MCB_On the straight and narrow, (AKD Daily, Dec 16, 2020)
AKD Daily
MCB: On the straight and narrow
- We revise and roll over our target price to Dec’21 for MCB Bank Limited (MCB), which stands at PkR223.4/sh (previously: PkR211.0/sh) offering an upside of 20.5% from last close. MCB has gained 6.6% over the past 1M – in line with market return – where stock performance could be triggered from expectations surrounding payouts (4QCY20E: PkR15/sh, c. CY20F: PkR20/sh, CY21F DY: 10.8%).
- Revision in estimates come from, i) favorable tilt towards higher yielding PIBs and interest rate hikes (AKD estimates CY21-end interest rate at 8.5%), ii) increasing proportion of CA in the deposit mix (management targets 40% CA vs. 35.3% currently), and iii) improving macro situation proportionally diluting credit risks (MCB booked general provision of PkR5.9bn to mitigate such risks, 1.1% of performing advances).
- Accordingly, NIMs of the bank are likely to gradually climb to 4.7% in the med run vs. normalized NIMs of 4.3%. Non-funded income’s contribution could gain prominence from potential capital gain realization (unrealized gains on investments stood at PkR16.6bn as of Sep’20) and recovery in fee income base of the bank (fee income down 2.8%YoY).
- MCB Bank reported earnings of PkR23.4bn (EPS: PkR19.75) in 9MCY20 vis-à-vis PkR16.1bn (EPS: PkR13.63) in the same period last year. On a quarterly basis, MCB reported EPS of PkR8.42, +46.2%/75.7% QoQ/YoY largely a product of i) NIMs standing at an elevated level of 5.74% in 3QCY20 vs. 6.1% in the previous quarter, and ii) realization of capital gains (PkR2.9bn) primarily on bonds.
AKD Research
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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