made. Provisions
are reviewed at each balance sheet date and are
(i) when the plan amendment or curtailment occurs adjusted to reflect the current best estimates.
(ii) and when the Bank recognises related restructuring

costs or termination benefits
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ANNUAL REPORT 2014

advances and investments is recognized on a

5.9 Foreign currencies receipt basis, in accordance with the requirements
of the Prudential Regulations issued by the State
5.9.1 Foreign currency transactions Bank of Pakistan (SBP) or as permitted by the
regulations of the overseas regulatory authorities
of countries where the branches operate. Where
Transactions in foreign currencies other than the debt securities are purchased at premium or
results of foreign operations discussed in note 5.9.2 discount, such premium / discount is amortized
are translated to Rupees at the foreign exchange rates through the profit and loss account over the
prevailing on the transaction date. Monetary assets remaining period of maturity.
and liabilities in foreign currencies are expressed in
Rupee terms at the rates of exchange prevailing at - Financing method is used in accounting for
the balance sheet date. Foreign bills purchased and income from lease financing. Under this method,
forward foreign exchange contracts other than those the unearned lease income (excess of the sum of
relating to foreign currency deposits are valued at the total lease rentals and estimated residual value
rates applicable to their respective maturities. over the cost of leased assets) is deferred and
taken to income over the term of the lease period
so as to produce a constant periodic rate of return
5.9.2 Foreign operations
on the outstanding net investment in lease. Gains
/ losses on termination of lease contracts are
The assets and liabilities of foreign branches are
recognized as income when these are realized.
translated to Rupees at exchange rates prevailing
at the balance sheet date. The results of foreign - Ijarah income is recognized on an accrual basis
operations are translated to Rupees at the average as and when the rental becomes due.
rate of exchange for the year.
- Commission income is recognized on a time
5.9.3 Translation gains and losses proportion basis.
Translation gains and losses are included in the - Dividend income is recognized when the Bank’s
profit and loss account, except those arising on the right to receive dividend is established.
translation of the Bank’s net investment in foreign
branches, which are taken to the capital reserve - Gain / loss on sale of investments is credited /
(exchange translation reserve) until the disposal of the charged to profit and loss account currently.
net investment, at which time these are recognised in
5.12 Operating leases
the profit and loss account.
perating lease rentals are recorded in profit and
O
5.9.4 Commitments loss account on a time proportion basis over the term
of the lease arrangements.
Commitments for outstanding forward foreign
exchange contracts are disclosed in these financial
5.13 Assets acquired in satisfaction of claims
statements at committed amounts. Contingent
liabilities / commitments for letters of credit and letters he Bank occasionally acquires assets in settlement
T
of guarantee denominated in foreign currencies are of certain advances. These are stated at lower of the
expressed in Rupee terms at the rates of exchange carrying value or current fair value of such assets.
prevailing at the date of the statement of financial
position. 5.14 Cash and cash equivalents

5.10 Acceptances
Cash and cash equivalents include cash and
Commitments for outstanding forward foreign balances with treasury banks and balances with
exchange contracts are disclosed in these financial other banks (net of overdrawn Nostro balances) in
statements at committed amounts. Contingent current and deposit accounts.
liabilities / commitments for letters of credit and letters
of guarantee denominated in foreign currencies are 5.15 Financial instruments
expressed in Rupee terms at the rates of exchange
prevailing at the date of the statement of financial 5.15.1 Financial assets and financial liabilities
position.
Financial instruments carried on the statement of
5.11 Revenue recognition financial position include cash and balances with
treasury banks, balances with other banks, lendings
- Mark-up / interest on advances and returns on to financial institutions, investments (excluding
investments are recognized on a time proportion investment in associates and subsidiaries), advances,
basis using the effective interest method except other assets, bills payable, borrowings, deposits
that mark-up / interest on non-performing and other liabilities. The particular recognition
143
methods adopted for significant financial assets Trading and Sales

and financial liabilities are disclosed in the individual
policy statements associated with these assets and It includes fixed income, equity, foreign exchange
liabilities. commodities, lendings to and borrowings from
financial institutions and brokerage debt.
5.15.2 Derivative financial instruments
Retail and Consumer Banking
Derivative financial instruments are initially recognized
at fair value on the date on which a derivative contract It includes retail lending and deposits, banking
is entered into and are subsequently remeasured at services, private lending and deposits, banking
their fair value using valuation techniques. All the services and retail offered to its retail customers and
derivative financial instruments are carried as an small and medium enterprises.
asset when the fair value is positive and as a liability
when the fair value is negative. Any change in the Commercial Banking
fair value of derivative financial instruments is taken
to the profit and loss account currently. It includes project finance, export finance, trade
finance, leasing, lending, guarantees and bills of
5.15.3 Off setting exchange relating to its corporate customers.
Financial assets and financial liabilities are off set 5.17.2 Geographical segments
and the net amount is reported in the financial
statements when there is a legally enforceable right
The Bank operates in three geographic regions
to set off and the Bank intends either to settle on
being:
a net basis, or to realize the assets and settle the
liabilities, simultaneously.
- Pakistan
- South Asia
5.16 Borrowings / deposits
- Middle East
Borrowings / deposits are recorded at the proceeds
5.18 Dividend distribution and appropriation
received. The cost of borrowings / deposits is
recognized as an expense in the period in which this
Dividends (including bonus dividend) and other
is incurred.
appropriations (except appropriations which are
required by law) are recognized in the period in
5.17 Segment reporting which these are approved.
A segment is a distinguishable component of the 5.19 Earnings per share
Bank that is engaged in providing products or
services (business segment) or in providing products
The Bank presents basic and diluted earnings per
or services within a particular economic environment
share (EPS). Basic EPS is calculated by dividing the
(geographical segment), which is subject to risks
profit or loss attributable to ordinary shareholders
and rewards that are different from those of other
of the Bank by the weighted average number of
segments. The Bank’s primary format of reporting is
ordinary shares outstanding during the year.
based on business segments.
5.17.1 Business segments
Corporate Finance
Corporate Finance includes underwriting,

securitization, investment banking, syndications,
IPO related activities (excluding investments) and
secondary private placements.
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ANNUAL REPORT 2014

Note 2014 2013

(Rupees in ‘000)
6. CASH AND BALANCES WITH TREASURY BANKS

In hand - local currency 6.1 11,140,314 10,189,516
foreign currencies 2,270,311 2,161,330

With State Bank of Pakistan (SBP) in:

Local currency current account 6.2 11,023,747 25,986,891
Foreign currency current account 6.3 170,097 142,724
Foreign currency deposit account 6.2 5,854,648 5,529,331

With other central banks in foreign currency current account 6.2 555,728 272,502

With National Bank of Pakistan in local currency current account 15,738,959 15,663,856
46,753,804 59,946,150
6.1 This includes national prize bonds amounting to Rs. 122.066 million (2013: Rs. 118.737 million).
6.2 Deposits with SBP are maintained to comply with their requirements issued from time to time. Deposits with other
central banks are maintained to meet their minimum cash reserves and capital requirements pertaining to the foreign
branches of the Bank.
6.3 This represents US Dollar settlement account maintained with SBP.
Note 2014 2013

(Rupees in ‘000)
7. BALANCES WITH OTHER BANKS
Outside Pakistan
- current account 2,205,658 1,052,532
- deposit account 7.1 809,966 484,414
3,015,624 1,536,946
7.1 Balances with other banks outside Pakistan in deposit accounts carry interest rate ranging from 0.90% to 2.50% per
annum (2013: 2.35% per annum).
145
Note 2014 2013

(Rupees in ‘000)
8. LENDINGS TO FINANCIAL INSTITUTIONS
Call money lendings 8.2 & 8.3 382,950 664,261

Repurchase agreement lendings 8.2 & 8.3 1,035,231 560,377
1,418,181 1,224,638
8.1 Particulars of lendings

In local currency 1,000,000 996,766
In foreign currencies 418,181 227,872
1,418,181 1,224,638
8.2. These carry mark up rates ranging from 5% to 10.35% per annum (2013 : 6.50% to 10%).
8.3 Securities held as collateral against lendings to financial institutions
2014 2013
Held by Further Total Held by Further Total
bank given as bank given as
collateral collateral
(Rupees in ‘000)
Market Treasury Bills 1,035,231 - 1,035,231 560,377 - 560,377
1,035,231 - 1,035,231 560,377 - 560,377
146
ANNUAL REPORT 2014

9. INVESTMENTS - NET
9.1 Investments by types

2014 2013
Note Held by Given as Total Held by Given as Total
bank collateral bank collateral
(Rupees in ‘000)
Held for trading securities

- Shares in listed companies 9.5 52,330 - 52,330 - - -
Available-for-sale securities
- Market Treasury Bills 113,790,156 25,908,740 139,698,896 304,804,941 16,631,860 321,436,801
- Pakistan Investment Bonds 328,986,586 - 328,986,586 107,615,147 - 107,615,147
- Shares in listed companies 11,887,621 - 11,887,621 7,792,448 - 7,792,448
- Shares in unlisted companies 9.4 206,027 - 206,027 206,107 - 206,107
- NIT units 5,253 - 5,253 5,253 - 5,253
- Sukuk Bonds 3,715,236 - 3,715,236 2,700,000 - 2,700,000
- Term Finance Certificates (TFCs) 930,653 - 930,653 958,412 - 958,412
459,521,532 25,908,740 485,430,272 424,082,308 16,631,860 440,714,168
Held-to-maturity securities
- Market Treasury Bills 9.6 1,780,611 58,441 1,839,052 1,656,039 64,836 1,720,875
- Provincial Government Securities 118 - 118 118 - 118
- Sukuk Bonds 244,489 - 244,489 442,838 - 442,838
- Euro Bonds 2,283,917 - 2,283,917 2,344,907 - 2,344,907
- Term Finance Certificates (TFCs),
Debentures, Bonds and Participation
Term Certificates (PTCs) 3,516,856 - 3,516,856 2,778,015 - 2,778,015
7,825,991 58,441 7,884,432 7,221,917 64,836 7,286,753

Subsidiaries
- MNET Services (Private) Limited 9.7 49,975 - 49,975 49,975 - 49,975
- MCB Trade Services Limited 77 - 77 77 - 77
- MCB - Arif Habib Savings &
Investments Limited 320,123 - 320,123 320,123 - 320,123
- MCB Leasing Closed Joint
Stock Company 178,832 - 178,832 178,832 - 178,832
- MCB Financial Services Limited 27,500 - 27,500 27,500 - 27,500
576,507 - 576,507 576,507 - 576,507
Associates
- Adamjee Insurance Company Limited 9.8 943,600 - 943,600 943,600 - 943,600
- Euronet Pakistan (Private) Limited 52,521 - 52,521 52,521 - 52,521
996,121 - 996,121 996,121 - 996,121
Investments at cost 468,972,481 25,967,181 494,939,662 432,876,853 16,696,696 449,573,549
Less: Provision for diminution in 9.3 (1,702,808) - (1,702,808) (2,549,959) - (2,549,959)
value of investments
Investments (net of provisions) 467,269,673 25,967,181 493,236,854 430,326,894 16,696,696 447,023,590

Surplus / (Deficit) on revaluation of
available for sale securities - net 21.2 17,915,048 (12,437) 17,902,611 1,995,296 (12,867) 1,982,429
Deficit on revaluation of ‘held for

trading’ securities - net 9.5 (2,273) - (2,273) - - -
Investments at revalued amounts -

net of provisions 485,182,448 25,954,744 511,137,192 432,322,190 16,683,829 449,006,019
147
Note 2014 2013

(Rupees in ‘000)
9.2 Investments by segments

Federal Government Securities:
- Market Treasury Bills 139,698,896 321,436,801
- Pakistan Investment Bonds 328,986,586 107,615,147
- Euro Bonds 2,283,917 2,344,907
- Sukuk Bonds 3,715,236 2,700,000
Overseas Government Securities

- Market Treasury Bills - Sri Lanka 1,839,052 1,720,875
- Development Bonds 607,880 632,791

Provincial Government Securities 118 118
Subsidiaries and Associated Undertakings 1,572,628 1,572,628
Fully Paid-up Ordinary Shares / Certificates / Units

- Listed companies / mutual funds / modarabas 11,876,666 7,729,163
- Unlisted companies / funds 206,027 206,107
Fully Paid-up Preference Shares:

- Listed Companies 63,285 63,285

Term Finance Certificates, Debentures, Bonds
and Participation Term Certificates:
- Listed Term Finance Certificates 1,445,050 1,267,298
- Unlisted Term Finance Certificates 1,789,213 1,527,553
- Commercial Papers 203,150 -
- Debentures, Bonds and Participation Term Certificates (PTCs) 402,216 308,785
Other Investments:
- Sukuk Bonds 244,489 442,838
- NIT Units 5,253 5,253

Total investments at cost 494,939,662 449,573,549
Less: Provision for diminution in the value of investments 9.3 (1,702,808) (2,549,959)
Investments (net of provisions) 493,236,854 447,023,590

Surplus on revaluation of available for sale securities - net 21.2 17,902,611 1,982,429
Deficit on revaluation of held for trading securities - net 9.5 (2,273) -

Investments at revalued amounts - net of provisions 511,137,192 449,006,019
9.3. Particulars of provision

Opening balance 2,549,959 2,783,347
Charge during the year 4,829 75,299
Reversal made during the year (360,638) (82,133)
(355,809) (6,834)
Reversal on disposal of shares (491,342) (224,353)
Reclassification - (173)
Investment written off against provision - (2,028)
Closing balance 1,702,808 2,549,959
9.3.1 Particulars of provision in respect of Type and Segment

Listed shares / Certificates / Units 1,502,571 1,993,913
Unlisted shares 77,070 74,741
1,579,641 2,068,654
Unlisted TFCs, Debentures, Bonds and Participation Term Certificates 123,167 481,305
1,702,808 2,549,959
148
ANNUAL REPORT 2014

9.4 Quality of ‘available for sale’ securities

2014 2013
Note Market value Credit rating Market value Credit rating
(Rupees in ‘000) (Rupees in ‘000)
Market Treasury Bills 9.4.1 139,647,839 Unrated 321,150,456 Unrated
Pakistan Investment Bonds 9.4.1 344,862,268 Unrated 107,720,565 Unrated
Listed Term Finance Certificates
Askari Bank Limited 244,695 AA- 253,321 AA-

Bank Alfalah Limited 516,380 AA- 527,480 AA-
Allied Bank Limited 180,618 AA 205,081 AA
941,693 985,882
Shares in Listed Companies
Abbott Laboratories Pakistan Limited - - 25,814 Not available
Aisha Steel Mills Limited (including right shares) 1,231 A- & A2 1,345 A- & A2
Allied Bank Limited - - 794,738 AA+ & A1+
Arif Habib Limited - - 3,067 Not available
Arif Habib Corporation Limited - - 41,188 AA & A1+
Altern Energy Limited 31 Not available - -
Archroma Pakistan Limited 72,826 Not available 34,410 Not available
Attock Cement Pakistan Limited - - 2,754 Not available
Attock Petroleum Limited 556,024 Not available 494,906 Not available
Bank Alfalah Limited 513,451 AA & A1+ 8,112 AA & A1+
Bank Al-Habib Limited 533,396 AA+ & A1+ 533,977 AA+ & A1+
The Bank of Punjab 38 AA- & A1+ - -
Engro Corporation Limited 215,131 AA- & A1+ - -
Engro Fertilizers Limited 272,374 A+ & A1 - -
Fatima Fertilizer Company Limited 346,021 AA- & A1+ - -
Fauji Cement Company Limited 13 Not available 22,330 Not available
Fauji Fertilizer Bin Qasim Company Limited 629,594 Not available 168,909 Not available
Fauji Fertilizer Company Limited 864,588 Not available 1,123,183 Not available
First Al - Noor Modaraba - - 27,766 Not available
Glaxo Smithkline Pakistan Limited 480,947 Not available - Not available
Habib Bank Limited - - 111,669 AAA & A1+
Habib Metropolitan Bank Limited 356,084 AA+ & A1+ 2,883 AA+ & A1+
Hub Power Company Limited - - 230,190 AA+ & A1+
IGI Insurance Limited 572,921 AA 11,507 AA
Indus Motors Company Limited - - 9,000 Not available
International Steels Limited 115,289 Not available - -
K-Electric Limited 27,660 A+ & A2 - -
Kohat Cement Company Limited 141,816 Not available - -
Kohinoor Energy Limited - - 1,952 AA & A1+
Kot Addu Power Company Limited 1,111,909 AA+ & A1+ 367,752 AA+ & A1+
Lafarge Pakistan Cement Limited 472,735 BB+ & B - -
Masood Textile Mills Limited - preference shares 50,000 Not available 50,000 Not available
Meezan Bank Limited - - 15,627 AA & A1+
Millat Tractors Limited - - 29 Not available
Murree Brewery Company Limited 4,024 Not available 9,460 Not available
National Bank of Pakistan 428,950 AAA & A1+ 428,773 AAA & A1+
National Foods Limited 5,527 AA- & A1 11,430 A+ & A1
National Refinery Limited 97,582 AA+ & A1+ - -
Nestle Pakistan Ltd Limited 98,116 Not available 40,378 Not available
NetSol Technologies Ltd 70,368 Not available - -
* Next Capital Limited 11,213 Not available 9,750 Not available
Oil & Gas Development Company Limited 48 AAA & A1+ 130,783 AAA & A1+
Pak Elektron Limited 149,681 A- & A2 - -
Balance carried forward
8,199,588 4,713,682
149
2014 2013
Balance brought forward 8,199,588 4,713,682

Pakistan Oilfields Limited 262,439 Not available 592,297 Not available
Pakistan Petroleum Limited 365,258 Not available 457,001 Not available
Pakistan State Oil Company Limited 14,460 AA+ & A1+ 96,410 AA+ & A1+
Pakistan Telecommunication Company Limited 56,193 Not available 32,706 Not available
Pakistan Tobacco Company Limited - - 27,572 Not available
Rafhan Maize Products Limited 290,929 Not available 127,037 Not available
Rupali Polyester Limited - - 2,985 Not available
Saif Power Limited 292,942 A+ & A1 - -
Samba Bank Limited 1 AA- & A1 66,947 AA- & A1
Searle Pakistan Limited 158,067 BBB & A-3 11,244 BBB & A-3
Siemens Pakistan Engineering Company Limited 12,573 Not available - -
** Sui Northern Gas Pipelines Limited 1,582,690 AA & A1+ 1,174,200 AA & A1+
* Trust Securities & Brokerage Limited 1,254 Not available 885 Not available
Unilever Pakistan Foods Limited 7,699 Not available 8,063 Not available
United Bank Limited 684,788 AA+ & A1+ 602,352 AA+ & A1+
Zulfiqar Industries Limited 3,490 Not available 3,481 Not available
11,932,371 7,916,862

Close Ended Mutual Fund
PICIC Growth Fund 407,958 Not available - -
PICIC Investment Fund 158,643 Not available - -

566,601 -

Shares in Un-listed Companies 9.4.2
* National Investment Trust Limited 100 AM2- 100 AM2-
* SME Bank Limited 3,892 BBB- & A3 6,527 BBB & A3
First Capital Investment (Private) Limited 2,500 AM4+ 2,500 AM4+
First Women Bank Limited 63,300 BBB+ & A2 63,300 A- & A2
Pak Asian Fund 11,500 Not available 11,500 Not available
* Pakistan Agro Storage and Services corporation 2,500 Not available - Not available
* Arabian Sea Country Club - Not available 2,194 Not available
* Central Depository Company of Pakistan Limited 10,000 Not available 10,000 Not available
* National Institutional Facilitation Technologies 1,526 Not available 1,526 Not available
(Private) Limited
Society for Worldwide Inter Fund Transfer (SWIFT) 1,738 Not available 1,738 Not available
Islamabad Stock Exchange Limited 30,346 Not available 30,346 Not available
Lanka Clearing (Private) Limited 766 Not available 805 Not available
Lanka Financial Services Bureau Limited 766 Not available 805 Not available
Credit Information Bureau of Sri Lanka 23 Not available 25 Not available
128,957 131,366
Other Investment

Sukuk Bonds 9.4.1 3,666,210 Unrated 2,717,310 Unrated
N.I.T. Units 7,303 AM2- 5,502 AM2-

501,753,242 440,627,943
9.4.1 These are Government of Pakistan guaranteed securities.
9.4.2 Investments in unlisted companies are stated at carrying value. The above excludes unlisted shares of companies
which are fully provided for in these financial statements.
* These are the strategic investments of the Bank.
** This includes 37.292 million shares valuing Rs. 1,070.639 million (2013: 37.292 million shares valuing Rs. 794.309
million) which are held as strategic investment by the Bank.
150
ANNUAL REPORT 2014

9.5 Unrealized gain / (loss) on revaluation of investments classified as ‘held for trading’
Unrealized gain /(loss) Cost

2014 2013 2014 2013
(Rupees in ‘000)

Investee Company
Dewan Cement Limited (260) - 4,241 -
Hascol Petroleum Limited (737) - 19,262 -
International Industries Limited (114) - 6,161 -
Searle Pakistan Limited (862) - 18,178 -
United Bank Limited (300) - 4,488 -
(2,273) - 52,330 -
9.6 “Available for sale” Market Treasury Bills and Pakistan Investment Bonds are eligible for rediscounting with the State
Bank of Pakistan. The market value of Market Treasury Bills classified as ‘held to maturity’ as at December 31, 2014
amounted to Rs. 1,839.052 million (2013: Rs. 1,720.875 million).
9.7 The Company is under process of deregistration with the Hong Kong Companies Registry.
9.8 Investment of the Bank in Adamjee Insurance Company Limited is carried at cost amounting to Rs. 943.600 million
(2013: Rs. 943.600 million) as at December 31, 2014. The market value of the investment in Adamjee Insurance
Company Limited as at December 31, 2014 amounted to Rs. 5,042.493 million (2013: Rs. 3,809.906 million).
9.9 Investments include Pakistan Investment Bonds amounting to Rs. 232.60 million (2013: Rs. 232.60 million) earmarked
by the SBP and National Bank of Pakistan against TT / DD discounting facilities and demand note facilities sanctioned
to the Bank. In addition, Pakistan Investment Bonds amounting to Rs. 5 million (2013: Rs. 5 million) have been
pledged with the Controller of Military Accounts on account of Regimental Fund account.
9.10 First Women Bank Limited has been reclassified from Investment in associates to unlisted shares due to dilution in
shareholding.
9.11 During the year, the Bank incorporated MCB Islamic Bank Limited, a wholly owned subsidiary, with an authorized
share capital of Rs 15 Billion. Subject to regulatory approvals, the operation of Islamic Bank Division of MCB Bank
Limited referred to in Annexure II will be transferred to the said subsidiary. The commercial operation of the said
subsidiary will commence after formal go ahead from State Bank of Pakistan. Subsequent to the year end, the Bank
has injected equity of Rs 10 billion in the said subsidiary.
9.12 Information relating to investments in ordinary shares and preference shares of listed companies and unlisted
companies required to be disclosed as part of the financial statements under BSD Circular No.04 of 2006 dated
February 17, 2006, is given in Annexure “I”.
9.13 Certain approved / Government securities are kept with the SBP to meet statutory liquidity requirements calculated
on the basis of domestic demand and time liabilities.
151
Note 2014 2013

(Rupees in ‘000)
10. ADVANCES - NET

Loans, cash credits, running finances, etc.
In Pakistan 280,297,779 231,039,502
Outside Pakistan 13,976,672 13,993,144
294,274,451 245,032,646
Islamic Financing and related assets 10.2 13,885,804 11,303,966

Net investment in finance lease 10.3
In Pakistan 2,101,598 1,027,911
Outside Pakistan 92,758 108,534
2,194,356 1,136,445
Bills discounted and purchased (excluding treasury bills)
Payable in Pakistan 4,406,599 1,455,467
Payable outside Pakistan 7,556,783 9,263,734
11,963,382 10,719,201
Advances - gross 322,317,993 268,192,258
Provision against advances 10.5

Specific provision (18,149,201) (19,450,148)
General provision (322,307) (267,860)
General provision against consumer loans & small enterprise loans (254,595) (201,354)
General provision by Sri Lanka operations (32,410) (29,931)
(18,758,513) (19,949,293)

Advances - net of provision 303,559,480 248,242,965
10.1 Particulars of advances (gross)

10.1.1 In local currency 285,542,435 222,305,289
In foreign currencies 36,775,558 45,886,969
322,317,993 268,192,258
10.1.2 Short-term 231,972,237 202,500,963

Long-term 90,345,756 65,691,295
322,317,993 268,192,258
10.2 Islamic Financing and related assets Annexure -II

Islamic Financing 6,089,304 5,468,451
Inventories 6,526,434 4,580,773
Advance against Murabaha 1,036,720 756,568
Advance against Future Ijara 108,984 268,721
Advance against Diminishing Musharaka 124,362 229,453
13,885,804 11,303,966
152
ANNUAL REPORT 2014

10.3 Net investment in finance lease

2014 2013
Not later Later than Over five Total Not later Later than Over five Total
Description than one one and years than one one and years
year less than year less than
five years five years
(Rupees in ‘000)
Lease rentals receivable 250,185 1,112,811 1,348,872 2,711,868 416,588 714,053 - 1,130,641
Guaranteed residual value 20,901 36,245 2,243 59,389 37,176 64,978 - 102,154
Minimum lease payments 271,086 1,149,056 1,351,115 2,771,257 453,764 779,031 - 1,232,795
Finance charge for future periods (29,387) (161,441) (386,073) (576,901) (36,786) (59,564) - (96,350)
Present value of minimum

lease payments 241,699 987,615 965,042 2,194,356 416,978 719,467 - 1,136,445
10.4 Advances include Rs.21,907.791 million (2013: Rs. 23,267.733 million) which have been placed under the non-performing status as detailed
below:
2014
Category of Classification Note Classified Advances Specific Provision Required Specific Provision Held
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
(Rupees in ‘000)
Other Assets Especially
Mentioned (OAEM) 10.4.1 50,405 - 50,405 3,477 - 3,477 3,477 - 3,477
Substandard 234,172 - 234,172 58,352 - 58,352 58,352 - 58,352
Doubtful 873,888 - 873,888 436,526 - 436,526 436,526 - 436,526
Loss 15,896,249 4,853,077 20,749,326 15,241,574 2,409,272 17,650,846 15,241,574 2,409,272 17,650,846
17,054,714 4,853,077 21,907,791 15,739,929 2,409,272 18,149,201 15,739,929 2,409,272 18,149,201
2013
Category of Classification Note Class Advances Specific Provision Required Specific Provision Held
(Rupees in ‘000)
Mentioned (OAEM) 10.4.1 35,782 - 35,782 2,660 - 2,660 2,660 - 2,660
Substandard 168,423 50,438 218,861 41,200 12,610 53,810 41,200 12,610 53,810
Doubtful 1,453,012 - 1,453,012 405,827 - 405,827 405,827 - 405,827
Loss 16,584,176 4,975,902 21,560,078 16,502,626 2,485,225 18,987,851 16,502,626 2,485,225 18,987,851
18,241,393 5,026,340 23,267,733 16,952,313 2,497,835 19,450,148 16,952,313 2,497,835 19,450,148
10.4.1 This represents non-performing portfolio of agricultural and small enterprise financing classified as OAEM as per the
requirements of the Prudential Regulation for Agricultural and Small Enterprise Financing issued by the State Bank of
Pakistan.
153
2014
Note Specific General General General Total
provision provision by
against Srilanka
consumer & SEs loans Operations
(Rupees in ‘000)
10.5 Particulars of provision against advances

Opening balance 19,450,148 267,860 201,354 29,931 19,949,293
Exchange adjustments (74,558) - - (1,462) (76,020)
Provision made during the year 2,193,998 54,447 53,241 3,941 2,305,627
Reversals (3,399,533) - - - (3,399,533)
(1,205,535) 54,447 53,241 3,941 (1,093,906)

Amounts written off 10.6.1 (20,854) - - - (20,854)
Closing balance 18,149,201 322,307 254,595 32,410 18,758,513
2013
Specific General General General Total
provision provision by
against Srilanka
consumer & SEs loans Operations
(Rupees in ‘000)
Opening balance 22,380,087 257,457 145,568 25,911 22,809,023

Exchange adjustments 129,419 - - 1,502 130,921
Reversals (4,516,978) - - - (4,516,978)
(2,897,490) 10,403 55,786 2,518 (2,828,783)
Closing balance 19,450,148 267,860 201,354 29,931 19,949,293
2014 2013
Specific General Total Specific General Total
(Total) (Total)
(Rupees in ‘000)
10.5.1 Particulars of provisions against advances

In local currency 15,739,929 576,902 16,316,831 16,952,313 469,214 17,421,527
In foreign currencies 2,409,272 32,410 2,441,682 2,497,835 29,931 2,527,766
18,149,201 609,312 18,758,513 19,450,148 499,145 19,949,293
Note 2014 2013

(Rupees in ‘000)
10.5.2 The following amounts have been charged to

the profit and loss account:

General provision 10.5.3 54,447 10,403
General provision against consumer & Small Enterprise loans 10.5.5 53,241 55,786
General provision by Sri Lanka operations 3,941 2,518
(1,093,906) (2,828,783)
10.5.3 General provision against advances represents provision maintained at around 0.1% of gross advances.
10.5.4 State Bank of Pakistan vide BSD Circular No. 2 dated January 27, 2009, BSD Circular No. 10 dated October 20, 2009, BSD Circular
No. 02 of 2010 dated June 03, 2010 and BSD Circular No.1 of 2011 dated October 21, 2011 has allowed benefit of forced sale value
(FSV) of Plant & Machinery under charge, pledged stock and mortgaged residential, commercial & industrial properties (land and building
only) held as collateral against NPLs for five years from the date of classification. However, management has not taken the FSV benefit
in calculation of specific provision.
154
ANNUAL REPORT 2014

10.5.5 General provision against consumer loans represents provision maintained at an amount equal to 1.5% of the fully secured performing
portfolio and 5% of the unsecured performing portfolio as required by the Prudential Regulations issued by the SBP. General provision
against Small Enterprise Finance represents provision maintained at an amount equal to 1% of the fully secured performing portfolio and
2% of the unsecured performing portfolio as required by the Prudential Regulations issued by the SBP.
10.5.6 General provision against advances in Sri Lanka is maintained at 0.5% of performing advances.
Note 2014 2013
(Rupees in ‘000)
10.6 Particulars of write offs:
10.6.1 Against provisions 10.5 20,854 161,868

Directly charged to the profit and loss account 20 -
20,874 161,868
10.6.2 Write offs of Rs. 500,000 and above 10.6.3 17,672 150,079
Write offs of below Rs. 500,000 3,202 11,789
20,874 161,868
10.6.3 Details of loan write offs of Rs. 500,000 and above

In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962, the statement in respect of
written-off loans or any other financial relief of Rupees five hundred thousand or above allowed to a person(s) during
the year ended December 31, 2014 is given at Annexure- III. However, this write off does not affect the Bank’s right
to recover the debts from these customers.
Note 2014 2013

(Rupees in ‘000)
10.7 Particulars of advances to directors, executives,

associated companies, etc.
Debts due by executives or officers of the Bank or any of

them either severally or jointly with any other persons
Balance at beginning of the year 3,633,975 3,884,019
Loans granted during the year 721,997 581,008
Repayments (857,432) (831,052)
Balance at end of the year 3,498,540 3,633,975

Debts due by subsidiary companies, controlled firms, managed
modarabas and other related parties
Balance at beginning of the year 713,157 640,465
Repayments (762,034) (402,105)
Balance at end of the year 594,555 713,157
4,093,095 4,347,132
11. OPERATING FIXED ASSETS

Capital work-in-progress 11.1 1,065,940 1,888,504
Property and equipment 11.2 29,432,205 26,117,418
Intangible asset 11.3 694,443 589,416
31,192,588 28,595,338
11.1 Capital work-in-progress

Civil works 129,757 1,260,427
Advances to suppliers and contractors 84,077 149,642
Others 852,106 478,435
1,065,940 1,888,504
155
11.2 Property and equipment
2014
Cost/Revalued amount Accumulated depreciation
Charge for Annual
Description Additions/ the year/ Net Book Rate of
At (disposals)/ At At (depreciation At value at depreciation
January 01, Exchange and December 31, January 01, on disposals) December 31, December 31, /estimated
2014 other adjustments 2014 2014 exchange and 2014 2014 useful life
other adjustments
(Rupees in ‘000)
Land - Freehold 14,373,912 272,267 14,646,179 - - - 14,646,179 -
Land - Leasehold 125,632 122,317 247,949 - - - 247,949 -
Buildings on freehold land 7,289,486 1,784,842 9,071,066 - 207,849 207,832 8,863,234 upto 70 years
- -
(3,262) (17)
Buildings on leasehold land 49,996 - 49,270 - 2,798 2,794 46,476 upto 50 years
- -
(726) (4)
Leasehold Improvements 663,619 45,704 706,944 310,115 160,104 469,377 237,567 3 years
- -
(2,379) (842)
Furniture and fixture 1,072,104 145,317 1,204,643 628,341 95,420 712,869 491,774 10%
(11,192) (9,766)
(1,586) (1,126)
Electrical, Computers and 8,369,575 1,647,225 9,943,320 6,188,453 827,567 6,945,711 2,997,609 10% to 25%
office Equipment (67,943) (66,121)
(5,537) (4,188)
Vehicles 742,585 179,769 861,113 379,173 79,929 412,311 448,802 20%

(59,321) (45,279)
(1,920) (1,512)
Ijarah Assets
Assets held under Ijarah - Car 750,029 570,416 1,228,537 144,970 190,162 290,502 938,035 20%
(91,908) (44,630)
Assets held under Ijarah - Equipment 563,369 354,931 826,634 231,837 160,387 312,054 514,580 20%
(91,666) (80,170)
34,000,307 5,122,788 38,785,655 7,882,889 1,724,216 9,353,450 29,432,205
(322,030) (245,966)
(15,410) (7,689)

2013
Cost/ Revalued amount Accumulated depreciation
Description At January Additions/ Revaluation Reversal due Transfer in / At At January Charge for the year/ Reversal due to Transfer in / At Net book Annual rate of
01, 2013 (disposals) / surplus to revaluation (out) December 31, 01, 2013 (description on revaluation (out) December 31, value at depreciation
exchange and 2013 disposal) exchange 2013 December 31, estimated
other adjustments and other adjustments 2013 useful life
(Rupees in ‘000)
Land - Freehold 12,057,399 809,296 1,507,217 - - 14,373,912 - - - - - 14,373,912 -
Land - Leasehold 120,100 - 5,532 - - 125,632 - - - - - 125,632 -
Buildings on 6,101,743 1,062,697 592,273 (526,948) 57,731 7,289,486 295,597 213,047 (526,948) 17,544 - 7,289,486 upto 70 years
- -
freehold land 1,990 760

Buildings on 538,898 1,836 16,465 (14,013) (493,999) 49,996 181,563 2,007 (14,013) (170,314) - 49,996 upto 50 years
- -
leasehold land 809 757

Leasehold - 225,847 - - 436,268 663,619 - 154,583 - 152,770 310,115 353,504 3 years
- -
Improvements* 1,504 2,762

Furniture and fixture 982,427 97,216 - - 1,072,104 538,266 97,350 - - 628,341 443,763 10%
(9,533) (6,790)
1,994 (485)

Electrical, Computers 7,662,200 790,075 - - - 8,369,575 5,536,781 732,143 - - 6,188,453 2,181,122 10% to 25%
and office Equipment (88,094) (84,727)
5,394 4,256

Vehicles 580,209 233,183 - - - 742,585 359,677 75,598 - - 379,173 363,412 20%
(73,053) (57,648)
2,246 1,546
Ijarah Assets

Assets held under 285,284 523,090 - - - 750,029 61,550 111,509 - - 144,970 605,059 20%
Ijarah - Car (58,345) (28,089)

Assets held under 537,749 150,840 - - - 563,369 123,349 155,077 - - 231,837 331,532 20%
Ijarah- Equipment (125,220) (46,589)
28,866,009 3,894,080 2,121,487 (540,961) - 34,000,307 7,096,783 1,541,314 (540,961) - 7,882,889 26,117,418
(354,245) (223,843)
13,937 9,596

* Leasehold Improvements have been classified separately from Buildings on leasehold land.
156
ANNUAL REPORT 2014

11.2.1 The land and buildings of the Bank are revalued in December 2013 by independent valuers (Arch-e-Decon & Sardar
Enterprises), valuation and engineering consultants, on the basis of market value. The information relating to location
of revalued assets is given in Annexure V. The details of revalued amounts are as follows:
(Rupees in ‘000)
Total revalued amount of land 14,499,544

Total revalued amount of buildings 7,339,482
Had the land and buildings not been revalued, the total carrying amounts of revalued properties as at December 31,
2014 would have been as follows:
(Rupees in ‘000)
Land 5,384,342
Buildings 6,247,292
11.2.2 The gross carrying amount (cost) of fully depreciated assets that are still in use are as follows:

Furniture and fixture 379,266
Electrical, computers and office equipment 4,560,059
Vehicles 417,779
Leasehold Improvements 206,542
Intangible asset 1,483,551
11.2.3 Details of disposal of operating fixed assets

The information relating to disposal of operating fixed assets required to be disclosed as part of the financial statements
by the State Bank of Pakistan is given in Annexure IV and is an integral part of these financial statements.
11.3 Intangible asset

2014
Description Cost Accumulated amortization

Net Book
At January 01 Additions/ At December At January Amortization At December value at Useful
2014 adjustments 31, 2014 01, 2014 for the year/ 31, 2014 December Life
adjustments 31, 2014
(Rupees in ‘000)
Computer software 2,205,379 465,748 2,667,642 1,615,963 359,734 1,973,199 694,443 3 - 7 years
(3,485) (2,498)
2,205,379 465,748 2,667,642 1,615,963 359,734 1,973,199 694,443
(3,485) (2,498)
2013

Net Book
At January 01 Additions/ At December At January Amortization At December value at Useful
(Rupees in ‘000)
3,527 2,878
1,861,486 340,366 2,205,379 1,352,661 260,424 1,615,963 589,416
3,527 2,878
157
Note 2014 2013

(Rupees in ‘000)
12. OTHER ASSETS - NET
Income / mark-up accrued on advances and

investments - local currency 21,345,333 8,403,945
investments - foreign currencies 284,730 192,928
Accrued income, advances, deposits, and other prepayments 1,425,051 1,075,992
Advance taxation (payments less provisions) 3,196,861 6,081,521
Compensation for delayed income tax refunds 265,971 44,802
Non-banking assets acquired in satisfaction of claims 12.1 1,809,891 1,939,184
Unrealized gain on derivative financial instruments 12.2 862,138 1,649,163
Stationery and stamps on hand 39,142 66,910
Prepaid exchange risk fee 225 257
Receivable from the pension fund 36.3 7,263,254 5,854,207
Others 2,187,686 2,729,121
38,680,282 28,038,030
Less: Provision held against other assets 12.3 1,125,667 1,081,715
37,554,615 26,956,315
12.1 The market value of non-banking assets with carrying value of Rs. 1,787.280 million (2013: Rs. 1,814.981 million) net of
provision as per the valuation reports dated December 31, 2014 amounted to Rs. 2,039.087 million (2013: Based on
valuation as of December 31, 2013 Rs. 1,831.591 million).
12.2 Unrealized gain on derivative financial instruments

Contract / Notional Amount Unrealized gain
2014 2013 2014 2013
(Rupees in ‘000)
Unrealized gain on:

FX Options - 216,344 - 1,062
Forward exchange contracts 46,863,967 90,769,449 862,138 1,648,101
46,863,967 90,985,793 862,138 1,649,163
2014 2013
(Rupees in ’000)
12.3 Provision held against other assets

Charge for the year 179,595 31,376
Reversal during the year (102,660) (83,661)
76,935 (52,285)
Write off during the year (8,774) (40,091)
Exchange adjustments / reclassification (24,209) 42,114
13. CONTINGENT ASSETS

There were no contingent assets of the Bank as at December 31, 2014 and December 31, 2013.
2014 2013
(Rupees in ‘000)
14. BILLS PAYABLE

In Pakistan 16,500,957 10,113,386
16,627,700 10,138,726
158
ANNUAL REPORT 2014

Note 2014 2013

(Rupees in ‘000)
15. BORROWINGS
In Pakistan 52,126,784 30,267,778
59,542,861 38,542,660
15.1 Particulars of borrowings with respect to currencies

In local currency 52,126,784 30,267,778
59,542,861 38,542,660
15.2 Details of borrowings (secured / unsecured)

Secured
Borrowings from State Bank of Pakistan
Export refinance scheme 15.3 10,604,033 8,939,210
Long term financing facility 15.4 4,828,527 3,832,857
Long term financing - export oriented projects scheme 15.5 60,365 213,965
Financing Facility for Storage of Agricultural Produce 15.6 509,061 670,858
16,001,986 13,656,890
Repurchase agreement borrowings 15.7 25,952,261 16,675,724
41,954,247 30,332,614

Unsecured
Borrowings from other financial institution 15.8 4,463,273 2,633,818
Call borrowings 15.9 12,783,248 4,950,256
Overdrawn nostro accounts 342,093 625,972
17,588,614 8,210,046
59,542,861 38,542,660
15.3 The Bank has entered into agreements for financing with the State Bank of Pakistan (SBP) for extending export
finance to customers. As per the agreements, the Bank has granted SBP the right to recover the outstanding amount
from the Bank at the date of maturity of the finance by directly debiting the current account maintained by the Bank
with SBP. These borrowings are repayable within six months. These carry mark at rates ranging from 5.50% to 6.50%
per annum.
15.4 These borrowings have been obtained from the SBP for providing financing facilities to exporters for adoption of new
technologies and modernization of their plant and machinery. These borrowings are repayable within a period ranging
from 3 years to 10 years. These carry mark at rates ranging from 6.0% to 7.50% per annum.
15.5 These borrowings have been obtained from SBP for providing long term finance to customers for export oriented
projects. As per the agreements with SBP, the Bank has granted SBP the right to recover the outstanding amount
from the Bank at the date of maturity of the finance by directly debiting the current account maintained by the Bank
with SBP. These carry mark at rates ranging from 4.0% to 5.0% per annum.
15.6 These Borrowings have been obtained from SBP under “Financing Facility for Storage of Agricultural Produce
(FFSAP)” to encourage Private Sector to establish Silos, Warehouses and Cold Storages. These borrowings are
repayable within a period ranging from 3 years to 7 years. These carry mark at rates ranging from 5.50% to 6.50%
per annum.
15.7 These carry mark-up rates ranging from 5.25% to 10% per annum (2013: 7.75% to 10.25% per annum) and are
secured against government securities of carrying value of Rs. 25,954.744 million (2013: Rs. 16,683.829 million).
15.8 These carry mark-up ranging from 1.20% to 2.0% per annum (2013: 1.20% to 2.20% per annum).
15.9 These carry mark-up ranging from 0.90% to 9.50% per annum (2013: 0.80% to 3% per annum). These are repayable
by March, 2015.
159
2014 2013
(Rupees in ‘000)
16. DEPOSITS AND OTHER ACCOUNTS

Customers
Fixed deposits 62,126,560 60,524,016
Saving deposits 382,582,290 349,223,728
Current accounts 227,132,866 206,720,753
Margin accounts 4,207,605 3,937,113
676,049,321 620,405,610
Financial institutions
Remunerative deposits 7,193,847 8,058,094
Non-remunerative deposits 5,086,352 3,866,582
12,280,199 11,924,676
688,329,520 632,330,286
16.1 Particulars of deposits
688,329,520 632,330,286
16.2 Deposits include deposits from related parties amounting to Rs. 17,226.452 million (2013: Rs. 16,547.558 million).
Note 2014 2013

(Rupees in ‘000)
17. DEFERRED TAX LIABILITY / (ASSET) - NET

The details of the tax effect of taxable and deductible
temporary differences are as follows:
Taxable temporary differences on:

Surplus on revaluation of operating fixed assets 21.1 931,846 957,493
Accelerated tax depreciation 1,391,924 1,236,316
Receivable from pension fund 2,542,139 2,048,974
Surplus / deficit on revaluation of securities 21.2 5,947,082 311,153
10,812,991 4,553,936

Deductible temporary differences on:
Provision for bad debts (21,640) (19,766)
Provision for post retirement benefits (394,251) (332,797)
(415,891) (352,563)
10,397,100 4,201,373
160
ANNUAL REPORT 2014

Note 2014 2013

(Rupees in ‘000)
18. OTHER LIABILITIES
Mark-up / return / interest payable in local currency 10,074,023 1,982,441

Mark-up / return / interest payable in foreign currencies 83,809 98,562
Accrued expenses 7,562,145 7,151,738
Unclaimed dividend 727,878 1,231,216
Staff welfare fund 12,794 18,846
Unrealized loss on derivative financial instruments 18.1 856,591 1,005,305
Provision for employees’ compensated absences 36.3 987,060 934,009
Provision for post retirement medical benefits 36.3 1,498,996 1,340,476
Provision for employees’ contributory benevolent scheme 36.3 179,409 213,438
Security deposits 346,315 313,323
Branch adjustment account 12,957 193,597
Retention money 22,238 25,004
Insurance payable against consumer assets 213,547 216,959
Unclaimed balances 988,690 993,264
Duties and taxes payable 195,060 839,820
Others 5,868,729 3,506,347
29,630,241 20,064,345
18.1 Unrealized loss on derivative financial instruments

Contracts / Notional Amount Unrealized loss
2014 2013 2014 2013
(Rupees in ‘000)
Unrealized loss on:

Fx Options - 216,344 - 1,062
50,474,436 61,623,209 856,591 1,005,305
19. SHARE CAPITAL

19.1 Authorised Capital
2014 2013 2014 2013
(Number of shares) (Rupees in ‘000)
1,500,000,000 1,500,000,000 Ordinary shares of Rs 10 each 15,000,000 15,000,000
19.2 Issued, subscribed and paid-up capital

2014 2013 2014 2013
Issued for Issued as Total Issued for Issued as Total (Rupees in ‘000)
cash bonus share cash bonus share
(Number of shares)
197,253,795 814,592,340 1,011,846,135 197,253,795 722,606,328 919,860,123 Opening balance 10,118,461 9,198,601

Shares issued
- 101,184,613 101,184,613 - 91,986,012 91,986,012 during the year 1,011,846 919,860
197,253,795 915,776,953 1,113,030,748 197,253,795 814,592,340 1,011,846,135 Closing balance 11,130,307 10,118,461
161
2014 2013
(Number of Shares)
19.3 Number of shares held by the associated undertakings

as at December 31, are as follows:
Adamjee Insurance Company Limited 34,606,587 29,914,034
Nishat Mills Limited 81,527,891 73,272,629
D.G. Khan Cement Company Limited 102,277,232 92,979,303
Din Leather (Private) Limited 6,936,333 6,305,758
Siddiqsons Limited 14,276,462 12,978,603
Mayban International Trust (Labuan) Berhad 222,606,147 202,369,225
462,230,652 417,819,552
Note 2014 2013

(Rupees in ‘000)
20. RESERVES
Share premium 9,702,528 9,702,528
Exchange translation reserve 394,507 598,192
Statutory reserve 20.1 20,132,970 17,700,494
General reserve 18,600,000 18,600,000
48,830,005 46,601,214
20.1 Statutory reserve represents amount set aside as per the requirements of section 21 of the Banking Companies
Ordinance, 1962.
Note 2014 2013

(Rupees in ‘000)
21. SURPLUS ON REVALUATION OF ASSETS - NET OF TAX

Surplus / (deficit) arising on revaluation (net of tax) of:
- fixed assets 21.1 11,240,358 11,287,987
- available-for-sale securities 21.2 11,955,529 1,671,276
23,195,887 12,959,263
21.1 Surplus on revaluation of fixed assets-net of tax

Surplus on revaluation of fixed assets as at January 01 12,245,480 10,179,052
Surplus / exchange adjustment during the year - 2,121,487
Transferred to unappropriated profit in respect of

incremental depreciation charged during the year
- net of deferred tax (47,629) (35,788)
Related deferred tax liability (25,647) (19,271)
(73,276) (55,059)
Surplus on revaluation of fixed assets as at December 31 12,172,204 12,245,480
Less: Related deferred tax liability on:

Revaluation as at January 01 957,493 763,706
Surplus during the year - 213,058
Incremental depreciation charged during the year
transferred to profit and loss account (25,647) (19,271)
931,846 957,493
11,240,358 11,287,987
162
ANNUAL REPORT 2014

Note 2014 2013

(Rupees in ‘000)
21.2 Surplus / (deficit) on revaluation of available

for sale securities - net of tax
Federal Government Securities
- Market Treasury Bills (51,057) (286,345)
- Pakistan Investment Bonds 15,875,682 105,418
Listed Securities
- Shares / Certificates / Units 2,112,015 2,116,420
- Open Ended Mutual Funds 3,957 2,156
- Term Finance Certificates 11,040 27,470
2,127,012 2,146,046
Sukuk Bonds (49,026) 17,310

17,902,611 1,982,429
Add: Related deferred tax (liability) / asset 17 (5,947,082) (311,153)
11,955,529 1,671,276
22. CONTINGENCIES AND COMMITMENTS

22.1 Direct credit substitutes
Contingent liabilities in respect of guarantees given favouring
Government 15,307,109 6,453,148
Banks and financial institutions 3,895,904 2,347,585
Others 15,334,608 8,533,001
34,537,621 17,333,734
22.2 Transaction-related contingent liabilities
Guarantees in favour of
Banks and financial institutions - 20,933
Others 2,026,346 1,500,019
Suppliers’ credit / payee guarantee 2,235,176 2,489,432
4,261,522 4,010,384
22.3 Trade-related contingent liabilities 86,547,085 88,195,433
22.4 Other contingencies

Claims against the Bank not acknowledged as debts 3,393,783 3,035,863
These represent certain claims by third parties against the Bank, which are being contested in the Courts of law.
The management is of the view that these relate to the normal course of business and the possibility of an outflow of
economic resources is remote.
22.5 Commitments to extend credit

The Bank makes commitments to extend credit in the normal course of its business but these being revocable
commitments do not attract any significant penalty or expense if the facility is unilaterally withdrawn.
22.6 Commitments in respect of forward foreign
exchange contracts
Purchase 47,859,438 72,216,751
Sale 49,478,965 79,959,563
22.7 Commitments for the acquisition of fixed assets 125,438 243,614
22.8 Other commitments

FX options (notional amount) 23.1 & 23.2
Purchase - 216,344
Sale - 216,344
Forward outright sale of Government Securities 250,000 -
Outright purchase of Government Securities 100,000 -
163
22.9 Taxation
For assessment year 1988-89 through tax year 2012, the tax department disputed Bank’s treatment on certain issues,
where the Bank’s appeals are pending at various appellate forums, entailing an additional tax liability of Rs.3,818 million
(2013: Rs.4,189 million) which has been paid. Such issues inter alia principally include disallowance of expenses
for non deduction of withholding tax and non availability of underlying records, provision for non performing loans,
attribution of expenses to heads of income other than income from business and disallowance of credit for taxes paid
in advance / deducted at source.
The Bank has filed appeals which are pending at various appellate forums. In addition, certain decisions made in
favour of the Bank are being contested by the department at higher forums. No provision has been made in the
financial statements regarding the aforesaid additional tax demand and already issued favourable decisions where
the department is in appeal, as the management is of the view that the issues will be decided in the Bank’s favour as
and when these are taken up by the Appellate Authorities.
23. DERIVATIVE INSTRUMENTS

Most corporate (counter parties) have either interest rate exposures arising from debt financing or excess liquidity or
currency exposures arising out of commercial and business transactions. In the event of a shift in interest or foreign
exchange (FX) rates, these corporate may incur higher borrowing costs or higher cash outflows that will adversely
affect profitability.
The Bank provides solutions to this conundrum through derivatives. Through this, counter parties will be hedging
exposure to adverse price movements in a security, typically when the counterparty has a concentrated position in
the security and is acutely exposed to movements in the underlying risk factors. The Bank is in a better position to
hedge that risk, and is thus able to provide cost efficient hedging solutions to the counterparties enabling them to
concentrate on their business risk.
Other Objectives include:
- contribution to the development of Pakistan financial markets.
- provision of financial solutions to the counterparties.
Risk management is performed at:

a) Strategic level: By senior management Assets and Liabilities Management Committee (ALCO), Risk Management
Committee (RMC) and the Board of Directors to institute a risk management framework and to ensure provision of
all resources and support required for effective risk management on Bank-wide basis.
b) Macro Level: By Financial Institution Public Sector (FIPS) & Market Risk Management (MRM) Division, responsible
for policy formulation, procedure development & implementation, monitoring and reporting.
c) Micro Level: Treasury Derivatives & Structured Product Desk and Treasury Operations, where risks are actually
created.
FIPS & MRM Division is responsible for coordinating for risk management of derivatives.
The risk management system generates marked to market risk numbers (i.e. VaR, PVBP, duration, etc.) of interest rate
derivative portfolio. These numbers are reported to senior management on a daily basis.
As per the State Bank of Pakistan’s (SBP) regulations, currency options are hedged back to back and thus the risk
associated with such transactions are minimal.
Risk Limits
Before initiating any new derivative transaction, Treasury Division requests the FIPS & MRM Division for risk limits. Limit
requests are approved by the appropriate level of authority. Presently the Bank has defined notional limits both for the
portfolio and the counterparty.
164
ANNUAL REPORT 2014

23.1 Product analysis

2014
Counter parties Cross Currency Swaps Interest Rate Swaps FX Options

No. of Notional No. of Notional No. of Notional
Contracts Principal Contracts Principal Contracts Principal
(Rupees (Rupees (Rupees
in ‘000) in ‘000) in ‘000)
With Banks for

Hedging - - - - - -
Market Making - - - - - -
With other entities for

Hedging - - - - - -
Total
Hedging - - - - - -
2013

in ‘000) in ‘000) in ‘000)
With Banks for

Hedging - - - - 2 216,344

Hedging - - - - - -
Market Making - - - - 2 216,344
Total
Hedging - - - - 2 216,344
Market Making - - - - 2 216,344
23.2 Maturity analysis
2014
Remaining maturity No. of Notional Mark to Market
Contracts Principal Negative Positive Net
(Rupees in ‘000)
FX Options
Over 1 to 3 months - - - - -
2013
(Rupees in ‘000)
FX Options
Over 1 to 3 months 4 432,688 (1,062) 1,062 -
165
2014 2013
(Rupees in ‘000)
24. MARK-UP / RETURN / INTEREST EARNED

On loans and advances to:
Customers 28,921,508 24,990,221
On investments in:
Held for trading securities 939 15,541
Available for sale securities 47,052,221 38,442,248
Held to maturity securities 781,608 775,352
47,834,768 39,233,141
On deposits with financial institutions 31,246 95,220

On securities purchased under resale agreements 448,129 731,612
On money at call 33,337 13,929
77,268,988 65,064,123
25. MARK-UP / RETURN / INTEREST EXPENSED

Deposits 30,340,761 23,560,817
Securities sold under repurchase agreements 1,091,677 1,705,713
Other short-term borrowings 1,698,028 1,107,629
Discount, commission and brokerage 498,862 533,513
Others 127,357 288,222
33,756,685 27,195,894
26. GAIN ON SALE OF SECURITIES - NET

Market Treasury Bills (59,593) 37,828
Pakistan Investment Bonds 180,644 193,812
Others
Shares and units- Listed 2,020,789 1,870,758
Term Finance Certificates - 27,943
2,141,840 2,130,341
27. OTHER INCOME
Rent on property / lockers 165,610 166,055
Net profit on sale of property and equipment 31,120 42,687
Bad debts recovered 65,081 60,522
Compensation on tax refunds 1,127,996 -
Postal, SWIFT and other charges recovered 176,668 180,340
1,566,475 449,604
166
ANNUAL REPORT 2014

Note 2014 2013

(Rupees in ‘000)
28. ADMINISTRATIVE EXPENSES

Salaries and allowances 8,755,227 8,640,410
Charge / (reversal) for defined benefit plans and other benefits:
- Approved pension fund 36.7 (831,689) (1,701,451)
- Post retirement medical benefits 36.7 156,619 187,792
- Employees’ contributory benevolent scheme 36.7 28,360 55,269
- Employees’ compensated absences 36.7 233,167 146,623
(413,543) (1,311,767)
Contributions to defined contribution plan - provident fund 214,712 197,721
Voluntary Separation Scheme 28.1 26,288 1,057,724
Non-executive directors’ fees 34,064 31,674
Rent, taxes, insurance and electricity 2,733,375 2,555,281
Legal and professional charges 281,749 272,431
Communications 965,462 861,849
Repairs and maintenance 1,499,203 1,103,210
Stationery and printing 560,661 502,943
Advertisement and publicity 315,109 119,184
Cash transportation charges 550,183 481,736
Instrument clearing charges 139,807 124,667
Donations 28.2 40,000 25,000
Auditors’ remuneration 28.3 33,746 32,112
Depreciation 11.2 1,724,216 1,541,314
Amortization of intangible asset 11.3 359,734 260,424
Travelling, conveyance and fuel 315,450 213,763
Subscription 17,775 19,574
Entertainment 129,472 117,750
Training Expenses 35,415 41,376
Petty Capital items 46,151 32,689
Card Related Expenses 298,368 238,147
Outsourced security guards, tea services and janitorial expenses etc 1,682,885 1,333,108
CNIC verification charges 60,487 52,716
Others 205,653 164,933
20,611,649 18,709,969
28.1 This expense represents Voluntary Separation Scheme (VSS) announced by the Bank for clerical & non-clerical
employees. The above expense excludes the payments made under retirement funds.
28.2 None of the directors, executives or their spouses had any interest in the donee. Detail of donations made during the
year is as follows:
2014 2013
(Rupees in ‘000)
40,000 25,000
28.3 Auditors’ remuneration
Annual Audit fee 12,976 12,128
Fee for audit and other certifications of overseas branches 3,665 4,477
Tax and other sundry services 15,814 14,732
Out-of-pocket expenses 1,291 775
33,746 32,112
167
2014 2013
(Rupees in ‘000)
29. OTHER CHARGES
Workers welfare fund 734,589 645,764
VAT and Crop Insurance Levy - Sri Lanka 56,431 57,611
Education cess 16,225 4,693
Impairment / loss on sale of Non-Banking assets 171,766 220,527
979,011 928,595
30. TAXATION
For the year
Current 11,920,022 15,170,974
Deferred 484,669 (4,378,107)
12,404,691 10,792,867
Prior years
Current - -
Deferred - -
- -
12,404,691 10,792,867
30.1 Relationship between tax expense and accounting profit

Accounting profit for the year 36,729,447 32,288,205
Tax rate 35% 35%
Tax on income 12,855,306 11,300,872

Tax effect on separate block of income (taxable at reduced rate) (488,086) (456,439)
Others 37,471 (51,566)
Tax charge for the year 12,404,691 10,792,867
31. CREDIT RATING

PACRA through its notification dated June 26, 2014, has maintained bank’s long term credit rating of AAA [Triple A]
and short-term credit rating of A1+ [A one plus].
2014 2013
(Rupees in ‘000)
32. BASIC AND DILUTED EARNINGS PER SHARE - PRE TAX

(Number of Shares)
Weighted average number of shares outstanding during the year 1,113,030,748 1,113,030,748
(Rupees)
Basic and diluted earnings per share - pre tax 33.00 29.01
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ANNUAL REPORT 2014

2014 2013
(Rupees in ‘000)
33. BASIC AND DILUTED EARNINGS PER SHARE - AFTER TAX

(Number of Shares)
Weighted average number of shares outstanding during the year 1,113,030,748 1,113,030,748
(Rupees)
Basic and diluted earnings per share - after tax 21.85 19.31
* Weighted average number of shares outstanding for 2013 have been restated to give effect of bonus shares issued
during the year.
Note 2014 2013

(Rupees in ‘000)
34. CASH AND CASH EQUIVALENTS

Overdrawn nostro accounts 15 (342,093) (625,972)
49,427,335 60,857,124
Note 2014 2013
(Numbers)
35. STAFF STRENGTH
Permanent 10,601 10,372

Temporary/contractual basis 88 81
Bank’s own staff strength at the end of the year 10,689 10,453
Outsourced 35.1 1,424 1,477
Total staff strength 12,113 11,930
35.1 This excludes outsourced security guards and tea services staff.
36. DEFINED BENEFIT PLANS AND OTHER BENEFITS
36.1 General description
The Bank operates the following retirement benefits for its employees:
- Pension fund (final salary plan) - funded
- Benevolent scheme - unfunded
- Post retirement medical benefits - unfunded
- Employees compensated absence - unfunded
The plan assets and defined benefit obligations are based in Pakistan.
169

36.2 Principal actuarial assumptions
The latest actuarial valuations of the approved pension fund, employees’ contributory benevolent scheme, post retirement
medical benefits and employee’s compensated absences were carried out at December 31, 2014. The principal actuarial
assumptions used are as follows:
Approved pension fund Employees’ contributory Post retirement Employees’

benevolent scheme medical benefits compensated absences
2014 2013 2014 2013 2014 2013 2014 2013

% % % % % % % %
Valuation discount rate 11.25 13 11.25 13 11.25 13 11.25 13

Expected rate of return on plan assets 11.25 13 - - - - - -
Salary increase rate 10 11 10 11 10 11 10 11
Medical cost inflation rate - - - - 8.25 13 - -
Exposure inflation rate - - - - 3 3 - -
The expected return on plan assets is based on the market expectations and depends on the asset portfolio of the Bank, at
the beginning of the period, for returns over the entire life of the related obligation.
36.3 (Receivable from) / payable to defined benefit plans and other benefits

Note 2014 2013 2014 2013 2014 2013 2014 2013

(Rupees in ‘000)
Present value of defined
benefit obligations 36.5 3,242,851 3,834,422 179,409 213,438 1,498,996 1,340,476 987,060 934,009
Fair value of plan assets 36.6 (10,506,105) (9,688,629) - - - - - -
Net (receivable) / payable
recognised as at the year-end (7,263,254) (5,854,207) 179,409 213,438 1,498,996 1,340,476 987,060 934,009
The effect of increase of one percent and the effect of a decrease of one percent in the medical trend rates on the present
value of medial obligation at December 31, 2014 would be Rs. 98.484 million (2013: Rs. 48.492 million) and Rs. 80.375
million (2013: Rs. 43.458 million) respectively.
36.4 Movement in balance (receivable) / payable

