MCB Bank :Smooth sailing!, (AKD Daily, Dec 31, 2019)
- MCB Bank Limited (MCB) has gained 34.0% CYTD from its low of PkR154/sh where we believe strong earnings growth in CY20F of 38.4% should provide upside thrust to valuations before monetary easing backed realignment takes effect on stock price. Our Dec’20TP stands at PkR230.1/sh offering an upside of 12.2% and a dividend yield of 8.5%.
- Strong regulatory capital base (Sep’19 CET-1 capital at 15.2%) can keep dividend payouts stable while allowing the bank to comfortably brace IFRS-9 impact, the application of which is expected by Jan’21.
- Earnings are expected to ascend over the medium cycle (CY20/21F: 38.4/19.5% over CY19F: 12.2%) before stabilizing over the longer run, driven by i) Favorable repricing mismatch (Sep’19 SA in the deposit mix: 54%) and PIB accumulation at better yields pulling up Net Interest Income (15.8% avg. till CY21F), ii) Capital gains offsetting the normalization of FX income, and iii) tight control on administrative costs.
- Though MCB’s domestic NPLs have grown by 9.2%QoQ during 3QCY19, it is premature to draw conclusion on the trend's sustainability. Hence, considering bank’s conservative risk profile and a backlog of potential NPL recoveries, cost of provisioning should remain contained over the medium run (CY20-22F cost of provisioning avg: 0.3%).
Muslim Commercial Bank, and its subsidiaries, are engaged in commercial banking and the floating, administration and management of modaraba companies, modaraba funds and modarabas.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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