Muslim Commercial Bank Limited (MCB), one of Pakistan' s largest private-sector banks, achieved substantial growth in core earnings, resulting in an impressive 75.5% year-on-year (YoY) increase in profit before tax (PBT) for the year ending December 31, 2023, reaching Rs125.2 billion, reports WealthPK. As per the unconsolidated interim statement, the profit after tax posted a remarkable growth of 82.1% to reach Rs59.6 billion, translating into earnings per share (EPS) of Rs50.32 compared to an EPS of Rs27.63 reported in the last calendar year. Furthermore, the net mark-up income increased by 69.5% due to strong volumetric growth in the current account and the timely repositioning of the asset book.

The bank's non-markup income surged to Rs32.9 billion against Rs24.6 billion in the last year, with major contributions from fee commission income (Rs6.04 billion), dividend income (Rs616.1 million), and other income (Rs378.6 million). In addition, the total asset base of the bank grew by 16% and was recorded at Rs2.43 trillion as of December 2023. The analysis of the asset mix highlights that net investments increased by Rs271 billion during the year. The bank continued its focus on building no-cost deposits, resulting in a robust growth of Rs180 billion in average current deposits. The average current to total deposits ratio improved to 52.3% during 2023 from 41.1% in the last year. The return on assets and equity notably improved to 2.64% and 31.6%, respectively.

Summary of Cash Flows

The bank's operating cash flow portrays net cash inflow generated from core activities, i.e., deposit mobilization and loan and advance disbursements. In 2023, total cash inflows generated from operating activities were Rs378.1 billion as compared to cash outflows of Rs68.03 billion recorded in 2022. The major reason for this increase was the historically high deposit mobilization of Rs426.6 billion during the year under review. The investing activities posted a net cash outflow, indicating a significant divestment of assets or reduction in long-term investments. Moreover, cash outflow from financing activities primarily reflects payments on account of dividends to the shareholders. The increase in financing cash outflows is due to the higher dividend paid in 2023 on account of improved profitability.

About the year

The year 2023 was marked as a challenging year; the complexities stemmed from geopolitical tensions, economic uncertainties, and climate-related concerns. Despite these headwinds, the bank maintained its commitment to financial stability, providing reliable banking services and support to valued customers. Amidst challenges, the year also presented exciting opportunities for innovation and growth. Rapid advancement of digital technologies, including artificial intelligence (AI), has revolutionized the banking industry globally. Pakistan's banking sector is also actively engaged in the digital transformation process, providing immense opportunities to better serve customers.

Quarterly Performance Analysis 2022-2023

Quarterly financial highlights reveal that the bank's net mark-up income increased over the quarters, indicating growth in interest earnings. From Rs18,112 million in the first quarter of 2022, it rises to Rs41,284 million in the fourth quarter of 2023. This increase was broad-based, driven by improved earning margins along with volumetric growth in earning assets. The non-markup income also shows an increasing trend over the quarters under consideration, from Rs5,722 million in 1Q2022 to Rs10,316 million in 4Q2023.

The primary contributors to the rising trend were higher fee and commission income and increased gain on securities. In addition, the bank's non-markup expenses also witnessed a surging trend. The increase was broad-based due to the galloping inflation and rising business costs amidst political instability and massive rupee devaluation. On the back of a strong overall performance (growth in net-mark-up income and non-markup income), the bank registered a higher profit before tax across quarters.

Future Outlook

MCB is committed to actively contributing to the development of the economy through strengthening financial inclusion and providing banking services across the country. Furthermore, the bank will target no-cost deposits to maximize the earnings potential and aggressively invest in the technological transformation to become a more agile and efficient organization.

Credit: Independent News Pakistan