MCB BANK LIMITED

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Aug 13 - 19, 2012

MCB Bank Limited is a leading bank in Pakistan and has enjoyed a remarkable tenure of more than half a century of competitively edged and well positioned heights of success by deploying quality banking, heads on technological developments, professionally leading management and prudent and ethical work methodologies. MCB was nationalized along with other private banks in 1974 as part of the Government of Pakistan's economic reform movement and was later privatized to Nishat Group lead consortium in 1991.

MCB BANK IN KSE (AUG-2012)

DATE OPEN RATE CLOSING RATE
1 187.95 188.09
2 188.09 185.22
3 185.22 184.61
6 184.61 185.61
7 185.61 184.77
8 184.77 184.69

Today, MCB in one of the largest foreign banks in Sri Lanka, the first bank in the country to launch Global Depository Receipts (GDR) in 2006, MCB has a strategic foreign partnership with Maybank of Malaysia which holds 20 per cent shares in MCB through its wholly owned subsidiary Mayban International Trust (Labuan) Berhad since 2008, has international indirect regional presence in Dubai, Bahrain, Azerbaijan, Hong Kong and Sri Lanka and serving through a domestic network of over 1,130 branches and 600 ATMs across Pakistan with a customer base of approximately 4.5 million.

The bank is versed as one of the oldest and most responsible banks in Pakistan and has played a pivotal role in representing the country on global platforms while being one of the few institutions that are recognized and traded in the international market. The bank has also been acknowledged though prestigious recognition and awards by Euromoney, MMT, Asia Money, SAFA (SAARC), The Asset and the Asian banker.

MCB is reputed as one of the most sound financial institution and as one of the leading banks in Pakistan with a deposit base of Rs 462 billion and total assets of Rs 605 billion.

MCB offers trade finance services that comprise of an entire range of import and export activities including issuing letters of credit, purchasing export documents, providing guarantees and other support services.

The bank brings fast and free home remittance service to beneficiaries in Pakistan. MCB fast transfer & MCB Pak cash enables customers, the non resident Pakistanis, to send money easily and conveniently. MCB home remittance service is free and available at all MCB correspondents (Banks/ Money Transfer Cos) Worldwide.

The bank's Investment Banking (IB) arm has played a dynamic role in the local market space in Pakistan through innovative structured solutions for its customers and is regarded as one of the leading investment banking houses in the country. The IB team has strong origination and distribution capabilities and a successful track record for efficient execution. In 2007, a USD 53 million listed bond issue led by MCB was awarded the banker's deal of the year for Pakistan. During the last three years, the bank has led or participated in deals over USD 5 billion, of which 65 per cent are in the energy sector, 14 per cent in fertilizer and chemicals, 11 per cent in telecom and 10 per cent in other industries.

MCB's Islamic Ijarah, analogous to the English term leasing, is based on the Ijarah wa Iqtina' concept which means the sale of the asset to the lessee after the Ijarah has matured. Under this scheme, MCB will be the owner of the asset, and lessee will be given the asset to use for a certain period of time in return for monthly rental payments. MCB will give a separate unilateral undertaking that it will offer to sell the asset to lessee at the maturity of the Ijarah agreement at a price that may be equal to the security deposit amount, hence the term 'Wa Iqtina.

BANKING INDUSTRY

Presently, in Pakistan, the banking industry showed handsome profits last year and the first quarter results of this year were the same. Most of these profits were earned by five large banks and the rest by foreign banks and some medium sized banks.

The State Bank has adopted a lenient attitude towards the paid-up capital requirement not attained by at least nine banks and gave them space to either improve or merge with others. Banks were required to raise their MCR to Rs23 billion which was slashed to only Rs10 billion. The banks are now required to raise their paid-up capital to Rs8 billion by 2011, Rs9 billion by 2012 and Rs10 billion by Dec 31, 2013. The banking industry witnessed sudden movements regarding buying and purchasing activities. HSBC, a foreign bank, wants to sell its Pakistan operations, while a fairly large local bank, Askari Bank, shows its inability to continue without strong backing. The State Bank has allowed due diligence for these two banks. It is expected that the few more banks are also eyeing options of sell-off or merge with others. Furthermore, the economic situation and political insecurity had diverted deposits towards a few large banks, while offers for much higher return by small and medium sized banks were not attracting depositors. The glut of deposits in large banks resulted in poor return to depositors. The State Bank last month forced the banks to pay minimum six per cent return on savings products.

However, the problem of about nine banks remained unresolved and their effort to improve deposits and paid-up capital have failed so far.

The foreign banks have been in profit, their size of profit is not large enough to force to them continue to work for better days. The poor economic growth rate and energy crisis have eroded hopes for the quick recovery of the economy, leaving no option for competitive banks to remain in the field.

Foreign banks have been curtailing their international operations as part of restructuring at home in the wake of financial crisis and now the debt crisis which trapped the entire European Union.