MCB Bank Limited (MCB) raked in phenomenal profitability growth on the back of strong core earnings. Like a well-oiled machine, there was hardly a blot across the P&L and balance sheet – as MCB’s adequacy ratio stands well above the requirement. There was delight for shareholders too, as the result was accompanied with an announcement of Rs5/share as first interim dividend.
The growth in topline comes primarily at the back of higher average interest rates during the quarter versus the same period last year. There was also growth in earning asset volumes, as MCB entered the Rs2 trillion club, with the asset base growing 6 percent over December 2021. The most telling contribution to asset growth expectedly came from investment portfolio – up by 14 percent over December 2021. Advances, on the other hand, declined slightly by 1 percent, which could be a result of higher interest rates leading to lower demand. The ADR continues to remain in the early 40s, as investments remain the preferred parking lot for most big banks.
The non-core income continued to lend a strong hand to bottomline growth, as foreign exchange, and dividend income almost doubled year-on-year. MCB’s earlier investment in technology seems to be reaping the fruits now, as administrative expenses were kept in check despite inflationary pressures. As a result, the cost to income ratio further improved to 39.9 percent, from 43.5 percent in the same period last year.
On the liability front, there was a growth of 6 percent over December 2021 in the deposit base. MCB went against the industry tide, where total deposits fell by over 2 percent in the same period. MCB has one of the best deposit mix in the industry, and it keeps bettering it quarter after quarter. The non-remunerative deposits grew 14 percent over December 2021 – taking the mix of current deposits to 43 percent of the total. CASA ratio at 92.87 percent stands out for MCB – and has time and again been the reason why the bank has sailed through even in the toughest of times.
The infection ratio remained curtailed at 8 percent with a coverage of 88 percent. The bank opted not to take FSV benefit while calculating specific provisions against the NPLs. MCB’s efforts in monitoring and recovery led to strong reversals in provision charges, strengthening the profitability. All in all, there appears no blip in MCB’s performance. With the interest rate cycle seemingly going higher – this may throw challenges of different kind. But MCB seems well ready.
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