201

2010
0

M.C.B Student Loan

First of all I am thankful to ALLAH Almighty who has created
us, gave us the power to understand and the power to gain
knowledge. Without HIS kindMarketing
[Strategic guidance I would have not
Management]
been able to complete any task given to me.

ARSENELS
Strategic Marketing Management

Imran Karamat 070634-052

Ali Furqan 070634-019
M.Awais 070634-002
Submitted to: Mr.Asad Awan
M.Haider 070634-044
Hassan Ali 070634-003

[M.C.B STUDENT
Submitted To
Sir Asad Awan
LOAN ]
[Type the abstract of the document here. The abstract is typically a short
summary of the contents of the document. Type the abstract of the
document here. The abstract is typically a short summary of the contents of
the document.] U.M.T
14/1/2010
Dated: 07/01/2010
 Acknowledgment

For whom who created us, fed us, brought us up and gave us knowledge.

Who is the most merciful, most beneficial and most forgiver. "In the name of

God, the Merciful, the Compassionate. Say (O Muhammad) He is God the One

God, the Everlasting Refuge, who has not begotten, nor has been begotten,

and equal to Him is not anyone." For whom who is more loving and kinder

than a mother to her dear child? For whom who are the First and the Last?

We are very thankful to Mr. Asad awan at UMT who gave us a chance to

prove ourselves, to gain something, to learn something, to experience

something and test ourselves. We really appreciate our friend’s valuable

suggestions and their initiative in our project. We are greatly thankful Mr.

Asad Awan who gave us the opportunity to learn the deep complexities of

market.
 M.C.B Bank PVT Ltd

“The Bank You Trust that push you towards education”

1.Company Description:
“MCB Ltd formerly known as Muslim Commercial Bank Limited was
incorporated by the Adamjee Group on July 9, 1947, under the Indian
Companies Act, VII of 1913 as a limited company. The bank was established
with a view to provide banking facilities to the business community of the
South Asia.

The bank was nationalized in 1974 during the government of Zulfikar Ali
Bhutto. This was the first bank to privatized in 1991 and the bank was
purchased by a consortium of distinguished Pakistani corporate groups led by
Nishat Group. As of June 2008, the Nishat Group owns a majority stake in the
bank.

MCB is Pakistan’s fourth largest bank by assets having an asset base of

US$6.7 billion, and the largest by market capitalization having a market
capitalization of US$4.1 billion. The Bank has a customer base of
approximately 4 million and a nationwide distribution network of 1,026
branches, including 8 Islamic banking branches, and over 300 ATMs, in a
market with a population of 160 million.

In 2008, MCB reported a profit after tax of PKR16.4 billion (US$270 million)
and generated a return on average equity of 38% and a net interest margin
of 8.08%.

During the last fifteen years, the Bank has concentrated on growth through
improving service quality, investment in technology and people, utilizing its
extensive branch network, developing a large and stable deposit base and
managing its non-performing loans via improved risk management processes
and getting mergers with different banks.

In 2005, the management of the bank changed its name from Muslim
Commercial Bank Limited to MCB Bank Limited (MCB). The reason was to
explore international markets as they were facing resistance specially from
Western Countries to avail license. In 2008 the head office of MCB was shifted
to Lahore in a newly constructed building, namely MCB House, located at
Sharea Ghous-ul-Azam (formerly known as Jail Road) from Karachi.

The MCB Tower in Karachi serves as the MCB's headquarters, and is also the
tallest building in Pakistan. MCB, advised by Merrill Lynch, became the fourth
Pakistani company (the other three being Hubco, PTCL and Chakwal Cement -
they all have been delisted) to list on the London Stock Exchange when it
raised US$150 million global depositary receipts.

M.C.B Mergers & Acquisition

In May 2008 Malaysian bank, Maybank and MCB sponsors Nishat Group
signed an agreement, whereby Maybank will acquire up to 20% of the
ordinary shares in MCB from Nishat Group. The acquisition is in-line with
Maybank’s strategy, as Malaysia’s financial services leader in the region, to
build its presence in key growth markets across the region. It also paves the
way for MCB, one of Pakistan’s premier financial services groups, to engage
Maybank as its exclusive foreign commercial bank strategic partner.

