MCB Bank Predicts Strong Growth and Challenges in Pakistan’s Banking Sector

Islamabad, Today, MCB Bank Ltd held an analyst briefing where it reported significant developments and projections for its fiscal and operational strategies. The bank noted a robust increase in its low-cost deposit penetration, which saw a 13% year-over-year growth, bringing total deposits to PkR1.85 trillion. Investments also rose sharply, particularly in floating and fixed rate Pakistan Investment Bonds.

According to AKD Securities Limited, the bank’s investment portfolio increased to PkR1.29 trillion as of March 2024, with new investments primarily in government securities. Despite a slight decline in Treasury Bill holdings, the bank maintained a high average yield of 19.25% on its investments during the first quarter of 2024. Meanwhile, advances reached PkR596 billion, showing a substantial rise in average yields compared to the same period last year.

Non-funded income (NFI) saw a significant rise, driven largely by fee commissions, foreign exchange dealings, and dividend income. Despite the challenges of attracting customers to choose current accounts over savings accounts due to high market-driven rates, management is committed to increasing the current account mix to 55%. The briefing also highlighted ongoing concerns with non-performing loans (NPLs), primarily within the retail segment, but recovery efforts are expected to improve outcomes.

Looking forward, MCB management anticipates a cumulative 200 basis point decrease in the policy rate by the end of the year, initiating in the second half of 2024. This anticipated easing could influence future strategic financial decisions, including the management of non-interest margins and the expected growth in current deposits to counteract recent declines.

Moreover, the bank expects to exceed PkR2.0 trillion in deposits by year-end and is focusing more on expanding its Islamic branch network. The management also forecasts a 4-5% devaluation of the domestic currency within the year and sees no immediate credit charges from government-backed borrowings due to the implementation of IFRS-9 standards.

As MCB Bank continues to navigate through a period of anticipated higher taxation and regulatory changes, it remains poised for strategic growth despite some market and operational challenges.