MCB Bank Expects MPC to Cut 100bps in September

Staff Report: The management of MCB Bank (MCB) has anticipated that the MPC will cut 100bps in the September meeting, followed by another 100bps in the November meeting.

Management expects that the SBP has room for a further 200bps cut in the interest rate.HBL, MCB, UBL again penalized millions

MCB Bank (MCB) conducted its 1H2024 Corporate Briefing Session, during which management discussed financial performance and the future outlook.

So far, the 250bps cut in interest rates has had a positive impact on NIMs due to the asset repricing lag. Management expects this trend to continue in 2H2024 as well. However, NIMs are expected to face pressure in 1Q2025, which the bank plans to offset by increasing volume growth.

Currently, the ADR is at 33.07%, and management is confident about meeting the 50% target by year-end.

MCB’s coverage and infection ratios stand at 89.07% and 8.64%, respectively, as of June 2024.

The investment book clocked in at Rs1.5 trillion as of June 2024. Of the total investment book, 23% is held in T-bills, 68% in PIBs, 4% in equity, 5% in other government securities, and 1% in debt instruments.

Of the total PIBs portfolio, 76% is held in floating-rate PIBs, while the remaining 24% is in fixed-rate PIBs. The average time to maturity for the fixed-rate PIBs is 2.39 years.

Management also highlighted that Rs78 billion (32% of fixed PIBs) will mature this year, carrying a yield of 10.76%.

The yield on investments stood at 19.06% as of June 2024, compared to 16.60% in June 2023.

The cost of deposits for June 2024 is 10.05%, compared to 7.54% in June 2023. The yield on advances is 18.47% in June 2024, up from 17.04% in June 2023.

Current accounts make up 49% of total deposits as of June 2024, and management is confident of maintaining this mix in the coming period.

MCB has a market share of 11.7% in home remittances and 7.10% in trade for 1H2024.

The Capital Adequacy Ratio (CAR) stands at 20.09%, comfortably above the minimum requirement. The bank is expected to maintain its current payout ratio.

MCB announced consolidated earnings of Rs16.8 billion (EPS of Rs14.17), up 14% YoY but down 6% QoQ in 2Q2024. This brings 1H2024 earnings to Rs34.6 billion (EPS of Rs29.21), up 21% YoY. Alongside the results, the bank announced a second interim cash dividend of Rs9 per share in 2Q2024, bringing the 1H2024 dividend to Rs18 per share.

We maintain a buy stance on MCB, with the stock currently trading at a 2024E PE ratio of 3.6x and a PBV ratio of 0.9x,” Topline Research said.