MCB has posted consolidated 3QCY22 NPAT of PKR9.2bn (EPS: PKR7.80), up 16% YoY and 4.0xQoQ – coming from a low base in 2Q. This takes 9MCY22 NPAT to PKR20.6bn (EPS: PKR17.40), down 10%YoY. The result is better than our estimated EPS of PKR7.00, led by a combination of net provisioning reversals and strong Fx gains. Results were accompanied by an interim cash dividend of PKR5.0/sh – inline with estimates, taking 9MCY22 payout to PKR14.0/sh.
3QCY22 Results Highlights:
MCB reported NII of PKR25.0bn, up a strong 44%YoY and 9% QoQ, inline with estimates as margin repricing and deposit mix improvement continues.
MCB reported a total provisioning reversal of PKR377mn. This is likely led by continued strong recoveries on the NPL book, where superior asset quality is MCBs key hallmark.
Fee income has is up 13%YoY, likely led by rise in trade and cards related business. Strong Fx gains of c. PKR4.1bn are a key feature – a function of higher trade volumes and exchange rate volatility. Total non-markup income is up 53%YoY.
Admin expenses have risen 22%YoY to PKR12.6bn – in line with expectations, in contrast to other banks where costs came in higher than expected. We understand the increase due to a rise in IT expenses, branch expansion, and high inflation. Strong revenues have helped maintain the cost/Income at 40%, same as 2Q and much lower than 47% SPLY.
Other highlights include an effective tax rate of 54% (in line) vs. a high 87% in the previous quarter (due to retrospective impact of ADR related tax) and 41% SPLY.
MCB’s asset quality remains a key strength, backed by its strong recovery pipeline. NII should continue to improve in the coming quarters, keeping revenue momentum buoyant. MCB is a strong dividend yield play (CY23f D/Y: 18%), and trades at a CY23f P/B of 0.7x and P/E of 3.1x. Our TP is PKR180/sh and we maintain our Buy stance.