MCB Bank decides not to acquire Easypaisa

MCB Bank decides not to acquire Easypaisa

KARACHI: MCB Bank – one of the largest banks in Pakistan – has decided not to acquire stake in Easypaisa, according to analyst briefing held on Tuesday.

“The due diligence of easypaisa has been done and the bank has decided not to pursue acquisition of stake in the entity,” the management informed the analysts.

Easypaisa is a Pakistani mobile wallet, mobile payments and branchless banking services provider.

MCB held its conference call on August 23 whereby they discussed the banks’ financials and its future outlook. The call was led by the CFO Hammad Khalid.

MCB announced earnings (PAT) for 2QCY22 at Rs 2.3 billion (EPS: Rs 1.93), registering a decline of 71 per cent YoY | -75 per cent QoQ (2QCY21 EPS: Rs 6.64).

The drag on overall profitability in 2Q was on the back of higher taxation on account of revised corporate, ADR-related tax, and super tax.

However, the profit before tax was up 30 per cent YoY| 18 per cent QoQ during the out-going quarter. Along with the result, bank also announced a dividend of Rs 4.

The Investment portfolio comprises 93 per cent of risk free securities of which 21 per cent is invested in T-Bills and remaining 72 per cent in PIBs as of June 2022.

The average yield on investment increased to 11.00 per cent in 1HCY22 as compared to 8.34 per cent in 1HCY21.

Additionally, fixed PIB portfolio has a duration of 2.5 years with an average yield of 11.6 per cent. The average yield for PIBs floaters is around 14.5 per cent -15.5 per cent depending on the tenor.

Of the total T-Bill portfolio, ~34 per cent is parked in 3M, ~35 per cent in 6M and remaining in 12M tenor.

On account of increase in policy rate, the Cost of Deposit of the bank 1HCY22 was around 5.27 per cent.

The management expects Rs to remain within the range of Rs 210-215 against the USD in the short term.

On the interest rate outlook, the management expects policy rate to remain unchanged in CY22 while easing off in CY23.

Recoveries are expected mainly from corporate segment (MCB side) and consumer segment from NIB portfolio.

As for the repricing, the management mentioned that ~90 per cent of the floating investment book will be repriced in the 2HCY22.

Deposits were up from Rs 1.4trn (Dec’21) to Rs 1.59trn as of Jun’22. Going forward, the bank expects deposit growth of around 12-13 per cent during CY22 with a focus on current account.

Infection ratio stood at 7.87 per cent as of Jun’22 while the coverage ratio clocked-in at 86.78 per cent.

The Bank’s ROE stands at 16.12 per cent (Dec 21: 19.11 per cent) and RoA at 1.28 per cent (Dec 21: 1.65 per cent). This decline was observed due to retrospective application of tax amendments enacted through Finance Act 2022.

Recoveries from NIB stand at Rs 7.79 billion.

The bank is eyeing to achieve an ADR of around 50 per cent by this year-end to avoid ADR-related tax, going forward.

During 2HCY22 NIMs are expected to improve further with full impact of asset repricing yet to be reflected.

MCB’s CAR stands at 16.45 per cent, comfortably above the regulatory requirement of 11.50 per cent.