MCB Bank’s profit rises 4% in ‘tough year’

ABL earnings soar 26% on back of higher interest income.

Net profit of MCB Bank for 2013 clocked in at Rs21.5 billion, 4% higher than its earnings of Rs20.7 billion last year, according to the bank’s unconsolidated financial results released on Tuesday.

In the last quarter of 2013, MCB’s earnings went up 8% year-on-year mainly on the back of its non-markup income and provisioning reversals. The bank also announced a cash dividend of Rs3.5 per share and 10% bonus shares.

According to Global Securities, 2013 was a ‘tough year’ in terms of spreads for MCB because declining interest rates and regulatory changes with regard to the cost of deposits kept spreads under pressure.



Data released by the State Bank of Pakistan (SBP) says the net spread of MCB in the first nine months of 2013 remained 2.9% as opposed to 3.5% in the comparable period of 2012.

Net interest income of MCB dipped 7% and 3% on an annual and quarterly basis respectively, according to the unconsolidated profit and loss statement. However, non-markup income posted strong growth of 22% year-on-year due to gains from the sale of Unilever Pakistan and Adamjee Insurance shares, Global Securities said.

“Improved recoveries of non-performing loans (NPLs) helped the bank register provisioning reversal of Rs2.8 billion in 2013 against the provisioning expense of Rs478 million in the preceding year. However, the positive impact of provisioning reversal was contained by an increase in non-markup expense that surged by 9% year-on-year, which is slightly higher than the CPI inflation of 7.68% year-on-year in the stated period,” it said.

However, going forward, Global Securities believes, the bank’s spread will improve, as interest rates on loans will adjust in line with the recent increase in the key policy rate.

Given that MCB is trading at a price-to-earnings ratio of 13 times, Topline Securities and BMA Capital maintain a ‘hold’ stance on MCB.

ABL’s earnings

Higher net interest income and ‘tax add-back’ lifted the net profit of Allied Bank (ABL) to Rs14.6 billion in 2013, up 26% from the preceding year.

According to Standard Capital Securities, ABL’s net interest income increased 18% to Rs21.7 billion compared with last year’s Rs18.4 billion mainly because of higher deposits and an expanding branch network.

“In spite of higher earnings, the bank slashed its payout ratio to 37% for 2013. It announced Rs1.5 per share cash dividend and 10% bonus shares in the final quarter,” it said.

The bank recorded a decrease of 30% in non-core business, which stood at Rs9.6 billion in 2013. ABL is also doing well with regard to non-performing loans (NPLs) and recorded a 13% lower provisioning cost to Rs565 million, it added.

Published in The Express Tribune, February 12^th, 2014.

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