MCB Bank’s net profit increases 2%

MCB Bank has announced lower-than-expected earnings January to June 2010, up two per cent on yearly basis.

MCB Bank has announced lower-than-expected earnings of Rs7.9 billion for January to June 2010, up two per cent on yearly basis.

The decline in provisions for loan defaults was the key driver of the bank’s results, said JS Global Capital banking sector analyst Mustafa Bilwani.

Total provisions declined 47 per cent to Rs2.1 billion for the first half of fiscal 2010 from Rs4 billion posted last year.

The bank’s net profit is at least seven per cent lower than the consensus estimates of three research firms.

The bank also announced a cash dividend of Rs3 per share, taking the cumulative interim dividend to Rs5 per share for 2010. Earnings per share increased to Rs10.45 from last year’s Rs10.2.

Net interest income fell two per cent to Rs17.7 billion versus Rs18.1 billion in the corresponding period last year, due to an increase in the costs of funds, according to Bilwani.

Non-interest income, on the other hand, rose 8 per cent on yearly basis to Rs3 billion, the strongest in the domestic banking sector, on strong foreign exchange income.

Operating expenditures on the contrary rose 22 per cent to Rs6.4 billion on the back of inflationary pressure which is expected to push up administrative costs, said Bilwani.

Net income rose to Rs7.94 billion for the period under review from Rs7.76 billion posted last year.

MCB Bank’s stock price fell 1.4 per cent to close at Rs208.03 on the Karachi Stock Exchange on Thursday.

Recently, in an unexpected move, the State Bank of Pakistan increased the policy discount rate by 0.5 per cent to 13 per cent which in turn resulted in 40 to 50 basis points uptick in interbank rates.

MCB Bank is likely to benefit the most in the coming quarters due to its faster asset yield re-pricing than other banks, according to BMA Capital.

Lower risk stance of the bank was also reflected from the increased proportion of the government-backed public sector loans, which went up by 10 per cent, taking the private-public mix to 70-30 from 80-20 earlier, according to IGI Securities.

Published in The Express Tribune, August 6^th, 2010.