MCB has posted consolidated 3QCY23 NPAT of PKR19.6bn (EPS: PKR16.57), up 112% YoY and 34% QoQ. This takes 9MCY23 NPAT to PKR48.2bn (EPS: PKR40.70), up 134% YoY. The result is better than our estimated 3Q EPS of PKR14.70, led by very strong fee income delivery (up 53% YoY) and a provisioning reversal of PKR434mn. Results were accompanied by an interim dividend of PKR8.0/sh – in-line with estimates, taking 9MCY23 DPS to PKR21.0/sh.
3QCY23 Results Highlights:
§ MCB reported very strong NII of PKR45bn up a sharp 80% YoY and 9% QoQ – in-line with estimates. This was led by a strong push on low-cost deposits and a better investment mix.
§ MCB reported provisioning reversal of PKR434mn vs. our estimated provisioning of PKR1.0bn. This demonstrates MCB’s strength on asset quality with a strong recovery pipeline.
§ Impressive growth in fee income (up 53% YoY) is the key takeaway of today’s result, led largely by strong traction on its cards related business and digital offerings. This is in addition to Fx gains of PKR2.5bn on exchange rate volatility. Total non-markup income has registered a healthy 21% YoY jump.
§ Core admin expenses are up 24% YoY and 10% QoQ at PKR15.6bn – a slower pace of growth vs. peer banks. Branch expansion is slowing which helping mute the impact of high inflation and USD costs. Together with strong growth in NII and NFI, MCB’s cost/Income continues to stay at historically low levels (31% in 3Q vs. 30% in 2Q).
§ Other highlights include an effective tax rate of 49% vs. 57% in the previous quarter on account of one-time retrospective impact of 10% Super tax.
These are strong numbers with MCB’s core business growing swiftly – even as other line items normalize (fx income, cap gains). This, together with very sharp fee income growth, strong cost control and resilient asset quality are key takeaways. NII is likely to remain elevated in the coming quarters, keeping the overall revenue momentum buoyant. MCB trades at a CY24f P/B of 0.7x and P/E of 2.7x. Our TP is PKR180/sh and we maintain our Buy stance.
Courtesy – Intermarket Securities Limited.