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MCB does most things right. Yes, a slight decline in after tax profits for 1H CY14 on a consolidated basis. This is just because it has been doing most things right for some time now. The bank still managed to post its highest ever pre-tax profits on an unconsolidated basis, mainly driven by solid top line growth and continued improvement in interest margins.
Very healthy yields offered by PIBs meant decent returns on investments, which only shed by Rs18 billion from March end 2014. The IDR continues to be on the higher side, much higher than most its peers. There is some growth in advances, but they have a lot of catching up to do before the ADR touches or even gets anywhere close to 50 percent.
MCB continues to improve its deposit mix, with the CASA increasing by the tick. MCB already boasts of one of the highest CASA ratio amongst its peers, touching 90 percent, and looks in no mood to entertain high cost fixed deposits. Hence, the decent returns, despite the regulatory revision in minimum deposit rate. There is little surprise that the interest margins improved by a good 14 percent during the period.
MCBs prudent management ensures its NPLs are in check with decent provision up to 86 percent, and infection ratio also improving, clocking down at 7.2 percent. Reversal in provision charges was just an outcome, boosting the post provision interest income. Non-core income shed slightly, but still made a decent enough contribution; thanks largely to robust increase in foreign currency dealing.
Banks have enjoyed the PIB honeymoon, which may soon be over should the interest rates start receding. There will be good opportunity to make capital gains in that case. Lending aggressively does not appear to be on top of the priority list for most banks, but very manageable NPLs may well hook MCB into advances. The deposit mix will continue to improve--things look rosy for MCB.


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MCB Bank Limited (Consolidated P&L)
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Rs (mn) 1HCY14 1HCY13 chg
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Markup Earned 37,632 33,029 14%
Markup Expensed 16,141 14,172 14%
Net Markup Income 21,491 18,857 14%
Provisioning/(Reversal) (973) (1,315) -26%
Net Markup Income after provisions 22,464 20,172 11%
Non Mark-up/Interest Income 5,617 5,999 -6%
Operating Revenues 28,081 26,171 7%
Non Mark-up/Interest Expenses 10,278 8,452 22%
Profit Before Taxation 18,060 18,171 -1%
Taxation 6,216 5,928 5%
Profit After Taxation 11,843 12,243 -3%
EPS (Rs) 10.59 10.97
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Source: KSE Notice

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