The Board of Directors of MCB Bank Limited (MCB) met under the chairmanship of Mian Mohammad Mansha on Wednesday to review the bank’s performance and approve its financial statements for the year ended December 31, 2020.
The BOD declared a final cash dividend of Rs15.0 per share i.e. 150pc, bringing the total cash dividend for the year 2020 to 200pc.
During the year 2020, MCB achieved significant financial growth by focusing on its operational resilience and continuity planning to successfully navigate through the downside risks posed to operating and economic outlook by the Covid-19 outbreak while concurrently playing a central role in supporting governments’ key pandemic responses for credit extension and provision of essential banking services to the general public.
With strong build up in core earnings, MCB’s profit after tax (PAT) for the year ended December 31, 2020, posted a growth of 21pc to reach Rs29.04 billion; translating into earnings per share (EPS) of Rs24.5 against an EPS of Rs20.23 posted in 2019.
Sizeable growth in current deposits, timely shift in maturity profiling of investments and favorable re-pricing lag enabled the bank to increase its net interest income by 20pc to Rs71.3 billion.
Fee income for the year 2020 was reported less by 3pc over last year, primarily due to lower transaction volumes and business activities induced by the lockdowns. However, with their lifting, fee income is normalizing. Amid evolving yield curve expectations, proactive duration management of the investments portfolio resulted in capital gains of Rs3.3 billion during the year under review. Hence, the total non-markup income posted growth of 9pc to reach Rs18.14 billion.
On the operating expenses side (excluding pension fund reversal), despite sustained inflationary pressures, expansion in branch outreach and continued investment in technological infrastructure together with regular performance and merit adjustments for the human capital, the bank’s strategic focus of balancing short term tactical cost reductions with long term cost initiatives has assisted in containing growth in administrative expenses; in turn registering a decline of Rs129 million during the year 2020. Thus, the cost to income ratio of the bank significantly improved to 36.87pc from 43.4pc reported last year.
In anticipation that customers affected by the pandemic might require provisioning once SBP’s relaxations and waivers expire in 2021, the management has exercised prudence and booked a general provision of Rs4.0 billion during the year under review, hence providing insulation and loss absorption capacity against anyrisks to asset quality.
On the financial position side, the total asset base of the bank on an unconsolidated basis was reported at Rs1.76 trillion depicting an increase of 16pc over December 2019. Analysis of the asset mix highlights that net investments increased by Rs. 267 billion (36pc) whereas due to subdued domestic demand gross advances decreased by Rs. 26.5 billion (-5pc) over December 2019. However, gross advances increased by Rs 19.9 billion in last quarter of 2020.
The non-performing loan (NPLs) base of the bank recorded an increase of Rs1.77 billion and was reported at Rs51.19 billion. The increase was primarily on account of subjective classification by the bank on prudent basis. The bank has not taken FSV benefit in 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 98.87pc and 9.97pc, respectively.
On the liabilities side, the bank’s deposit base registered an unprecedented increase of Rs144.74 billion (+13pc) over December 2019, with 15pc growth contributed by current accounts, improving the current account mix to 38pc and CASA ratio to 92.96pc.
Return on Assets and Return on Equity was reported at 1.77pc and 18.88pc, respectively, whereas book value per share was reported at Rs137.02.
While complying with the regulatory capital requirements, the bank’s total Capital Adequacy Ratio (CAR) is 20.98pc against the requirement of 11.50pc (including capital conservation buffer of 1.50pc as reduced under the BPRD Circular Letter No. 12 of 2020). Quality of the capital is evident from the bank’s Common Equity Tier-1 (CET1) to total risk weighted assets ratio which comes to 17.03pc against the requirement of 6.00pc. Bank’s capitalization also resulted in a Leverage Ratio of 7.03pc which is well above the regulatory limit of 3.0pc. The bank reported Liquidity Coverage Ratio (LCR) of 237.72pc and Net Stable Funding Ratio (NSFR) of 174.86pc against the requirement of 100pc.
MCB has been declared the ‘Overall Most Outstanding Company in Pakistan – 2020’ and ‘Most Outstanding Company – Financials Sector in Pakistan – 2020’ by Asiamoney, an associate of Euromoney. The annual report of MCB Bank has also been adjudged 1stby ICAP/ICMAP in the financial sector category. MCB has won this award 10 times in last 11 years with 8 consecutive wins.
The bank enjoys highest local credit ratings of AAA / A1+ categories for long term and short term respectively, based on PACRA notification dated June 26, 2020.