Earnings Report /
Pakistan

MCB Bank (Pakistan): 1QCY22 review – superior cost efficiency but fee income could be better

  • MCB’s 1QCY22 EPS of PKR7.66 is a beat vs. our expectation of PKR7.00. Earnings are up 30%yoy. The PKR5 DPS is inline.

  • NII is up a strong 19%yoy but fee is down 2%yoy. Cost efficiency and superior asset quality remain hallmarks.

  • MCB trades at a CY22f P/B of 0.9x and P/E of 5.2x while offering a D/Y of 13.3%. Our TP is PKR200/sh.

Raza Jafri
Raza Jafri

Executive Director, Research

Yusra Beg
Yusra Beg

Senior Investment Analyst

Intermarket Securities
27 April 2022

MCB has posted consolidated NPAT of PKR9.1bn (EPS: PKR7.66) in 1QCY22, up 30%yoy and 9%qoq. The result was above our expected EPS of PKR7.00, with the deviation driven by higher than expected net interest income. The first interim dividend of PKR5/sh was inline.

Result highlights include:

  • Net interest income of PKR19.4bn, up 19%yoy / 12%qoq as margin expansion comes through. Our NII projection for the quarter was PKR18.6bn.

  • Non-interest income of PKR5.9bn, up 18%yoy / 9%qoq. Growth has been driven by trading-related lines. Core fee income is disappointingly down by 2%yoy, in contrast to strong growth posted by peers. 

  • Where MCB has outperformed peers is on costs. Admin expenses are up 9%yoy, much lower than c 20%yoy for peers such as HBL, UBL and MEBL. As a result, the Cost/Income for MCB has reduced to 44% from 48% in the previous quarter as well as SPLY.

  • Total provisioning reversals have come in at almost PKR1bn, lower than in the previous few quarters but a reversal nonetheless.

NII is strong and expected to pick pace across the year. Non-interest income has been pushed up by non-recurring lines, but cost efficiency and asset quality remain superior. MCB trades at a CY22f P/B of 0.9x and P/E of 5.2x while offering a D/Y of 13.3%. Our TP is PKR200/sh.