MCB Bank Limited (MCB) Q1 earnings results
Akseer Research Quarterly Report Analysis: MCB Bank Limited Shows Strong Performance in 1QCY24.
Akseer Research has just released an update on MCB Bank Limited’s recent quarterly results. Here are the important points from the earnings announcement:
Impressive Financial Performance
MCB Bank Limited announced its 1QCY24 result on April 24th, 2024, showcasing a robust performance. The bank reported an unconsolidated EPS of PKR 13.97, marking a significant increase of 27% compared to the same period last year. Alongside this positive outcome, MCB declared an interim cash dividend of PKR 9.00 per share.
Key Highlights
- Net Interest Income (NII) for the 1QCY24 surged by 27% YoY to PKR 38.1 billion, despite a notable increase in interest expenses, which rose by 51% YoY, outpacing the growth in interest income by 39% YoY.
- Non-interest income witnessed a substantial growth of 54% YoY, reaching PKR 9.1 billion. This increase was primarily driven by a surge in fee & commission income, FX income, and dividend income during the first quarter of CY24.
- The bank managed to book a provisioning reversal of PKR 69 million, indicating an improvement in loan recovery and prudent risk management practices, despite the prevailing economic slowdown.
- Operating expenses for 1QCY24 increased by 19% YoY to PKR 14.7 billion, leading to a cost-income ratio of 31%, down from 34% in the same period last year, primarily due to higher NII.
Financial Estimates
| Financial Estimates (PKR mn) | 1QCY23 | 1QCY24 | YoY |
|---|---|---|---|
| M/up Earned | 63,855 | 89,009 | 39% |
| M/up Expense | 33,785 | 50,938 | 51% |
| Net Interest Income | 30,070 | 38,071 | 27% |
| Non-Interest Income | 5,922 | 9,123 | 54% |
| Total Provisions | 624 | -69 | -111% |
| Operating Expenses | 12,351 | 14,722 | 19% |
| Profit Before Tax | 23,016 | 32,541 | 41% |
| Taxation | 9,960 | 15,986 | 61% |
| Profit After Tax | 13,056 | 16,555 | 27% |
| EPS | 11.02 | 13.97 | 27% |
| DPS | 6.00 | 9.00 |
Investment Outlook
Based on the strong performance and future prospects, Akseer Research maintains a ‘BUY’ rating on MCB Bank Limited with a December 2024 price target of PKR 234 per share, offering an upside potential of 10% along with an attractive dividend yield of 17%.
Key Financial Ratios
| Key Financial Ratios | CY21A | CY22A | CY23A | CY24E | CY25F | CY26F |
|---|---|---|---|---|---|---|
| EPS | 26.0 | 27.6 | 50.3 | 50.6 | 49.1 | 48.8 |
| EPS Growth | 6.1% | 6.3% | 82.1% | 0.6% | -3.0% | -0.6% |
| DPS | 19.0 | 20.0 | 30.0 | 36.0 | 34.0 | 34.0 |
| BVPS | 147.2 | 159.9 | 185.5 | 200.6 | 216.8 | 232.2 |
| PER | 8.2 | 7.7 | 4.2 | 4.2 | 4.3 | 4.4 |
| Dividend Yield | 8.9% | 9.4% | 14.1% | 16.9% | 15.9% | 15.9% |
| P/B | 1.5 | 1.3 | 1.2 | 1.1 | 1.0 | 0.9 |
| ROE | 16.9% | 18.0% | 29.1% | 26.2% | 23.5% | 21.8% |
Valuation Basis and Investment Thesis
The PT for MCB Bank Limited has been computed using the dividend discounting method. The investment thesis is based on the bank’s high CASA ratio, robust capital adequacy ratio (CAR), and efficient cost-to-income ratio, ensuring sustainable payouts and profitability.
Risks
While the outlook appears positive, it’s important to consider key risks to the investment thesis, including lower-than-anticipated growth in advances and deposits, and higher-than-anticipated provisioning.
Company Description
MCB Bank Limited is a leading banking company in Pakistan, offering commercial banking and related services both domestically and internationally. With a rich history dating back to 1947, MCB is headquartered in Lahore, Pakistan, and operates through a vast network of branches, including international locations.
Disclaimer
The information in this article is based on research by Akseer Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
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