Thriving on its vast pool of low cost deposits and higher operational efficiency, MCB Bank Limited the countrys fourth largest bank by asset size, rewarded its shareholders with fat bottom-line. The growth in profitability stems from a combination of higher non mark-up income and a significant decline in provisioning cost.
In spite of increase in the asset size, the banks net interest income declined during the first half of the current year as compared to the same period, last year. This is likely due to decline in spreads against the backdrop of lower Kibor and increase in minimum profit rates on savings accounts by one percentage point to six percent, effective from May 1.
The banks gross spread ratio stood at around 61 percent in 1HCY12, registering a decline of seven percentage points compared to the corresponding period last year.
The bank was active on advances front as its portfolio expanded by seven percent during the first six months of the current year to Rs241 billion at the end of June, 2012. Its investment base expanded marginally by three percent to Rs328 billion, bringing the investments to deposit ratio (IDR) down by around 2.5 percentage points to around 62 percent.
However, to counter the rising cost of deposits, the savvy bank expanded contribution of low cost deposits in its total deposit portfolio given that the banks CASA ratio increased by 2.7 percentage points during the first six months of the current year to 81.6 percent at the end of June, 2012. The bank enjoys one of the highest CASA ratios in the industry.
Relief came in the form of lower provisioning expenses as the bank managed to thwart growth in non-performing loans. In the same breath, the banks infection ratio eased by 75 bps during the first six months of the current year to 10 percent as of June 30, 2012.
On the heels of higher income from investment banking activities, dividend income and gain on sale of securities; non mark-up income improved by a whopping 25 percent. In the wake of higher inflationary pressure, the banks administrative expenses increased by around 15 percent year-on-year to Rs 8.2 billion in 1HCY12.
With the total operating revenues virtually stagnant, increase in non mark-up expense has hauled down the total operating income to other expenses ratio to 3.09 in 1HCY12 from 3.39 in 1HCY11.
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MCB Bank Ltd.
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(Rs mn) 1HCY12 1HCY11 chg
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Mark-up Earned 34,492 32,842 5%
Mark-up Expensed (13,587) (10,615) 28%
Net Markup Income 20,905 22,227 -6%
Provisioning (400) (2,439) -84%
Net Mark-up income
after provision 20,505 19,788 4%
Other income 5,195 4,153 25%
Operating revenues 26,101 26,380 -1%
Other expenses (8,441) (7,779) 9%
Profit before taxation 17,259 16,162 7%
Profit after taxation 11,326 10,571 7%
EPS (Rs) 12.31 11.49
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Source: Company Accounts