MCB: Earnings overshoot as portfolio gains make their play
MCB Bank Limited (MCB) announced its financial results for CY19, posting a profit after tax (PAT) of PKR 23.95bn, 17% up on YoY basis. This result was above our expectation with deviations emanating from elevated portfolio gains.
This result was accompanied with a dividend of PKR 5/sh for 4QCY19, taking cumulative dividend to PKR 17/sh for CY19 compared to PKR 16/sh in CY18.
Net Interest Income (NII) increased by 8% on QoQ basis taking cumulative increase to 33% for CY19. This increase was largely attributed to MCB’s exposure in high yielding bonds and a favorable deposit mix.
Non-interest income posted an impressive growth of 51% on QoQ basis. Higher foreign exchange income and portfolio gains booked in 4QCY19 were the major contributors of the said uptick.
Despite escalating inflationary pressures, the bank was able to control its operating cost that declined by 3% on QoQ basis and only grew by 6% on cumulative basis. Tamed operating cost along with the expansion in NII reduced cost/income to 46% compared to 54% in CY18.
Going forward, we expect expansion in NII to remain the central theme for the ongoing year. We maintain our BUY stance on the stock. Given its potential earnings growth and robust asset quality, the stock is currently trading at an attractive P/BV of 1.44x.
Muslim Commercial Bank, and its subsidiaries, are engaged in commercial banking and the floating, administration and management of modaraba companies, modaraba funds and modarabas.
BMA is amongst the leading financial groups in Pakistan. BMA Capital’s core areas of business include Capital Markets, Corporate Finance & Advisory, Asset Management, and Financial Products Distribution. BMA Capital is the leader in privatisation advisory in Pakistan, having successfully advised on over 50% of all privatisations in Pakistan, by value, in transactions valued in excess of US$4 billion. Recent transactions include joint lead managing the $813 million GDR Offering of 10% of OGDCL on the London Stock Exchange in 2006-07, and advising Etisalat on their successful acquisition of a 26% strategic stake in Pakistan Telecommunications Company Limited (PTCL) for US$2.6 billion, the largest M&A transaction and foreign direct investment in Pakistan’s history. The firm is among the top brokers in the Pakistan equity and treasury markets, and is among a handful of firms that comprehensively cover all segments of the capital markets. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media. BMA Capital’s retail brokerage brand, BMA Trade, has launched a nationwide network of branches as well as a comprehensive online trading platform, enabling investors across Pakistan to take part in the capital markets.
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