Maybank initially acquired from Nishat Group 94,241,527 ordinary shares in

MCB, representing a 15% stake in the Bank, for a cash price of PKR470 per
share. The total consideration paid was approximately US$686 million. The
purchase price represented a 11.4% premium to MCB’s closing share price of
PKR 422 on May 2, 2008, and a premium of 12.9% to the average closing
share price for MCB over the 30 trading days immediately preceding the date
of this announcement.

As part of the transaction, Maybank and MCB are also expected to enter into
a business cooperation arrangement which will include, among others,
Islamic banking, retail banking, credit cards, asset management and SME
banking. Leveraging Maybank’s leadership and experience in these segments
coupled with MCB’s brand and broad distribution network, Maybank and MCB
believe that significant revenue synergies can be attained. Both Maybank and
MCB are also expected to benefit from increased business ties and trade
flows between Pakistan and Malaysia.

M.C.B Buys R.B.S Pakistan

The MCB announced the signing of the agreement while the RBS said it had
reached an agreement, in principle, for sale of its 99.37 per cent holding.The
shares of RBS got the lowest price as compared to previous deals made
during the last six years in the country.

The MCB will acquire 1.707 billion (1,707,107,891) ordinary shares for a cash
price of Rs4.22 per share. The MCB succeeded to strike the deal at the lowest
price.In the previous deals, the Union Bank was sold at a price of Rs93 per
share while Prime Bank was acquired by ABN AMRO (Now RBS Pakistan) at
the rate of Rs54 per share, PICIC DFI got Rs78 per share, Saudi Pak Bank got
Rs29.3 per share and MCB Bank sold its shares at a price of Rs470 per share
to May Bank, Malaysia.

The total consideration to be paid will be Rs7.2 billion (US$87 million). In

addition, the MCB would make a tender offer for the remaining 0.63 per cent
of ordinary shares not owned by the majority shareholder.

‘We are delighted to confirm today that we have successfully entered into a
sale agreement with the MCB for RBS Pakistan which comprises Retail,
Commercial, Islamic and onshore GBM (Global Banking and Markets) and GTS
(Global Transaction Services) businesses in Pakistan,’ said Mohammad
Aurangzeb, chairman of RBS Pakistan.

RBS Pakistan is a leading international bank in Pakistan with a branch

network of over 75 in 24 cities, of which 30 serve the affluent retail customer
segment and three are Islamic banking branches, and has over 90 ATMs. On
Dec 31, 2008, RBS Pakistan had total assets of Rs108 billion.

As a result of the transaction, based on latest available pro forma numbers

the total number of branches of combined MCB and acquired bank (RBS
Pakistan) will increase to 1,139, the total consolidated deposits would
increase to Rs413 billion and consolidated gross advances to Rs324 billion.

2.Strategic focus & plan:

1) VISION
“To be the leading financial services provider, partnering with our customers
for a more prosperous and secure future”.

2) MISSION
We are looking to play an increasingly progressive role in economy by
providing innovative and value-added products and services to a diverse
customer base. Our Mission is to support the economy with numerous ways
like to facilitate the education sectors with best which we can do through
student’s long term financing loans at nominal rate of return.

3) STRATEGIC GOALS
1. Aims at bringing Education within the reach of students and help them to improve
their quality of life and be the supportive element in booming the economy.

2. Our foremost goal is to sustain our current position under these circumstances to
remain listed in London stock exchange.

3. Objective for this student loan is to capture the financial activities of educational
institutions of Pakistan on national level and provide them with financial
assistance, they might require.

4. While retaining our existing customer base, our major emphasis is on their
children’s future education plan and to affiliate with them on an emotional track.

5. Through this student loan our goal is to provide an opportunity to the local
potential and place them in our diversified business units thus, helping in
reducing the unemployment.

