Muslim Commercial Bank Limited (MCB) is a banking company incorporated in Pakistan and is engaged in commercial banking and related services. MCB is listed on all the stock exchanges in Pakistan. MCB has two wholly-owned subsidiaries, MNET Services (Private) Limited and Muslim Commercial Financial Services (Private) Limited. The present review is that of MCB alone, without consolidating the accounts with its subsidiary companies.
MCB has a solid foundation of over 50 years in Pakistan, with a network of 946 branches (2003: 981 branches), over 750 of which are Automated Branches, over 214 MCB ATMs in 35 cities nation-wide and a network of over 12 banks on the MNET ATM Switch.
MCB offers a wide range of financial products and advice for Personal and Corporate Customers. One can also apply on-line for many of its Online Services. Customers can access their accounts using simple and convenient MCB Virtual Internet Banking services. The branch break-up province wise is Punjab (57%), Sindh (21%), NWFP (19%) and Balochistan (3%) respectively. MCB has the Mission to become the preferred provider of quality financial services in the country with profitability and responsibility and to be the best place to work
MCB shares are distributed among 47,201 shareholders. The directors, their families and associated companies hold 31 % shares; Banks, DFIs and Corporate sector/institutions own 38 % while the rest 31 % shares are owned by the general public. MCB has substantial investment in a number of banking, insurance and related companies.
Apart from two subsidiaries mentioned above, MCB has large holdings in Pak Asian Fund Limited (10.22%), Khushhali Bank Limited (17.60%) and First Women Bank Limited (31.65%).
MCB's Total Assets at end of 2004 stood at Rs 259 billion, experiencing a reduction of 5 % from Rs 272 billion at end of 2003. Major decline has been seen in investments which declined from Rs 128 billion at end 2003 to Rs 67 billion at end 2004. Part of the decline was off set by increase in Advances which at end 2004 stand at Rs 137 billion as against Rs 97 billion at the end of previous year. Related to Total Assets, the Advances and Investments at end 2004 are 53% and 26% respectively as against 36% and 47 % respectively at end of 2003. A major shift from Investments to Advances is considered a clever move by the management. Compared to Deposits, the Advances and Investments at end 2004 are 62% and 31% respectively as against 46% and 61 % respectively at end of 2003. Bulk of the MCB investments is in government securities.
There has been positive development on the equity side of the balance sheet. Borrowing from financial institutions has reduced from 12% of Total Assets at end 2003 to 3% of Total Assets at end 2004. In the same period, however, the Deposits have increased to 85% of Total Assets as compared to 78% at end 2003. Replacing Borrowings by increasing deposits is a good move. Deposits are less costly than Borrowings. Compared to Total Assets, the Total Liabilities have declined at end 2004 to 94% from 96% at end 2003. Correspondingly, the Total Equity at end 2004 stands at 6% as compared to only 4% at end 2003. This has been achieved by the management through increase in Paid up Capital, larger Retained Earnings and higher Surplus on Revaluation of Assets-net of tax. This area needs more attention of the senior management.
MCB had a good year in 2004. It's Profit after tax increased by 14 % from Ra 2,230 million for 2003 to Rs 2,540 million for 2004. This was possible with better management of operations coupled with other factors such as receipt of Compensation of Rs 514 million for delayed tax refund, higher earnings by way of Fees and Commissions at Rs 1,887 million for 2004 as compared to Rs 1,042 million for the previous year. Major boost to MCB profitability, however, came from higher Net Markup Income margin at 78% of Gross Markup Income as compared to 72% for the previous year. The Net Markup Income margin increased due to lower Markup Expense at only 22% of Gross Mark up Income as compared to 28% for 2003. More Information/data related to MCB Performance are given below.
Due to easy money supply and absence of minimum rate of return to small individual depositors fixed by the banking regulator, many large banks appear to be rather strict when it comes to paying a return to the depositors. It is felt that as good corporate citizens, the banks might consider paying reasonable return to the depositors, which leaves something for the depositors after covering deductions due to Zakat and Withholding Tax. The Government and the State Bank of Pakistan might look into this issue as well and link the minimum return to KIBOR, annual inflation rate or some other suitable index. Savings are important for development. Small savers might be continuously encouraged by all the stakeholders to save for economic development.
MCB has substantially increased the level of Advances at end 2004. MCB better be very careful with its loan portfolio. The ratio of NPLs for 2004 is 6% (2003: 11%) and Total Equity as percentage of Total Assets is around 6%. It is felt that there is need to increase the level of equity by efficient operations including measures such as cutting of Admin Expenses and by revisiting the policy on dividend payouts.
MCB has added a landmark building, MCB Tower, to the horizons of Karachi and beyond. MCB claims this Tower to be the tallest building in Pakistan and is rightly proud of it. However, MCB might always keep in view that with more nationalised banks now in the private sector in the country, it may have to strive harder to maintain its position in the banking industry.
======================================================
Performance Statistics (Million Rupees)
======================================================
Balance sheet (As on Dec 31)
======================================================
2004 2003
======================================================
Total Assets: 259,285 272,324
Cash, Balances With Banks: 29,541 25,357
Investments-Net: 67,195 128,277
Advances-Net: 137,318 97,200
Deposits, Other Accounts: 219,966 211,511
Total Liabilities: 244,538 261,215
Share Capital: 3,372 3,065
Reserves, Retained earnings: 6,021 4,661
Surplus on Revaluation of Assets: 5,354 3,383
Total Equity: 14,747 11,109
Subordinated Loan: 1,599 1,600
Equity and Sub. Loans: 16,346 12,709
------------------------------------------------------
Ratios
------------------------------------------------------
Cash and Bank/Total Assets: 11% 9%
Investments/Total Assets: 26% 47%
Advance/Total Assets: 53% 36%
NPLs/Advances: 6% 11%
Provisions/Advances: 5% 7%
Deposits/Total Assets: 85% 78%
Total Liabilities/Total Assets: 94% 96%
Total Equity/Total Assets: 5.7% 4.1%
Equity + Sub. Loans/Total Assets: 6.3% 4.7%
Deposits/Equity + S Loans - (times): 13.5 16.6
Advances/Deposits: 62% 46%
Investments/Deposits: 31% 61%
Share Price Rs (22-3-05): 58.80 -
Book Value Per Share: 43.73 36.24
Price/Book Value Ratio: 1.34 -
Income Statement (Y end Dec 31): 2004 2003
Markup/Interest Earned: 9,347 10,370
Markup/Interest Expensed: 2,057 2,933
Net Markup/Interest Income: 7,290 7,437
Total Non-Markup Income: 3,998 4,532
Admin Expenses: 7,004 6,587
Profit Before Taxation: 4,203 3,613
Profit After Taxation: 2,540 2,230
Ratios
Net Markup Income/Total Assets: 2.8% 2.7%
Non-Markup Income/Total Assets: 1.5% 1.7%
Admin expenses/Total Assets: 2.7% 2.4%
Profit Before Taxation/Total Assets: 1.6% 1.3%
Profit After Taxation/Total Assets: 1.0% 0.8%
Profit After Tax/Total Equity: 17.2% 20.1%
EPS-After Tax Rs: 7.53 7.28
Cash Dividend: 25.0% 27.5%
Dividend Payout Ratio: 33% 38%
Stock Dividend: 10% 10%
Price/Earning Ratio: 7.81 -
======================================================