Note 2014 2013 2014 2013 2014 2013 2014 2013

(Rupees in ‘000)
Opening balance of (receivable) / payable (5,854,207) (18,428,483) 213,438 257,089 1,340,476 1,565,634 934,009 594,100
Expense recognised 36.7 (831,689) (1,701,451) 28,360 55,269 156,619 187,792 233,167 146,623
Employees’ contribution - - 5,988 7,564 - - - -
Benefits paid - - (68,583) (101,510) (187,117) (234,011) (353,596) (370,840)
Other Comprehensive income (577,358) (456,171) 206 (4,974) 189,018 (178,939) 173,480 564,126
Refund / withdrawn from fund - 14,731,898 - - - - - -
Closing balance of (receivable) / payable (7,263,254) (5,854,207) 179,409 213,438 1,498,996 1,340,476 987,060 934,009

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ANNUAL REPORT 2014

36.5 Reconciliation of the present value of the defined benefit obligations

2014 2013 2014 2013 2014 2013 2014 2013

(Rupees in ‘000)
Present value of obligation as at January 01, 3,834,422 4,259,671 213,438 257,089 1,340,476 1,565,634 934,009 594,100
Current service cost 44,905 53,739 6,372 13,826 13,602 13,773 43,672 36,447
Interest cost 452,099 451,727 23,289 24,760 162,099 173,835 98,437 49,042
Benefits paid (713,479) (990,554) (68,583) (101,510) (187,117) (234,011) (353,596) (370,840)
Loss / (gain) on settlement (115,547) (23,251) 4,687 24,247 (19,082) 184 91,058 61,134
-(Gain) / loss from change in demographic assumptions - 22,670 - 5,824 - 39,965 - (6,687)
-(Gain) / loss from change in financial assumptions 150,701 34,000 21,367 12,141 127,423 30,238 85,132 (62,754)
-Experience (gains) / losses (410,250) 26,420 (21,161) (22,939) 61,595 (249,142) 88,348 633,567
(259,549) 83,090 206 (4,974) 189,018 (178,939) 173,480 564,126
Present value of obligation
as at December 31, 3,242,851 3,834,422 179,409 213,438 1,498,996 1,340,476 987,060 934,009
36.6 Changes in fair values of plan assets

Note benevolent scheme medical benefits compensated absences
2014 2013 2014 2013 2014 2013 2014 2013
(Rupees in ‘000)
Net assets as at January 01, 9,688,629 22,688,154 - - - - - -

Expected return on plan assets 1,213,146 2,183,666 - - - - - -
Refund / withdrawn from fund - (14,731,898) - - - - - -
Benefits paid (713,479) (990,554) - - - - - -
Actuarial gain / (loss) 317,809 539,261 - - - - - -
Net assets as at December 31, 36.9 10,506,105 9,688,629 - - - - - -
36.7 Charge for defined benefit plans and other benefits

The following amounts have been charged to the profit and loss account in respect of defined benefit plans and other benefits:

2014 2013 2014 2013 2014 2013 2014 2013

(Rupees in ‘000)
Interest cost 452,099 451,727 23,289 24,760 162,099 173,835 98,437 49,042
Expected return on plan assets (1,213,146) (2,183,666) - - - - - -
Contributions employees - - (5,988) (7,564) - - - -
(831,689) (1,701,451) 28,360 55,269 156,619 187,792 233,167 146,623
The effect of increase of one percent and the effect of a decrease of one percent in the medical trend rates on the
aggregate of the current service cost and interest cost components of net period post - employment medical costs
would be Rs. 11.498 million (2013: Rs. 6.129 million) and Rs. 9.384 million (2013: Rs. 5.496 million) respectively.
36.8 Actual return on plan assets

2014 2013 2014 2013 2014 2013 2014 2013

(Rupees in ‘000)
Actual return on plan assets 1,530,955 2,722,927 - - - - - -
171
36.9 Composition of fair value of plan assets

Approved Pension Fund
2014 2013
Fair value Percentage Fair value Percentage
(Rupees in ‘000) (%) (Rupees in ‘000) (%)

Listed equity shares 7,330,994 69.78 5,322,463 54.93
Open ended mutual funds units 388,142 3.69 264,434 2.73
Term Finance certificates 98,583 0.94 - -
Cash and bank balances 2,688,386 25.59 4,101,732 42.34
Fair value of plan total assets 10,506,105 100 9,688,629 100
36.9.1 Fair value of the Bank’s financial instruments

included in plan assets
Shares of MCB 5,172,094 4,368,136
Bank balance with MCB 2,688,386 4,101,732
7,860,480 8,469,868
36.10 Other relevant details of above funds are as follows:
2014 2013 2012 2011 2010

(Rupees in ‘000)
36.10.1 Pension Fund

Present value of defined benefit obligation 3,242,851 3,834,422 4,259,671 4,262,421 4,217,507
Fair value of plan assets (10,506,105) (9,688,629) (22,688,154) (19,543,388) (19,303,801)
(Surplus) / deficit (7,263,254) (5,854,207) (18,428,483) (15,280,967) (15,086,294)
Actuarial gain / (loss) on obligation 259,549 (83,090) 20,130 (190,661) (191,752)
Actuarial gain / (loss) on assets 317,809 539,261 1,194,359 (1,529,469) (852,657)
36.10.2 Employees’ Contributory Benevolent Scheme

Present value of defined benefit obligation 179,409 213,438 257,089 283,477 314,414
Fair value of plan assets - - - - -
179,409 213,438 257,089 283,477 314,414
Actuarial gain / (loss) on obligation (206) 4,974 26,335 19,979 (25,282)
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ANNUAL REPORT 2014

2014 2013 2012 2011 2010

(Rupees in ‘000)
36.10.3 Post Retirement Medical Benefits
1,498,996 1,340,476 1,565,634 1,388,970 1,320,933

Actuarial gain / (loss) on obligation (189,018) 178,939 (129,950) (19,198) 30,671
36.10.4 Compensated absences
987,060 934,009 594,100 535,870 555,792
Actuarial gain / (loss) on obligation (173,480) (564,126) (141,920) (75,701) (81,138)
36.11 No contribution to the pension fund is expected in the next year.
37. DEFINED CONTRIBUTION PLAN

The Bank operates an approved contributory provident fund for 7,724 (2013: 7,306) employees where contributions
are made by the Bank and employees at 8.33% per annum (2013: 8.33% per annum) of the basic salary. During the
year, the Bank contributed Rs. 214.712 million (2013: Rs. 197.721 million) in respect of this fund.
38. COMPENSATION OF DIRECTORS AND EXECUTIVES
‘The aggregate amount charged in the financial statements for compensation, including all benefits, to the Chief
Executive, Directors and Executives of the Bank is as follows:
President / Chief Executive Directors Executives

2014 2013 2014 2013 2014 2013
(Rupees in ‘000)
Fees - - 34,064 31,674 - -

Managerial remuneration 27,099 23,013 - - 1,246,044 1,122,733
Bonus and others 29,620 16,913 - - 680,113 546,861
Retirement benefits 2,232 1,892 - - 86,409 76,370
Rent & house maintenance 12,054 10,215 - - 426,033 391,944
Utilities 2,679 2,270 - - 95,489 86,593
Medical - - - - 26,062 23,256
Conveyance - - - - 492,830 444,493
73,684 54,303 34,064 31,674 3,052,980 2,692,250
Number of persons 1 1 12 12 991 887
38.1. The Chairman has been provided with free use of the Bank maintained car. In addition to the above, the Chief Executive and certain
executives are provided with free use of the Bank’s maintained cars and household equipments in accordance with the terms of their
employment.
173
39. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of traded investments is based on quoted market prices, except for tradable securities classified by the Bank as ‘held to
maturity’. Fair value of unquoted equity investments is determined on the basis of break up value of these investments as per the latest
available audited financial statements.
Fair value of fixed term loans, other assets, other liabilities and fixed term deposits cannot be calculated with sufficient
reliability due to absence of current and active market for such assets and liabilities and reliable data regarding market rates
for similar instruments. The provision for impairment of loans and advances has been calculated in accordance with the
Bank’s accounting policy as stated in note 5.3 to these financial statements.
The maturity and repricing profile and effective rates are stated in notes 43.3, 43.4.1 and 43.4.2 respectively.
In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different
from their carrying values since assets and liabilities are either short-term in nature or in the case of customer loans and
deposits are frequently re-priced.
40. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES
The segment analysis with respect to business activity is as follows:

Corporate Trading and Retail & Commercial Inter Total

Finance Sales Consumer Banking segment
Banking elimination
(Rupees in ‘000)
2014
Total income 179,986 10,780,507 37,614,989 8,371,865 - 56,947,347
Total expenses (70,034) (1,785,581) (16,515,761) (1,846,524) - (20,217,900)
Income tax expense - - - - - (12,404,691)
Net income 109,952 8,994,926 21,099,228 6,525,341 - 24,324,756
Segment assets - (Gross of NPL’s provision) 454,341 561,720,044 780,056,430 246,612,785 (639,259,776) 949,583,824
Advance taxation (payments less provisions) - - - - - 3,196,861
Total assets 454,341 561,720,044 780,056,430 246,612,785 (639,259,776) 952,780,685
Segment non performing loans - - 8,261,678 13,646,113 - 21,907,791
Segment specific provision required - - 8,217,857 9,931,344 - 18,149,201
Segment liabilities 101,176 514,875,249 702,889,727 215,523,946 (639,259,776) 794,130,322
Deferred tax liability - - - - - 10,397,100
Total liabilities - net 101,176 514,875,249 702,889,727 215,523,946 (639,259,776) 804,527,422
Segment return on assets (ROA) (%) 39.61% 1.92% 4.87% 3.54% - -
Segment cost of fund (%) - 9.92% 6.16% 9.35% - -
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ANNUAL REPORT 2014

Corporate Trading and Retail & Commercial Inter Total

Finance Sales Consumer Banking segment
Banking elimination
(Rupees in ‘000)
2013
Total income 135,559 8,059,020 33,480,427 7,363,861 - 49,038,867
Total expenses (30,302) (1,194,453) (14,452,521) (1,073,386) - (16,750,662)

Income tax expense - - - - - (10,792,867)
Net income 105,257 6,864,567 19,027,906 6,290,475 - 21,495,338
Segment assets - (Gross of NPL’s provision) 390,941 494,256,812 694,394,864 202,347,916 (562,513,535) 828,876,998
Advance taxation (payments less provisions) - - - - - 6,081,521
Total assets 390,941 494,256,812 694,394,864 202,347,916 (562,513,535) 834,958,519

Segment non performing loans - - 9,600,755 13,666,978 - 23,267,733

Segment specific provision required - - 9,565,097 9,885,051 - 19,450,148
Segment liabilities 38,582 469,328,689 622,852,777 171,369,504 (562,513,535) 701,076,017
Deferred tax liability - - - - - 4,201,373
Total liabilities - net 38,582 469,328,689 622,852,777 171,369,504 (562,513,535) 705,277,390

Segment return on assets (ROA) (%) 34.68% 1.63% 4.89% 3.83% - -
Segment cost of fund (%) - 9.27% 5.41% 8.94% - -
Total income = Net markup income + non-markup income

Total expenses = Non Mark up expenses + Provisions
Segment assets and liabilities include inter segment balances.
Transactions between reportable segments are based on an appropriate transfer pricing mechanism using agreed rates.
Segment cost of funds have been computed based on the average balances.
41. RELATED PARTY TRANSACTIONS AND BALANCES

The Bank has related party relationship with its associates, subsidiaries, employee benefit plans and its key
management personnel (including their associates) and companies with common directors. The detail of investment
in subsidiary companies and associates are stated in Annexure I (note 5 & 6) to these financial statements.
The Bank enters into transactions with related parties in the normal course of business. Contributions to and accruals
in respect of staff retirement benefits and other benefit plans are made in accordance with the actuarial valuations /
terms of the contribution plan. Remuneration to the executives / officers is determined in accordance with the terms
of their appointment. Remuneration to Chief Executive, Directors and Executives is disclosed in note 38 to these
financial statements.
175
Directors Associates Subsidiaries Other related parties Key management

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
(Rupees in ‘000)
A. Balances
Deposits
Opening balance 931,665 2,863,874 978,408 976,642 24,771 74,461 14,487,517 26,850,559 125,197 46,039
Received during the year 5,719,181 4,273,706 9,719,217 18,859,601 181,926 167,560 53,502,747 61,540,324 1,131,625 1,176,959
Withdrawn during the year (3,264,626) (6,205,915) (8,977,803) (18,857,835) (144,406) (217,250) (56,067,168) (73,903,366) (1,121,798) (1,097,801)
Closing balance 3,386,220 931,665 1,719,822 978,408 62,291 24,771 11,923,096 14,487,517 135,024 125,197

Advances (secured )
Opening balance 2,185 2,795 - - 526,623 485,749 116,584 98,056 67,765 53,865
Additions / adjustments during the year - - - - - 40,874 627,390 406,354 16,042 27,569
Repaid during the year (636) (610) - - (24,207) - (722,056) (387,826) (15,135) (13,669)
Closing balance 1,549 2,185 - - 502,416 526,623 21,918 116,584 68,672 67,765
Outstanding Balance of credit card 709 545 - - - - 78 2 1,631 2,635
Receivable from Pension fund - - - - - - 7,263,254 5,854,207 - -
B. Other transactions (including profit and loss related transactions)
Directors Associates Subsidiaries Other related parties Key management

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
(Rupees in ‘000)
Outstanding commitments and contingent

liabilities - - 11,405 10,805 - - 656 90,171 - -
Forward foreign exchange contracts
(Notional) - outstanding - - - - - - 7,497,696 5,623,351 - -
Unrealized gain / (loss) on forward foreign
exchange contracts Outstanding - - - - - - (30,613) 19,424 - -
Borrowings - - - - - - 4,019,324 3,159,738 - -
Trade payable - - 9,757 7,594 6,541 3,918 5,653 27,433 - -
Payments for Capital Expenditure - - 15,288 23,257 - - - - - -
Retention money - - - - - - 6,525 3,612 - -
Markup payable 14,407 - 8,511 405 256 156 1,178,840 1,071,287 681 80
Advance receivable - - - - 1,067 - 44,000 58,085 - -
Markup Receivable - - - - 8,820 4,630 419 5,121 - -
Other Receivable - - - - 41,778 7,381 - - - -
Commission Receivable - - - - 38,437 25,181 - - - -
Insurance premium paid-net of refund - - 482,843 247,803 - - - - - -
Insurance claim settled - - 39,526 95,645 - - - - - -
Markup income on advances 94 125 - - 26,516 23,665 4,639 7,983 4,162 6,269
Forward contracts during the period - - - - - - 86,645,768 34,665,422 - -
Repo deals during the period - - - - - - - 39,742,107 - -
Rent Income Received - - - 2,025 - - - - - -
Dividend Income - - 229,390 126,118 101,631 92,392 34,282 159,570 - -
Capital gain on sale of investments - - - - - - - 303,215 - -
Commission income - - 757,822 751,069 43,842 38,803 2,935 7,209 - -
Reimbursement of expenses - - - - 6,000 12,081 - - - -
Outsourcing service expenses - - 115,392 138,229 - 24,550 - - - -
Switch Expense - - - - - 26,925 - - - -
Proceeds from sale of fixed assets - - - - - - - - 24 2,896
Gain / (loss) on sale of fixed assets - - - - - - - - 21 (2,307)
Cash sorting expenses - - - - - 56,678 49,915 - -
Stationery Expenses - - - - - 191,482 207,063 - -
Security guard expenses - - - - - - 321,424 298,394 - -
Remuneration and non-executive
directors fee 107,747 85,977 - - - - - - 440,298 311,605
Mark-up expense 60,678 103,394 80,348 56,068 1,893 1,483 906,010 2,095,967 3,686 2,317
Clearing expenses paid to NIFT - - - - - - 138,727 124,315 - -
Contribution to provident fund - - - - - - 214,712 197,721 - -
Gas Charges - - - - - - 10,831 10,939 - -
Miscellaneous expenses and payments - - 114,106 153,831 - - 56,355 117,843 - -

The details of director’s compensations are also given in note 38 to these financial statements.
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ANNUAL REPORT 2014

42. CAPITAL ASSESSMENT AND ADEQUACY
42.1 Scope of Applications
The Basel-III Framework is applicable to the bank both at the consolidated level (comprising of wholly/partially owned
subsidiaries & associates) and on a stand alone basis. Subsidiaries are included while calculating Consolidated Capital
Adequacy for the Bank using full consolidation method whereas associates in which the bank has significant influence
on equity method. Standardized Approach is used for calculating the Capital Adequacy for Credit and Market risk,
whereas, Basic Indicator Approach (BIA) is used for Operational Risk Capital Adequacy purposes.
42.2 Capital Management
Objectives and goals of managing capital
The Bank manages its capital to attain following objectives and goals:
- an appropriately capitalized status, as defined by banking regulations;

- acquire strong credit ratings that enable an optimized funding mix and liquidity sources at lesser costs;
- cover all risks underlying business activities;
- retain flexibility to harness future investment opportunities; build and expand even in stressed times.
Statutory minimum capital requirement and Capital Adequacy Ratio
The State Bank of Pakistan through its BSD Circular No.07 of 2009 dated April 15, 2009 requires the minimum paid up
capital (net of losses) for all locally incorporated banks to be raised to Rs. 10 billion by the year ended on December
31, 2013. The raise was to be achieved in a phased manner requiring Rs.10 billion paid up capital (net of losses) by
the end of the financial year 2013. The paid up capital of the Bank for the year ended December 31, 2014 stands at
Rs. 11.130 billion and is in compliance with the SBP requirement.
The capital adequacy ratio of the Bank was subject to the Basel III capital adequacy guidelines stipulated by the State
Bank of Pakistan through its BPRD Circular No. 06 of 2013 dated August 15, 2013. These instructions are effective
from December 31, 2013 in a phased manner with full implementation intended by December 31, 2019. Under Basel
III guidelines banks are required to maintain the following ratios on an ongoing basis:
Phase-in arrangement and full implementation of the minimum capital requirements:
Year End As of Dec 31

Sr. No Ratio 2013 2014 2015 2016 2017 2018 31-12-2019
1 CET1 5.00% 5.50% 6.00% 6.00% 6.00% 6.00% 6.00%
2 ADT-1 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
3 Tier 1 6.50% 7.00% 7.50% 7.50% 7.50% 7.50% 7.50%
4 Total Capital 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
5 *CCB - - 0.25% 0.65% 1.275% 1.90% 2.50%
Total Capital
6 plus CCB 10.00% 10.00% 10.25% 10.65% 11.275% 11.90% 12.50%
- *(Consisting of CET1 only)
177
Bank’s regulatory capital is analysed into three tiers.
- Common Equity Tier 1 capital (CET1), which includes fully paid up capital (including the bonus shares), balance in
share premium account, general reserves, statutory reserves, as per the financial statements and net unappropriated
profits after all regulatory adjustments applicable on CET1.
- Additional Tier 1 Capital (AT1), which includes perpetual non-cumulative preference shares and Share premium
resulting from the issuance of preference shares balance in share premium account after all regulatory adjustments
applicable on AT1.
The deduction from Tier 1 Capital include mainly:

i) Book value of goodwill / intangibles;
ii) Deficit on revaluation of available for sale investments
iii) Defined-benefit pension fund net assets
iv) Reciprocal cross holdings in equity capital instruments of other banks, financial institutions and insurance companies;
v) Investment in mutual funds above a prescribed ceiling;
vi) Threshold deductions applicable from 2014 on deferred tax assets and certain investments;
vii) 50% of investments in majority owned securities or other financial subsidiaries not consolidated in the statement of
financial position,
- Tier 2 capital, which includes Subordinated debt/ Instruments, share premium of issuance of Subordinated debt/
Instruments, general provisions for loan losses (up to a maximum of 1.25 % of credit risk weighted assets), Net of tax
reserves on revaluation of fixed assets and investments up to a maximum of 45 % of the balance and 20% of remaining
55% for 2014 and foreign exchange translation reserves after all regulatory adjustments applicable on Tier-2
The deductions from Tier 2 include mainly:

i) Reciprocal cross holdings in other capital instruments of other banks, financial institution and insurance companies;
ii) 50% of investments in majority owned securities or other financial subsidiaries not consolidated in the statement of
financial position, during transition phase.
The required capital adequacy ratio (10% of the risk-weighted assets) is achieved by the Bank through improvement in
the asset quality at the existing volume level, ensuring better recovery management and composition of asset mix with low
risk. Banking operations are categorized as either trading book or banking book and risk-weighted assets are determined
according to specified requirements of the State Bank of Pakistan that seek to reflect the varying levels of risk attached to
assets and off-balance sheet exposures. The total risk-weighted exposures comprise of the credit risk, market risk and
operational risk.
Basel-III Framework enables a more risk-sensitive regulatory capital calculation to promote long term viability of the Bank. As
the Bank conducts business on a wide area network basis, it is critical that it is able to continuously monitor the exposure
across entire organization and aggregate the risks so as to take an integrated view. Maximization of the return on risk-adjusted
capital is the principal basis to be used in determining how capital is allocated within the Bank to particular operations or
activities.
The Bank remained compliant with all externally imposed capital requirements through out the year. Further, there has been
no material change in the Bank’s management of capital during the year.
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ANNUAL REPORT 2014

42.3 Capital Adequacy Ratio

2014 2013
(Rupees in ‘000)
Common Equity Tier 1 capital (CET1): Instruments and reserves

1 Fully Paid-up Capital 11,130,307 10,118,461
2 Balance in Share Premium Account 9,702,528 9,702,528
3 Reserve for issue of Bonus Shares - -
4 Discount on Issue of shares - -
5 General/ Statutory Reserves 38,732,970 36,300,494
6 Gain/(Losses) on derivatives held as Cash Flow Hedge - -
7 Unappropriated/unremitted profits/ (losses) 46,947,863 40,552,043
8 Minority Interests arising from CET1 capital instruments issued to
third parties by consolidated bank subsidiaries (amount allowed
in CET1 capital of the consolidation group) - -
9 CET 1 before Regulatory Adjustments 106,513,668 96,673,526
10 Total regulatory adjustments applied to CET1 (Note 42.3.1) 2,430,274 1,571,879

11 Common Equity Tier 1 104,083,394 95,101,647

Additional Tier 1 (AT 1) Capital
12 Qualifying Additional Tier-1 capital instruments plus any
related share premium - -
13 of which: Classified as equity - -
14 of which: Classified as liabilities - -
15 Additional Tier-1 capital instruments issued to third parties by consolidated
subsidiaries (amount allowed in group AT 1) - -
16 of which: instrument issued by subsidiaries subject to phase out - -
17 AT1 before regulatory adjustments - -
18 Total regulatory adjustment applied to AT1 capital (Note 42.3.2) - -
19 Additional Tier 1 capital after regulatory adjustments - -
20 Additional Tier 1 capital recognized for capital adequacy - -

21 Tier 1 Capital (CET1 + admissible AT1) (11+20) 104,083,394 95,101,647
Tier 2 Capital
22 Qualifying Tier 2 capital instruments under Basel III plus any related
share premium - -
23 Tier 2 capital instruments subject to phaseout arrangement issued under
pre-Basel 3 rules - -
24 Tier 2 capital instruments issued to third parties by consolidated subsidiaries
(amount allowed in group tier 2) - -
25 of which: instruments issued by subsidiaries subject to phase out - -
26 General provisions or general reserves for loan losses-up to maximum
of 1.25% of Credit Risk Weighted Assets 609,312 499,145
27 Revaluation Reserves (net of taxes)
28 of which: Revaluation reserves on fixed assets 6,294,600 5,079,594
29 of which: Unrealized gains/losses on AFS 6,695,096 752,074
30 Foreign Exchange Translation Reserves 394,507 598,192
31 Undisclosed/Other Reserves (if any) - -
32 T2 before regulatory adjustments 13,993,515 6,929,005
33 Total regulatory adjustment applied to T2 capital (Note 42.3.3) 588,053 735,066

34 Tier 2 capital (T2) after regulatory adjustments 13,405,462 6,193,939
35 Tier 2 capital recognized for capital adequacy 13,405,462 6,193,939
36 Portion of Additional Tier 1 capital recognized in Tier 2 capital - -
37 Total Tier 2 capital admissible for capital adequacy 13,405,462 6,193,939
38 TOTAL CAPITAL (T1 + admissible T2) (21+37) 117,488,856 101,295,586

179
2014 2013
(Rupees in ‘000)
39 Total Risk Weighted Assets (RWA) {for details refer Note 42.6} 575,663,052 455,188,687

Capital Ratios and buffers (in percentage of risk weighted assets)
40 CET1 to total RWA 18.08% 20.89%
41 Tier-1 capital to total RWA 18.08% 20.89%
42 Total capital to total RWA 20.41% 22.25%

43 Bank specific buffer requirement (minimum CET1 requirement plus
capital conservation buffer plus any other buffer requirement) 5.50% 5.00%
44 of which: capital conservation buffer requirement - -
45 of which: countercyclical buffer requirement - -
46 of which: D-SIB or G-SIB buffer requirement - -
47 CET1 available to meet buffers (as a percentage of risk weighted assets) 12.58% 15.89%

National minimum capital requirements prescribed by SBP
48 CET1 minimum ratio 5.50% 5.00%
49 Tier 1 minimum ratio 7.00% 6.50%
50 Total capital minimum ratio 10.00% 10.00%
2014 2013
Regulatory Adjustments and Additional Information
Amounts
Amount subject to Pre
- Basel III
treatment
(Rupees in ‘000)
42.3.1 Common Equity Tier 1 capital: Regulatory adjustments
1 Goodwill (net of related deferred tax liability) - - -

2 All other intangibles (net of any associated deferred tax liability) 897,998 836,813
3 Shortfall in provisions against classified assets - -
4 Deferred tax assets that rely on future profitability excluding those arising
from temporary differences (net of related tax liability) - -
5 Defined-benefit pension fund net assets 944,223 4,721,115 -
6 Reciprocal cross holdings in CET1 capital instruments of banking, financial
and insurance entities - -
7 Cash flow hedge reserve - -
8 Investment in own shares/ CET1 instruments - -
9 Securitization gain on sale - -
10 Capital shortfall of regulated subsidiaries - -
11 Deficit on account of revaluation from bank’s holdings of fixed assets/ AFS - -
12 Investments in the capital instruments of banking, financial and insurance
entities that are outside the scope of regulatory consolidation, where the
bank does not own more than 10% of the issued share capital
(amount above 10% threshold) - -
13 Significant investments in the common stocks of banking, financial and
insurance entities that are outside the scope of regulatory consolidation
14 Deferred Tax Assets arising from temporary differences (amount above
10% threshold, net of related tax liability) - -
15 Amount exceeding 15% threshold - -
16 of which: significant investments in the common stocks of financial entities - -
17 of which: deferred tax assets arising from temporary differences - -
18 National specific regulatory adjustments applied to CET1 capital - -
19 Investments in TFCs of other banks exceeding the prescribed limit - -
20 Any other deduction specified by SBP (mention details) - -
21 Adjustment to CET1 due to insufficient AT1 and Tier 2 to cover deductions* 588,053 735,066
22 Total regulatory adjustments applied to CET1 2,430,274 1,571,879
180
ANNUAL REPORT 2014

2014 2013
Amounts
- Basel III
treatment
(Rupees in ‘000)
42.3.2 Additional Tier-1 & Tier-1 Capital: regulatory adjustments
23 Investment in mutual funds exceeding the prescribed limit

[SBP specific adjustment] - -
24 Investment in own AT1 capital instruments - -
25 Reciprocal cross holdings in Additional Tier 1 capital instruments of banking,
financial and insurance entities - -
entities that are outside the scope of regulatory consolidation, where the bank
does not own more than 10% of the issued share capital
27 Significant investments in the capital instruments of banking, financial and
insurance entities that are outside the scope of regulatory consolidation - -
28 Portion of deduction applied 50:50 to Tier-1 and Tier-2 capital based on
pre-Basel III treatment which, during transitional period, remain subject to
deduction from additional tier-1 capital 588,053 735,066
29 Adjustments to Additional Tier 1 due to insufficient Tier 2 to cover deductions - - -
30 Total regulatory adjustment applied to AT1 capital * - -
*As the Bank has not Tier 1 capital, deduction was made from CET1.
42.3.3 Tier 2 Capital: regulatory adjustments

deduction from tier-2 capital 588,053 735,066
32 Reciprocal cross holdings in Tier 2 instruments of banking, financial and
insurance entities - -
33 Investment in own Tier 2 capital instrument - -
35 Significant investments in the capital instruments issued by banking,
financial and insurance entities that are outside the scope of regulatory
consolidation - -
36 Total regulatory adjustment applied to T2 capital 588,053 735,066
2014 2013
(Rupees in ‘000)
42.3.4 Additional Information
Risk Weighted Assets subject to pre-Basel III treatment
37 Risk weighted assets in respect of deduction items (which during the
transitional period will be risk weighted subject to Pre-Basel III Treatment) - -
(i) of which: deferred tax assets - -
(ii) of which: Defined-benefit pension fund net assets 3,776,892 3,805,233
(iii) of which: Recognized portion of investment in capital of banking,
inancial and insurance entities where holding is less than 10% of the
issued common share capital of the entity - -
(iv) of which: Recognized portion of investment in capital of banking,
financial and insurance entities where holding is more than 10% of the
Amounts below the thresholds for deduction (before risk weighting)
38 Non-significant investments in the capital of other financial entities - -
39 Significant investments in the common stock of financial entities - -
40 Deferred tax assets arising from temporary differences (net of related tax liability) - -
Applicable caps on the inclusion of provisions in Tier 2
41 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to
standardized approach (prior to application of cap) 609,312 499,145
42 Cap on inclusion of provisions in Tier 2 under standardized approach 4,572,704 3,912,455
43 Provisions eligible for inclusion in Tier 2 in respect of exposures subject
to internal ratings-based approach (prior to application of cap) - -
44 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach - -
181
42.4 Capital Structure Reconciliation

Step 1 Balance Sheet Under
as per published regulatory
Financial Statements scope of
consolidation
As at 31-12-2014 As at 31-12-2014
(Rupees in ‘000)
Assets
Cash and balances with treasury banks 46,753,804 46,753,804
Balanced with other banks 3,015,624 3,015,624
Lending to financial institutions 1,418,181 1,418,181
Investments 511,137,192 511,137,192
Advances 303,559,480 303,559,480
Operating fixed assets 31,192,588 31,192,588
Deferred tax assets - -
Other assets 37,554,615 37,554,615
Total assets 934,631,484 934,631,484
Liabilities & Equity

Bills payable 16,627,700 16,627,700
Borrowings 59,542,861 59,542,861
Sub-ordinated loans - -
Deferred tax liabilities 10,397,100 10,397,100
Other liabilities 29,630,241 29,630,241
Total liabilities 804,527,422 804,527,422
Share capital 11,130,307 11,130,307

Reserves 48,830,005 48,830,005
Minority Interest - -
Total Equity 106,908,175 106,908,175
Surplus on revaluation of assets - net of tax 23,195,887 23,195,887

Total liabilities & equity 934,631,484 934,631,484

as per published regulatory Ref
consolidation
As at 31-12-2014 As at 31-12-2014
(Rupees in ‘000)
Assets
Investments 511,137,192 511,137,192
of which: Non-significant capital investments in capital of other financial institutions
exceeding 10% threshold - - a
of which: significant investments in the capital instruments issued by banking, financial
and insurance entities exceeding regulatory threshold - - b
of which: Mutual Funds exceeding regulatory threshold - - c
of which: reciprocal crossholding of capital instrument (separate for CET1, AT1, T2) - - d
of which: others - - e
Advances 303,559,480 303,559,480
shortfall in provisions/ excess of total EL amount over eligible provisions under IRB - - f
general provisions reflected in Tier 2 capital 609,312 609,312 g
182
ANNUAL REPORT 2014

Step 2 Balance Sheet Under Ref

consolidation
As at 31-12-2014 As at 31-12-2014
(Rupees in ‘000)
Fixed Assets 31,192,588 31,192,588

of which: Intangibles 897,998 897,998 k
Deferred Tax Assets - -
of which: DTAs that rely on future profitability excluding those arising from temporary differences - - h
of which: DTAs arising from temporary differences exceeding regulatory threshold - - i
Other assets 37,554,615 37,554,615
of which: Goodwill - - j
of which: Defined-benefit pension fund net assets 7,263,254 7,263,254 l
Total assets 934,631,484 934,631,484
Bills payable 16,627,700 16,627,700

Borrowings 59,542,861 59,542,861
of which: eligible for inclusion in AT1 - - m
of which: eligible for inclusion in Tier 2 - - n
of which: DTLs related to goodwill - - o
of which: DTLs related to intangible assets - - p
of which: DTLs related to defined pension fund net assets 2,542,139 2,542,139 q
of which: other deferred tax liabilities 7,854,961 7,854,961 r
Share capital 20,832,835 20,832,835

of which: amount eligible for CET1 20,832,835 20,832,835 s
of which: amount eligible for AT1 - - t
Reserves 39,127,477 39,127,477
of which: portion eligible for inclusion in CET1 (general reserve & statutory reserve) 38,732,970 38,732,970 u
of which: portion eligible for inclusion in Tier 2 394,507 394,507 v
Unappropriated profit 46,947,863 46,947,863 w
Minority Interest - -
of which: portion eligible for inclusion in CET1 - - x
of which: portion eligible for inclusion in AT1 - - y
of which: portion eligible for inclusion in Tier 2 - - z
Surplus on revaluation of assets 23,195,887 23,195,887
of which: Revaluation reserves on fixed assets 11,240,358 11,240,358
of which: Unrealized Gains/Losses on AFS 11,955,529 11,955,529 aa
In case of Deficit on revaluation (deduction from CET1) - - ab
Total Equity 130,104,062 130,104,062
Total liabilities and equity 934,631,484 934,631,484
183
Step 3 Component of Source based

regulatory on reference
capital reported number from
by bank step 2
(Rupees in ‘000)

1 Fully Paid-up Capital 11,130,307 (s)
2 Balance in Share Premium Account 9,702,528
3 Reserve for issue of Bonus Shares -
4 General/ Statutory Reserves 38,732,970 (u)
5 Gain/(Losses) on derivatives held as Cash Flow Hedge -
6 Unappropriated/unremitted profits/(losses) 46,947,863 (w)
7 Minority Interests arising from CET1 capital instruments issued to third party by
consolidated bank subsidiaries (amount allowed in CET1 capital of the
consolidation group - (x)
8 CET 1 before Regulatory Adjustments 106,513,668

Common Equity Tier 1 capital: Regulatory adjustments
9 Goodwill (net of related deferred tax liability) - (j) - (o)
10 All other intangibles (net of any associated deferred tax liability) 897,998 (k) - (p)
11 Shortfall of provisions against classified assets - (f)
12 Deferred tax assets that rely on future profitability excluding those arising from
temporary differences (net of related tax liability) - {(h) - (r} * 20%
13 Defined-benefit pension fund net assets 944,223 {(l) - (q)} * 20%
14 Reciprocal cross holdings in CET1 capital instruments - (d)
15 Cash flow hedge reserve -
16 Investment in own shares/ CET1 instruments -
17 Securitization gain on sale -
18 Capital shortfall of regulated subsidiaries -
19 Deficit on account of revaluation from bank’s holdings of property/ AFS - (ab)
20 Investments in the capital instruments of banking, financial and
insurance entities that are outside the scope of regulatory consolidation,
where the bank does not own
more than 10% of the issued share capital (amount above 10% threshold) - (a) - (ac) - (ae)
financial and
(amount above 10% threshold) - (b) - (ad) - (af)
22 Deferred Tax Assets arising from temporary differences
(amount above 10% threshold, net of related tax liability) - (i)
23 Amount exceeding 15% threshold -
24 of which: significant investments in the common stocks of financial entities -
25 of which: deferred tax assets arising from temporary differences -
26 National specific regulatory adjustments applied to CET1 capital -
27 Investment in TFCs of other banks exceeding the prescribed limit -
28 Any other deduction specified by SBP (mention details) -
29 Regulatory adjustment applied to CET1 due to insufficient AT1
and Tier 2 to cover deductions 588,053
30 Total regulatory adjustments applied to CET1 2,430,274
31 Common Equity Tier 1 104,083,394

32 Qualifying Additional Tier-1 instruments plus any related share premium -
33 of which: Classified as equity - (t)
34 of which: Classified as liabilities - (m)
35 Additional Tier-1 capital instruments issued by consolidated
subsidiaries and held by
third parties (amount allowed in group AT 1) - (y)
36 of which: instrument issued by subsidiaries subject to phase out -
37 AT1 before regulatory adjustments -

184
ANNUAL REPORT 2014


by bank step 2
(Rupees in ‘000)
Additional Tier 1 Capital: regulatory adjustments

38 Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) -
39 Investment in own AT1 capital instruments -
40 Reciprocal cross holdings in Additional Tier 1 capital instruments -
41 Investments in the capital instruments of banking, financial and insurance entities that
are outside the scope of regulatory consolidation, where the bank does not own more
than 10% of the issued share capital (amount above 10% threshold) - (ac)
42 Significant investments in the capital instruments issued by banking, financial and
insurance entities that are outside the scope of regulatory consolidation - (ad)
43 Portion of deduction applied 50:50 to core capital and supplementary capital based
on pre-Basel III treatment which, during transitional period, remain subject to deduction
from tier-1 capital 588,053
44 Regulatory adjustments applied to Additional Tier 1 due to insufficient
Tier 2 to coverdeductions -
45 Total of Regulatory Adjustment applied to AT1 capital -
46 Additional Tier 1 capital -
47 Additional Tier 1 capital recognized for capital adequacy -
48 Tier 1 Capital (CET1 + admissible AT1) 104,083,394
Tier 2 Capital
49 Qualifying Tier 2 capital instruments under Basel III -
50 Capital instruments subject to phase out arrangement from tier 2
(Pre-Basel III instruments) - (n)
51 Tier 2 capital instruments issued to third party by consolidated subsidiaries
(amount allowed in group tier 2) - (z)
52 of which: instruments issued by subsidiaries subject to phase out -
53 General Provisions or general reserves for loan losses-up to maximum of
1.25% of Credit Risk Weighted Assets 609,312 (g)
54 Revaluation Reserves eligible for Tier 2 12,989,696
55 of which: Revaluation reserves on fixed assets 6,294,600
portion of (aa)
56 of which: Unrealized Gains/Losses on AFS 6,695,096
57 Foreign Exchange Translation Reserves 394,507 (v)
58 Undisclosed/Other Reserves (if any) -
59 T2 before regulatory adjustments 13,993,515
Tier 2 Capital: regulatory adjustments
60 Portion of deduction applied 50:50 to core capital and supplementary
capital based on pre-Basel III treatment which, during transitional period,
remain subject to deduction from tier-2 capital 588,053
61 Reciprocal cross holdings in Tier 2 instruments -
62 Investment in own Tier 2 capital instrument -
63 Investments in the capital instruments of banking, financial and insurance entities
that are outside the scope of regulatory consolidation, where the bank does not own
more than 10% of the issued share capital (amount above 10% threshold) - (ae)
insurance entities that are outside the scope of regulatory consolidation - (af)
65 Amount of Regulatory Adjustment applied to T2 capital 588,053
66 Tier 2 capital (T2) 13,405,462
67 Tier 2 capital recognized for capital adequacy 13,405,462
68 Excess Additional Tier 1 capital recognized in Tier 2 capital -
69 Total Tier 2 capital admissible for capital adequacy 13,405,462
70 TOTAL CAPITAL (T1 + admissible T2) 117,488,856
185
42.5 Main Features Template of Regulatory Capital Instruments
1 Issuer MCB Bank Limited

2 Unique identifier (eg KSE Symbol or Bloomberg identifier etc.) MCB
3 Governing law(s) of the instrument Relevant Capital Market Laws
Regulatory treatment
4 Transitional Basel III rules Common equity Tier 1
5 Post-transitional Basel III rules Common equity Tier 1
6 Eligible at solo/ group/ group & solo Group & standalone
7 Instrument type Common Shares
8 Amount recognized in regulatory capital (Currency in PKR thousands, as of reporting date) 11,130,307
9 Par value of instrument PKR 10 per share
10 Accounting classification Shareholder equity
11 Original date of issuance 1947
12 Perpetual or dated Perpetual
13 Original maturity date No maturity
14 Issuer call subject to prior supervisory approval Not applicable
15 Optional call date, contingent call dates and redemption amount Not applicable
16 Subsequent call dates, if applicable Not applicable
Coupons / dividends
17 Fixed or floating dividend/ coupon Not applicable
18 Coupon rate and any related index/ benchmark Not applicable
19 Existence of a dividend stopper No
20 Fully discretionary, partially discretionary or mandatory Fully discretionary
21 Existence of step up or other incentive to redeem No
22 Noncumulative or cumulative Not applicable
Convertible or non-convertible Non-convertible
23 If convertible, conversion trigger (s) Not applicable
24 If convertible, fully or partially Not applicable
25 If convertible, conversion rate Not applicable
26 If convertible, mandatory or optional conversion Not applicable
27 If convertible, specify instrument type convertible into Not applicable
28 If convertible, specify issuer of instrument it converts into Not applicable
Write-down feature Not applicable
29 If write-down, write-down trigger(s) Not applicable
30 If write-down, full or partial Not applicable
31 If write-down, permanent or temporary Not applicable
32 If temporary write-down, description of write-upmechanism Not applicable
33 Position in subordination hierarchy in liquidation (specify instrument type immediately Common equity ranks after
senior to instrument) all creditors and depositors
34 Non-compliant transitioned features No
35 If yes, specify non-compliant features Not applicable
186
ANNUAL REPORT 2014

42.6 Risk Weighted Assets
The risk weighted assets to capital ratio, calculated in accordance with the State Bank of Pakistan’s guidelines on
capital adequacy was as follows:
Capital Requirements Risk Weighted Assets
2014 2013 2014 2013
(Rupees in ‘000)
Credit Risk
Portfolios subject to standardized approach
(simple or comprehensive)

On-Balance Sheet
Corporate portfolio 20,245,752 16,798,503 181,620,569 153,993,395
Banks / DFIs 789,091 607,426 7,078,773 5,568,328
Public sector entities 874,983 829,582 7,849,296 7,604,851
Sovereigns / cash & cash equivalents 789,081 725,599 7,078,684 6,651,630
Loans secured against residential property 142,950 146,302 1,282,379 1,341,164
Retail 1,710,048 1,622,352 15,340,500 14,872,245
Past due loans 353,427 359,457 3,170,522 3,295,180
Operating fixed assets 3,377,023 3,028,063 30,294,590 27,758,525
Other assets 3,377,034 2,323,440 30,294,689 21,299,182
31,659,389 26,440,724 284,010,002 242,384,500
Off-Balance Sheet
Non-market related 8,479,176 7,269,044 76,064,982 66,635,984
Market related 96,875 123,285 869,050 1,130,165
8,576,051 7,392,329 76,934,032 67,766,149
Equity Exposure Risk in the Banking Book
Listed 387,466 168,971 3,475,876 1,548,974
Unlisted 155,661 141,464 1,396,400 1,296,809
543,127 310,435 4,872,276 2,845,783
Total Credit Risk 40,778,567 34,143,488 365,816,310 312,996,432

Market Risk
Capital requirement for portfolios subject to
standardized approach
Interest rate risk 6,912,117 2,655,717 86,401,463 33,196,459
Equity position risk 1,835,716 1,134,344 22,946,450 14,179,306
Foreign exchange risk 492,917 177,184 6,161,462 2,214,805
Total Market Risk 9,240,750 3,967,245 115,509,375 49,590,570

Operational Risk
Capital requirement for operational risks 7,546,989 7,408,135 94,337,367 92,601,685

Total 57,566,306 45,518,868 575,663,052 455,188,687
2014 2013
Required Actual Required Actual
% % % %
Capital Adequacy Ratio
CET1 to total RWA 5.50 18.08 5.00 20.89

Tier-1 capital to total RWA 7.00 18.08 6.50 20.89
Total capital to total RWA 10.00 20.41 10.00 22.25
* As SBP capital requirement of 10% (10% in 2013) is calculated on overall basis therefore, capital charge for credit risk is calculated after
excluding capital requirements against market and operational risk from the total capital required.
187
43 RISK MANAGEMENT
Risk is an inherent part of banking business activities. The risk management framework and governance structure
at MCB helps to mitigate and counter any foreseeable risk in its various lines of business. Risk awareness forms an
integral part of strategic and operational activities of risk management. Through its risk management policy the Bank
sets the best course of action under uncertainty by identifying, prioritizing, mitigating and monitoring risk issues, with
the goal of enhancing shareholders’ value. Bank’s risk management structure is based on the following five guiding
principles:
• Optimizing risk/return in a controlled manner

• Establishing clear responsibility and accountability
• Establishing independent and properly resourced risk management function.
• Promoting open risk culture
• Adopting international best practices in risk management
Keeping in view dynamics of internal and external environment, the bank regularly reviews and updates policy manuals
/ frameworks and procedures in accordance with domestic regulatory environment and international standards.
The Bank executes its risk strategy and undertakes controlled risk-taking activities within its risk management
framework. The Board of Directors and its relevant committee, i.e. the Risk Management & Portfolio Review Committee
(RM&PRC), the senior management and its relevant committees, i.e. the Risk Management Committee (RMC), Asset
Liability Committee (ALCO), etc., are responsible to ensure formulation and implementation of comprehensive Risk
Management Framework. This framework is based on prudent risk identification, measurement, management and
monitoring process which are closely aligned with the activities of the bank. The framework combines core policies,
procedures and process designs with broad oversight and is supported by an efficient monitoring mechanism across
the bank to ensure that risks are kept within an acceptable level.
The Bank ensures that not only the relevant risks are identified but their implications are also considered and basis
provided for managing and measuring the risks. Through Internal Control units, the Bank ensures that effective
controls are in place to mitigate each of the identified risk.
Independent from business groups, Head of Risk Management reports functionally to the Risk Management &
Portfolio Review Committee (RM&PRC) and administratively to the President; the RM&PRC committee convenes
regularly to evaluate bank’s risk and portfolio concentrations. The Risk Management Group performs the following
critical functions:

• Credit Risk Management
• Credit Review
• Credit Risk Control
• Market Risk Management
• Liquidity Risk Management
• Operational Risk Management
Keeping in view the international best practices and SBP requirements, Board of Directors of the Bank has approved
a Risk Appetite Statement, which takes into account quantitative and qualitative risk indicators, covering target ratios,
credit, market, operational, liquidity and business risks.
188
ANNUAL REPORT 2014

43.1 Credit Risk

Credit risk arises from our dealings with individuals, corporate borrowers, financial institutions, sovereigns etc. The Bank
is exposed to credit risk through its lending and investment activities. It stems from Bank’s both on and off-balance
sheet activities. Credit risk makes up the largest part of the Bank’s exposure. Purpose of Credit Risk Management
function is to identify, measure, manage, monitor and mitigate credit risk. Organizational structure of this function
ensures pre and post-facto management of credit risk. While, Credit Review function provides pre-fact evaluation of
counterparties, the Credit Risk Control (CRC) performs post-fact evaluation of financing facilities and reviews clients’
performance on an ongoing basis.
The Bank has adopted Standardized Approach to measure Credit risk regulatory capital charge in compliance with
Basel-II requirements. The approach mainly takes into account the assessment of external credit rating agencies. In
line with SBP guidelines on Internal Credit Risk Rating Systems, the Bank has developed rating systems and all its
corporate and commercial borrowers are internally rated. Bank is in the process of continuously improving the system
and bringing it inline with the Basel framework requirements.
In order to manage bank’s credit risk, following policies and procedures are in place:
• Individuals who take or manage risks clearly understand them in order to protect the Bank from avoidable risks;
• The approval of credit limits to counter parties are subject to pre-fact review;
• Extension in credit facility or material change to the credit facility is subject to credit review;
• Approval and review process is reviewed by RM&PRC and internal audit;
• Management periodically reviews the powers of credit approving and credit reviewing authorities.
As a part of credit assessment Bank uses internal rating framework as well as the ratings assigned by the external
credit rating agencies, wherever available.
Ongoing administration of the credit portfolio is an essential part of the credit process that supports and controls
extension and maintenance of credit. The Bank’s Credit Risk Control, being an independent function from the business
and operations groups, is responsible for performing following activities:
• Credit disbursement authorization;

• Collateral coverage and monitoring;
• Compliance of loan covenants/ terms of approval;
• Maintenance/ custody of collateral and security documentation.
Credit Risk Monitoring is based on a comprehensive reporting framework. Continuous monitoring of the credit portfolio
and the risks attached thereto are carried out at different levels including businesses, Audit & Risk Assets Review, Credit
Risk Control, Credit Risk Management Division, etc.
To ensure a prudent distribution of asset portfolio, the Bank manages its lending and investment activities within an
appropriate limits framework. Per party exposure limit is maintained in accordance with SBP Prudential Regulation
R-1.
The Bank creates specific provision against Non- Performing Loans (NPLs) in accordance with the Prudential
Regulations and other directives issued by the State Bank of Pakistan (SBP) and charged to the profit and loss
account. Provisions are held against identified as well as unidentified losses. Provisions against unidentified losses
include general provision against consumer loans made in accordance with the requirements of the Prudential
Regulations issued by SBP and provision based on historical loss experience on advances. Please refer note No. 10.5
for reconciliation of changes in specific and general provisions.
Management of Non Performing Loans
The Bank has a Special Asset Management Group (SAMG), which is responsible for management of non performing
loans. SAMG undertakes restructuring / rescheduling of problem loans, as well as litigation of both civil and criminal
cases for collection of debt.
Stress Testing
Credit Risk stress testing is a regular exercise. Bank’s all credit exposures including funded and non-funded facilities
are subject to stress test. This exercise is conducted on a quarterly basis through assigning shocks to all assets of the
Bank and assessing its resulting affect on capital adequacy inline with SBP requirements.
189
43.1.1 Segmental information

Segmental Information is presented in respect of the class of business and geographical distribution of advances
(gross), deposits, contingencies and commitments.
2014
Advances (Gross) Deposits Contingencies
and commitments
(Rupees Percent (Rupees Percent (Rupees Percent
in ‘000) (%) in ‘000) (%) in ’000) (%)
43.1.1.1 Segments by class of business

Agriculture, forestry, hunting and fishing 21,369,968 6.63 36,870,083 5.36 7,313,455 3.23
Mining and quarrying 21,371 0.01 1,523,083 0.22 481,969 0.21
Textile 37,094,287 11.51 3,217,779 0.47 8,636,386 3.81
Chemical, Petroleum and pharmaceuticals 46,483,618 14.42 3,929,431 0.57 21,556,743 9.52
Cement 1,857,325 0.58 692,982 0.10 1,462,137 0.65
Sugar 15,740,048 4.88 2,208,055 0.32 6,502,059 2.87
Footwear and leather garments 934,593 0.29 363,273 0.05 446,067 0.20
Automobile and transportation equipment 356,548 0.11 2,092,257 0.30 899,908 0.40
Electronics and electrical appliances 2,609,784 0.81 590,613 0.09 1,329,789 0.59
Construction 2,848,906 0.88 14,267,389 2.07 9,881,421 4.36
Power (electricity), gas, water, sanitary 24,858,205 7.71 22,399,807 3.25 6,926,486 3.06
Wholesale and Retail Trade 18,399,294 5.71 32,183,337 4.68 8,643,493 3.82
Transport, storage and communication 62,440,089 19.37 2,619,410 0.38 18,039,741 7.96
Financial 5,341,320 1.66 7,960,331 1.16 92,917,292 41.01
Insurance - - 4,319,868 0.63 11,867 0.01
Services 4,247,334 1.32 70,738,783 10.28 19,929,088 8.80
Individuals 14,341,922 4.45 426,579,274 61.97 743,002 0.33
Others 63,373,381 19.66 55,773,765 8.10 20,832,949 9.17
322,317,993 100 688,329,520 100 226,553,852 100
2013
and commitments
(Rupees Percent (Rupees Percent (Rupees Percent
in ‘000) (%) in ‘000) (%) in ’000) (%)

Mining and quarrying 5,000 0.00 1,233,151 0.20 2,136,618 0.80
Textile 41,120,102 15.33 2,436,221 0.39 9,611,601 3.62
Chemical, Petroleum and pharmaceuticals 36,888,331 13.75 21,103,199 3.34 31,780,773 11.97
Cement 894,170 0.33 830,008 0.13 1,596,090 0.60
Sugar 15,537,248 5.79 2,314,203 0.37 1,474,420 0.56
Footwear and leather garments 4,682,822 1.75 386,090 0.06 1,718,371 0.65
Automobile and transportation equipment 586,303 0.22 2,063,712 0.33 1,532,315 0.58
Construction 714,696 0.27 3,181,489 0.50 3,640,172 1.37
Financial 1,841,644 0.69 10,307,209 1.63 143,262,515 53.97
Insurance 60,415 0.02 1,617,467 0.26 11,282 0.00
Services 6,480,676 2.42 97,366,136 15.40 19,073,590 7.19
Individuals 13,851,499 5.16 351,396,962 55.57 43,385 0.02
Others 43,257,434 16.14 13,041,737 2.05 27,114,845 10.23
268,192,258 100 632,330,286 100 265,428,030 100
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ANNUAL REPORT 2014

2014
and commitments
(Rupees in ‘000) (%) (Rupees in ‘000) (%) (Rupees in ‘000) (%)
43.1.1.2 Segment by sector

Public / Government 88,409,306 27.43 55,756,607 8.10 39,578,389 17.47
Private 233,908,687 72.57 632,572,913 91.90 186,975,463 82.53
322,317,993 100 688,329,520 100 226,553,852 100
2013
and commitments

Private 218,172,858 81.35 584,863,132 92.49 182,533,531 68.77
268,192,258 100 632,330,286 100 265,428,030 100
43.1.1.3 Details of non-performing advances and specific provisions by class of business segment
2014 2013
Classified Specific Classified Specific
Advances Provision Held Advances Provision Held
(Rupees in ‘000)
Agriculture, forestry, hunting and fishing 431,506 395,288 507,486 494,680

Mining and quarrying 9,620 9,620 - -
Textile 4,534,564 4,125,481 4,122,275 4,079,378
Chemical and pharmaceuticals 194,097 194,097 183,434 183,434
Cement - - 130,950 130,950
Sugar 235,998 235,998 428,224 428,224
Footwear and leather garments 73,196 73,196 85,595 85,595
Automobile and transportation equipment 24,666 23,847 26,155 25,337
Electronics and electrical appliances 290,996 290,996 374,522 374,522
Construction 92,040 92,040 118,363 118,363
Power (electricity), gas, water, sanitary 2,499 2,499 - -
Wholesale and retail trade 3,640,093 3,524,368 4,038,560 3,949,429
Transport, storage and communication 596,035 596,035 593,413 589,033
Financial 803,843 803,843 814,600 814,600
Services 355,739 355,239 594,830 590,498
Individuals 2,931,911 2,884,887 3,188,170 3,117,058
Others 7,690,988 4,541,767 8,061,156 4,469,047
21,907,791 18,149,201 23,267,733 19,450,148
43.1.1.4 Details of non-performing advances and

specific provisions by sector
Public/ Government 639,825 - 639,825 -
Private 21,267,966 18,149,201 22,627,908 19,450,148
21,907,791 18,149,201 23,267,733 19,450,148
191
43.1.1.5 Geographical segment analysis
2014
Profit before Total assets Net assets Contingencies &
taxation employed employed commitments
(Rupees in ‘000)
Pakistan 36,257,450 917,150,509 129,591,721 220,705,725

South Asia 224,687 12,923,675 266,592 5,470,217
Middle East 247,310 4,557,300 245,749 377,910
36,729,447 934,631,484 130,104,062 226,553,852

2013
Profit before Total assets Net assets Contingencies &
taxation employed employed commitments
(Rupees in ‘000)
Pakistan 31,708,602 798,416,691 109,635,974 259,694,660

South Asia 327,628 11,314,474 334,864 5,188,358
Middle East 251,975 5,777,206 260,143 545,012
32,288,205 815,508,371 110,230,981 265,428,030
Total assets employed include intra group items of Rs. NIL (2013: Rs. NIL).
43.1.2 Credit Risk - General Disclosures

The Bank has adopted Standardized approach of Basel II for calculation of capital charge against credit risk in line with
SBP’s requirements.
43.1.2.1 Credit Risk: Disclosures for portfolio subject to the Standardized Approach
Under standardized approach, the capital requirement is based on the credit rating assigned to the counterparties
by the External Credit Assessment Institutions (ECAIs) duly recognized by SBP for capital adequacy purposes. Bank
utilizes, wherever available, the credit ratings assigned by the SBP recognized ECAIs, viz. PACRA (Pakistan Credit
Rating Agency), JCR-VIS (Japan Credit Rating Company– Vital Information Systems), Fitch, Moody’s and Standard &
Poors . Credit rating data for advances is obtained from recognized External Credit Assessment Institutions and then
mapped to State Bank of Pakistan’s Rating Grades.
Type of Exposures for which the ratings from the External Credit Rating Agencies are used by the Bank.
Exposures JCR-VIS PACRA Other (S&P / Moody’s

/ Fitch)
Corporate Yes Yes -
Banks Yes Yes Yes
Sovereigns - - Yes
SME’s Yes Yes -
The criteria for transfer public issue ratings onto comparable assets in the banking book and the alignment of the
alphanumerical scale of each agency used with risk buckets is the same as specified by the banking regulator SBP in BSD
Circular No.8 table 2.3.
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ANNUAL REPORT 2014

Long - Term Ratings Grades Mapping
SBP Rating Grade PACRA JCR-VIS Fitch Moody’s S&P ECA Scores
1 AAA AAA AAA Aaa AAA 1
AA+ AA+ AA+ Aa1 AA+
AA AA AA Aa2 AA
AA- AA- AA- Aa3 AA-
2 A+ A+ A+ A1 A+ 2
A A A A2 A
A- A- A- A3 A-
3 BBB+ BBB+ BBB+ Baa1 BBB+ 3

BBB BBB BBB Baa2 BBB
BBB- BBB- BBB- Baa3 BBB-
4 BB+ BB+ BB+ Ba1 BB+ 4

BB BB BB Ba2 BB
BB- BB- BB- Ba3 BB-
5 B+ B+ B+ B1 B+ 5,6
B B B B2 B
B- B- B- B3 B-
6 CCC+ and CCC+ and CCC+ and Caa1 and CCC+ and 7
below below below Below below
Short - Term Ratings Grades Mapping
SBP Rating Grade PACRA JCR-VIS Fitch Moody’s S&P

S1 A-1 A-1 F1 P-1 A-1+, A-1
S2 A-2 A-2 F2 P-2 A-2
S3 A-3 A-3 F3 P-3 A-3
S4 Others Others Others Others Others
193
Credit Exposures subject to Standardized approach

2014 2013
Exposures Rating Amount Deduction Net Amount Deduction Net
Outstanding CRM amount Outstanding CRM amount
(Rupees in ‘000)
Corporate 1 11,939,397 - 11,939,397 12,965,194 - 12,965,194

2 11,046,618 - 11,046,618 16,023,019 - 16,023,019
3,4 2,084,712 - 2,084,712 666,209 - 666,209
5,6 - - - - - -
Unrated 163,022,996 - 163,022,996 142,722,637 - 142,722,637

Bank
1 22,511,312 - 22,511,312 18,704,638 - 18,704,638
2,3 708,589 - 708,589 1,263,692 - 1,263,692
4,5 216,796 - 216,796 527,759 - 527,759
6 1,126,231 - 1,126,231 18,718 - 18,718
Unrated 669,757 - 669,757 1,482,555 - 1,482,555

Public Sector Entities in Pakistan
1 23,800,801 - 23,800,801 - - -
2,3 - - - - - -
4,5 - - - - - -
6 867,906 - 867,906 - - -
Unrated 64,263,893 60,689,337 3,574,555 47,872,322 32,662,619 15,209,703

Sovereigns and on Government of Pakistan or

provincial governments or SBP or Cash 31,134,075 - 31,134,075 45,126,907 - 45,126,907
1 - - - - - -
2 - - - - - -
3 2,486,790 - 2,486,790 - - -
4,5 3,061,262 - 3,061,262 3,571,381 - 3,571,381
6 - - - 478,848 - 478,848
Unrated - - - 2,361,976 - 2,361,976
Mortgage 3,663,941 - 3,663,941 3,831,898 - 3,831,898
Retail 20,454,000 - 20,454,000 19,829,660 - 19,829,660
43.1.3 Credit Risk: Disclosures with respect to Credit Risk Mitigation for Standardized Approach
The Bank does not make use of on and off-balance sheet netting in capital charge calculations under Basel-II’s
Standardized Approach for Credit Risk.
The Bank has strong policies and processes for collateral valuation and collateral management thus ensuring that
collateral valuation happens at regular defined intervals. Collaterals are normally held for the life of exposure. Regular
monitoring of coverage of exposure by the collateral and lien/ charge registered over the collaterals is carried out besides
ensuring that collateral matches the purpose, nature and structure of the transaction and also reflect the form and
capacity of the obligor, its operations, nature of business and economic environment. The Bank mitigates its risk by
taking collaterals that may include assets acquired through the funding provided, as well as cash, government securities,
marketable securities, current assets, fixed assets, and specific equipment, commercial and personal real estate.
The Standardized Approach of Basel-II guidelines allows the Bank to take benefit of credit risk mitigation of financial
collaterals against total exposures in the related loan facilities. As a prudent and conservative measure while calculating
capital charge for credit risk of on balance sheet activities, bank has taken only the benefit of Sovereign guarantees.
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ANNUAL REPORT 2014

