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MCB_Analyst Briefing Key Takeaways,(AKD Off the Analyst's Desk Feb 20, 2022)

AKD, Off the Analyst's Desk

MCB: Analyst Briefing Key Takeaways

 

MCB Bank Limited (MCB) held its analyst briefing earlier today to discuss the CY22 results. Highlights of the call are as follows:

 

• MCB posted earnings of PkR32.7bn (EPS: PkR27.6), 6% higher than the earnings posted in the earlier quarter. For the final quarter, the bank posted NPAT of PkR12.9bn or PkR10.9/sh, higher by 48%QoQ and 56%YoY. Alongside the earnings, the bank announced final cash dividend of PkR6/sh, taking the full year payout to PkR20/sh. 
• Net interest income for the bank improved by 36%YoY to PkR87.2bn in CY22. The increase can be attributed to the increase in Current Accounts in its deposit mix and favorable yield curve movements.
• MCB’s deposits during the year dropped by a meager 2%, with the bank actively taking steps to skew the mix towards low-cost Current Accounts, which made up 49% of total deposits as at CY22 end. In comparison, Current Accounts made up 40% of total deposits at the end of the earlier year.
• The bank’s Cost of Deposits stood at 6.23% in CY22, compared to 3.42% in the earlier period, attributable to the increase in interest rates in the country. 
• Gross advances at the end of the year stood at PkR798bn, which were higher by ~PkR162bn or 25% compared to the earlier year. The majority of the advances for the bank were to the corporate sector, wherein the bank sees a heightened demand for working capital finances—which it plans to capitalize on.
• To note, Corporate advances made up ~76% of total advances as at Dec’22, compared to 70% at the end of the earlier year. 
• Regarding the bank’s investment portfolio, the management apprised that at the end of the year, 80% of the bank’s portfolio was held in PIBs, whereas 13% was in the form of T-bills. Of the PIBs, PkR528bn were held in floating rate instruments, whereas PkR289bn were held in fixed rate instruments.
• As of Dec’22, PkR368bn is expected to mature in a period of 1 month, whereas PkR137bn would mature in 1-3 months and PkR145bn in 3-6 months. The Weighted Averaged Time to Maturity for the portfolio stands at 2.32 years.
• Regarding the implementation of IFRS-9, the bank is anticipating a one-time charge of PkR6.5bn on its equity, with a recurring impact of PkR1-1.5bn in the income statement. However, the latter is expected to be offset by recoveries from the NIB, which would amount to PkR3bn.
• Going forward, the bank aims to increase its mix of Current Accounts in total deposits even further, to keep the cost of deposits in check. Given that the interest rates may increase even further (management outlook of 150bps hike), the bank would aim to position the bond portfolio in shorter tenure securities. 

 

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