KARACHI: MCB Bank, one of the largest financial institutions in Pakistan, has decided not to acquire a stake in Easypaisa, as confirmed during an analyst briefing held on Tuesday. The management of MCB shared that the due diligence process for Easypaisa had been completed, but after careful consideration, the bank opted not to pursue the acquisition.
Easypaisa, a leading mobile wallet and mobile payments provider in Pakistan, has gained substantial traction in the digital payments sector by offering branchless banking services across the country. Despite the growing prominence of mobile financial services, MCB has chosen to refrain from becoming a shareholder in the company.
This development came to light during MCB’s conference call on August 23, where the bank discussed its financial performance and future projections. The call was led by MCB’s CFO, Hammad Khalid, who provided insights into the bank’s financial position and outlook. MCB reported a significant drop in its second-quarter earnings (PAT), posting Rs 2.3 billion in profit, a 71% decline year-on-year, and a 75% decline quarter-on-quarter. The earnings per share (EPS) stood at Rs 1.93, compared to Rs 6.64 in the same period last year.
The decline in profitability was primarily attributed to higher taxation resulting from the revised corporate taxes, ADR-related tax, and super tax. However, the bank’s profit before tax showed an improvement, rising 30% year-on-year and 18% quarter-on-quarter. Along with these results, MCB announced a dividend payout of Rs 4.
In terms of investments, MCB’s portfolio is predominantly made up of risk-free securities, with 93% of its holdings in government-backed instruments. As of June 2022, 21% of the investment portfolio was in T-Bills, while the remaining 72% was invested in Pakistan Investment Bonds (PIBs). The bank’s average yield on investments increased to 11.00% in the first half of 2022, up from 8.34% in the same period of 2021.
The bank’s management also noted that the cost of deposits had risen to 5.27% in the first half of 2022 due to the increase in the policy rate. They expect the Pakistani Rupee (PKR) to remain in the range of Rs 210-215 against the US Dollar in the short term. Moreover, the bank is optimistic about recoveries from its corporate segment (especially from MCB) and the consumer segment from NIB, which holds a portion of MCB’s portfolio.
Looking ahead, MCB anticipates growth in deposits, with a projected increase of 12-13% in 2022. The bank is focusing on enhancing its current account base to support this growth. Its infection ratio stood at 7.87% as of June 2022, with a coverage ratio of 86.78%.
In terms of interest rate outlook, MCB expects the policy rate to remain unchanged in 2022, with a potential easing in 2023. The bank’s capital adequacy ratio (CAR) remains strong at 16.45%, well above the regulatory requirement of 11.50%.
Despite MCB’s decision not to pursue Easypaisa, the bank’s strategic focus remains on improving its profitability and achieving significant growth in its core banking operations. The move reflects the bank’s careful approach to investment decisions, particularly in the rapidly evolving digital financial services sector.