MCB manages limits and controls concentrations of credit risk as identified, in particular, to individual counterparties and
groups, and also reviews exposure to industry sectors and geographical regions on a regular basis. Limits are applied
in a variety of forms to portfolios or sectors where MCB considers it appropriate to restrict credit risk concentrations or
areas of higher risk, or to control the rate of portfolio growth.
Concentration of risk
Out of the total financial assets of Rs. 890,489.176 million (2013: Rs. 774,815.595 million) the financial assets which are
subject to credit risk amounting to Rs. 877,078.551 million (2013: Rs. 762,464.749 million). To manage credit risk the
Bank applies credit limits to its customers and obtains adequate collaterals. Investments amounting to Rs. 474,684.635
million (2013: Rs. 434,096.855 million) are guaranteed by the Government of Pakistan. In addition, an amount of Rs.
17,604.220 million (2013: Rs. 31,931.448 million) are held by the Bank with the State Bank of Pakistan and central
banks of other countries.
43.1.3.2 Equity position risk in the banking book
The Bank takes proprietary equity positions for both trading and strategic purposes. The Bank has invested in its
subsidiaries and associated companies to achieve long term strategic objectives. As of December 31, 2014 the
composition of equity investments, subsidiaries and associated companies is as follows:
Composition of equity investments
Exposures Held for trading Available for Sale Subsidiary and

Associates
(Rupees in ‘000)
quity investments – publicly traded

E 52,330 11,892,874 1,263,723
Equity investments - others - 206,027 308,905
Total value 52,330 12,098,901 1,572,628
Classification of equity investments
Banks classify its equity investment portfolio in accordance with the directives of SBP as follows:
• Investments - Held for trading
• Investments - Available for sale
• Investments in subsidiaries
• Investments in Associates
Policies, valuation and accounting of equity investments
The accounting policies for equity investments are designed and their valuation is carried out under the provisions and
directives of State Bank of Pakistan, Securities and Exchange Commission of Pakistan and the requirements of approved
International Accounting Standards as applicable in Pakistan.
In accordance with the requirements of the State Bank of Pakistan, quoted securities, other than investments in subsidiaries
and investments in associates are subsequently re-measured to market value. Surplus / (deficit) arising on revaluation of
quoted securities which are classified as ‘available for sale’, is taken to a separate account which is shown in the statement
of financial position below equity. Surplus / (deficit) arising on revaluation of quoted securities which are classified as ‘held for
trading’, is taken to the profit and loss account directly.
Unquoted equity securities are valued at the lower of cost and break-up value. Break-up value of equity securities is calculated
with reference to the net assets of the investee company as per the latest available audited financial statements.
The cumulative realized gain of Rs. 2,020.789 million has been charged to profit & loss account from sale of equity securities;
however unrealized gain of Rs. 2,115.972 million was recognized in the balance sheet in respect of “AFS” equity securities.
Further a provision for impairment in value of equity investments amounting to Rs. 2.329 million has been charged to profit
and loss account.
195
43.2 Market Risk Management

Market Risk arises from changes in market rates such as Interest Rates, Foreign Exchange Rates, Equity Prices, credit
spreads and/or commodity prices as well as their correlations and volatilities resulting in a loss to earnings and capital.
MCB is exposed to market risk primarily through its trading activities, which are centered in the Treasury and Foreign
Exchange Group and the Capital Market Group. Market risk exposure also arises from market-making, facilitation of
client business and proprietary positions in equities, fixed income and interest rate products and foreign exchange,
which exposes bank to interest rate risk, foreign exchange risk and equity price risk.
The Bank’s Market Risk Management structure consists of Risk Management & Portfolio Review Committee (RM&PRC)
of the Board, Risk Management Committee of management, ALCO and independent Market Risk Management
Division reporting directly to Group Head Risk Management. Market Risk is an independent risk management function
that works in close partnership with the business segments to identify and monitor market risks throughout the
Bank and to define market risk policies and procedures. Market Risk Division seeks to facilitate efficient risk/return
decisions, reduce volatility in operating performance and provide transparency in reporting the Bank’s market risk
profile to the senior management, the Board of Directors and regulator. Market risk management authority, including
approval of market risk limits and exposure levels is vested in the ALCO.
In line with regulatory requirements, MCB has clearly defined, in its Risk Management policy, the positions which shall
be subject to market risk. The definition covers the accounting classifications as well as positions booked by different
business groups under Available for Sale category. The assets subject to trading book treatment are frequently, mostly
on daily basis, valued and actively managed. The positions which does not fulfil the criteria of Trading book falls under
the Banking Book and are treated as per SBP requirements.
The Bank measures and manages Market Risk by using conventional methods i.e. notional amounts, sensitivity
and combinations of various limits. Bank has established a specific Market Risk Limit Policy providing guideline for
assuming controlled market risk, its monitoring and management. These Limits are compared with the numbers
generated by the market risk management systems based on the trading activity and the outstanding positions.
Beside conventional methods, the Bank also uses VaR (Value at Risk) technique for market risk assessment of
positions assumed by its treasury and capital market groups. In-house solutions are used for calculating mark to
market value of positions and generating VaR (value at risk) and sensitivity numbers. Thresholds for different positions
are established to compare the expected losses at a given confidence level and over a specified time horizon.
A framework of stress testing, scenario analysis and reverse stress tests of both banking and trading books as per
SBP guidelines is also in place. The results of the stress tests are reviewed by the Senior Management and also
reported to the SBP.
The Bank is also exposed to interest rate risk both in trading and banking books. Risk numbers along with the marked
to market values of government securities held by the Bank’s treasury are generated on daily basis. The risk numbers
include duration, PVBP, and VaR on individual security basis as well as on portfolio basis. These reports are presented
to the senior management for review on a daily basis.
43.2.1 Foreign Exchange Risk Management
Foreign exchange risk exposes the bank to changes in the values of current holdings and future cash flows denominated
in currencies other than home currency due to the exchange rate fluctuation and volatility. The types of instruments
exposed to this risk include investments in foreign branches, foreign currency-denominated loans, foreign currency-
denominated deposits, future cash flows in foreign currencies arising from foreign exchange transactions, etc.
The core objective of foreign exchange risk management is to ensure the foreign exchange exposure of the Bank
remain within defined risk appetite and insulate bank against undue losses that may arise due to volatile movements
in foreign exchange rates or interest rates.
Limit structure to manage Foreign exchange risk is in place. Gap limits on different tenors in major currencies are
in place to control risk. Bank’s net open position and Foreign exchange exposure limit (FEEL) is monitored and
reported on daily basis. Additionally, daily reports are generated to evaluate the exposure in different currencies. Risk
management system generates VaR numbers for foreign exchange portfolio to estimate the potential loss under
normal conditions. Stress testing of foreign exchange portfolio is also performed and reported to senior management.
All these activities are performed on a daily basis.
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ANNUAL REPORT 2014

2014
Assets Liabilities Off-balance Net foreign
sheet items currency exposure
(Rupees in ‘000)
Pakistan Rupee 875,350,818 744,485,841 1,701,427 132,566,404

Sri Lankan Rupee 20,767,861 20,785,111 363 (16,887)
United States Dollar 36,554,666 31,176,178 (7,819,739) (2,441,251)
Pound Sterling 1,040,413 3,791,294 2,743,304 (7,577)
Japanese Yen 40,555 7 (41,686) (1,138)
Euro 834,523 4,288,991 3,442,493 (11,975)
Other currencies 42,648 - (26,162) 16,486
934,631,484 804,527,422 - 130,104,062
2013
Assets Liabilities Off-balance Net foreign
sheet items currency exposure
(Rupees in ‘000)
Pakistan Rupee 757,862,650 654,735,583 6,922,673 110,049,740

Sri Lankan Rupee 11,049,130 11,099,250 45,462 (4,658)
United States Dollar 44,685,577 31,710,628 (12,854,354) 120,595
Pound Sterling 876,537 3,495,434 2,630,109 11,212
Japanese Yen 10,881 51,448 53,717 13,150
Euro 993,614 4,185,047 3,202,393 10,960
Other currencies 29,982 - - 29,982
815,508,371 705,277,390 - 110,230,981
43.2.2 Equity Price Risk
Bank’s proprietary positions in the equity instruments expose it to the equity price risk in its trading and banking books. Equity
price risk is managed by applying trading limit, scrip-wise and portfolio wise nominal limits. VaR analysis and stress testing of
the equity portfolio are also performed and reported to senior management on daily basis. The stress test for equity price risk
assesses the impact of the fall in the stock market index using internal based assumptions. In addition to this Stress Testing
and historical scenario analysis on Equities is also performed periodically as advised by the State Bank of Pakistan through
Guideline on Stress Testing.
43.2.3 Country Risk
The world is changing rapidly and interdependencies and inter linkages of banks operating in different countries are ever
increasing. Thus the banks having cross border exposures whether on-balance sheet or off-balance sheet are susceptible to
the changing conditions in various countries of the world. Therefore, it becomes very important for institutions to effectively
manage its cross border exposures to avoid any unfavourable situation.
MCB understands the risks involved in taking cross border exposure and to cater it; Country Risk Policy, in line with SBP
guidelines, is already in place. The Policy not only envisages a centralized approach to measure, monitor and manage
country risk but also strengthen overall risk management framework in the Bank.
Country Exposure Limits are in place, which broadly capture direct exposure on sovereigns and exposures on foreign
domiciled counter parties. Additionally, business product wise sub limits involving cross border exposure are also implemented.
Monitoring of these limits is a regular feature of Risk Management.
197
198
43.3 Mismatch of Interest Rate Sensitive Assets and Liabilities
Yield / interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual re-pricing or maturity date and for off-balance sheet instruments is
based on settlement date.
2014
Effective Total Exposed to Yield/ Interest risk Not exposed
Yield/ Up to Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above to Yield/
Interest 1 month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years Interest
rate months months 1 year years years years years Risk
(Rupees in ‘000)
On-balance sheet financial instruments

Assets
Cash and balances with treasury banks 0% 46,753,804 4,396,531 - - - - - - - - 42,357,273
Balances with other banks 0.9% to 2.50% 3,015,624 809,966 - - - - - - - - 2,205,658
Lendings to financial institutions 5% to 10.35% 1,418,181 1,418,181 - - - - - - - - -
Investments - net 5.66% to 13.40% 509,564,564 17,072,843 53,972,750 64,470,682 58,504,709 128,806,857 44,281,499 78,203,161 51,618,462 - 12,633,601
Advances - net 10.87% 303,559,480 252,678,394 17,370,169 8,157,975 4,508,711 5,895,645 6,554,249 4,351,912 1,434,621 2,607,804 -
Other assets - net 26,177,523 - - - - - - - - - 26,177,523
890,489,176 276,375,915 71,342,919 72,628,657 63,013,420 134,702,502 50,835,748 82,555,073 53,053,083 2,607,804 83,374,055
Liabilities
Bills payable 16,627,700 - - - - - - - - - 16,627,700
Borrowings 0.9% to 10% 59,542,861 31,414,474 17,371,426 5,297,275 2,750,905 2,708,781 - - - - -
Deposits and other accounts 6.5% to 11.64% 688,329,520 407,951,109 16,082,615 11,440,071 14,664,652 1,400,319 156,796 207,135 - - 236,426,823
Other liabilities 25,748,913 - - - - - - - - - 25,748,913
790,248,994 439,365,583 33,454,041 16,737,346 17,415,557 4,109,100 156,796 207,135 - - 278,803,436
On-balance sheet gap 100,240,182 (162,989,668) 37,888,878 55,891,311 45,597,863 130,593,402 50,678,952 82,347,938 53,053,083 2,607,804 (195,429,381)
Off-balance sheet financial instruments

FX options purchase - - - - - - - - - - -
Foreign exchange contracts Purchase 47,859,438 18,624,849 18,156,762 11,046,852 30,975 - - - - - -
47,859,438 18,624,849 18,156,762 11,046,852 30,975 - - - - - -
FX options sale - - - - -
Foreign exchange contracts sale 49,478,965 28,994,504 16,514,430 3,970,031 - - - - - - -
49,478,965 28,994,504 16,514,430 3,970,031 - - - - - - -
Off-balance sheet gap (1,619,527) (10,369,655) 1,642,332 7,076,821 30,975 - - - - - -
Total yield / interest risk sensitivity gap (173,359,323) 39,531,210 62,968,132 45,628,838 130,593,402 50,678,952 82,347,938 53,053,083 2,607,804
Cumulative yield / interest risk sensitivity gap (173,359,323) (133,828,113) (70,859,981) (25,231,143) 105,362,259 156,041,211 238,389,149 291,442,232 294,050,036
2013
(Rupees in ‘000)

Assets
Balances with other banks 2.35% 1,536,946 484,414 - - - - - - - - 1,052,532
Lendings to financial institutions 6.5% to 10% 1,224,638 1,224,638 - - - - - - - - -
Advances - net 10.77% 248,242,965 210,483,644 18,073,299 4,290,733 1,358,361 5,239,720 2,641,480 3,111,616 2,442,367 601,745 -
Other assets - net 16,494,805 - - - - - - - - - 16,494,805
774,815,595 318,352,672 229,564,319 21,206,385 12,685,450 26,638,285 41,707,822 27,237,020 15,534,978 601,745 81,286,919
Liabilities
Bills payable 10,138,726 - - - - - - - - - 10,138,726
Borrowings 0.8% to 10.25% 38,542,660 19,312,395 10,005,135 4,469,605 2,396,684 2,358,841 - - - - -
Deposits and other accounts 7% to 10.75% 632,330,286 373,718,728 19,136,275 8,714,275 15,472,801 217,157 219,938 326,664 - - 214,524,448
697,075,869 393,031,123 29,141,410 13,183,880 17,869,485 2,575,998 219,938 326,664 - - 240,727,371
On-balance sheet gap 77,739,726 (74,678,451) 200,422,909 8,022,505 (5,184,035) 24,062,287 41,487,884 26,910,356 15,534,978 601,745 (159,440,452)

Foreign exchange contracts Purchase 216,344 - 216,344 - - - - - - - -
Cross currency swaps - long position 72,216,751 42,583,683 23,239,215 6,393,853 - - - - - - -
72,433,095 42,583,683 23,455,559 6,393,853 - - - - - - -
Foreign exchange contracts Sale 216,344 - 216,344 - -

Cross currency swaps - short position 79,959,563 44,369,336 25,266,531 9,957,417 366,279 - - - - - -
80,175,907 44,369,336 25,482,875 9,957,417 366,279 - - - - - -
Off-balance sheet gap (7,742,812) (1,785,653) (2,027,316) (3,563,564) (366,279) - - - - - -
Total yield / interest risk sensitivity gap (76,464,104) 198,395,593 4,458,941 (5,550,314) 24,062,287 41,487,884 26,910,356 15,534,978 601,745
Cumulative yield / interest risk sensitivity gap (76,464,104) 121,931,489 126,390,430 120,840,116 144,902,403 186,390,287 213,300,643 228,835,621 229,437,366
Yield risk is the risk of decline in earnings due to adverse movement of the yield curve.
Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates.
ANNUAL REPORT 2014
199
Reconciliation to total assets 2014 2013 Reconciliation to total liabilities 2014 2013
Balance as per balance sheet 934,631,484 815,508,371 Balance as per balance sheet 804,527,422 705,277,390
Less: Non financial assets Less: Non financial liabilities
Investments 1,572,628 1,635,928 Other liabilities 3,881,328 4,000,148

Operating fixed assets 31,192,588 28,595,338 Deferred tax liability 10,397,100 4,201,373
Other assets 11,377,092 10,461,510 14,278,428 8,201,521
44,142,308 40,692,776
Total financial assets 890,489,176 774,815,595 Total financial liabilities 790,248,994 697,075,869
43.4 Liquidity Risk

Liquidity represents the ability to fund assets and meet obligations as they become due. The Bank understands that liquidity does not
come for free, and surplus liquidity has an opportunity cost which needs to be recognized. Liquidity risk is a risk of not being able to
obtain funds at a reasonable price within a reasonable time period to meet obligations as they become due. Liquidity is essential to
the ability to operate financial services businesses and, therefore, the ability to maintain surplus levels of liquidity through economic
cycles is crucial, particularly during periods of adverse conditions, liquidity management is among the most important activities that
the MCB conducts during both normal and stress periods. MCB recognizes that liquidity risk can arise from the Bank’s activities and
can be grouped into three categories:

- Inflows/Outflows from on-balance sheet items (other than marketable securities and wholesale borrowings) and off-balance
sheet items;
- Marketability of trading securities; and
- Capacity to borrow from the wholesale markets for funding as well as trading activities.
Liquidity Management
Asset Liability Management Committee of the bank has the responsibility for the formulation of overall strategy and oversight of the
Asset Liability management function. Board has approved a comprehensive Liquidity Risk Policy (part of Risk Management Policy),
which stipulates policies regarding maintenance of various ratios, funding preferences, and evaluation of Banks’ liquidity under normal
and crisis situation. MCB Bank monitors and assesses the impact of increase in NPLs, deposits concentration, deposits withdrawal,
decline in earnings, expanded business opportunities, acquisitions and negative reputation, on its liquidity positions. Liquidity Strategy
is also in place, to ensure that the Bank can meet its temporal liquidity needs and optimize the contribution towards the profitability
of the Bank. A framework to assess the maturity profile of non-contractual assets and liabilities is in place to supplement the liquidity
management. As per preliminary assessments, the Bank’s Liquidity Coverage Ratio and Net Stable Funding Ratio as per Basel III are
well within the prescribed limits.
MCB’s liquidity risk management framework is designed to identify measure and manage in a timely manner the liquidity risk position
of the Bank. The underlying policies and procedures include: Risk Management policy, Treasury Policy, Investment policy, Contingency
Funding Plan, Liquidity Strategy and Limit Structure which are reviewed and approved regularly by the senior management /Board
members. MCB Bank also conducts Liquidity Risk Analysis on regular basis. MCB liquidity Risk Policy envisages to project the Bank’s
funding position during temporary and long-term liquidity changes, including those caused by liability erosion and explicitly identifying
quantifying and ranking all sources of funding preferences, such as reducing assets, modifying or increasing liability structure; and
using other alternatives for controlling statement of financial position changes. MCB performs regular liquidity stress tests as part
of its liquidity monitoring activities. The purpose of the liquidity stress tests is intended to ensure sufficient liquidity for the Bank
under both idiosyncratic and systemic market stress conditions. MCB’s liquidity risk management approach involves intraday liquidity
management, managing funding sources and evaluation of structural imbalances in balance sheet structure.
Intraday Liquidity Management

Intraday liquidity management is about managing the daily payments and cash flows. Bank has policies to ensure that sufficient cash
is maintained during the day to make payments through local payment system. The policy of the Bank is to maintain adequate liquidity
at all times, in all geographical locations and for all currencies and hence to be in a position, in the normal course of business, to meet
obligations, repay depositors and fulfill commitments.
Managing Funding Sources

Managing funding sources, as per policy MCB maintain a portfolio of marketable securities that can either be sold outright or
sold through a repurchase agreement to generate cash flows for meeting unexpected liquidity requirement. As a part of liquidity
management MCB maintains borrowing relationships to ensure the continued access to diverse market of funding sources. MCB’s
sound credit rating together with excellent market reputation has enabled MCB to secure ample call lines with local and foreign banks.
The level of liquidity reserves as per regulatory requirements also mitigates risks. MCB’s investment in marketable securities is much
higher than the Statutory Liquidity requirements.
200
43.4.1 Maturities of Assets and Liabilities - Based on contractual maturity of the assets and liabilities of the Bank
2014
Total Up to 1 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Above
month to 3 to 6 months to to 2 to 3 to 5 to 10 10 years
months months 1 year years years years years
(Rupees in ‘000)
Assets
Cash and balances with treasury banks 46,753,804 46,753,804 - - - - - - - -
Balances with other banks 3,015,624 3,015,624 - - - - - - - -
Lendings to financial institutions 1,418,181 1,418,181 - - - - - - - -
Investments - net 511,137,192 16,234,092 55,541,660 60,407,842 60,188,404 136,874,636 48,860,752 78,626,653 52,830,525 1,572,628
Advances - net 303,559,480 74,542,607 73,234,572 46,575,734 32,433,021 22,613,329 19,124,498 24,116,567 8,288,815 2,630,337
Operating fixed assets 31,192,588 173,663 347,325 520,988 1,041,975 2,083,950 2,083,950 4,167,900 10,419,750 10,353,087
Deferred tax assets 415,891 5,458 10,915 16,373 54,386 65,491 263,268 - - -
Other assets - net 37,554,615 12,259,607 13,297,311 894,374 2,490,237 - - 8,613,086 - -
935,047,375 154,403,036 142,431,783 108,415,311 96,208,023 161,637,406 70,332,468 115,524,206 71,539,090 14,556,052
Liabilities
Bills payable 16,627,700 16,627,700 - - - - - - - -
Borrowings 59,542,861 31,414,474 17,371,426 5,297,275 2,750,905 2,708,781 - - - -

Deposits and other accounts 688,329,520 644,377,932 15,891,674 11,450,634 14,845,030 1,400,319 156,796 207,135 - -
Deferred tax liabilities 10,812,991 56,455 59,066 52,682 189,985 1,971,757 578,539 4,751,963 2,477,168 675,376
Other liabilities 29,630,241 13,474,629 3,189,043 5,279,664 2,626,352 3,606,004 478,706 379,352 596,491 -
804,943,313 705,951,190 36,511,209 22,080,255 20,412,272 9,686,861 1,214,041 5,338,450 3,073,659 675,376
Net assets 130,104,062 (551,548,154) 105,920,574 86,335,056 75,795,751 151,950,545 69,118,427 110,185,756 68,465,431 13,880,676

Share capital 11,130,307
Reserves 48,830,005
Unappropriated profit 46,947,863
Surplus on revaluation of assets - net of tax 23,195,887
130,104,062
ANNUAL REPORT 2014
201
202
2013
(Rupees in ‘000)
Assets
Investments - net 449,006,019 100,877,118 213,459,894 11,773,577 13,209,949 26,611,921 39,459,204 26,770,124 15,208,304 1,635,928
Advances - net 248,242,965 84,949,035 31,569,858 42,710,236 33,840,507 17,030,056 14,335,825 16,231,895 6,862,033 713,520
Operating fixed assets 28,595,338 150,145 300,290 450,435 900,869 1,801,738 1,801,738 3,603,476 9,008,690 10,577,957
Other assets - net 26,956,315 7,033,468 8,838,558 1,732,474 2,653,299 - - 6,698,516 - -
815,860,934 255,724,325 254,182,251 56,687,198 50,665,342 45,525,619 55,765,756 53,304,011 31,079,027 12,927,405
Liabilities
Bills payable 10,138,726 10,138,726 - - - - - - - -
Borrowings 38,542,660 19,312,395 10,005,135 4,469,605 2,396,684 2,358,841 - - - -

Deposits and other accounts 632,330,286 588,243,176 19,136,275 8,714,275 15,472,801 217,157 219,938 326,664 - -
Deferred tax liabilities 4,553,936 41,368 9,114 19,953 102,777 378,637 335,693 2,284,833 616,778 764,783
705,629,953 623,819,062 32,017,009 17,926,814 19,982,266 5,625,077 1,233,611 2,883,391 1,377,940 764,783
Net assets 110,230,981 (368,094,737) 222,165,242 38,760,384 30,683,076 39,900,542 54,532,145 50,420,620 29,701,087 12,162,622

Reserves 46,601,214
110,230,981
43.4.2 Maturities of Assets and Liabilities - Based on the working prepared by the Asset and Liabilities Management Committee (ALCO) of the Bank
2014
(Rupees in ‘000)
Assets
Investments - net 511,137,192 16,234,092 55,541,660 60,407,842 60,188,404 136,874,636 48,860,752 78,626,653 52,830,525 1,572,628
Advances - net 303,559,480 42,243,916 39,709,486 27,024,432 11,639,070 53,941,472 52,059,901 56,002,124 18,330,827 2,608,252
Other assets - net 37,554,615 12,259,607 13,297,311 894,374 2,490,237 - - 8,613,086 - -
935,047,375 122,104,345 108,906,697 88,864,009 75,414,072 192,965,549 103,267,871 147,409,763 81,581,102 14,533,967
Liabilities
Bills payable 16,627,700 16,627,700 - - - - - - - -
Borrowings 59,542,861 31,414,474 17,371,426 5,297,275 2,750,905 2,708,781 - - - -

Deposits and other accounts 688,329,520 49,866,453 43,468,710 52,998,330 15,349,942 158,835,417 157,423,589 157,810,537 52,576,542 -
804,943,313 111,439,711 64,088,245 63,627,951 20,917,184 167,121,959 158,480,834 162,941,852 55,650,201 675,376
Net assets 130,104,062 10,664,634 44,818,452 25,236,058 54,496,888 25,843,590 (55,212,963) (15,532,089) 25,930,901 13,858,591

Reserves 48,830,005
130,104,062
ANNUAL REPORT 2014
203
204
2013
(Rupees in ‘000)
Assets
Investments - net 449,006,019 100,877,118 213,459,894 11,773,577 13,209,949 26,611,921 39,459,204 26,770,124 15,208,304 1,635,928
Advances - net 248,242,965 54,755,876 34,665,006 24,564,085 6,087,800 41,703,166 35,809,840 36,780,148 13,192,809 684,235
Other assets - net 26,956,315 7,033,468 8,838,558 1,732,474 2,653,299 - - 6,698,516 - -
815,860,934 225,531,166 257,277,399 38,541,047 22,912,635 70,198,729 77,239,771 73,852,264 37,409,803 12,898,120

Liabilities
Bills payable 10,138,726 10,138,726 - - - - - - - -

Borrowings 38,542,660 19,312,395 10,005,135 4,469,605 2,396,684 2,358,841 - - - -
Deferred tax liabilities 4,553,936 41,368 9,114 19,953 102,777 378,637 335,693 2,284,833 616,778 764,783
705,629,953 84,752,805 68,304,691 42,966,051 20,454,720 148,777,582 144,228,632 146,193,382 49,187,307 764,783
Net assets 110,230,981 140,778,361 188,972,708 (4,425,004) 2,457,915 (78,578,853) (66,988,861) (72,341,118) (11,777,504) 12,133,337

Reserves 46,601,214
110,230,981
Liquidity Gap Reporting

When an asset or liability does not have any contractual maturity date, the period in which these are assumed to mature has been taken as the expected date of maturity. Bank regularly conducts an objective and
systematic behavioral study using regression analysis technique to ascertain the maturity of its non-contractual assets and liabilities. Core and non-core parts of the non-contractual assets and liabilities are segregated
through the behavioral study. Non Core part is placed among the short term maturity buckets i.e. up to 1 Year based on the model results, whereas core part is distributed among the longer terms buckets based on
the discussion and decision by the ALCO. Following percentages are used to distribute the core assets and liabilities among longer term buckets:
Currently following percentages are being used to distribute the core assets and liabilities among longer term buckets:
Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years Over 5 to 10 Years


30% 30% 30% 10%
ANNUAL REPORT 2014

43.5 Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external
events. This definition includes legal risks but excludes strategic and reputational risks.
The Bank’s operational risk management framework, as laid down in the operational risk policy, duly approved by
BOD, is flexible enough to implement in stages and permits the overall risk management approach to evolve in the light of
organizational learning and the future needs of the Bank. Operational loss events are reviewed and appropriate corrective
actions taken on an ongoing basis, including measures to improve control procedures with respect to design and operative
effectiveness.
Operational Risk Management helps the Bank understand risks and improve mitigating controls so as to minimize operational
risks that are inherent in almost all areas of the Bank. Going forward, the Bank will further strengthen its risk function, policies
and procedures to facilitate its operations and improve quality of assets to safeguard interest of depositors.
43.5.1 Operational Risk-Disclosures Basel II Specific
Currently, the bank is reporting operational risk capital charge under Basic Indicator Approach (BIA). However, the Bank took
a number of initiative with respect to operational risk management. The parallel run approval for Alternative Standardized
Approach (ASA) was accorded by SBP during the current year. The bank will initiate further steps for improvement Operational
Risk management in the bank.
Operational loss data pertaining to key risk events is also collected on bank-wide basis. Periodic review and analysis is
prepared for senior management and Risk Management and Portfolio Review Committee (RM&PRC) of the Board. The
report covers the significant risk events with root cause analysis and recommendations for further improvements.
44. GENERAL
Comparative information has been reclassified and rearranged in these financial statements for the purpose of better
presentation. Below reclassification has been made during the year:
Reclassified
Description Amount From To
(Rupees in ‘000)

Finance against foreign bills 898,784 Bills discounted Loans, cash
purchased credits,
(Advances) running
finances etc
(Advances)
45. NON-ADJUSTING EVENT
The Board of Directors in its meeting held on February 12, 2015 has announced a final cash dividend in respect of the year
ended December 31, 2014 of Rs. 4.0 per share (2013: Rs. 3.50 per share) and bonus shares of NIL (2013: 10%). These
financial statements for the year ended December 31, 2014 do not include the effect of these appropriations which will be
accounted for subsequent to the year end.
46. DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue by the Board of Directors of the Bank in their meeting held on February
12, 2015.

205
Annexure - I
1. Particulars of Investments in listed companies & mutual funds-available for sale
Investee Entities Note Number of Paid-up Total paid-up/ Cost as at

shares value per nominal value December
share 31, 2014
Rupees (Rupees in ‘000)
1 Fully Paid-up Preference Shares
Azgard Nine Limited 1,160,241 10 11,602 11,602
Aisha Steel Mills Limited 168,286 10 1,683 1,683
Aisha Steel Mills Limited - right shares 84,143 0 - -
Masood Textile Mills Limited 1.1 5,000,000 10 50,000 50,000
Fully Paid-up Ordinary Shares

Altern Energy Limited 1,000 10 10 31
Archroma Pakistan Limited 127,550 10 1,276 28,456
Attock Petroleum Limited 1,030,476 10 10,305 436,756
Bank Alfalah Limited 14,720,500 10 147,205 421,625
Bank Al-Habib Limited 10,986,528 10 109,865 336,886
The Bank of Punjab 3,500 10 35 30
Engro Corporation Limited 971,200 10 9,712 214,136
Engro Fertilizers Limited 3,487,500 10 34,875 256,414
Fatima Fertilizer Company Limited 9,673,500 10 96,735 317,440
Fauji Cement Company Limited 500 10 5 10
Fauji Fertilizer Bin Qasim Company Limited 13,926,000 10 139,260 610,433
Fauji Fertilizer Company Limited 7,382,700 10 73,827 632,312
Glaxo Smithkline Pakistan Limited 2,193,000 10 21,930 503,304
Habib Metropolitan Bank Limited 9,546,500 10 95,465 334,882
IGI Insurance Limited 2,117,380 10 21,174 460,881
International Steels Limited 4,530,000 10 45,300 108,174
K-Electric Limited 3,000,000 10 30,000 26,599
Kohat Cement Company Limited 743,000 10 7,430 139,864
Kot Addu Power Company Limited 14,085,500 10 140,855 883,455
Lafarge Pakistan Cement Limited 27,247,000 10 272,470 447,545
Mehr Dastagir Textile Mills Limited 1,616,912 10 16,169 16,169
Murree Brewery Company Limited 3,650 10 37 435
National Bank of Pakistan 6,175,500 10 61,755 386,752
National Foods Limited 13,950 5 70 1,566
National Refinery Limited 527,900 10 5,279 106,767
Nestle Pakistan Ltd Limited 10,782 10 108 68,917
NetSol Technologies Ltd 1,883,500 10 18,835 63,401
Next Capital Limited 1,950,000 10 19,500 19,500
Oil & Gas Development Company Limited 235 10 2 52
Pak Elektron Limited 3,657,000 10 36,570 147,722
Pakistan Oilfields Limited 691,795 10 6,918 351,225
Pakistan Petroleum Limited 2,069,218 10 20,692 454,385
Pakistan State Oil Company Limited 40,400 10 404 14,542
Pakistan Telecommunication Company Limited 2,440,000 10 24,400 58,282
PICIC Growth Fund 16,550,000 10 165,500 457,369
PICIC Investment Fund 13,003,500 10 130,035 189,056
Rafhan Maize Products Limited 25,967 10 260 160,587
Saif Power Limited 7,934,500 10 79,345 260,964
Samba Bank Limited 101 10 1 1
Searle Pakistan Limited 653,600 10 6,536 163,174
Siemens Pakistan Engineering Company Limited 11,280 10 113 13,412
Sui Northern Gas Pipelines Limited 55,126,789 10 551,268 2,205,253
Trust Securities & Brokerage Limited 300,000 10 3,000 3,000
Unilever Food Pakistan Limited 867 10 9 1,364
United Bank Limited 3,875,207 10 38,752 517,652
Zulfiqar Industries Limited 35,117 10 351 3,556
Carrying value before revaluation & provision 11,887,621
Provision for diminution in value of investments (1,500,664)
Surplus on revaluation of securities 2,112,015
Market value as at December 31, 2014 12,498,972
206
ANNUAL REPORT 2014
Annexure - I
Fully Paid-up Ordinary Certificate/ Name of Number of Paid-up Total paid-up/ Cost as at
Units of Mutual Funds Management Units value per nominal value December
Company held unit 31, 2014
(Rupees) (Rupees in ‘000)
National Investments Trust National Investment

Trust Limited 110,602 50 5,530 5,253
Carrying value before revaluation & provision 5,253

Provision for diminution in value of investments (1,907)
Surplus on revaluation of securities 3,957
Market value as at December 31, 2014 7,303
1.1 These are redeemable after the end of the fourth year from June 2005 at the option of the issuer either in whole or
multiples of 10% of outstanding issue at a price of Rs. 10 per share plus any accumulated preference dividend. Dividend
rate is 6 months KIBOR + 200 bps per annum.
1.2 Particulars of Investments in listed companies Held for trading
Number of Paid-up Total paid up/ Cost as at

share 31, 2014
Dewan Cement Limited 513,000 10 5,130 4,241
Hascol Petroleum Limited 250,000 10 2,500 19,262
International Industries Limited 97,000 10 970 6,161
Searle Pakistan Limited 71,600 10 716 18,178
United Bank Limited 23,700 10 237 4,488
52,330
207
Annexure - I
2. Particulars of Investment held in unlisted companies-available for sale

Company Name Percentage of Number of shares / Cost as at Net Asset Based on audited Name of Chief Executive
holding certificates held December Value of total financial statements
(%) 31, 2014 investment as at
(Rupees in ‘000)
Shareholding more than 10%

Fully paid up Ordinary Shares/
Certificates/ Units
Pak Asian Fund Limited 10.22% 1,150,000 11,500 19,542 Jun 30, 2014 Mr. Ashfaq A. Berdi
First Women Bank Limited 11.58% 23,095,324 63,300 252,702 Dec 31, 2013 Ms. Tahira Raza
Central Depository Company
of Pakistan Limited 10.00% 6,500,000 10,000 186,657 Jun 30, 2014 Mr. Mohammad Hanif Jakhura
84,800
Shareholding upto 10%

Certificates/ Units

First Capital Investment Limited
National Institute of Facilitation 275,000 2,500 3,651 Jun 30, 2014 Mr. Shahzad Jawahar
Technology Private Limited 1,478,227 1,526 93,421 Jun 30, 2014 Mr. M.M. Khan
National Investment Trust Limited 79,200 100 872,874 Jun 30, 2014 Mr. Manzoor Ahmed
SME Bank Limited 1,490,619 10,106 3,892 Sep 30, 2014 Mr. Ihsan ul haq Khan
Islamabad Stock Exchange Limited 3,034,603 30,346 32,702 June 30, 2014 Mr. Imtiaz Haider
Society for Worldwide Inter
Fund Transfer (SWIFT) 18 1,738 6,453 Dec 31, 2013 Mr. Gottfried Leibbrandt
Credit Information Bureau of Srilanka 300 23 18,252 Dec 31, 2013 Mr. Gamini Karunaratne
Lanka Clear (Private) Limited 100,000 766 5,513 Mar 31, 2014 Mr. S. B. Weerasooriya
Lanka Financial Services Bureau Limited 100,000 766 777 Mar 31, 2014 Mr. Minindu Rajaratne
Pakistan Agro Storage and
Services corporation 2,500 2,500 207,536 Mar 31, 2014 Capt (R) Tariq Masud
Arabian Sea Country Club* 500,000 5,000 - - -
Al-Ameen Textile Mills Limited.* 19,700 197 - - -
Ayaz Textile Mills Limited.* 225,250 2,252 - - -
Custodian Management Services* 100,000 1,000 - - -
Musarrat Textile Mills Limited.* 3,604,500 36,045 - - -
Sadiqabad Textile Mills Limited.* 2,636,100 26,362 - - -
121,227
Cost of unlisted shares/ certificates/ units 206,027
Provision against unlisted shares (77,070)
Carrying value of unlisted shares/ certificates/ units 128,957
* These are fully provided unlisted shares.
208
ANNUAL REPORT 2014
Annexure - I
3. Particulars of investments in Term Finance Certificates and Sukuk Bonds- (refer note 9)
Investee Number of Paid up Total Paid up Profit Principal Redemption Balance as at Name of
certificates held value per Value (before December Chief Executive
certificate redemption) 31, 2014

(Rupees) (Rupees in’000)
LISTED TERM FINANCE CERTIFICATES - available for sale

Askari Bank Limited - issue no. III 50,000 5,000 250,000,000 6 months KIBOR + 2.5% p.a. 0.32% of principal amount in the 249,500 Syed Majeedullah Husaini
for first five years & 6 month 96 months and remaining
KIBOR +2.95% for next principal in four equal semi annual
five years installments starting from the
102nd month from issue.
Bank Alfalah Limited - issue no. IV 100,000 5,000 500,000,000 6 months KIBOR + 2.5% p.a. 0.26% of principal amount 499,000 Mr. Atif Bajwa
in the first 78 months and
remaining principal in three
semi -annual installments
starting from the 84th month.

Allied Bank Limited - issue no. II 37,000 5,000 185,000,000 6 months KIBOR + 0.85% p.a. 0.38% of principal amount 182,153 Mr. Tariq Mahmood
for first five years & 6 months in the first 114 months and
KIBOR+1.30% for next 5 years. remaining principal will be
paid at maturity
Carrying value before revaluation 930,653
Market value of listed TFCs (revalued amount) 941,693
SUKUK BONDS - available for sale Terms of Redemption Rate of Interest Currency
Principal Interest
Government of Pakistan Ijara Sukuks At maturity Half-yearly 6-Month MTB PKR 3,715,236
Auction Weighted
Average Yield.
Deficit on revaluation of securities (49,026)
Market value of Sukuk bonds 3,666,210
209
Annexure - I
TERM FINANCE CERTIFICATES - held to maturity


Bank Alfalah Limited - issue no. V 100,000 5,000 500,000,000 6 months KIBOR + 1.25% p.a. 0.3% of the principal will 481,921 Mr. Atif Bajwa
be redeemed in the first 90 months
and remaining principal of 99.70%
at maturity. First maturity in
the 96th month
Bank Al Habib Limited - issue no. IV 20,000 5,000 100,000,000 Payable six monthly at 6th - 108th month: 0.36%; 99,860 Mr. Abbas D. Habib
15.00% p.a. for first 5 years 114th and 120th
and 15.50% p.a. for month: 49.82% each
next 5 years
for first five years & 6 months in the first 114 months
KIBOR+1.30% for next 5 years. and remaining principal
will be paid at maturity

Askari Bank Limited - issue no. V 120,000 5,000 600,000,000 6 months KIBOR + 1.20% p.a 0.36% of principal amount 600,000 Syed Majeedullah Husaini
remaining principal in 2 equal
semi annual installments of
49.82% each.
NIB Bank Limited 60,000 5,000 300,000,000 6 months KIBOR + 1.15% p.a. Fifteen equal semi-annual 299,940 Mr. Atif R. Bokhari
installments of 0.02% of the
Issue Amount for the first ninety
months followed by remaining
99.70% on maturity at the end
of the ninety sixth month.
Azgard Nine Limited 13,878 5,000 69,390,000 NIL In 7 semi-annual installments 69,390 Mr. Ahmed Shaikh
starting from 24th month
Shakarganj Mills Limited 16,000 5,000 80,000,000 6 month KIBOR +2.25% p.a. In 10 equal semi-annual installments 40,000 Mr. Ahsan Saleem
from March 2012 starting from March 2012 .
Pakistan Mobile Communication Limited 200,000 5,000 1,000,000,000 3 month KIBOR +2.65% p.a. In 17 equal quarterly installments 470,588 Mr. Jeffery Hedberg
starting from 12th month after first
disbursement and subsequently every
three months.
Carrying value of TFCs - HTM 2,293,235
The above excludes unlisted term finance certificates, debentures, bonds and participation term certificates of companies which are fully provided for in these financial statements.
210
ANNUAL REPORT 2014
Annexure - I
4. Details of Bonds, Debentures and Federal Government Securities (refer note 9) - held to maturity
Description Terms of Redemption Rate of interest Currency Foreign Currency Carrying value as
Principal Interest Amount at December 31,
2014
(‘000) (Rupees in ‘000)
Debentures
Bank of Ceylon At maturity Half-yearly Weighted Average LKR 250,000 191,475
Six Month T Bill Rate
(Before Tax) + 0.75 %
Sampath Bank At maturity Half-yearly 13.40% LKR 64,610 49,485
NDB Bank At maturity Half-yearly 13.40% LKR 62,760 48,068
Richard Pieris & Company PLC At maturity Half-yearly 10.75% LKR 43,500 33,317
Siyapatha Finance Limited At maturity Half-yearly 8.90% LKR 100,000 76,590

Commercial papers

Singer (Sri Lanka) PLC At maturity Half-yearly 9.00% LKR 265,243 203,150

Development Bonds
Government of Sri Lanka At maturity Half-yearly 6 Month LIBOR + 400 BP LKR 793,680 607,880
Sukuk Bonds
Maple Leaf Cement Factory In 8 unequal Half-yearly 6 Month KIBOR+1.70% PKR - 203,109
Limited Sukuk Bonds semi-annual installments.

Quetta Textile Mills In 12 equal Half-yearly 6 Month KIBOR+1.50% PKR - 41,380
- 244,489
Euro Bonds
Pakistan Euro Bonds At maturity Half-yearly 7.125% & 6.875 US$ 22,729 2,283,917
5 Investment in subsidiaries
Details of the Bank’s subsidiary companies are as follows:

Name % of holding Country of Year of
incorporation incorporation
MCB Financial Services Limited * 99.99 Pakistan 1992

MNET Services (Private) Limited * 99.95 Pakistan 2001
MCB Trade Services Limited 100 Hong Kong 2005
MCB - Arif Habib Savings & Investments Limited 51.33 Pakistan 2005
“MCB Leasing” Closed Joint Stock Company 95 Azerbaijan 2009
* Remaining shares are held by certain individuals as nominees of the Bank.

6. Summarized financial information of associated undertakings (refer note 9)
The gross amount of assets, liabilities, revenue, profit and net assets of associated undertakings are as follows:
Name of associated Country of Assets Liabilities Net assets Revenue Profit / (loss) % of interest
undertaking incorporation after tax held
(Rupees in ‘000)
2014
(unaudited based on
December 31, 2014) Pakistan 251,701 36,670 215,031 258,208 3,615 30.00%
Adamjee Insurance Company
Limited (unaudited based on
September 30, 2014) Pakistan 29,831,228 16,202,619 13,628,609 4,613,013 * 1,388,740 29.13%
2013
(audited based on

* Represents net premium revenue
211
Islamic Banking Business ANNEXURE - II
Report of Shari’ah Advisor
The Shareholders of MCB Bank Limited ASSETS SIDE:
The year under review was 2014 of Banking Operations, Existing Products:
MCB Islamic banking Group (MCB IBG). The fundamental
objectives of Islamic Banking Group is to design & provide • Corporate Banking products (Based on Islamic
unique Shari’ah complaint efficient products & services. contracts of Murabaha, Ijarah, and Musharakah-
Shirkat-ul-Milk & Shirkat-ul-Aqd)
A lot of work is being done on existing and new liability &
assets side products, catering financial needs & demand of - Maeeshat Murabaha (A Murabaha based facility for
all walk of society, are in finalization stage. working capital finance)
During the year, MCB IBG developed and executed a number - Running Finance Musharaka
of Islamic Commercial Banking products in consultation
with the Shari’ ah Advisor of the Bank. Currently the Bank is - Spot Payment Murabaha facility specially designs for
offering a number of Shari’ ah Complaint Banking Products shipbreaking industry.
on both asset and liability sides which include:
- Pre-shipment Export Financing (An Istisna based
LIABILITY SIDE: facility to finance to finance manufacturing of export
consignment)
For general deposits and treasury functions (Based on
Islamic contract of Mudarabah & Qard): - For Medium & Long Term Finance for Plant, Machinery
& Equipment
Existing Products:
• afaqat Musharaka Financing (A Musharakah
R
- Hifazat Saving Account (A Mudarabah based Saving based facility for tangible asset financing)
Account Product for general depositors, corporate
entities, NBFI’s & non-banking financial intuitions and • an’ at Equipment Ijarah (An Ijarah based facility
S
mutual funds). for tangible assets financing)
- Hifazat Plus Saving Account (A Slab based Mudarabah - Salamat Car Ijarah (An Ijarah based motor vehicles
Saving Account Product for general depositors, financing product)
corporate entities, NBFI’s & non-banking financial
intuitions and mutual funds). - Islamic Export Refinance Scheme (IERS)
- Aasoodgi one year Term Deposits Receipt (TDR) for • Trade Finance Facilities:
senior citizens and widows.
- Bar’aamad Export Financing (A Musharaka based
- Na’mat Term Deposit Account (A Mudarabah based Shari’ ah Complaint alternative for conventional
Term Deposits Receipt (TDR) Product for general banking Foreign Bill Purchased (FBP) Product.
depositors, corporate entities, non-banking financial
intuitions and mutual funds). - Letters of Credit (Sight & Usance) local and foreign.
- Hidayat Current Account (A Qard based Term Current • Kafalat Bank Guarantee (Non funds based facility
Account for general depositors, corporate entities, to issue different guarantees based on Islamic
non-banking financial intuitions and mutual funds). contract of Kafalah):
NEW VARIANT OF ALREADY DEVLOP ASSET SIDE CHARITY

PRODUCTS:
The opening balance of undistributed charity was
- Flee Car Ijarah for Blue Chip Corporate Customers PKR 2,877,000/- During the year under review, PKR
21,804,000/- received from customers on account
- Foreign Currency Import Financing (FCIF) through Spot of charity due to late payments of Bank dues and
Murabaha for Shipbreaking Industry. disbursed PKR 5,000,000/- to registered charitable
institutions. The closing balance of undistributed charity
- Local Currency Financing through Spot Murabaha for is PKR 19,681,000/-.
Shipbreaking Industry.
SHARI’AH COMPLIANCE
- Diminishing Musharakah Based Commercial Vehicles
Financing for Corporate Customers and Modaraba During the year, I visited Islamic Banking Branches and
Sector. observed its general banking operational activities from
Shari ah perspective which I found satisfactory. These
activities included basic Shari’ ah Knowledge of staff
members, display of profit sharing ratio & weightages
of various deposit types for the next month, display of
profit rates of previous month, timely distributed of profit
212
ANNUAL REPORT 2014
7. Though, the Islamic Bankin
ANNEXURE - II
Shari’ah Compliant Staff Fin
Implementation Manual, du
the same is still not availab
to depositors, Shari’ ah compliance of account opening 3. Although, few training programs were arranged Banking Group.but
forms etc. Relevant reports have also been issued by I would like to suggest that Long tenure extensive
the undersigned from time to time. During the year, I also training program should be arranged IBG for is inIBG theand
process of deve
reviewed/verified the assignment of weightages to various Islamic windows staff for better understanding of Islamic
depositors, calculation of profit on monthly basis and its’ banking products & services. of its products to make the pro
distribution, application of profit and loss sharing ratios to market, conforming to the prefe
distributable profit and allocation of funds, which were found 4. Staff Provident Fund of Islamic Banking Group should
Compliance.
satisfactory from Shari’ ah perspective. I have also reviewed be managed under Shari’ ah guidelines & invested in
all credit & Trade transactions executed by the branches and Shari’ ah complaint avenues.
found that the transactions were done as per the approved/ I would like to take this opportunity
suggested mechanism. However, while carrying out the I would like to take this opportunity to offerAllah
praiseand to Almighty
seek his guidance and
Shari’ ah compliance process, the following observations Allah and seek his guidance and Tawfeeq, my wishesexpress
and to for further progress, de
are made to further improve the Shari’ ah compliance of the my wishes for further progress, development and prosperity
of MCB
of Islamic Banking, Alhamdulillah under the sincere effortsIBG and Islamic Banking
transactions:
whole.
of senior management, and Islamic Banking industry in
1. In some Murabaha cases, I advised that soon after Pakistan as a whole.
the goods are procured by the customers as bank’s
agent, offer & acceptance should be executed without
allowing any further period to the customers, because Regards,
Regards,
at this particulars stage, all risk pertaining to ownership
of asset remains with the bank. In case, the asset is
not insured, and faces partial/full destruction within this
grace period, bank shall have to bear the loss, as it may
lead to expose Shari’ ah/bank risks.
Dr. Muhammad Zubair Usmani
2. Though, the bank has started the process of making Dr. Muhammad ZubairAdvisor
Shari’ah Usmani
Takaful arrangement instead of conventional insurance, Shari’ah Advisor
yet Islamic Banking Portfolio must continue the MCB IslamicMCB IslamicGroup
Banking Banking Group
conversion of conventional insurance into Takaful 21st Floor,
21st Floor, MCB MCBTower,Tower,
arrangement. I.I Chundrigar Road, Karachi
I.I Chundrigar Road, Karachi
Dated: February 03, 2015
Dated: January 22, 2013
178
213
ANNEXURE - II
ISLAMIC BANKING BUSINESS

The Bank is operating 27 Islamic banking branches at the end of December 31, 2014 (2013: 27 branches).

2014 2013

Note (Rupees in ‘000)
ASSETS
Cash and balance with treasury banks 611,058 609,797
Balance with other banks - -
Due form financial institution - -
Investments - net 3,707,589 2,817,667
Islamic financing & related assets A-II.1 13,768,034 11,207,333
Other assets 67,535 90,592
20,330,034 16,358,299
LIABILITIES
Bills payable 96,574 107,938
Due to financial institution 515,200 682,770
Deposits and other accounts
- Current accounts 1,127,464 1,302,177
- Saving accounts 1,978,248 2,391,100
- Term deposits 3,122,950 2,765,346
- Others 29,847 96,641
Deposits from financial institution - remunerative 4,728,287 4,609,453
Deposits from financial institution - non- remunerative 12 12
Due to head office 6,427,402 1,898,328
Deferred tax liability - -
Other liabilities 541,245 729,272
18,567,229 14,583,037
1,762,805 1,775,262
REPRESENTED BY
Islamic banking fund 1,500,000 1,500,000
Other reserves - -
Unappropriated profit 243,462 257,952
1,743,462 1,757,952
Surplus on revaluation of assets - net of tax 19,343 17,310
1,762,805 1,775,262
Remuneration to Shariah Advisor / Board 2,150 1,944

CHARITY FUND
Opening balance 2,877 6,892
Additions during the year
Received from customers on delayed payments 20,919 8,208
Profit on charity saving account 885 277
21,804 8,485
Payments / utilization during the year
Social welfare (2,000) (1,000)
Health (2,000) (500)
Education (1,000) (1,000)
Relief and disaster recovery - (10,000)
(5,000) (12,500)
Closing balance 19,681 2,877
214
ANNUAL REPORT 2014
ANNEXURE - II

Profit and Loss Account
2014 2013
(Rupees in ‘000)

Income / return / profit earned 1,237,058 1,120,157
Income / return / profit expensed 807,047 655,873
430,011 464,284
Provision against loans and advances - net 21,136 (129)
Provision for diminution in the value of investments (21,136) -
Bad debts written off directly - -
- (129)
Net profit / income after provisions 430,011 464,413
Other income
Fee, commission and brokerage income 510,037 392,592
Dividend income - -
Income from dealing in foreign currencies 16,137 14,546
Other income 38,685 22,295
Total other income 564,859 429,433
994,870 893,846
Other expenses
Administrative expenses 750,350 635,888
Other provisions / write offs - -
Other charges 1,058 6
Total other expenses 751,408 635,894
Extra ordinary / unusual items - -
Profit before taxation 243,462 257,952
Taxation - Current - -
- Prior years - -
- Deferred - -
- -
Profit after taxation 243,462 257,952
215
ANNEXURE - II

Cash Flow Statement
2014 2013

(Rupees in ‘000)

Profit before taxation 243,462 257,952
Less: Dividend income - -
243,462 257,952
Depreciation on fixed assets 396,904 305,718
Provision against loans and advances - net 21,136 (129)
Provision / (reversal) for diminution in the value of investments - net (21,136) -
Gain on disposal of fixed assets - net (2,256) (2,135)
394,648 303,454
638,110 561,406
Islamic Financing & Related Assets (2,581,837) (1,299,413)
Other assets - net 23,057 1,791
(2,558,780) (1,297,622)
Bills payable (11,364) 19,474
Due to Financial Institution (167,570) 101,719
Deposits and other accounts (177,921) 1,542,550
Other liabilities (188,028) 370,501
(544,883) 2,034,244
(2,465,553) 1,298,028
Income tax paid - -
Net cash flows from operating activities (2,465,553) 1,298,028

Net investments in ‘available-for-sale’ securities (1,009,253) (1,027,120)
Net investments in ‘held-to-maturity’ securities 74,131 173,278
Due to Head office 4,529,075 8,353
Profit remitted to Head Office (257,952) (118,380)
Sale proceeds of operating fixed assets disposed off 61,025 111,171
Investment in operating fixed assets (930,212) (743,707)

Net cash flows from investing activities 2,466,814 (1,596,405)

Injection of capital - 200,000

Net cash flows from financing activities - 200,000
Increase / (decrease) in cash and cash equivalents 1,261 (98,377)
Cash and cash equivalents at beginning of the period 609,797 708,174
Cash and cash equivalents at end of period 611,058 609,797

216
ANNUAL REPORT 2014
ANNEXURE - II

Notes to the annexure II
2014 2013
Notes (Rupees in ‘000)
A-II.1 Islamic Financing and Related Assets

Murabaha A-II.1.1 12,097,673 9,500,229
Ijarah A-II.1.2 108,984 268,721
Diminishing Musharakah A-II.1.3 1,679,147 1,535,016
Gross advances 13,885,804 11,303,966
Provision held (117,770) (96,633)

13,768,034 11,207,333
A-II.1.1 Murabaha
Financing/Investments/Receivables 4,534,519 4,162,888
Advances 1,036,720 756,568
Assets/Inventories 6,526,434 4,580,773
Others - -
12,097,673 9,500,229
A-II.1.2 Ijarah
Financing/Investments/Receivables - -
Advances 108,984 268,721
Assets/Inventories - -
Others - -
108,984 268,721
A-II.1.3 Diminishing Musharakah
Financing/Investments/Receivables 1,554,785 1,305,563
Advances 124,362 229,453
Assets/Inventories - -
Others - -
1,679,147 1,535,016
A-II.2 Type of unrestricted investments/ PLS deposits

2014 2013
(Rupees in ‘000)

Savings accounts 4,029,535 2,422,553
Term Deposits 5,799,950 7,343,346
9,829,485 9,765,899
A-II.2.1 Funds of unrestricted investment / PLS deposit account holders and their equivalent have been considered
as redeemable capital for the purpose of financial accounting and reporting. All the Redeemable capital by
the bank is in Pakistan Rupee.
217
ANNEXURE - II
A-II.3 Rights, obligations and conditions

(a) Rights
It is the right of Unrestricted Investment Accounts/ PLS Deposit Accounts to know
(i) that the pool to which their deposit is to be allocated is identified at the time of accepting the deposit.
(ii) that their deposits are invested in earning assets i.e. financing, investment etc. Such deposits shall not be
invested in non-trading fixed and other assets i.e. land, building, furniture fixtures, computers and IT systems
etc.
(iii) that the Mudarib (Bank) may comingle its own equity (available in liquid/cash form) with the depositor’s funds in
a pool.
(iv) the percentage of Mudarib Share for period concerned and at least two previous periods in each category of
deposits.
(v) the weightages assigned to each category of deposits for period concerned and at least two previous periods.
(b) Obligations
(i) Unrestricted/PLS Deposit account holders are responsible for risk of the pools in which their deposits is
invested.
(ii) In case of loss, the loss is distributed according to the investment ratio among the Unrestricted investment/ PLS
deposits account holders.
(c) Conditions
Premature withdrawals of fixed deposits is allowed as per the approved conditions.
A-II.4 MCB Islamic Banking Division is maintaining following pools for profit declaration & distribution.
I) General Pool
II) IERS Musharakah Pool
III) AAFM Pool
IV) AAFM FCIF Pool Shipbreaking I
V) AAFM FCIF Pool Shipbreaking II
VI) AAFM FCIF Pool Shipbreaking III
Features, risks & rewards of each pool are given below:
I) General Pool
a) Priority of utilization of Funds in the general pool shall be
• Depositor Funds
• Placements/ Investments of other IBI
• Mudaraba placements of MCB (Principal Office)
• Equity Funds
b) Weightages for distribution of profit in general pool

Assignment of weight-age for profit distribution to different type of profit bearing sources of funds is as
follows:
- While considering weight-ages emphasis shall be given to the quantum, type and the period of risk assessed
by following factors.
- Contracted period, nature and type of deposit/ fund.
- Payment cycle of profit on such deposit/ fund, i.e. monthly, quarterly or on maturity
- Magnitude of risk
- Weight-ages for general pool shall be determined & declared on monthly basis prior to commencement of
next month’s business in order to provide an opportunity to the customers/ fund providers to exercise their
option of either to keep or withdraw their deposits/ funds.
Any change in profit sharing weight-age of any category of deposit/ fund providers shall be applicable from the
next month.
218
ANNUAL REPORT 2014
ANNEXURE - II
c) Identification and allocation of pool related income & expenses
The allocation of income and expenses to different pools is being done based on pre-defined basis and
accounting principles as mentioned below:
The direct expenses shall be charged to respective pool, while indirect expenses including the establishment
cost shall be borne by MCB IBIs as Mudarib. The direct expenses to be charged to the pool may include
depreciation of Ijarah assets, cost of sales of inventories, insurance / Takaful expenses of pool assets, stamp
fee or documentation charges, brokerage fee for purchase of securities/commodities etc., impairment / losses
due to physical damages to specific assets in pools etc. However, this is not an exhaustive list; MCB IBIs pool
management framework and the respective pool creation memo may identify and specify these and any other
similar expenses to be charged to the pool.
d) Parameters associated with risk & rewards

Following are the consideration attached with risk & reward of general pool:
- Period, return, safety, security and liquidity of investment
- Financing proposals under process at various stages and likely to be extended in the near future.
- Expected withdrawals of deposits according to the maturities affecting the deposit base.
- Expected amount of procurement of deposit during coming days as a result of concerted marketing efforts of
Islamic Banking Branches & MCB-IBD.
- Maturities of funds obtained from Principal Office, Islamic Banking Institutions and Shariah compliant
organizations as regulated in Pakistan.
- Element of Risk attached to various types of investments.
- SBP rules & Shariah Clearance.
II) IERS Musharaka Pool

All the features and other detail of this pool are in accordance with the SBP IERS Scheme and all circulars and
instructions issued from time to time in this regard.
III) AAFM Pool
a) Priority of utilization of Funds in the AAFM pool shall be

- Mudaraba placements of MCB (Principal Office)
- Equity Funds
b) Weightages for distribution of profit in AAFM pool

Assignment of weight-age for profit distribution to different type of profit bearing sources of funds is as follows:
- While considering weight-ages emphasis shall be given to the quantum, type and the period of risk assessed
by following factors.
- Contracted period, nature and type of deposit/ fund.
- Payment cycle of profit on such deposit/ fund, i.e. monthly, quarterly or on maturity
- Magnitude of risk
- Weight-ages for AAFM pool shall be determined & declared on monthly basis prior to commencement of next
month’s business in order to provide an opportunity to the customers/ fund providers to exercise their option
of either to keep or withdraw their deposits/ funds.
Any change in profit sharing weight-age of any category of deposit/ fund providers shall be applicable from the
next month.

