MCB POISED TO TAKE A NEW POSITION
Research Analyst, PAGE
Aug 24 - 30, 2009
MCB Bank Limited (MCB) is principally engaged in commercial banking and related services. The bank along with its subsidiaries is engaged in providing a wide range of banking products and services to retail clients, and small and medium enterprises in Pakistan, Asia Pacific, and the Middle East.
It offers various deposit products, including fixed deposits, savings deposits, term deposits, current accounts, margin accounts, and foreign currency accounts. MCB also offers personal loans, auto loans, working capital loans, and term loans.
Recently, MCB has signed an agreement with The Royal Bank of Scotland Group plc to acquire 99.37 percent of the ordinary share capital in RBS Pakistan. As a result of the transaction, the total number of branches of combined MCB and the acquired bank will increase to 1,139. The total consolidated deposits will increase to Rs 413 billion and consolidated gross advances to Rs 324 billion.
|INDICATORS||JUNE 30, 2009||MARCH 31, 2009|
|Profit After Tax||3,666,304||4,253,981|
|Source: MCB BANK LTD.|
Pakistan's largest bank by market capitalisation posted a 1.7 percent rise in net profit for the three months ending June 30, 2009. MCB earned 3.6 billion rupees ($43.7 million) in the second quarter of the calendar year 2009. Profit before tax was Rs 11.7 billion registering a significant growth of 10% over the reported profit before tax of corresponding period last year, translating into an EPS of Rs 11.22.
During the period under review the bank's deposits showed a growth of 10% from December 31, 2008 and reached to Rs 362 billion.
Gross loans and advances marginally decreased by Rs 315 million from Rs 273.2 billion as at December 31, 2008 to Rs 272.9 billion. Investments have, however, increased by 21% to Rs 116 billion as banks continue to invest in safer markets. Equity (before surplus) increased by 9% over the year-end 2008. The bank announced cash dividend in respect of the half-year ended June 30, 2009 of Rs 2.5 per share (June 30, 2008: Rs 3 per share). Net mark-up interest income increased by 44%, due to a growth in CASA, which kept the increase in cost of funds subdued in comparison to increase in interest revenues. Non-mark-up income showed a slight decline of 3.4% because of the underperformance on account of sale of securities.
ACQUISITION OF RBS Pakistan BY MCB
MCB Bank would initially acquire 1,707,107,891 of ordinary shares in RBS Pakistan with a 99.37 percent stake for a cash price of Rs 4.22 per share. The total consideration to be paid will be Rs 7.2 billion (approximately $87 million). MCB Bank is to acquire this from ABN Amro Bank N.V., which is a subsidiary of The Royal Bank of Scotland Group plc. The sale comprises Retail, Commercial, Islamic and onshore GBM and GTS businesses in Pakistan.
RBS Pakistan has a branch network of over 75 branches in 24 cities, of which 30 serve the affluent retail customer segment and three are Islamic banking branches. It has over 90 ATMs. RBS Pakistan had total assets of Rs 108 billion by December 31, 2008. MCB is Pakistan's fourth largest bank in terms of assets having an asset base of Rs 445 billion as on December 31, 2008 on a consolidated basis and the largest bank by market capitalization.
RBS ACQUISITION COULD SPUR GROWTH IN FEE INCOME
MCB has entered in the consumer financing segment late. MCB'sfee income growth is far below than that of Big 4 banks. This scenario would now change as MCB has successfully acquired the RBS Pakistan operations. RBS has a well established consumer banking business (30% exposure to consumer segment) supported by a strong infrastructure and quality human resource. Despite that consumer business is under pressure at present on account of higher NPLs, it has long term opportunity for banks once economy starts picking up again.
Moreover, MCB could gain access to top quality multinational clients of RBS which could also contribute immensely towards growth in fee income.
MCB, despite the downturn in the economy with the banking sector feeling the pinch of rising NPLs and slowdown in credit off-take, has managed to post appropriate results for H109. Moody's Investors Service has raised its outlook on the B3 long-term foreign currency deposit ratings of four Pakistani banks to stable from negative. The rating will leave positive impact on its outlook in days to come.