The challenging economic conditions seem to have done no harm to MCB Bank’s profits. The bank also continued with the rich tradition of high payout ratio, announcing Rs4/share as interim dividend, in addition to Rs8/share already paid. The asset mix strategy and exemplary cost control throughout the period helped the bank post a sizeable increase of 18 percent year-on-year, in pretax profits.
|MCB Bank Limited|
|Net Markup Income||42,994||33,926||27%|
|Non Mark-up / Interest Income||11,453||12,109||-5%|
|Non Mark-up / Interest Expenses||25,325||25,739||-2%|
|Profit Before Taxation||27,506||23,315||18%|
|Profit After Taxation||16,287||14,311||14%|
|Source: company accounts|
The balance sheet continued to expand in the right direction. The high interest rates were the decisive factor in shaping up the asset mix strategy, which was hugely tilted towards investments, particularly short-term investments. The investments grew by 15 percent over December 2018 to Rs864 billion. The advances, on the other hand, slid a bit by 2.6 percent to under Rs500 billion, as private sector appetite did not pick up owing to economic slowdown. The ADR slipped from 48 percent earlier to 42 percent as at September end 2019.
On the investment fronts, the focus was shifted towards shorter term papers, which coupled with a rising interest rate scenario, yielded a massive top line growth. The mark-up earned during 1HCY19 went up by a staggering 67 percent year-on-year. On net basis, the mark-up income was up by 27 percent year-on-year, as the cost of deposits also went up, with the interest rates.
The deposit base continued to expand aggressively, higher than the industry average, having grown 9 percent over December 2018. More importantly, the addition of current deposits continues to be at the centre of MCB’s deposit mobilization efforts. Recall that MCB already boasts of the highest CASA in the industry at over 91 percent – which gives it a major advantage over peers in terms of managing the costs associated with rising interest rates better. The bank increased the current deposits at the rate of 4 percent over December 2018.
There was a dip in non-funded income, mainly on account of significantly reduced contribution from gain on securities. All other arms of non mark-up income provided able support to the bottom-line, with fee, commission and foreign exchange income making the bulk of noncore income.
The administrative expenses, after accounting for the pension costs, were also kept well in check, below general inflation. The increase in operating expenses was kept in check at 6 percent year-on-year, despite much higher inflation and overall expansion in branch network. The NPLs too were largely in control and the loans are adequately provided for at 84 percent.