The allocation of income and expenses to different pools is being done based on pre-defined basis and
accounting principles as mentioned below:
depreciation of Ijarah assets, cost of sales of inventories, insurance / Takaful expenses of pool assets, stamp
fee or documentation charges, brokerage fee for purchase of securities/commodities etc, impairment / losses
219
ANNEXURE - II

Following are the consideration attached with risk & reward of AAFM pool:
• Period, return, safety, security and liquidity of investment
• Financing proposals under process at various stages and likely to be extended in the near future.
• Expected withdrawals of deposits according to the maturities affecting the deposit base.
• Expected amount of procurement of deposit during coming days as a result of concerted marketing
efforts of Islamic Banking
• Branches & MCB-IBD.
• Maturities of funds obtained from Principal Office, Islamic Banking Institutions and Shariah compliant
• Element of Risk attached to various types of investments.
• SBP rules & Shariah Clearance.
IV) AAFM FCIF Shipbreaking Pool - I
a) Priority of utilization of Funds in the AAFM FCIF Shipbreaking Pool - I shall be

• Mudarabah placements of MCB (Principal Office)
• Equity Funds
b) Weightages for distribution of profit in AAFM FCIF Shipbreaking Pool - I

• While considering weight-ages emphasis shall be given to the quantum, type and the period of risk
assessed by following factors.
• Contracted period, nature and type of deposit/ fund.
• Payment cycle of profit on such deposit/ fund, i.e. monthly, quarterly or on maturity
• Magnitude of risk
• Weight-ages for AAFM FCIF Shipbreaking Pool - I shall be determined & declared on monthly basis prior
to commencement of next month’s business in order to provide an opportunity to the customers/ fund
providers to exercise their option of either to keep or withdraw their deposits/ funds.
Any change in profit sharing weight-age of any category of deposit/ fund providers shall be applicable from
the next month.
The allocation of income and expenses to different pools is being done based on pre-defined basis
and accounting principles as mentioned below:
insurance / Takaful expenses of pool assets, stamp fee or documentation charges etc., impairment / losses
Following are the considerations attached with risk & reward of AAFM FCIF Shipbreaking Pool - I:

efforts of Islamic Banking Branches & MCB-IBD.
220
ANNUAL REPORT 2014
ANNEXURE - II
V) AAFM FCIF Shipbreaking Pool - II
a) Priority of utilization of Funds in the AAFM FCIF Shipbreaking Pool - II shall be

• Equity Funds
b) Weightages for distribution of profit in FCIF Shipbreaking Pool - II

• Weight-ages for AAFM FCIF Shipbreaking Pool - II shall be determined & declared on monthly basis prior
the next month.
Following are the considerations attached with risk & reward of FCIF Shipbreaking Pool - II:

VI) AAFM FCIF Shipbreaking Pool - III
a) Priority of utilization of Funds in the AAFM FCIF Shipbreaking Pool - III shall be
• Equity Funds
b) Weightages for distribution of profit in FCIF Shipbreaking Pool - III

221

• Weight-ages for AAFM FCIF Shipbreaking Pool - III shall be determined & declared on monthly basis prior
the next month.
Following are the considerations attached with risk & reward of AAFM FCIF Shipbreaking Pool - III:
A-II.5 Net Income / Loss has been allocated between equity and the unrestricted investment/ PLS deposits
accounts in proportion to their respective share in a pool where the equity has been commingled.
A-II.5.1 No restricted pool has been managed therefore no significant category of accounts and the percentage
thereof is maintained during the financial year.
A-II.5.2 No administrative expenses has been charged to unrestricted investment/ PLS deposits accounts during the
financial year.
222
ANNUAL REPORT 2014

A-II.5.3 Percentage for profit allocation between owners equity & various unrestricted investment / PLS deposits accounts
2014 2013

*Equity Share
Minimum 2% 7%
Maximum 61% 31%
*equity share means proportionate equity share for all pools in a profit distribution period.
A-II.5.4 No revenue from banking operations has been shared with unrestricted investment/ PLS deposits accounts during
the financial year.
A-II.6 Classification of assets, revenues, expenses, gain and losses on the basis of sources of finance:the
financial year.
a) Exclusively financed by unrestricted investment/PLS deposits account holders:
No earning assets are solely financed by unrestricted investment/PLS deposits account holders.
b) Exclusively financed by MCB IBD:
No earning assets are solely financed by MCB IBD.
c) Exclusively financed by MCB IBD:
Below are Avenues/sectors of economy/business which are jointly financed by Unrestricted Investment/ PLS
deposits account holders and MCB IBD:
2014 2013
(Rupees in ‘000)
hemical and Pharmaceuticals

C 293,258 304,980
Agribusiness - 5,090
Textile 1,670,182 1,369,692
GOP Ijarah Sukuk 3,756,315 2,821,494
Sugar 37,475 159,159
Production and transmission of energy - -
Commerce / Trade - -
Transport, Storage and Communication - -
Services 124,479 51,034
Individuals - -
Ship Breaking 3,497,006 2,075,472
Food & Tobacco Except Sugar 6,634,897 6,430,141
Others 1,628,807 908,397
17,642,419 14,125,459
A-II.7 Basis of Profit Allocation:

Profit was distributed between Mudarib & Rabb ul Maal with below profit sharing ratio based upon Gross Income
approach (Gross Income less Direct Expenses)
Rabb ul Maal 50%

Mudarib 50%

Charging Expenses

The direct expenses are being charged to respective pool, while indirect expenses including the establishment cost
is being borne by MCB IB as Mudarib. The direct expenses to be charged to the pool may include depreciation of
Ijarah assets, cost of sales of inventories, insurance / Takaful expenses of pool assets, stamp fee or documentation
charges, brokerage fee for purchase of securities/commodities etc., impairment / losses due to physical damages
223
to specific assets in pools etc. However, this is not an exhaustive list; MCB IB pool management framework and the
respective pool creation memo may identify and specify these and any other similar expenses to be charged to the
pool.

Provisions

The general and specific provisions created against non-performing financings and diminution in the value of
investments as under prudential regulations and other SBP directives shall be borne by the MCB IB as Mudarib.
However, write-offs of financings and loss on sale of investments shall be charged to respective pool along with
other direct expenses.

The losses on financings and investments due to misconduct/negligence/breach of contract by MCB IB shall not be
charged to the pool; the MCB IB as Mudarib shall be responsible for absorbing such losses. The financing approved
and disbursed and investment made in contravention to the prudential regulations or the MCB IB’s own policies,
procedures and processes as determined by internal auditor, external auditor and/or SBP inspection team will be
treated as the negligence on the part of the MCB IB.

A-II.8 Mudarib Share (in amount and Percentage of Distributable income)
2014 2013
(Rupees in ‘000) % (Rupees in ‘000) %
Rabb ul Maal 674,103 69 496,915 56

Mudarib 307,390 31 382,588 44
Distributable Income 981,493 879,503

A-II.8.1 No incentive profit has been received by Mudarib (Bank) from the profits of unrestricted investments/ PLS deposits
accounts.

A-II.9 Amount & percentage of Mudarib share transferred to depositors through Hiba

2014 2013
(Rupees in ‘000)
Mudarib Share 307,390 382,588

Hiba 42,598 72,238
Hiba percentage of Mudarib Share 14% 19%

A-II.10 Profit Rate Earned vs Profit rate Distributed to the depositors during the year:

2014 2013
*Profit Rate Earned 9.15% 10.77%

Profit Rate distributed to Depositors 6.66% 6.65%

* The profit rate earned means the return on earning assets.
224
ANNUAL REPORT 2014


A-II.11 Profit Distribution of the Pools jointly financed by MCB IBD and unrestricted investments/ PLS deposit
account holders.
2014
(Rupees in ‘000)
I ncome derived from investment of depositors and others PLS funds

Income from Financing activities 983,227
Income from Investment in Shares and Securities 253,831
Income from Other sources -
- Income from Ijarah Assets 460,842
- Others (Postage, Service Charges, etc.) -
Total Income 1,697,900

Direct Expenses charged to pool(s) 371,604
Write-offs -
Transfer (to)/from Profit Equalization reserve -
Net Income of the pool(s) 1,326,296

Profit distributed to bank (Mudarib fee & equity share) 556,291
Profit distributed to other PLS fund providers 150,599
Profit distributed to Depositors 619,406
1,326,296
A-II.12 Contractual Maturity of unrestricted investments/PLS deposit accounts

2014
Type of unrestricted Total Upto 1 Month Over 1 Months Over 3 Months Over 6 Months Over 1 Year
investment/PLS To 3 Months To 6 Months To 1 Year
Deposit Accounts
(Rupees in ‘000)
Savings 4,029,535 4,029,535 - - - -

Term Deposits 5,799,950 3,211,632 1,159,419 575,405 695,801 157,693
9,829,485 7,241,167 1,159,419 575,405 695,801 157,693
225
226
Statement showing written-off loans or any other financial relief of five hundred thousand or above provided during the year 2014 (Rs. in ‘000)
Sr. No Name & Address of the Borrower Name of Individuals/Partners/Directors Father’s/Husband’s Name Outstanding Liabilities at Beginning of Year Principal Interest/ Other Fin. Total
Written off Markup Reliefs
Name CNIC No. Principal Intt/Acc/Mup Others Total Written off Provided
1 Asia Corporation Muhammad Aslam 33100-1001826-3 Muhammad Ismail - 549 - 549 - - 549 549
P-170, St No. 5, Al Masoom Town, Faisalabad. Muhammad Farhan Aslam 33100-1001826-5 Muhammad Aslam
2 Saeed Anwar Janjua Saeed Anwar Janjua 42301-2750055-9 Muhammad Latif Janjua - 1,420 65 1,485 - - 1,485 1,485
House # 72/1, 8th Commercial Street,
Phase IV- DHA , Karachi.
3 Zeb Rice Pvt. Ltd. Makhdoom Abbas 35202-9786080-9 Amanat Ali - 17,891 163 18,054 - - 18,054 18,054
2-KM, Narowal Road, Muridke. Kashif Amanat Ali 35200-1520481-7 Amanat Ali
Nadeem Abbas 35202-0964542-3 Amanat Ali
Naeem Amanat 35401-1726310-1 Amanat Ali

4 Sheikh Karyana Merchant Sheikh Anwar Ul Haq 35202-3061006-7 Muhammad Hassan - 1,122 - 1,122 - - 1,122 1,122
H-No. 529, Block III, Sector C II, Muhammad Hassan 35202-3061008-9 Allah Baksh
Green Town, Lahore.
5 Ch. Aziz Ur Rehman & Rubina Aziz Ch. Aziz Ur Rehman 35202-5462193-7 Ch. Abdul Raheem - 4,090 77 4,167 - - 4,167 4,167
237 D/II, Johar Town, Lahore. Rubina Aziz 35202-1754926-2 Ch. Aziz Ur Rehman
6 Muhammad Afzaal & Nabila Afzaal Muhammad Afzaal 35201-4362523-5 Malik Muhammad Iqbal - 2,897 - 2,897 - - 2,897 2,897
House # 49, Tufail Block, Nabila Afzaal 35201-6260402-8 Muhammad Afzaal
Canal Bank Scheme, Lahore.
7 Mian Rice Corporation Mian M. Arshad 34101-9980358-7 Ghulam Muhammad - 1,541 - 1,541 - - 1,541 1,541
New Ghalla Mandi, Qila Didar Singh,
District Gujranwala.
8 Malik Muneer Ahmed Malik Muneer Ahmed 35201-4383429-3 Abdul Majeed - 1,938 - 1,938 - - 1,938 1,938
House # 503, G-1 M.A Johar Town, Lahore.
9 Mumtaz Ahmad Warraich Mumtaz Ahmad Warraich 35201-3990110-1 Ch Muhammad Sadiq - 1,749 - 1,749 - - 1,749 1,749
12-KM Lahore Sheikhupura Road,
Kot Abdul Malik, District Lahore.
10 City Petroleum Mubbarik Ali 33104-6255174-9 Feroz Din - 882 - 882 - - 882 882
Chak No. 266/RB, Khurrianwala, Tariq Mehmood 33104-0462801-3 Muhammad Akram
Tehsil Jarranwala, Faisalabad.
11 Sun Enterprises Muhammad Jamil 35201-3089595-1 Bashir Ahmed 300 1,569 150 2,019 - - 1,669 1,669
156 GT Road Baghbanpura, Lahore. Muhammad Saghir 35201-9789997-1 Bashir Ahmed
12 Chancellor Overseas Fiaz Jillani Malik 54548-7874135-1 S/o Riaz Ul Hassan - 858 115 973 - - 973 973
216 DOHS-1 Gujranwalla Cantt. Sarwar Sultana 41549-7987896-5 W/o Riaz Ul Hassan
13 Khan Poultry Breeders Liaqat Ali Khan 61101-2117649-1 Muhammad Zafar Khan 16,995 7,950 278 25,223 - - 8,332 8,332
Flat No. 13, 2nd Floor,
United Centre, Rawalpindi.
14 Kh Qammar Pervaiz Kh Qammar Pervaiz 35201-7452359-1 Kh Abdul Khaliq - 6,883 70 6,953 - - 6,953 6,953
House # 451, Block W, Phase III, DHA, Lahore.
15 Fida Hussain Niazi Fida Hussain Niazi 35202-9213344-1 Ali Ahmed Niazi - 721 9 730 - - 730 730
House #1, Zaildar Street,
Main Bazar Raiwind , Lahore.
16 Jawad Ali Khan Jawad Ali Khan 35200-0143605-7 Sardar Ali Khan - 641 - 641 - - 641 641
House # 42-E, Model Town, Lahore. Ruksana Jawad 35202-1574972-0 Jawad Ali Khan
17 Allah Ditta Allah Ditta 35202-3052017-5 Lal Din - 1,031 - 1,031 - - 1,031 1,031
Ghalib Street, Rajgarh, Lahore.
ANNEXURE - III
18 Al-Syed Garments Syed Riaz Ul Islam 35202-2517681-3 Syed Zulfiqar Islam - 533 - 533 - - 533 533
House # 8, Street 10-B,
Sher Shah Colony, Ichhra, Lahore.
19 Abdul Wadood Alvi & Atta Ullah Alvi Abdul Wadood Alvi 35202-2754995-1 Atta Ullah Alvi - 1,174 - 1,174 - - 1,174 1,174
12-B, Shahzaib Market, Atta Ullah Alvi 35202-2343650-5 Umer Din
9 Cooper Road, Lahore
20 Shahryar Abbas Baloch & Iffat Sultana Shahryar Abbas Baloch 35201-7661137-3 Zawar Hussain Baloch - 1,428 - 1,428 - - 1,428 1,428
House No. 124/1, Block GG, Iffat Sultana 35202-2782002-6 Zawar Hussain Baloch
Phase IV, DHA, Lahore Cantt.
21 786-Friends Filling Station Khalid Mehmood 35404-7311753-1 Muhammad Jameel - 664 - 664 - - 664 664
Sharqpur Road, Sheikhupura. Gull Bahar Khan 35404-7689070-1 Gulzar Ahmad
Javed Iqbal 35404-7312608-1 Muhammad Abdullah
22 Muhammad Shadi Sabri & Co. Allah Rakha 33100-1012435-9 Muhammad Shadi - 748 - 748 - - 748 748
P-2, St# 6, Raja Town, Faisalabad. Muhammad Sarwar 33100-5199472-3 Muhammad Shadi
23 Chemium Innovation Sadia Chaman 42201-6627571-6 Abdul Malik - 523 - 523 - - 523 523
Shop # 2, Ground Floor, Marhaba Centre,
Plot # 396-C, Block 2, P/1 PECHS Karachi.
24 Hussain Builders M. Afzal 34201-0488511-7 M. Hussain - 842 - 842 - - 842
C/o Zaib Builders, Opposite NBP
Main Branch, Bhimber Road, Gujrat.842
25 M. Ashraf Nasir M. Ashraf Nasir 34402-3534381-1 Bashir Ahmed - 644 - 644 - - 644 644
City Top Hotel, Mandi Bahauddin.
26 Mehar Ali Mehar Ali 45502-6796650-7 Muhammad Paryal Buriro 3,969 1,062 67 5,098 - - 935 935
Shahi Bazar, P.O Kandhra, Talluka,
Rohri District Sukkur.
27 Javaid Iqbal & Muhammad Saleem Javaid Iqbal 45402-0938869-9 Muhammad Saleem - 4,639 45 4,684 - - 4,684 4,684
House No: 415, Block EE, Phase IV, Muhammad Saleem 45402-0938380-3 Muhammad Hussain
DHA Lahore.
28 Nazir Ahmed Nazir Ahmed 37405-4108303-9 Abdul Ghani 733 2,460 70 3,263 - - 2,339 2,339
H # 634/1, Afshan Colony, Rawalpindi Cantt.
29 Hajvery Sanitory Store Muhammad Irfan Siddique 35202-3086927-1 Muhammad Siddique Akhtar - 1,230 - 1,230 - - 878 878
27/B, New Shalimar Scheme,
Salamatpura, Lahore.
30 Javaid Iqbal, Javaid Iqbal 35202-3033728-3 Abdul Haq 12,542 3,823 - 16,365 - - 3,905 3,905
289-Riwaz Garden, Lahore.
31 Abid Ellahi Abid Ellahi 13101-0980951-9 Karam Ellahi 240 230 - 470 240 - 264 504
26-B,St # 43, G-8/2, Islamabad.
32 Liaquat Ali Liaquat Ali 31303-2381117-7 Muhammad Boota 118 517 - 635 118 - 578 696
Liaquat Ali House Main St Bast,
Aslamabad Bin Dor Wali, Rahim Yar Khan.
33 Muhammad Jamil Muhammad Jamil 35202-6264235-7 Abdur Razzaq - 679 - 679 - - 718 718
H # 1, Adda Chebeel, GT Road, Batapur, Lahore.
34 Sajjad Iqbal Kiyani Sajjad Iqbal Kiyani 37405-8678320-7 Muhammad Nazir Kiyani 1,674 760 - 2,434 - - 770
H# B-IV-1606, St# 11, Al-Muslim St,
Muslim Town, Rawalpindi.770
35 Malik Zahid Iqbal Malik Zahid Iqbal 35202-2909833-7 Malik Amjad Iqbal 3,157 1,425 - 4,582 - - 1,454 1,454
ANNEXURE - III
87-Mamdot Block, Mustafa Town, Lahore.

ANNUAL REPORT 2014
227
228
36 Muhammad Atif Abbasi Muhammad Atif Abbasi 37405-0471750-9 Muhammad Asif Abbasi 975 562 - 1,537 - - 744 744
St # 3, Gulshan Dadan Khan,
Muree Road, Rawalpindi.
37 Zareen Jaffary Zareen Jaffary 35202-2509315-4 Nawazish Ali Jaffary 2,556 598 - 3,154 - - 765 765
46-B, A-1 Block, Punjab Board of
Revenue Society, Johar Town, Lahore.
38 M. Iqbal M. Iqbal 34101-9421597-1 Fazal Hussain - 534 - 534 - - 534 534
Sialkot Road, Gulzar Colony, Gujranwala.
39 Shah Jahan Traders Rai Alamgir Khan 34302-1263439-9 M. Yaqoob - 1,368 - 1,368 - - 1,368 1,368
Village & P.O Kassisay, Tehsil Pindi Bhattian,
District Hafizabad.
40 3-A Diagnostics Mushtaq Ahmed 35202-4738485-7 Sultan Ahmed 868 1,895 - 2,763 - - 1,522 1,522
365-B, PCSIR Phase-II, Lahore.
41 Modern Agriculture Development Farm Inds. Sheikh Muhammad Ikhlas 35202-0216795-5 Muhammad Sadiq 9,995 1,227 - 11,222 - - 896 896
Opp. Millat Tractor, 8-KM, Muhammad Ejaz Sheikh 35202-6947464-5 Muhammad Sadiq
Sheikhupura Road, Lahore.
42 Hameed & Sons Hamid Mehmood 35202-3859442-9 Sheikh Abdul Hameed - 2,655 - 2,655 - - 2,110 2,110
64-Mcleod Road, Lahore.
43 Asghar Ali Commission Shop M. Ashghar 34302-1128581-5 M. Ameer - 1,617 - 1,617 - - 1,517 1,517
Kot Sarwar, Post Office Sukheki Mandi,
Pindi Bhattian, Distt. Hafizabad.1,517
44 Nasim & Co. Nasim Abbas 34301-1518008-5 M. Akbar - 1,051 - 1,051 - - 887 887
BXXIV-45-166/3A, Muhal Prem Kot,
Tehsil & District Hafizabad.887
45 Babar Enterprises Hafeez-ur-Rehman Babar 34101-9487815-7 M. Shafi - 648 - 648 - - 648 648
Ammar Road, link Muslim Road, Gujranwala.
46 Tahir Javed Khan Tahir Javed Khan 32303-0699281-5 Allah Bux - 707 - 707 - - 707 707
Ward # 14, House # 131, Mohallah Rehmanabad,
Kot Addu, District Muzzafargarh.707
47 Atly Textile Tahir Mehmood Yahya 42201-1547702-9 Taj Muhammad Yahya - 2,695 183 2,878 - - 2,878 2,878
H-6/A, Textile Avenue, SITE, Karachi. Rehana Yahya 42201-6836650-4 Taj Muhammad Yahya
48 Junaid & Co. M. Shahid Quershi 34104-3209964-5 Siraj Din 3,323 1,169 - 4,492 - - 1,112 1,112
Mouza Baddoke, Ghusian, Ghakhar,
District Gujranwala.1,112
49 Khalid Mahmood Khalid Mahmood 33100-3473349-7 Mushtaq Ahmad - 945 - 945 - - 945 945
House No. 12, Street No. 01, Block - B,
Ghulam Muhamadabad, Faisalabad.945
50 Umair Enterprises Sh. Muhammad Akhtar 36101-0268556-9 Karim ud Din - 471 60 531 - - 531 531
By Pass Road, Jahanian Distt. Khanewal. Sh. Muhammad Saleem 36101-7485188-7 Karim ud Din
51 Sheikh Aftab Ahmad Sheikh Aftab Ahmad 36603-6552494-7 Sheikh Altaf Ahmad - 974 - 974 - - 974 974
House # 88-A, Zakriya Town,
Bosan Road, Multan.
52 Malhi Fish Farm Nazir Ahmad Malhi 33101-9125914-9 Muhammad Munshi - 972 - 972 - - 972 972
Chak No. 165/RB, Tehsil Chak Jhumra,
District Faisalabad.
ANNEXURE - III
53 Malhi Dairy Farm Nazir Ahmad Malhi 33101-9125914-9 Muhammad Munshi - 2,626 - 2,626 - - 2,626 2,626
Chak No. 165/RB, Tehsil Chak Jhumra,
District Faisalabad.
54 Muhammad Amir Iqbal Muhammad Amir Iqbal 33100-9604081-1 Muhammad Iqbal Qamar - 572 - 572 - - 572 572
H # P-13, Rachna Town,
Satiana Road, Faisalabad.
55 Shahid Farms Shahid Mahmood 33100-3417421-7 Ghulam Rasool 5,999 1,208 - 7,207 - - 1,267 1,267
House No-92-A, Peoples Colony No. 01,
Faisalabad.
56 Innayat Ullah Khan Niazi Innayat Ullah Khan Niazi 33100-0719029-7 Muhammad Ayub Khan Niazi - 1,853 - 1,853 - - 1,853 1,853
House No. 219, Block B, Gulberg, Faisalabad.
57 Munir Ahmed Malik Munir Ahmed Malik 35201-3357698-7 Muhammad Hussain Malik - 4,934 - 4,934 - - 4,934 4,934
H No. 468, Block-Y, Phase-III, DHA, Lahore.
58 Kamran Butt & Shafqat Inam Kamran Butt 35202-2993519-1 Inam Rasool Butt - 1,412 - 1,412 - - 1,412 1,412
House No. 454, Block - G, Gulshan Ravi, Lahore. Shafqat Inam 35202-2849804-0 Inam Rasool Butt
59 Naseem ur Rehman Naseem ur Rehman 35201-9114309-7 Ghulam Rasool Khan - 1,165 70 1,235 - - 1,061 1,061
H No. 123-E, Nadirabad No 1,
Badian Road, Lahore.
60 Imran Wazir Qureshi Imran Wazir Qureshi 35202-0722979-3 Wazir Ali Qureshi - 2,101 66 2,167 - - 2,167 2,167
House No. 145, Aurangzaib Block,
New Garden Town, Lahore.2,167
61 S & S Tractors Irshad Ali 36601-1215266-9 Sultan Ali - 1,719 - 1,719 - - 1,719 1,719
Multan Road near
Madina Petrolium Services, Vehari.
62 Umar Ahmad Petroleum Services Abdul Rauf 31304-1659978-3 Muhammad Ashraf - 960 - 960 - - 960 960
Ayoob Nagar By Pass, KLP Road, Sadiqabad.
63 Raza Impex Corporation Malik Muhammad Arif 34603-2211322-9 Muhammad Sharif 5,222 2,951 116 8,289 - - 3,054 3,054
Daska Road, Adha District Sialkot.
64 UK Travels Muhammad Faheem Siddique 35202-2982956-9 Zakria Siddique 995 1,954 61 3,010 - - 1,974 1,974
55-B, PCSIR Staff Cooperative Housing Society,
College Road, Lahore.
65 Shalozan Marble (Pvt.) Ltd. Maqsood Khan 17301-6402510-5 Ameer Nawaz 122 3,821 - 3,943 - - 3,823 3,823
Peer Bala, Warsak Road, Peshawar. Raza Ullah Khan 17301-6816847-3 Nasrullah Khan
66 International Fashion Apparels Muhammad Tariq Paracha 42201-7646135-3 Abdul Aziz Paracha 5,164 3,096 - 8,260 - - 3,295 3,295
Plot No. 218, Shah Khalid Bin Abdul Aziz Colony,
Sector 16-A, North Karachi, Karachi.
67 Akber Naeem Akber Naeem 42101-7176262-3 Muhammad Naeem 3,707 1,267 105 5,079 - - 1,345 1,345
House# F-44/3, Block-B, KDA Scheme No. 2,
North Nazimabad, Karachi.
68 Shabbir Ghani Shabbir Ghani 42301-5947141-5 Abdul Ghani 14,961 5,283 205 20,449 - - 4,856 4,856
House No. 20, C/1, Nespak Colony,
Ghazi Chowk, Lahore.
69 Naqeeb ul Hassnain Musavi Naqeeb ul Hassnain Musavi 45504-1102984-3 Syed Badar Hussain Musavi 5,985 1,435 247 7,667 - - 1,795 1,795
Flat# F-7, 2nd Floor, Prime House, Plot# C-2,
Block 9, KDA Scheme No. 5, Clifton, Karachi.
ANNEXURE - III
ANNUAL REPORT 2014
229
230
70 Hassnain Corporation, Naqeeb ul Hassnain Musavi 45504-1102984-3 Syed Badar Hussain Musavi - 947 66 1,013 - - 1,013 1,013
Flat# F-7, 2nd Floor, Prime House,
Plot# C-2, Block 9, KDA Scheme No. 5,
Clifton, Karachi.
71 Muhammad Murad Sheikh Muhammad Murad Sheikh 41303-1528615-9 Pir Bux Sheikh 7,500 3,344 162 11,006 - - 3,640 3,640
House No. A-156, Kalhora Colony,
Jail Road, Hyderabad.
72 Raja Sajid Mehmood Abbasi Raja Sajid Mehmood Abbasi 37405-6359404-3 Sarfraz Abbasi 6,441 1,787 - 8,228 - - 2,231 2,231
H # DK-908, Block A,
Dhoke Paracha, Rawalpindi.
73 Sohail Ahmed Paracha Sohail Ahmed Paracha 37405-8942349-9 Ejaz Hussain Paracha 3,417 647 - 4,064 - - 1,636 1,636
House No. 491, Mouza Ratta Amral, Rawalpindi.
74 Akhlaq Ahmed Malik Akhlaq Ahmed Malik 37405-4304951-3 Malik Muhammad Yousaf 1,781 1,029 - 2,810 - - 1,115 1,115
House NO. 06, Lane No. 02 Ch.
Waliyat Colony Scheme-III, Rawalpindi.
75 Abdul Qayyum Qureshi Abdul Qayyum Qureshi 34104-2356245-1 Feteh Muhammad Qureshi 1,246 1,783 75 3,104 - - 1,783 1,783
H # 210, Block E-1, Wapda Town, Lahore.
76 Mazhar Iqbal Bhatti
H # 46, Kashmir Block, Mazhar Iqbal Bhatti 35200-1556392-7 Ghulam Muhammad Bhatti 4,069 3,178 45 7,292 - - 2,882 2,882
Allama Iqbal Town, Lahore.
77 Malik Zulfiqar Ali Malik Zulfiqar Ali 35202-1751889-9 Malik Muhammad Siddique 2,520 790 45 3,355 - - 866 866
House # 2, AL-Haj Road, khasra # 889, Shakeela Ali 35202-4907252-8 Malik Zulfiqar Ali
Mouza Pakki Thatti, Anwer Park,
Link Bastami Road Lahore.
78 Usman Javed Usman Javed 35202-5335010-7 Javed Iqbal 1,035 576 17 1,628 - - 607 607
House # 380, Block A /3, Gulberg-III, Lahore. Shaheena Javed 35202-8868508-2 Javed Iqbal
79 Naveed Ahmed Anjum Naveed Ahmed Anjum 35202-2969677-5 Chaudhry Abdul Majeed 10,266 4,099 296 14,661 - - 4,553 4,553
House No. 111, Block J, Model Town, Lahore.
80 Amjad Mumtaz Amjad Mumtaz 35202-7994134-1 Muhammad Bashir 2,715 752 178 3,645 - - 882 882
House No. 17 - X, Shad Bagh, Lahore.
81 Syed Zafar Shah Syed Zafar Shah 35202-4258591-1 M Arif Shah 3,017 12,478 - 15,495 - - 13,930 13,930
134-A, Rachan Block, Allama Iqbal Town, Lahore.
82 Saad Traders Muhammad Naeem 35402-2002215-9 Mian Muhammad Rafique - 2,021 - 2,021 - - 1,220 1,220
Ghalla Mandi, Warburton, District Nankana Sahib.
83 Al-Madina Traders Muhammad Ali 33106-0343640-5 Muhammad Siddique 500 770 - 1,270 - - 578 578
Sarafa Bazar, Tandlianwala, Faisalabad.
84 Mian Zulfiqar Traders Zulfiqar Ahmed 35404-1308637-5 Mukhtar Ahmed - 1,349 - 1,349 - - 1,106 1,106
Sharqpur Road, Sheikhupura.
85 Al Noor Petroleum Javed Akhtar 33201-6490717-7 Nazir Ahmad - 1,192 - 1,192 - - 596 596
Mohallah Barhanga Lalian,
Tehsil Chiniot, Distt. Jhang.
86 Abdul Sattar Abdul Sattar 38302-1147401-7 Mola Bakhsh 1,997 568 78 2,643 - - 678 678
Katchery Road, Mianwali.
87 Rana Muhammad Nadeem & Bros. Rana Nadeem 38103-2167252-5 Muhammad Yameen - 460 117 577 - - 577 577
Main Bazar, Nawan Jandanwala,
ANNEXURE - III
Tehsil Kallurkot, Dist. Bhakkar.577

88 Muhammad Haroon Khatr Muhammad Haroon Khatri 42201-7736839-7 Barkat Ali 12,806 6,979 - 19,785 - - 16,825 16,825 i
WH-4, H # D-12, Block 17,
Gulshan e Iqbal, Karachi.
89 Taj Mahal Zari Palace Ansar Iqbal 61101-2493263-7 Muhammad Iqbal - 1,482 - 1,482 - - 1,482 1,482
Shop # 8, AL-Sheikh Plaza, Shahzad Akbar 37405-3641868-9 Sheikh Inyat Ullah
Chandni Chowk, Rawalpindi.
90 New Ever Gold Furniture Muhammad Amjad 42201-3245678-5 Muhammad Ayub 3,922 2,715 101 6,738 - - 2,834 2,834
House No. A-46, Wasim Bagh, Block-13, Muhammad Aslam 42201-0799587-1 Muhammad Ayub
D-2, K.D.A Scheme No. 24,
Gulshan-e- Iqbal, Karachi.
91 Mian Traders Mian Shoaib Ahmed 34301-1289218-1 Mian M. Tufail - 552 - 552 - - 552 552
Ghalla Mandi East, Hafizabad.
92 Softnet Saeed Ahmed 34301-2661300-9 Allah Baksh - 522 - 522 - - 522 522
Madharianwala Road, Hafizabad.
93 Khalid Ehsan Khalid Ehsan 34301-1737877-9 Sana Ullah - 584 - 584 - - 584 584
Allaow Din Ke Chatha, Hafizabad.
94 Muhammad Aslam Muhammad Aslam 38202-9004052-3 Said Rasool 1,519 2,845 - 4,364 - - 2,893 2,893
VPO Adhi Sargal, Tehsil Noorpur, Distt. Khushab.
95 Hussain Abad Filling Station Malik Zulfiqar Ahmed 17301-2437379-5 Malik Ghulam Hussain 2,500 1,248 110 3,858 - - 1,380 1,380
Hussainabad Colony, Gul Bahar Road, Peshawar.
96 Rizwan Haider Rizwan Haider 35202-6599591-5 Sheikh Rajab Ali 3,695 821 131 4,647 - - 1,094 1,094
House # 256, Block-E, Phase – I,
Punjab Co-operative Housing Society Ltd.,
Defence Road, Lahore.
97 Muhammad Azeem Muhammad Azeem 35202-0310761-9 M Saleem 4,043 1,033 82 5,158 - - 1,177 1,177
H No. 3, ST. No. 28,
Mohallah Qilla Gujjar Singh Lahore.
98 Muhammad Imran Hasni Muhammad Imran Hasni 34104-8499032-9 Muhammad Afzaal 4,590 1,633 67 6,290 - - 1,356 1,356
House 18/B, Behind Jail Road, Lahore.
99 Mian Zubair Ahmed Mian Zubair Ahmad 33100-7969198-1 Zia ul Haq Naeem 2,996 3,326 - 6,322 - - 2,708 2,708
P-82, Gole Kiryana Bazar Faisalabad.
100 Muhammad Naseem & Faisal Naseem Muhammad Naseem 38403-7544540-1 Muhammad Din 2,801 1,579 - 4,380 - - 1,560 1,560
Chak No.116-SB , Sargodha. Faisal Naseem 38403-5668794-3 Muhammad Naseem
101 Saeed Ahmad Saeed Ahmad 33100-8695531-9 Manzoor Ahmad 2,495 1,757 - 4,252 - - 1,926 1,926
House No 341/D, Zaib Clinic,
People Colony, Faisalabad.
102 Muhammad Shahid Muhammad Shahid 33100-1229474-7 Khushi Muhammad 999 869 - 1,868 - - 892 892
House No. 163-164,
Gulistan Colony, Block H, Faisalabad.
103 Mirza Muhammad Farooq Mirza Muhammad Farooq 33100-6153941-1 Mirza Abdul Majeed 5,302 1,138 - 6,440 - - 1,412 1,412
Lodhi Chowk, House No. 91/1,
Batala Colony, Faisalabad.
104 Al Nafiu Engineering and Trading Concern Nosheen Azhar 35202-4397902-8 Ali Raza Husnain 6,000 5,393 202 11,595 2,000 - 5,755 7,755
Street No. 01, Katar Bund Road,
Thokar Niaz Baig, Lahore.
ANNEXURE - III
ANNUAL REPORT 2014
231
232
105 Texcellence Wajih-ud-Din 35202-2030145-5 Ghias-ud-Din 3,489 1,299 66 4,854 - - 1,407 1,407
House # 252, Block G-3, Johar Town, Lahore.
106 Muhammad Azmat Chaudhary Muhammad Azmat Chaudhary 35202-9973356-3 Ch. Muhammad Sharif 354 956 102 1,412 - - 727 727
House No. 64, Ravi Block,
107 Babar Nisar khan and Gulshan Ara. Babar Nisar 35202-2352094-9 Nisar Ahmed Khan 4,040 903 75 5,018 - - 1,137 1,137
House No. 42-A, Khyber Block, Gulshan Ara 35202-2261606-8 Nisar Ahmed Khan
108 Hassan Majid & Abdul Majid Hassan Majid 35202-5362446-1 Abdul Majid 2,534 5,466 17 8,017 - - 5,522 5,522
H # 80, Afzal Town, Baghat Pura, Abdul Majid 35202-2505384-3 Mehar Laba
Shadbagh, Lahore.
109 Talat Waseem Talat Waseem 37405-3335951-5 Qazi Allaudin - 2,502 - 2,502 - - 2,502 2,502
78/4-A, Block-A, Satellite Town, Rawalpindi.
110 Capital Industries (Pvt.) Ltd. Kamran Afzal 35202-5013880-1 Muhammad Afzal Hameed 57,400 70,155 1,900 129,455 - - 73,714 73,714
2-A-1, Race Course Road, Lahore. Yousaf Waqar 35202-2868513-9 Waqar Ahmed Sheikh
Sheikh Zubair Ahmed 35202-3988608-5 Sheikh Nazir Ahmed
111 Ace Indigo Transformers (Pvt.) Ltd. Gohar Yasin Chaudhary 35202-3727410-9 Muhammad Yasin Chaudhary 75,399 28,334 1,500 105,233 15,182 - 32,247 47,429
172-A, Canal View Housing Society, Lahore. Shazia Gohar 35202-1375143-0 Mr. Gohar Yasin Chaudhary
112 Sh. Muhammad Naseeb Sh. Muhammad Naseeb 35201-0696997-9 Muhammad Shabbir 2,000 850 18 2,868 - - 950 950
161-Shalimar Link Road, Lahore.
113 Jehanzeb Saeed Jehanzaib Saeed 35202-8509552-9 Muhammad Saeed 1,137 993 84 2,214 - - 1,051 1,051
House No.475 - E, Phase I, Punjab
Cooperative Housing Society, Lahore - Cantt.
114 Nasir Ahmed Nasir Ahmed 35201-1569254-7 Imdad Hussain 782 2,634 19 3,435 - - 2,256 2,256
House No 19 A, Block A ,
Fort Villas , Lahore Cantt.
115 Abdul Hameed Abdul Hameed 42201-5215526-1 Rehmatullah 657 413 - 1,070 132 - 443 575
3rd Floor, 2-B Street, Kahayban-e-Jami,
Phase-II Ext, DHA, Karachi.
116 Ch M Amjad Shahzad Ch M Amjad Shahzad 35202-2918259-5 Ch M Shafi 11,412 4,670 - 16,082 - - 4,949 4,949
17, College Block, Allama Iqbal Town, Lahore.
117 Muhammad Mairaj Uddin Muhammad Mairaj Uddin 42101-1714012-3 Muhammad Noor Ul Islam 8,989 4,485 - 13,474 - - 5,779 5,779
House # B-42, Block-12, F.B. Area, Karachi.
118 Pak Poultry Services M. Mansha Cheema 34101-2588151-7 M. Abdullah 2,669 653 - 3,322 - - 720 720
GT Road, Gujranwala.
119 Rehman Kiryana & General Store Asif Rehman 38403-8915380-9 Abdul Rehman - 1,252 - 1,252 - - 1,252 1,252
65-Urdu Bazar, Chowk Sabzi Mandi, Sargodha.
120 Muhammad Iqbal Muhammad Iqbal 33202-1355086-9 Siraj Din 1,133 999 - 2,132 - - 785 785
House No. 447/2, Elahi Bukhsh Colony,
Main Bazar, Jhang Saddar.
121 Malik Petroleum Services Malik Fateh Sher 38302-8755920-5 Haji Alam Sher - 781 - 781 - - 731 731
House No. 1, Sargodha-Mianwali Road,
Shadia Janubi, Mianwali.
ANNEXURE - III
122 Shaheen Atta Sheikh Shaheen Atta Sheikh 37405-0652845-5 Sheikh Atta Allah - 1,133 40 1,173 - - 1,173 1,173
House # 15, Street # 08, Sector D,
Phase 1, DHA, Islamabad.
123 Sajjad Traders Aamar Zahoor 36601-8413015-7 Zahoor Ahmad 999 866 - 1,865 - - 866 866
Shop No.03, Ghalla Mandi, Burewala. Rehan Zahoor 36601-2862015-1 Zahoor Ahmad
Sajjad Zahoor 36601-6528719-9 Zahoor Ahmad
124 Star Horizen (Pvt.) Ltd. Mohamed Unais Ziyard 650101626V N/A 4,309 5,053 - 9,362 - - 4,084 4,084
No.15, Tickell Road, Colombo - 08. Fathima Shizaa Ziyard 736850443V
125 D B Exim (Pvt.) Ltd. Dr.Doraisami Venkateshwaran 730313250V N/A 4,700 2,872 - 7,572 - - 1,546 1,546
307, 3rd Floor, George R De Silva, Sivalingam Raveendran 691763730V
Mawatha, Colombo-13. K. Aruna Priyankara 773132151V
126 Rai Enterprises M. Amir 34301-1757174-3 Sardar Khan - 1,388 - 1,388 - - 1,388 1,388
Village Lakhiya, District Hafizabad.
127 Rafaqat Hayat Bhatti Rafaqat Hayat Bhatti 34301-8437475-1 Aslam Hayat 1,300 515 - 1,815 - - 540 540
Muhal Karak, Tehsil & District Hafizabad.
128 Faisal Ijaz Bajwa Faisal Ijaz Bajwa 33100-1092829-1 Ijaz Ahmad Bajwa 2,071 2,589 - 4,660 - - 2,663 2,663
House No. 517, F Block,
Gulistan Colony, No. 01, Faisalabad.
129 Muhammad Shareef & Parveen Muhammad Shareef 35201-3908922-1 Din Muhammad 8,986 3,850 167 13,003 - - 2,564 2,564
Hadbast Mauza Devipura, Parveen Begum 35201-0836648-2 Muhammad Shareef
Tehsil cantt, District Lahore.
130 Muhammad Najeeb Muhammad Najeeb 61101-5157357-3 Ch Sanaullah 1,764 1,843 - 3,607 - - 2,207 2,207
H. No. 298, St # 18, G-10/2, Islamabad.
131 Khurram Electric Concern Rab Nawaz 37405-0312251-3 Abdur Rahim 1,982 1,247 - 3,229 - - 593 593
House No. N/269, Mohalla Waris Khan,
Rawalpindi.
132 Hassan Indutries Abdul Rauf 33100-1128735-5 Ahmed Din 9,067 4,101 - 13,168 - - 4,590 4,590
P-67, Maqbool Road, Faisalabad.
133 Syed Petroleum Syed Zeeshan Elahi 33100-9421835-9 Syed Shabbir Hussain - 2,373 - 2,373 - - 2,373 2,373
Main Jhumra, Near Awani Bazar, Syed Ehsan Elahi 33100-8764384-9 Syed Shabbir Hussain
Commercial Market, Faisalabad.
134 Shakeel Plastic Shakeel Sharif 35201-1360899-7 Muhammad Sharif Tahir 3,654 958 80 4,692 - - 1,232 1,232
House No. 3/B, Street No 25, Malap Street,
Dars Road, Baghbanpura. Lahore.
135 Fara Metal Crafts Muhammad Asif Khan 34102-2834525-9 Abdul Aziz Khan 1,444 1,645 141 3,230 - - 1,759 1,759
45-KM, G T Road, Kamonke, District Gujranwala. Muhammad Salman Asif Khan 35202-0708003-3 Muhammad Asif Khan
Muhammad Wajid Ali Khan 34102-3751513-5 Abdul Aziz Khan
136 Mola Ali & Co Ihsan Ullah 34301-2350615-3 Noor Muhammad - 5,602 - 5,602 - - 5,602 5,602
Thatta Garha, Tehsil & District Hafizabad.
137 Tahir Corporation M.Rafique,(Late) 301-45-258280 Hasan ud din 2,222 5,452 90 7,764 - - 5,765 5,765
128-C, Small Industrial Estate, Sialkot. M.Tahir Rafique (Late) 300-93-414351 Muhammad Rafique
M.Amir Rafique 34603-4346815-9 Muhammad Rafique
M.Kamir Rafique 300-77-414355 Muhammad Rafique
138 Prime Gas (Pvt.) Ltd. Javed Iqbal 35202-9566584-5 Abdul Razzak 3,827 2,534 113 6,474 - - 2,692 2,692
Suit No. 1, Plot No. 624, Mian Plaza, Rukhsana Javed 35202-7365262-8 Javed Iqbal
Block G/1 Market, Johar Town, Lahore. Umar Javed 35202-1719947-1 Javed Iqbal
ANNEXURE - III
ANNUAL REPORT 2014
233
234
139 Shuja Farid Shuja Farid 35200-9756697-5 Sh. Zaheer Ahmed - 4,304 66 4,370 - - 4,370 4,370
House # 222, Block-S, DHA, Lahore.
140 Adnan Ahmed Amin & Safia Amin Adnan Ahmed Amin 35201-9003760-7 CH Muhammad Amin - 3,503 19 3,522 - - 3,522 3,522
House No. 68, Street No 2, Cavalary Ground, Safia Amin 35201-8779856-6 CH Muhammad Amin
Officer Colony, Lahore Cantt.
141 S.T Stores Muhammad Ali Tahir 42301-0800778-5 Muhammad Saeed Bari 6,992 2,613 136 9,741 - - 3,035 3,035
Shop No. 50, 2nd Floor, Glamour One,
Tariq Road, Karachi.
142 Muhammad Yasin Muhammad Yasin 42301-7253383-9 Abdul Sattar 8,395 4,722 87 13,204 - - 5,066 5,066
D-801, FT 16/3, Mehran Square,
Frere Town, Clifton, Karachi.
143 Muhammad Iqbal Hashmani Muhammad Iqbal Hashmani 42201-6242358-3 Abu Bakar 6,598 4,764 145 11,507 - - 5,029 5,029
House No. 130-L, Block -2, P.E.C.H.S, Karachi.
144 Kissan Textile Industries (Pvt.) Ltd. Naseer Ahmad 31303-1217689-7 Ali Muhammad - 4,695 100 4,795 - - 4,795 4,795
By Pass Road, Rahim Yar Khan. Tanveer Ahmad 31303-2452034-3 Naseer Ahmad
Tanzeer Ahmad 31303-2452036-1 Naseer Ahmad
Zaheer Ahmad 31303-2452037-3 Naseer Ahmad
145 Data Bakers and General Store Malik Muhammad Asif 37405-7554015-3 Malik Muhammad Ashiq 4,465 3,276 - 7,741 - - 3,610 3,610
House # B-IV/285, Street No.03,
Muslim Town, Rawalpindi.
146 Rana Muhammad Saleem Rana Muhammad Saleem 35202-2668944-7 Rana Faiz Muhammad 10,778 4,349 - 15,127 - - 4,979 4,979
170, G-III, Johar Town, Lahore.
455,320 411,396 8,959 875,675 17,672 - 432,677 450,349
ANNEXURE - III
ANNUAL REPORT 2014
ANNEXURE - IV
Disposal of operating fixed assets (refer note 11.2.3)

Description Cost/revalued Accumulated Book Sales proceeds Mode of disposal Particulars of Location
amount depreciation value /insurance claim /settlement buyers
(Rupees in ‘000)
Furniture and fixture, electrical,
computers and office equipment
Items having book value in aggregate more
than Rs. 250,000 or cost of more than
Rs. 1,000,000 5,394 4,888 506 1,154 Claim AdamJee Insurance Company Lahore
5,359 5,341 18 37 Auction/Quotation M/S 3rd Generation Solutions Islamabad
46,731 46,723 8 - Write Off Karachi
2,179 2,179 - 118 Auction/Quotation M/s Innovative Pvt Ltd. Karachi
1,344 1,344 - 199 Auction/Quotation M. Farooq Potha Bansi AJ Faisalabad
5,538 4,477 1,061 205 Auction/Quotation M/S Farhan & Company Karachi
66,545 64,952 1,593 1,713
Items having book value of less than

Rs. 250,000 or cost of less than Rs. 1,000,000 12,589 10,935 1,654 2,378 Auction/Quotation Different Buyers All Pakistan
Vehicles
Vehicles having book value of less than
Items having book value in aggregate more than
Rs. 250,000 or cost of more than Rs. 1,000,000
Suzuki Cultus 1,040 236 804 900 Claim M/S Adam Jee Insurance Karachi
Toyota Corolla 1,389 1,111 278 950 Auction Muhammad Nasir Khan Lahore
Toyota Corolla 1,749 373 1,376 1,535 Claim M/S Adam Jee Insurance Karachi
Honda Civic 1,800 1,440 360 1,185 Auction Abdul Ahad Lahore
Honda Civic 1,905 1,397 508 1,255 Auction Muhammad Tauseef Khan Lahore
Honda Civic 1,941 1,035 906 1,510 Auction Mr. Rana Khalil Ur Rehman Lahore
Toyota Hilux 2,290 1,832 458 867 Auction Muhammad Arif Lahore
Honda Accord 2,410 1,928 482 1,375 Auction Asim Nadeem Lahore
Mercedes Benz 3,950 3,160 790 2,750 Auction Kamran Jehangir Lahore
19,876 13,633 6,243 13,285
Car Ijarah
Mercedes Benz 9,952 2,124 7,828 8,065 Buy Back EFU Insurance Ltd Lahore
Toyota Corolla 1,437 1,437 - 370 Buy Back Niaz Arshad Malik Lahore
Honda Civic 1,912 1,361 551 551 Buy Back Mehboob Ali Lahore
Honda City 1,609 1,454 155 155 Buy Back Big Bird Poultry Lahore
Toyota Corolla GLI 1,740 1,572 168 168 Buy Back Big Bird Poultry Lahore
Honda Civic -VTI 1,730 1,396 334 334 Buy Back Mr. Jhazaiab Khan Banth Faisalabad
Suzuki Swift 1,003 565 438 541 Buy Back Interloop Ltd Faisalabad
Suzuki APV 1,736 1,568 168 167 Buy Back Interloop Ltd Faisalabad
Suzuki Cultus 1,038 250 788 855 Buy Back Interloop Ltd Faisalabad
Toyota Avanza 2,191 1,977 214 214 Buy Back Interloop Ltd Faisalabad
Toyota Corolla GLI 1,309 881 428 451 Buy Back Pakistan Tobacco Company Islamabad
Honda Civic -VTI 2,045 1,451 594 593 Buy Back Konnect Holden Pvt Ltd Islamabad
Suzuki Alto 771 485 286 308 Buy Back Konnect Holden Pvt Ltd Islamabad
Toyota Corolla GLi 1,444 503 941 1,012 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla GLi 1,682 537 1,145 1,198 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla GLi 1,309 349 960 1,009 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla Altis 1,399 649 750 802 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla Gli 1,354 736 618 669 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla Gli 1,749 342 1,407 1,424 Insurance Claim Pakistan Tobacco Company Islamabad
Toyota Corolla Gli 1,749 498 1,251 1,301 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla Altis 2,226 259 1,967 1,925 Insurance Claim Pakistan Tobacco Company Islamabad
Toyota Corolla Altis 1,489 532 957 1,027 Insurance Claim Pakistan Tobacco Company Islamabad
Toyota Corolla Gli 1,309 711 598 645 Buy Back Pakistan Tobacco Company Islamabad
Toyota Camry 3,605 3,065 540 540 Buy Back Pakistan Tobacco Company Islamabad
Suzuki Mehran 554 392 162 161 Buy Back Konnect Holden (Pvt) Ltd Islamabad
Suzuki Cultus 942 753 189 189 Buy Back Capital Strategies Group Pvt Ltd Islamabad
Suzuki Bolan 684 547 137 136 Buy Back Capital Strategies Group Pvt Ltd Islamabad
Suzuki Cultus 790 713 77 77 Buy Back Interloop Ltd Faisalabad
Suzuki Cultus 962 869 93 94 Buy Back Grand Parent Poultry Lahore
Suzuki Mehran 604 545 59 59 Buy Back Grand Parent Poultry Lahore
Suzuki Mehran 533 456 77 77 Buy Back Big Bird Poultry Lahore
Mercedes E250 CGI 5,405 2,393 3,012 3,283 Buy Back Pakistan Tobacco Company Islamabad
Suzuki Swift 1,151 819 332 332 Buy Back Konnect Holden (Pvt) Ltd Islamabad
Toyota Corolla Xli 1,255 741 514 549 Insurance Claim Pakistan Tobacco Company Islamabad
Toyota Corolla Altis 2,173 836 1,337 1,396 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla GLi 1,422 730 692 762 Buy Back Pakistan Tobacco Company Islamabad
Toyota corolla GLi 1,745 478 1,267 1,322 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla GLi 1,354 720 634 721 Buy Back Pakistan Tobacco Company Islamabad
91,908 44,630 47,278 49,528
Equipment Ijarah
Cages for Birds 37,166 33,450 3,716 3,717 Buy Back Bigbird Poultry Lahore
Cages for Birds 16,200 12,250 3,950 3,950 Buy Back Grand Parent Poultry Lahore
91,666 80,170 11,496 11,497
2014 322,030 245,966 76,064 107,184
2013 354,245 223,843 130,402 173,089
235
ANNEXURE - V
Summarized detail of the valuation of owned properties (refer note 11.2.1)
City Land Building Total

(Rupees in ‘000)
Abbottabad 22,000 19,856 41,856

Bahawalpur 78,012 24,445 102,457
Chakwal 2,000 1,920 3,920
Dera Gazi Khan 18,450 20,000 38,450
Faisalabad 812,308 223,618 1,035,926
Gawadar 1,900 9,000 10,900
Gujranwala 221,044 172,238 393,282
Gujrat 78,500 42,216 120,716
Hafizabad 27,000 14,782 41,782
Haripur 28,453 2,958 31,411
Haroonabad 20,000 5,240 25,240
Hyderabad 185,498 87,118 272,616
Islamabad 1,317,210 416,652 1,733,862
Jehlum 55,000 32,817 87,817
Jhang 124,110 30,715 154,825
Karachi 4,666,793 2,974,623 7,641,416
Kasur 16,380 2,390 18,770
Khairpur 1,442 3,183 4,625
Khanewal 13,500 2,800 16,300
Kohat 4,650 - 4,650
Khanpur 24,040 14,420 38,460
Lahore 4,972,779 2,305,651 7,278,430
Larkana 47,735 13,601 61,336
Mianwali 19,125 35,443 54,568
Mirpurkhas 11,040 3,726 14,766
Multan 139,600 332,878 472,478
Muree 15,000 991 15,991
Muridke 45,000 25,453 70,453
Muzafarabad 128,373 52,979 181,352
Nawabshah 18,270 10,339 28,609
Okara 26,275 12,524 38,799
Peshawar 114,375 16,726 131,101
Quetta 284,696 59,803 344,499
Rahim Yar Khan 9,915 5,740 15,655
Rawalpindi 448,536 168,514 617,050
Sadiqabad 26,667 4,842 31,509
Sahiwal 52,094 13,826 65,920
Sargodha 140,986 20,825 161,811
Sheikhupura 56,000 13,112 69,112
Sialkot 94,000 20,895 114,895
Sukkur 48,288 16,656 64,944
Swat 56,500 6,715 63,215
Vehari 11,000 7,330 18,330
Wazirabad 15,000 7,274 22,274
Overseas - 82,648 82,648
Grand total 14,499,544 7,339,482 21,839,026
236
MCB Bank Limited
Consolidated Financial Statements
Director’s Report
On Consolidated Financial Statements
The Board of Directors present the report on the consolidated financial statements of MCB Bank Limited and its subsidiaries
namely MCB-Arif Habib Savings & Investments Limited, MCB Financial Services Limited, MNET Services (Private) Limited,
MCB Trade Services and MCB Leasing Closed Joint Stock Company for the year ended December 31, 2014.
The following appropriation of profit has been recommended by the Board of Directors
(Rs. in ‘000)
Profit before taxation 37,354,022

Taxation (12,579,576)
Profit after taxation 24,774,446
Profit attributable to minority interest (118,859)
Profit attributable to ordinary shareholders 24,655,587
Un-appropriated profit brought forward 43,038,094

Re-measurement of defined benefits plans - net of tax 139,500
Transfer from surplus on revaluation of fixed assets - net of tax 47,941
43,225,535
Profit available for appropriation 67,881,122
Appropriations:
Statutory Reserve 2,432,476
Issue of Bonus Shares - December 2013 1,011,846
Final Cash Dividend - December 2013 3,541,461
Interim Cash Dividend - March 2014 3,339,092
Interim Cash Dividend - June 2014 3,895,608
Interim Cash Dividend - September 2014 3,895,608
Total Appropriations 18,116,091
Un-appropriated profit carried forward 49,765,031
The pattern of shareholding as at December 31, 2014 is annexed in annual report.
Earnings per Share

The consolidated financial statements reflect Rs. 22.15 earnings per share for the year under review.
On behalf of Directors

February 12, 2015 Chairman
238
ANNUAL REPORT 2014
Auditors’ Report to the Members
We have audited the annexed consolidated financial statements comprising consolidated statement of financial position
of MCB Bank Limited and its subsidiary companies as at December 31, 2014 and the related consolidated profit and
loss account, consolidated statement of comprehensive income, consolidated cash flow statement and consolidated
statement of changes in equity together with the notes forming part thereof (hereinafter referred to as the ‘consolidated
financial statements’) for the year then ended. These consolidated financial statements include unaudited certified returns
from the branches except for fifty branches which have been audited by us and nine branches audited by auditors abroad.
We have also expressed separate opinions on the financial statements of MCB Bank Limited and MNET Services (Private)
Limited. While the subsidiary MCB - Arif Habib Savings & Investments Limited was subject to a limited scope review by us.
The financial statements of subsidiary companies MCB Financial Services Limited and MCB Leasing Closed Joint Stock
Company were audited by other firms of chartered accountants, whose reports have been furnished to us and our opinion,
in so far as it relates to the amounts included for such companies, is based solely on the reports of such other auditors. The
financial statements of MCB Trade Services Limited are unaudited.
These consolidated financial statements are responsibility of the Bank’s management. Our responsibility is to express our
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we
plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above
said statements. An audit also includes assessing the accounting policies and significant estimates made by management,
as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion the consolidated financial statements present fairly the financial position of MCB Bank Limited and its subsidiary
companies as at December 31, 2014 and the results of their operations, their cash flows and changes in equity for the year
then ended in accordance with the approved accounting standards as applicable in Pakistan.
A. F. Ferguson & Co.

Chartered Accountants
Lahore Engagement Partner
Dated: February 28, 2015 Imran Farooq Mian
239
Consolidated Statement of Financial Position
Note 2014 2013
(Rupees in ‘000)
ASSETS
Lendings to financial institutions 8 1,418,181 1,224,638
Investments - net 9 516,898,299 453,808,345
Advances - net 10 304,000,563 248,521,792
Operating fixed assets 11 31,583,646 29,005,931
Deferred tax assets - net - -
Other assets - net 12 37,888,155 27,176,720
941,606,486 821,278,304
LIABILITIES
Bills payable 14 16,627,700 10,138,726
Borrowings 15 59,776,578 38,660,405
Deposits and other accounts 16 688,270,091 632,309,094
Sub-ordinated loan - -
Deferred tax liabilities - net 17 10,735,841 4,500,293
Other liabilities 18 29,927,070 20,206,991
805,337,280 705,815,509
NET ASSETS 136,269,206 115,462,795
Represented by
Share capital 19 11,130,307 10,118,461

Reserves 20 49,200,045 47,008,936
110,095,383 100,165,491
Minority interest 511,960 489,671
110,607,343 100,655,162
Surplus on revaluation of assets - net of tax 21 25,661,863 14,807,633
136,269,206 115,462,795
Contingencies and commitments 22
The annexed notes 1 to 46 and Annexures I to III form an integral part of these consolidated financial statements.

240
ANNUAL REPORT 2014
Consolidated Profit and Loss Account

Note 2014 2013
(Rupees in ‘000)
Mark-up / return / interest earned 24 77,411,189 65,186,388

Mark-up / return / interest expensed 25 33,770,144 27,219,433
Net mark-up / interest income 43,641,045 37,966,955
(1,449,534) (2,835,617)
Net mark-up / interest income after provisions 45,090,579 40,802,572
Non-mark-up / interest income

Fee, commission and brokerage income 7,775,318 7,204,266
Dividend income 729,708 714,207
Income from dealing in foreign currencies 1,443,458 920,008
Gain on sale of securities - net 26 2,206,577 2,165,381
Unrealized gain / (loss) on revaluation of investments
classified as held for trading 27,324 21,787
Other income 27 1,570,088 450,879
Total non-mark-up / interest income 13,752,473 11,476,528
58,843,052 52,279,100
Non-mark-up / interest expenses

Administrative expenses 28 21,014,641 19,099,222
Other charges 29 979,225 928,954
Total non-mark-up / interest expenses 22,070,801 19,975,891
Share of profit of associates 9.7 & 9.8 581,771 628,861
Extra ordinary / unusual item - -
Taxation - Current year 12,003,454 15,220,551
- Prior years (1,074) (2,137)
- Deferred 529,658 (4,318,658)
Share of tax of associates 47,538 82,173
30 12,579,576 10,981,929

Profit attributable to minority interest (118,859) (75,043)
Profit attributable to ordinary share holders 24,655,587 21,875,098
Unappropriated profit brought forward 43,038,094 37,530,955

Transfer from surplus on revaluation of fixed assets - net of tax 47,941 36,045
43,086,035 37,567,000
Profit available for appropriation 67,741,622 59,442,098
Basic and diluted earnings - after tax Rupees per share 33 22.15 19.65

241
Consolidated Statement of Comprehensive Income
2014 2013

(Rupees in ‘000)
Profit after tax for the year 24,774,446 21,950,141
Other comprehensive income
Items that will not be reclassified to profit and loss account
Remeasurement of defined benefit plans - net of tax 139,500 49,373
Items that may be reclassified to profit and loss account
Effect of translation of net investment in foreign branches and subsidiaries

- Equity shareholders of the bank (213,212) 211,772
- Minority interest (498) 737
(213,710) 212,509
Share of exchange translation reserve of associates (28,155) 26,702
Comprehensive income transferred to equity 24,672,081 22,238,725
Components of comprehensive income not reflected in equity
Net change in fair value of available for sale securities 15,996,388 (3,650,355)
Deferred tax (5,635,929) 1,189,889
Share of other comprehensive income of associates - net of tax 541,972 726,265
10,902,431 (1,734,201)
Total Comprehensive income 35,574,512 20,504,524

242
ANNUAL REPORT 2014
Consolidated Cash Flow Statement

For The Year Ended December 31, 2014
Note 2014 2013
(Rupees in ‘000)

Less: Dividend income and share of profit of associates (1,311,479) (1,343,068)
36,042,543 31,589,002
Depreciation 11.2 1,742,867 1,557,534
Amortization 11.3 364,648 263,024
Provision for Workers’ Welfare Fund 29 734,803 646,123
Reversal for defined benefit plan - net 28 (413,188) (1,307,285)
Unrealized gain on revaluation of investments classified as held for trading 9.5 (27,324) (23,400)
Gain on disposal of fixed assets - net 27 (31,051) (42,687)
998,156 (1,794,593)
37,040,699 29,794,409
Lendings to financial institutions (193,543) 326,834
Net investments in ‘held for trading’ securities 41,638 (1,689)
Advances - net (54,385,046) (5,904,498)
Other assets - net (12,278,459) (2,814,959)
(66,815,410) (8,394,312)
Bills payable 6,488,974 242,442
Borrowings 21,400,052 (40,200,995)
Other liabilities 9,310,253 (2,487,841)
93,160,276 44,874,609
63,385,565 66,274,706
Defined benefits paid (603,267) (706,361)
Receipt from pension fund - 14,731,898
Income tax paid (9,108,676) (10,398,228)
Net cash flows from operating activities 53,673,622 69,902,015

Net investments in ‘available for sale’ securities (45,335,732) (51,013,745)
Net investments in ‘held to maturity’ securities (597,679) 405,975
Dividends received 959,159 848,353
Investments in operating fixed assets (4,761,613) (4,682,052)
Sale proceeds of property and equipment disposed off 107,434 173,089
Net cash flows from investing activities (49,628,431) (54,268,380)


Dividend paid (15,270,838) (12,759,262)
Net cash flows from financing activities (15,270,838) (12,759,262)
Exchange differences on translation of the net investment in foreign branches and subsidiaries (213,710) 212,509
Increase/(decrease) in cash and cash equivalents (11,439,357) 3,086,882
Cash and cash equivalents at beginning of the year 61,429,851 57,218,423

Effects of exchange rate changes on cash and cash equivalents (514,945) 609,601
60,914,906 57,828,024
Cash and cash equivalents at end of the year 34 49,475,549 60,914,906

243
Consolidated Statement of Changes in Equity
Capital Reserves Revenue Reserves
Share Reserve for Share Exchange Statutory General Unappropriated Sub Total Minority Total
Capital issue of Premium translation reserve reserve profit interest
bonus shares reserve
(Rupees in ‘000)
Balance as at December 31, 2012 9,198,601 - 9,924,438 545,530 15,550,960 18,600,000 37,530,955 91,350,484 501,256 91,851,740
Profit after taxation for the year ended December 31, 2013 - - - - - - 21,950,141 21,950,141 - 21,950,141
Profit attributable to minority interest - - - - - - (75,043) (75,043) 75,043 -
Profit after taxation for the year ended December 31, 2013
attributable to ordinary share holders of the group - - - - - - 21,875,098 21,875,098 75,043 21,950,141
plans - net of tax - - - - - - 49,373 49,373 - 49,373
investment in foreign branches and subsidiaries - - - 211,772 - - - 211,772 737 212,509

Share of exchange translation reserve of associates - - - 26,702 - - - 26,702 - 26,702
assets to unappropriated profit - net of tax - - - - - - 36,045 36,045 243 36,288

Transferred to statutory reserve - - - - 2,149,534 - (2,149,534) - - -

Transfer to reserve for issue of bonus shares - 919,860 - - - - (919,860) - - -

Issue of bonus shares - December 2012 919,860 (919,860) - - - - - - - -

Share of dividend attributable to minority interest - - - - - - - - (87,608) (87,608)

Final cash dividend - December 2012 - - - - - - (2,759,581) (2,759,581) - (2,759,581)

Interim cash dividend - March 2013 - - - - - - (3,541,471) (3,541,471) - (3,541,471)

Interim cash dividend - June 2013 - - - - - - (3,541,470) (3,541,470) - (3,541,470)

Interim cash dividend - September 2013 - - - - - - (3,541,461) (3,541,461) - (3,541,461)


December 31, 2014 - - - - - - 24,774,446 24,774,446 - 24,774,446

Profit attributable to minority interest - - - - - - (118,859) (118,859) 118,859 -

Profit after taxation for the year ended December 31, 2014
attributable to ordinary shareholders of the group - - - - - - 24,655,587 24,655,587 118,859 24,774,446

plans - net of tax - - - - - - 139,500 139,500 - 139,500
-
investment in foreign branches and subsidiaries - - - (213,212) - - - (213,212) (498) (213,710)

Share of exchange translation reserve of associates - - - (28,155) - - - (28,155) - (28,155)
-
assets to unappropriated profit - net of tax - - - - - - 47,941 47,941 297 48,238
-
Transferred to statutory reserve - - - - 2,432,476 - (2,432,476) - -

Transfer to reserve for issue of bonus shares - 1,011,846 - - - - (1,011,846) - - -

Issue of bonus shares - December 2013 1,011,846 (1,011,846) - - - - - - - -

Share of dividend attributable to minority interest - - - - - - - - (96,369) (96,369)

Final cash dividend - December 2013 - - - - - - (3,541,461) (3,541,461) - (3,541,461)

Interim cash dividend - March 2014 - - - - - - (3,339,092) (3,339,092) - (3,339,092)

Interim cash dividend - June 2014 - - - - - - (3,895,608) (3,895,608) - (3,895,608)

Interim cash dividend - September 2014 - - - - - - (3,895,608) (3,895,608) - (3,895,608)
For details of dividend declaration and appropriations, please refer note 45 to these consolidated financial statements.
The annexed notes 1 to 46 and Annexures I to III form an integral part of these consolidated financial statements.

