MCB Bank Reports Its Highest Ever Profit in a Year

MCB Bank made an all-time high profit of over Rs. 29 billion in 2020.

In 2015, the bank made the highest profit of Rs. 25.5 billion, which did not sustain in later years even though the bank remained the most profitable bank in the industry for 2018 and 2019.

According to the annual financial results, MCB’s Profit After Tax (PAT) for the year ended December 31, 2020, posted a growth of 21 percent to reach Rs. 29.04 billion compared to Rs. 23.97 billion in 2019, translating into an Earning Per Share (EPS) of Rs. 24.5 against an EPS of Rs. 20.23 posted in the last year 2019.

The Board of Directors has also announced a final cash dividend of Rs. 15 per share, i.e., 150 percent, bringing the total cash dividend for the year ended 2020 to 200 percent.

Sizeable growth in current deposits, a timely shift in maturity profiling of investments, and favorable re-pricing lag enabled the bank to increase its net interest income by 20 percent to Rs. 71.3 billion, in 2020.

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Fee income for the year 2020 was reported less by 3 percent over last year, primarily due to lower transaction volumes and business activities induced by the lockdowns.

However, with the lifting of pandemic restrictions, fee income is also normalizing. Amidst evolving yield curve expectations, the proactive duration management of the investment portfolio resulted in capital gains of Rs. 3.3 billion during the year under review. Hence, the total non-markup income posted a growth of 9 percent to reach Rs. 18.14 billion.

On the operating expenses side (excluding pension fund reversal), the cost to income ratio of the bank significantly improved to 36.87 percent from 43.4 percent reported last year.

In anticipation that customers affected by the pandemic might require provisioning once the central bank’s relaxations and waivers expire in 2021, the management has exercised prudence and booked a general provision of Rs. 4.0 billion during the year under review, hence providing insulation and loss absorption capacity against any risks to asset quality.

Financial Details

On the financial position side, the total asset base of the bank on an unconsolidated basis was reported at Rs. 1.76 trillion depicting an increase of 16 percent over December 2019.

Analysis of the asset mix highlights that net investments increased by Rs. 267 billion (36 percent), whereas due to subdued domestic demand, gross advances decreased by Rs. 26.5 billion (negative 5 percent) over December 2019. However, gross advances increased by Rs. 19.9 billion in the last quarter of 2020.

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The Non-performing loan (NPLs) base of the bank recorded an increase of Rs. 1.77 billion and was reported at Rs. 51.19 billion. The increase was primarily on account of subjective classification by the bank on a prudent basis.

The bank has not taken Forced Sale Value (FSV) benefit in the calculation of specific provision and has increased its un-encumbered general provision reserve to Rs. 4.57 billion.

The coverage and infection ratios of the bank were reported at 98.87 percent and 9.97 percent, respectively.

On the liabilities side, the deposit base of the bank registered an unprecedented increase of Rs. 144.74 billion (13 percent) over December 2019, with 15 percent growth contributed by current accounts, improving the current account mix to 38 percent and CASA ratio to 92.96 percent.

Return on Assets and Return on Equity was reported at 1.77 percent and 18.88 percent, respectively, whereas book value per share was reported at Rs. 137.02.

While complying with the regulatory capital requirements, the bank’s total Capital Adequacy Ratio (CAR) is 20.98 percent against the requirement of 11.50 percent.

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MCB’s capitalization also resulted in a Leverage Ratio of 7.03 percent, which is well above the regulatory limit of 3.0 percent. The bank reported a Liquidity Coverage Ratio (LCR) of 237.72 percent and a Net Stable Funding Ratio (NSFR) of 174.86 percent against the requirements of 100 percent each.