It takes persistent efforts to stay at the top, and MCB knows just how to do that. Bucking the industry-wide trend that usually sees a drop in deposits in the first quarter every year, MCB Bank increased its deposit base by 7 percent in the quarter ending March 2011.
Announcing its 1QCY11 results yesterday the bank said its deposits grew to Rs462 billion in the past three months, from Rs431 billion at the end of calendar year 2010. The growing deposit base deserves appreciation considering that cumulative deposit of all commercial banks in Pakistan fell to Rs5,069 billion as of March end, from around Rs5,106 billion at the end of December 2010.
The utilisation of deposits, however, skewed in favour of the countrys biggest borrower: the government.
As the banks advances-to-deposit ratio fell from 59 percent at the end of December to 56 percent in March, its investment-to-deposit ratio increased from 49 percent to 54 percent by the end of first quarter. The governments treasury securities have been compensating investors rather lucratively of late - tracking which MCBs investment portfolio grew by 17.5 percent to Rs250 billion in the past three months.
The P&L performance was equally good. Surpassing market expectations, the bank regaled the market by announcing Rs5 billion in first quarter profits, a jump of 21 percent year-on-year.
With Kibor on the higher side along with robust growth in the investment portfolio, MCBs savvy management accrued 22 percent gain in mark-up income in the first quarter.
The banks top line growth was around 7 percent higher than market expectations; it was also higher than other top lenders, namely HBL, ABL and NBP. It remains to be seen whether UBL, which is due to announce its results today, will beat MCB in this contest.
The best part is that MCBs cost of deposits, which is lowest among its peers; further improved on account of improvement in its CASA ratio.
The banks CASA ratio inched upwards to 80.5 percent by the end of March 2011 as against 79 percent at the end of 2010. However, banks aggressive stance towards deposit gathering resulted in year-on-year jump of 15 percent in its interest expenses.
Growth in net provision against loans and advances lifted provision expenses. However, on account of slight growth in NPLs; the banks coverage ratio increased by 3 percentage points to 83 percent while the infection ratio remained unchanged at 9 percent.
Aided by growth in returns from brokerage activities, the banks investments in equity markets and from dealing in foreign currencies, along with net gain on sale of securities; the non mark-up income totalled Rs2 billion for the three months ending March 2011, as against Rs1.4 billion in the same quarter last year.
The expansion in banks infrastructure, along with inflationary pressure, lifted MCBs administration expenses by around 38 percent year-on-year. But this is reasonable, as the banks continuous effort to expand its branch network has been compensating it with profitability growth.
Besides, rising administration cost is not a concern for MCB, as it ranks better on efficiency scale. MCBs administrative expenses as a percentage of revenue and per branch were the lowest among group of five largest banks in Pakistan in 2010.
Quite naturally, investors at the local bourse were thrilled, as they responded positively to the results, sending the banks stock price higher by nearly 2 percent by the session close, in a market that was up only 0.15 percent.
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MCB Bank
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Rs(mn) 1QCY11 1QCY10 Chg
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Mark-up earned 15,960 13,101 22%
Mark-up expensed 5,037 4,369 15%
Net mark-up income 10,923 8,732 25%
Provisioning 1,197 1,002 19%
Net mark-up income after provision 9,726 7,730 26%
Other income 2,008 1,400 43%
Operating revenues 12,931 10,132 28%
Other expenses 3,898 2,879 35%
Profit before taxation 7,836 6,251 25%
Profit after taxation 5,024 4,141 21%
EPS (Rs) 6.61 5.45
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Source: Company Accounts
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