Karachi: MCB Limited, a prominent financial institution, held its analyst briefing today to discuss the first quarter results for the calendar year 2025. The bank reported a significant decline in profits, attributed to lower net mark-up income and increased operating expenses.
MCB's profit for the first quarter stood at PkR13.8 billion, marking a 16.6% year-on-year decline. This decrease was primarily due to a drop in net mark-up income, which fell by 7.6% to PkR35.2 billion. The decline in income was linked to a 25% reduction in yields on investments, despite a 42% increase in the investment book to PkR1.8 trillion.
The bank's operating expenses surged by 21.9% to PkR17.0 billion, driven by continued investments in human resources, technology, and marketing. Consequently, the cost-to-income ratio rose to 38.2%, compared to 29.5% the previous year.
Despite the decline in net mark-up income, MCB experienced a slight increase in non-interest income, which rose to PkR9.2 billion. This was supported by a notable 16% rise in foreign exchange income and a 71% growth in dividend income.
Total assets of the bank increased by 17% quarter-on-quarter, with the majority of growth stemming from a 124% rise in borrowings to PkR600.6 billion. The investment book saw a significant 56% increase, with allocations to floating Pakistan Investment Bonds (PIBs) amounting to PkR565 billion.
The bank's gross advances fell by 26% to PkR810.3 billion, which was a sharper decline compared to the industry average. The corporate loan portfolio contracted by 30% during the quarter, contributing to a reduced market share of 5.7%.
Deposits expanded by 8.9% to PkR2.1 trillion, with a significant portion of growth originating from current accounts. However, the average cost of deposits decreased to 5.14% in March 2025.
MCB's non-performing loan base reached PkR55.1 billion, with a coverage ratio of 94.1%. The bank achieved recoveries amounting to PkR112 million from NIB's non-performing loans stock during the quarter.
Looking ahead, MCB anticipates maintaining the current monetary policy stance, with expected interest rate cuts in the latter half of the year. The bank maintains a strong capital adequacy ratio of 19.1%, well above the regulatory requirement.
MCB's board approved an interim cash dividend of PkR9.0 per share, while analysts maintain a 'BUY' recommendation with a target price of PkR398 per share by December 2025.