MCB Bank’s consolidated profit dropped 38% to PKR 4.75 billion for the quarter ended June, 2018. This drop is observed due to a table reversal in tax rate to a higher side in the quarter, according to the information sent to Pakistan stock exchange (PSX).
Earnings per share (EPS) reduced to PKR 3.99 bn in the quarter as compared to PKR 6.88 bn in the corresponding quarter last year. An interim cash dividend of PKR 4 is recommended by board of directors (BoD). As per the experts, bank’s earnings are down chiefly due to higher taxation during the quarter. MCB’s effective tax in second quarter of 2017 was 8%, which was below average on account of tax reversal last year.
The profit & loss statement depicts that bank has paid PKR 3.63 billion tax on profit in the quarter which is six times higher than the tax paid for second quarter last year. Net Interest income of the bank increase by 13% to PKR 11.9 billion on account of higher interest rates. SBP cumulatively increased policy rate by 75 bps during first half of 2018 to 6.5%, which was further increased to 7.5% in July, 18. This increase will support the Net interest income in third quarter of 2018. Non-interest expenses also show an increase of 14% due to higher administration cost.
Capital gains also declined by 65% to PKR 400 million due to lesser gains on bonds and securities, accordingly non-interest income dropped 9% to PKR 4 billion, keeping bottom-line of the bank under pressure.
Key risks elements for the bank include delay in increase in policy rate, lower advances and deposits growth and weakening in economic conditions of Pakistan. Overall, the bank’s profit is PKR 9.42 billion lower than PKR 13.55 billion booked in the same half in the previous year.