MCB Bank (MCB): 3Q2018 EPS of Rs3.5, -24% YoY (-12% QoQ); DPS Rs4/share (Below expectations)
- MCB announced 3Q2018 financial results reporting earnings of Rs3.5/share, down 24% YoY, lower than expectations. Net interest income (NII) of the bank remained flat, contrary to expectations. Moreover, lower non-interest income and higher non-interest expense dragged down earnings.
- Net Interest Income (NII) of the bank remained flat despite 275bps hike in policy rate during 2018. We attribute this to maturing high yielding PIBs of the Bank. Further, since it takes longer for assets to re-price compared to liabilities, there is lag in benefit of rising interest rates.
- Bank’s provision reversal also declined by Rs323mn YoY, with 3Q2018 provision reversal at Rs218mn. This includes a NPL provision reversal of Rs486mn and a charge for provision of diminution in value of investments of Rs268mn.
- Non-interest income of the bank fell by 16% YoY primarily due to capital loss of Rs9mn in 3Q2018 compared to capital gain of Rs859mn in the same period last year.
- Non-interest expense of MCB increased by 8% YoY to Rs9.1bn, mainly on back of higher admin charge. Cost to income ratio increased to 58%, higher than 53% in same period last year.
- In 9M2018, earnings of the bank clocked in at Rs11.5/share, down 29% YoY on the back of higher non-interest expense, lower non-interest income and flat net interest income.
- Key risks for the company include 1) delay in hike in policy rate, 2) lower than expected advances growth and deposit growth, and 3) deterioration in Pakistan macros.
Muslim Commercial Bank, and its subsidiaries, are engaged in commercial banking and the floating, administration and management of modaraba companies, modaraba funds and modarabas.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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