MCB Bank’s 2QCY21 results above market expectations

MCB Bank’s 2QCY21 results above market expectations

KARACHI: MCB Bank on Wednesday announced a profit after tax of Rs7.9 billion for second quarter ended June 30, 2021.

Analysts at Khadi Ali Shah Bukhari (KASB) said that the result is above estimates and street consensus.

The deviation is mainly on account of recognition of provisioning reversal worth Rs1.8 billion during the quarter. The result was accompanied with an interim cash dividend of Rs5.0 per share.

MCB’s profitability increased 12 per cent YoY during second quarter April – June of 2021 attributed to provisioning reversal.

However, NII declined by 17 per cent YoY as the policy rate remained unchanged during the period under review.

NFI increased by 46 per cent YoY in 2QCY21 as lockdown restrictions were eased off and economic activity picked up.

Major support came from 17 per cent YoY jump in fee income that clocked in at PKR 3.0 billion as against PKR 2.5 billion. Additionally, other income increased to PKR 661mn as opposed to PKR 61mn in corresponding period last year.

Notably, the bank recognized a provisioning reversal of PKR 1.8 billion that resulted in expansion in bottom-line. We expect a similar momentum in coming quarters with lower risk of provisioning as business activity has normalized.

The bank recorded higher effective tax rate of 45 per cent which we believe is attributed to new taxation measures introduced in Budget FY22. This is in-line with industry’s ETR as banks have shown prudence.

Additionally, C/I improved to 43 per cent as opposed to 45 per cent in corresponding period last year that lent support to MCB’s profitability.

We have an Outperform stance on the stock and our target price stands at PKR 220/sh. The stock is trading at a forward P/B of 1.13x and offers a dividend yield of 12 per cent

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