November 12, 2020 (MLN): MCB Bank Limited held its conference call yesterday whereby the management discussed bank’s financial results as well as future roadmap.
To recall, the bank reported a 45% YoY growth in its earnings for the nine months ended September 30, 2020, from Rs. 16.1 billion (EPS: 13.63) to Rs. 23.5 billion (EPS: 19.75).
In 3QCY20, the bank posted earnings of Rs 9.7 billion (EPS: PKR 8.21) which was 45% higher than the earnings reported in previous quarter and 73% higher than the earnings of 3QCY19.
As per the management, the quarterly jump in earnings was supported by lower provisions sequentially in addition to significant capital gains being booked and a much lower than expected decline in NII.
Key points of the briefing covered by Arif Habib Limited revealed that bank’s advances are down 8.6% CYTD while deposits have accelerated 11.4% CYTD. The corporate loan book is down by Rs 28 billion while the Retail book has contracted by Rs13.5 billion CYTD.
The growth in deposits has been led by impressive increase in current accounts (38% mix against 37% as at Dec’19) which saw a 13% CYTD jump while 21% term deposits were shed CYTD. CASA is up to 93.2% as at Sep’20 against 90.4% as at Dec’19. Management expects deposit growth to clock in at 10-11% during CY21 with focus on current accounts accumulation while loan growth is expected around 7-8%.
On investment front, the bank has accrued T-bills and PIBS worth of Rs 150 billion and 59 billion respectively in 9MCY20. 33% of PIBs are in the 3-Yr category, 27% in the 5-Yr category and 40% in the 10-Yr category. Whereas, from the T-bills portfolio, 24% of T-Bills are in the 3-month category, 26% in the 6-months and 45% in the 1-year category.
The average yield on PIBs currently stands at 11.9% with an average yield of 10% on the outstanding portfolio while the average yield on the T-Bills portfolio is around 11.6%. Average yield on the overall investment book is 10.07% while yields on advances is 11.65%.
In addition to above, the management informed that T-Bills maturities are expected in 4Q of CY20 which will most likely suppress NIMs. However, loan re-pricing has mostly been done.
Furthermore, total coverage ratio for the bank has improved to 96.9% against 87.7% as at Dec’19. The management is confident of the general provisioning reserves of Rs 6.8 billion it has created for buffers against any potential NPL accretion and does not see any significant dent post expiry of the SBP’s moratorium on principal repayments. Infection stands at 10.2% against 9.2% as at Dec’19.
Shedding light on dividends’ outlook, the management briefed that it is based upon bank’s earnings, credit risk assessment and future economic outlook. The bank will maintain the payout ratio if the profitability of the banks remains intact, they added further.
While commenting on the housing finance targets which are challenging for the bank, the management said they are confident of meeting them. Moreover, the management stated that they are also focusing on promoting the Roshan Digital Account.
On the implementation of the IFRS-9, the management was of the view that the SBP may postponed the implementation to Jan’22 from the current target ofJan’21 as it may be impractical for banks to implement it by Jan’21.
While deliberating upon the interest rates, the management said that they see a 200bps rate hike in 1HCY21. However, if the covid-19 continues to persist, there is a possibility that the interest rates may remain at the current levels.
With regards to future roadmap, the management informed that they plan to open about 15 branches next year, of which around 3 are expected to be carried forward from the current year. Currently, the bank is operating with 1,402 branches as of September 2020. Furthermore, the management has no plans for the expansion of foreign branch network.
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