Kicking off the earnings season for the major banks, MCB announced its result on the local bourse yesterday. Setting the bar for the rest of its competitors, investors in the lender will be happy with their companys performance, despite the jittery economic situation.
Hitting the mark on analyst expectations, MCB posted earnings per share of Rs 22.2 for the year ended Dec 31, 2010. Thats not all, the board also decided on bonus shares of 10 percent in addition to the anticipated 30 percent cash dividend. For the year in review, that takes the full year cash payout to Rs11.5 per share.
As witnessed throughout 2010 in the banking industry, mark-up growth remained tepid, posting a 6.2 percent over the previous year. Most likely, the bulk of the growth may be attributed to a higher interest rate environment given the tightening monetary policy as earning assets growth may have remained subdued.
Analysts following banks missed the mark on provisioning for MCB for the full year. After posting aggressive reductions in the first nine months, the pace slowed somewhat in the final quarter, tallying to a still significant 50 percent year-on-year.
Improving marginally in the last quarter of the year in review, net mark-up income after counting provisions grew 17 percent in the year..
According to an announcement released by the bank, toxic loans have been pacified to a large extent as NPLs increased by 6 percent over 2009 as compared to a significant increase of 27 percent observed over the previous year. However stagnating advances worsen the gross infection ratio by 40 bps to reach 9.6 percent.
Partly as a result of weak private credit demand, MCB continued with the industry trend of placing an additional Rs46 billion in investments, as opposed to Rs4.4 billion increase in gross advances.
At the same time the deposit base grew by 17 percent year-on-year in line with broad money growth of 18 percent in the same period. Nonetheless, its net advance-to-deposit ratio owing to continued banking inclination towards sovereign papers declined by nearly 10 percent to 59 percent.
The fondness for government securities in likely to continue in the months to come for the banking industry overall, given the governments announcement to freeze borrowing from the central bank. Bank managers can kick their boots off and relax while the honeymoon lasts.
Slowdown in economic activity and increasing share of a few medium sized banks in trade activities resulted in a tepid growth in other income which increased by 11 percent in 2010.
Administrative expenses have remained a concern across the industry throughout the year. Inflationary pressures reflected a 21 percent increase over the previous year. Inflation has been hovering around 15 percent through the credit managers must tighten their belts in the current year.
MCBs scrip slipped nearly 3.5 percent in the days trading at the KSE, as some analysts see the bank as being overvalued.
It is likely that a string of positive results may change the market outlook on the banking industry for the months to come.
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MCB Bank (MCB)
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PL (Rs mn) CY10 CY09 chg
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Mark-up earned 54,821 51,616 6.2%
Mark-up expensed (17,988) (15,837) 13.6%
Net Mark-up Income 36,834 35,779 2.9%
Provisioning (3,685) (7,465) -50.6%
Net Mark-up income after provision 33,148 28,314 17.1%
Other income 6,265 5,643 11.0%
Operating revenues 43,099 41,422 4.0%
Operating expenses (13,160) (10,801) 21.8%
Profit before taxation 26,253 23,155 13.4%
Profit after taxation 16,873 15,495 8.9%
EPS 22.20 20.38
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Source: Company Accounts
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