MCB: Steady profits

Not quite the 2020 performance, but CY21 has started on a bright note for MCB, which declared Rs4.5 per share as dividend, announcing the first quarterly financial results. The net markup income went down year-on-year, and understandably so, given the expansionary monetary policy stance by the central bank for the period under review, versus the same period last year.

MCB delivered strong performance on the non-core income front, as much improved economic activity translated into a 17 percent year-on-year increase in fee, commission income. The dividend income almost doubled, whereas gain on sale of securities went up by a little over four times, year-on-year. Significant lost ground was covered by the exceptional non markup income growth, which has been a consistent feature in MCB’s recent history.

On the cost front, administrative expenses were kept in check despite inflationary pressures, branch expansion and technology investments. The cost to income ratio improved further from the same period last year. MCB booked reversal on disposal of equity investments, further aiding profitability. The NPLs showed only a marginal increase of 1.2 percent over December 2020, taking the infection ratio close to 11 percent. The NPLs are very adequately provided for at 98 percent.

On the balance sheet front, the deposit growth was slow at around 2 percent, but still better than the industry average. MCB’s deposit book is the envy of peer banks in terms of its low-cost composition, and the bank carried on adding non-remunerative deposits, which grew by 7 percent over December 2020. The CASA ratio now stands at a jaw-dropping 93.1 percent, with current accounts making 40 percent of the deposit base.

The earning assets continue to be dominated by investments, which increased by 7 percent, whereas advances remained on the lower side, sliding by 6.5 percent, over December 2020. MCB’s ADR, as a result has now dropped to 33 percent, which is the lowest amongst peer banks. Not that the investors would mind that, but going back to lending more should not be too far away, as the economy starts to look up.