MCB outlooks

MCB held its conference call today whereby they discussed the banks’ financials and its outlook. The call was led by the CFO Mr. Hammad Khalid.

Highlights:

  • MCB announced earnings for 9MCY21 at PKR 22.9bn (EPS: PKR 19.29), depicting a YoY decline of 2% while slightly up 1% QoQ (3QCY21 EPS: PKR 6.73). Sequential uptick came primarily on the back of net reversals booked this quarter, while NII and NFI remained under pressure. The bank announced a DPS of PKR 4.50 for the quarter taking total payout to PKR 14/share for 9M.
  • MCB targets a growth of 13-14% in deposits next year.
  • As at Sept’21, the coverage ratio of the bank stood at 92.21% (Dec’20: 98.87%) while NPLs ratio clocked-in at 9.69% (Dec’20: 9.97%).
  • NIMs during 3QCY21 contracted QoQ mainly due to: A huge chunk of PIBs maturity that fell during the outgoing quarter as well as contraction in Current Account proportion to 39% against 41% compared to last quarter.
  • Investments in PIBs increased by PKR 258bn to PKR 607bn while T-bills decreased by PKR 87bn to PKR 511bn during 9MCY21 compared to Dec’20.
  • MCB is expected to maintain its dividend payout policy of 80%, going forward.
  • The Investment portfolio comprises of: 43% T-Bills, 51% PIBs and 4% Equity as of Sept’21. Of the total T-Bill portfolio, ~30% is parked in 3-Month while remaining ~70% is in 6-Month, with majority maturing in Jan’22. Additionally, the composition of PIB investment includes: 44% in 3-Year, 27% in 5-Year and 29% in 10-Year and above. The average yield for fixed PIBs is around 9.45%. There was a maturity of PKR 86bn worth PIBs in July, which was reflected in this quarter earnings. Moreover, there was an increment of PKR 248bn in floaters this quarter.
  • The bank expects advances to increase by around 13-15% this year primarily due to corporate lending.
  • Acquisition of Telenor Microfinance is on the cards, however still in the preliminary stages. If materialized, this acquisition will help MCB in the digital space and increase its customer base by around 8.2mn.
  • The bank is geared up for IFRS-9 implementation early next year, it is expected to have a marginal impact of around 5-6bps on its CAR.
  • Cost/Income ratio of the bank increased to 42% as at Sept’21 compared to 36% SPLY.
  • The bank is eyeing to achieve an ADR of around 40% by this year-end due to additional taxation on banks with low ADR. ADR as of Sept’21 was around 36%.
  • Overall recoveries of ~23% worth PKR 7.4bn have been made from the ex-NIB book.
  • The bank predicts a 50-75bps hike in the coming monetary policy and another 150bps in the next calendar year.

Courtesy- AHL Research

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