MCB Bank Limited (MCB) announced Rs6/share final dividend to shareholders, taking the year-to-date payout to Rs20/share. The Bank announced its financial results for CY22, posting an impressive37percent year-on-year increase in pretax profits. The profit after tax growth was understandably curtailed at 6 percent year-on-year, owing to an average effective tax rate of 54 percent versus 41 percent in CY21.
Northwards interest rate movement during the year along with the ever-expanding asset volume led to net interest income increasing by a third year-on-year. MCB’s focus on maintaining a favorable deposit mix remained undeterred, as evident by 18 percent year-on-year jump in average current account deposits – which is the highest in the Ban’s history.
Current account concentration level now stands at 49 percent, representing compete transformation of the deposit base. The CASA ratio stood at 96 percent, comfortably the highest among peer banks, , as non-remunerative deposits grew 21 percent– with the total deposit base clocking at Rs1.37 trillion, slightly lower from last year. The ADR requirements and incentives attached, also seem to have played a role.
On the asset front, the total asset base expanded 6 percent over December 2021 – with the most significant contribution coming from advances. Lending to the private sector had taken a backseat for the industry as a whole with ADRs dropping to low 40s a year ago. MCB recorded a massive 25 percent growth in advances portfolio, well above the industry average, closing in at Rs798 billion. The ADR jumped to 58 percent, up from 45 percent a year ago.
The non-markup income continued to lend an able hand to the bottomline growth with most streams showing double digit growth. Fee income, card business, dividends, foreign exchange, and remittances all contributed significantly to the 23 percent year-on-year growth in non-core income. MCB managed to keep a lid on operating expenses, despite multiyear high inflate, branch expansion, currency depreciation and technological advancements. The cost to income ratio bettered by 500 basis points from last year to 37.4 percent.
Prudent and proactive policies led to reversal in provisioning charges, as infection ratio was contained at 6.4 percent, with an adequate provision of 86 percent. Times are tough for the country, and banks do not operate in silos. Slowdown in advances growth and uptick in NPLs cannot be ruled out for CY23, and inflationary pressures might prove too much to not impact the cost to income ratio adversely going forward. Given Pakistan’s fiscal constraints, another year of super taxes cannot be ruled out either. That said, MCB’s financial health appears sound and as long as a willing borrower, in federal government, is there with unsatiated appetite, it is not all doom and gloom for banking.
