Karachi, February 28, 2024 – In a recent corporate briefing, MCB Bank has set its sights on a potential reduction of up to 3 percent in the existing policy rate of 22 percent during the current calendar year, according to insights provided by analysts at Arif Habib Limited.
The majority of these expected cuts are anticipated to materialize in the second half of the year.
MCB Bank announced its profit after tax (PAT) for the fourth quarter of CY23, reporting a notable increase of 23% year-on-year (YoY) at Rs 16.9 billion (EPS: Rs 14.24). Despite a 14% quarter-on-quarter (QoQ) decline, this growth was attributed to an overall increase in total income. On an annual basis, MCB recorded earnings of Rs 65 billion (EPS: Rs 54.94), surpassing CY22’s PAT of Rs 34.7 billion (EPS: Rs 29.0). Alongside this positive financial performance, MCB declared a final dividend of Rs 9 per share, compared to CY23’s Rs 30 per share.
The bank’s investment portfolio is predominantly composed of government securities, with 96% allocated to this sector. As of December 2023, Rs 355 billion is invested in T-Bills, Rs 213 billion in Fixed PIBs, and Rs 595 billion in Floaters. Approximately Rs 75 billion worth of Fixed PIBs are expected to mature in the third quarter of CY24.
The average yield on investment saw a significant increase to 18.3% in December 2023, compared to 12.4% in the same period last year. Concurrently, yields on advances improved from 11.4% in December 2022 to 17.9% in December 2023.
MCB Bank reported robust financial health with coverage and infection ratios standing at 82.7% and 8.7%, respectively. Excluding the Non-Performing Investments (NIB), the infection ratio is estimated to be around 2.5-2.7%.
Deposits witnessed substantial growth, rising from Rs 1.38 trillion in December 2022 to Rs 1.81 trillion as of December 2023. The bank aims to enhance the Current Account (CA) proportion, which increased by 28% to Rs 871 billion as of December 2023, driven primarily by a 90% growth in the retail segment. Consequently, the bank’s Current and Savings Account (CASA) ratio improved from 95.9% in December 2022 to 96.8% in December 2023.
Recoveries from Non-Performing Loans (NPL) in the outgoing year amounted to approximately Rs 1.15 billion, bringing the total stock to Rs 9.67 billion as of December 2023.
With a comfortable Capital Adequacy Ratio (CAR) of 20.4% as of December 2023, well above the regulatory requirement of 11.5%, MCB Bank remains well-positioned. The management stated that they currently maintain a significant buffer above the minimum capital requirement and expressed the intention to retain it, while also considering potential dividend increases in the future if the bank’s performance improves.
Looking ahead, the bank foresees operating expenses (OPEX) to increase within the range of 18-20% in CY24. Management attributed subjective provisioning mainly to the SME segment.
Regarding the higher tax charge in the fourth quarter of CY23, the management clarified that around Rs 3.46 billion of the charge pertained to the windfall tax on foreign exchange gains.
As the implementation of IFRS-9 approaches in the first quarter of CY24, the management anticipates a transfer of Rs 8.5 billion from Retained Earnings to the General Reserves.
