MCB Bank Limited (MCB) posted a sizeable 24 percent year-on-year increase in 1HCY20, primarily built on strong core income performance. The net markup income registered solid growth on the back of strong volumetric growth, and the earning yields also improved as evidenced by 69 basis point increase in net interest margin.
The pandemic did lead to a nationwide impact on economic activity and MCB may well have felt some of the pinch, but in terms of balance sheet growth and profitability indicators, it seems to have stormed the weather rather nicely. Much in line with the industry trend and the macroeconomic realities the gross advances portfolio, decreased by 6 percent over December 2019 to Rs465 billion.
MCB continues to put prudence ahead market leader in terms of adequately providing for the NPLs at over 94 percent. The NPLs went up by Rs939 million, clocking in at Rs50.4 billion. The bank attributes the increase primarily to currency devaluation impact of foreign currency denominated NPLs with no major increase in the number of cases. The infection ratio at the end of the period stood a little under 10 percent.
The investment portfolio grew by 24 percent over December 2019 to Rs929 billion, taking the investment to deposit ratio to a high of 73 percent. The investment portfolio was consistently reprofiled based on the rapidly changing interest rate environment. The bank made a gradual shift from investment in short-term government securities to longer term investments, capitalizing on the available opportunity.
The non-core income understandably remained subdued due to lower business volumes, as the pandemic spread particularly in the second quarter, limiting the fee, commission and related income streams. On the expenses, front MCB managed to keep a lid, bringing down the cost to income ratio from 46 percent in the same period last year to just 38 percent, which supported the bottomline, especially in times when non mark-up income was not growing.
On the liabilities front, the growth in deposits was exceptional and unprecedented – as the deposit base expanded by 11 percent over December 2019 to Rs1.27 trillion. MCB proudly boasts of one of the best deposit mix among peers, as indicated by a very strong CASA ratio of 94.2 percent. More than half the deposit additions were seen in current accounts, which reflects MCB is focused on adding the right mix of deposit, to keep the spreads high in challenging times.
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