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ANNUAL REPORT 2014
Notes to and forming part of the Consolidated Financial Statements

1. STATUS AND NATURE OF BUSINESS main reason for the worsening financial position was due to
huge fixed cost being incurred by the Company on account
The “Group” consists of: of Switch operations against which the Company was
unable to generate sufficient revenues. Further, the Board
Holding company of Directors of MCB Bank Limited in their meeting held on
August 16, 2013 also resolved to wind up the subsidiary i.e.
MCB Bank Limited (the ‘Bank’) is a banking company MNET Services (Private) Limited.
incorporated in Pakistan and is engaged in commercial
banking and related services. The Bank’s ordinary shares However, the BOD of the Company, in their meeting held
are listed on all the stock exchanges in Pakistan whereas on December 15, 2014, has decided to reverse their
its Global Depository Receipts (GDRs) representing two aforementioned decision and has requested the Board of
ordinary shares (2013: two ordinary shares) are traded on the Holding Company to reverse their decision taken earlier
the International Order Book (IOB) system of the London in this regard as well. In pursuance of the above resolution,
Stock Exchange. The Bank’s Registered Office and the management of the Company has proceeded to
Principal Office are situated at MCB -15 Main Gulberg, withdraw their request submitted to State Bank of Pakistan
Lahore. The Bank operates 1,222 branches including 27 for transfer of Switch to MCB Bank Limited and dissolution
Islamic banking branches (2013: 1,208 branches including of the Company.
27 Islamic banking branches) within Pakistan and 10
branches (2013: 9 branches) outside the country (including The Bank owns 99.95% shares of the company while
the Karachi Export Processing Zone branch). remaining shares are held by nominees of the Bank.
Subsidiary Companies MCB Trade Services Limited

The company was incorporated under the laws of Hong
MCB Financial Services Limited Kong on February 25, 2005. The registered office of the
MCB Financial Services Limited was incorporated on company is located at 28 / F, BEA Harbour View Centre
February 12, 1992 under the Companies Ordinance, 1984 56 Gloucester Road, Wan Chai, Hong Kong. The principal
as a private limited company. The company converted activity of the company is to provide agency services. The
its status from Private Limited Company to Unlisted Company ceased its business since October 21, 2013 and
Public Limited Company on June 19, 2009. The principal there is no more business transaction during 2014. The
objects of the company are to act as Trustee of investment Company is under process of deregistration with the Hong
trust schemes, voluntary pension schemes, real estate Kong Companies Registry. The Bank owns 100% shares of
investment trust schemes, to provide custodian services the company.
and to act as transfer agent/share registrar of securities
of listed and non listed companies and mutual funds etc. MCB - Arif Habib Savings and Investments Limited
The Company’s main source of income is from trusteeship MCB - Arif Habib Savings and Investments Limited (the
services provided to mutual funds. Its registered office is Company) was incorporated on August 30, 2000, as an
located at Karachi. The Bank owns 99.999% shares of the unquoted public limited company under the Companies
company while remaining shares are held by nominees of Ordinance, 1984. During 2008, the Company was listed
the Bank. on the Karachi Stock Exchange by way of offer for sale
of shares by a few of the existing shareholders of the
MNET Services (Private) Limited Company to the general public. The registered office of the
MNET Services (Private) Limited is a private limited Company is situated at 8th Floor, Techno City, Corporate
company incorporated in Pakistan under the Companies Tower, Molana Hasrat Mohani Road, Karachi, Pakistan.
Ordinance, 1984 on September 7, 2001. The company’s
registered office and principal place of business are situated The Company is registered as an Asset Management
at MCB Building, F-6 / G-6, Jinnah Avenue, Islamabad and Company and Investment Advisor under the Non-Banking
Sheikh Sultan Trust Building, Beaumount Road, Karachi Finance Companies (Establishment and Regulation)
respectively. The core objective of the company is to Rules, 2003 and Pension Fund Manager under Voluntary
provide services in Information Technology and to develop Pension System Rules 2005. The Company also manages
computer software and other data processing equipment discretionary portfolio accounts. The Bank owns 51.33%
for planning, designing, management and execution of all shares of the company.
types of financial, personal, organizational and institutional
activities. “MCB Leasing” Closed Joint Stock Company
MCB Leasing was incorporated as a Closed Joint Stock
During the year 2013, the Board of Directors (BOD) of the Company under the laws of Azerbaijan on October 16, 2009
Company in their meeting held on August 7, 2013 resolved with 95% holding of MCB Bank Limited. The registered
to voluntarily wind up the Company (subject to supervision office of the company is located at 49B Tbilisi Ave. Baku
of the court) because of its worsening financial position. The AZ1065, Republic of Azerbaijan.
245
The Company’s principal business activity is providing lease 3. STATEMENT OF COMPLIANCE

finance within the Republic of Azerbaijan. The company
leases various types of industrial equipment, medical 3.1 These consolidated financial statements have
equipment, public transports and real estate. In addition, the been prepared in accordance with the approved
Company leases cars, trucks and rail cars. The company accounting standards as applicable in Pakistan.
purchases leasing assets from suppliers in the Republic of Approved Accounting Standards comprise of
Azerbaijan and abroad. such International Financial Reporting Standards
(IFRS) issued by the International Accounting
MCB Islamic Bank Limited Standards Board and Islamic Financial Accounting
Standards (IFAS) issued by the Institute of Chartered
During the year, the Bank incorporated MCB Islamic Bank Accountants of Pakistan as are notified under the
Limited, a wholly owned subsidiary, with an authorized share Companies Ordinance, 1984, provisions of and
capital of Rs 15 Billion. Subject to regulatory approvals, the directives issued under the Companies Ordinance,
operation of Islamic Bank Division of MCB Bank Limited 1984 and Banking Companies Ordinance, 1962. In
referred to in Annexure II to the unconsolidated financial case requirements differ, the provisions and directives
statements will be transferred to the said subsidiary. The given in Companies Ordinance, 1984 and Banking
commercial operation of the said subsidiary will commence Companies Ordinance, 1962 shall prevail.
after formal go ahead from State Bank of Pakistan.
Consequently, no financial statements of the said subsidiary The State Bank of Pakistan has deferred the
have been prepared as at December 31, 2014. Subsequent applicability of International Accounting Standard
to the year end, the Bank has injected equity of Rs 10 billion (IAS) 39, ‘Financial Instruments: Recognition and
in the said subsidiary. Measurement’ and IAS 40, ‘Investment Property’
for Banking Companies through BSD Circular
2. BASIS OF PRESENTATION No. 10 dated August 26, 2002. The Securities
and Exchange Commission of Pakistan (SECP)
2.1 These consolidated financial statements include the has deferred applicability of IFRS-7 “Financial
financial statements of MCB Bank Limited and its Instruments: Disclosures” on banks through S.R.O
subsidiary companies and associates. 411(1) /2008 dated April 28, 2008. Accordingly,
the requirements of these standards have not been
2.2 In accordance with the directives of the Federal considered in the preparation of these consolidated
Government regarding the shifting of the banking financial statements. However, investments have
system to Islamic modes, the State Bank of Pakistan has been classified and valued in accordance with
issued various circulars from time to time. Permissible the requirements prescribed by the State Bank of
forms of trade-related modes of financing include Pakistan through various circulars.
purchase of goods by banks from their customers
and immediate resale to them at appropriate profit IFRS 8, ‘Operating Segments’ is effective for the Bank’s
in price on deferred payment basis. The purchases accounting period beginning on or after January 1,
and sales arising under these arrangements are not 2009. All banking companies in Pakistan are required
reflected in these financial statements as such but are to prepare their annual financial statements in line with
restricted to the amount of facility actually utilized and the format prescribed under BSD Circular No. 4 dated
the appropriate portion of profit thereon. The Islamic February 17, 2006, ‘Revised Forms of Annual Financial
Banking branches of the Bank have complied with Statements’, effective from the accounting year
the requirements set out under the Islamic Financial ended December 31, 2006. The management of the
Accounting Standards issued by the Institute of Bank believes that as SBP has defined the segment
Chartered Accountants of Pakistan and notified under categorisation in the above mentioned circular,
the provisions of the Companies Ordinance, 1984. its requirements will prevail over the requirements
specified in IFRS 8. Accordingly, segment information
2.3 The financial results of the Islamic Banking branches disclosed in these consolidated financial statements is
have been consolidated in these financial statements based on the requirements laid down by the SBP.
for reporting purposes, after eliminating material inter-
branch transactions / balances. Key financial figures 3.2 Standards, interpretations and amendments to
of the Islamic Banking branches are disclosed in published approved accounting standards that
Annexure II to unconsolidated financial statements. are effective in the current year
2.4 For the purpose of translation, rates of Rs. 100.4831 The Securities and Exchange Commission of
per US Dollar (2013: Rs. 105.3246) and Rs. 0.7659 Pakistan (SECP) has notified Islamic Financial
per LKR (2013: Rs.0.8052) Rs. 128.1019 per AZN Accounting Standard (IFAS) 3, ‘Profit and Loss
(2013: Rs. 134.2570) have been used. Sharing on Deposits’ issued by the Institute of
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ANNUAL REPORT 2014

Chartered Accountants of Pakistan. IFAS 3 shall presentation currency. The amounts are rounded off
be followed with effect from the financial periods to the nearest thousand.
beginning after January 1, 2014 in respect of
accounting for transactions relating to ‘Profit and 4.3 Critical accounting estimates and judgments
Loss Sharing on Deposits’ as defined by the said The preparation of consolidated financial statements
standard. The standard has resulted in certain new in conformity with the approved accounting standards
disclosures in the financial statements of the Bank as requires the use of certain critical accounting
disclosed in Annexure II to unconsolidated financial estimates. It also requires the management to
statements. exercise its judgment in the process of applying
the Group’s accounting policies. Estimates and
There are certain other new and amended standards, judgments are continually evaluated and are based
interpretations and amendments that are mandatory on historical experiences, including expectations
for the Bank’s accounting periods beginning on or of future events that are believed to be reasonable
after January 1, 2014 but are considered not to be under the circumstances. The areas where various
relevant or do not have any significant effect on the assumptions and estimates are significant to the
Bank’s operations and therefore not detailed in these Group’s financial statements or where judgment was
consolidated financial statements. exercised in the application of accounting policies are
as follows:
3.3 Standards, interpretations and amendments to
published approved accounting standards that a) Classification of investments
are relevant and not yet effective
In classifying investments the Bank follows the
The following standards, amendments and interpretations guidance provided in SBP circulars:
of approved accounting standards will be effective for
accounting periods beginning on or after January 01, 2015 - Investments classified as ‘held for trading’, are
securities which are acquired with an intention to
Effective date trade by taking advantage of short term market /
(accounting
periods beginning interest rate movements and are to be sold within 90
on or after) days of acquisition.
- IAS 27 ‘Separate Financial Statements (Amendments)’ January 01, 2015
- Investments classified as ‘held to maturity’ are non-
- IFRS 10 ‘Consolidated Financial Statements (Amendments)’ January 01, 2015
derivative financial assets with fixed or determinable
- IFRS 11 ‘Joint Arrangements’ January 01, 2015
payments and fixed maturity. In making this judgment,
- IFRS 12 ‘Disclosure of interests in other entities (Amendments)’ January 01, 2015
the Bank evaluates its intention and ability to hold
- IFRS 13 ‘Fair value measurement’ January 01, 2015
such investment to maturity.
There are other new and amended standards and
interpretations that are mandatory for the Bank’s - The investments which are not classified as ‘held for
accounting periods beginning on or after January 1, 2015 trading’ or ‘held to maturity’ are classified as ‘available
but are considered not to be relevant or do not have any for sale’.
significant effect on the Bank’s operations and are therefore
not detailed in these financial statements. b) Provision against advances
The management anticipates that the adoption of the - The Bank reviews its loan portfolio to assess the
above standards, amendments and interpretations in future amount of non-performing advances and provision
periods will have no material impact on these consolidated required there against on regular basis. While
financial statements other than in presentation / disclosures. assessing this requirement various factors including
the delinquency in the account, financial position of
4. BASIS OF MEASUREMENT the borrowers and the requirements of the Prudential
Regulations are considered.
4.1 These consolidated financial statements have
been prepared under the historical cost convention - The amount of general provision is determined
except that certain classes of fixed assets are stated in accordance with the relevant regulations and
at revalued amounts and certain investments and management’s judgment as explained in notes
commitments in respect of certain forward exchange 10.5.3, 10.5.5 and 10.5.6.
contracts have been marked to market and are
carried at fair value. c) Impairment of ‘available for sale’ equity
investments
4.2 The consolidated financial statements are presented
in Pak Rupees, which is the Group’s functional and The Bank determines that ‘available for sale’ equity
247
investments are impaired when there has been a 5. SUMMARY OF SIGNIFICANT ACCOUNTING
significant or prolonged decline in the fair value below POLICIES
its cost. The determination of what is significant
or prolonged requires judgment. In making this 5.1 Basis of consolidation
judgment, the Bank evaluates among other factors, a) The consolidated financial statements include the
the normal volatility in share price. In addition, the financial statements of MCB Bank Limited and
impairment may be appropriate when there is an its subsidiary companies and share of the profit /
evidence of deterioration in the financial health of reserves of associates are accounted for under the
the investee and sector performance, changes in equity basis of accounting.
technology and operational/financial cash flows.
b) Subsidiaries are all entities over which the Group
d) Taxation has the power to govern the financial and operating
policies accompanying a shareholding of more than
In making the estimates for income taxes currently one half of the voting rights. The existence and
payable by the Group, the management considers effect of potential voting rights that are currently
the current income tax laws and the decisions of exercisable are considered when assessing whether
appellate authorities on certain issues in the past. the Group controls another entity. Subsidiaries are
fully consolidated from the date on which control is
e) Fair value of derivatives transferred to the Group. They are de-consolidated
from the date when control ceases / the subsidiaries
The fair values of derivatives which are not quoted are disposed off. The assets and liabilities of
in active markets are determined by using valuation subsidiary companies have been consolidated on a
techniques. The valuation techniques take into line by line basis based on the financial statements
account the relevant interest rates at the balance as at December 31, 2014 and the carrying value
sheet date and the rates contracted. of investments held by the Bank is eliminated
against the subsidiaries’ shareholders’ equity in
f) Depreciation, amortization and revaluation of these consolidated financial statements. Material
operating fixed assets intra-group balances and transactions have been
eliminated.
In making estimates of the depreciation / amortization
method, the management uses the method which c) Associates are all entities over which the Group has
reflects the pattern in which economic benefits significant influence but not control. Investments in
are expected to be consumed by the Group. The associates are accounted for by the equity method
method applied is reviewed at each financial year of accounting and are initially recognised at cost,
end and if there is a change in the expected pattern thereafter for the post-acquisition change in the
of consumption of the future economic benefits Group’s share of net assets of the associate, the
embodied in the assets, the method is changed cumulative post-acquisition movements are adjusted
to reflect the changed pattern. Such change is in the carrying amount of the investment. Accounting
accounted for as change in accounting estimates in policies of the associates have been changed where
accordance with International Accounting Standard necessary to ensure consistency with the policies
(IAS) 8 “Accounting Policies, Changes in Accounting adopted by the Group.
Estimates and Errors”. Further, the Group estimates
the revalued amount of land and buildings on a d) Minority interest is that part of the net results of
regular basis. The estimates are based on valuations operations and of net assets of subsidiary companies
carried out by independent professional valuers under attributable to interests which are not owned by the
the market conditions. Group.
g) Staff retirement benefits 5.2 Investments
Certain actuarial assumptions have been adopted as The Group classifies its investments as follows:
disclosed in Note 36 of these consolidated financial
statements for the actuarial valuation of staff retirement a) Held for trading
benefit plans. Actuarial assumptions are entity’s best
estimates of the variables that will determine the These are securities, which are either acquired for
ultimate cost of providing post employment benefits. generating profit from short-term fluctuations in
Changes in these assumptions in future years may market prices, interest rate movements, dealers’
affect the liability / asset under these plans in those margin or are securities included in a portfolio in which
years. a pattern of short-term profit taking exists.
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ANNUAL REPORT 2014

b) Held to maturity acquisitions of associates is included in ‘investments

in associates’.
These are securities with fixed or determinable
payments and fixed maturity in respect of which the 5.3 Sale and repurchase agreements
Group has the positive intent and ability to hold to
maturity. Securities sold subject to a repurchase agreement
(repo) are retained in the financial statements as
c) Available for sale investments and the counter party liability is included
in borrowings. Securities purchased under an
These are investments, other than those in subsidiaries agreement to resell (reverse repo) are not recognized
and associates, that do not fall under the ‘held for in the financial statements as investments and the
trading’ or ‘held to maturity’ categories. amount extended to the counter party is included
in lendings to financial institutions. The difference
Investments are initially recognized at cost which between the purchase / sale and re-sale / re-purchase
in case of investments other than ‘held for trading’ price is recognized as mark-up income / expense on
include transaction costs associated with the a time proportion basis, as the case may be.
investment.
5.4 Advances
All purchases and sales of investments that require
delivery within the time frame established by Advances are stated net of specific and general
regulation or market convention are recognized at the provisions. Specific provision is determined on
trade date. Trade date is the date on which the Group the basis of the Prudential Regulations and other
commits to purchase or sell the investment. directives issued by the State Bank of Pakistan (SBP)
and charged to the profit and loss account. Provisions
In accordance with the requirements of the State are held against identified as well as unidentified
Bank of Pakistan, quoted securities, other than losses. Provisions against unidentified losses include
those classified as ‘held to maturity’, investments general provision against Consumer and Small
in subsidiaries and investments in associates are Enterprise (SEs) loans made in accordance with the
subsequently re-measured to market value. Surplus requirements of the Prudential Regulations issued by
/ (deficit) arising on revaluation of quoted securities SBP and provision based on historical loss experience
which are classified as ‘available for sale’, is taken to on advances. Advances are written off when there is
a separate account which is shown in the balance no realistic prospect of recovery.
sheet below equity. Surplus / (deficit) arising on
revaluation of quoted securities which are classified Leases where the Bank transfers substantially all
as ‘held for trading’, is taken to the profit and loss the risks and rewards incidental to ownership of an
account, currently. asset to the lessee are classified as finance leases.
A receivable is recognized at an amount equal to the
Unquoted equity securities (excluding investments present value of the lease payments including any
in subsidiaries and associates) are valued at the guaranteed residual value. Finance lease receivables
lower of cost and break-up value. Break-up value of are included in advances to the customers.
equity securities is calculated with reference to the
net assets of the investee company as per the latest 5.5 Operating fixed assets and depreciation
available audited financial statements. Investments
classified as ‘held to maturity’ are carried at Property and equipment, other than land carrying
amortized cost. value of which is not amortized, are stated at cost or
revalued amount less accumulated depreciation and
Provision for impairment in the values of securities accumulated impairment losses, if any. Land is carried
(except debentures, participation term certificates at revalued amount. Cost of property and equipment
and term finance certificates) is made currently. of foreign operations includes exchange differences
Provisions for impairment in value of debentures, arising on currency translation at year-end rates.
participation term certificates and term finance
certificates are made as per the requirements of the Capital work-in-progress is stated at cost less
Prudential Regulations issued by the State Bank of accumulated impairment losses, if any. These are
Pakistan. transferred to specific assets as and when assets
become available for use.
Goodwill represents the excess of the cost of an
acquisition over the fair value of the Group’s share of Depreciation on all operating fixed assets is charged
the net identifiable assets of the acquired associate using the straight line method in accordance with
and subsidiary at the date of acquisition. Goodwill on the rates specified in note 11.2 to these financial
249
statements and after taking into account residual re-Ijarah, depreciation is charged over the economic
value, if any. The residual values, useful lives and life of the asset using straight line basis.
depreciation methods are reviewed and adjusted, if
appropriate, at each balance sheet date. 5.6 Impairment
Depreciation on additions is charged from the month The carrying amount of assets are reviewed at each
the assets are available for use while no depreciation balance sheet date for impairment whenever events
is charged in the month in which the assets are or changes in circumstances indicate that the carrying
disposed off. amounts of the assets may not be recoverable. If such
indication exists and where the carrying value exceeds
Surplus on revaluation of land and buildings is credited the estimated recoverable amount, assets are written
to the surplus on revaluation account. Revaluation is down to their recoverable amounts. Recoverable
carried out with sufficient regularity to ensure that the amount is the greater of net selling price and value
carrying amount of assets does not differ materially in use. The resulting impairment loss is taken to the
from their fair value. To the extent of the incremental profit and loss account except for impairment loss on
depreciation charged on the revalued assets, the revalued assets, which is adjusted against the related
related surplus on revaluation of land and buildings revaluation surplus to the extent that the impairment
(net of deferred taxation) is transferred directly to loss does not exceed the surplus on revaluation of
unappropriated profit. that asset.
Gains / losses on sale of property and equipment 5.7 Staff retirement benefits
are credited / charged to the profit and loss account MCB Bank Limited
currently, except that the related surplus on revaluation
of land and buildings (net of deferred taxation) is The Bank operates the following staff retirement
transferred directly to unappropriated profit. benefits for its employees:
Subsequent costs are included in the asset’s carrying a) For clerical / non-clerical staff who did not opt for the
amount or are recognized as a separate asset, new scheme, the Bank operates the following:
as appropriate, only when it is probable that future
economic benefits associated with the item will flow - an approved contributory provident fund;
to the Bank and the cost of the item can be measured - an approved gratuity scheme; and
reliably. All other repairs and maintenance are charged
- a contributory benevolent scheme
to the profit and loss account.
b) For clerical / non-clerical staff who joined the Bank
5.5.1 Intangible assets
after the introduction of the new scheme and for
others who opted for the new scheme introduced in
Intangible assets are stated at cost less accumulated
1975, the Bank operates the following:
amortization and accumulated impairment losses,

if any. Intangible assets are amortized from the
- an approved non-contributory provident fund
month when these assets are available for use,
introduced in lieu of the contributory provident fund;
using the straight line method, whereby the cost
of the intangible assets are amortized over its - an approved pension fund; and
estimated useful lives over which economic benefits - contributory benevolent scheme
are expected to flow to the Bank. The useful lives
are reviewed and adjusted, if appropriate, at each c) For officers who joined the Bank after the introduction
balance sheet date. of the new scheme and for others who opted for the
new scheme introduced in 1977, the Bank operates
Intangible assets with indefinite useful lives are not the following:
amortised, but are tested for impairment annually,
either individually or at the cash generating unit level. - an approved non-contributory provident fund
introduced in lieu of the contributory provident fund;
5.5.2 Leases (Ijarah) - an approved pension fund; and
- contributory benevolent fund
Assets leased out under ‘Ijarah’ are stated at cost
less accumulated depreciation and accumulated However, the management has replaced the pension
impairment losses, if any. Assets under Ijarah are benefits for employees in the officer category with a
depreciated over the period of lease term. However, contributory provident fund for services rendered after
in the event the asset is expected to be available for December 31, 2003.
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ANNUAL REPORT 2014

d) For executives and officers who joined the Bank on financial reporting purposes and amounts used
or after January 01, 2000, the Bank operates an for taxation purposes. The Bank records deferred
approved contributory provident fund. tax assets / liabilities using the tax rates, enacted
or substantively enacted by the balance sheet date
e) Post retirement medical benefits to entitled expected to be applicable at the time of its reversal.
employees.
Deferred tax asset is recognised only to the extent
that it is probable that future taxable profits will be
Annual contributions towards the defined benefit
available against which the asset can be utilised.
plans and schemes are made on the basis of actuarial
advice using the Projected Unit Credit Method. The Deferred tax assets are reduced to the extent that
above benefits are payable to staff at the time of it is no longer probable that the related tax benefit
separation from the Bank’s services subject to the will be realised. The Bank also recognises deferred
completion of qualifying period of service. tax asset / liability on deficit / surplus on revaluation
of securities and deferred tax liability on surplus on
Past service cost is the change in the present value revaluation of fixed assets which is adjusted against
of the defined benefit obligation resulting from a plan the related deficit / surplus in accordance with the
amendment or curtailment. The Bank recognise requirements of International Accounting Standard
past service cost as an expense at the earlier of the (IAS) 12, ‘Income Taxes’.
following dates:
Deferred tax liability is not recognized in respect
(i) when the plan amendment or curtailment occurs of taxable temporary differences associated with
exchange translation reserves of foreign operations,
(ii) and when the Bank recognises related restructuring where the timing of the reversal of the temporary
costs or termination benefits difference can be controlled and it is probable that
the temporary differences will not reverse in the
MNET Services (Private) Limited foreseeable future.
The company operates an unfunded gratuity scheme 5.9 Provisions

for its eligible employees. Minimum qualifying period
for entitlement to gratuity is five years continuous Provisions are recognized when the Group has a
service with the Company. Accrual of charge for legal or constructive obligation as a result of past
the year is made on the basis of actuarial valuations events and it is probable that an outflow of resources
carried out under the projected unit credit method. will be required to settle the obligation and a reliable
estimate of the amount can be made. Provisions
Employees’ compensated absences are reviewed at each balance sheet date and are
adjusted to reflect the current best estimates.
Liability in respect of employees’ compensated
absences is accounted for in the year in which these 5.10 Foreign currencies
are earned on the basis of actuarial valuation carried
out using the Projected Unit Credit Method. 5.10.1 Foreign currency transactions
5.8 Taxation Transactions in foreign currencies other than the

results of foreign operations discussed in note
Current 5.10.2 are translated to Rupees at the foreign
exchange rates prevailing on the transaction
Provision for current taxation is based on taxable date. Monetary assets and liabilities in foreign
income at the current rates of taxation after taking currencies are expressed in Rupee terms at the
into consideration available tax credits and rebates. rates of exchange prevailing at the balance sheet
The charge for current tax also includes adjustments date. Foreign bills purchased and forward foreign
where considered necessary, relating to prior years exchange contracts other than those relating to
which arise from assessments framed / finalized foreign currency deposits are valued at the rates
during the year. applicable to their respective maturities.
Deferred 5.10.2 Foreign operations
Deferred tax is recognised using the balance sheet The assets and liabilities of foreign branches and
liability method on all temporary differences between subsidiaries are translated to Rupees at exchange
the amounts attributed to assets and liabilities for rates prevailing at the balance sheet date. The
251
results of foreign operations are translated to outstanding net investment in lease. Gains / losses
Rupees at the average rate of exchange for the year. on termination of lease contracts are recognized as
income when these are realized.
5.10.3 Translation gains and losses
- Ijarah income is recognized on an accrual basis as
Translation gains and losses are included in the and when the rental becomes due.
profit and loss account, except those arising on the
translation of the Bank’s net investment in foreign - Commission income is recognized on a time
branches, which are taken to the capital reserve proportion basis.
(exchange translation reserve) until the disposal
of the net investment, at which time these are - Dividend income is recognized when the Group’s
recognised in the profit and loss account. right to receive dividend is established.
5.10.4 Commitments - Gain / loss on sale of investments is credited /

charged to profit and loss account currently.
Commitments for outstanding forward foreign
exchange contracts are disclosed in these - Outsourcing revenue, payment system managed
consolidated financial statements at committed service income, subscription fee in Switch product
amounts. Contingent liabilities / commitments for revenue and networking services revenue is
letters of credit and letters of guarantee denominated recognised on an accrual basis when the related
in foreign currencies are expressed in Rupee terms services are rendered.
at the rates of exchange prevailing at the date of the
statement of financial position. - Revenue for acting as trustee is recognized on Net
Assets Value (NAV) of respective funds.
5.11 Acceptances
- Management / advisory fee is calculated on a
Commitments for outstanding forward foreign daily / monthly basis by charging specified rates
exchange contracts are disclosed in these financial to the net assets value / income of the Collective
statements at committed amounts. Contingent Investment Schemes. Advisory fee from the
liabilities / commitments for letters of credit and discretionary portfolio is calculated in accordance
letters of guarantee denominated in foreign with the respective agreements with the clients.
currencies are expressed in Rupee terms at the Management fee from the pension funds is
rates of exchange prevailing at the date of the calculated by charging the specified rates to the
statement of financial position. average net assets value.
5.12 Revenue recognition 5.13 Operating leases
- Mark-up / interest on advances and returns on Operating lease rentals are recorded in profit and
investments are recognized on a time proportion loss account on a time proportion basis over the
basis using the effective interest method except term of the lease arrangements.
that mark-up / interest on non-performing
advances and investments is recognized on a 5.14 Assets acquired in satisfaction of claims
receipt basis, in accordance with the requirements
of the Prudential Regulations issued by the State The Bank occasionally acquires assets in settlement
Bank of Pakistan (SBP) or as permitted by the of certain advances. These are stated at lower of the
regulations of the overseas regulatory authorities of carrying value or current fair value of such assets.
countries where the branches operate. Where debt
securities are purchased at premium or discount, 5.15 Cash and cash equivalents
such premium / discount is amortized through the
profit and loss account over the remaining period Cash and cash equivalents include cash and
of maturity. balances with treasury banks and balances with
other banks (net of overdrawn Nostro balances) in
- Financing method is used in accounting for income current and deposit accounts.
from lease financing. Under this method, the
unearned lease income (excess of the sum of total 5.16 Financial instruments
lease rentals and estimated residual value over
the cost of leased assets) is deferred and taken to 5.16.1 Financial assets and financial liabilities
income over the term of the lease period so as to Financial instruments carried on the statement of
produce a constant periodic rate of return on the financial position include cash and balances with
252
ANNUAL REPORT 2014

treasury banks, balances with other banks, lendings Trading and Sales
to financial institutions, investments (excluding
investment in associates and subsidiaries), It includes fixed income, equity, foreign exchange
advances, other assets, bills payable, borrowings, commodities, lendings to and borrowings from
deposits and other liabilities. The particular financial institutions and brokerage debt.
recognition methods adopted for significant financial
assets and financial liabilities are disclosed in the Retail and Consumer Banking
individual policy statements associated with these
assets and liabilities. It includes retail lending and deposits, banking
services, private lending and deposits, banking
5.16.2 Derivative financial instruments services and retail offered to its retail customers and
small and medium enterprises.
Derivative financial instruments are initially
recognized at fair value on the date on which Commercial Banking
a derivative contract is entered into and are
subsequently remeasured at their fair value using It includes project finance, export finance, trade
valuation techniques. All the derivative financial finance, leasing, lending, guarantees and bills of
instruments are carried as an asset when the fair exchange relating to its corporate customers.
value is positive and as a liability when the fair value
is negative. Any change in the fair value of derivative Asset Management
financial instruments is taken to the profit and loss
account currently. It includes asset management, investment advisory,
portfolio management, equity research and
5.16.3 Off setting underwriting.
Financial assets and financial liabilities are set off 5.18.2 Geographical segments
and the net amount is reported in the financial
statements when there is a legally enforceable right The Bank operates in four geographic regions
to set off and the Bank intends either to settle on being:
a net basis, or to realize the assets and settle the
liabilities, simultaneously. - Pakistan
- South Asia
5.17 Borrowings / deposits - Middle East
- Eurasia
Borrowings / deposits are recorded at the proceeds
received. The cost of borrowings / deposits is 5.19 Dividend distribution and appropriation
recognized as an expense in the period in which this
is incurred. Dividends (including bonus dividend) and other
appropriations (except appropriations which are
5.18 Segment reporting required by law) are recognized in the period in
which these are approved.
A segment is a distinguishable component of
the Bank that is engaged in providing products 5.20 Earnings per share
or services (business segment) or in providing
products or services within a particular economic The Group presents basic and diluted earnings per
environment (geographical segment), which is share (EPS). Basic EPS is calculated by dividing the
subject to risks and rewards that are different from profit or loss attributable to ordinary shareholders
those of other segments. The Bank’s primary format of the Group by the weighted average number of
of reporting is based on business segments. ordinary shares outstanding during the year.
5.18.1 Business segments
Corporate Finance
Corporate Finance includes underwriting,

securitization, investment banking, syndications,
IPO related activities (excluding investments) and
secondary private placements.
253
Note 2014 2013

(Rupees in ‘000)
6. CASH AND BALANCES WITH TREASURY BANKS

In hand - local currency 6.1 11,140,319 10,189,522
- foreign currencies 2,270,370 2,161,392
With State Bank of Pakistan (SBP) in:
Local currency current account 6.2 11,023,747 25,986,891
Foreign currency current account 6.3 170,097 142,724
Foreign currency deposit account 6.2 5,854,648 5,529,331
With other central banks in foreign currency current account 6.2 555,728 272,502
With National Bank of Pakistan in local currency current account 15,738,959 15,663,856
46,753,868 59,946,218
6.1 This includes national prize bonds amounting to Rs. 122.066 million (2013: Rs. 118.737 million).
6.2 Deposits with SBP are maintained to comply with their requirements issued from time to time. Deposits with other
central banks are maintained to meet their minimum cash reserves and capital requirements pertaining to the foreign
branches of the Bank.
6.3 This represents US Dollar settlement account maintained with SBP.
Note 2014 2013

(Rupees in ‘000)
7. BALANCES WITH OTHER BANKS
Inside Pakistan
- current account 3,098 16,882
- deposit account 7.1 39,402 37,922
Outside Pakistan
- current account 2,211,308 1,052,532
- deposit account 7.2 809,966 487,324
3,063,774 1,594,660
7.1 Balances with other banks inside Pakistan in deposit accounts carry interest rate ranging from 7.00% to 8.25% per
annum (2013: 7.25% to 8.50% per annum).
7.2 Balances with other banks outside Pakistan in deposit accounts carry interest rate ranging from 0.90% to 2.50% per
annum (2013: 2.35 % per annum).
254
ANNUAL REPORT 2014

Note 2014 2013

(Rupees in ‘000)
8. LENDINGS TO FINANCIAL INSTITUTIONS
Call money lendings 8.2 & 8.3 382,950 664,261

Repurchase agreement lendings 8.2 & 8.3 1,035,231 560,377
1,418,181 1,224,638
8.1 Particulars of lendings

In local currency 1,000,000 996,766
In foreign currencies 418,181 227,872
1,418,181 1,224,638
8.2. These carry mark up rates ranging from 5% to 10.35% per annum (2013 : 6.50% to 10%).
8.3 Securities held as collateral against lendings to financial institutions
2014 2013
Held by Further Total Held by Further Total
bank Given as bank given as
collateral collateral
(Rupees in ‘000)
Market Treasury Bills 1,035,231 - 1,035,231 560,377 - 560,377

1,035,231 - 1,035,231 560,377 - 560,377
255
9. INVESTMENTS - NET
9.1 Investments by types
2014 2013
Note Held by Given as Total Held by Given as Total
bank collateral bank collateral
(Rupees in ‘000)
Held for trading securities

- Shares in listed companies 9.5.1 52,330 - 52,330 - - -
- Units in open ended mutual fund 9.5.2 504,702 - 504,702 575,270 - 575,270
557,032 557,032 575,270 - 575,270

- Market Treasury Bills 113,790,156 25,908,740 139,698,896 304,804,941 16,631,860 321,436,801
- Pakistan Investment Bonds 329,079,474 - 329,079,474 107,615,147 - 107,615,147
- Shares in listed companies 11,887,621 - 11,887,621 7,792,448 - 7,792,448
- Units in open ended mutual fund 257,841 - 257,841 222,443 - 222,443
- Shares in unlisted companies 9.4 206,027 - 206,027 206,107 - 206,107
- NIT units 5,253 - 5,253 5,253 - 5,253
- Sukuk Bonds 3,715,236 - 3,715,236 2,700,000 - 2,700,000
- Term Finance Certificates (TFCs) 930,653 - 930,653 958,412 - 958,412
459,872,261 25,908,740 485,781,001 424,304,751 16,631,860 440,936,611
- Market Treasury Bills 9.6 1,780,611 58,441 1,839,052 1,656,039 64,836 1,720,875
- Provincial Government Securities 118 - 118 118 - 118
- Sukuk Bonds 244,489 - 244,489 442,838 - 442,838
- Euro Bonds 2,283,917 - 2,283,917 2,344,907 - 2,344,907
- Term Finance Certificates (TFCs),
Debentures, Bonds and Participation
Term Certificates (PTCs) 3,516,856 - 3,516,856 2,778,015 - 2,778,015
7,825,991 58,441 7,884,432 7,221,917 64,836 7,286,753
Associates
- Adamjee Insurance Company Limited 9.7 6,203,825 - 6,203,825 5,386,250 - 5,386,250
- Euronet Pakistan (Private) Limited 9.8 64,511 - 64,511 63,426 - 63,426
6,268,336 - 6,268,336 5,449,676 - 5,449,676
Investments at cost 474,523,620 25,967,181 500,490,801 437,551,614 16,696,696 454,248,310

Less: Provision for diminution in
value of investments 9.3 (1,702,808) - (1,702,808) (2,549,959) - (2,549,959)
Investments (net of provisions) 472,820,812 25,967,181 498,787,993 435,001,655 16,696,696 451,698,351

Surplus / (Deficit) on revaluation of
available for sale securities - net 21.2 18,095,419 (12,437) 18,082,982 2,099,461 (12,867) 2,086,594
Surplus on revaluation of
‘held for trading’ securities - net 9.5 27,324 - 27,324 23,400 - 23,400
Investments at revalued amounts-

net of provisions 490,943,555 25,954,744 516,898,299 437,124,516 16,683,829 453,808,345
256
ANNUAL REPORT 2014

Note 2014 2013

(Rupees in ‘000)
9.2 Investments by segments

Federal Government Securities:
- Market Treasury Bills 139,698,896 321,436,801
- Pakistan Investment Bonds 329,079,474 107,615,147
- Euro Bonds 2,283,917 2,344,907
- Sukuk Bonds 3,715,236 2,700,000
Overseas Government Securities

- Market Treasury Bills - Sri Lanka 1,839,052 1,720,875
- Development Bonds 607,880 632,791
Provincial Government Securities 118 118
Associated Undertakings 6,268,336 5,449,676
Fully Paid-up Ordinary Shares / Certificates / Units

- Listed companies / mutual funds / modarabas 11,876,666 7,729,163
- Unlisted companies / funds 206,027 206,107
Units of Open Ended Mutual Funds 762,543 797,713
Fully Paid-up Preference Shares:

- Listed Companies 63,285 63,285
Term Finance Certificates, Debentures, Bonds

and Participation Term Certificates:
- Listed Term Finance Certificates 1,445,050 1,267,298
- Unlisted Term Finance Certificates 1,789,213 1,527,553
- Commercial Papers 203,150 -
- Debentures, Bonds and Participation Term Certificates (PTCs) 402,216 308,785

Other Investments:
- Sukuk Bonds 244,489 442,838
- NIT Units 5,253 5,253
Total investments at cost 500,490,801 454,248,310

Less: Provision for diminution in the value of investments 9.3 (1,702,808) (2,549,959)
Investments (net of provisions) 498,787,993 451,698,351

Surplus on revaluation of available for sale securities - net 21.2 18,082,982 2,086,594
Surplus on revaluation of held for trading securities - net 9.5 27,324 23,400
Investments at revalued amounts - net of provisions 516,898,299 453,808,345
9.3 Particulars of provision

Charge during the year 4,829 75,299
Reversal made during the year (360,638) (82,133)
(355,809) (6,834)
Reversal on disposal of shares (491,342) (224,353)
Reclassification - (173)
Investment written off against provision - (2,028)
9.3.1 Particulars of provision in respect of Type and Segment

Listed shares / Certificates / Units 1,502,571 1,993,913
Unlisted shares 77,070 74,741
1,579,641 2,068,654
Unlisted TFCs, Debentures, Bonds and Participation Term Certificates 123,167 481,305
1,702,808 2,549,959
257
9.4 Quality of ‘available for sale’ securities
2014 2013
Market Treasury Bills 9.4.1 139,647,839 Unrated 321,150,456 Unrated
Pakistan Investment Bonds 9.4.1 344,958,847 Unrated 107,720,565 Unrated
Listed Term Finance Certificates
Askari Bank Limited 244,695 AA- 253,321 AA-

Bank Alfalah Limited 516,380 AA- 527,480 AA-
Allied Bank Limited 180,618 AA 205,081 AA
941,693 985,882
Shares in Listed Companies
Abbott Laboratories Pakistan Limited - - 25,814 Not available
Aisha Steel Mills Limited (including right shares) 1,231 A- & A2 1,345 A- & A2
Allied Bank Limited - - 794,738 AA+ & A1+
Arif Habib Limited - - 3,067 Not available
Arif Habib Corporation Limited - - 41,188 AA & A1+
Altern Energy Limited 31 Not available - -
Archroma Pakistan Limited 72,826 Not available 34,410 Not available
Attock Cement Pakistan Limited - - 2,754 Not available
Attock Petroleum Limited 556,024 Not available 494,906 Not available
Bank Alfalah Limited 513,451 AA & A1+ 8,112 AA & A1+
Bank Al-Habib Limited 533,396 AA+ & A1+ 533,977 AA+ & A1+
The Bank of Punjab 38 AA- & A1+ - -
Engro Corporation Limited 215,131 AA- & A1+ - -
Engro Fertilizers Limited 272,374 A+ & A1 - -
Fatima Fertilizer Company Limited 346,021 AA- & A1+ - -
Fauji Cement Company Limited 13 Not available 22,330 Not available
Fauji Fertilizer Bin Qasim Company Limited 629,594 Not available 168,909 Not available
Fauji Fertilizer Company Limited 864,588 Not available 1,123,183 Not available
First Al - Noor Modaraba - - 27,766 Not available
Glaxo Smithkline Pakistan Limited 480,947 Not available - Not available
Habib Bank Limited - - 111,669 AAA & A1+
Habib Metropolitan Bank Limited 356,084 AA+ & A1+ 2,883 AA+ & A1+
Hub Power Company Limited - - 230,190 AA+ & A1+
IGI Insurance Limited 572,921 AA 11,507 AA
Indus Motors Company Limited - - 9,000 Not available
International Steels Limited 115,289 Not available - -
K-Electric Limited 27,660 A+ & A2 - -
Kohat Cement Company Limited 141,816 Not available - -
Kohinoor Energy Limited - - 1,952 AA & A1+
Kot Addu Power Company Limited 1,111,909 AA+ & A1+ 367,752 AA+ & A1+
Lafarge Pakistan Cement Limited 472,735 BB+ & B - -
Masood Textile Mills Limited - preference shares 50,000 Not available 50,000 Not available
Meezan Bank Limited - - 15,627 AA & A1+
Millat Tractors Limited - - 29 Not available
Murree Brewery Company Limited 4,024 Not available 9,460 Not available
National Bank of Pakistan 428,950 AAA & A1+ 428,773 AAA & A1+
National Foods Limited 5,527 AA- & A1 11,430 A+ & A1
National Refinery Limited 97,582 AA+ & A1+ - -
Nestle Pakistan Ltd Limited 98,116 Not available 40,378 Not available
NetSol Technologies Ltd 70,368 Not available - -
* Next Capital Limited 11,213 Not available 9,750 Not available
Oil & Gas Development Company Limited 48 AAA & A1+ 130,783 AAA & A1+
Pak Elektron Limited 149,681 A- & A2 - -
Balance carried forward 8,199,588 4,713,682
258
ANNUAL REPORT 2014

2014 2013
Balance brought forward 8,199,588 4,713,682

Pakistan Oilfields Limited 262,439 Not available 592,297 Not available
Pakistan Petroleum Limited 365,258 Not available 457,001 Not available
Pakistan State Oil Company Limited 14,460 AA+ & A1+ 96,410 AA+ & A1+
Pakistan Telecommunication Company Limited 56,193 Not available 32,706 Not available
Pakistan Tobacco Company Limited - - 27,572 Not available
Rafhan Maize Products Limited 290,929 Not available 127,037 Not available
Rupali Polyester Limited - - 2,985 Not available
Saif Power Limited 292,942 A+ & A1 - -
Samba Bank Limited 1 AA- & A1 66,947 AA- & A1
Searle Pakistan Limited 158,067 BBB & A-3 11,244 BBB & A-3
Siemens Pakistan Engineering Company Limited 12,573 Not available - -
** Sui Northern Gas Pipelines Limited 1,582,690 AA & A1+ 1,174,200 AA & A1+
* Trust Securities & Brokerage Limited 1,254 Not available 885 Not available
Unilever Pakistan Foods Limited 7,699 Not available 8,063 Not available
United Bank Limited 684,788 AA+ & A1+ 602,352 AA+ & A1+
Zulfiqar Industries Limited 3,490 Not available 3,481 Not available
11,932,371 7,916,862
Open Ended Mutual Fund
Pakistan Pension Fund 195,442 Not Applicable 162,546 Not Applicable
Pakistan Islamic Pension Fund 199,355 Not Applicable 164,062 Not Applicable
Pakistan Stock Market Fund 39,724 Not Applicable - -
434,521 326,608
Closed Ended Mutual Fund
PICIC Growth Fund 407,958 Not available - -
PICIC Investment Fund 158,643 Not available - -
566,601 -
Shares in Un-listed Companies 9.4.2

* National Investment Trust Limited 100 AM2- 100 AM2-
* SME Bank Limited 3,892 BBB- & A3 6,527 BBB & A3
First Capital Investment (Private) Limited 2,500 AM4+ 2,500 AM4+
First Women Bank Limited 63,300 BBB+ & A2 63,300 A- & A2
Pak Asian Fund 11,500 Not available 11,500 Not available
* Pakistan Agro Storage and Services corporation 2,500 Not available - Not available
* Arabian Sea Country Club - Not available 2,194 Not available
* Central Depository Company of Pakistan Limited 10,000 Not available 10,000 Not available
* National Institutional Facilitation Technologies (Private) Limited 1,526 Not available 1,526 Not available
Society for Worldwide Inter Fund Transfer (SWIFT) 1,738 Not available 1,738 Not available
Islamabad Stock Exchange Limited 30,346 Not available 30,346 Not available
Lanka Clearing (Private) Limited 766 Not available 805 Not available
Lanka Financial Services Bureau Limited 766 Not available 805 Not available
Credit Information Bureau of Srilanka 23 Not available 25 Not available
128,957 131,366
Other Investment
Sukuk Bonds 9.4.1 3,666,210 Unrated 2,717,310 Unrated
N.I.T. Units 7,303 AM2- 5,502 AM2-
502,284,342 440,954,551
259
9.4.1 These are Government of Pakistan guaranteed securities.
9.4.2 Investments in unlisted companies are stated at carrying value. The above excludes unlisted shares of companies
which are fully provided for in these financial statements.
*These are the strategic investments of the Group.
**This includes 37.292 million shares valuing Rs. 1,070.639 million (2013: 37.292 million shares valuing Rs. 794.309
million) which are held as strategic investment by the Group.
9.5 Unrealized gain / (loss) on revaluation of investments classified as ‘held for trading’
Unrealized gain / (loss) Cost

Note 2014 2013 2014 2013
(Rupees in ‘000)
9.5.1 Investment in Shares

Investee Company
Dewan Cement Limited (260) - 4,241 -
Hascol Petroleum Limited (737) - 19,262 -
International Industries Limited (114) - 6,161 -
Searle Pakistan Limited (862) - 18,178 -
United Bank Limited (300) - 4,488 -
(2,273) - 52,330 -
9.5.2 Investment in units of mutual funds

Investee Company
MCB Dynamic Cash Fund 5,998 12,921 90,817 358,985
MCB Dynamic Allocation Fund 17,419 6,053 169,933 173,348
Metro Bank-Pakistan Sovereign Fund 6,180 488 243,952 15,937
Pakistan Cash Management Fund 9.5.3 - 3,938 - 27,000
29,597 23,400 504,702 575,270
27,324 23,400 557,032 575,270
2014 2013
(Rupees in ‘000)
9.5.3 At fair value through profit or loss
Cost of investment - 27,000

Unrealized gain - 3,938
Fair value of investments - 30,938
Fair value of investment

Opening balance 30,938 28,614
Purchased during the year 44,157 -
Gain on fair value of remeasurement recognized in Profit & Loss 3,136 2,324
Investment redeemed during the year (78,231) -
Closing balance - 30,938
9.6 “Available for sale” Market Treasury Bills and Pakistan Investment Bonds are eligible for rediscounting with the State
Bank of Pakistan. The market value of Market Treasury Bills classified as ‘held to maturity’ as at December 31, 2014
amounted to Rs. 1,839.052 million (2013: Rs. 1,720.875 million).
9.7 Investment of the Group in Adamjee Insurance Company Limited has been accounted for under the equity method of
accounting in accordance with the treatment specified in International Accounting Standard 28, (IAS 28) ‘Accounting
for Investments in Associates’. The market value of the investment in Adamjee Insurance Company Limited as at
December 31, 2014 amounted to Rs. 5,042.493 million (2013: Rs. 3,809.906 million).
260
ANNUAL REPORT 2014

Investment in Adamjee Insurance Company Limited under equity method - holding 29.13%
2014 2013
(Rupees in ‘000)
Opening Balance 5,386,250 4,176,476
Share of profit for the year before tax 580,609 622,902

Dividend from associate (229,390) (126,118)
Share of tax (47,461) (83,961)
303,758 412,823
Share of other comprehensive income 9.7.1 513,817 796,951
Closing Balance 6,203,825 5,386,250
9.7.1 Share of other comprehensive income
Share of unrealized surplus on assets -net of tax 541,972 770,249

Share of exchange translation reserve of associate (28,155) 26,702
513,817 796,951
9.8 Investment of the Group in Euronet Pakistan Private Limited has been accounted for under the equity method of
accounting in accordance with the treatment specified in International Accounting Standard 28, (IAS 28) ‘Accounting
for Investments in Associates’.
Investment in Euronet Pakistan Private Limited under equity method - holding 30%
2014 2013
(Rupees in ‘000)
Opening Balance 63,426 55,679
Share of profit for the year before tax 1,162 5,959

Share of tax (77) 1,788
1,085 7,747
Closing Balance 64,511 63,426
9.9 First Women Bank Limited has been reclassified from Investment in associates to unlisted shares due to dilution in
shareholding.
9.10 Investments include Pakistan Investment Bonds amounting to Rs. 232.60 million (2013: Rs. 232.60 million) earmarked
by the SBP and National Bank of Pakistan against TT / DD discounting facilities and demand note facilities sanctioned
to the Bank. In addition, Pakistan Investment Bonds amounting to Rs. 5 million (2013: Rs. 5 million) have been
pledged with the Controller of Military Accounts on account of Regimental Fund account.
9.11 Information relating to investments in ordinary shares and preference shares of listed companies and unlisted
companies required to be disclosed as part of the financial statements under BSD Circular No.04 of 2006 dated
February 17, 2006, is given in Annexure “I”.
9.12 Certain approved / Government securities are kept with the SBP to meet statutory liquidity requirements calculated
on the basis of domestic demand and time liabilities.
261
Note 2014 2013

(Rupees in ‘000)
10. ADVANCES - NET

Loans, cash credits, running finances, etc.
In Pakistan 280,297,779 231,039,502
293,775,710 244,508,842
Islamic Financing and related assets 10.2 13,885,804 11,303,966
Net investment in finance lease 10.3

In Pakistan 2,101,598 1,027,911
Outside Pakistan 1,032,743 911,165
3,134,341 1,939,076
Bills discounted and purchased (excluding treasury bills)
Payable in Pakistan 4,406,599 1,455,467
Payable outside Pakistan 7,556,783 9,263,734
11,963,382 10,719,201
Advances - gross 322,759,237 268,471,085
Provision against advances 10.5

General provision (322,307) (267,860)
General provision against consumer loans and small enterprise loans (254,595) (201,354)
General provision by Sri Lanka Operations and MCB Leasing (32,571) (29,931)
(18,758,674) (19,949,293)
Advances - net of provision 304,000,563 248,521,792
10.1 Particulars of advances (gross)
10.1.1 In local currency 285,542,597 222,305,289

322,759,237 268,471,085
10.1.2 Short-term 231,929,535 202,403,592

Long-term 90,829,702 66,067,493
322,759,237 268,471,085
10.2 Islamic Financing and related assets

Islamic Financing 6,089,304 5,468,451
Inventories 6,526,434 4,580,773
Advance against Murabaha 1,036,720 756,568
Advance against Future Ijara 108,984 268,721
Advance against Diminishing Musharaka 124,362 229,453
13,885,804 11,303,966
262
ANNUAL REPORT 2014

10.3 Net investment in finance lease

2014 2013
Not later Later than Over five Not later Later than Over five
than one one and years than one one and years
year less than Total year less than Total
five years five years
(Rupees in ‘000)
Lease rentals receivable 845,629 1,678,352 1,348,872 3,872,853 956,830 1,148,581 - 2,105,411
Guaranteed residual value 20,901 36,245 2,243 59,389 37,176 64,978 - 102,154
Minimum lease payments 866,530 1,714,597 1,351,115 3,932,242 994,006 1,213,559 - 2,207,565
Finance charge for future periods (168,792) (243,036) (386,073) (797,901) (150,595) (117,894) - (268,489)
Present value of minimum

lease payments 697,738 1,471,561 965,042 3,134,341 843,411 1,095,665 - 1,939,076
10.4 Advances include Rs. 21,907.791 million (2013: Rs. 23,267.733 million) which have been placed under the non-performing status as detailed
below:
2014
Category of Classification Note Classified Advances Specific Provision Required Specific Provision Held
(Rupees in ‘000)
Mentioned (OAEM) 10.4.1 50,405 - 50,405 3,477 - 3,477 3,477 - 3,477
Substandard 234,172 - 234,172 58,352 - 58,352 58,352 - 58,352
Doubtful 873,888 - 873,888 436,526 - 436,526 436,526 - 436,526
Loss 15,896,249 4,853,077 20,749,326 15,241,574 2,409,272 17,650,846 15,241,574 2,409,272 17,650,846
17,054,714 4,853,077 21,907,791 15,739,929 2,409,272 18,149,201 15,739,929 2,409,272 18,149,201
2013
Category of Classification Note Class Advances Specific Provision Required Specific Provision Held
(Rupees in ‘000)
Mentioned (OAEM) 10.4.1 35,782 - 35,782 2,660 - 2,660 2,660 - 2,660
Substandard 168,423 50,438 218,861 41,200 12,610 53,810 41,200 12,610 53,810
Doubtful 1,453,012 - 1,453,012 405,827 - 405,827 405,827 - 405,827
Loss 16,584,176 4,975,902 21,560,078 16,502,626 2,485,225 18,987,851 16,502,626 2,485,225 18,987,851
18,241,393 5,026,340 23,267,733 16,952,313 2,497,835 19,450,148 16,952,313 2,497,835 19,450,148
10.4.1 This represents non-performing portfolio of agricultural and small enterprise financing classified as OAEM as per the
requirements of the Prudential Regulation for Agricultural and Small Enterprise Financing issued by the State Bank of
Pakistan.
263
2014
provision against provision
consumer & by Sri Lanka
SEs loans Operations &
MCB Leasing
(Rupees in ‘000)
10.5 Particulars of provision

against advances
Opening balance 19,450,148 267,860 201,354 29,931 19,949,293
Exchange adjustments (74,558) - - (1,462) (76,020)
Reversals (3,399,533) - - - (3,399,533)
(1,205,535) 54,447 53,241 4,102 (1,093,745)
Closing balance 18,149,201 322,307 254,595 32,571 18,758,674
2013
provision against provision
consumer & by Sri Lanka
SEs loans Operations &
MCB Leasing
(Rupees in ‘000)
Opening balance 22,380,087 257,457 145,568 25,911 22,809,023

Exchange adjustments 129,419 - - 1,502 130,921
Reversals (4,516,978) - - - (4,516,978)
(2,897,490) 10,403 55,786 2,518 (2,828,783)
Closing balance 19,450,148 267,860 201,354 29,931 19,949,293
10.5.1 Particulars of provisions against advances

2014 2013
Specific General Total Specific General Total
(Total) (Total)
(Rupees in ‘000)
In local currency 15,739,929 576,902 16,316,831 16,952,313 469,214 17,421,527
In foreign currencies 2,409,272 32,571 2,441,843 2,497,835 29,931 2,527,766
18,149,201 609,473 18,758,674 19,450,148 499,145 19,949,293
264
ANNUAL REPORT 2014

10.5.2 The following amounts have been charged to the profit and loss account:
Note 2014 2013

(Rupees in ‘000)

General provision 10.5.3 54,447 10,403
General provision against consumer & Small Enterprise loans 10.5.5 53,241 55,786
General provision by Sri Lanka Operations and MCB Leasing 4,102 2,518
(1,093,745) (2,828,783)
10.5.3 General provision against advances represents provision maintained at around 0.1% of gross advances.
10.5.4 State Bank of Pakistan vide BSD Circular No. 2 dated January 27, 2009, BSD Circular No. 10 dated October 20, 2009, BSD
Circular No. 02 of 2010 dated June 03, 2010 and BSD Circular No.1 of 2011 dated October 21, 2011 has allowed benefit of forced
sale value (FSV) of Plant & Machinery under charge, pledged stock and mortgaged residential, commercial & industrial properties
(land and building only) held as collateral against NPLs for five years from the date of classification. However, management has
not taken the FSV benefit in calculation of specific provision.
10.5.5 General provision against consumer loans represents provision maintained at an amount equal to 1.5% of the fully
secured performing portfolio and 5% of the unsecured performing portfolio as required by the Prudential Regulations
issued by the SBP. General provision against Small Enterprise Finance represents provision maintained at an amount
equal to 1% of the fully secured performing portfolio and 2% of the unsecured performing portfolio as required by the
Prudential Regulations issued by the SBP.
10.5.6 General provision against advances in Sri Lanka is maintained at 0.5% of performing advances.
Note 2014 2013

(Rupees in ‘000)
10.6 Particulars of write offs:
10.6.1 Against provisions 10.5 20,854 161,868

Directly charged to the profit and loss account 20 -
20,874 161,868
10.6.2 Write offs of Rs. 500,000 and above 10.6.3 17,672 150,079
Write offs of below Rs. 500,000 3,202 11,789
20,874 161,868
10.6.3 Details of loan write offs of Rs. 500,000 and above

In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962, the statement in respect of
written-off loans or any other financial relief of Rupees five hundred thousand or above allowed to a person(s) during
the year ended December 31, 2014 is given at Annexure- III in unconsolidated financial statements. However, this
write off does not affect the Bank’s right to recover the debts from these customers.
265
Note 2014 2013

(Rupees in ‘000)
10.7 Particulars of advances to directors, executives,

associated companies, etc.
Debts due by executives or officers of the Bank or any of
them either severally or jointly with any other persons
Balance at beginning of the year 3,637,694 3,884,919

Repayments (857,432) (831,052)
Balance at end of the year 3,502,259 3,637,694
Debts due by subsidiary companies, controlled firms, managed

modarabas and other related parties
Balance at beginning of the year 199,676 156,696

Repayments (737,827) (402,105)
Balance at end of the year 113,520 199,676
3,615,779 3,837,370
11. OPERATING FIXED ASSETS
Capital work-in-progress 11.1 1,065,940 1,900,221

Property and equipment 11.2 29,537,332 26,234,684
Intangible asset 11.3 980,374 871,026
31,583,646 29,005,931
11.1 Capital work-in-progress
Civil works 129,757 1,260,427

