Karachi: MCB Bank continues to be an attractive option for investors looking for dividend returns, maintaining a higher dividend yield compared to the secondary market despite potential earnings headwinds.

According to JS Global, despite achieving a robust year-to-date performance of over 40% including dividends in the current year, MCB Bank’s annual dividend yield stands at 17%, surpassing the 12-month secondary market yield of 16.76%. This yield is based on a 65% payout ratio, which is lower than the bank’s historical average of 75%. A sensitivity analysis suggests that if the bank were to revert to its historical payout ratio, the dividend per share for the next calendar year could increase to Rs41, potentially raising the dividend yield to 19%. This consideration takes into account a year-over-year drop in earnings for the next year amid continued monetary easing.

The bank’s management, during a Corporate Briefing session held yesterday, highlighted their strategic focus on increasing the Gross Advances to Deposits Ratio (ADR) to a minimum of 50% by the end of the next year, up from 34% at the end of the second quarter of this year. To achieve this target without altering the deposit levels, MCB would need to increase its loan portfolio by 46%, an increase of more than Rs350 billion.