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

Brief Takeaways

· MCB announced earnings (PAT) for 2QCY22 at PKR 2.3bn (EPS: PKR 1.93), registering a decline of 71% YoY | -75% QoQ (2QCY21 EPS: PKR 6.64). The drag on overall profitability in 2Q was on the back of higher taxation on account of revised corporate, ADR-related tax, and super tax. However, the profit before tax was up 30% YoY| 18% QoQ during the out-going quarter. Along with the result, bank also announced a dividend of PKR 4.

· The Investment portfolio comprises 93% of risk free securities of which ~21% is invested in T-Bills and remaining 72% in PIBs as of Jun’22.

· The average yield on investment increased to 11.00% in 1HCY22 as compared to 8.34% in 1HCY21.

· Additionally, fixed PIB portfolio has a duration of 2.5 years with an average yield of 11.6%. The average yield for PIBs floaters is around 14.5% -15.5% depending on the tenor.

· Of the total T-Bill portfolio, ~34% is parked in 3M, ~35% in 6M and remaining in 12M tenor.

· On account of increase in policy rate, the Cost of Deposit of the bank 1HCY22 was around 5.27%.

· The management expects PKR to remain within the range of PKR 210-215 against the USD in the short term.

· On the interest rate outlook, the management expects policy rate to remain unchanged in CY22 while easing off in CY23.

· Recoveries are expected mainly from corporate segment (MCB side) and consumer segment from NIB portfolio.

· As for the repricing, the management mentioned that ~90% of the floating investment book will be repriced in the 2HCY22.

· Deposits were up from PKR 1.4trn (Dec’21) to PKR 1.59trn as of Jun’22. Going forward, the bank expects deposit growth of around 12-13% during CY22 with a focus on current account.

· The due diligence of easy paisa has been done and the bank has decided not to pursue acquisition of stake in the entity.

· Infection ratio stood at 7.87% as of Jun’22 while the coverage ratio clocked-in at 86.78%.

· The Bank’s ROE stands at 16.12% (Dec 21: 19.11%) and RoA at 1.28% (Dec 21: 1.65%). This decline was observed due to retrospective application of tax amendments enacted through Finance Act 2022.

· Recoveries from NIB stand at PKR 7.79bn.

· The bank is eyeing to achieve an ADR of around 50% by this year-end to avoid ADR-related tax, going forward.

· During 2HCY22 NIMs are expected to improve further with full impact of asset repricing yet to be reflected.

· MCB’s CAR stands at 16.45%, comfortably above the regulatory requirement of 11.50%.

Courtesy- AHL Research