MCB Bank’s profit plummets 38% to Rs4.75 billion

EPS shrinks to Rs3.99 for April-June quarter

Our Correspondent August 02, 2018

KARACHI: MCB Bank’s consolidated profit dropped 38% to Rs4.75 billion for the second quarter ended June 30, due to notable reversal in tax rate to a higher side in the quarter, according to a notice sent to the Pakistan Stock Exchange (PSX) on Wednesday.

The bank booked a profit of Rs7.68 billion in the same quarter last year.

Earnings per share shrank to Rs3.99 in the quarter compared to Rs6.88 in the corresponding quarter of last year.

The Board of Directors recommended an interim cash dividend at Rs4 per share. The entitlement will be paid to the shareholders whose names will appear in the register of members on August 16, 2018.

Its share price fell 1%, or Rs2.05, to close at Rs205.10 with 265,800 shares changing hands. The KSE-100 Index ended 0.23% higher.

“MCB’s earnings [are] down primarily on back of higher taxation during the quarter,” Topline Securities’ analyst Umair Naseer said in a commentary to his clients. “To recall, MCB’s effective tax in the second quarter of 2017 stood at 8%, which was below average on account of tax (amount) reversal last year.”

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According to the profit and loss accounts, the bank paid Rs3.63 billion tax on profit in the quarter. This was almost six-times higher than the tax paid at Rs645.95 million in the same quarter last year that stood comparatively low due to receipt of a tax return amounting to Rs2.17 billion to the bank.

Net Interest Income (NII) of the bank improved by 13% to Rs11.9 billion amid higher interest rates during the period under review. “SBP had cumulatively increased policy rate by 75 basis points during the first half of 2018 to 6.5%, which was further increased to 7.5% in July. This [is] likely to further support NII in 3Q2018,” analyst said.

Non-interest expense increased 14% to Rs8.6 billion mainly on back of higher admin charge. “Cost to income ratio of 52% was in line with average seen during last 3-quarters post consolidation of NIB with MCB,” he said.

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Capital gains during the quarter also declined by 65% to Rs400 million “due to lower gains from bonds and equities, we believe. Consequently, non-interest income dropped 9% to Rs4 billion, keeping bottom-line of the bank in check,” he added.

Key risks for the bank include delay in hike in policy rate, lower than expected advances growth and deposit growth and deterioration in Pakistan macros, he said.

Cumulatively in the first half of 2018, the bank’s profit stood at Rs9.42 billion (earnings per share of Rs7.95) that was 30.5% lower than Rs13.55 billion (earnings per share of Rs12.18) booked in the same half in the previous year.

Published in The Express Tribune, August 2nd, 2018.

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