MCB: Profits and dividends grow

It is dividend galore at the PSX this earning season. MCB Bank Limited (MCB) announced Rs5/share interim dividend to shareholders, taking the year-to-date payout to Rs14/share. The Bank announced its nine-month financial results for CY22, posting 35 percent year-on-year increase in pretax profits. Super tax and other tax measures took the effective tax rate for the period to 62 percent – up from 41 percent in the same period last year. After-tax profits, as a result, were 12 percent lower, year-on-year.

The topline was driven by both, volumetric expansion in asset base and favorable interest rate movements, resulting in the highest-ever quarterly pretax profits in MCB’s history. The average current account growth at 21 percent outpaced the overall deposit growth. MCB continues to be the market leader in terms of CASA ratio – which is seen touching 94 percent.

The non-markup income grew sizably over the same period last year, led by foreign exchange, dividend income, fee and commission, and remittance business lines, taking the total income growth to a very strong 32 percent year-on-year. Administrative expenses were largely in line with the rising inflationary environment, as the Bank continues to expand branch network and invest in technology upgradation. That said, the cost-to-income ratio improved significantly from 42.5 percent in the same period last year to 37.3 percent.

The NPLs hovered around Rs52 billion, as the infection ratio came down to 8.3 percent, with a provision of 85 percent. MCB would not mind doing better on both these counts. It is worth noting that the Bank did not take any Forced Sale Value benefit in specific provision against NPLs. The asset base grew 5.4 percent, crossing the Rs2 trillion mark. On the advances front, the growth was muted, largely in line with the overall economic conditions across the country, declining 1 percent over December 2021. The ADR now sits at under 40 percent and may well remain there or thereabouts in the near future, given the growth outlook. Government, on the other hand, is likely to continue borrowing via PIBs and treasury bills, which will likely constitute the bulk of MCB’s asset base.