The Board of Directors of MCB Bank Limited met under the Chairmanship of Mian Mohammad Mansha, on August 07, 2019 to review the performance of the Bank and approve the condensed interim financial statements for the six months ended June 30, 2019. The Board of Directors has declared 2nd interim cash dividend of Rs. 4.0 per share i.e. 40% bringing the total cash dividend for the year ending 2019 to 80%, continuing with its highest dividend payout trend.
MCB reported profit before tax of Rs 18.25 billion which is 14% higher than the corresponding last period and translated into earnings per share of Rs. 9.01 (2018: Rs 8.24). This was achieved through continuous improvement in the operating efficiencies along with improving margins based on strategic positioning of the asset book. Profit after tax (PAT) of the Bank increased by 9% to Rs. 10.68 billion as the bank recorded super tax @ 4% for the tax year 2018, as enacted through the Second Supplementary Act, 2019; resultantly, effective tax rate for the six months ended June 30, 2019 is reported at 42% which is 3% higher than the corresponding last period.
These are an encouraging set of results, particularly in the context of heightened economic concerns in Pakistan. The Bank remained focused on executing its outlined strategy while being alert to risks in the economy.
Net interest income increased to Rs. 27.80 billion, 23% higher than corresponding last period. Volumetric growth in average earning assets, particularly advances, along with effective mix of shorter maturity earning assets in a rising interest rate scenario enabled the Bank to post a higher gross mark-up income by Rs. 21.42 billion, up 57% over corresponding last period. In-spite of volumetric growth in deposits with re-pricing upon each policy rate change, gross mark-up expense growth curtailed to Rs.16.237 billion.
The non-markup income block of the Bank was reported at Rs. 7.9 billion with major contributions coming in from fee commission and foreign exchange income. Fees and commissions generated from core banking businesses increased by 4% to Rs. 5.6 billion. Foreign exchange income increased by 47% to Rs. 1.7 billion as a result of better leveraging of market opportunities.
Notwithstanding significant inflationary pressures (June-19 YoY CPI of 8.9%), overall administrative expenses increased by only 7% over corresponding last period excluding pension fund cost. Variance includes the cost charged against the deposit protection premium amounting to Rs. 576 million, which was applicable from July 01, 2018; excluding the impact of deposit protection premium, the increase in operating cost was only 3.3%.
As one of the key strengths of MCB Bank, the Bank continued with its NPL recovery trajectory, thereby reversing provision against advances by Rs. 701 million in the first six months of 2019. The coverage and gross NPLs to advances ratio improved to 89.14% and 8.64% respectively.
Total asset base of the Bank on unconsolidated basis was reported at Rs. 1.57 trillion showing an increase of 5% over December 2018. Analysis of the assets mix highlights that net investments have increased by Rs. 44.1 billion (+6%) whereas advances have increased by Rs. 10.6 billion over December 31, 2018.
The Bank remained ahead of the industry on the domestic deposits front, increasing its share to 7.65% from 7.57% as of December 2018. The deposit base of the Bank has registered a healthy increase of Rs. 99.6 billion and stood at Rs. 1,148.6 billion, a growth of 9% over December 2018. Focusing on its low cost deposit base, the Bank was able to increase current deposits at the rate of 9% over December 2018, which reflects the customer confidence and the inherent value of a strong brand name.
The Bank on a consolidated basis is operating the 2nd largest network of 1,554 branches in Pakistan. This includes 177 Islamic Banking branches of its wholly owned Islamic Banking subsidiary. The Bank remains one of the prime stocks traded in the Pakistani equity market with highest market capitalization in the industry. The profitability and payout returns of the Bank are one of the highest in the industry.
The Bank remains well capitalized with the Capital Adequacy Ratio at 17.48% against the requirement of 11.90% (including capital conservation buffer of 1.90%). Quality of the capital is evident from Bank’s Common Equity Tier-1 (CET1) to total risk weighted assets ratio which comes to 15.48% against the requirement of 6.00%. Bank’s capitalization also resulted in a leverage ratio of 6.89% which is well above the regulatory limit of 3.0%. The Bank Reported Liquidity Coverage Ratio (LCR) of 192.66% and Net Stable Funding Ratio (NSFR) of 137.19% against requirement of 100%.
The Bank enjoys highest local credit ratings of AAA / A1+ categories for long term and short term respectively, based on PACRA notification dated June 27, 2019.