Advances to suppliers and contractors 84,077 161,359
Others 852,106 478,435
1,065,940 1,900,221
266
ANNUAL REPORT 2014


2014
Cost/Revalued amount Accumulated depreciation
Charge for Annual
Description Additions/ the year/ Net Book Rate of
At (disposals)/ At At (depreciation At value at depreciation
January 01, Exchange and December 31, January 01, on disposals) December 31, December 31, /estimated
2014 other adjustments 2014 2014 exchange and 2014 2014 useful life
other adjustments
(Rupees in ‘000)
Land-Freehold 14,373,912 272,267 14,646,179 - - - 14,646,179 -
Land-Lease Hold 125,632 122,317 247,949 - - - 247,949 -
Buildings on freehold land 7,377,725 1,784,842 9,159,305 15,541 207,849 223,373 8,935,932 upto 70 years
- -
(3,262) (17)
Buildings on leasehold land 49,996 - 49,270 - 2,798 2,794 46,476 upto 50 years
- -
(726) (4)
Leasehold Improvements 663,619 45,704 709,669 308,206 160,692 468,056 241,613 3 years
- -
346 (842)
Furniture and fixture 1,088,171 145,722 1,217,878 639,179 97,627 725,765 492,113 10%
(11,250) (9,766)
(4,765) (1,275)
Electrical, Computers and 8,440,072 1,648,678 10,013,324 6,217,053 839,887 6,985,103 3,028,221 10% to 25%
(6,008) (4,502)
Vehicles 748,307 185,252 872,073 389,362 83,465 425,839 446,234 20%

(59,321) (45,279)
(2,165) (1,709)
Ijarah Assets
Assets held under Ijarah - Car 750,029 570,416 1,228,537 144,970 190,162 290,502 938,035 20%
(91,908) (44,630)
- -
Assets held under Ijarah - Equipment 563,369 354,931 826,634 231,837 160,387 312,054 514,580 20%
(91,666) (80,170)
- -
34,180,832 5,130,129 38,970,818 7,946,148 1,742,867 9,433,486 29,537,332
(323,563) (247,180)
(16,580) (8,349)

2013
Cost/ Revalued amount Accumulated depreciation
Description At January Additions/ Revaluation Reversal due to Transfer in / At At Charge for the year/ Reversal due to Transfer in / At Net book Annual rate of
01, 2013 (disposals) / surplus to revaluation (out) December 31, January 01, (depreciation on revaluation (out) December 31, value at depreciation/
exchange and 2013 2013 disposal) exchange 2013 December 31, estimated
other adjustments and other 2013 useful life
adjustments
(Rupees in ‘000)
Land - Freehold 12,057,399 809,296 1,507,217 - - 14,373,912 - - - - - 14,373,912 -
Land - Leasehold 120,100 - 5,532 - 125,632 - - - - - 125,632 -
Buildings on freehold land 6,191,206 1,062,697 595,968 (538,745) 64,609 7,377,725 319,280 216,702 (538,745) 17,544 15,541 7,362,184 upto 70 years
- - - - - - - - - - - -
1,990 760
Buildings on leasehold land 538,898 1,836 16,465 (14,013) (493,999) 49,996 181,563 2,007 (14,013) (170,314) - 49,996 upto 50 years
- - - - - - - - - - - -
809 757
Leasehold Improvements* - 225,847 - - 436,268 663,619 - 154,583 - 152,770 308,206 355,413 3 years
- -
1,504 853
Furniture and fixture 1,001,163 100,656 - (6,878) 1,088,171 544,725 99,097 - - 639,179 448,992 10%
(9,533) (6,790)
2,763 2,147
Electrical, Computers and 7,722,797 799,170 - - - 8,440,072 5,557,447 740,918 - - 6,217,053 2,223,019 10% to 25%
6,199 3,415
Vehicles 585,513 233,183 - - - 748,307 366,787 77,641 - - 389,362 358,945 20%

(73,053) (57,648)
2,664 2,582
Ijarah Assets
Assets held under Ijarah - Car 285,284 523,090 - - - 750,029 61,550 111,509 - - 144,970 605,059 20%
(58,345) (28,089)
- -
Assets held under Ijarah - Equipment 537,749 150,840 - - - 563,369 123,349 155,077 - - 231,837 331,532 20%
(125,220) (46,589)
- -
29,040,109 3,906,615 2,125,182 (552,758) - 34,180,832 7,154,701 1,557,534 (552,758) - 7,946,148 26,234,684
(354,245) (223,843)
15,929 10,514
* Leasehold Improvements have been classified separately from Buildings on leasehold land.
267
11.2.1 The land and buildings of the Group were revalued in December 2013 by independent valuers (Arch-e-Decon & Sardar
Enterprises), valuation and engineering consultants, on the basis of market value. The information relating to location of
revalued assets is given in Annexure III. The details of revalued amounts are as follows:
(Rupees in ‘000)
Total revalued amount of land 14,499,544
Total revalued amount of buildings 7,412,180
Had the land and buildings not been revalued, the total carrying amounts of revalued properties as at December 31, 2014
would have been as follows:
(Rupees in ‘000)
Land 5,384,342
Buildings 6,319,990
11.2.2 The gross carrying amount (cost) of fully depreciated assets that are still in use are as follows:
Furniture and fixture 379,266

Electrical, computers and office equipment 4,560,059
Vehicles 417,779
Leasehold Improvements 206,542
Intangible asset 1,483,551
11.2.3 Details of disposal of operating fixed assets
The information relating to disposal of operating fixed assets required to be disclosed as part of the financial statements by
the State Bank of Pakistan is given in Annexure II and is an integral part of these consolidated financial statements.
11.3 Intangible asset

2014

At At Net Book
At January 01 Additions/ December At January Amortization December value at Useful
(Rupees in ‘000)
(3,495) (2,500)
Goodwill 82,127 - 82,127 - - - 82,127
Management rights 192,000 - 192,000 - - - 192,000
2,498,974 474,991 2,970,470 1,627,948 364,648 1,990,096 980,374

(3,495) (2,500)
2013

At At Net Book
At January 01 Additions/ December At January Amortization December value at Useful
(Rupees in ‘000)
3,527 2,878
Goodwill 82,127 - 82,127 - - - 82,127
Management rights 192,000 - 192,000 - - - 192,000
2,150,739 344,708 2,498,974 1,362,046 263,024 1,627,948 871,026

3,527 2,878
268
ANNUAL REPORT 2014

Note 2014 2013
(Rupees in ‘000)
12. OTHER ASSETS - NET

investments - local currency 21,341,618 8,403,945
investments - foreign currencies 303,679 188,298
Accrued income, advances, deposits, and other prepayments 1,406,779 1,065,013
Advance taxation (payments less provisions) 3,246,452 6,145,527
Compensation for delayed income tax refunds 265,971 44,802
Non-banking assets acquired in satisfaction of claims 12.1 1,809,891 1,939,184
Unrealized gain on derivative financial instruments 12.2 862,138 1,649,163
Stationery and stamps on hand 39,142 66,910
Prepaid exchange risk fee 225 257
Receivable from the pension fund 36.3 7,263,254 5,854,207
Others 2,474,673 2,901,129
39,013,822 28,258,435
Less: Provision held against other assets 12.3 1,125,667 1,081,715
37,888,155 27,176,720
12.1 The market value of non-banking assets with carrying value of Rs. 1,787.280 million (2013: Rs. 1,814.981 million) net of
provision as per the valuation reports dated December 31, 2014 amounted to Rs. 2,039.087 million (2013: Based on
valuation as of December 31, 2013 Rs. 1,831.591 million).
12.2 Unrealized gain on derivative financial instruments
Contract / Notional amount Unrealized gain

2014 2013 2014 2013
(Rupees in ‘000)
Unrealized gain on:

FX Options - 216,344 - 1,062
46,863,967 90,985,793 862,138 1,649,163
12.3 Provision held against other assets

2014 2013
(Rupees in ‘000)

Charge for the year 179,595 31,376
Reversal during the year (102,660) (83,661)
76,935 (52,285)
Write off during the year (8,774) (40,091)
Exchange adjustments / reclassification (24,209) 42,114
13. CONTINGENT ASSETS
There were no contingent assets of the Group as at December 31, 2014 and December 31, 2013.
269
2014 2013
(Rupees in ‘000)
14. BILLS PAYABLE

In Pakistan 16,500,957 10,113,386
16,627,700 10,138,726
15. BORROWINGS
In Pakistan 52,126,784 30,267,778
59,776,578 38,660,405
15.1 Particulars of borrowings with respect to currencies
59,776,578 38,660,405
15.2 Details of borrowings (secured / unsecured)
Secured
Borrowings from State Bank of Pakistan
Export refinance scheme 15.3 10,604,033 8,939,210
Long term financing facility 15.4 4,828,527 3,832,857
Long term financing - export oriented projects scheme 15.5 60,365 213,965
Financing Facility for Storage of Agricultural Produce 15.6 509,061 670,858
16,001,986 13,656,890
Repurchase agreement borrowings 15.7 25,952,261 16,675,724

41,954,247 30,332,614
Unsecured
Borrowings from other financial institution 15.8 4,696,990 2,751,563
Call borrowings 15.9 12,783,248 4,950,256
Overdrawn nostro accounts 342,093 625,972
17,822,331 8,327,791
59,776,578 38,660,405
15.3 The Bank has entered into agreements for financing with the State Bank of Pakistan (SBP) for extending export finance
to customers. As per the agreements, the Bank has granted SBP the right to recover the outstanding amount from the
Bank at the date of maturity of the finance by directly debiting the current account maintained by the Bank with SBP.
These borrowings are repayable within six months. These carry mark at rates ranging from 5.50% to 6.50% per annum.
15.4 These borrowings have been obtained from the SBP for providing financing facilities to exporters for adoption of new
technologies and modernization of their plant and machinery. These borrowings are repayable within a period ranging
from 3 years to 10 years. These carry mark at rates ranging from 6.0% to 7.50% per annum.
15.5 These borrowings have been obtained from SBP for providing long term finance to customers for export oriented
projects. As per the agreements with SBP, the Bank has granted SBP the right to recover the outstanding amount from
the Bank at the date of maturity of the finance by directly debiting the current account maintained by the Bank with SBP.
These carry mark at rates ranging from 4.0% to 5.0% per annum.
15.6 These Borrowings have been obtained from SBP under “Financing Facility for Storage of Agricultural Produce (FFSAP)”
to encourage Private Sector to establish Silos, Warehouses and Cold Storages. These borrowings are repayable within
a period ranging from 3 years to 7 years. These carry mark at rates ranging from 5.50% to 6.50% per annum.
15.7 These carry mark-up rates ranging from 5.25% to 10% per annum (2013: 7.75% to 10.25% per annum) and are secured
against government securities of carrying value of Rs. 25,954.744 million (2013: Rs. 16,683.829 million).
270
ANNUAL REPORT 2014

15.8 These carry mark-up ranging from 1.20% to 15.0% per annum (2013: 1.20% to 11.50% per annum).
15.9 These carry mark-up ranging from 0.90% to 9.50% per annum (2013: 0.80% to 3% per annum). These are repayable
by March, 2015.
16. DEPOSITS AND OTHER ACCOUNTS

2014 2013
(Rupees in ‘000)
Customers
Fixed deposits 62,126,560 60,524,016
Saving deposits 382,535,978 349,209,809
Current accounts 227,119,749 206,713,480
Margin accounts 4,207,605 3,937,113
675,989,892 620,384,418
Financial institutions
Remunerative deposits 7,193,847 8,058,094
Non-remunerative deposits 5,086,352 3,866,582
12,280,199 11,924,676
688,270,091 632,309,094
16.1 Particulars of deposits

688,270,091 632,309,094
16.2 Deposits include deposits from related parties amounting to Rs. 17,167.162 million (2013: Rs. 16,525.673 million).
17. DEFERRED TAX LIABILITY / (ASSET) - NET
The details of the tax effect of taxable and deductible temporary differences are as follows:
Note 2014 2013

(Rupees in ‘000)
Taxable temporary differences on:

Surplus on revaluation of operating fixed assets 21.1 937,505 963,433
Accelerated tax depreciation 1,440,377 1,276,877
Receivable from pension fund 2,542,139 2,048,974
Investments in associates 285,262 254,886
Surplus/ (deficit) on revaluation of securities 21.2 5,947,082 311,153
11,152,365 4,855,323
Deductible temporary differences on:

Provision for bad debts (21,640) (19,766)
Taxable losses (157) (2,467)
Provision for post retirement benefits (394,727) (332,797)
(416,524) (355,030)
10,735,841 4,500,293
271
18. OTHER LIABILITIES

Note 2014 2013

(Rupees in ‘000)
Mark-up / return / interest payable in local currency 10,074,023 1,982,285

Mark-up / return / interest payable in foreign currencies 78,704 93,932
Accrued expenses 7,602,338 7,217,767
Unclaimed dividend 730,196 1,232,896
Staff welfare fund 12,794 18,846
Unrealized loss on derivative financial instruments 18.1 856,591 1,005,305
Provision for employees’ compensated absences 36.3 987,060 934,009
Provision for post retirement medical benefits 36.3 1,498,996 1,340,476
Provision for employees’ contributory benevolent scheme 36.3 179,409 213,438
Staff gratuity payable 1,372 976
Security deposits 346,315 322,371
Branch adjustment account 12,957 193,597
Retention money 22,238 25,004
Insurance payable against consumer assets 213,547 216,959
Unclaimed balances 988,690 993,264
Duties and taxes payable 359,724 897,003
Others 5,962,116 3,518,863
29,927,070 20,206,991
18.1 Unrealized loss on derivative financial instruments
Contract / Notional amount Unrealized loss

2014 2013 2014 2013
(Rupees in ‘000)
Unrealized loss on:

FX Options - 216,344 - 1,062
50,474,436 61,623,209 856,591 1,005,305
19. SHARE CAPITAL
19.1 Authorised Capital
2014 2013 2014 2013

(Number of shares) (Rupees in ‘000)
1,500,000,000 1,500,000,000 Ordinary shares of Rs 10 each 15,000,000 15,000,000
19.2 Issued, subscribed and paid-up capital
2014 2013 2014 2013

Issued for Issued as Total Issued for Issued as Total
cash bonus share cash bonus share (Rupees in ‘000)
(Number of shares)
197,253,795 814,592,340 1,011,846,135 197,253,795 722,606,328 919,860,123 Opening balance 10,118,461 9,198,601

Shares issued
- 101,184,613 101,184,613 - 91,986,012 91,986,012 during the year 1,011,846 919,860
197,253,795 915,776,953 1,113,030,748 197,253,795 814,592,340 1,011,846,135 Closing balance 11,130,307 10,118,461
272
ANNUAL REPORT 2014

19.3 Number of shares held by the associated undertakings as at December 31, are as follows:
2014 2013
(Number of shares)
Adamjee Insurance Company Limited 34,606,587 29,914,034

Nishat Mills Limited 81,527,891 73,272,629
D.G. Khan Cement Company Limited 102,277,232 92,979,303
Din Leather (Private) Limited 6,936,333 6,305,758
Siddiqsons Limited 14,276,462 12,978,603
Mayban International Trust (Labuan) Berhad 222,606,147 202,369,225
462,230,652 417,819,552
20. RESERVES
Note 2014 2013
(Rupees in ‘000)
Share premium 9,924,438 9,924,438

Exchange translation reserve 542,637 784,004
Statutory reserve 20.1 20,132,970 17,700,494
General reserve 18,600,000 18,600,000
49,200,045 47,008,936
20.1 Statutory reserve represents amount set aside as per the requirements of section 21 of the Banking Companies
Ordinance, 1962.
Note 2014 2013

(Rupees in ‘000)
21. SURPLUS ON REVALUATION OF ASSETS- NET OF TAX

Surplus / (deficit) arising on revaluation (net of tax) of:
- fixed assets 21.1 11,251,810 11,300,011
- available-for-sale securities 21.2 12,135,900 1,775,441
Surplus / (deficit) arising on revaluation of assets of
associated undertaking (net of tax) 2,274,153 1,732,181
25,661,863 14,807,633
21.1 Surplus on revaluation of fixed assets-net of tax

Surplus on revaluation of fixed assets as at January 01 12,263,444 10,194,231
Surplus / exchange adjustment during the year 37 2,125,182
Transferred to unappropriated profit in respect of
incremental depreciation charged during the
year - net of deferred tax (48,238) (36,288)
Related deferred tax liability (25,928) (19,681)
(74,166) (55,969)
Surplus on revaluation of fixed assets as at December 31 12,189,315 12,263,444
Less: Related deferred tax liability on:

Revaluation as at January 01 963,433 768,800
Surplus during the year - 214,314
Incremental depreciation charged during the year
transferred to profit and loss account (25,928) (19,681)
937,505 963,433
11,251,810 11,300,011

273
Note 2014 2013

(Rupees in ‘000)
21.2 Surplus / (deficit) on revaluation of available-

for-sale securities - net of tax
- Market Treasury Bills (51,057) (286,345)
- Pakistan Investment Bonds 15,879,373 105,418
Listed Securities
- Shares / Certificates / Units 2,112,015 2,116,420
- Open Ended Mutual Funds 180,637 106,321
- Term Finance Certificates 11,040 27,470
2,303,692 2,250,211
Sukuk Bonds (49,026) 17,310
18,082,982 2,086,594
Add: Related deferred tax (liability) / asset 17 (5,947,082) (311,153)
12,135,900 1,775,441
22. CONTINGENCIES AND COMMITMENTS
22.1 Direct credit substitutes

Contingent liabilities in respect of guarantees given favouring
Government 15,307,109 6,453,148
Banks and financial institutions 3,895,904 2,347,585
Others 15,334,608 8,533,001
34,537,621 17,333,734
22.2 Transaction-related contingent liabilities
Guarantees in favour of
Banks and financial institutions - 20,933
Others 2,026,346 1,500,019
Suppliers’ credit / payee guarantee 2,235,176 2,489,432
4,261,522 4,010,384

22.3 Trade-related contingent liabilities 86,547,085 88,195,433
22.4 Other contingencies

Claims against the Bank not acknowledged as debts 3,393,783 3,035,863

These represent certain claims by third parties against the Bank, which are being contested in the Courts of law.
The management is of the view that these relate to the normal course of business and the possibility of an outflow
of economic resources is remote.
22.5 Commitments to extend credit

The Bank makes commitments to extend credit in the normal course of its business but these being revocable
commitments do not attract any significant penalty or expense if the facility is unilaterally withdrawn.
22.6 Commitments in respect of forward foreign exchange contracts

Purchase 47,859,438 72,216,751
Sale 49,478,965 79,959,563
22.7 Commitments for the acquisition of fixed assets 125,438 243,614
22.8 Other commitments

FX options (notional amount) 23.1 & 23.2
Purchase - 216,344
Sale - 216,344
Forward outright sale of Government Securities 250,000 -

Outright purchase of Government Securities 100,000 -
274
ANNUAL REPORT 2014

22.9 Taxation
For assessment year 1988-89 through tax year 2012, the tax department disputed Bank’s treatment on certain issues,
where the Bank’s appeals are pending at various appellate forums, entailing an additional tax liability of Rs.3,818 million
(2013: Rs.4,189 million) which has been paid. Such issues inter alia principally include disallowance of expenses
for non deduction of withholding tax and non availability of underlying records, provision for non performing loans,
attribution of expenses to heads of income other than income from business and disallowance of credit for taxes paid
in advance / deducted at source.
The Bank has filed appeals which are pending at various appellate forums. In addition, certain decisions made in
favour of the Bank are being contested by the department at higher forums. No provision has been made in the
financial statements regarding the aforesaid additional tax demand and already issued favourable decisions where the
department is in appeal, as the management is of the view that the issues will be decided in the Bank’s favour as and
when these are taken up by the Appellate Authorities.
23. DERIVATIVE INSTRUMENTS
Most corporate (counter parties) have either interest rate exposures arising from debt financing or excess liquidity or
currency exposures arising out of commercial and business transactions. In the event of a shift in interest or foreign
exchange (FX) rates, these corporate may incur higher borrowing costs or higher cash outflows that will adversely
affect profitability.
The Bank provides solutions to this conundrum through derivatives. Through this, counterparties will be hedging
exposure to adverse price movements in a security, typically when the counterparty has a concentrated position in
the security and is acutely exposed to movements in the underlying risk factors. The Bank is in a better position to
hedge that risk, and is thus able to provide cost efficient hedging solutions to the counterparties enabling them to
concentrate on their business risk.
Other Objectives include:

- contribution to the development of Pakistani financial markets.
- provision of financial solutions to the counterparties.
Risk management is performed at:
a) Strategic level: By senior management Assets and Liabilities Management Committee (ALCO), Risk Manage
ment Committee (RMC) and the Board of Directors to institute a risk management framework and to ensure
provision of all resources and support required for effective risk management on Bank-wide basis.
b) Macro Level: By Financial Institution Public Sector (FIPS) & Market Risk Management (MRM) Division,
responsible for policy formulation, procedure development & implementation, monitoring and reporting.
c) Micro Level: Treasury Derivatives & Structured Product Desk and Treasury Operations, where risks are actually
created.
FIPS & MRM Division is responsible for coordinating for risk management of derivatives.
The risk management system generates marked to market risk numbers (i.e. VaR, PVBP, duration, etc.) of Interest rate
derivative portfolio. These numbers are reported to senior management on a daily basis.
As per the State Bank of Pakistan’s (SBP) regulations, currency options are hedged back to back and thus the risk
associated with such transactions are minimal.
Risk Limits
Before initiating any new derivative transaction, Treasury Division requests the FIPS & MRM Division for risk limits.
Limit requests are approved by the appropriate level of authority. Presently the Bank has defined notional limits both
for the portfolio and the counterparty.
275
23.1 Product analysis

2014

in ‘000) in ‘000) in ‘000)
With Banks for

Hedging - - - - - -

Hedging - - - - - -
Total
Hedging - - - - - -
2013

in ‘000) in ‘000) in ‘000)
With Banks for

Hedging - - - - 2 216,344

Hedging - - - - - -
Market Making - - - - 2 216,344
Total
Hedging - - - - 2 216,344
Market Making - - - - 2 216,344

23.2 Maturity analysis
2014
(Rupees in ‘000)
FX Options
Over 1 to 3 months - - - - -
2013
(Rupees in ‘000)
FX Options
Over 1 to 3 months 4 432,688 (1,062) 1,062 -
276
ANNUAL REPORT 2014

2014 2013
(Rupees in ‘000)
24. MARK-UP / RETURN / INTEREST EARNED

On loans and advances to:
Customers 29,040,286 25,107,486
On investments in:
Held for trading securities 939 15,541
Available for sale securities 47,072,191 38,442,248
Held to maturity securities 781,608 775,352
47,854,738 39,233,141
On deposits with financial institutions 34,699 100,220

On securities purchased under resale agreements 448,129 731,612
On money at call 33,337 13,929
77,411,189 65,186,388

25. MARK-UP / RETURN / INTEREST EXPENSED
Deposits 30,340,761 23,560,817
Securities sold under repurchase agreements 1,091,677 1,705,713
Other short-term borrowings 1,711,487 1,123,626
Discount, commission and brokerage 498,862 541,052
Others 127,357 288,225
33,770,144 27,219,433

26. GAIN ON SALE OF SECURITIES - NET
Market Treasury Bills (59,593) 37,828
Pakistan Investment Bonds 180,644 193,812
Others
Shares and units- Listed 2,085,526 1,905,798
Term Finance Certificates - 27,943
2,206,577 2,165,381
27.
OTHER INCOME
Rent on property / lockers 165,610 163,786
Net profit on sale of property and equipment 31,051 42,687
Bad debts recovered 65,081 60,522
Compensation on tax refunds 1,127,996 -
Postal, SWIFT and other charges recovered 176,668 180,340
Switch and outsourcing revenue 3,682 3,544
1,570,088 450,879
277
Note 2014 2013

(Rupees in ‘000)
28. ADMINISTRATIVE EXPENSES

Salaries and allowances 9,007,909 8,885,794
Charge / (reversal) for defined benefit plans and other benefits:
- Approved pension fund 36.7 (831,689) (1,701,451)
- Post retirement medical benefits 36.7 156,619 187,792
- Employees’ contributory benevolent scheme 36.7 28,360 55,269
- Employees’ compensated absences 36.7 233,167 146,623
- Gratuity scheme 355 4,482
(413,188) (1,307,285)
Contributions to defined contribution plan - provident fund 215,265 198,213
Voluntary Separation Scheme 28.1 26,288 1,057,724
Non-executive directors’ fees 34,064 31,674
Rent, taxes, insurance and electricity 2,761,314 2,598,334
Legal and professional charges 301,531 286,936
Communications 969,084 886,322
Repairs and maintenance 1,528,825 1,132,519
Stationery and printing 565,059 508,395
Advertisement and publicity 318,641 124,552
Cash transportation charges 550,183 481,736
Instrument clearing charges 139,807 124,667
Donations 28.2 40,000 25,000
Auditors’ remuneration 28.3 37,973 36,494
Depreciation 11.2 1,742,867 1,557,534
Amortization of intangible asset 11.3 364,648 263,024
Travelling, conveyance and fuel 319,919 217,581
Subscription 26,805 27,886
Entertainment 132,261 119,944
Training Expenses 35,415 41,376
Petty Capital items 47,459 34,112
Card Related Expenses 298,368 238,147
Outsourced security guards, tea services and janitorial expenses etc 1,686,443 1,308,558
CNIC verification charges 60,487 52,716
Others 217,214 167,269
21,014,641 19,099,222
28.1 This expense represents Voluntary Separation Scheme (VSS) announced by the Bank for clerical & non-clerical
employees. The above expense excludes the payments made under retirement funds.
28.2 None of the directors, executives or their spouses had any interest in the donee. Detail of donations made during the
year is as follows:
2014 2013
(Rupees in ‘000)
40,000 25,000
28.3 Auditors’ remuneration
Annual Audit fee 12,976 12,128
Fee for audit and other certifications of overseas branches 3,665 4,477
Fee for the audit of subsidiaries 2,420 2,428
Fee for the audit of overseas subsidiary 1,369 1,836
Tax and other sundry services 16,214 14,736
Out-of-pocket expenses 1,329 889
37,973 36,494
278
ANNUAL REPORT 2014

2014 2013
(Rupees in ‘000)
29. OTHER CHARGES

Workers welfare fund 734,803 646,123
VAT and Crop Insurance Levy - Sri Lanka 56,431 57,611
Education cess 16,225 4,693
Impairment / loss on sale of Non-Banking assets 171,766 220,527
979,225 928,954
30. TAXATION
For the year
Current 12,003,454 15,220,551
Deferred 529,658 (4,318,658)
12,533,112 10,901,893
Prior years
Current (1,074) (2,137)
Deferred - -
(1,074) (2,137)
Share of tax of associates 47,538 82,173
12,579,576 10,981,929
30.1 Relationship between tax expense and accounting profit

Accounting profit for the year 37,354,022 32,932,070
Tax rate 35% 35%
Tax on income 13,073,908 11,526,225

Tax effect on separate block of income (taxable at reduced rate) (488,086) (456,439)
Tax effect of prior years provisions (1,074) -
Others (5,172) (87,857)
Tax charge for the year 12,579,576 10,981,929

31. CREDIT RATING
PACRA through its notification dated June 26, 2014, has maintained bank’s long term credit rating of AAA [Triple A]
and short-term credit rating of A1+ [A one plus].
2014 2013
(Rupees in ‘000)
32. BASIC AND DILUTED EARNINGS PER SHARE - PRE TAX

(Number of shares)
*Weighted average number of shares outstanding during the year 1,113,030,748 1,113,030,748
(Rupees)
Basic and diluted earnings per share - pre tax 33.56 29.59
(Rupees in ‘000)
33. BASIC AND DILUTED EARNINGS PER SHARE - AFTER TAX

Profit after taxation attributable to ordinary shareholders 24,655,587 21,875,098
(Number of shares)
*Weighted average number of shares outstanding during the year 1,113,030,748 1,113,030,748
(Rupees)
Basic and diluted earnings per share - after tax 22.15 19.65
*Weighted average number of shares outstanding for 2013 have been restated to give effect of bonus shares issued
during the year.
279
Note 2014 2013

(Rupees in ‘000)
34. CASH AND CASH EQUIVALENTS

Overdrawn nostro accounts 15 (342,093) (625,972)
49,475,549 60,914,906
Note 2014 2013

(Numbers)
35. STAFF STRENGTH

Permanent 10,714 10,479
Temporary/contractual basis 88 81
Bank’s own staff strength at the end of the year 10,802 10,560
Outsourced 35.1 1,499 1,549
Total staff strength 12,301 12,109
35.1 This excludes outsourced security guards and tea services staff.
36. DEFINED BENEFIT PLANS AND OTHER BENEFITS
36.1 General description
The Bank operates the following retirement benefits for its employees:
- Pension fund (final salary plan) - funded

- Benevolent scheme - unfunded
- Post retirement medical benefits - unfunded
- Employees compensated absence - unfunded
The plan assets and defined benefit obligations are based in Pakistan.
36.2 Principal actuarial assumptions

The latest actuarial valuations of the approved pension fund, employees’ contributory benevolent scheme, post
retirement medical benefits and employee’s compensated absences were carried out at December 31, 2014.
The principal actuarial assumptions used are as follows:

2014 2013 2014 2013 2014 2013 2014 2013
(%)
Valuation discount rate 11.25 13 11.25 13 11.25 13 11.25 13
Expected rate of return on plan assets 11.25 13 - - - - - -
Salary increase rate 10 11 10 11 10 11 10 11
Medical cost inflation rate - - - - 8.25 13 - -
Exposure inflation rate - - - - 3 3 - -
The expected return on plan assets is based on the market expectations and depends on the asset portfolio of the
Bank, at the beginning of the period, for returns over the entire life of the related obligation.

280
ANNUAL REPORT 2014

36.3 (Receivable from) / payable to defined benefit plans and other benefits

2014 2013 2014 2013 2014 2013 2014 2013

(Restated)
(Rupees in ‘000)
Present value of defined

benefit obligations 36.5 3,242,851 3,834,422 179,409 213,438 1,498,996 1,340,476 987,060 934,009
Fair value of plan assets 36.6 (10,506,105) (9,688,629) - - - - - -
Net (receivable) / payable

recognised as at the year-end (7,263,254) (5,854,207) 179,409 213,438 1,498,996 1,340,476 987,060 934,009
The effect of increase of one percent and the effect of a decrease of one percent in the medical trend rates on the present
value of medial obligation at December 31, 2014 would be Rs. 98.484 million (2013: Rs. 48.492 million) and Rs. 80.375
million (2013: Rs. 43.458 million) respectively.
36.4 Movement in balance (receivable) / payable

2014 2013 2014 2013 2014 2013 2014 2013
(Rupees in ‘000)
Opening balance of
(receivable) / payable (5,854,207) (18,428,483) 213,438 257,089 1,340,476 1,565,634 934,009 594,100
Expense recognised 36.7 (831,689) (1,701,451) 28,360 55,269 156,619 187,792 233,167 146,623
Employees’ contribution - - 5,988 7,564 - - - -
Benefits paid - - (68,583) (101,510) (187,117) (234,011) (353,596) (370,840)
Other Comprehensive income (577,358) (456,171) 206 (4,974) 189,018 (178,939) 173,480 564,126
Refund / withdrawn from fund - 14,731,898 - - - - - -
Closing balance of
(receivable) / payable (7,263,254) (5,854,207) 179,409 213,438 1,498,996 1,340,476 987,060 934,009
36.5 Reconciliation of the present value of the defined benefit obligations

2014 2013 2014 2013 2014 2013 2014 2013
(Rupees in ‘000)
Present value of obligation as at January 01, 3,834,422 4,259,671 213,438 257,089 1,340,476 1,565,634 934,009 594,100
Interest cost 452,099 451,727 23,289 24,760 162,099 173,835 98,437 49,042
Benefits paid (713,479) (990,554) (68,583) (101,510) (187,117) (234,011) (353,596) (370,840)
-(Gain) / loss from change in
demographic assumptions - 22,670 - 5,824 - 39,965 - (6,687)
-(Gain) / loss from change in
financial assumptions 150,701 34,000 21,367 12,141 127,423 30,238 85,132 (62,754)
-Experience (gains) / losses (410,250) 26,420 (21,161) (22,939) 61,595 (249,142) 88,348 633,567
(259,549) 83,090 206 (4,974) 189,018 (178,939) 173,480 564,126
Present value of obligation
as at December 31, 3,242,851 3,834,422 179,409 213,438 1,498,996 1,340,476 987,060 934,009
281
36.6 Changes in fair values of plan assets

2014 2013 2014 2013 2014 2013 2014 2013

(Rupees in ‘000)
Net assets as at January 01, 9,688,629 22,688,154 - - - - - -

Expected return on plan assets 1,213,146 2,183,666 - - - - - -
Refund / withdrawn from fund - (14,731,898) - - - - - -
Benefits paid (713,479) (990,554) - - - - - -
Actuarial gain / (loss) 317,809 539,261 - - - - - -
Net assets as at December 31, 36.9 10,506,105 9,688,629 - - - - - -
36.7 Charge for defined benefit plans and other benefits

The following amounts have been charged to the profit and loss account in respect of defined benefit plans and other benefits:

2014 2013 2014 2013 2014 2013 2014 2013
(Rupees in ‘000)
Interest cost 452,099 451,727 23,289 24,760 162,099 173,835 98,437 49,042
Expected return on plan assets (1,213,146) (2,183,666) - - - - - -
Contributions employees - - (5,988) (7,564) - - - -
(831,689) (1,701,451) 28,360 55,269 156,619 187,792 233,167 146,623
The effect of increase of one percent and the effect of a decrease of one percent in the medical trend rates on the aggregate of the current service cost and interest
cost components of net period post - employment medical costs would be Rs. 11.498 million (2013: Rs. 6.129 million) and Rs. 9.384 million (2013: Rs. 5.496
million) respectively.
36.8 Actual return on plan assets

2014 2013 2014 2013 2014 2013 2014 2013
(Rupees in ‘000)
Actual return on plan assets 1,530,955 2,722,927 - - - - - -
36.9 Composition of fair value of plan assets

Approved Pension Fund
2014 2013
Fair value Percentage Fair value Percentage
(Rupees (%) (Rupees (%)
in ‘000) in ‘000)
Listed equity shares 7,330,994 69.78 5,322,463 54.93

Open ended mutual funds units 388,142 3.69 264,434 2.73
Term Finance certificates 98,583 0.94 - -
Cash and bank balances 2,688,386 25.59 4,101,732 42.34
Fair value of plan total assets 10,506,105 100 9,688,629 100
36.9.1 Fair value of the Bank’s financial instruments

included in plan assets:
Shares of MCB 5,172,094 4,368,136

Bank balance with MCB 2,688,386 4,101,732
7,860,480 8,469,868
282
ANNUAL REPORT 2014

36.10 Other relevant details of above funds are as follows:
36.10.1 Pension Fund

2014 2013 2012 2011 2010
(Rupees in ‘000)
Fair value of plan assets (10,506,105) (9,688,629) (22,688,154) (19,543,388) (19,303,801)
(Surplus) / deficit (7,263,254) (5,854,207) (18,428,483) (15,280,967) (15,086,294)
Actuarial gain / (loss) on obligation 259,549 (83,090) 20,130 (190,661) (191,752)
Actuarial gain / (loss) on assets 317,809 539,261 1,194,359 (1,529,469) (852,657)
36.10.2 Employees’ Contributory Benevolent Scheme
179,409 213,438 257,089 283,477 314,414
Actuarial gain / (loss) on obligation (206) 4,974 26,335 19,979 (25,282)
36.10.3 Post Retirement Medical Benefits

1,498,996 1,340,476 1,565,634 1,388,970 1,320,933

Actuarial gain / (loss) on obligation (189,018) 178,939 (129,950) (19,198) 30,671
36.10.4 Compensated absences

987,060 934,009 594,100 535,870 555,792

Actuarial gain / (loss) on obligation (173,480) (564,126) (141,920) (75,701) (81,138)
36.11 No contribution to the pension fund is expected in the next year.
37. DEFINED CONTRIBUTION PLAN
37.1 MCB Bank Limited(Holding company)

The Bank operates an approved contributory provident fund for 7,724 (2013: 7,306) employees where contributions are
made by the Bank and employees at 8.33% per annum (2013: 8.33% per annum) of the basic salary. During the year, the
Bank contributed Rs. 214.712 million (2013: Rs. 197.721 million) in respect of this fund.
37.2. MCB Financial Services Limited

The company operates the provident fund scheme covering all permanent employees. Contribution at the rate of 8.33%
per annum are made both by the Company and employees to the fund.
283
38. COMPENSATION OF DIRECTORS AND EXECUTIVES

The aggregate amount charged in the financial statements for compensation, including all benefits, to the Chief Executive,
Directors and Executives of the Group as follows:
President / Chief Executive Directors Executives

2014 2013 2014 2013 2014 2013
(Rupees in ‘000)
Fees - - 34,064 31,674 - -

Managerial remuneration 27,099 23,013 - - 1,316,698 1,189,283
Bonus and others 29,620 16,913 - - 698,150 562,447
Retirement benefits 2,232 1,892 - - 89,624 79,375
Rent and house maintenance 12,054 10,215 - - 444,808 407,956
Utilities 2,679 2,270 - - 99,208 90,150
Medical - - - - 29,484 26,506
Conveyance - - - - 504,087 455,633
73,684 54,303 34,064 31,674 3,182,059 2,811,350
Number of persons 1 1 12 12 1026 918
38.1. The Chairman has been provided with free use of the Bank maintained car. In addition to the above, the Chief Executive and
certain executives are provided with free use of the Group’s maintained cars and household equipments in accordance with
the terms of their employment.
39. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of traded investments is based on quoted market prices, except for tradable securities classified by the Bank as
‘held to maturity’. Fair value of unquoted equity investments is determined on the basis of break up value of these investments
as per the latest available audited financial statements.
Fair value of fixed term loans, other assets, other liabilities and fixed term deposits cannot be calculated with sufficient
reliability due to absence of current and active market for such assets and liabilities and reliable data regarding market rates for
similar instruments. The provision for impairment of loans and advances has been calculated in accordance with the Bank’s
accounting policy as stated in note 5.4 to these consolidated financial statements.
The maturity and repricing profile and effective rates are stated in notes 43.3, 43.4.1 and 43.4.2 respectively.
In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different
from their carrying values since assets and liabilities are either short-term in nature or in the case of customer loans and de-
posits are frequently re-priced.
284
ANNUAL REPORT 2014

40. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES
The segment analysis with respect to business activity is as follows:
Inter
Corporate Trading and Retail & Commercial Asset segment/ Total
Finance Sales Consumer Banking Management group
Banking elimination
(Rupees in ‘000)
2014
Total income 220,248 10,567,973 38,066,034 8,510,776 612,922 (2,664) 57,975,289

Total expenses (97,316) (1,767,805) (16,602,402) (1,872,772) (283,636) 2,664 (20,621,267)
Income tax expense - - - - - - (12,579,576)
Net income 122,932 8,800,168 21,463,632 6,638,004 329,286 - 24,774,446
Segment assets - (Gross of NPL’s provision) 588,078 564,578,299 789,210,778 249,438,985 1,797,434 (649,104,339) 956,509,235
Advance taxation (payments less provisions) - - - - - - 3,246,452
Total assets 588,078 564,578,299 789,210,778 249,438,985 1,797,434 (649,104,339) 959,755,687
Segment non performing loans - - 8,261,678 13,646,113 - - 21,907,791
Segment specific provision required - - 8,217,857 9,931,344 - - 18,149,201
Segment liabilities 140,671 517,157,912 708,711,714 217,323,742 371,739 (649,104,339) 794,601,439

Deferred tax liability - - - - - - 10,735,841
Total liabilities - net 140,671 517,157,912 708,711,714 217,323,742 371,739 (649,104,339) 805,337,280
Segment return on assets (ROA) (%) 37.45% 1.87% 4.87% 3.55% 34.10% - -
Segment cost of fund (%) - 9.92% 6.16% 9.35% - - -
Inter
Corporate Trading and Retail & Commercial Asset segment/ Total
Finance Sales Consumer Banking Management group
Banking elimination
(Rupees in ‘000)
2013
Total income 171,289 7,970,392 33,999,672 7,530,014 455,614 (54,637) 50,072,344
Total expenses (54,381) (1,192,313) (14,584,308) (1,109,566) (254,343) 54,637 (17,140,274)
Income tax expense - - - - - - (10,981,929)
Net income 116,908 6,778,079 19,415,364 6,420,448 201,271 - 21,950,141

Segment assets - (Gross of NPL’s provision) 483,485 494,892,926 697,975,826 203,531,529 1,504,746 (563,805,587) 834,582,925
Advance taxation (payments less provisions) - - - - - - 6,145,527
Total assets 483,485 494,892,926 697,975,826 203,531,529 1,504,746 (563,805,587) 840,728,452

Segment non performing loans - - 9,600,755 13,666,978 - - 23,267,733
Segment specific provision required - - 9,565,097 9,885,051 - - 19,450,148
Segment liabilities 49,592 469,547,401 623,681,467 171,643,706 198,637 (563,805,587) 701,315,216

Deferred tax liability - - - - - - 4,500,293
Total liabilities - net 49,592 469,547,401 623,681,467 171,643,706 198,637 (563,805,587) 705,815,509

Segment return on assets (ROA) (%) 35.43% 1.61% 4.94% 3.89% 30.28% - -
Segment cost of fund (%) - 9.27% 5.41% 8.94% - - -
Total income = Net markup income + non-markup income

Total expenses = Non Mark up expenses + Provisions
Segment assets and liabilities include inter segment balances.
Transactions between reportable segments are based on an appropriate transfer pricing mechanism using agreed rates.
Segment cost of funds have been computed based on the average balances.
285
41. RELATED PARTY TRANSACTIONS AND BALANCES
The Group has related party relationship with its associates, employee benefit plans and its key management personnel
(including their associates) and companies with common directors. The detail of investment in associates are stated in
Annexure I (note 5) to these consolidated financial statements.
The Group enters into transactions with related parties in the normal course of business. Contributions to and accruals in
respect of staff retirement benefits and other benefit plans are made in accordance with the actuarial valuations / terms of the
contribution plan. Remuneration to the executives / officers is determined in accordance with the terms of their appointment.
Remuneration to Chief Executive, Directors and Executives is disclosed in note 38 to these consolidated financial statements.
Directors Associates Other related parties Key management

2014 2013 2014 2013 2014 2013 2014 2013
(Rupees in ‘000)
A. Balances
Deposits
Opening balance 931,665 2,863,874 978,408 976,642 14,490,403 26,850,559 125,197 46,039
Received during the year 5,719,181 4,273,706 9,719,217 18,859,601 53,502,747 61,543,210 1,131,625 1,176,959
Withdrawn during the year (3,264,626) (6,205,915) (8,977,803) (18,857,835) (56,067,168) (73,903,366) (1,121,798) (1,097,801)
Closing balance 3,386,220 931,665 1,719,822 978,408 11,925,982 14,490,403 135,024 125,197

Advances (secured )
Opening balance 2,185 2,795 - - 116,584 98,056 78,927 53,865
Additions / adjustments
during the year - - - - 627,390 406,354 24,281 38,731
Repaid during the year (636) (610) - - (722,056) (387,826) (15,135) (13,669)
Closing balance 1,549 2,185 - - 21,918 116,584 88,073 78,927
Outstanding Balance of credit card 709 545 - - 78 2 1,631 2,635
Receivable from Pension fund - - - - 7,263,254 5,854,207 - -
B. Other transactions (including profit and loss related transactions)
Outstanding commitments
and contingent liabilities - - 11,405 10,805 656 90,171 - -
Forward foreign exchange contracts
(Notional) - outstanding - - - - 7,497,696 5,623,351 - -
Unrealized gain / (loss) on forward foreign
exchange contracts Outstanding - - - - (30,613) 19,424 - -
Borrowings - - - - 4,019,324 3,159,738 - -
Trade payable - - 9,757 7,594 5,653 27,498 - -
Payments for Capital Expenditure - - 15,288 23,257 - - - -
Investments in units - - - - 747,602 297,000 - -
Redemption of units - - - - 825,662 347,268 - -
Outstanding Investments in mutual funds - - - - 968,821 877,915 - -
Retention money - - - - 6,525 3,612 - -
Markup payable 14,407 - 8,511 405 1,178,840 1,071,287 681 80
Advance receivable - - - - 44,000 58,085 - -
Trade debts - - - 280 - 1,345 - -
Markup Receivable - - - - 419 5,121 - -
Other Receivable - - 6,195 3,821 274,870 210,076 - 2,819
Other payable - - 2,136 - - - - -
Insurance premium paid-net of refund - - 482,843 247,803 574 4,124 - -
Insurance claim settled - - 39,526 95,645 - - - -
Markup income on advances 94 125 - - 4,639 8,216 4,162 7,475
Forward contracts during the period - - - - 86,645,768 34,665,422 - -
Repo deals during the period - - - - - 39,742,107 - -
Rent Income Received - - - 2,025 - - - -
Dividend Income - - 229,390 126,118 34,282 159,570 - -
Capital gain on sale of investments - - - - - 303,215 - -
Commission income - - 757,822 751,069 7,419 14,410 - -
Management fee and Advisory income - - - - 565,303 503,526 - -
Reimbursement of expenses - - - - 1,871 1,571 - -
Outsourcing service expenses - - 115,392 138,229 - - - -
Switch Expense - - - - - - - -
Proceeds from sale of fixed assets - - - - - 57,970 24 2,896
Gain / (loss) on sale of fixed assets - - - - - - 21 (2,307)
Service fee & IBFT - - 3,531 43,843 - - - -
Cash sorting expenses - - - - 56,678 49,915 - -
Stationery Expenses - - - - 191,482 207,063 - -
Security guard expenses - - - - 321,424 298,394 - -
Remuneration and non-executive
directors fee 107,747 85,977 - - - - 440,298 377,743
Mark-up expense 60,678 103,394 80,348 71,275 906,010 2,080,760 3,686 2,317
Clearing expenses paid to NIFT - - - - 138,727 124,315 - -
Contribution to provident fund - - - - 214,712 202,355 - -
Gas Charges - - - - 10,831 10,939 - -
Miscellaneous expenses and payments - - 114,106 153,832 57,338 124,196 - -
The details of director’s compensations are given in note 38 to these Consolidated Financial Statements.
286
ANNUAL REPORT 2014

42. CAPITAL ASSESSMENT AND ADEQUACY
42.1 Scope of Applications
The Basel-III Framework is applicable to the bank both at the consolidated level (comprising of wholly/partially owned
subsidiaries & associates) and on a stand alone basis. Consolidation for capital adequacy is based on consolidated
financial statements of MCB Bank Limited and its subsidiaries and associates. Subsidiaries are included while calcu-
lating Consolidated Capital Adequacy for the Bank using full consolidation method whereas associates in which the
bank has significant influence on equity method. Standardized Approach is used for calculating the Capital Adequacy
for Credit and Market risk, whereas, Basic Indicator Approach (BIA) is used for Operational Risk Capital Adequacy
purposes.
42.2 Capital Management
Objectives and goals of managing capital
The Bank manages its capital to attain following objectives and goals:
- an appropriately capitalized status, as defined by banking regulations;

- acquire strong credit ratings that enable an optimized funding mix and liquidity sources at lesser costs;
- cover all risks underlying business activities;
- retain flexibility to harness future investment opportunities; build and expand even in stressed times.
Statutory minimum capital requirement and Capital Adequacy Ratio
The State Bank of Pakistan through its BSD Circular No.07 of 2009 dated April 15, 2009 requires the minimum paid up
capital (net of losses) for all locally incorporated banks to be raised to Rs. 10 billion by the year ended on December
31, 2013. The raise was to be achieved in a phased manner requiring Rs.10 billion paid up capital (net of losses) by
the end of the financial year 2013. The paid up capital of the Bank for the year ended December 31, 2014 stands at
Rs. 11.130 billion and is in compliance with the SBP requirement.
The capital adequacy ratio of the Bank was subject to the Basel III capital adequacy guidelines stipulated by the State
Bank of Pakistan through its BPRD Circular No. 06 of 2013 dated August 15, 2013. These instructions are effective
from December 31, 2013 in a phased manner with full implementation intended by December 31, 2019. Under Basel
III guidelines banks are required to maintain the following ratios on an ongoing basis:
Phase-in arrangement and full implementation of the minimum capital requirements:
Year End As of Dec 31

Sr. No Ratio 2013 2014 2015 2016 2017 2018 31-12-2019
1 CET1 5.00% 5.50% 6.00% 6.00% 6.00% 6.00% 6.00%
2 ADT-1 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
3 Tier 1 6.50% 7.00% 7.50% 7.50% 7.50% 7.50% 7.50%
4 Total Capital 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
5 *CCB - - 0.25% 0.65% 1.275% 1.90% 2.50%
Total Capital
6 plus CCB 10.00% 10.00% 10.25% 10.65% 11.275% 11.90% 12.50%
- *(Consisting of CET1 only)
287
Bank’s regulatory capital is analysed into three tiers.
- Common Equity Tier 1 capital (CET1), which includes fully paid up capital (including the bonus shares), balance in
share premium account, general reserves, statutory reserves, minority interest as per the financial statements and net
unappropriated profits after all regulatory adjustments applicable on CET1.
- Additional Tier 1 Capital (AT1), which includes perpetual non-cumulative preference shares and Share premium
resulting from the issuance of preference shares balance in share premium account after all regulatory adjustments
applicable on AT1.
The deduction from Tier 1 Capital include mainly:

i) Book value of goodwill / intangibles;
ii) Deficit on revaluation of available for sale investments
iii) Defined-benefit pension fund net assets
iv) Reciprocal cross holdings in equity capital instruments of other banks, financial institutions and insurance
companies;
v) Investment in mutual funds above a prescribed ceiling;
vi) Threshold deductions applicable from 2014 on deferred tax assets and certain investments;
vii) 50% of investments in majority owned securities or other financial subsidiaries not consolidated in the statement
of financial position,
- Tier 2 capital, which includes Subordinated debt/ Instruments, share premium of issuance of Subordinated debt/
Instruments, general provisions for loan losses (up to a maximum of 1.25 % of credit risk weighted assets), Net of tax
reserves on revaluation of fixed assets and investments up to a maximum of 45 % of the balance and 20% of remaining
55% for 2014 and foreign exchange translation reserves after all regulatory adjustments applicable on Tier-2
The deductions from Tier 2 include mainly:

i) Reciprocal cross holdings in other capital instruments of other banks, financial institution and insurance companies;
ii) 50% of investments in majority owned securities or other financial subsidiaries not consolidated in the statement
of financial position, during transition phase.
The required capital adequacy ratio (10% of the risk-weighted assets) is achieved by the Bank through improvement in
the asset quality at the existing volume level, ensuring better recovery management and composition of asset mix with low
risk. Banking operations are categorized as either trading book or banking book and risk-weighted assets are determined
according to specified requirements of the State Bank of Pakistan that seek to reflect the varying levels of risk attached to
assets and off-balance sheet exposures. The total risk-weighted exposures comprise of the credit risk, market risk and
operational risk.
Basel-III Framework enables a more risk-sensitive regulatory capital calculation to promote long term viability of the Bank. As
the Bank conducts business on a wide area network basis, it is critical that it is able to continuously monitor the exposure
across entire organization and aggregate the risks so as to take an integrated view. Maximization of the return on risk-adjusted
capital is the principal basis to be used in determining how capital is allocated within the Bank to particular operations or
activities.
The Bank remained compliant with all externally imposed capital requirements through out the year. Further, there has been
no material change in the Bank’s management of capital during the year.
288
ANNUAL REPORT 2014

42.3 Capital Adequacy Ratio
2014 2013

(Rupees in ‘000)

1 Fully Paid-up Capital 11,130,307 10,118,461
2 Balance in Share Premium Account 9,924,438 9,924,438
3 Reserve for issue of Bonus Shares - -
4 Discount on Issue of shares - -
5 General/ Statutory Reserves 38,732,970 36,300,494
6 Gain/(Losses) on derivatives held as Cash Flow Hedge - -
7 Unappropriated/unremitted profits/ (losses) 49,765,031 43,038,094
8 Minority Interests arising from CET1 capital instruments issued to
third parties by consolidated bank subsidiaries (amount allowed
in CET1 capital of the consolidation group) 511,960 489,671
9 CET 1 before Regulatory Adjustments 110,064,706 99,871,158
10 Total regulatory adjustments applied to CET1 (Note 42.3.1) 4,698,923 3,911,092

11 Common Equity Tier 1 105,365,783 95,960,066

12 Qualifying Additional Tier-1 capital instruments plus any
related share premium - -
13 of which: Classified as equity - -
14 of which: Classified as liabilities - -
15 Additional Tier-1 capital instruments issued to third parties by consolidated
subsidiaries (amount allowed in group AT 1) - -
16 of which: instrument issued by subsidiaries subject to phase out - -
17 AT1 before regulatory adjustments - -
18 Total regulatory adjustment applied to AT1 capital (Note 42.3.2) - -
19 Additional Tier 1 capital after regulatory adjustments - -
20 Additional Tier 1 capital recognized for capital adequacy - -

21 Tier 1 Capital (CET1 + admissible AT1) (11+20) 105,365,783 95,960,066
Tier 2 Capital
22 Qualifying Tier 2 capital instruments under Basel III plus any related
share premium - -
23 Tier 2 capital instruments subject to phaseout arrangement issued under
pre-Basel 3 rules - -
24 Tier 2 capital instruments issued to third parties by consolidated subsidiaries
(amount allowed in group tier 2) - -
25 of which: instruments issued by subsidiaries subject to phase out - -
26 General provisions or general reserves for loan losses-up to maximum
of 1.25% of Credit Risk Weighted Assets 609,473 499,145
27 Revaluation Reserves (net of taxes)
28 of which: Revaluation reserves on fixed assets 6,355,692 5,128,943
29 of which: Unrealized gains/losses on AFS 8,014,952 1,534,492
30 Foreign Exchange Translation Reserves 542,637 784,004
31 Undisclosed/Other Reserves (if any) - -
32 T2 before regulatory adjustments 15,522,754 7,946,584
33 Total regulatory adjustment applied to T2 capital (Note 42.3.3) 2,481,530 2,693,125

34 Tier 2 capital (T2) after regulatory adjustments 13,041,224 5,253,459
35 Tier 2 capital recognized for capital adequacy 13,041,224 5,253,459
36 Portion of Additional Tier 1 capital recognized in Tier 2 capital - -
37 Total Tier 2 capital admissible for capital adequacy 13,041,224 5,253,459
38 TOTAL CAPITAL (T1 + admissible T2) (21+37) 118,407,007 101,213,525

289
2014 2013

(Rupees in ‘000)
39 Total Risk Weighted Assets (RWA) {for details refer Note 42.6} 580,157,751 456,836,518

Capital Ratios and buffers (in percentage of risk weighted assets)
40 CET1 to total RWA 18.16% 21.01%
41 Tier-1 capital to total RWA 18.16% 21.01%
42 Total capital to total RWA 20.41% 22.16%

43 Bank specific buffer requirement (minimum CET1 requirement plus
capital conservation buffer plus any other buffer requirement) 5.50% 5.00%
44 of which: capital conservation buffer requirement - -
45 of which: countercyclical buffer requirement - -
46 of which: D-SIB or G-SIB buffer requirement - -
47 CET1 available to meet buffers (as a percentage of risk weighted assets) 12.66% 16.01%

National minimum capital requirements prescribed by SBP
48 CET1 minimum ratio 5.50% 5.00%
49 Tier 1 minimum ratio 7.00% 6.50%
50 Total capital minimum ratio 10.00% 10.00%
2014 2013
Amounts
- Basel III
treatment
(Rupees in ‘000)
42.3.1 Common Equity Tier 1 capital: Regulatory adjustments
1 Goodwill (net of related deferred tax liability) 82,127 - 82,127

2 All other intangibles (net of any associated deferred tax liability) 1,101,802 1,048,023
3 Shortfall in provisions against classified assets - -
4 Deferred tax assets that rely on future profitability excluding those arising
from temporary differences (net of related tax liability) - -
5 Defined-benefit pension fund net assets 944,223 4,721,115 -
6 Reciprocal cross holdings in CET1 capital instruments of banking, financial
and insurance entities - -
7 Cash flow hedge reserve - -
8 Investment in own shares/ CET1 instruments - -
9 Securitization gain on sale - -
10 Capital shortfall of regulated subsidiaries - -
11 Deficit on account of revaluation from bank’s holdings of fixed assets/ AFS - -
entities that are outside the scope of regulatory consolidation, where the
bank does not own more than 10% of the issued share capital
13 Significant investments in the common stocks of banking, financial and
14 Deferred Tax Assets arising from temporary differences (amount above
10% threshold, net of related tax liability) - -
15 Amount exceeding 15% threshold - -
16 of which: significant investments in the common stocks of financial entities - -
17 of which: deferred tax assets arising from temporary differences - -
18 National specific regulatory adjustments applied to CET1 capital - -
19 Investments in TFCs of other banks exceeding the prescribed limit - -
20 Any other deduction specified by SBP (mention details) - -
21 Adjustment to CET1 due to insufficient AT1 and Tier 2 to cover deductions* 2,570,771 2,780,942
22 Total regulatory adjustments applied to CET1 4,698,923 3,911,092
290
ANNUAL REPORT 2014

2014 2013
Amounts
- Basel III
treatment
(Rupees in ‘000)
42.3.2 Additional Tier-1 & Tier-1 Capital: regulatory adjustments

23 Investment in mutual funds exceeding the prescribed limit
[SBP specific adjustment] 89,241 87,817
24 Investment in own AT1 capital instruments - -
25 Reciprocal cross holdings in Additional Tier 1 capital instruments of banking,
financial and insurance entities - -
27 Significant investments in the capital instruments of banking, financial and
insurance entities that are outside the scope of regulatory consolidation - -
deduction from additional tier-1 capital 2,481,530 2,693,125
29 Adjustments to Additional Tier 1 due to insufficient Tier 2 to cover deductions - -
30 Total regulatory adjustment applied to AT1 capital * - -
*As the Bank has not Tier 1 capital, deduction was made from CET1.
42.3.3 Tier 2 Capital: regulatory adjustments

deduction from tier-2 capital 2,481,530 2,693,125
32 Reciprocal cross holdings in Tier 2 instruments of banking, financial and
insurance entities - -
33 Investment in own Tier 2 capital instrument - -
financial and insurance entities that are outside the scope of regulatory
consolidation - -
36 Total regulatory adjustment applied to T2 capital 2,481,530 2,693,125
42.3.4 Additional Information

2014 2013
(Rupees in ‘000)
Risk Weighted Assets subject to pre-Basel III treatment

37 Risk weighted assets in respect of deduction items (which during the
transitional period will be risk weighted subject to Pre-Basel III Treatment) - -
(i) of which: deferred tax assets - -
(ii) of which: Defined-benefit pension fund net assets 3,776,892 3,805,233
(iii) of which: Recognized portion of investment in capital of banking,
financial and insurance entities where holding is less than 10% of the
(iv) of which: Recognized portion of investment in capital of banking,
financial and insurance entities where holding is more than 10% of the
Amounts below the thresholds for deduction (before risk weighting)
38 Non-significant investments in the capital of other financial entities - -
39 Significant investments in the common stock of financial entities - -
40 Deferred tax assets arising from temporary differences (net of related tax liability) - -
Applicable caps on the inclusion of provisions in Tier 2
41 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to
standardized approach (prior to application of cap) 609,473 499,145
42 Cap on inclusion of provisions in Tier 2 under standardized approach 4,607,395 3,913,834
43 Provisions eligible for inclusion in Tier 2 in respect of exposures subject
to internal ratings-based approach (prior to application of cap) - -
44 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach - -
291
42.4 Capital Structure Reconciliation

consolidation
As at 31-12-2014 As at 31-12-2014
(Rupees in ‘000)
Assets
Investments 516,898,299 516,898,299
Advances 304,000,563 304,000,563
Other assets 37,888,155 37,888,155
Total assets 941,606,486 941,606,486

Bills payable 16,627,700 16,627,700
Borrowings 59,776,578 59,776,578
Share capital 11,130,307 11,130,307

Reserves 49,200,045 49,200,045
Minority Interest 511,960 511,960
Total Equity 110,607,343 110,607,343
Surplus on revaluation of assets - net of tax 25,661,863 25,661,863

Total liabilities & equity 941,606,486 941,606,486

as per published regulatory Ref
consolidation
As at 31-12-2014 As at 31-12-2014
(Rupees in ‘000)
Assets
Investments 516,898,299 516,898,299
of which: Non-significant capital investments in capital of other financial institutions
exceeding 10% threshold - - a
of which: significant investments in the capital instruments issued by banking, financial
and insurance entities exceeding regulatory threshold - - b
of which: Mutual Funds exceeding regulatory threshold 89,241 89,241 c
of which: reciprocal crossholding of capital instrument (separate for CET1, AT1, T2) - - d
of which: others e
292
ANNUAL REPORT 2014

Step 2 Balance Sheet Under Ref

consolidation
As at 31-12-2014 As at 31-12-2014
(Rupees in ‘000)
Advances 304,000,563 304,000,563

shortfall in provisions/ excess of total EL amount over eligible provisions under IRB - - f
general provisions reflected in Tier 2 capital 609,473 609,473 g
Fixed Assets 31,583,646 31,583,646

of which: Intangibles 1,101,802 1,101,802 k
of which: Goodwill 82,127 82,127 j
Deferred Tax Assets - -
of which: DTAs that rely on future profitability excluding those arising from temporary differences - - h
of which: DTAs arising from temporary differences exceeding regulatory threshold - - i
Other assets 37,888,155 37,888,155
of which: Defined-benefit pension fund net assets 7,263,254 7,263,254 l
Total assets 941,606,486 941,606,486
Bills payable 16,627,700 16,627,700

