Credit Suisse rates MCB as best bank in Pakistan

KARACHI: Credit Suisse, one of the most prestigious financial company in the world, has rated MCB Bank as the best bank in Pakistan and among the best three banks in Asia Pacific region.

Credit Suisse is headquartered in Zurich and its Investment Research is considered to be one the most credible source of financial information for investment opportunities in the world.

According to the report, MCB is the best saving deposit franchise in Asia with demand deposits and saving deposits constituting 38% and 54%, respectively, of total deposits; has the best operating efficiency among PK banks (cost-to-income ratio of 36.5%) and also one of the best in Asia; has the best asset quality management track record among PK banks with the lowest nonperforming loan ratio of 5.8%; and the best capital ratio among PK banks with Tier 1 capital ratio of 16.5%.

In Asia, MCB is the best deposit franchise (CASA 92 percent), and has some of the widest net interest margins (5.41 percent in 2015), second lowest LDRs (43 percent) and third best ROAs (2.6 percent in 2015). They rated MCB basically, a very high-quality and conservative bank, which can be considered a bond fund (raises deposits at an average ~3.3 percent, invests in government bonds yielding ~8.3 percent gaining a risk free spread of 5 percent).

The report also said that Pakistan has enjoyed a substantial reduction in the cost of equity since 2013 on the back of an improving political environment. ‘The pro-business approach of the new government helped sentiments further. The improving macro backdrop made PK banks the best performers in Asia over the past three years and second-best in the past five years,’ the report added.

Earning high-teen ROEs despite the sharp decline in margins over the past few years, MCB is available for 1.4x book (Maybank bought 20 percent stake in 2008 at 5.1x book). ‘We consider MCB among top three banks in Asia and compare it with HDFC Bank and BCA,’ stated the research report.