MCB: In the catbird seat, (AKD Insight, Jan 16, 2018)
The banking sector in Pakistan and particularly MCB has seen weak price performance over the last 6months. Earnings deceleration, initially driven by lower NII, was further exacerbated by the bank's inability to grow its non-interest income franchise. The softness in NII has been particularly pronounced for MCB where the bank's conservatism to tap lending opportunities amid maturities of high-yielding PIBs are to be blamed. However, this foot-off-the-pedal approach is now beginning to change where we are now seeing a visible shift in the bank's business strategy. Loan growth is showing signs of acceleration with focus on the high-margin consumer space. Furthermore, effective utilization of CAR (acquisition of NIB/ foray into the profitable Islamic banking business), makes us more confident on the bank's push for growth. Other positives such as: 1) CASA at 94% - the highest in the industry and 2) excellent asset quality credentials place MCB at a vantage point in times of interest rate reversal. The mentioned factors drive our 3yr NPAT CAGR of 13.9%, making way for a superior valuation set (CY18F PB/PER/DY at 1.4x/9.9x/7.2%). At our TP of PkR244.9/sh, the stock offers a potential upside of 10.3% along with a D/Y of 7.2%. Accumulate!
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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