MCB Bank announced its 1HCY19 financial results yesterday, continuing the rich tradition of hefty dividends. There was another Rs4/share announced as interim dividend, in addition to Rs4/share already paid. Many expected the industry to face consequences of highly concerning economic circumstances, but the bank seems to have managed the risk rather well, through smart asset management, cost control, and treasury performance.
The balance sheet growth continued and importantly in the healthy direction. The strategic repositioning of the asset mix was continued in 2QCY19, as dictated by the interest rate scenarios. The investment book expanded by nearly 6 percent over December 2019, whereas, the advances grew by 2 percent. The ADR, as a result, slid slightly to 45 percent, versus 48 percent as at December 2018 end.
On the investment fronts, the focus was shifted towards shorter term papers, which coupled with a rising interest rate scenario, yielded a massive top line growth. The mark-up earned during 1HCY19 went up by a staggering 57 percent year-on-year. On net basis, the mark-up income was up by 23 percent year-on-year, as the cost of deposits also went up, with the interest rates.
The deposit base continued to expand aggressively, higher than the industry average, having grown 10 percent over December 2018. More importantly, the addition of current deposits continues to be at the centre of MCB’s deposit mobilization efforts. Recall that MCB already boasts of the highest CASA in the industry at over 90 percent – which gives it a major advantage over peers in terms of managing the costs associated with rising interest rates better.
The non mark-up income was only slightly down from the same period previous year, which in itself is nothing short of an achievement. Most banks are expected to book heavy losses on account of both foreign exchange and securities, but MCB managed to keep the losses from securities in check, whereas the income from foreign exchange soared year-on-year. This is testament to the efforts put in effective leveraging of opportunities.
The administrative expenses, after accounting for the pension costs, were also kept well in check, below general inflation. The NPLs have been also in check with the infection ratio maintained at 8.6 percent, effectively provided for at 89 percent. Provisioning charges were mostly on account of investments, as reversals were booked on advances. Most soundness indicators place the bank well poised to pounce on any opportunity that may arise, sooner or later. In the near future, advances and deposit growth may remain subdued, and non-core income may well be again at the core of driving the bottom-line growth.
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