Times promise to be good for banks. Big ones especially, MCB’s 9MCY17 results showed just high. In times of squeezed spreads and low interest rates, the bank managed to pull a double digit bottom-line growth in after tax profits. Mind you, MCB is fresh of NIB’s merger, and it seems to have conveniently shrugged off the troubles of merging with a struggling bank.
MCB’s balance sheet has expanded massively during the period, owing to the acquisition. Comparisons with others will not be an apple to apple equation. That said the deposits base of the bank expanded massively by over 23 percent over December 2016. Bulk of the increase has come from current and saving accounts, both north of 20 percent.
Recall that MCB boasts of one of the highest CASA ratio in the industry, at an astonishing 93.5 percent. All this after the NIB merger, makes the number even more special. The NIB’s lower CASA, although, did have an impact on mark-up expenses for the period, as the cost of deposit went slightly higher than yesteryear.
On the asset front, the growth is again massive, on both accounts of advances and investments. The investments continue to make the surge, having soared by 23 percent over December 2016. Low interest rates coupled with more enabling environment and improved demand for private sector credit; advances have also grown strong, at 26 percent over December 2016. The ADR continues to hover around the peer average of 45 percent, and promises much more room in the days to come.
The NPLs have understandably doubled post the NIB merger, increasing the infection ratio to double digits. It is well provided for at over 90 percent. Expect the provisioning reversals to reverse in the days to come, and MCB would have to focus more on reducing cost of deposits, as provisioning expenses are likely to go up.
MCB’s cross selling continues to be its stronger suit, evident from a massive surge in non-core income. It will take some time for MCB to streamline administrative costs post merger, and for the cost to income ratio to start looking good again. MCB has the muscle and might to take advantage of any good opportunity that is expected to arise in the market. Banks will have to start looking away from the risk free sovereign government papers. Interest rates are believed to have bottomed out already, and this should offer a breather to the spreads. MCB would look to keep consolidating its position as an able lender.