Karachi, February 08, 2023 (PPI-OT): MCB: CY22 Result Review

MCB Bank Limited (MCB) reported its CY22 earnings earlier today, wherein the bank reported earnings of PkR32.7bn (EPS: PkR27.6) for the full year, higher by 6%YoY. For 4QCY22, NPAT clocked in at PkR12.9bn (EPS: PkR10.9) for the quarter, higher by 48%/56% QoQ/YoY, respectively.

Net interest income for 4QCY22 clocked in at PkR25.6bn, higher by 14%QoQ/58%YoY, driven by a 7%QoQ/79%YoY increase in interest earned, offset by a 3%QoQ/98%YoY increase in interest expensed.

Non-interest income for the quarter stood at PkR4.4bn, lower by 41%QoQ and 23%YoY. The lower non-interest income in 4QCY22 is attributable to: i) lower FX income during the period, down by 69%QoQ to PkR1.2bn in 4QCY22, and ii) hefty losses on sale of securities, clocking in at PkR1.6bn, compared to PkR573mn in the previous quarter.

The bank also posted a reversal of PkR1.5bn in 4QCY22, compared to a reversal of PkR516mn in the earlier quarter.

Non-markup expenses were largely flat on a sequential basis, clocking in at PkR11.7bn during the final quarter, higher by 3%QoQ and 23%YoY.

The bank’s financial performance during the final quarter was better than anticipated, on account of lower tax charged during the period. To note, the effective tax rate in 4QCY22 clocked in at 35%, compared to 54% in the previous quarter.

Alongside the earnings, the bank announced a final cash dividend of PkR6/sh. This takes the full year cash payout of the bank to PkR20.00/sh, representing a payout ratio of 72%.

We have a Buy call on the stock with a Dec’23 TP of PkR160/sh, which provides an upside potential of 41% from current levels. Alongside this, the stock provides a CY23 dividend yield of 22%.