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Dear Clients,

– MCB Bank Limited (MCB) reported annual result today posting profit (consolidated) of PkR29.6bn (EPS: PkR24.8/sh), up 23%Y/Y. Earnings were 7% below our estimates.

– Along with this, the bank announced bumper final dividend of PkR15.0/sh that took the full payout to PkR20.0/sh.

– Net Interest Income increased by 19% in 2020 because of 17% Y/Y decline in interest expense amid lower interest rates. Non-interest income grew 11%Y/Y to PkR19.8bn because of gain realized on sale of securities in 3Q2020.

– During 4Q2020, the company posted a profit of PkR6.0bn (EPS: PkR5.1) down by 39%Q/Q and 22%Y/Y. This is on account of lower interest income which declined by 17%Q/Q and 4%Y/Y.

– Moreover, non-markup income during 4QCY20 also decreased primarily attributed to absence of gain on sale of securities that came in at PkR2.9bn in 3Q2020.

– Operating expenses were up 1%Y/Y to PkR9.8bn. The C/I ratio for 4Q2020 deteriorated to 45% as compared to 36% in 3Q2020 and 42% in 4Q2019.

– Provisioning expense clocked in at PkR2.1bn taking total provisioning expense during 2020 to PkR7.3bn against PkR2.7bn recorded in 2019.

– We have an Outperform rating on MCB with a target price of PkR215/sh. The stock offers a dividend yield of 11% and is currently trading at a one year forward P/Bv of 1.3x.

KASB Research

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