MCB Bank Reports 9.8% Profit Growth Amid Rising Non-Interest Income and Deposit Milestones

Lahore: MCB Limited presented its financial results for the first nine months of 2024, detailing a 9.8% year-over-year increase in profits to PkR48.6 billion. This growth was driven primarily by a rise in Net Mark-up Income and Non-Interest Income, despite elevated operating expenses. The Board of Directors also announced an interim dividend of PkR9 per share, raising the total payout for the period to PkR27 per share.

According to AKD Securities Limited, MCB’s total deposits surpassed PkR2 trillion, with the domestic market share increasing to 6.1% from 5.9% as of December 2023. Net Mark-up Income climbed 8.1% year-over-year to PkR115.1 billion, attributed to efforts to sustain no-cost deposits and optimize the earning asset mix. Non-Interest Income reached PkR26.9 billion, up by 18.9%, fueled by a 15% increase in fee commission income, a 27% rise in FX income, and a 21% increase in dividend income. In fee commission income, investment service commissions rose by 54% year-over-year, with additional growth in card-related income and branch banking fees.

Operating expenses increased 17.5% to PkR43.9 billion, influenced by inflationary pressures, currency devaluation, and investments in human resources and technology, resulting in a cost-to-income ratio of 30.9%, up from 28.9% in September 2023. Overseas operations generated a profit of PkR5.7 billion, marking a 33% year-over-year increase. Total assets expanded by 15.4% since December 2023, primarily due to growth in investments funded by higher deposits.

The bank’s investment portfolio grew by 20.6%, reaching PkR1.5 trillion, with most allocations directed to floating Pakistan Investment Bonds (PIBs). Fixed PIBs, with a duration of 2.9 years, also increased, and PIBs now constitute 69% of the bank’s investment portfolio. Gross advances rose by 16.6% to PkR674.8 billion, resulting in an Advances to Deposits Ratio of 35.1%. MCB aims to reach a 50% ratio by year-end to reduce tax liabilities, though falling within a 40-50% range could still incur an additional tax of PkR7.0 billion. Corporate loans grew by 21% year-to-date, and the yield on advances improved to 18.2%.

The bank’s Non-Performing Loans (NPLs) reached PkR55.1 billion with a coverage ratio of 92.0% and an infection ratio of 7.6%. Recoveries totaled PkR10.4 billion, including PkR772 million from the NIB NPL stock. Deposits grew 14.4% over December 2023 to PkR2.1 trillion, with a 17.2% increase in savings accounts, raising the CASA ratio to 97.2%. MCB Islamic deposits increased by 17% to PkR240 billion, though Islamic profitability declined to PkR3.4 billion due to higher non-mark-up expenses.

The bank’s Return on Assets (RoA) and Return on Equity (RoE) remained stable at 2.5% and 30.0%, respectively. Management projects a 250 basis-point policy rate reduction by December 2024 and maintains a Capital Adequacy Ratio (CAR) of 21.9%, significantly above the regulatory requirement of 11.5%, with plans to retain a 500-basis-point buffer over this minimum.

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