6. For sustaining the stakeholder’s equity, approximately net 10% Interest p.a shall
be charged on the issued loans.

4) SUSTAINABLE COMPETITIVE ADVANTAGE

(SCA)
1. MCB is the leader of local commercial bank supported by its increasing
trends of revenue, all over Pakistan.
2. It was the first Bank which introduced ATM Technology in Pakistan.
3. All over Pakistan, it has most ATM Machines, and most Branches
available, and now the network transaction can be done through
mobile phones as well.
4. Not only in Pakistan, MCB has also come up with an idea of introducing
shares in LSE (London stock exchange).
5. Time and structure of repayment loan is also providing us the
competitive edge.
6. Our processing time and disbursement of loan is very flexible from
which student convenience is much higher than others.
2. Situation analysis:
2.1 External analysis:
Industry Analysis:
Financial Sector in Pakistan possesses a wide spectrum of financial
institutions, Commercial banks, specialized banks, national savings
schemes, insurance companies, development finance institutions,
investment banks, stock exchanges, corporate brokerage houses, leasing
companies, discount houses, micro-finance institutions and Islamic banks.

They offer a whole range of products and services both on the assets and
liabilities side. Financial deepening has intensified during the last several
years but the commercial banks are by far the predominant players
accounting for 90 percent of the total financial assets of the system.
Among the commercial banks, 12 foreign and 20 domestic banks together
hold 80 Percent of the banking system assets - a feat that is unparalleled
among developing countries. Foreign banks enjoy the same facilities and
same access as the domestic banks and there is no preferential treatment
for domestic institutions. Unlike many countries, foreign banks can have
100 percent ownership, can open their branches or establish local
subsidiary with full ownership. Foreign companies are also provided level
playing fields as they can raise finances of all types and tenures from the
domestic banking system.

Pakistan Banking overview:

The Banking sector is an integral part of the country’s financial services
industry. The sector witnessed a phenomenal growth in 2005-07 where
deposits rose by almost 100%. There are 39 scheduled banks (including
11 foreign banks) operating in Pakistan. Competition is relatively high,
especially after the challenging capital adequacy benchmarks set by the
State Bank of Pakistan to nourish a stable banking system. Attracting
foreign investment and winning profitable customers are the only options
left to banks for survival.
Opportunities for foreign banks, especially in consumer and retail banking,
are greater than ever before. In the financial year of 2007-08, the banking
sector experienced growth rates of 21% and 36% in its deposit and
advances portfolio respectively, which in turn, has increased the banks’
stability as compared to the preceding year. A significant shift of focus
from industrial lending to consumer products has allowed the banks to
enjoy enormous spreads. However, the manufacturing sector is still
enjoying the highest share in credit facilities extended by the banking
industry.
The industry is passing through a transitional period from long established
patterns and norms to the unknown land of threats and opportunities.
Structure of the banking sector:

Structure of the Pakistani banking sector has substantially changed in the

last decade, particularly following the privatization of the state-owned
banks. In 1990, the banking system was dominated by five commercial
banks which were all state-owned. The 1990 amendments to the Banking
Companies Ordinance launched the process of financial sector reforms by
allowing privatization of the state-owned banks. During the first round of
reform, two of the state-owned banks, Muslim Commercial Bank (MCB)
and Allied Bank (ABL), were privatized between 1991 and 1993. The
reforms process was subsequently delayed for several years and resumed
significantly only in the early 2000s. With the privatization of the third
large bank, United Bank (UBL), in 2002, the domination of the state-owned
banks was ended. As of September 2003, the asset share of local private
banks and public sector commercial banks was 47 percent and 41 percent
respectively.
Another large state-owned bank, Habib Bank (HBL), completed its
privatization n process in February 2004. As a result of this privatization,
the share of banking system assets held by public sector commercial
banks decreased to less than 25 percent. The largest bank in the country,
National Bank of Pakistan (NBP), with a market share of approximately 20
percent, remains state-owned and its privatization prospects are uncertain
at this stage, although the government divested approximately 25 percent
of its capital in 2001-03.
The privatization of state-owned banks has been accompanied by the
liberalization in the financial system and the openness to domestic and
foreign competition. The number of commercial banks and various
nonblank financial institutions grew rapidly in the early 1990s (the number
of commercial banks increased to more than 40 by the year 1995).
Worried by the health and soundness of the newly entering smaller banks,
the authorities imposed a cessation on the establishment of new banks in
1995, which still remains in force. In addition, the authorities sought to
consolidate the banking sector by increasing the minimum capital
requirement from PRs 500 million to PRs 750 million from end-December
2001 and to PRs 1 billion (around US$17 million) from end December
2002.
Efforts have been made in recent years to promote Islamic banking
services. In particular, the State Bank of Pakistan (SBP) exempted Islamic
commercial banks from the moratorium on the establishment of new
banks, and the first full-fledged Islamic bank, Meezan Bank, was licensed
in 2002. Several conventional banks have also opened branches that
provide only Islamic financial services.

