MCB Bank’s Earnings Decline Amid Higher Tax Rates, Cash Payouts Steady

Karachi: MCB Bank Ltd reported a decrease in its net profit after tax (NPAT) for the fourth quarter of the calendar year 2024, citing increased tax rates and provisioning expenses as key factors. The bank’s earnings for the quarter amounted to PKR 9.2 billion, or PKR 7.7 per share, marking a 41% year-over-year and 45% quarter-over-quarter decline. Despite the earnings drop, the bank’s cash dividend payout remains unaffected.

According to a statement by AKD Securities Limited, MCB Bank’s full-year profitability totaled PKR 57.6 billion, which is a 3% decrease from the previous year. The bank announced a final cash dividend of PKR 9.0 per share, resulting in a total dividend of PKR 36 per share for the year 2024.

Net interest income (NII) for the fourth quarter was reported at PKR 34.0 billion, a decrease of 18% year-over-year and 15% quarter-over-quarter. This decline was largely attributed to reduced mark-up income, which fell by 8% year-over-year and 13% quarter-over-quarter to PKR 85.3 billion, following a 450 basis points drop in the policy rate during the quarter.

Non-interest income showed some resilience, increasing to PKR 10.6 billion in the fourth quarter, driven by gains from the sale of securities and dividend income. Provisioning charges, however, rose to PKR 3.7 billion, contrasting with a reversal of PKR 863 million in the same quarter last year.

Operating expenses increased by 15% year-over-year and 8% quarter-over-quarter to PKR 17.6 billion, pushing the cost-to-income ratio up to 39.5%. The effective tax rate for the quarter was 60.7%, reflecting an increase following amendments to the Income Tax Ordinance by the Government of Pakistan, which raised tax rates for banks.

Despite these challenges, MCB Bank’s fundamentals remain strong, with robust capital buffers and the highest CASA ratio in the industry. The bank’s shares are trading at a 25% discount to its historical price-to-book value average, with a target price of PKR 398 per share projected for December 2025.

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