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Lahore: MCB Bank Limited (MCB) recently conducted an analyst briefing to discuss its financial results for the calendar year 2024 and its future outlook. The bank reported a profit decline of 3.4% year-on-year, totaling PkR57.6 billion, primarily due to an increase in non-mark-up expenses and credit loss allowance.
According to a statement by AKD Securities Limited, the Board of Directors declared a final dividend of PkR9.0 per share, bringing the total payout for CY24 to PkR36.0 per share. The bank’s net mark-up income saw a slight increase of 0.9% year-on-year to PkR149.1 billion, attributed to strategic efforts in maintaining no-cost deposits and optimizing its earning asset mix.
Non-interest income rose by 13.7% year-on-year to PkR37.4 billion. This growth was largely driven by fee commission income, foreign exchange income, gains on the sale of securities, and dividend income. In particular, investment service commissions saw a significant increase of 61% year-on-year.
MCB reported handling remittance inflows of US$4.6 billion in CY24, capturing a 13.2% market share. Operating expenses grew by 15.9% year-on-year to PkR63.8 billion, with expenditures focused on staff costs, utilities, and IT upgrades. Consequently, the cost-to-income ratio increased to 32.7% from 28.7% in CY23.
Profits from overseas operations showed a promising increase of 26% year-on-year, amounting to PkR7.6 billion. Meanwhile, the bank’s tax expense decreased by 7.3% due to the reversal of a provision related to ADR tax for CY21.
MCB’s total assets grew by 11.4% over December 2023, with the majority of growth stemming from advances fueled by deposit growth. Total deposits reached PkR1.9 trillion, marking a 6.7% year-on-year increase, while the investment book decreased by 6.6% due to reduced exposure to treasury bills.
The bank’s gross advances surged by 76% over December 2023, significantly outperforming the industry average. However, the yield on advances dropped to 16.9% from 17.9% in the previous year. The non-performing loan base expanded to PkR53.5 billion, with a coverage ratio of 90.3%.
MCB’s Islamic banking deposits grew by 2% year-on-year, while gross advances increased by 35%. However, profitability in the Islamic segment declined by 18% due to higher non-mark-up expenses. The bank is still in the planning stages of an IPO for its Islamic banking segment.
Despite challenges, MCB maintains a Capital Adequacy Ratio of 19.4%, exceeding the regulatory requirement. The bank anticipates that interest rates have bottomed out and expects minor adjustments in the foreign exchange rate due to strong remittance inflows. The collection of windfall tax on FX income is not expected to impact profitability, as provisions have been made.
MCB reiterated its ‘BUY’ recommendation with a target price of PkR398 per share by December 2025, projecting a dividend yield of 13% from the last close.