Introduction:
MCB Bank Limited (the ‘Bank’) is a banking company
incorporated in Pakistan and is engaged in commercial banking and related
services. The Bank’s ordinary shares are listed on all the stock exchanges in
Pakistan whereas it’s Global Depository Receipts (GDRs) representing two
ordinary shares are traded on the International Order Book (IOB) system of the London
Stock Exchange. The Bank operates 1,208 branches including 27 Islamic banking
branches within Pakistan and 9 branches outside the country. Maybank International is a major shareholder of this bank.
Key data
The bank has extensive branch network in Pakistan making it
one of the best bank in banking activities. The bank has strong capital base as
well as human capital. It has a deposit base of 666 billion rupees as of September
2014.
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Key economic data MCB Bank
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2011
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2012
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2013
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Mar-14
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Jun-14
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Sep-14
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Capital (Bn Rs)
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88,802,482
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101,750,806
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110,230,981
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113,550,299
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114,486,274
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116,421,700
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Branches (No.)
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1,173
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1,188
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1,217
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1217
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1218
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1222
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Employees (No.)
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13,380
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13,046
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12,611
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Deposits (Bn Rs)
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491,188,710
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545,060,728
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632,330,286
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627,143,643
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685,765,679
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666,344,116
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Deposit growth%
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13.87
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10.97
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16.01
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Income profile:
The banks net spread income as %age of Deposits declined
from 10.32 to almost 7 during 2011-13. Despite the fall it is well above industry
average. The bank has strong income profile. The bank’s core income adequately
covers regular admin expenses.
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Income Profile and sustainability
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2011
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2012
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2013
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Mar-14
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Jun-14
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Sep-14
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Net Spread Income NSI
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44,526,314
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40,856,172
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37,868,229
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10,013,882
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11,422,972
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10,577,276
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NSI as % of Deposits T-1
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10.32
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8.32
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6.95
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1.58
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1.82
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1.54
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NSI /Admin expenses
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2.86
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2.39
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2.02
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2.08
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2.40
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2.04
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EPS /LPS
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17.45
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18.81
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19.31
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4.95
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5.58
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5.75
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Leverage:
The bank’s balance sheet is quite stable and it has significant
room for taking more risk. The leverage is stable over the period 2011-14.the
bank should take risk and expand its loan portfolio and stop feeding on
government rent. The %age of non-performing loans has decreased from around 10.5%
of loans in 2011 to 7.7% in Sep 2014.
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Leverage and Loan Portfolio Infection
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2011
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2012
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2013
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Mar-14
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Jun-14
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Sep-14
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Total Assets/equity
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8.28
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8.69
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8.38
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8.34
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8.51
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8.30
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advances/equity
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2.86
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2.72
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2.55
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2.55
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2.78
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2.77
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NPL/Advances T-1
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10.48
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11.32
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9.71
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9.07
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8.73
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7.72
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Dividend Distrbution:
The bank issued/distributed 10% bonus shares in the year
2012 and 2013 as well as Rs. 13 and Rs. 14 per share as dividend respectively.
Stock Valuation:
Stock Market Price Faysal Bank (Jan
2013-Oct 2014)
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2011
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2012
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2013
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Mar-14
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Jun-14
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Sep-14
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Book Value
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79.78
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91.42
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99.04
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102.02
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102.86
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104.60
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book value *
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70.90
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79.20
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87.39
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89.15
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91.68
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94.09
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book value **
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66.59
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76.35
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83.96
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85.81
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88.35
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90.58
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* without accounting for revaluation reserve
** without accounting for revaluation reserve and adjusted for Non
Performing Loans
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Oct 2013 – 2014 (unadjusted)
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Book
Value
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Max
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Min
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Range
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Average
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Stock Price
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311
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234
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77
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285
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Conclusion:
The bank’s balance sheet is less leveraged and therefore the
bank needs to raise its loan portfolio.
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