MCB Bank, one of Pakistan’s leading banks, has announced its stance on the benchmark policy rate set by the State Bank of Pakistan (SBP), ruling out the possibility of further rate hikes.
During a recent corporate briefing, analysts from Arif Habib Limited reported that MCB Bank’s management does not anticipate any additional increases in the interest rate.
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This announcement comes after the SBP’s decision in April 2023 to raise the benchmark rate by 100 basis points to 21 percent. The market has been speculating about the possibility of another rate hike in the upcoming policy statement due to the persistent issue of rising inflation.
In terms of financial performance, MCB Bank reported robust earnings for the first quarter of CY23, reaching PKR 13.9 billion with an earnings per share (EPS) of PKR 11.75. This reflects a significant year-on-year increase of 53% and a marginal 1% increase compared to the previous quarter’s EPS of PKR 11.61.
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The rise in earnings is primarily attributed to a substantial increase in total income. Alongside the financial results, MCB Bank also declared a dividend of PKR 6.00 per share.
MCB Bank’s investment portfolio is predominantly composed of government securities, accounting for 91% of the portfolio. As of March 2023, the bank had invested PKR 80 billion in T-Bills, PKR 291 billion in Fixed PIBs, and PKR 540 billion in Floaters.
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The average yield on investments increased to 15% in 1QCY23 compared to 10.16% in the same period last year. Additionally, yields on advances improved from 8.99% in 1QCY22 to 15.39% in 1QCY23. The average rate of return on the Fixed PIB portfolio stands at approximately 10.76%.
MCB Bank’s management expects the full impact of asset repricing to be reflected in the coming quarters of CY23, resulting in higher Net Interest Margins (NIMs). However, the increase in the policy rate has led to a higher Cost of Deposit, which stood at 6.83% during 1QCY23, compared to 4.74% in the same period last year.
The bank maintains a strong position in terms of key financial ratios. The Asset to Deposit Ratio (ADR) stands at 45.63%, while the Coverage and Infection ratios were reported at 81.88% and 7.87% respectively. Deposits witnessed growth, rising from PKR 1.38 trillion in December 2022 to PKR 1.54 trillion as of March 2023.
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MCB Bank aims to continue its efforts to improve the proportion of current accounts, which increased by 22% from PKR 680 billion in December 2022 to PKR 827 billion in March 2023. As a result, the bank’s CASA (Current Accounts and Savings Accounts) improved from 95.93% in December 2022 to 96.93% in March 2023.
Furthermore, MCB Bank comfortably meets regulatory requirements, with a Capital Adequacy Ratio (CAR) of 18.01% as of March 2023, well above the minimum requirement of 11.5%.
During the last quarter, the bank’s recoveries from the Non-Performing Loan (NPL) stock of the National Institutionalized Borrowers (NIB) amounted to approximately PKR 205 million. This brings the total NPL stock to PKR 8.7 billion as of March 2023, indicating progress in the bank’s efforts to address non-performing assets.
