PACRA updates on MCB Bank TFC II | Jun-14

As per the management representation, the TFC holders have been paid in pursuance of the call option exercised by the bank. PACRA awaits conclusive evidence to withdraw the rating. The TFC had AAA rating. This rating had taken note of MCB's sustained financial profile, reflected in very strong capitalization, sound liquidity and diverse deposit base. This was enabled by the bank's able parentage, wherein a diverse mix of sponsors - mainly led by Nishat Group - have been providing an effective oversight. The ratings factor in MCB's strong market positioning, supported by its well established brand name and substantial out-reach. MCB has one of the highest CASA in the industry, with lowest cost of funds amongst all players. The bank deposit base grew, slightly below the industry average, enabling the bank to close its distance to a trillion rupee. The bank continues with its current strategy of lending to premier corporates with sustained focus on government exposure. The Bank took a cautious approach with advances this time. ADR has stayed the same. The bank has established an Islamic Banking subsidiary, thereby, becoming the first conventional bank to do so. The risk absorption capacity of the bank, measured in terms of CAR, has increased from 16.4% 2017 to 18.1% in 2018.

About the Entity
MCB Bank is the fourth largest bank in terms of its share in total customer deposits (7.8% at end-Dec18) in the country. The bank is operating with a distinct domestic franchise, having 1,376 branches. Compared to its peers, MCB Bank has limited overseas operations. MCB Bank is majority owned by Nishat group (~36%), a prominent business conglomerate, having diversified interests in Textiles, Cement, Banking, Insurance, Power Generation, Hotel Business, Agriculture, Dairy, and Paper Products. Malayan Banking Berhad (Maybank) of Malaysia has ~19% stake in MCB. A set of prominent domestic industrial groups also own a sizeable stake in the Bank. Nishat group, in addition to MCB Bank, has strong presence in entire spectrum of financial services - Adamjee General Insurance; Adamjee Life Assurance; MCB Islamic Bank Limited and MCB-Arif Habib Savings and Investments Limited. The spectrum is gradually building synergistic benefits.

About the Instrument
The instrument was rated, listed, unsecured subordinated TFC of PKR 4,198mln issued in Jun14. Tenor of the instrument is eight years (Jun22) with a profit rate of 6M-KIBOR plus 115bps, payable semi-annually. TFC carried a call option, which has been exercised.