Borrowings 59,776,578 59,776,578
of which: eligible for inclusion in AT1 - - m
of which: eligible for inclusion in Tier 2 - - n
of which: DTLs related to goodwill - - o
of which: DTLs related to intangible assets - - p
of which: DTLs related to defined pension fund net assets 2,542,139 2,542,139 q
of which: other deferred tax liabilities 8,193,702 8,193,702 r
Share capital 21,054,745 21,054,745

of which: amount eligible for CET1 21,054,745 21,054,745 s
of which: amount eligible for AT1 - - t
Reserves 39,275,607 39,275,607
of which: portion eligible for inclusion in CET1 (general reserve & statutory reserve) 38,732,970 38,732,970 u
of which: portion eligible for inclusion in Tier 2 542,637 542,637 v
Unappropriated profit 49,765,031 49,765,031 w
Minority Interest 511,960 511,960
of which: portion eligible for inclusion in CET1 511,960 511,960 x
of which: portion eligible for inclusion in AT1 - - y
of which: portion eligible for inclusion in Tier 2 - - z
Surplus on revaluation of assets 25,661,863 25,661,863
of which: Revaluation reserves on fixed assets 11,349,450 11,349,450
aa
of which: Unrealized Gains/Losses on AFS 14,312,413 14,312,413
In case of Deficit on revaluation (deduction from CET1) - - ab
Total Equity 136,269,206 136,269,206
Total liabilities and equity 941,606,486 941,606,486
293

by bank step 2
(Rupees in ‘000)

1 Fully Paid-up Capital 11,130,307 (s)
2 Balance in Share Premium Account 9,924,438
3 Reserve for issue of Bonus Shares -
4 General/ Statutory Reserves 38,732,970 (u)
5 Gain/(Losses) on derivatives held as Cash Flow Hedge -
6 Unappropriated/unremitted profits/(losses) 49,765,031 (w)
7 Minority Interests arising from CET1 capital instruments issued to third party by
consolidated bank subsidiaries (amount allowed in CET1 capital of the
consolidation group 511,960 (x)
8 CET 1 before Regulatory Adjustments 110,064,706

Common Equity Tier 1 capital: Regulatory adjustments

9 Goodwill (net of related deferred tax liability) 82,127 (j) - (o)
10 All other intangibles (net of any associated deferred tax liability) 1,101,802 (k) - (p)
11 Shortfall of provisions against classified assets - (f)
12 Deferred tax assets that rely on future profitability excluding those arising from
temporary differences (net of related tax liability) - {(h) - (r} * 20%
13 Defined-benefit pension fund net assets 944,223 {(l) - (q)} * 20%
14 Reciprocal cross holdings in CET1 capital instruments - (d)
15 Cash flow hedge reserve -
16 Investment in own shares/ CET1 instruments -
17 Securitization gain on sale -
18 Capital shortfall of regulated subsidiaries -
19 Deficit on account of revaluation from bank’s holdings of property/ AFS - (ab)
20 Investments in the capital instruments of banking, financial and
insurance entities that are outside the scope of regulatory consolidation,
where the bank does not own more than 10% of the issued share capital
(amount above 10% threshold) - (a) - (ac) - (ae)
financial and insurance entities that are outside the scope of regulatory consolidation
(amount above 10% threshold) - (b) - (ad) - (af)
22 Deferred Tax Assets arising from temporary differences
(amount above 10% threshold, net of related tax liability) - (i)
23 Amount exceeding 15% threshold -
24 of which: significant investments in the common stocks of financial entities -
25 of which: deferred tax assets arising from temporary differences -
26 National specific regulatory adjustments applied to CET1 capital -
27 Investment in TFCs of other banks exceeding the prescribed limit -
28 Any other deduction specified by SBP (mention details) -
29 Regulatory adjustment applied to CET1 due to insufficient AT1
and Tier 2 to cover deductions 2,570,771
30 Total regulatory adjustments applied to CET1 4,698,923
31 Common Equity Tier 1 105,365,783

32 Qualifying Additional Tier-1 instruments plus any related share premium -
33 of which: Classified as equity - (t)
34 of which: Classified as liabilities - (m)
35 Additional Tier-1 capital instruments issued by consolidated
subsidiaries and held by
third parties (amount allowed in group AT 1) - (y)
36 of which: instrument issued by subsidiaries subject to phase out -
37 AT1 before regulatory adjustments -
294
ANNUAL REPORT 2014


by bank step 2
(Rupees in ‘000)
Additional Tier 1 Capital: regulatory adjustments

38 Investment in mutual funds exceeding the prescribed limit (SBP specific adjustment) 89,241
39 Investment in own AT1 capital instruments -
40 Reciprocal cross holdings in Additional Tier 1 capital instruments -
41 Investments in the capital instruments of banking, financial and insurance entities that
are outside the scope of regulatory consolidation, where the bank does not own more
than 10% of the issued share capital (amount above 10% threshold) - (ac)
insurance entities that are outside the scope of regulatory consolidation - (ad)
43 Portion of deduction applied 50:50 to core capital and supplementary capital based
on pre-Basel III treatment which, during transitional period, remain subject to deduction
from tier-1 capital 2,481,530
44 Regulatory adjustments applied to Additional Tier 1 due to insufficient
Tier 2 to coverdeductions -
45 Total of Regulatory Adjustment applied to AT1 capital -
46 Additional Tier 1 capital -
47 Additional Tier 1 capital recognized for capital adequacy -
48 Tier 1 Capital (CET1 + admissible AT1) 105,365,783
Tier 2 Capital
49 Qualifying Tier 2 capital instruments under Basel III - (n)
50 Capital instruments subject to phase out arrangement from tier 2
(Pre-Basel III instruments) -
51 Tier 2 capital instruments issued to third party by consolidated subsidiaries
(amount allowed in group tier 2) - (z)
52 of which: instruments issued by subsidiaries subject to phase out -
53 General Provisions or general reserves for loan losses-up to maximum of
1.25% of Credit Risk Weighted Assets 609,473 (g)
54 Revaluation Reserves eligible for Tier 2 14,370,644
55 of which: Revaluation reserves on fixed assets 6,355,692 portion of (aa)
56 of which: Unrealized Gains/Losses on AFS 8,014,952
57 Foreign Exchange Translation Reserves 542,637 (v)
58 Undisclosed/Other Reserves (if any) -
59 T2 before regulatory adjustments 15,522,754
Tier 2 Capital: regulatory adjustments
60 Portion of deduction applied 50:50 to core capital and supplementary
capital based on pre-Basel III treatment which, during transitional period,
remain subject to deduction from tier-2 capital 2,481,530
61 Reciprocal cross holdings in Tier 2 instruments -
62 Investment in own Tier 2 capital instrument -
63 Investments in the capital instruments of banking, financial and insurance entities
that are outside the scope of regulatory consolidation, where the bank does not own
more than 10% of the issued share capital (amount above 10% threshold) - (ae)
insurance entities that are outside the scope of regulatory consolidation - (af)
65 Amount of Regulatory Adjustment applied to T2 capital 2,481,530
66 Tier 2 capital (T2) 13,041,224
67 Tier 2 capital recognized for capital adequacy 13,041,224
68 Excess Additional Tier 1 capital recognized in Tier 2 capital -
69 Total Tier 2 capital admissible for capital adequacy 13,041,224
70 TOTAL CAPITAL (T1 + admissible T2) 118,407,007
295
42.5 Main Features Template of Regulatory Capital Instruments
1 Issuer MCB Bank Limited

2 Unique identifier (e.g KSE Symbol or Bloomberg identifier etc.) MCB
3 Governing law(s) of the instrument Relevant Capital Market Laws
Regulatory treatment
4 Transitional Basel III rules Common equity Tier 1
5 Post-transitional Basel III rules Common equity Tier 1
6 Eligible at solo/ group/ group & solo Group & standalone
7 Instrument type Common Shares
8 Amount recognized in regulatory capital (Currency in PKR thousands, as of reporting date) 11,130,307
9 Par value of instrument PKR 10 per share
10 Accounting classification Shareholder equity
11 Original date of issuance 1947
12 Perpetual or dated Perpetual
13 Original maturity date No maturity
14 Issuer call subject to prior supervisory approval Not applicable
15 Optional call date, contingent call dates and redemption amount Not applicable
16 Subsequent call dates, if applicable Not applicable
Coupons / dividends
17 Fixed or floating dividend/ coupon Not applicable
18 Coupon rate and any related index/ benchmark Not applicable
19 Existence of a dividend stopper No
20 Fully discretionary, partially discretionary or mandatory Fully discretionary
21 Existence of step up or other incentive to redeem No
22 Noncumulative or cumulative Not applicable
Convertible or non-convertible Not applicable
23 If convertible, conversion trigger (s) Not applicable
24 If convertible, fully or partially Not applicable
25 If convertible, conversion rate Not applicable
26 If convertible, mandatory or optional conversion Not applicable
27 If convertible, specify instrument type convertible into Not applicable
28 If convertible, specify issuer of instrument it converts into Not applicable
Write-down feature Not applicable
29 If write-down, write-down trigger(s) Not applicable
30 If write-down, full or partial Not applicable
31 If write-down, permanent or temporary Not applicable
32 If temporary write-down, description of write-upmechanism Not applicable
33 Position in subordination hierarchy in liquidation (specify instrument type immediately Common equity ranks after
senior to instrument) all creditors and depositors
34 Non-compliant transitioned features No
35 If yes, specify non-compliant features Not applicable
296
ANNUAL REPORT 2014

42.6 Risk Weighted Assets
The risk weighted assets to capital ratio, calculated in accordance with the State Bank of Pakistan’s guidelines on
capital adequacy was as follows:
Capital Requirements Risk Weighted Assets
2014 2013 2014 2013
(Rupees in ‘000)
Credit Risk
Portfolios subject to standardized approach
(simple or comprehensive)
On-Balance Sheet
Corporate portfolio 20,251,843 16,788,315 181,663,947 153,766,068

Banks / DFIs 790,276 609,648 7,088,968 5,583,831
Public sector entities 875,037 830,304 7,849,296 7,604,851
Sovereigns / cash & cash equivalents 789,130 726,231 7,078,684 6,651,630
Loans secured against residential property 143,279 146,856 1,285,245 1,345,071
Retail 1,742,630 1,664,298 15,631,817 15,243,489
Past due loans 353,659 359,771 3,172,406 3,295,180
Operating fixed assets 3,388,951 3,043,503 30,399,717 27,875,789
Other assets 3,414,426 2,349,527 30,628,229 21,519,586
31,749,231 26,518,453 284,798,309 242,885,495
Off-Balance Sheet

Non-market related 8,479,702 7,275,375 76,064,982 66,635,984
Market related 96,881 123,393 869,050 1,130,165
8,576,583 7,398,768 76,934,032 67,766,149
Equity Exposure Risk in the Banking Book
Listed 662,850 169,118 5,945,927 1,548,975
Unlisted 101,820 98,930 913,346 906,109
764,670 268,048 6,859,273 2,455,084
Total Credit Risk 41,090,484 34,185,269 368,591,614 313,106,728

Market Risk
Capital requirement for portfolios subject to
standardized approach
Interest rate risk 6,913,325 2,655,717 86,416,562 33,196,459
Equity position risk 1,906,082 1,204,219 23,826,025 15,052,742
Foreign exchange risk 492,917 177,184 6,161,462 2,214,805
Total Market Risk 9,312,324 4,037,120 116,404,049 50,464,006

Operational Risk
Capital requirement for operational risks 7,612,967 7,461,263 95,162,088 93,265,784

Total 58,015,775 45,683,652 580,157,751 456,836,518
2014 2013
Required Actual Required Actual
% % % %
Capital Adequacy Ratio
CET1 to total RWA 5.50 18.16 5.00 21.01

Tier-1 capital to total RWA 7.00 18.16 6.50 21.01
Total capital to total RWA 10.00 20.41 10.00 22.16

* As SBP capital requirement of 10% (10% in 2013) is calculated on overall basis therefore, capital charge for credit risk is calculated after
excluding capital requirements against market and operational risk from the total capital required.
297
43. RISK MANAGEMENT
Risk is an inherent part of banking business activities. The risk management framework and governance structure at MCB helps to mitigate
and counter any foreseeable risk in its various lines of business. Risk awareness forms an integral part of strategic and operational activities
of risk management. Through its risk management policy the Bank sets the best course of action under uncertainty by identifying, prioritizing,
mitigating and monitoring risk issues, with the goal of enhancing shareholders’ value. Bank’s risk management structure is based on the
following five guiding principles:
• Optimizing risk/return in a controlled manner

• Establishing clear responsibility and accountability
• Establishing independent and properly resourced risk management function.
• Promoting open risk culture
• Adopting international best practices in risk management
Keeping in view dynamics of internal and external environment, the bank regularly reviews and updates policy manuals / frameworks and
procedures in accordance with domestic regulatory environment and international standards.
The Bank executes its risk strategy and undertakes controlled risk-taking activities within its risk management framework. The Board of
Directors and its relevant committee, i.e. the Risk Management & Portfolio Review Committee (RM&PRC), the senior management and
its relevant committees, i.e. the Risk Management Committee (RMC), Asset Liability Committee (ALCO), etc., are responsible to ensure
formulation and implementation of comprehensive Risk Management Framework. This framework is based on prudent risk identification,
measurement, management and monitoring process which are closely aligned with the activities of the bank.. The framework combines core
policies, procedures and process designs with broad oversight and is supported by an efficient monitoring mechanism across the bank to
ensure that risks are kept within an acceptable level.
The Bank ensures that not only the relevant risks are identified but their implications are also considered and basis provided for managing and
measuring the risks. Through Internal Control units, the Bank ensures that effective controls are in place to mitigate each of the identified risk.
Independent from business groups, Head of Risk Management reports functionally to the Risk Management & Portfolio Review Committee
(RM&PRC) and administratively to the President; the RM&PRC convenes regular meetings to evaluate bank’s risk and portfolio concentrations.
The Risk Management Group performs the following critical functions:
• Credit Risk Management

• Credit Review
• Credit Risk Control
• Market Risk Management
• Liquidity Risk Management
• Operational Risk Management
Keeping in view the international best practices and SBP requirements, Board of Directors of the Bank has approved a Risk Appetite
Statement, which takes into account quantitative and qualitative risk indicators, covering target ratios, credit, market, operational, liquidity
and business risks.
43.1 Credit Risk

Credit risk arises from our dealings with individuals, corporate borrowers, financial institutions, sovereigns etc. The Bank is exposed
to credit risk through its lending and investment activities. It stems from Bank’s both on and off-balance sheet activities. Credit risk
makes up the largest part of the Bank’s exposure. Purpose of Credit Risk Management function is to identify, measure, manage,
monitor and mitigate credit risk. Organizational structure of this function ensures pre and post-facto management of credit risk. While,
Credit Review function provides pre-fact evaluation of counterparties, the Credit Risk Control (CRC) performs post-fact evaluation of
financing facilities and reviews clients’ performance on an ongoing basis.
The Bank has adopted Standardized Approach to measure Credit risk regulatory capital charge in compliance with Basel-II
requirements. The approach mainly takes into account the assessment of external credit rating agencies. In line with SBP guidelines
on Internal Credit Ratings Systems, the Bank has developed a system and all its corporate and commercial borrowers are internally
rated. Bank is in the process of continuously improving the system and bringing it inline with the Basel framework requirements.
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ANNUAL REPORT 2014

In order to manage bank’s credit risk, following policies and procedures are in place:
• Individuals who take or manage risks clearly understand them in order to protect the Bank from avoidable risks;
• The approval of credit limits to counter parties are subject to pre-fact review;
• Extension in credit facility or material change to the credit facility is subject to credit review;
• Approval and review process is reviewed by RM&PRC and internal audit;
• Management periodically reviews the powers of credit approving and credit reviewing authorities.
As a part of credit assessment Bank uses internal rating framework as well as the ratings assigned by the external credit rating agencies,
wherever available.
Ongoing administration of the credit portfolio is an essential part of the credit process that supports and controls extension and maintenance
of credit. The Bank’s Credit Risk Control, being an independent function from the business and operations groups, is responsible for
performing following activities:
• Credit disbursement authorization;

• Collateral coverage and monitoring;
• Compliance of loan covenants/ terms of approval;
• Maintenance/ custody of collateral and security documentation.
Credit Risk Monitoring is based on a comprehensive reporting framework. Continuous monitoring of the credit portfolio and the risks attached
thereto are carried out at different levels including businesses, Audit & Risk Assets Review, Credit Risk Control, Credit Risk Management
Division, etc.
To ensure a prudent distribution of asset portfolio, the Bank manages its lending and investment activities within an appropriate limits
framework. Per party exposure limit is maintained in accordance with SBP Prudential Regulation R-1.
The Bank creates specific provision against Non-Performing Loans (NPLs) in accordance with the Prudential Regulations and other directives
issued by the State Bank of Pakistan (SBP) and charged to the profit and loss account. Provisions are held against identified as well as
unidentified losses. Provisions against unidentified losses include general provision against consumer loans made in accordance with the
requirements of the Prudential Regulations issued by SBP and provision based on historical loss experience on advances. Please refer note
No. 10.5 for reconciliation of changes in specific and general provisions.
Management of Non Performing Loans
The Bank has a Special Asset Management Group (SAMG), which is responsible for management of non-performing loans. SAMG undertakes
restructuring / rescheduling of problem loans, as well as litigation of both civil and criminal cases for collection of debt.
Stress Testing
Credit Risk stress testing is a regular exercise. Bank’s all credit exposures including funded and non-funded facilities are subject to stress test.
This exercise is conducted on a quarterly basis through assigning shocks to all assets of the Bank and assessing its resulting affect on capital
adequacy inline with SBP requirements.
299
43.1.1 Segmental information

Segmental Information is presented in respect of the class of business and geographical distribution of advances (gross), deposits,
contingencies and commitments.
2014
and commitments
43.1.1.1 Segments by class of business
Mining and quarrying 21,371 0.01 1,523,083 0.22 481,969 0.21
Textile 37,094,287 11.49 3,217,779 0.47 8,636,386 3.81
Chemical, petroleum and pharmaceuticals 46,483,618 14.40 3,929,431 0.57 21,556,743 9.52
Cement 1,857,325 0.58 692,982 0.10 1,462,137 0.65
Sugar 15,740,048 4.88 2,208,055 0.32 6,502,059 2.87
Footwear and leather garments 934,593 0.29 363,273 0.05 446,067 0.20
Automobile and transportation equipment 356,548 0.11 2,092,257 0.30 899,908 0.40
Construction 2,848,906 0.88 14,267,389 2.07 9,881,421 4.36
Financial 5,782,564 1.79 7,899,429 1.15 92,917,292 41.01
Insurance - - 4,319,868 0.63 11,867 0.01
Services 4,247,334 1.32 70,738,783 10.28 19,929,088 8.80
Individuals 14,341,922 4.44 426,579,274 61.98 743,002 0.30
Others 63,373,381 19.63 55,775,238 8.10 20,832,949 9.20
322,759,237 100 688,270,091 100 226,553,852 100
2013
Contingencies
Advances (Gross) Deposits
and commitments
Mining and quarrying 5,000 0.00 1,233,151 0.20 2,136,618 0.80
Textile 41,120,102 15.32 2,436,221 0.39 9,611,601 3.62
Chemical, petroleum and pharmaceuticals 36,888,331 13.74 21,103,199 3.34 31,780,773 11.97
Cement 894,170 0.33 830,008 0.13 1,596,090 0.60
Sugar 15,537,248 5.79 2,314,203 0.37 1,474,420 0.56
Footwear and leather garments 4,682,822 1.74 386,090 0.06 1,718,371 0.65
Automobile and transportation equipment 586,303 0.22 2,063,712 0.33 1,532,315 0.58
Construction 714,696 0.27 3,181,489 0.50 3,640,172 1.37
Financial 2,120,471 0.79 10,286,017 1.63 143,262,515 53.97
Insurance 60,415 0.02 1,617,467 0.26 11,282 0.00
Services 6,480,676 2.41 97,366,136 15.40 19,073,590 7.19
Individuals 13,851,499 5.16 351,396,962 55.57 43,385 0.02
Others 43,257,434 16.12 13,041,737 2.05 27,114,845 10.23
268,471,085 100 632,309,094 100 265,428,030 100
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ANNUAL REPORT 2014

2014
and commitments

43.1.1.2 Segment by sector

Private 234,349,931 72.61 632,513,484 91.90 186,975,463 82.53
322,759,237 100 688,270,091 100 226,553,852 100
2013
and commitments

Private 218,451,685 81.37 584,841,940 92.49 182,533,531 68.77
268,471,085 100 632,309,094 100 265,428,030 100
43.1.1.3 Details of non-performing advances and specific provisions by class of business segment
2014 2013
Classified Specific Classified Specific
Advances Provision Advances Provision
Held Held
(Rupees in ‘000)
Agriculture, forestry, hunting and fishing 431,506 395,288 507,486 494,680

Mining and quarrying 9,620 9,620 - -
Textile 4,534,564 4,125,481 4,122,275 4,079,378
Chemical and pharmaceuticals 194,097 194,097 183,434 183,434
Cement - - 130,950 130,950
Sugar 235,998 235,998 428,224 428,224
Footwear and leather garments 73,196 73,196 85,595 85,595
Automobile and transportation equipment 24,666 23,847 26,155 25,337
Electronics and electrical appliances 290,996 290,996 374,522 374,522
Construction 92,040 92,040 118,363 118,363
Power (electricity), gas, water, sanitary 2,499 2,499 - -
Wholesale and retail trade 3,640,093 3,524,368 4,038,560 3,949,429
Transport, storage and communication 596,035 596,035 593,413 589,033
Financial 803,843 803,843 814,600 814,600
Services 355,739 355,239 594,830 590,498
Individuals 2,931,911 2,884,887 3,188,170 3,117,058
Others 7,690,988 4,541,767 8,061,156 4,469,047
21,907,791 18,149,201 23,267,733 19,450,148
43.1.1.4 Details of non-performing advances and

specific provisions by sector
Public/ Government 639,825 - 639,825 -

Private 21,267,966 18,149,201 22,627,908 19,450,148
21,907,791 18,149,201 23,267,733 19,450,148
301
43.1.1.5 Geographical segment analysis

2014
Profit before Total assets Net assets Contingencies
taxation employed employed and
Commitments
(Rupees in ‘000)
Pakistan 36,846,710 923,127,641 135,525,801 220,705,725

South Asia 224,687 12,923,675 266,592 5,470,217
Middle East 247,310 4,557,300 245,749 377,910
Eurasia(Azerbaijan) 35,315 997,870 231,064 -
37,354,022 941,606,486 136,269,206 226,553,852
2013
Profit before Total assets Net assets Contingencies
taxation employed employed and
Commitments
(Rupees in ‘000)
Pakistan 32,302,923 803,308,163 114,654,666 259,694,660

South Asia 327,628 11,314,474 334,864 5,188,358
Middle East 251,975 5,777,206 260,143 545,012
Eurasia(Azerbaijan) 49,544 878,461 213,122 -
32,932,070 821,278,304 115,462,795 265,428,030
Total assets employed include intra group items of Rs. NIL (2013: Rs. NIL).
43.1.2 Credit Risk - General Disclosures
The Bank has adopted Standardized approach of Basel II for calculation of capital charge against credit risk in line with SBP’s requirements.
Under standardized approach, the capital requirement is based on the credit rating assigned to the counterparties by the External Credit
Assessment Institutions (ECAIs) duly recognized by SBP for capital adequacy purposes. Bank utilizes, wherever available, the credit ratings
assigned by the SBP recognized ECAIs, viz. PACRA (Pakistan Credit Rating Agency), JCR-VIS (Japan Credit Rating Company– Vital
Information Systems), Fitch, Moody’s and Standard & Poors . Credit rating data for advances is obtained from recognized External Credit
Assessment Institutions and then mapped to State Bank of Pakistan’s Rating Grades.
Type of Exposures for which the ratings from the External Credit Rating Agencies are used by the Bank.
Exposures JCR-VIS PACRA Other (S&P /

Moody’s / Fitch)
Corporate Yes Yes -
Banks Yes Yes Yes
Sovereigns - - Yes
SME’s Yes Yes -

The criteria for transfer public issue ratings onto comparable assets in the banking book and the alignment of the alphanu-
merical scale of each agency used with risk buckets is the same as specified by the banking regulator SBP in BSD Circular
No.8 table 2.3.
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ANNUAL REPORT 2014

Long - Term Ratings Grades Mapping
“SBP Rating Grade” PACRA JCR-VIS Fitch Moody’s S&P ECA Scores
1 AAA AAA AAA Aaa AAA 1
AA+ AA+ AA+ Aa1 AA+
AA AA AA Aa2 AA
AA- AA- AA- Aa3 AA-
2 A+ A+ A+ A1 A+ 2
A A A A2 A
A- A- A- A3 A-
3 BBB+ BBB+ BBB+ Baa1 BBB+ 3
BBB BBB BBB Baa2 BBB
BBB- BBB- BBB- Baa3 BBB-
4 BB+ BB+ BB+ Ba1 BB+ 4
BB BB BB Ba2 BB
BB- BB- BB- Ba3 BB-
5 B+ B+ B+ B1 B+ 5,6
B B B B2 B
B- B- B- B3 B-
6 CCC+ and CCC+ and CCC+ and Caa1 and CCC+ and 7
below below below Below below
Short - Term Ratings Grades Mapping

SBP PACRA JCR-VIS Fitch Moody’s S&P
S1 A-1 A-1 F1 P-1 A-1+, A-1
S2 A-2 A-2 F2 P-2 A-2
S3 A-3 A-3 F3 P-3 A-3
S4 Others Others Others Others Others
303
Credit Exposures subject to Standardized approach
2014 2013
Exposures Rating Amount Deduction Net Amount Deduction Net
Outstanding CRM amount Outstanding CRM amount
(Rupees in ‘000)
Corporate 1 11,939,397 - 11,939,397 12,965,194 - 12,965,194

2 11,046,618 - 11,046,618 16,023,019 - 16,023,019
3,4 2,084,712 - 2,084,712 666,209 - 666,209
5,6 - - - - - -
Unrated 163,066,375 - 163,066,375 142,495,310 - 142,495,310
Bank 1 22,553,812 - 22,553,812 18,745,447 - 18,745,447

2,3 708,589 - 708,589 1,263,692 - 1,263,692
4,5 218,680 - 218,680 540,960 - 540,960
6 1,126,231 - 1,126,231 18,718 - 18,718
Unrated 673,524 - 673,524 1,486,260 - 1,486,260
Public Sector Entities in Pakistan 1 23,800,801 - 23,800,801 - - -

2,3 - - - - - -
4,5 - - - - - -
6 867,906 - 867,906 - - -
Unrated 64,263,893 60,689,337 3,574,555 47,872,322 32,662,619 15,209,703
Sovereigns and on Government of Pakistan 31,134,139 - 31,134,139 45,126,975 - 45,126,975

or provincial governments or SBP or Cash 1 - - - - - -
2 - - - - - -
3 2,486,790 - 2,486,790 - - -
4,5 3,061,262 - 3,061,262 3,571,381 - 3,571,381
6 - - - 478,848 - 478,848
Unrated - - - 2,361,976 - 2,361,976
Mortgage 3,672,127 - 3,672,127 3,843,059 - 3,843,059
Retail 20,842,422 - 20,842,422 20,324,653 - 20,324,653
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ANNUAL REPORT 2014

43.1.3 Credit Risk: Disclosures with respect to Credit Risk Mitigation for Standardized Approach
The Bank does not make use of on and off-balance sheet netting in capital charge calculations under Basel-II’s
Standardized Approach for Credit Risk.
The Bank has strong policies and processes for collateral valuation and collateral management thus ensuring
that collateral valuation happens at regular defined intervals. Collaterals are normally held for the life of exposure.
Regular monitoring of coverage of exposure by the collateral and lien/ charge registered over the collaterals is
carried out besides ensuring that collateral matches the purpose, nature and structure of the transaction and also
reflect the form and capacity of the obligor, its operations, nature of business and economic environment. The
Bank mitigates its risk by taking collaterals that may include assets acquired through the funding provided, as
well as cash, government securities, marketable securities, current assets, fixed assets, and specific equipment,
commercial and personal real estate.
The Standardized Approach of Basel-II guidelines allows the Bank to take benefit of credit risk mitigation of
financial collaterals against total exposures in the related loan facilities. As a prudent and conservative measure
while calculating capital charge for credit risk of on balance sheet activities, bank has taken only the benefit of
Sovereign guarantees.
MCB manages limits and controls concentrations of credit risk as identified, in particular, to individual counterparties
and groups, and also reviews exposure to industry sectors and geographical regions on a regular basis. Limits
are applied in a variety of forms to portfolios or sectors where MCB considers it appropriate to restrict credit risk
concentrations or areas of higher risk, or to control the rate of portfolio growth.
Concentration of risk
Out of the total financial assets of Rs. 892,377.412 million (2013: Rs. 776,290.225 million) the financial assets
which are subject to credit risk amounting to Rs. 878,966.723 million (2013: Rs. 763,939.311 million). To manage
credit risk the Bank applies credit limits to its customers and obtains adequate collaterals. Investments amounting
to Rs. 474,777.523 million (2013: Rs. 434,096.855 million) are guaranteed by the Government of Pakistan. In
addition, an amount of Rs. 17,604.220 million (2013: Rs. 31,931.448 million) are held by the Bank with the State
Bank of Pakistan and central banks of other countries.
43.1.3.2 Equity position risk in the banking book
The Bank takes proprietary equity positions for both trading and strategic purposes. The Bank has invested in its
subsidiaries and associated companies to achieve long term strategic objectives. As of December 31, 2014 the
composition of equity investments, subsidiaries and associated companies is as follows:
Composition of equity investments

Exposures Held for trading Available for Sale Associates

(Rupees in ‘000)
Equity investments – publicly traded 557,032 12,150,715 6,203,825

Equity investments - others - 206,027 64,511
Total value 557,032 12,356,742 6,268,336
Classification of equity investments
Bank classifies its equity investment portfolio in accordance with the directives of SBP as follows:
• Investments - Held for trading

• Investments - Available for sale
• Investments in Associates
305
Policies, valuation and accounting of equity investments
The accounting policies for equity investments are designed and their valuation is carried out under the provisions
and directives of State Bank of Pakistan, Securities and Exchange Commission of Pakistan and the requirements of
approved International Accounting Standards as applicable in Pakistan.
In accordance with the requirements of the State Bank of Pakistan, quoted securities, other than investments in
subsidiaries and investments in associates are subsequently re-measured to market value. Surplus / (deficit) arising
on revaluation of quoted securities which are classified as ‘available for sale’, is taken to a separate account which is
shown in the statement of financial position below equity. Surplus / (deficit) arising on revaluation of quoted securities
which are classified as ‘held for trading’, is taken to the profit and loss account directly.
Unquoted equity securities are valued at the lower of cost and break-up value. Break-up value of equity securities
is calculated with reference to the net assets of the investee company as per the latest available audited financial
statements.
The cumulative realized gain of Rs. 2,085.526 million has been charged to profit & loss account from sale of equity
securities; however unrealized gain of Rs. 2,292.652 million was recognized in the balance sheet in respect of “AFS”
equity securities. Further a provision for impairment in value of equity investments amounting to Rs. 2.329 million has
been charged to profit and loss account.
43.2 Market Risk Management
Market Risk arises from changes in market rates such as Interest Rates, Foreign Exchange Rates, Equity Prices,
credit spreads and/or commodity prices as well as their correlations and volatilities resulting in a loss to earnings and
capital. MCB is exposed to market risk primarily through its trading activities, which are centered in the Treasury and
Foreign Exchange Group and the Capital Market Group. Market risk also arises from market-making, facilitation of
client business and proprietary positions in equities, fixed income and interest rate products and foreign exchange,
which exposes bank to interest rate risk, foreign exchange risk and equity price risk.
The Bank’s Market Risk Management structure consists of Risk Management & Portfolio Review Committee (RM&PRC)
of the Board, Risk Management Committee of management, ALCO and independent Market Risk Management
Division reporting directly to Group Head Risk Management. Market Risk is an independent risk management function
that works in close partnership with the business segments to identify and monitor market risks throughout the
Bank and to define market risk policies and procedures. Market Risk seeks to facilitate efficient risk/return decisions,
reduce volatility in operating performance and provide transparency into the Bank’s market risk profile for senior
management, the Board of Directors and regulators. Market risk authority, including both approval of market risk limits
and approval of market risks is vested in the ALCO.
In line with regulatory requirements, MCB has clearly defined, in its Risk Management policy, the positions which shall
be subject to market risk. The definition covers the accounting classifications as well as positions booked by different
business groups under “Available for Sale” category. The assets subject to trading book treatment are frequently,
mostly on daily basis, valued and actively managed. The positions which does not fulfill the criteria of Trading book
falls under the Banking Book and are treated as per SBP requirements.
The Bank measures and manages Market Risk by using conventional methods i.e. notional amounts, sensitivity
and combinations of various limits. Bank has established a specific Market Risk Limit Policy providing guideline for
assuming controlled market risk, its monitoring and management. These Limits are compared with the numbers
generated by the market risk management systems based on the trading activity and the outstanding positions.
Beside conventional methods, the Bank also uses VaR (Value at Risk) technique for market risk assessment of
positions assumed by its treasury and capital market groups. In-house based solutions are used for calculating mark to
market value of positions and generating VaR (value at risk) and sensitivity numbers. Thresholds for different positions
are established to compare the expected losses at a given confidence level and over a specified time horizon.
A framework of stress testing, scenario analysis and reverse stress tests of both banking and trading books as per
SBP guidelines is also in place. The results of the stress tests are reviewed by senior management and also reported
to the SBP.
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ANNUAL REPORT 2014

The Bank is also exposed to interest rate risk both in trading and banking books. Risk numbers along with the marked
to market values of government securities held by the Bank’s treasury are generated on daily basis. The risk numbers
include duration, PVBP, and VaR on individual security basis as well as on portfolio basis. These reports are presented
to the senior management for review on a daily basis.
43.2.1 Foreign Exchange Risk Management
Foreign exchange risk exposes the bank to changes in the values of current holdings and future cash flows denominated
in currencies other than home currency due to the exchange rate fluctuation and volatility. The types of instruments
exposed to this risk include investments in foreign branches, foreign currency-denominated loans, foreign currency-
denominated deposits, future cash flows in foreign currencies arising from foreign exchange transactions, etc.

The core objective of foreign exchange risk management is to ensure the foreign exchange exposure of the Bank
remain within defined risk appetite and insulate bank against undue losses that may arise due to volatile movements
in foreign exchange rates or interest rates.

Limit structure to manage Foreign exchange risk is in place. Gap limits on different tenors in major currencies are
in place to control risk. Bank’s net open position and Foreign exchange exposure limit (FEEL) is monitored and
reported on daily basis. Additionally, daily reports are generated to evaluate the exposure in different currencies.
Risk management system generates VaR numbers for foreign exchange portfolio to estimate the potential loss
under normal conditions. Stress testing of foreign exchange portfolio are also performed and reported to senior
management. All these activities are performed on a daily basis.
2014
Off-balance Net foreign
Assets Liabilities
sheet items currency
exposure
(Rupees in ‘000)
Pakistan Rupee 881,326,900 744,528,893 1,701,427 138,499,434

Sri Lankan Rupee 20,767,861 20,785,111 363 (16,887)
United States Dollar 36,555,716 31,176,178 (7,819,739) (2,440,201)
Pound Sterling 1,040,413 3,791,294 2,743,304 (7,577)
Japanese Yen 40,555 7 (41,686) (1,138)
Euro 834,523 4,288,991 3,442,493 (11,975)
Other currencies 1,040,518 766,806 (26,162) 247,550
941,606,486 805,337,280 - 136,269,206
2013
Off-balance Net foreign
Assets Liabilities
sheet items currency
exposure
(Rupees in ‘000)
Pakistan Rupee 762,751,477 654,607,438 6,922,673 115,066,712

Sri Lankan Rupee 11,049,130 11,099,250 45,462 (4,658)
United States Dollar 44,688,222 31,711,553 (12,854,354) 122,315
Pound Sterling 876,537 3,495,434 2,630,109 11,212
Japanese Yen 10,881 51,448 53,717 13,150
Euro 993,614 4,185,047 3,202,393 10,960
Other currencies 908,443 665,339 - 243,104
821,278,304 705,815,509 - 115,462,795
307
43.2.2 Equity Price Risk
Bank’s proprietary positions in the equity instruments expose it to the equity price risk in its trading and banking books.
Equity price risk is managed by applying trading limit, scrip-wise and portfolio wise nominal limits. VaR analysis and
stress testing of the equity portfolio are also performed and reported to senior management on daily basis. The stress
test for equity price risk assesses the impact of the fall in the stock market index using internal based assumptions.
In addition to this Stress Testing and historical scenario analysis on Equities is also performed periodically as advised
by the State Bank of Pakistan through Guideline on Stress Testing.
43.2.3 Country Risk
The world is changing rapidly and interdependencies and inter linkages of banks operating in different countries are
ever increasing. Thus the banks having cross border exposures whether on-balance sheet or off-balance sheet are
susceptible to the changing conditions in various countries of the world. Therefore, it becomes very important for
institutions to effectively manage its cross border exposures to avoid any unfavorable situation.
MCB understands the risks involved in taking cross border exposure and to cater it; Country Risk Policy, in line with
SBP guidelines, is already in place. The Policy not only envisages a centralized approach to measure, monitor and
manage country risk but also strengthen overall risk management framework in the Bank.
Country Exposure Limits are in place, which broadly capture direct exposure on sovereigns and exposures on foreign
domiciled counter parties. Additionally, business product wise sub limits involving cross border exposure are also
implemented. Monitoring of these limits is a regular feature of Risk Management.
308
2014
(Rupees in ‘000)

Assets
Balances with other banks 0.9% to 2.50% 3,063,774 855,593 - - - - - - - - 2,208,181
Lendings to financial institutions 5% to 10.35% 1,418,181 1,418,181 - - - - - - - - -
Advances - net 10.87% 304,000,563 252,678,394 17,370,169 8,157,975 4,508,711 6,336,728 6,554,249 4,351,912 1,434,621 2,607,804 -
Other assets - net 26,511,063 - - - - - - - - - 26,511,063
892,377,412 276,955,900 71,874,019 72,628,657 63,013,420 135,143,585 50,835,748 82,555,073 53,053,083 2,607,804 83,710,123
Liabilities
Bills payable 16,627,700 - - - - - - - - - 16,627,700
Borrowings 0.9% to 10% 59,776,578 31,414,474 17,605,143 5,297,275 2,750,905 2,708,781 - - - - -
Deposits and other accounts 6.5% to 11.64% 688,270,091 407,890,207 16,082,615 11,440,071 14,664,652 1,400,319 156,796 207,135 - - 236,428,296
790,720,111 439,304,681 33,687,758 16,737,346 17,415,557 4,109,100 156,796 207,135 - - 279,101,738
On-balance sheet gap 101,657,301 (162,348,781) 38,186,261 55,891,311 45,597,863 131,034,485 50,678,952 82,347,938 53,053,083 2,607,804 (195,391,615)
FX options purchase - - - - - - - - - - -
Foreign exchange contracts Purchase 47,859,438 18,624,849 18,156,762 11,046,852 30,975 - - - - - -
47,859,438 18,624,849 18,156,762 11,046,852 30,975 - - - - - -
FX options sale - - - - -
Foreign exchange contracts Sale 49,478,965 28,994,504 16,514,430 3,970,031 - - - - - - -
49,478,965 28,994,504 16,514,430 3,970,031 - - - - - - -
Off-balance sheet gap (1,619,527) (10,369,655) 1,642,332 7,076,821 30,975 - - - - - -
Total yield / interest risk sensitivity gap (172,718,436) 39,828,593 62,968,132 45,628,838 131,034,485 50,678,952 82,347,938 53,053,083 2,607,804
Cumulative yield / interest risk sensitivity gap (172,718,436) (132,889,843) (69,921,711) (24,292,873) 106,741,612 157,420,564 239,768,502 292,821,585 295,429,389
ANNUAL REPORT 2014
309
310
2013
(Rupees in ‘000)

Assets
Balances with other banks 2.35% 1,594,660 542,128 - - - - - - - - 1,052,532
Lendings to financial institutions 6.5% to 10% 1,224,638 1,224,638 - - - - - - - - -
Advances - net 10.77% 248,521,792 210,483,644 18,073,299 4,290,733 1,784,794 5,615,918 2,117,676 3,111,616 2,442,367 601,745 -
Other assets - net 16,707,548 - - - - - - - - - 16,707,548
776,290,225 318,410,386 229,564,319 21,206,385 13,111,883 27,014,483 41,184,018 27,237,020 15,534,978 601,745 82,425,008
Liabilities
Bills payable 10,138,726 - - - - - - - - - 10,138,726
Borrowings 0.8% to 10.25% 38,660,405 19,312,395 10,005,135 4,469,605 2,396,684 2,434,306 42,280 - - - -
Deposits and other accounts 7% to 10.75% 632,309,094 373,704,833 19,136,275 8,714,275 15,472,801 217,157 219,938 326,664 - - 214,517,151
697,314,092 393,017,228 29,141,410 13,183,880 17,869,485 2,651,463 262,218 326,664 - - 240,861,744
On-balance sheet gap 78,976,133 (74,606,842) 200,422,909 8,022,505 (4,757,602) 24,363,020 40,921,800 26,910,356 15,534,978 601,745 (158,436,736)
Foreign exchange contracts Purchase 216,344 - 216,344 - - - - - - - -

Cross currency swaps - long position 72,216,751 42,583,683 23,239,215 6,393,853 - - - - - - -
72,433,095 42,583,683 23,455,559 6,393,853 - - - - - - -
Foreign exchange contracts Sale 216,344 - 216,344 - -

Cross currency swaps - short position 79,959,563 44,369,336 25,266,531 9,957,417 366,279 - - - - - -
80,175,907 44,369,336 25,482,875 9,957,417 366,279 - - - - - -
Off-balance sheet gap (7,742,812) (1,785,653) (2,027,316) (3,563,564) (366,279) - - - - - -
Total yield / interest risk sensitivity gap (76,392,495) 198,395,593 4,458,941 (5,123,881) 24,363,020 40,921,800 26,910,356 15,534,978 601,745
Cumulative yield / interest risk sensitivity gap (76,392,495) 122,003,098 126,462,039 121,338,158 145,701,178 186,622,978 213,533,334 229,068,312 229,670,057
Yield risk is the risk of decline in earnings due to adverse movement of the yield curve.
Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates.
ANNUAL REPORT 2014

Reconciliation to total assets 2014 2013 Reconciliation to total liabilities 2014 2013
Balance as per balance sheet 941,606,486 821,278,304 Balance as per balance sheet 805,337,280 705,815,509
Less: Non financial assets Less: Non financial liabilities
Investments 6,268,336 5,512,976 Other liabilities 3,881,328 4,001,124

Operating fixed assets 31,583,646 29,005,931 Deferred tax liability 10,735,841 4,500,293
Other assets 11,377,092 10,469,172 14,617,169 8,501,417
49,229,074 44,988,079
Total financial assets 892,377,412 776,290,225 Total financial liabilities 790,720,111 697,314,092
43.4 Liquidity Risk

Liquidity represents the ability to fund assets and meet obligations as they become due. The Bank understands that liquidity does not
come for free, and surplus liquidity has an opportunity cost which needs to be recognized. Liquidity risk is a risk of not being able to
obtain funds at a reasonable price within a reasonable time period to meet obligations as they become due. Liquidity is essential to
the ability to operate financial services businesses and, therefore, the ability to maintain surplus levels of liquidity through economic
cycles is crucial, particularly during periods of adverse conditions, liquidity management is among the most important activities that
the MCB conducts during both normal and stress periods. MCB recognizes that liquidity risk can arise from the Bank’s activities and
can be grouped into three categories:

- Inflows/Outflows from on-balance sheet items (other than marketable securities and wholesale borrowings) and off-balance
sheet items;
- Marketability of trading securities; and
- Capacity to borrow from the wholesale markets for funding as well as trading activities.
Liquidity Management
Asset Liability Management Committee of the bank has the responsibility for the formulation of overall strategy and oversight of the
Asset Liability management function. Board has approved a comprehensive Liquidity Risk Policy (part of Risk Management Policy),
which stipulates policies regarding maintenance of various ratios, funding preferences, and evaluation of Banks’ liquidity under normal
and crisis situation. MCB Bank monitors and assesses the impact of increase in NPLs, deposits concentration, deposits withdrawal,
decline in earnings, expanded business opportunities, acquisitions and negative reputation on its liquidity positions. Liquidity Strategy
is also in place, to ensure that the Bank can meet its temporal liquidity needs and optimize the contribution towards the profitability
of the Bank. A framework to assess the maturity profile of non-contractual assets and liabilities is in place to supplement the liquidity
management. As per preliminary assessments, the Bank’s Liquidity Coverage Ratio and Net Stable Funding Ratio as per Basel III are
well within the prescribed limits.
MCB’s liquidity risk management framework is designed to identify, measure and manage in a timely manner the liquidity risk position
of the Bank. The underlying policies and procedures include: Risk Management policy, Treasury Policy, Investment policy, Contingency
Funding Plan, Liquidity Strategy and Limit Structure which are reviewed and approved regularly by the senior management /Board
members. MCB Bank also conducts Liquidity Risk Analysis on regular basis. MCB liquidity Risk Policy envisages to project the Bank’s
funding position during temporary and long-term liquidity changes, including those caused by liability erosion and explicitly identifying,
quantifying and ranking all sources of funding preferences, such as reducing assets, modifying or increasing liability structure; and
using other alternatives for controlling statement of financial position changes. MCB performs regular liquidity stress tests as part
of its liquidity monitoring activities. The purpose of the liquidity stress tests is intended to ensure sufficient liquidity for the Bank
under both idiosyncratic and systemic market stress conditions. MCB’s liquidity risk management approach involves intraday liquidity
management, managing funding sources and evaluation of structural imbalances in balance sheet structure.
Intraday Liquidity Management

Intraday liquidity management is about managing the daily payments and cash flows. Bank has policies to ensure that sufficient cash
is maintained during the day to make payments through local payment system. The policy of the Bank is to maintain adequate liquidity
at all times, in all geographical locations and for all currencies and hence to be in a position, in the normal course of business, to meet
obligations, repay depositors and fulfil commitments.
Managing Funding Sources

Managing funding sources, as per policy MCB maintain a portfolio of marketable securities that can either be sold outright or
sold through a repurchase agreement to generate cash flows for meeting unexpected liquidity requirement. As a part of liquidity
management MCB maintains borrowing relationships to ensure the continued access to diverse market of funding sources. MCB’s
sound credit rating together with excellent market reputation has enabled MCB to secure ample call lines with local and foreign banks.
The level of liquidity reserves as per regulatory requirements also mitigates risks. MCB’s investment in marketable securities is much
higher than the Statutory Liquidity requirements.
311
312
2014
(Rupees in ‘000)
Assets
Investments - net 516,898,299 16,768,391 56,072,760 60,407,842 60,188,404 136,874,636 48,860,752 78,626,653 52,830,525 6,268,336
Advances - net 304,000,563 74,542,607 73,234,572 46,575,734 32,433,021 23,054,412 19,124,498 24,116,567 8,288,815 2,630,337
Other assets - net 37,888,155 12,593,147 13,297,311 894,374 2,490,237 - - 8,613,086 - -
942,023,010 155,319,722 142,962,883 108,415,311 96,208,023 162,469,547 70,332,468 115,524,206 71,539,090 19,251,760
Liabilities
Bills payable 16,627,700 16,627,700 - - - - - - - -
Borrowings 59,776,578 31,414,474 17,605,143 5,297,275 2,750,905 2,708,781 - - - -

Deposits and other accounts 688,270,091 644,318,503 15,891,674 11,450,634 14,845,030 1,400,319 156,796 207,135 - -
805,753,804 706,188,590 36,744,926 22,080,255 20,412,272 9,740,973 1,214,041 5,338,450 3,073,659 960,638
Net assets 136,269,206 (550,868,868) 106,217,957 86,335,056 75,795,751 152,728,574 69,118,427 110,185,756 68,465,431 18,291,122

Reserves 49,200,045
Minority interest 511,960
136,269,206
2013
(Rupees in ‘000)
Assets
Investments - net 453,808,345 101,475,786 213,459,894 11,773,577 13,209,949 26,938,529 39,459,204 26,770,124 15,208,304 5,512,978
Advances - net 248,521,792 84,949,035 31,569,858 42,710,236 33,840,507 17,308,883 14,335,825 16,231,895 6,862,033 713,520
Other assets - net 27,176,720 7,253,873 8,838,558 1,732,474 2,653,299 - - 6,698,516 - -
821,633,334 256,602,748 254,185,388 56,691,903 50,686,629 46,149,874 55,784,576 53,341,651 31,173,127 17,017,438
Liabilities
Bills payable 10,138,726 10,138,726 - - - - - - - -
Borrowings 38,660,405 19,312,395 10,005,135 4,469,605 2,472,149 2,401,121 - - - -

Deposits and other accounts 632,309,094 588,221,984 19,136,275 8,714,275 15,472,801 217,157 219,938 326,664 - -
Deferred tax liabilities 4,855,323 41,368 9,114 19,953 102,777 378,637 335,693 2,284,833 616,778 1,066,170
706,170,539 623,940,516 32,017,009 17,926,814 20,057,731 5,667,357 1,233,611 2,883,391 1,377,940 1,066,170
Net assets 115,462,795 (367,337,768) 222,168,379 38,765,089 30,628,898 40,482,517 54,550,965 50,458,260 29,795,187 15,951,268

Reserves 47,008,936
115,462,795
ANNUAL REPORT 2014
313
314
2014
(Rupees in ‘000)
Assets
Investments - net 516,898,299 16,768,391 56,072,760 60,407,842 60,188,404 136,874,636 48,860,752 78,626,653 52,830,525 6,268,336
Advances - net 304,000,563 42,243,916 39,709,486 27,024,432 11,639,070 54,382,555 52,059,901 56,002,124 18,330,827 2,608,252
Other assets - net 37,888,155 12,593,147 13,297,311 894,374 2,490,237 - - 8,613,086 - -
942,023,010 123,021,031 109,437,797 88,864,009 75,414,072 193,797,690 103,267,871 147,409,763 81,581,102 19,229,675
Liabilities
Bills payable 16,627,700 16,627,700 - - - - - - - -
Borrowings 59,776,578 31,414,474 17,605,143 5,297,275 2,750,905 2,708,781 - - - -

805,753,804 111,677,111 64,321,962 63,627,951 20,917,184 167,176,071 158,480,834 162,941,852 55,650,201 960,638
Net assets 136,269,206 11,343,920 45,115,835 25,236,058 54,496,888 26,621,619 (55,212,963) (15,532,089) 25,930,901 18,269,037

Reserves 49,200,045
136,269,206
2013
(Rupees in ‘000)
Assets
Investments - net 453,808,345 101,475,786 213,459,894 11,773,577 13,209,949 26,938,529 39,459,204 26,770,124 15,208,304 5,512,978
Advances - net 248,521,792 54,755,876 34,665,006 24,564,085 6,514,233 42,079,364 35,286,036 36,780,148 13,192,809 684,235
Other assets - net 27,176,720 7,253,873 8,838,558 1,732,474 2,653,299 - - 6,698,516 - -
821,633,334 226,409,589 257,280,536 38,545,752 23,360,355 70,920,355 76,734,787 73,889,904 37,503,903 16,988,153
Liabilities
Bills payable 10,138,726 10,138,726 - - - - - - - -
Borrowings 38,660,405 19,312,395 10,005,135 4,469,605 2,472,149 2,401,121 - - - -

Deferred tax liabilities 4,855,323 41,368 9,114 19,953 102,777 378,637 335,693 2,284,833 616,778 1,066,170
706,170,539 84,874,259 68,304,691 42,966,051 20,530,185 148,819,862 144,228,632 146,193,392 49,187,307 1,066,170
Net assets 115,462,795 141,535,330 188,975,845 (4,420,299) 2,830,170 (77,899,507) (67,493,845) (72,303,478) (11,683,404) 15,921,983

Reserves 47,008,936
115,462,795
Liquidity Gap Reporting

When an asset or liability does not have any contractual maturity date, the period in which these are assumed to mature has been taken as the expected date of maturity. Bank regularly conducts an objective and
systematic behavioral study using regression analysis technique to ascertain the maturity of its non-contractual assets and liabilities. Core and non-core parts of the non-contractual assets and liabilities are segregated
through the behavioral study. Non Core part is placed among the short term maturity buckets i.e. up to 1 Year based on the model results, whereas core part is distributed among the longer terms buckets based on
the discussion and decision by the ALCO. Following percentages are used to distribute the core assets and liabilities among longer term buckets:
Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years Over 5 to 10 Years


30% 30% 30% 10%
ANNUAL REPORT 2014
315
43.5 Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems or from
external events. This definition includes legal risks but excludes strategic and reputational risks.
The Bank’s operational risk management framework, as laid down in the operational risk policy, duly approved by
BOD, is flexible enough to implement in stages and permits the overall risk management approach to evolve in the
light of organizational learning and the future needs of the Bank. Operational loss events are reviewed and appropriate
corrective actions taken on an ongoing basis, including measures to improve control procedures with respect to
design and operative effectiveness.
Operational Risk Management helps the Bank understand risks and improve mitigating controls so as to minimize
operational risks that are inherent in almost all areas of the Bank. Going forward, the Bank will further strengthen its
risk function, policies and procedures to facilitate its operations and improve quality of assets to safeguard interest of
depositors.
43.5.1 Operational Risk-Disclosures Basel II Specific
Currently, the bank is reporting operational risk capital charge under Basic Indicator Approach (BIA). However, the
Bank took a number of initiative with respect to operational risk management. The parallel run approval for Alternative
Standardized Approach (ASA) was accorded by SBP during the current year. The bank will initiate further steps for
improvement Operational Risk management in the bank.
Operational loss data pertaing to key risk events is also collected on bank-wide basis. Periodic review and analysis
is prepared for senior management and Risk Management and Portfolio Review Committee (RM&PRC) of the Board.
The report covers the significant risk events with root cause analysis and recommendations for further improvements.
44. GENERAL
Comparative information has been reclassified and rearranged in these consolidated financial statements for the
purpose of better presentation. Below reclassification has been made during the year:
Reclassified
Description Amount From To
(Rupees in ‘000)
Finance against Foreign Bills 898,784 Bills discounted Loans, cash

& purchased credits, running
(Advances) finances etc
(Advances)
45. NON-ADJUSTING EVENT
The Board of Directors in its meeting held on February 12, 2015 has announced a final cash dividend in respect of
the year ended December 31, 2014 of Rs. 4.0 per share (2013: Rs. 3.50 per share) and bonus shares of NIL (2013:
10%). These consolidated financial statements for the year ended December 31, 2014 do not include the effect of
these appropriations which will be accounted for subsequent to the year end.
46. DATE OF AUTHORIZATION FOR ISSUE

These consolidated financial statements were authorized for issue by the Board of Directors of the Bank in their
meeting held on February 12, 2015.

