High provision charges cause MCB’s results to fall below expectations

MCB's results for CY 16 might be below expectations but analysts believe this will not hamper investor confidence.

Muslim Commercial Bank (MCB) has posted consolidated Net Profit after Tax (NPAT) of Rs 22.1 billion for the CY16. This is 11.4 percent decline on the CY15 results of Rs 22.38. However, these results show a steeper fall (27 percent) on the last quarter’s (Third Quarter of 2016) results. According to the AKD Research report, this fall has come in the wake of lower gains utilisation which accounts for 57 percent of the decline since the past quarter.

Other highlights of the results include 2 percent increase in the provisions. The AKD report terms the results in line with the market expectations, but according to the analyst Zeeshan Afzal, the bank performed below expectations. He believes that this decline came as a result of the bank taking Rs 1.4 billion in provision charges in the last quarter against the reversal of Rs 802 million in 9MCY16. However, he does not anticipate any massive impact of this decline on investor confidence and said that if the bank is able to make good of the reported NPLs, it would allow it to maintain its stock position.

It is important to note that the banking sector has already been under pressure because of two factors. The inflation rate has remained less than expected and the government is expected to review interest rates in the current year. Putting together, these have led the banking sector to operate in difficult conditions.

MCB has also announced a final interim dividend of Rs 4 per share which is also below the market expectations of Rs 5. Another analyst Umair Naseer is of the opinion that this is a one-off event and since this provision has the possibility of being reversed if the NPL is recovered, it would not create any long-term negative pressures on the investors, despite the short-term negative sentiment risen in the wake of these results.

The stock price of MCB has fallen by 2.1 percent which reflects the weak results and the less-than-expected EPS reported by the bank. However, according to analysts this will not be a long-term effect.

- Advertisement -
Syeda Masooma
Writer is business reporter at Pakistan Today
- Advertisement -

Must Read

NA approves Rs50 petroleum levy in budget

The National Assembly passed an amendment in the Finance Bill to approve Rs50 per litre petroleum development levy on all POL products. The session of...