MCB Bank expects up to 200 basis points increase in benchmark interest rate

MCB Bank expects up to 200 basis points increase in benchmark interest rate

KARACHI: MCB Bank is expecting up to 200 basis points increase in benchmark interest rates in near terms, according to conference call held on February 20, 2023.

According to researchers at Insight Securities, the management of the bank expects hike of 150-200 basis points in policy rate in near term, while management did not expect reversal in monetary settings in the year 2023.

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MCB has conducted its conference call today to discuss financial performance and future outlook of the bank. To highlight, bank’s unconsolidated profitability increased by 6 per cent YoY in CY22, to clock-in at PKR32.7 billion (EPS: PKR27.6) vs. PKR30.8 billion (EPS: PKR26.0) in SPLY. While on consolidated basis, profitability increased by ~10 per cent YoY in CY22, to clock-in at PKR34.4 billion (EPS: PKR29.0) vs. PKR31.3 billion (EPS: PKR26.3) in SPLY. Key takeaways of the conference call are as follows:

MCB has a wide network of 1,439 domestic branch across Pakistan along with 8 international branches in 3 countries. Banks’s market share in total deposits, advances, remittances and trade stood at ~5.8 per cent, 6.4 per cent, 11.6 per cent and 5.8 per cent, respectively.

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MCB recorded its highest ever profit before tax of PKR71.4 billion in CY22, thanks to significant growth in Net Interest Income.

Bank’s gross advances increased by 25 per cent YoY, to clock in at PKR798 billion. Yield on advance were recorded at 11.38 per cent in CY22 vs. 7.22 per cent in CY21. Bank’s ADR clocked in at ~57.8 per cent while infection ratio was recorded at 6.4 per cent.

As of December 2022, bank carries treasury bills worth of PKR132 billion vs. PKR326 billion in December 2021. Similarly, fixed Pakistan Investment Bonds (PIBs) and floating PIB stood at PKR289 billion and PKR528 billion, respectively. Within the investment portfolio, 35 per cent of total PIB comprises of fixed, while 65 per cent is floating rate PIBs. The weighted average maturity of fixed PIBs is around 2.3 years, having rate of 10.5 per cent.

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On deposit front, bank is aggressively focused on expanding current account mix which stands at 49 per cent at the end of CY22 vs. 40 per cent in SPLY.

Bank’s total Capital Adequacy Ratio stood at 18.8 per cent in December 2022 vs. 17.0 per cent in December 2021.

Regarding implementation of IFRS-9, management commented that the bank will record one-time impact of PKR6.5 billion on its equity, resulting in slight improvement in CAR.

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On macro-economic indicators, management opined that domestic currency will remain stable in near future, however, will devalue by 6 per cent-7 per cent per annum going forward.