MCB Bank profits a modest 8% higher in 2012

Announces a dividend of Rs3 per share, bonus share issue of 10% .

KARACHI:

MCB Bank, Pakistan fourth largest bank by assets, has made a profit of Rs20.94 billion in 2012, reporting modest growth of 8%, from Rs19.42 billion earned by the bank in 2011 mainly on the back of bad loans shrinking to one-fifth.

Provisioning expenses dipped 87% to Rs478 million from Rs3.65 billion a year earlier, emerging as the key profitability driver.

A press statement released by the bank said they were was able to decrease the provision charges significantly primarily on the back of a strengthened risk management framework. Analysts second the claim as they believe the decline attributes to prudent management of the bank, as it has done subjective provisioning which is resulting in reversal and stagnation in non-performing loans and improving asset quality.

The board of directors meeting chaired by the first Pakistani ever to make it to the Forbes list Mian Mohammad Mansha on Thursday announced a dividend of Rs3 per share, taking the total payout for the year to Rs13 per share. The payout ratio currently stands at 57% for 2012. The bank also announced a bonus share issue of 10% along with the results.

In 2012, the State Bank has been continuously, in its monetary policy announcements, tightening banking margins in order to push them toward greater lending to the private sector and stimulate growth in the economy, which has hit MCB’s net interest income – the bank’s core earnings. Banking sector’s average spread for 2012 was recorded at 7.02% against 7.63% in 2011, according to data provided by JS Global Capital.

Net interest income declined 8% to Rs40.86 billion due to a moderate interest rate environment and relatively higher funding costs due to the enhanced floor on saving accounts. Though, the bank’s core revenue stream posted decline, MCB was able to absorb the falling revenues by cutting its provisional expenses considerably, noted Umair Naseer, analyst at Global Securities.

Other key income streams that supported the bottom-line was an growth of 13% in the bank’s non-interest income to Rs9.15 billion, as the company was able to record a 16% growth in fee, commissions and brokerage income. Apart from fees and charges, a strong share of profit from associate, Adamjee Insurance Company, added to non-interest income of the bank. With non-interest expense ending flat at Rs17.5 billion, non-interest income was able to transfer the whole growth into the bottom-line.

For 2012, MCB Banks’ return on assets came to 2.95%; return on equity was recorded at 25.07% and book value per share improved to Rs95.84.

Though the results were satisfactory but below analysts’ expectations, the announcement had a negative impact on the stock price as it fell by Rs2.34 to close at Rs211.43 during trade at the Karachi Stock Exchange.

The stock gained 53% to Rs209.76 during 2012, January 2 to December 31, at the KSE. Moreover, during the year MCB Bank also announced that it was keen to launch banking services in India.

Published in The Express Tribune, February 8^th, 2013.

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