316
ANNUAL REPORT 2014
Annexure - I
1. Particulars of Investments in listed companies and mutual funds-available for sale
Investee Entities Note Number of Paid-up Total paid-up/ Cost as at

share 31, 2014
Rupees (Rupees in ‘000)
1 Fully Paid-up Preference Shares
Azgard Nine Limited 1,160,241 10 11,602 11,602
Aisha Steel Mills Limited 168,286 10 1,683 1,683
Aisha Steel Mills Limited - right shares 84,143 0 - -
Masood Textile Mills Limited 1.1 5,000,000 10 50,000 50,000
Fully Paid-up Ordinary Shares

Altern Energy Limited 1,000 10 10 31
Archroma Pakistan Limited 127,550 10 1,276 28,456
Attock Petroleum Limited 1,030,476 10 10,305 436,756
Bank Alfalah Limited 14,720,500 10 147,205 421,625
Bank Al-Habib Limited 10,986,528 10 109,865 336,886
The Bank of Punjab 3,500 10 35 30
Engro Corporation Limited 971,200 10 9,712 214,136
Engro Fertilizers Limited 3,487,500 10 34,875 256,414
Fatima Fertilizer Company Limited 9,673,500 10 96,735 317,440
Fauji Cement Company Limited 500 10 5 10
Fauji Fertilizer Bin Qasim Company Limited 13,926,000 10 139,260 610,433
Fauji Fertilizer Company Limited 7,382,700 10 73,827 632,312
Glaxo Smithkline Pakistan Limited 2,193,000 10 21,930 503,304
Habib Metropolitan Bank Limited 9,546,500 10 95,465 334,882
IGI Insurance Limited 2,117,380 10 21,174 460,881
International Steels Limited 4,530,000 10 45,300 108,174
K-Electric Limited 3,000,000 10 30,000 26,599
Kohat Cement Company Limited 743,000 10 7,430 139,864
Kot Addu Power Company Limited 14,085,500 10 140,855 883,455
Lafarge Pakistan Cement Limited 27,247,000 10 272,470 447,545
Mehr Dastagir Textile Mills Limited 1,616,912 10 16,169 16,169
Murree Brewery Company Limited 3,650 10 37 435
National Bank of Pakistan 6,175,500 10 61,755 386,752
National Foods Limited 13,950 5 70 1,566
National Refinery Limited 527,900 10 5,279 106,767
Nestle Pakistan Ltd Limited 10,782 10 108 68,917
NetSol Technologies Ltd 1,883,500 10 18,835 63,401
Next Capital Limited 1,950,000 10 19,500 19,500
Oil & Gas Development Company Limited 235 10 2 52
Pak Elektron Limited 3,657,000 10 36,570 147,722
Pakistan Oilfields Limited 691,795 10 6,918 351,225
Pakistan Petroleum Limited 2,069,218 10 20,692 454,385
Pakistan State Oil Company Limited 40,400 10 404 14,542
Pakistan Telecommunication Company Limited 2,440,000 10 24,400 58,282
PICIC Growth Fund 16,550,000 10 165,500 457,369
PICIC Investment Fund 13,003,500 10 130,035 189,056
Rafhan Maize Products Limited 25,967 10 260 160,587
Saif Power Limited 7,934,500 10 79,345 260,964
Samba Bank Limited 101 10 1 1
Searle Pakistan Limited 653,600 10 6,536 163,174
Siemens Pakistan Engineering Company Limited 11,280 10 113 13,412
Sui Northern Gas Pipelines Limited 55,126,789 10 551,268 2,205,253
Trust Securities & Brokerage Limited 300,000 10 3,000 3,000
Unilever Food Pakistan Limited 867 10 9 1,364
United Bank Limited 3,875,207 10 38,752 517,652
Zulfiqar Industries Limited 35,117 10 351 3,556
Carrying value before revaluation & provision 11,887,621
Provision for diminution in value of investments (1,500,664)
Surplus on revaluation of securities 2,112,015
Market value as at December 31, 2014 12,498,972
317
Annexure - I
Fully Paid-up Ordinary Certificate/ Name of Number of Paid-up Total paid-up/ Cost as at
Units of Mutual Funds Management Units value per nominal value December
Company held unit 31, 2014
National Investments Trust National Investment

Trust Limited 110,602 50 5,530 5,253
Carrying value before revaluation & provision 5,253

Provision for diminution in value of investments (1,907)
Market value as at December 31, 2014 7,303
1.1 These are redeemable after the end of the fourth year from June 2005 at the option of the issuer either in whole or multiples of 10% of
outstanding issue at a price of Rs. 10 per share plus any accumulated preference dividend. Dividend rate is 6 months KIBOR + 200 bps
per annum.
1.2 Particulars of Investments in listed companies & mutual funds-Held for trading
Listed company Number of Paid-up Total paid up/ Cost as at

share 31, 2014
Dewan Cement Limited 513,000 10 5,130 4,241

Hascol Petroleum Limited 250,000 10 2,500 19,262
International Industries Limited 97,000 10 970 6,161
Searle Pakistan Limited 71,600 10 716 18,178
United Bank Limited 23,700 10 237 4,488
52,330
1.3 Mutual fund Number of Paid-up Total paid up/ Cost as at

units value per nominal value December
share 31, 2014
MCB Dynamic Cash Fund 894,111 100 89,411 90,817

MCB Dynamic Allocation Fund 2,364,412 100 236,441 169,933
MetroBank-Pakistan Sovereign Fund - perpetual 4,589,584 50 229,479 243,952
504,702
318
ANNUAL REPORT 2014
Annexure - I
2. Particulars of Investment held in unlisted companies-available for sale

Company Name Percentage of Number of shares / Cost as at Net Asset Based on audited Name of Chief Executive
holding certificates held December Value of total financial statements
(%) 31, 2014 investment as at
(Rupees in ‘000)
Shareholding more than 10%

Certificates/ Units
Pak Asian Fund Limited 10.22% 1,150,000 11,500 19,542 Jun. 30, 2014 Mr. Ashfaq A. Berdi
First Women Bank Limited 11.58% 23,095,324 63,300 252,702 Dec. 31, 2013 Ms. Tahira Raza
Central Depository Company
of Pakistan Limited 10.00% 6,500,000 10,000 186,657 Jun. 30, 2014 Mr. Mohammad Hanif Jakhura
84,800
Shareholding upto 10%

Certificates/ Units

First Capital Investment Limited 275,000 2,500 3,651 Jun. 30, 2014 Mr. Shahzad Jawahar
National Institute of Facilitation Technology
Private Limited 1,478,227 1,526 93,421 Jun. 30, 2014 Mr. M.M. Khan
National Investment Trust Limited 79,200 100 872,874 Jun. 30, 2014 Mr. Manzoor Ahmed
SME Bank Limited 1,490,619 10,106 3,892 Sep. 30, 2014 Mr. Ihsan ul haq Khan
Islamabad Stock Exchange Limited 3,034,603 30,346 32,702 Jun. 30, 2014 Mr. Imtiaz Haider
Society for Worldwide Inter Fund Transfer (SWIFT) 18 1,738 6,453 Dec. 31, 2013 Mr. Gottfried Leibbrandt
Credit Information Bureau of Srilanka 300 23 18,252 Dec. 31, 2013 Mr. Gamini Karunaratne
Lanka Clear (Private) Limited 100,000 766 5,513 Mar. 31, 2014 Mr. S. B. Weerasooriya
Lanka Financial Services Bureau Limited 100,000 766 777 Mar. 31, 2014 Mr. Minindu Rajaratne
Pakistan Agro Storage and Services corporation 2,500 2,500 207,536 Mar. 31, 2014 Capt (R) Tariq Masud
Arabian Sea Country Club* 500,000 5,000 - - -
Al-Ameen Textile Mills Limited.* 19,700 197 - - -
Ayaz Textile Mills Limited.* 225,250 2,252 - - -
Custodian Management Services* 100,000 1,000 - - -
Musarrat Textile Mills Limited.* 3,604,500 36,045 - - -
Sadiqabad Textile Mills Limited.* 2,636,100 26,362 - - -
121,227
Cost of unlisted shares/ certificates/ units 206,027
Provision against unlisted shares (77,070)
Carrying value of unlisted shares/ certificates/ units 128,957
* These are fully provided unlisted shares.
319
Annexure - I
3. Particulars of investments in Term Finance Certificates and Sukuk Bonds- (refer note 9)

LISTED TERM FINANCE CERTIFICATES - available for sale

Askari Bank Limited - issue no. III 50,000 5,000 250,000,000 6 months KIBOR + 2.5% p.a. 0.32% of principal amount in the 249,500 Syed Majeedullah Husaini
for first five years & 6 month 96 months and remaining
KIBOR +2.95% for next principal in four equal semi annual
five years installments starting from the
102nd month from issue.
Bank Alfalah Limited - issue no. IV 100,000 5,000 500,000,000 6 months KIBOR + 2.5% p.a. 0.26% of principal amount in the 499,000 Mr. Atif Bajwa
first 78 months and
remaining principal in three
semi-annual installment starting
from the 84th month.

for first five years & 6 months in the first 114 months and
KIBOR+1.30% for next 5 years. remaining principal will be
paid at maturity
Carrying value before revaluation 930,653
Market value of listed TFCs (revalued amount) 941,693
SUKUK BONDS - available for sale Terms of Redemption Rate of Interest Currency
Principal Interest
Government of Pakistan Ijara Sukuks At maturity Half-yearly 6-Month MTB PKR 3,715,236
Auction Weighted
Average Yield.
Deficit on revaluation of securities (49,026)
Market value of Sukuk bonds 3,666,210
320
ANNUAL REPORT 2014
Annexure - I
TERM FINANCE CERTIFICATES - held to maturity


Bank Alfalah Limited - issue no. V 100,000 5,000 500,000,000 6 months KIBOR + 1.25% p.a. 0.3% of the principal will 481,921 Mr. Atif Bajwa
be redeemed in the first 90 months
and remaining principal of 99.70%
at maturity. First maturity in
the 96th month
Bank Al Habib Limited - issue no. IV 20,000 5,000 100,000,000 Payable six monthly at 6th - 108th month: 0.36%; 99,860 Mr. Abbas D. Habib
15.00% p.a. for first 5 years 114th and 120th
and 15.50% p.a. for month: 49.82% each
next 5 years
for first five years & 6 months in the first 114 months
KIBOR+1.30% for next 5 years. and remaining principal
will be paid at maturity

Askari Bank Limited - issue no. V 120,000 5,000 600,000,000 6 months KIBOR + 1.20% p.a 0.36% of principal amount 600,000 Syed Majeedullah Husaini
remaining principal in 2 equal
semi annual installments of
49.82% each.
NIB Bank Limited 60,000 5,000 300,000,000 6 months KIBOR + 1.15% p.a. Fifteen equal semi-annual 299,940 Mr. Atif R. Bokhari
installments of 0.02% of the
Issue Amount for the first ninety
months followed by remaining
99.70% on maturity at the end
of the ninety sixth month.
Azgard Nine Limited 13,878 5,000 69,390,000 NIL In 7 semi-annual installments 69,390 Mr. Ahmed Shaikh
starting from 24th month
Shakarganj Mills Limited 16,000 5,000 80,000,000 6 months KIBOR +2.25% p.a. In 10 equal semi-annual installments 40,000 Mr. Ahsan Saleem
from March 2012 starting from March 2012 .
Pakistan Mobile Communication Limited 200,000 5,000 1,000,000,000 3 Month KIBOR +2.65% p.a. In 17 equal quarterly installments 470,588 Mr. Jeffery Hedberg
starting from 12th month after first
disbursement and subsequently every
three months.
Carrying value of TFCs - HTM 2,293,235
The above excludes unlisted term finance certificates, debentures, bonds and participation term certificates of companies which are fully provided for in these financial statements.
321
Annexure - I
4. Details of Bonds, Debentures and Federal Government Securities (refer note 9) - held to maturity
Description Terms of Redemption Rate of interest Currency Foreign Currency Carrying value as
Principal Interest Amount at December 31,
2014
(‘000) (Rupees in ‘000)
Debentures
Bank of Ceylon At maturity Half-yearly Weighted Average LKR 250,000 191,475
Six Month T Bill Rate
(Before Tax) + 0.75 %
Sampath Bank At maturity Half-yearly 13.40% LKR 64,610 49,485
NDB Bank At maturity Half-yearly 13.40% LKR 62,760 48,068
Richard Pieris & Company PLC At maturity Half-yearly 10.75% LKR 43,500 33,317
Siyapatha Finance Limited At maturity Half-yearly 8.90% LKR 100,000 76,590

Commercial papers

Singer (Sri Lanka) PLC At maturity Half-yearly 9.00% LKR 265,243 203,150

Development Bonds
Government of Sri Lanka At maturity Half-yearly 6 Month LIBOR + 400 BP LKR 793,680 607,880
Sukuk Bonds
Maple Leaf Cement Factory In 8 unequal Half-yearly 6 Month KIBOR+1.70% PKR - 203,109

Quetta Textile Mills In 12 equal Half-yearly 6 Month KIBOR+1.50% PKR - 41,380
- 244,489
Euro Bonds
Pakistan Euro Bonds At maturity Half-yearly 7.125% & 6.875 US$ 22,729 2,283,917
5. Summarized financial information of associated undertakings (refer note 9)
The gross amount of assets, liabilities, revenue, profit and net assets of associated undertakings are as follows:
Name of associated Country of Assets Liabilities Net assets Revenue Profit / (loss) % of interest
undertaking incorporation after tax held
(Rupees in ‘000)
2014
(unaudited based on
2013
(audited based on

*Represents net premium revenue
322
ANNUAL REPORT 2014
Annexure - II
Disposal of operating fixed assets (refer note 11.2.3)

Description Cost/revalued Accumulated Book Sales proceeds Mode of disposal Particulars of Location
amount depreciation value /insurance claim /settlement buyers
(Rupees in ‘000)
Furniture and fixture, electrical,
computers and office equipment
Items having book value in aggregate more
than Rs. 250,000 or cost of more than Rs. 1,000,000 5,394 4,888 506 1,154 Claim AdamJee Insurance Company Lahore
5,359 5,341 18 37 Auction/Quotation M/S 3rd Generation Solutions Islamabad
46,731 46,723 8 - Write Off Karachi
2,179 2,179 - 118 Auction/Quotation M/s Innovative Pvt Ltd. Karachi
1,344 1,344 - 199 Auction/Quotation M. Farooq Potha Bansi AJ Faisalabad
5,538 4,477 1,061 205 Auction/Quotation M/S Farhan & Company Karachi
66,545 64,952 1,593 1,713
Items having book value of less than

Vehicles
Vehicles having book value of less than
Suzuki Cultus 1,040 236 804 900 Claim M/S Adam Jee Insurance Karachi
Toyota Corolla 1,749 373 1,376 1,535 Claim M/S Adam Jee Insurance Karachi
Honda Civic 1,800 1,440 360 1,185 Auction Abdul Ahad Lahore
Honda Civic 1,905 1,397 508 1,255 Auction Muhammad Tauseef Khan Lahore
Honda Civic 1,941 1,035 906 1,510 Auction Mr. Rana Khalil Ur Rehman Lahore
Toyota Hilux 2,290 1,832 458 867 Auction Muhammad Arif Lahore
Honda Accord 2,410 1,928 482 1,375 Auction Asim Nadeem Lahore
Mercedes Benz 3,950 3,160 790 2,750 Auction Kamran Jehangir Lahore
19,876 13,633 6,243 13,285
Car Ijarah
Mercedes Benz 9,952 2,124 7,828 8,065 Buy Back EFU Insurance Ltd Lahore
Toyota Corolla 1,437 1,437 - 370 Buy Back Niaz Arshad Malik Lahore
Honda Civic 1,912 1,361 551 551 Buy Back Mehboob Ali Lahore
Honda City 1,609 1,454 155 155 Buy Back Big Bird Poultry Lahore
Honda Civic -VTI 1,730 1,396 334 334 Buy Back Mr. Jhazaiab Khan Banth Faisalabad
Suzuki APV 1,736 1,568 168 167 Buy Back Interloop Ltd Faisalabad
Suzuki Cultus 1,038 250 788 855 Buy Back Interloop Ltd Faisalabad
Toyota Avanza 2,191 1,977 214 214 Buy Back Interloop Ltd Faisalabad
Honda Civic -VTI 2,045 1,451 594 593 Buy Back Konnect Holden Pvt Ltd Islamabad
Suzuki Alto 771 485 286 308 Buy Back Konnect Holden Pvt Ltd Islamabad
Toyota Corolla GLI 1,444 503 941 1,012 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla GLI 1,682 537 1,145 1,198 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla GLI 1,309 349 960 1,009 Buy Back Pakistan Tobacco Company Islamabad
Toyota Corolla GLI 1,749 342 1,407 1,424 Insurance Claim Pakistan Tobacco Company Islamabad
Toyota Corolla Altis 1,489 532 957 1,027 Insurance Claim Pakistan Tobacco Company Islamabad
Toyota Camry 3,605 3,065 540 540 Buy Back Pakistan Tobacco Company Islamabad
Suzuki Mehran 554 392 162 161 Buy Back Konnect Holden (Pvt) Ltd Islamabad
Suzuki Cultus 942 753 189 189 Buy Back Capital Strategies Group Pvt Ltd Islamabad
Suzuki Cultus 790 713 77 77 Buy Back Interloop Ltd Faisalabad
Suzuki Mehran 604 545 59 59 Buy Back Grand Parent Poultry Lahore
Suzuki Mehran 533 456 77 77 Buy Back Big Bird Poultry Lahore
Mercedes E250 CGI 5,405 2,393 3,012 3,283 Buy Back Pakistan Tobacco Company Islamabad
Suzuki Swift 1,151 819 332 332 Buy Back Konnect Holden (Pvt) Ltd Islamabad
Toyota Corolla Xli 1,255 741 514 549 Insurance Claim Pakistan Tobacco Company Islamabad
Toyota corolla GLI 1,745 478 1,267 1,322 Buy Back Pakistan Tobacco Company Islamabad
91,908 44,630 47,278 49,528
Equipment Ijarah
91,666 80,170 11,496 11,497
2014 323,563 247,180 76,383 107,434
2013 354,245 223,843 130,402 173,089
323
Annexure - III
Summarized detail of the valuation of owned properties (refer note 11.2.1)
City Land Building Total

(Rupees in ‘000)
Abbottabad 22,000 19,856 41,856

Bahawalpur 78,012 24,445 102,457
Chakwal 2,000 1,920 3,920
Dera Gazi Khan 18,450 20,000 38,450
Faisalabad 812,308 223,618 1,035,926
Gawadar 1,900 9,000 10,900
Gujranwala 221,044 172,238 393,282
Gujrat 78,500 42,216 120,716
Hafizabad 27,000 14,782 41,782
Haripur 28,453 2,958 31,411
Haroonabad 20,000 5,240 25,240
Hyderabad 185,498 87,118 272,616
Islamabad 1,317,210 416,652 1,733,862
Jehlum 55,000 32,817 87,817
Jhang 124,110 30,715 154,825
Karachi 4,666,793 2,974,623 7,641,416
Kasur 16,380 2,390 18,770
Khairpur 1,442 3,183 4,625
Khanewal 13,500 2,800 16,300
Kohat 4,650 - 4,650
Khanpur 24,040 14,420 38,460
Lahore 4,972,779 2,305,651 7,278,430
Larkana 47,735 13,601 61,336
Mianwali 19,125 35,443 54,568
Mirpurkhas 11,040 3,726 14,766
Multan 139,600 332,878 472,478
Muree 15,000 991 15,991
Muridke 45,000 25,453 70,453
Muzafarabad 128,373 52,979 181,352
Nawabshah 18,270 10,339 28,609
Okara 26,275 12,524 38,799
Peshawar 114,375 16,726 131,101
Quetta 284,696 59,803 344,499
Rahim Yar Khan 9,915 5,740 15,655
Rawalpindi 448,536 168,514 617,050
Sadiqabad 26,667 4,842 31,509
Sahiwal 52,094 13,826 65,920
Sargodha 140,986 20,825 161,811
Sheikhupura 56,000 13,112 69,112
Sialkot 94,000 20,895 114,895
Sukkur 48,288 16,656 64,944
Swat 56,500 6,715 63,215
Vehari 11,000 7,330 18,330
Wazirabad 15,000 7,274 22,274
Overseas - 82,648 82,648
Karachi - (subsidiary company) - 72,698 72,698
Grand total 14,499,544 7,412,180 21,911,724
324
ANNUAL REPORT 2014
Branch Network
As on December 31, 2014
RETAIL BANKING GROUP - SOUTH

No. of No. of
Circle / No. of Branches Region Branches Sub Branches
Retail Banking Group – South

1. KARACHI CITY 01. Karachi City 21 -
45 02. Karachi North 24 -
2. KARACHI EAST 03. Karachi East 21 -
41 04. Karachi South 20 -
3. KARACHI WEST 05. Karachi Central 21 -
42 06. Karachi West 21 -
4. HYDERABAD 07. Hyderabad 37 -
67 08. Nawabshah 30 1
5. QUETTA 09. Makran 10 -
42 10. Quetta Circle 32 -
TOTAL RBG - SOUTH 237 01
Retail Banking Group – East

1. BAHAWALPUR 01. Bahawalpur 34 -
91 02. Rahim Yar Khan 29 -
03. Vehari 28 -
2. MULTAN 04. Dera Ghazi Khan 33 -
105 05. Multan 34 -
06. Sahiwal 38 -
3. SUKKUR 07. Larkana 34 -
68 08. Sukkur 34 -
TOTAL RBG - EAST 264 -
Retail Banking Group – Central

1. LAHORE 01. Lahore Central 24 -
99 02. Lahore City 25 -
03. Lahore East 28 -
04. Lahore West 22 -
2. FAISALABAD 05. Faisalabad 37 -
102 06. Faisalabad City 37 -
07. Sheikhupura 28 -
3. GUJRANWALA 08. Gujranwala 28 1
95 09. Gujrat 35 1
10. Sialkot 32 -
4. SARGODHA 11. Jhang 31 1
93 12. Mianwali 29 -
13. Sargodha 33 -
TOTAL RBG - CENTRAL 389 03
Retail Banking Group – North

1. ISLAMABAD 01. Islamabad 29 -
58 02. Rawalpindi 29 1
2. JHELUM 03. Chakwal 25 -
80 04. Jhelum 24 -
05. Muzaffarabad A.K. 31 -
3. PESHAWAR 06. Kohat 23 -
74 07. Mardan 25 1
08. Peshawar 26 1
4. ABBOTTABAD 09. Abbottabad 27 -
74 10. Attock 29 3
11. Swat 18 -
TOTAL RBG - NORTH 286 06
325
Branch Network
As on December 31, 2014
No. of
Branches
Wholesale Banking Branches 10
Islamic Banking 27
Privilege Banking 09
OVERSEAS OPERATION
No. of
Circle / No. of Branches Branches
1. Colombo 1
2. EPZ 1
3. Kandy 1
4. Maradana 1
5. Kollupitiya 1
6. Offshore Banking Unit (OBU) - Bahrain 1
7. Pettah 1
8. Wellawatte 1
9. Batticaloa 1
10. Galle 1
TOTAL 10
Dubai (Rep. Office) 1
SUMMARY
No. of No. of
Group Circles Regions Branches Sub Branches
RBG-South 5 10 237 1
RBG-East 3 8 264 -
RBG-Central 5 13 389 3
RBG-North 4 11 286 6
Privilege Banking - - 09 -
Wholesale Banking 4 6 10 -
Islamic Banking - - 27 -
Total 21 48 1,222 10
Overseas - - 09 -
EPZ - - 1 -
Grand Total 21 48 1,232 10
PROVINCE-WISE
Province / Territory/AJK Branches Sub-Branches Total

Azad Jammu & Kashmir 26 - 26
Balochistan 44 - 44
Federal Capital Territory 28 1 29
Federally Administered Tribal Areas (FATA) 6 - 6
Gilgit-Baltistan 4 - 4
Khyber Pakhtunkhwa 116 2 118
Punjab 722 6 728
Sindh 276 1 277
Domestic Total 1,222 10 1,232
Overseas 9 - 9
EPZ 1 - 1
Grand Total 1,232 10 1,242
326
ANNUAL REPORT 2014
As of December 31, 2014
Having Shares
No. of Shareholders From To No. of Shares Percentage
14,546 1 100 590,923 0.0531%

11,889 101 500 2,901,954 0.2607%
5,497 501 1,000 4,057,516 0.3645%
7,784 1,001 5,000 13,030,114 1.1707%
275 5,001 10,000 1,944,659 0.1747%
197 10,001 50,000 4,082,059 0.3668%
52 50,001 100,000 3,704,857 0.3329%
59 100,001 500,000 14,228,814 1.2784%
28 500,001 1,000,000 22,024,109 1.9788%
58 1,000,001 5,000,000 143,759,258 12.9160%
5 5,000,001 10,000,000 34,732,081 3.1205%
3 10,000,001 15,000,000 40,518,687 3.6404%
4 15,000,001 25,000,000 70,735,696 6.3552%
12 25,000,001 Above 756,720,021 67.9873%
40,409 1,113,030,748 100.0000%
Categories of Shareholders
No. of
Particulars Shareholders Shares Held Percentage
Directors, CEO, Spouse(s) & Minor Children 16 119,702,756 10.7547%

Associated Companies 5 239,624,505 21.5290%
NIT & ICP 2 114,659 0.0103%
Banks, DFI & NBFI 20 4,583,047 0.4118%
Insurance Companies 10 71,806,698 6.4515%
Modarabas & Mutual Funds 31 1,671,838 0.1502%
Public Sector Cos. & Corp. 11 32,713,890 2.9392%
General Public (Local) 36,703 153,301,664 13.7734%
General Public (Foreign) 3,354 2,579,727 0.2318%
Foreign Companies 105 419,640,257 37.7025%
Others 152 67,291,707 6.0458%
Company Total 40,409 1,113,030,748 100.0000%
327
Pattern of Shareholding under Code of Corporate Governance
Associated Companies, Undertakings and Related Parties

Maybank International Trust (Labuan) Berhad 222,606,147
D. G. Khan Cement Company Limited 102,277,232
Nishat Mills Limited 81,527,891
Adamjee Insurance Company Limited 34,606,587
Trustee - MCB Provident Fund Pak Staff 33,985,760
Trustee - MCB Employees Pension Fund 16,921,622
Siddiqsons Limited 14,276,462
Din Leather (Pvt) Ltd 6,936,333
Trustees Nishat Mills Ltd. Employees Provident Fund 4,168,126
Nishat Mills Ltd. Employees Provident Fund Trust 4,116,264
Trustees D.G.Khan Cement Co. Ltd. Employees Provident Fund 266,200
Trustees of Adamjee Insurance Company Ltd. Employees Provident Fund 73,577
CDC - Trustee Pak Strategic Alloc. Fund 57,730
Trustee, Nishat (Chunian) Limited Employees Provident Fund 8,857
Mutual Funds:
CDC - Trustee NIT-Equity Market Opportunity Fund 682,676
CDC - Trustee IGI Stock Fund 155,000
CDC - Trustee NAFA Stock Fund 104,900
CDC - Trustee AKD Index Tracker Fund 102,558
CDC - Trustee ABL Stock Fund 99,680
CDC - Trustee Alfalah GHP Alpha Fund 85,000
CDC - Trustee NAFA Asset Allocation Fund 72,700
CDC - Trustee Pak Strategic Allocation Fund 57,730
CDC - Trustee Alfalah GHP Value Fund 57,400
CDC - Trustee Askari Asset Allocation Fund 52,000
CDC - Trustee NAFA Multi Asset Fund 50,624
CDC - Trustee First Capital Mutual Fund 32,900
CDC - Trustee First Habib Stock Fund 31,970
CDC - Trustee Faysal Savings Growth Fund - MT 20,000
MC FSL - Trustee JS KSE-30 Index Fund 18,058
CDC - Trustee JS Pension Savings Fund - Equity Account 13,500
CDC - Trustee Crosby Dragon Fund 13,000
CDC - Trustee NAFA Pension Fund Equity Sub-Fund Account 7,400
CDC - Trustee NAFA Savings Plus Fund - MT 5,000
CDC - Trustee NAFA Income Opportunity Fund - MT 2,100
Safeway Fund (Pvt) Ltd. 1,651
TRI. Star Mutual Fund Ltd. 754
Growth Mutual Fund Limited 303
Prudential Stock Fund Ltd. 179
Pak Asian Fund Limited 162
CDC - Trustee Lakson Equity Fund 134
328
ANNUAL REPORT 2014
Pattern of Shareholding under Code of Corporate Governance

Directors, spouse(s) and minor children:

Mian Mohammad Mansha 7,834
Naz Mansha 6,424,057
S. M. Muneer 2,059
Saeeda Parveen 2,427,986
Tariq Rafi 32,008,864
Nighat Tariq 5,715,093
Shahzad Saleem 902
Sarmad Amin 2,851
Mian Raza Mansha 12,661,685
Ammil Raza 28,461,365
Mian Umer Mansha 31,986,378
Aftab Ahmad Khan 914
Ahmad Alman Aslam 665
Dato’ Seri Ismail Shahudin 669
Muhammad Ali Zeb 550
Mohd Suhail Amar Suresh Bin Abdullah 884
Executives 78,816
Public Sector Companies and Corporations: 32,713,890
Banks, Development Finance Institutions, Non-Banking Finance Companies,

Insurance Companies, Takaful, Modarabas and Pension Funds: 137,080,259
Shareholders holding Five percent (5%) or more:

Maybank International Trust (Labuan) Berhad 222,606,147
D. G. Khan Cement Company Limited 102,277,232
Nishat Mills Limited 81,527,891
All trades in shares carried out by Directors, CEO, CFO, Company Secretary, Executives, their Spouse(s) and Minor
Children during the year 2014 are given as under:
Purchase /
Name
Status No. of Shares Sale/Transfer
Mr. Mohd Suhail Amar Suresh Bin Abdullah Director 884 Transferred
Mr. Muhammad Furqan Ahmed Executive 150 Purchased
Mr. Muhammad Imran Executive 100 Purchased
329
Notice of 67th Annual General Meeting
Notice is hereby given that 67th Annual General Meeting of modification, for alterations in the Articles of Association
MCB Bank Limited will be held at Pearl-Continental Hotel, of the Bank:
Shahrah-e-Quaid-e-Azam, Lahore, on Friday, March 27,
“RESOLVED THAT the alterations in the Articles of Association of
2015, at 11:00 AM to transact the following business:
MCB Bank as disclosed in Statement under Section 160 (1) (b) of
the Companies Ordinance, 1984, annexed with this notice be and
Ordinary Business:
are hereby approved.”
1. To receive, consider and adopt the Annual Audited “FURTHER RESOLVED THAT the Company Secretary be and is
Separate and Consolidated Financial Statements of hereby authorized to do all acts, deeds and things, take all steps
MCB Bank Limited (the “Bank”) together with the and actions necessary, ancillary and incidental for altering the
Directors’ and Auditors’ Reports thereon for the year Articles of Association of the Bank including filing of all requisite
ended December 31, 2014, documents/statutory forms as may be required to be filed with the
Registrar of Companies and complying with all other regulatory
2. To appoint auditors till the conclusion of next Annual
requirements so as to effectuate the alterations in the Articles of
General Meeting and fix their remuneration. The retiring
Association and implementing the aforesaid resolution.”
Auditors, M/s A.F. Ferguson & Company, Chartered
Accountants, being eligible, have offered themselves 7. To consider and approve additional equity Investment in
for re-appointment. MCB Leasing, Closed Joint Stock Company (“CJSC”),
Azerbaijan, a subsidiary of MCB Bank Limited and pass
3. To approve, as recommended by the Directors,
the following resolutions as “Special Resolutions”, with
payment of Final Cash Dividend @ 40% i.e., PKR
or without modifications, as required under Section 208
4.00 per share for the financial year 2014, in addition
of the Companies Ordinance, 1984:
to 100% (30% for 1st, 35% for 2nd and 3rd quarter)
Interim Cash Dividends already paid for the year ended “RESOLVED THAT subject to all applicable regulatory approvals
December 31, 2014. and compliance of all relevant legal formalities, the approval of
the members of MCB Bank Limited be and is hereby accorded
4. To elect twelve (12) Directors as fixed by the Board
for additional long term equity investment of equivalent of USD
of Directors of the Bank under Section 178(1) of the
2.5 million in MCB Leasing, CJSC, a subsidiary of MCB Bank
Companies Ordinance, 1984, for a period of three years
Limited incorporated under the laws of Azerbaijan as per terms and
commencing from March 27, 2015. The following are
conditions disclosed to the members.”
the names of retiring directors of the Bank:
“FURTHER RESOLVED THAT subject to all applicable regulatory
i. Mian Mohammad Mansha. approvals and compliance of all relevant legal formalities, the
ii. Mr. S. M. Muneer. approval of the members of MCB Bank Limited be and is hereby
iii. Mr. Tariq Rafi. accorded for long term equity investment by way of purchase of
iv. Mr. Shahzad Saleem. 82,442 shares of MCB Leasing, CJSC offered by Mr. Hasan Matla,
v. Mr. Sarmad Amin. a minority shareholder against a consideration of USD 105,000
vi. Mian Raza Mansha. (US Dollar one hundred and five thousands only) as per terms and
vii. Mian Umer Mansha. conditions disclosed to the members.”
viii. Mr. Aftab Ahmad Khan.
“FURTHE RESOLVED THAT the Company Secretary and/or
ix. Dato’ Seri Ismail Shahudin.
Mr. Rashid Jahangir, EVP & Divisional Head, MCB Bank Ltd,
x. Mr. Ahmad Alman Aslam.
singly and/or jointly be and are hereby authorized and empowered
xi. Mr. Muhammad Ali Zeb.
to complete all the regulatory formalities and to give effect to this
xii. Mr. Mohd Suhail Amar Suresh.
resolution and to do or cause to do all acts, deeds and things that
may be necessary or required under the relevant laws, rules and
Special Business:
regulations.”
5. To consider and pass the following Ordinary Resolution A Statement under Section 160(1)(b) of the Companies
as recommended by the Board of Directors of the Ordinance, 1984, setting forth all material facts pertaining
Bank: to the Special Business referred to above is annexed to this
Notice being sent to the members.
“RESOLVED THAT post facto approval be and is hereby accorded
for donation of PKR 40 million (Rupees forty million only), for ‘Chief
By Order of the Board,
Minister’s Relief Fund for IDPs North Waziristan – 2014’, as Bank’s
Corporate Social Responsibility.”
-Sd-
6. To consider and, if deemed fit, pass the following March 05, 2015 FIDA ALI MIRZA
resolutions as ‘Special Resolutions’, with or without Lahore Company Secretary
330
ANNUAL REPORT 2014
Notes:
1. The Shares Transfer Books of MCB Bank Limited will remain closed from March 18, 2015 to March 27, 2015 (both days
inclusive). Share Transfers received at the Bank’s Share Registrar and Transfer Agent at the below mentioned address,
at the close of business hours on March 17, 2015 will be treated as being in time for the purpose of the entitlement of
cash dividend and for attending the meeting.
2. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint another member as a proxy to
attend and vote on his/her behalf. A corporation being a member may appoint as its proxy any of its official or any other
person whether a member of the Bank or not.
3. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed, or a
notarized certified copy of the power of attorney or authority in order to be effective must be deposited at the Share
Registrar of the Bank not less than 48 hours before the time for holding the meeting, and must be duly stamped, signed
and witnessed.
4. Members are requested to immediately notify the change, if any, in their registered addresses to the Share Registrar of
the Bank at the below mentioned address.
5. CDC Accountholders will further have to follow the under mentioned guidelines as laid down by Circular No. 1, dated
January 26, 2000, issued by Securities and Exchange Commission of Pakistan (“SECP”).
For Attending of Meeting:
i.
In case of individuals, the Accountholder and/or Sub-Accountholder whose registration details are uploaded as
per the CDC regulations, shall authenticate his/her identity by showing his/her original CNIC or original passport
at the time of attending the meeting.
ii.
In case of corporate entity, the Board of Directors’ resolution/power of attorney with specimen signature of the
nominee shall be produced (unless it has been provided earlier) at the time of the meeting.
For Appointing of Proxies:
i. In case of individuals, the Accountholder and/or Sub-Accountholder whose registration details are uploaded as
per the CDC regulations, shall submit the proxy form as per above requirements.
ii. The proxy form shall be witnessed by the two persons whose name, addresses and CNIC numbers shall be
mentioned on the form.
iii.
Attested copy of CNIC or the passport of the beneficial owners and the proxy shall be furnished with the proxy
form.
iv. The proxy shall produce his/her original CNIC or passport at the time of the meeting.
v. In case of entity, the Board of Directors’ resolution/power of attorney with specimen signature shall be submitted
along with proxy form of the Bank.
6. CNIC /NTN Requirement for Payment Of Dividend – SECP Notification:
SECP through its notification SRO # 19 (I) 2014, dated January 10, 2014, read with SRO # 831 (I) 2012, dated July
05, 2012, has made it mandatory for listed companies to mention, in the case of Individuals, Computerized National
Identity Card (“CNIC”), National Identity Card for Overseas Pakistanis (“NICOP”) or Passport number and in the case of
Corporate Entity, National Tax Number (“NTN”) of the shareholders or their authorized persons, on Dividend Warrants. In
order to avoid any inconvenience in this respect, the shareholders are once again requested to provide a valid copy of
your CNIC/NICOP/ Passport/NTN to the Share Registrar at the below mentioned address, at their earliest convenience
failing which dividend payable will be withheld by the Bank.
331
7. Payment of Cash Dividend Electronically (e-Dividend Mechanism):
SECP through its Notification No. 8(4)SM/CDC 2008, dated April 05, 2013, has advised that the shareholders who have
provided bank mandate should be paid dividend by transferring directly to their respective bank accounts (e-dividend
mechanism); therefore, the registered shareholders of MCB Bank Ltd, who have not yet provided us dividend mandate
are requested to provide the details of their bank account including title of account, account number, bank name, branch
name & code and address, in order to credit their cash dividends, as and when declared, directly to their respective
bank accounts. This information is to be provided to: (i) in case of book-entry securities in Central Depository System
(CDS), to CDS Participants; and (ii) in case of physical securities to our Share Registrar at the below mentioned address.
8. Circulation of Annual Audited Financial Statements and Notice of AGM to Members through E-mail:
SECP through its Notification No. SRO 787 (I)/2014, dated September 08, 2014, has allowed companies to circulate
Annual Audit Financial Statements (“Annual Financial Statements”) along with Notice of Annual General Meeting (“Notice
of AGM”) to its members through email.
In order to avail this facility, the members who desire to opt to receive Annual Financial Statements and Notice of
AGM through email are requested to provide their written consent and email addresses to the Share Registrar at the
below mentioned address. For the convenience of the members, a “Standard Request Form” has been placed on the
website of MCB Bank Ltd to communication their e-mail address and consent for electronic transmission of Annual
Financial Statements and Notice of AGM. In case any member, subsequently, requests for hard copy of Annual Financial
Statements, the same shall be provided free of cost within seven days of receipt of such request.
9. Deduction of Withholding Tax on the Amount of Dividend:
As notified by SECP-Circular No. 19 of 2014, dated October 24, 2014.
The Government of Pakistan through Finance Act, 2014, has made certain amendments in Section 150 of the Income
Tax Ordinance, 2001, whereby, different rates are prescribed for deduction of withholding tax on the amount of dividend
paid by the companies. These tax rates are as under:
a. For filers of income tax returns: 10%

b. For non-filers of income tax returns: 15%
To enable the Bank to make tax deduction on the amount of cash divided @ 10% instead of 15%, all the shareholders
whose names are not entered into the Active Tax-Payer List (“ATL”) provided on the website of FBR, despite the fact
that they are filer, are advised to make sure that their name are entered into ATL before the date for payment of the cash
dividend otherwise tax on their cash dividend will be deducted @15% instead of 10%.
The corporate shareholders having CDC accounts are required to have National Tax Number (“NTN”) updated with their
respective participants, whereas, corporate physical shareholders should send a copy of their NTN certificate to the
Share Registrar at the below mentioned address. The shareholders while sending NTN or NTN certificate, as the case
may be, must quote their respective folio numbers must be in the name of MCB Bank Limited.
For any query/problem/information, the shareholders may contact our Share Registrar at the following address:
M/s THK Associates (Pvt) Limited, Share Registrar, Second Floor, State Life Building-3, Dr. Ziauddin Ahmed Road,
Karachi-75530. UAN +92(21) 111-000-322. Email: [email protected]
Statement under Section 160 (1)(b) of the Companies Ordinance, 1984 pertaining to Special Business:
This Statement sets out the material facts pertaining to the Special Business to be transacted at the 67th Annual General
Meeting (“AGM”) of the Bank.
332
ANNUAL REPORT 2014
Agenda No. 4
Election of Directors:
The term of office of the present Directors of the Bank will expire on March 27, 2015. In terms of Section 178 (1) of the
Companies Ordinance, 1984, the directors have fixed the number of elected directors at twelve (12) to be elected in the AGM
for a period of three years.
The present Directors are interested to the extent that they are eligible for re-election as Directors of the Company.
Any person who seeks to contest the election to the office of a Director, whether he is retiring director or otherwise, shall file
following with the Company Secretary of the Bank at the Registered Office, MCB Building, 15-Main Gulberg, Lahore, not later
than fourteen days before the date of AGM to obtain clearance/approval, in principle, from State Bank of Pakistan (“SBP”):
i. In terms of Section 178 (3) of the Companies Ordinance, 1984, notice of his/her intention to offer him/herself for the
election together with: (a) Consent on Form 28 under Section 184 of the Companies Ordinance, 1984; (b) a Declaration
under clause (ii) of the Code of Corporate Governance, 2012, of SECP to the effect that he is not a director of more than
seven (07) listed companies; (c) a Declaration that he is not ineligible to become director of MCB Bank in terms of Section
187 of the Companies Ordinance, 1984; and (d) a Declaration that he is not ineligible to become a director of MCB Bank
under any circulars / directives of SBP: (e) A detailed profile along with office address as required under SECP’s SRO 634
(I)/2014, dated July 10, 2014.
ii. A director must be holding 500 shares of the Bank at the time of filing of his/her consent to act as director.
iii. A questionnaire duly completed, recent photograph, copy of CNIC / Passport and an Affidavit to, interalia, meet the
requirement of SBP’s Prudential Regulations G-1 and the Fit and Proper Test for Appointment of Directors as contained
in Annexure VI-A and VI-B of the Prudential Regulations. This questionnaire may be obtained from Registered Office of
the Bank.
In terms of the criteria prescribed by the SBP, association of the following person as director is undesirable and against the
public interest:
a. A person who is / has been associated with any illegal activity, especially relating to banking business.
b. A person who is in his individual capacity or a proprietary concern of any partnership firm or any private limited company
or any unlisted public company or any listed public company (of which he has been a proprietor, partner, director or
shareholder), has been in default of payment of dues owed to any financial institution and / or in default of payment of
any taxes.
Agenda No. 5
Donation to Prime Minister’s Relief Fund for IDPs of North Waziristan:
MCB Board to redress the dire needs of the “Internally Displaced Persons” (IDPs) of North Waziristan, approved a donation
for ‘Chief Minister’s Relief Fund for IDPs North Waziristan - 2014’, as a part of Bank’s philanthropic and Corporate Social
Responsibility in order to stand-by our internally displaced brethren in their hour of adversity.
Agenda No. 6
Amendments in Articles of Association of the Bank:
The Board of Directors has proposed the following amendments in the Articles of Association of the Bank for the purposes
including, to bring them in line with the requirements of the regulators, provisions of the Banking Companies Ordinance, 1962
and the Companies Ordinance, 1984.
333
Existing Articles Proposed Article

Article 41: Article 41: (Amended)
Pertaining to Transfer of Shares. (Transfer Deed) The format of Transfer Deed as prescribed in Article 41 of the Articles of
Association will be changed to incorporate the following changes:
i. Option for Transferee to provide Bank Account details for Dividend

Mandate.
ii. After the words “Full address of the transferee” the words “including
e-mail address in case transferee intends to receive annual accounts of
the company through e-mail” shall be inserted.
“The qualification of a Director other than nominated by Federal “Subject to the exclusions given in Section 187(h) of the Ordinance,
Government shall be holding of at least 500 shares in the Company no person shall be appointed as a director unless he is a member of
of the face value of Rupees Five thousand, in his own name, solely or the Company and holds at least 500 (Five Hundred) ordinary shares
jointly with another or others and whether beneficially or as a trustee of the face value of PKR 5,000 (Rupees Five Thousand) in his own
for another or others or otherwise howsoever.” name.”
“The Company may by Resolution in General Meeting remove any “Subject to the provisions of Section 181 of the Ordinance, the
Director before the expiration of his period of office and may in Company may, by a Resolution passed in a General Meeting,
manner aforesaid appoint another person in his stead. A resolution remove a Director before the expiration of his term of office.”
for removing a Director shall not be deemed to have been passed
unless the number of votes favouring such resolution is equal to
or exceed the number of votes cast in favour of the last candidate
declared elected in the immediately preceding election of Directors.”
“The Secretary may at any time and he shall upon the request of a “The Secretary may at any time and he shall upon the request of a
Director convene a meeting of the Directors. A Director who is at any Director convene a meeting of the Directors. Notice sent through
time not in Pakistan shall not during such time be entitled to notice email, shall be a valid notice of a meeting.”
of any such meeting.”
“The Board of Directors shall elect one Director as Chairman. “The Board of Directors shall elect, amongst elected Directors,
The Board of Directors shall also elect a Vice Chairman. The first a Chairman and a Vice-Chairman. The Chairman and the Vice
Chairman and Vice Chairman shall hold the office for a period of three Chairman shall hold the office for a period of three years. The retiring
years and subsequently the tenure of office shall be two years. The Chairman and the Vice-Chairman shall be eligible for re-election.
retiring Chairman and Vice Chairman shall be eligible for re-election. Upon completion of tenure of the Chairman and the Vice-Chairman,
Upon completion of the tenure of the Chairman and Vice Chairman, or earlier determination thereof by virtue of death, resignation or
or earlier determination thereof by virtue of death, resignation or retirement, the Board of Directors shall elect a new Chairman and/
retirement, the Board of Directors shall elect a new Chairman and/ or Vice-Chairman, as the case may be, for remaining term. The
or Vice Chairman as the case may be for remaining term. Subject Chairman and in his absence, the Vice-Chairman will preside over
as aforesaid, the Directors may elect a Chairman of their meeting. the Board meetings. If no Chairman and/or Vice-Chairman is elected
If no Chairman is elected or if at any meeting the Chairman is not or if at any meeting the Chairman and/or the Vice-Chairman is not
present within 15 minutes of the appointed time for holding the present within 15 minutes of the appointed time, the Directors
same, the Directors present shall choose one of their members to be present shall choose one of their members to be a Chairman of such
a Chairman of such meeting.” meeting.
Upon the expiry of the term of office of the Chairman and/or the
Vice Chairman, and in the event that the Directors have not elected
any other persons to act as Chairman and/or Vice-Chairman, the
retiring Chairman and/or Vice-Chairman Directors shall be deemed
to have been reappointed, for the purposes of subsequent meetings
till such time as the directors reappoint/appoint a new Chairman
/ Vice-Chairman. No resolution of the Board shall be called in
question solely due to the non-appointment of a Chairman and/or
Vice Chairman.”
334
ANNUAL REPORT 2014

Article 121: Article 121:
“No Director shall be disqualified for his office from contracting with “The directors shall comply with the provisions of Section 214 and 216 of the
the Company either as vendor, purchaser or otherwise, nor shall Ordinance.”
any such contract, or any contract or arrangement entered into by
or on behalf of the Company in which any Director shall be in any
way interested be avoided nor shall any Director so contracting or
being so interested be liable to account to the Company for any
profit realized by any such contract or arrangement by reason of
such Director holding that office or the fiduciary relation thereby
established, but it is declared that the nature of his interest shall
be disclosed by him at the meeting of the Directors at which the
contract or arrangement is determined on, if his interest then exists,
or in any other case at the first meeting of the Directors after the
acquisition of his interest, and that no Director shall as a Director vote
in respect of any contract or arrangement in which he is so interested
as aforesaid; nor shall his presence count for the purpose of forming
a quorum at the time of any such vote and if he does so vote, his vote
shall not be counted. A general notice that a Director is a member of
any specified firm or company, and is to be regarded as interested
in any subsequent transaction with such firm or company, shall be
sufficient disclosure under this Clause, and after such general notice
it shall not be necessary to give any special notice relating to any
particular transaction with such firm or company.”
Article 127(a): Article 127(a): (Amended)

“The Company shall, out of the declared profits of each year and “The Company shall create a reserve fund (hereinafter referred to as the
before any dividend is declared, transfer a sum equivalent to not less Statutory Reserve Fund) to which shall be credited—
than 20 per cent, of such profits to reserve fund (hereinafter referred
to as the Statutory Reserve Fund) until the amount of the said fund is (a) if the amount in such fund together with the amount in the share
equal to the paid up capital of the Company.” premium account is less than the paid-up capital of the banking
company, a sum equivalent to not less than twenty per cent of the
balance of profit of each year as disclosed in the profit and loss
account and before any dividend is declared; and
(b) if the amount in such fund together with the amount in the share
premium account is equal to or exceeds the paid-up capital of the
banking company, a sum equivalent to not less than ten per cent of
the balance of profit disclosed as aforesaid and before any dividend
is declared.”
Article 127(b): Article 127(b): (Amended)

“The Company shall invest the amount standing to the credit of its “The Company shall invest the amount standing to the credit of its
Statutory Reserve Fund in Government Securities or in securities Statutory Reserve Fund in Government Securities or in securities
mentioned or referred to in Section 20 of the Indian Trusts Act of mentioned or referred to in Section 20 of the Trusts Act of 1882 or
1882 or keep deposited in a special account to be opened by the keep deposited in a special account to be opened by the Company
Company for the purpose in a scheduled Bank as defined in Clause for the purpose in a scheduled Bank as defined in Clause (l) of
(e) of Section 2 of the Reserve Bank of Indian Act, 1934.” Section 5 of the Banking Companies Ordinance, 1962.”
N.B.- This article may be dispensed with and will not apply to the
Company as soon as the Company is declared by the appropriate
authority to be a scheduled Bank as defined in Clause (e) of Section
2 of the Reserve Bank of Indian Act, 1934.

“The Company in General Meeting may declare a dividend to be paid “The Company in General Meeting may declare a dividend to be
to the members according to the rights and interests in the profits paid to the members according to the rights and interests in the
and may fix the time for payment subject to the provision of Section profits and may fix the time for payment subject to the provision
251. No longer shall dividend be declared than is recommended by of Section 251 of the Ordinance but no dividend shall exceed the
the Directors, but the Company in General Meeting may declare a amount recommended by the directors.”
smaller dividend.”
335

“A balance-sheet shall be made at least once in every year and laid “The Balance Sheet and Profit and Loss Account of the Company
before the Company in General Meeting made up to a date not more shall be prepared, signed and submitted to the relevant regulatory
than four months before such meeting. The balance sheet shall authorities and others, as the case may be, in accordance with the
be accompanied by a report of the Directors as to the state of the applicable laws, rules and regulations.”
Company’s affairs and the amount which they recommend to be paid
by way of dividend and the amount (if any) which they propose to
carry to the reserve funds. The profit and loss account and balance
sheet shall be signed by at least three Directors.”
“A copy of the balance sheet and report shall, at least twenty-one “A copy of the Balance Sheet and Profit and Loss account and the
days previously to the meeting, be sent to the persons entitled to Directors’ and Auditors’ Reports thereon as are required under law
receive notices of General Meeting in the manner in which notices shall, at least twenty-one days prior to the meeting, be sent to the
are to be given hereunder.” persons entitled to receive notices of the Annual General Meeting in
the manner in which notices are to be issued.”
Agenda No. 7
Additional Equity Investment in MCB Leasing, CJSC, Azerbaijan:
MCB Leasing, Closed Joint Stock Company (“CJSC”), a 95% owned subsidiary of MCB Bank Limited, having a joint venture
with local partner, was incorporated in Azerbaijan in 2009 with initial capital base of US$ 1 million which was subsequently
increased to US$ 2 million during 2012. MCB Leasing has been performing exceptionally well since launch of its commercial
operations in 2010. The year-wise financial numbers of MCB Leasing are as under:
Amount in AZN
2010 2011 2012 2013 2014
Yearly lending 1,209,130 3,714,172 4,631,102 4,227,263 5,197,273
Non-performing leases NIL NIL NIL NIL 0.03%
Profit after tax (354,153) (141,736) 109,089 305,376 216,330
Equity 487,952 346,216 1,282,042 1,587,418 1,803,748
MCB Leasing achieved its break even during 2011, whereas, recovered its initial years’ losses within a period of 4 years in
2014. For the financial year 2014, MCB Leasing has also declared a cash dividend of 34% of after tax profits.
One of the major impediments of attracting higher amounts from local lenders has been MCB Leasing’s lower equity base
and the most of the financial institutions have required higher capital by the sponsors into MCB Leasing. In order to manage
this situation, MCB Leasing Board in its meeting held in December, 2014, requested MCB Bank Board to inject an additional
amount of US$ 2.5 million. MCB Leasing Management is confident that enhanced capital and increased profitability would
help MCB Leasing to attract funding lines from local banks.
Mr. Hassan Matla, a minor shareholder of MCB Leasing, has also approached MCB Bank to buy his entire holding of 82,442
(4.94%) shares in MCB Leasing and the Bank’s Management has agreed at a price of US$ 105,000 (at par).
Section 208 of the Companies Ordinance, 1984, requires prior approval of shareholders of MCB Bank through their Special
Resolution for investing in associated entities in general meeting. Likewise, SBP’s prior approval would also require for further
investment by MCB Bank. In order to comply with all the regulatory requirements, M/s Riaz Ahmed & Company, Chartered
Accountants, were engaged for valuation who have valued MCB Leasing based on generally acceptable valuation techniques.
The Board of Directors of MCB Bank Limited in its meeting held on February 12, 2015, approved this additional capital
investment and purchase of shares from minor shareholder.
The shareholders are requested to approve additional equity investment in MCB Leasing, Azerbaijan.
336
ANNUAL REPORT 2014
Information as per the Regulation 3(1)(a) of the Companies (Investment in Associated Companies or
Undertakings) Regulations, 2012.
1. Name of the associated company or associated undertaking MCB Leasing CJSC – Azerbaijan, a subsidiary company
along with criteria based on which the associated
relationship is established;
2. Purpose, benefits and period of investment; Additional Equity to increase company’s capital base
which will lead to increase in available internal and external
resources resulting in increased business, thus, profitability.
3. Maximum amount of investment; USD $ 2.5 million
4. Maximum price at which securities will be acquired; At par i.e. one share at 1 AZN
5. Maximum number of securities to be acquired; New share will be issued at face value and proposed
investment will be converted into AZN at the time of
remittance and converted amount will be utilized to subscribe
the new issue.
6. Number of securities and percentage thereof held before Currently MCB Bank Limited holds 95% of share capital of
and after the proposed investment; MCB Leasing CJSC, after proposed equity increase and
purchase of Mr. Matla shares, MCB Bank Limited holding
will be 99.98%
7. In case of investment in listed securities, average of the NA
preceding twelve weekly average price of the security
intended to be acquired;
8. In case of investment in unlisted securities, fair market value DCF value using FCFE method AZN 1.09 (USD $ 1.39)
of such securities determined in terms of regulation 6(1); DCF value using FCFF method AZN 11.35 (USD $ 14.48)
9. Break-up value of securities intended to be acquired on the AZN 1.08 (USD $ 1.38)
basis of the latest audited financial statements;
10. Earnings per share of the associated company or associated Year 2012 2013 2014
undertaking for the last three years;
Earnings per share AZN 0.13 AZN 0.18 AZN 0.07
11. Sources of fund from which securities will be acquired; Retained profit of MCB Bank, holding company
12. Where the securities are intended to be acquired using NA
borrowed funds:
(I) justification for investment through borrowings; and
(II) detail of guarantees and assets pledged for obtaining
such funds;
13. Salient features of the agreement(s), if any, entered into with NA
its associated company or associated undertaking with
regards to the proposed investment;
14. Direct or indirect interest of directors, sponsors, majority The directors and/or their relatives of MCB Bank have
shareholders and their relatives, if any, in the associated no direct or indirect interest either in MCB Leasing,
company or associated undertaking or the transaction CJSC, Azerbaijan or the proposed additional equity
under consideration; investment, save their shareholdings in the Bank.
15. Any other important details necessary for the members to NA

understand the transaction; and
16. In case of investment in securities of a project of an NA
associated company or associated undertaking that has
not commenced operations, in addition to the information
referred to above, the following further information, is
required, namely:
(I) description of the project and its history since
conceptualization;
(II) starting and expected dated of completion of work;
(III) time by which such project shall become
commercially operational; and
(IV) expected time by which the project shall start paying
return on investment.
337
The directors have carried out their due diligence for the offered stake and after due deliberation decided to make long term
investment in MCB Leasing subject to approval of the shareholders in the Annual General Meeting and other regulatory
approvals, if required.
Inspection of Documents:
A copy of the original and amended copies of the Articles of Association have been kept at the Registered Office of the Bank
which could be inspected on any working days during usual business hours till the date of Annual General Meeting. Further,
Due Diligence Report and audited latest annual financial statements along with the latest reviewed financial statements, if
required, of MCB Leasing will be available for inspection of the members in the Annual General Meeting
The Financial Statements of the Bank have been placed on Website of the Bank.
The directors of MCB Bank have no direct or indirect interest in the above said Special Business, save their shareholding in
the Bank.
338
ANNUAL REPORT 2014
Glossary of Terms
Important terms and formulae used for calculation in Fixed Deposits

Financial Statements are briefly described here; Deposits having fixed maturity dates and a rate of return.
Accrual Basis Forced Sale Value (FSV)

Recognizing the effects of transactions and other events when Forced Sale Value means the value which fully reflects the
they occur without waiting for receipt or payment of cash or its possibility of price fluctuations and can currently be obtained by
equivalent. selling the mortgaged / pledged assets in a forced / distressed
sale conditions.
Basis point
One hundredth of a per cent i.e. 0.01 per cent. 100 basis points Government Securities
is 1 per cent. Used when quoting movements in interest rates or Government Securities shall include such types of Pak. Rupee
yields on securities. obligations of the Federal Government or a Provincial Government
or of a Corporation wholly owned or controlled, directly or
Breakup Value per share indirectly, by the Federal Government or a Provincial Government
Represents the total worth (equity) of the business per share, and guaranteed by the Federal Government as the Federal
calculated as shareholders’ equity or Net Assets excluding the Government may, by notification in the Official Gazette, declare,
impact of revaluation on fixed assets, divided by the total number to the extent determined from time to time, to be Government
of share outstanding at year end. Securities.
BSD Impairment allowances

Banking Surveillance Department A provision held on the balance sheet as a result of the raising
of a charge against profit for the incurred loss inherent in the
CAGR lending book. An impairment allowance may either be identified
An abbreviation for Compound Annual Growth Rate. or unidentified and individual or collective.
Capital Adequacy Ratio (CAR) Foreign Exchange Options(FX Options)

The relationship between capital and risk weighted assets Contracts that give the buyer the right, but not the obligation, to
as defined in the framework developed by the State Bank of buy or sell one currency against the other, at a predetermined
Pakistan. price and on or before a predetermined date. The buyer of a call/
put FX option has the right to buy/sell a currency against another
Cash Reserve Ratio (CRR) at a specified rate.
Cash Reserve Ratio is the amount of funds that the banks have
to keep with SBP. Forward Purchase Contract
Forward purchase contract is one in which the exporter enters
Cash Equivalents into the forward booking contract to protect himself from the
Short-term highly liquid investments that are readily convertible to exchange rate fluctuation at the time of receiving payment.
known amounts of cash and which are subject to an insignificant
risk of changes in value. Forward Sale Contract
In a forward sale contract the importer enters into a transaction
Commitment to Extend Credit to buy foreign currency from the Bank at the predetermined rate
Credit facilities approved but not yet utilized by the client as atthe to protect himself from the exchange fluctuation at the date the
Balance Sheet date. payment.
Cost to Income Ratio Historical Cost Convention

The proportion of total operating costs excluding total provisions Recording transactions at the actual value received or paid.
and write-offs, to total income, represented as combination of
net interest income and non interest income. IAS
International Accounting Standards
Credit Risk Spread
The credit spread is the yield spread between securities with IFRS
the same coupon rate and maturity structure but with different International Financial Reporting Standards
associated credit risks, with the yield spread rising as the credit
rating worsens. It is the premium over the benchmark or risk-free IFRIC
rate required by the market to take on a lower credit quality. International Financial Reporting Interpretation Committee
Discount rate Interest Spread

Discount is the rate at which SBP provides three-day Repo facility Represents the difference between the average interest rate
to banks, acting as the lender of last resort. earned and the average interest rate paid on funds.
Dividend Payout Ratio Loan losses and provisions

Dividends (cash dividend plus bonus shares) paid per share as a Amount set aside against identified and possible losses on loans,
fraction of earnings per share (EPS). advances and other credit facilities as a result of their becoming
party or wholly uncollectible.
Dividend Yield Ratio
Dividend per share divided by the market value of share. Liquid Assets
The assets which are readily convertible into cash without
Earnings Per Share recourse to a court of law and mean encashment / realizable
Profit after taxation divided by the weighted average number of value of government securities, bank deposits, certificates of
ordinary shares in issue deposit, shares of listed companies which are actively traded
339
Glossary of Terms
on the stock exchange, NIT Units, certificates of mutual funds, after tax) to the average equity (before surplus) for the period.
Certificates of Investment (COIs) issued by DFIs / NBFCs rated at Return on Assets (ROA)
least ‘A’ by a credit rating agency on the approved panel of State Indicator of profitability of the business relative to the value of its
Bank of Pakistan, listed TFCs rated at least ‘A’ by a credit rating assets, calculated by dividing the net profit (profit after tax) to the
agency on the approved panel of State Bank of Pakistan and average total assets for the period.
certificates of asset management companies for which there is a
book maker quoting daily offer and bid rates and there is active Statutory Reserve Funds
secondary market trading. These assets with appropriate margins A capital reserve created as per the provisions of the section 21
should be in possession of the banks / DFIs with perfected lien. of Banking Companies Ordinance, 1962.
Market Capitalization Small Enterprise

Number of ordinary shares in issue multiplied by the market value A Small Enterprise (SE) is a business entity which meets both the
of share as at any cut-off date. following parameters:
Materiality
Number of Employees Annual Sales Turnover
The relative significance of a transaction or an event the omission
or misstatement of which could influence the economic decisions
of users of financial statements. *Up to 20 Up to Rs. 75 million
Net Interest Income (NII) *including contract employees.

Net interest income is the difference between the interest earned
on assets and interest expensed on liabilities. Basel III
Basel III (or the Third Basel Accord) is a global, voluntary regulatory
Non-Performing Loan standard on bank capital adequacy, stress testing and market
A non-performing loan is a loan that is in default or close to being liquidity risk.
in default. Loans become non-performing in accordance with
provision of prudential regulations issued by SBP. Strategic Investment
Strategic Investment is an investment which a bank / DFI makes
NPLs to Gross Advances/Loans with the intention to hold it for a period of minimum 5 years.
Represents the infected portfolio of the bank and is
calculated by dividing the total non-performing loans by gross The following must be noted further in respect of strategic
advances. investment:
Non Performing Loan-Substandard Category • The bank should mark strategic investment as such at the
Where markup/interest or principal is overdue by 90 days or more time of investment
from the due date. • If there are a series of purchases of stocks of a company, the
minimum retention period of 5 years shall be counted from
Non Performing Loan-Doubtful Category the date of the last purchase.
Where markup/interest or principal is overdue by 180 days or
more from the due date. SRO
Statutory Regulatory Order
Non Performing Loan-Loss Category
Where mark-up/interest or principal is overdue by one year or KIBOR – (Karachi Interbank Offered Rate)
more from the due date and Trade Bill (Import/ Export or Inland KIBOR is the interbank lending rate between banks in Pakistan
Bills) are not paid/adjusted within 180 days of the due date. and is used as a benchmark for lending.
Off Balance Sheet Transactions LIBOR (London Interbank Offered Rate)

Transactions that are not recognized as assets or liabilities in the An interest rate at which banks can borrow funds, in marketable
statement of financial position but which give rise to contingencies size, from other banks in the London interbank market. The LIBOR
and commitments. is fixed on a daily basis by the British Bankers’ Association.
Price Earnings Ratio (P/E Ratio) VaR

Market price of a share divided by earnings per share. Value at Risk is an estimate of the potential loss which might arise
from market movements under normal market conditions, if the
Repo / Reverse Repo current positions were to be held unchanged for one business
A repurchase agreement, or repo, is a short term funding day, measured to a confidence level of 97.5 per cent.
agreements which allow a borrower to sell a financial asset, such
as ABS or government bonds as collateral for cash. As part of Weighted Average Cost of Deposits
the agreement the borrower agrees to repurchase the security at Percentage of the total interest expense on average deposit of the
some later date, usually less than 30 days, repaying the proceeds bank for the period.
of the loan. For the party on the other end of the transaction
(buying the security and agreeing to sell in the future) it is a reverse
repurchase agreement or reverse repo.
Return on Equity (ROE)

Represents the ratio of the current year’s profit available for
distribution to the weighted average shareholders equity over the
period under review, calculated by dividing the net profit (profit
340
ANNUAL REPORT 2014
Form of Proxy
67th Annual General Meeting
I/We
of
being a member (s) of MCB Bank Limited, and holder of
ordinary shares, do hereby appoint
of vide Folio/CDC Account No.
or failing him / her of who is also a member
of the Bank, video Folio / CDC Account No.
as my / our proxy in my / our absence to attend, speak and vote for me / us and on my / our behalf at the 67th Annual General
Meeting of the Bank to be held on Friday, March 27, 2015 at 11:00 AM at Pearl-Continental Hotel, Shahrah-e-Quaid-e-
Azam, Lahore, and at any adjournment thereof.
As witness my / our hand/Seal this day of 2015
Signed by
In the presence of
CDC Account No.

Folio No. Signature on
Participant I.D. Account No.
Five-Rupees
Revenue Stamp
The signature should agree

with the specimen registered
with the Bank.
Important:
1. This Proxy Form, duly completed and signed, must be deposited in the office of M/s THK Associates (Pvt) Limited,
the Share Registrar and Transfer Agent, situated at 2nd Floor, State Life Building No. 3, Dr. Ziauddin Ahmed Road,
Karachi, not less than 48 hours before the time of holding the meeting.
2. If a member appoints more than one proxy and more than one instrument of proxies are deposited by a member
with the Share Registrar, all such instruments of proxy shall be rendered invalid.
3. For CDC Account Holders / Corporate Entities
In addition to the above the following requirements have to be met:
• Attested copies of CNIC or the passport of the beneficial owners and the proxy shall be provided with the proxy
form.
• The proxy shall produce his original CNIC or passport at the time of the meeting.
• In case of corporate entity, the Board of Directors’ resolution / power of attorney with specimen signature shall be
submitted along with proxy form to the Company.
341

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CONTENTS Vision & Mission..................................

Unconsolidated Financial Statements

Consolidated Financial Statements

ANNUAL REPORT 2014

Vision & Mission

• Providing value added services through operational expansion,

• Building a corporate culture of equality, trust and team spirit as

The Circle of Life

2013 The Asset Triple A: Best Domestic Bank - Pakistan

2012 The Asset Triple A: Best Domestic Bank - Pakistan

2011 CFA Association Pakistan: Most Stable Bank of the Year

2010 The Asian Banker: Strongest Bank in Pakistan

2009 Asiamoney: Best Domestic Bank in Pakistan

2008 Euromoney: Best Bank in Asia

2006 Asiamoney: Best Domestic Bank in Pakistan

2005 Asiamoney: Best Domestic Bank in Pakistan

2004 Euromoney: Best Bank in Pakistan

2003 Euromoney: Best Bank in Pakistan

2000 Euromoney: Best Bank in Pakistan

Rupee Travelers Cheque

Dividend Warrant Management: TBD provides a complete and comprehensive

Rupee Travelers Cheque

Rupee Travelers Cheque

Savings Account depending on their requirement to protect their documents, jewelry or

MCB Kidz Club Remittances

MCB Smart Card SME & Corporate Financing

Rupee Travelers Cheque

Registrar’s and Share

* Independent Non-Executive Director under CCG having relevant industry experience.

MIAN MOHAMMAD MANSHA

MIAN RAZA MANSHA

MIAN UMER MANSHA

DATO’ SERI ISMAIL SHAHUDIN

MOHD SUHAIL AMAR SURESH

1. Mr. Ahmad Alman Aslam – Chairman 1. Mian Mohammad Mansha – Chairman

Determining appropriate measures to safeguard the Bank’s 7. President & CEO

TERMS OF REFERENCE: 1. Mian Raza Mansha – Chairman

to review and approve Management recommendations for IT

SBP Report Compliance Monitoring Committee

1. Mr. S. M. Muneer – Chairman

The terms of reference of the Committee are to review six

Write Off and Waiver Committee

1. Mian Mohammad Mansha – Chairman

The terms of reference of the Committee are to review and

Audit & RAR Treasury & Wholesale Compliance Financial Corporate

Information CCM & CSR &

Retail Banking Retail Banking

5. Write off Committee

Other Senior Management

Fida Ali Mirza

Malik Abdul Waheed

Kamran Zafar Muggo

Azfar Alam Nomani

Corporate Profile of the Bank

MCB Financial Services Limited

MNET Services (Private) Limited

MCB Trade Services Limited

MCB - Arif Habib Savings & Investments Limited

“ MCB Leasing” Closed Joint Stock Company, Azerbaijan