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MCB Bank Ltd. (MCB): Leveraging its value via low-cost CASA base
11 April 2018
Al Habib Capital Markets (Pvt.) Limited
We initiate our investment case for MCB Bank Ltd. (MCB) with an ‘ACCUMULATE’ rating and Dec ‘18 Target Price (TP) of PKR245/- offering 12% upside, trading at a CY18 P/B (Excl. NCI & SoR) of 1.85x and P/E of 11.02x with a CY18 forward dividend yield of 7% (overall expected return of 20%).
Our ‘ACCUMULATE’ stance for the MCB Bank stock stems from: (i) Forecasted surge in deposits with CASA foreseen at 93%; (ii) Decent growth in advances with focus on high-yielding Consumer Banking & SME portfolios; (iii) Maturing PIBs investment coupled with heavy investment in T-Bills in a rising interest rates scenario; (iv) Our anticipation of improvement in NIMs; (v) Projection of recoveries against PKR29.8bn NPL book of NIB Bank coupled with no further provision against equity investment in CY18 and beyond; (vi) Anticipated surge in fee, commission & brokerage income; (vii) Cost rationalization efforts; and (viii) Adequate capitalization thus allowing MCB to maintain its existing dividend payout ratio.
MCB Bank Limited (MCB): Lower cap. gains & higher Op. exp to weigh on 1QCY18 EPS
23 April 2018
Pearl Securities Limited
The board meeting of MCB Bank Limited (MCB) is scheduled to take place on April 25th, 2018 to unveil its 1QCY18 financial results.
We expect MCB to post consolidated net earnings of PKR5.18bn (EPS PKR4.36) as compared to PKR5.93bn (EPS PKR4.98) registered in 1QCY17, exhibiting a decline of 13%YoY. The double-digit decline in bank’s bottom-line is anticipated primarily due to lower capital gains and considerable rise in operating expenses.
In-line with its payout pattern, we expect the bank to declare an interim cash dividend of PKR4.0/share.
Interest income of the bank is estimated to increment 12%YoY primarily due to notable growth in bank’s loan portfolio (+35%YoY) whereas interest expense is anticipated to rise by a slender 4%YoY due to overwhelming majority of bank’s deposit volumes concentrated in zero/low cost deposits (CASA/CA ratio +90%/+38%), thereby resulting in 17%YoY expansion in bank’s net interest income.
MCB Bank (MCB): 1Q2018 EPS of Rs4, -20% YoY (+61% QoQ); DPS Rs4/share (In-line with expectations)
25 April 2018
Topline Securities (Private) Limited
MCB announced 1Q2018 earnings of Rs4/share, down 20% YoY primarily due to a one time pension cost of Rs2bn (Rs1.1/share). To recall, Supreme Court had ordered top four banks to increase minimum monthly pensions of the pensioners to Rs8,000/month with an annual increase of 5%. In line with the above orders, MCB bank charged a one time pension cost based on the present value of the future expected expenses against the same. UBL and ABL has also charged a one-off pension cost of Rs6bn and 265mn respectively during 1Q2018
Earnings excluding pension charge would have clocked in at Rs5.1/share vs. Rs5/share in 1Q2017.
Net Interest Income (NII) of the bank clocked in 14% higher compared to previous year. This was mainly led by higher interest income post merger with NIB bank during 3Q2017.
MCB Bank Limited (MCB): Budgetary measures warrant revision in earnings estimates, ‘Buy’ with TP of Rs230
10 May 2018
JS Global Capital Limited
We revise our earnings estimates downwards for MCB Bank (MCB) by 1%-20% for 2018E-2020F as we incorporate 4% and 3% additional Super Tax to be accounted for during 2018, along with 2%/1% Super Tax during 2019/2020, respectively
As a result, our Dec-2018 Target Price cuts down to Rs230 (Rs245 previously)
The stock currently trades at 2018E P/B of 1.55x, vis-à-vis our estimated justified P/B of 1.73x, offering 12% upside on current market price.
Though CASA declined during 1Q2018, we bring investors’ attention towards increase in zero-cost deposit mix, contributing to overall decline in cost of deposits.
MCB Bank Limited (MCB): Higher cost dents profitability
07 June 2018
Azee Securities (Pvt.) Ltd.
In our today's morning briefing we would discuss the performance of MCB Bank Limited (MCB) in 1QCY18.
Despite higher core income, the profit after taxation (PAT) of MCB fell by 22% YoY in 1QCY18 to Rs 4.77 billion (EPS: Rs 4.03) as against a PAT of Rs 6.14 billion (EPS: Rs 5.19) owing to decline in non-interest income and one-off charge of pension related expense. The bank had to bear a one-off charge of pension related expense amounting to Rs 2.03 billion in compliance with the Honorable Supreme Court's order, raising minimum pension to Rs8,000/month. On QoQ basis, the bottom-line of the bank posted an impressive hike of 44% in 1QCY18 on back of multiple factors which include; reversal in provisions, surge in non-interest income, and lower non-interest expenses. The corporate results were accompanied with a first interim cash dividend of Rs 4/share.
The net interest income (NII) of the bank totaled Rs 10.99 billion in 1QCY18 which is 13% YoY up from a NII of Rs 9.73 billion in 1QCY17 as the bank remained focused on increasing its low cost deposit base and ventured in higher yielding assets. The interest income grew by 5% YoY in 1QCY18 to Rs 18.21 billion while interest expenses came down by 4% YoY in 1QCY18 to Rs 7.21 billion. The non-interest income of the bank fell by 17% YoY in 1QCY18 to Rs 4.29 million as against Rs 5.18 billion in 1QCY17 primarily owing to decline in capital gain on sale of securities.