Competitive analysis:
There are 39 banks currently operating in Pakistan. However, there are
only 4 competitors of MCB. These include ABL, UBL, NBP and HBL. The
competitor analysis has been done using graphs and charts in the
following pages. The description of 2 banks is also given below.
Market share of banks in Pakistan (2007)
1. Increasing diversity within the commercial banking industry

Diversity is making the head way at a rapid speed pattern of operations,

market focus, advertising emphasis and use of information technology. Now
the banks are inclined to build their organizations to look different from their
market competitors by pursuing divergent and distinctive strategies and by
introducing novel products and services through product differentiation.

2. Intensifying pressure of competition

Competition is scaling new heights in the banking industry and it will gain
further force. A number of factors are expanding the frontiers of competition
in both funding and asset use. Competition for all kinds of savings will
continue to deepen and broaden but constant consumer awareness about
different markets; situations and alternatives will surely block the capacity of
banks to collect savings at lower rates than said by their aggressive market
competitors. On the other hand, market pressures will compel the banks to
make loans in unknown areas loosening the rope of risk management

3. Profit trends in banking industry

Current key ratios indicate a striking upward trend in the banking industry
with huge banking spreads, particularly during the last half decade.

4. Soaring loan losses

Provision for loan losses is on the rise over the years. Troubled loans or non
performing advances are regarded as a cancer for banking industry. It can be
said that quality loans is the ultimate goal for bankers today.

5. Merger mania

Merger game is going to take front seat in the world. A craze for giant banks
is developing to benefit effectively from the future market openings and to
tame ever increasing competition. But there are inherent constraints in this
mania. The economies of scale vanish automatically after a certain level of
expansion in the banking industry.
Market analysis:

Porter five forces model:

Threat of new
entrants

Bargaining Bargaining
Rivalry
Power of Power of
supplier customer

Threat of
substitute
products or
services
1.Threat of new entrants:
The threat of new entrants is very low, as all of the commercial banks
already operating in Pakistan can introduce this offer.

2.Bargaining power of customers:

The bargaining power of customers for this industry is very low, as the
customers are in need for any such package that’ll satisfy their needs, and
for this their bargaining power is very low.

3.Bargaining power of suppliers:

The teaching institutes are the suppliers in this case and their bargaining
power is low in this case as more student loans shall result in more
 students’ footfall in the institutes, which on the end of the day will turn in
more revenues for the universities.

But some of the institutes have high bargaining power, such as UMT, as
they on their own are giving away student loans, on easy installments and
that also without any interest.

4.Threat of substitute products:

The threat for substitute product is low in this case, the substitute product
being offered for this currently is easy loans or discounts being offered by
educational institutes, which in long term is not sustainable at all.

5.Rivalry:
The level of competition in this segment is medium, although there is no
such direct competition, but as they are offering this loan at interest rate
and NBP is offering the loan at no interest basis, but still they are facing a
lot of difficulties in gaining the market share due to their poor strategic
stance.

Environmental analysis:
PEST
Pakistan being a developing country and having a relatively low level of
income, is required growth rate is low as there is hardly any savings. The
standard of living along with the quality of life is the newer concept in
Pakistan which emphasizes on individual aspects of human nature. These
have led to foreign aids which have been the holding force to bridge the gap
for us between our savings and investments. Nevertheless, these aids have
become the drowning force for our country. By virtue of being a member of
the most western aid consortium, the famous IMF occupies a pivotal role in
our economies sphere by influencing our international financial transactions
and creates the pace of our development policies. IMF’s main objective for
Pakistan is to maintain stable exchange rates, multi lateral credit system and
international liquidity so as to recover the country from its worst economic
crisis. But Pakistan’s economic problem can mainly be aspired by internal
development and avoidance of any major international role.

