MCB Bank Details Future Strategy and Financial Outlook in Analyst Briefing

Lahore, MCB Bank Ltd (MCB) shared insights into its strategic and financial planning during an analyst briefing hosted today. The management discussed challenges and strategies related to the return of the ADR-based tax, dividend payout policies, treasury yields, and investment strategies among other focal points. This briefing aimed to provide clarity on the bank's direction amid current macroeconomic conditions and future expectations.

According to AKD Securities Limited, the bank's management touched upon the difficulty of building a robust loan book due to the anticipated return of the ADR-based tax in CY24. They also highlighted the bank's approach to retaining profits to maintain leverage ratios while expressing optimism for increased future dividend payouts aligned with profitability growth. The discussion further ventured into the bank's treasury operations, noting a negative carry between Open Market Operations (OMO) and secondary market T-Bill yields, with expectations of a modest rise in treasury yields should the policy rate remain stable.

Significantly, MCB's investment strategy leans heavily towards short-term floating rate notes, with 73% of its Pakistan Investment Bonds (PIBs) being floaters and an anticipated maturity of PKR75-76 billion by 3QCY24. Management also conveyed expectations for the first quarter of CY24 to reflect a major portion of the repriced credit book.

The briefing addressed concerns over higher effective taxes in the final quarter of CY23, attributing it to an additional windfall tax on foreign exchange income, despite obtaining a stay-order against it. On the risk management front, the bank acknowledged making subjective provisions for certain SME-based non-performing loans (NPLs) but remains confident in its current risk appetite.

MCB's strategy to enhance its current account base to 55% from 51% in CY23 was also discussed, aiming to mitigate the negative carry on its saving deposit base. Additionally, management shared expectations of currency devaluation in the latter part of the year, in line with IMF program requirements, and projected a decrease in interest rates by 200-300 basis points during the second half of CY24.

The implementation of IFRS-9 was another critical topic, with management anticipating a transfer of PKR8.5 billion to general reserve from retained earnings to comply with the new accounting standard. Operational expenses are expected to grow by 18-20% in CY24, aligning with inflation rates.

Lastly, MCB plans to expand its Islamic Banking operations by adding 60-70 branches within the year, signaling a broader commitment to diversifying its banking services.