Earnings Report /
Pakistan

MCB Bank (Pakistan): 1QCY20 review – Inline 1Q results, DPS delivers a positive surprise

  • MCB has posted consolidated 1Q20 NPAT of PKR6,624mn (EPS: PKR5.59), up 33%yoy but lower by 4%qoq.

  • MCB posted 21%yoy growth in NII to PKR17,86mn (below expected), but lower by 2%qoq.

  • Other result highlights include: (i) effective tax rate of 40.5% and (ii) a profit from associates of PKR261mn.

Yusra Beg
Yusra Beg

Senior Investment Analyst

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Intermarket Securities
22 April 2020

MCB has posted consolidated 1Q20 NPAT of PKR6,624mn (EPS: PKR5.59), up 33%yoy but lower by 4%qoq. The result is inline with our estimates, where we note (i) NII pressures are beginning to come through (down 2%qoq), (ii) sequentially lower provisioning expenses (likely led by equity impairment), (iii) minor capital loss, and (iv) rising pressure on fee income which despite a decline in admin costs, has raised the C/I to 46% vs. 42% in 4Q. 

MCB announced an interim cash dividend of PKR5.0/sh, higher than expected. We think this invites confidence.

1QCY20 key result highlights include

MCB posted 21%yoy growth in NII to PKR17,86mn (below expected), but lower by 2%qoq. The pressure on NII is beginning to come through where recent interest rate cuts should further push down on margins in the coming quarters.

Total provisions of PKR780mn came in lower than projected, and is likely to be led by impairment on equities portfolio rather than NPL provisioning. While the asset quality cycle has turned, we think noticeable deterioration will become more visible in the upcoming quarters.

Non-interest income rose 10%yoy to PKR4,167mn supported primarily by fx gains (up 73%yoy). Both fee income (up 2%yoy) and dividend income (-1%yoy) remained muted while MCB booked a capital loss of PKR6mn.

MCB’s admin expenses came down to PKR9,392mn down 1%yoy, and below our expectation of PKR10.0bn. However, the strain on revenues has raised the cost/Income to 46% (still lower than 48% average run rate in the CY19). 

Other highlights include: (i) effective tax rate of 40.5% and (ii) a profit from associates at PKR261mn.

While this is an inline result, the strong PKR5.0/sh payout invites confidence. That said, we expect sequential earnings to come under pressure going forward, where provisioning expenses are likely to rise from here alongside a more prominent compression in NIMs. MCB trades at a 2020f P/B of 1.0x while offering a dividend yield of 12.7%.