Political:

• The current weak political scenario of the country has already led in
fleeing of many investors
• The weak, unfaithful leadership has made the country to come at a
backward and defensive stance in the world
 • The current war against terror has badly reputed our image worldwide
and also its relations with the business community.

Economical:

• The uncertain economic conditions have also badly affected the

industrial and the business sector, as stable economic indicators are
directly proportional to the investment being done
• The current warfare against terrorism has badly shattered the trust of
the investors and most of them are withdrawing from expanding
further or investing more into the market.
• National income & GDP is recessive as well
• There is an economic recession globally.

Social:

• Social factors are also the major factors affecting any organization, and
specially if operating in an environment which has influence of
conservatives, extremists, seculars all in one
• It becomes really easy to mould the minds with an average literacy
rate of 37.6% in any desired direction
• Most of the companies use this to falsely propagate against their
competitors most of the time.
• People are much conscious about brands now in Pakistan.

Technological:

• Pakistan has a significant importance geographically being in the heart

of South Asia
• And it is already on its way to becoming an international hub for trade
and commerce
• Technology is advancing and in these conditions the introduction of
student loans, if made available nationwide shall result in high
customer attraction.

2.2 Internal analysis:

SWOT ANALYSIS
STRENGTHS

1. MCB has the highest ROE amongst its competitors

2. MCB has the highest Net Interest Margin compared to HBL, NBP, etc.
 3. It has lowest average deposit rates.

4. It has a high consumer loan growth rate.

5. It has an extensive branch network

It has AA+ rating for long term and A1+ for short term by PACRA showing
high credit quality and low credit risk.

OPPORTUNITIES

1. MCB can focus on consumer banking to increase yields

2. It can work to improve the conditions of NPLs
3. During recession, it can take advantage of decreased Cash Reserve Requirement.
4. It can expand its Islamic banking.
5. M.C.B has an opportunity to work with education institutions

WEAKNESSES

1. It has an increasing rate of NPLs (from 4.67% to 6.69%).

2. Its EPS growth rate is decreasing over the past years.
3. Does not have international recognition.
4. Though its investments are increasing but 40% are confined to investment in
government securities only. This reduces its returns.

THREATS

1. MCB has threat from banks like UBL which has 67% low cost deposit base
2. It also has threats from banks including NBP and UBL that are increasing their
branch network to encourage deposit raising.
3. Threats from Government if it raises CRR and SLR.
4. It has threats from Al-Falah and UBL as far as Car Financing is concerned
Similarly NBP is a threat in house financing.
Current strategy
Segmentation:

In this project we have divided the market into four different segments which
are based on government institutions, semi government institution, private
and foreign universities. In the we will focused on government and semi
government institution to facilitate the students regarding to the hurdles
which they face to full fill their academic career.

Target market:

In the introductory phase we will target the major cities of Pakistan like
Lahore, Karachi, Islamabad, Faisalabad and Peshawar. Our target market is
based upon the students of graduation and post graduation. We will facilitate
them not only in their tution fee but also in their other expenditure like
laptops, medical equipments….etc

Approved courses;

1) Medical

2) Engineering

3) Management

4) Commerce

5) Business & Economics

6) Accounting & finance

7) Arts

8) Fashion designing

9) Mass communication

Loan amount:

Our loan amount starts from 50000-700000 and the interest rate will charge
from 10%-18% annually and it will depend on the amount borrowed.

Rate of interest:

10% to 18% annually.

Fee structure:
 1) Based on educational institution

2) Annually

3) Semi annually

4) Trimester

5) Quarterly

Terms & conditions:

Terms and conditions are varied from loan amount.

1) Previous documentation plugged

2) Three person referential undertaking

3) 70% above mark sheet in previous class

4) Father NIC copy with written undertaking

5) Submission of original papers of the valuable assets. (if required)

Pay back Time period:

Varies from the loan amount and degree time duration.