The banking giant, Muslim Commercial Bank, might record a growth of as much as 27 percent in its profit for the year 2003 on back of higher deposits following the introduction of several innovative products for consumers and gain in earnings from capital market operations.
The bank is all set to announce its full year results for the fiscal year ended December 31, 2003 during its scheduled board meeting, which will take place on Monday.
MCB has been a pioneer in terms of providing loans for the consumer segment with plans encompassing car financing, housing finance and credit cards. Moreover, the bank has a debit card system and was the founder of the 1-Link system that allows a number of commercial banks to utilise the other''s ATM machines at no extra charge to the customer.
ISLAMIC BANKING: The addition of these consumer products has helped the bank increase its customer base and consequently increase the deposit base. Also, the bank has recently opened up its first Islamic banking branch and there are plans in the pipeline to open up other branches as well.
For 2003, we expect net interest income to range between Rs 11.6 billion to Rs 12 billion and profit after tax to range between of Rs 2.06 billion - Rs 2.24 billion (EPS: Rs 6.71 - Rs 7.33), said Fariha Tayyeb, research analyst from Capital One Equities.
The bank has already paid an interim dividend of Rs 2.75 per share and for the full year we expect another Rs 1.5 - Rs 2 dividend per share and a bonus share of around 20 percent-25 percent.
Although this is below the market P/E we are cautious with regards to the banks performance. Our fair value for the scrip ranges between Rs 60 - Rs 64 per share and therefore, at current levels of Rs 55.15 we advise investors to purchase the stock if it dips below, Fariha said.
Kashif Artani, research analyst from Investcapital, said the MCB''s full-year earnings forecast comes to Rs 2.1 billion - Rs2.2 billion (EPS Rs 6.9-7.2), growth of 21-27 percent.
MCB has already paid Rs2.75 a share as interim dividends, and we expect MCB to pay another Rs 0.75 to Rs 1.00 a share as final dividend along with a 10 percent bonus.
We expect net interest income of MCB to reach Rs 8.5 billion in 2003 against Rs 9.3 billion in 2002. Against industry trend, MCB witnessed decline in NIM in January-September 2003.
Decline in advances (by Rs 9 billion or 11 percent) and growth in deposits (by Rs 32 billion or 17.5 percent), coupled with major reduction in spread may have caused NIM to decline.
Moreover, outflow of some high yielding fixed income securities (converted into capital gains) may have also impacted interest-based earnings.
However, considering that deposit rates are drastically reduced (MCB offered 1.3 percent PLS rate for July-December 2003), MCB''s core interest-based earnings may not receive further hit in 2004 rather it may grow slightly.
MCB realised huge amount (Rs 1.67 billion) of capital gains during January-September 2003. The significance of treasury earnings can be judged with the fact that when (in January-September 2003) before tax profit of MCB increased by around Rs 890 million, capital gains surged by Rs 1,580 million.
But magnitude of the capital gains may decline, going forward. MCB''s after tax profits may decline in 2004 due to lesser capital gains, but net interest income may not decline.