MCB bigger and bolder

Capitalising on their reach and scale, big banks have become a star business for investors, as a high market share and attractive growth prospects augur a positive outlook of the business.
A good case in point is MCB Bank Ltd. - the countrys fourth largest commercial bank by assets. Thriving on its low-cost deposit base and expansion of investment portfolio, the bank has reported a 33 percent year-on-year jump in its profitability to Rs10.5 billion in 1HCY11, which was largely in line with market expectations.
With average Kibor on a higher level, together with massive growth in investments, the banks topline expanded by 24 percent to nearly Rs 33 billion in 1HCY11. The average six-month Kibor stood at 13.73 percent in 1HCY11, nearly 140 bps higher than the corresponding period a year earlier.
Since government securities have now become a money-spinner for commercial banks, net investments grew by a whopping 22 percent to Rs260 billion in the first six months of CY11. At the same time, advances (net) inched up by two percent to Rs 260 billion. Growing interest in sovereign instruments has lifted the banks investment-to-deposit ratio (IDR) to 52 percent in 1HCY11 from around 49 percent in CY10.
Although MCB managed to keep its CASA ratio close to 79 percent, its mark-up expenses surged by 22 percent year-on-year to Rs10.65 billion. Thats because the banks deposit base surged by 15 percent to Rs496 billion in the first six months of CY11.
Therefore, growth in mark-up income translated into a 26 percent jump in net-interest income, while, the banks gross spread ratio stood at 68 percent in 1HCY11.
Driven by a healthy rise in commission and brokerage income, income for dealing in foreign currencies and gain on sale of securities, non-mark-up income grew by around 40 percent year-on-year to rupees four billion in 1HCY11.
Aggressive expansion in branch network amid a high inflationary environment lifted the banks expenses by 21 percent to Rs 7.7 billion. The bank has added 49 new branches to its network in the past one year, bringing the total network to 1,134 branches.
Non-performing loans surged by 3.5 percent to Rs 25.4 billion. However, the banks infection ratio remained stagnant at nine percent, which is lower than the average infection ratio of around 12.6 percent of the group of top five big banks in Pakistan.
MCB rewarded the shareholders with a rupees three per share dividend against its 2QCY11 performance, bringing the total divided payout to rupees six per share in the first six months of CY11. Investors reacted positively to the banks performance, as they lifted the share price by Rs 2.87, or 1.5 percent, to Rs 195.32 on Monday, against a market that was down 0.25 percent.

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MCB Bank Ltd

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Rs(mn)                                 1HY11       1HY10     chg

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Mark-up earned                        32,842      26,395     24%

Mark-up expensed                     -10,615      -8,699     22%

Net mark-up income                    22,227      17,696     26%

Provisioning                          -2,439      -2,050     19%

Net mark-up income after provision    19,788      15,646     26%

Other income                           4,153       2,991     39%

Operating revenues                    26,380      20,687     28%

Other expenses                        -7,779      -6,426     21%

Profit before taxation                16,162      12,211     32%

Profit after taxation                 10,571       7,942     33%

EPS (Rs)                              12.64        9.50

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Source: Company Accounts