MCB Bank has confirmed that the ongoing windfall tax issue is still pending before the Lahore High Court, where the bank has successfully secured a stay order, halting any immediate financial implications. Despite the ongoing legal proceedings, the bank has prudently accounted for the potential tax liability in its financial statements, ensuring transparency and sound financial management amidst the regulatory uncertainty.
In a recent conference call, MCB Bank provided analysts and investors with insights into its financial performance and future strategic direction. The discussion focused on the bank’s commitment to growth, digital transformation, and strong capital management. Management highlighted the importance of adapting to the ever-evolving financial landscape, especially with regard to digital advancements and customer-centric services.
One of the major takeaways from the conference call was MCB Bank’s focus on improving its deposit mix, particularly increasing the share of current accounts. The bank aims to boost current accounts to approximately 55% of total deposits. This shift would significantly enhance liquidity and provide a more stable financial foundation. As part of its overall growth strategy, MCB Bank is targeting a deposit growth of 15% to 18% for the fiscal year 2025. This comes after the bank achieved a compound annual growth rate (CAGR) of 10.6% in total deposits since 2019. The current account deposits, in particular, have grown at a more impressive CAGR of 15.3% over the same period, indicating strong performance in this key area.
The bank’s investment portfolio also reflects a well-diversified approach, ensuring the maximization of returns while managing risk. MCB Bank’s investment in Pakistan Investment Bonds (PIBs) consists of a combination of fixed-rate and floating-rate bonds, accounting for 22% and 60% of the total PIBs, respectively. Additionally, Treasury Bills (T-bills) make up 7% of the bank’s overall investment mix. The average yield on fixed PIBs currently stands at 14.5%, with a maturity period of approximately 2.7 years. This balanced investment approach is designed to provide stability and consistent returns for the bank’s shareholders.
A key area of growth for MCB Bank has been its Islamic banking segment. The bank has seen significant progress, with the number of Islamic banking branches growing from 244 in December 2023 to 301 in December 2024. This includes the conversion of 39 conventional branches to Islamic banking. MCB Bank has set an ambitious target to expand its Islamic banking network further, aiming to reach 500 Islamic branches within the next three years. This move reflects the growing demand for Sharia-compliant financial services and the bank’s commitment to meeting the needs of a broader customer base.
However, MCB Bank’s management acknowledged a decline in fee income, primarily attributed to the increased competition in the remittance sector. The growing prominence of digital banks has also added pressure on traditional financial institutions like MCB Bank. In response, the bank has been investing significantly in upgrading its digital banking capabilities to ensure it remains competitive. These investments are focused on strengthening the bank’s digital offerings, making them more efficient, user-friendly, and aligned with industry trends.
As MCB Bank navigates the challenges of the windfall tax issue and other market dynamics, it continues to strengthen its position in the industry through strategic investments in digital banking and an expansion of its Islamic banking services. With a focus on growth, technological advancement, and financial prudence, MCB Bank is positioning itself for continued success in an increasingly digital and competitive financial environment.